UPDATE 2-Shares in Alaska mine developer slide 26 percent on EPA reversal

(Adds CEO interview, background, PIX)

VANCOUVER, Jan 29 (Reuters) - Shares in mine developer Northern Dynasty Minerals Ltd fell as much as 26 percent on Monday after a U.S. regulator reversed himself and maintained restrictions on the company's big copper and gold mine project in Alaska.

Both Canada-based Northern Dynasty and U.S. Environmental Protection Agency Administrator Scott Pruitt said on Friday the move would not derail the Pebble mine's permit application process. But it was the first sign the project's path may not be as smooth under the mining-friendly Trump administration as some analysts and the company had predicted.

Pebble, located in Alaska's Bristol Bay region, holds one of the world's largest undeveloped copper and gold deposits. Its development, near one of the biggest sockeye salmon fisheries on earth, is fiercely opposed by environmentalists, native groups and fisherman.

"The news was a surprise," said Chris Mancini, research analyst at Gabelli Funds, which owns Northern Dynasty shares.

Its U.S.-listed shares were down nearly 25 percent at $1.15. In Toronto, the stock fell 24.5 percent to C$1.42 after dropping as low as C$1.39.

The Obama-era EPA in July 2014 unveiled proposals to limit large-scale mining in the Bristol Bay area, even before Northern Dynasty had started the permitting process, citing environmental concerns.

Last July, Pruitt began a process to withdraw the restrictions.

In a statement on Friday, Pruitt said he was suspending that process. "It is my judgment at this time that any mining projects in the region likely pose a risk to the abundant natural resources that exist there."

Environmental groups applauded the move. "The Pebble Partnership has been touting that they had smooth sailing at the state and federal level for the past year... and with this news, they clearly don't," Nelli Williams, Alaska director for conservation group Trout Unlimited, said in an email.

Northern Dynasty shares quadrupled after Donald Trump won the 2016 U.S. presidential election on expectations the long-stalled project would face an easier road under an administration keen to reduce environmental regulations to benefit business.

The view was reinforced by a settlement between Northern Dynasty and Trump's EPA in May 2017. Under it, the mine permitting process could be carried out through the U.S. Army Corp of Engineers.

That agreement "drives everything," Northern Dynasty Chief Executive Officer Ron Thiessen said in an interview late on Saturday, downplaying Pruitt's about-face.

"From my perspective this has done nothing to us... This in no way impairs or jeopardizes the (permit) process," he said.

The 2017 settlement paved the way for the miner to lure a deep-pocketed partner, First Quantum Minerals Ltd, to help fund development.

First Quantum did not respond to a request for comment.

Northern Dynasty last month started the permitting process for Pebble and is studying a smaller mine design than before.

"We're hopeful that the PLP (Pebble Limited Partnership) will be able to prove to the Army Corps that the mine can be built in such a way that the fishery will not be negatively impacted," Gabelli's Mancini said. (Reporting by Nicole Mordant in Vancouver; Editing by Chizu Nomiyama and Jeffrey Benkoe)