* Top court largely upholds appeals court ruling
* Pascua-Lama environmental license untouched
* Indigenous group had appealed to nix permit
By Erik Lopez
SANTIAGO, Sept 25 (Reuters) - Chile's Supreme Court on Wednesday confirmed a freeze on Barrick Gold Corp's suspended Pascua-Lama gold mine but the Toronto-based miner escaped having the project's environmental permit revoked.
The ruling dispels a significant uncertainty surrounding the controversial project, which now essentially has to complete a water management system issued by the environmental regulator to likely be re-activated.
A group of indigenous Chileans had asked the top court to rescind Barrick's license, arguing that environmental harm at the complex, which straddles the Chilean and Argentine border, warranted a re-evaluation of the project.
The group had appealed a Copiapo Court of Appeals ruling in July that ordered a freeze on construction of the complex, which is roughly half complete, until the company builds infrastructure to prevent water pollution.
But the Supreme Court ruled that "the measures issued by Court of Appeals of Copiapo are sufficient to protect the constitutional guarantees that have been denounced as violated."
The top court's ruling largely defers to Chilean environmental regulator SMA, which also suspended the roughly $8.5 billion project originally forecast to produce 800,000 to 850,000 ounces of gold per year in its first five years of full production.
"This (ruling) is positive for the project," said Juan Carlos Guajardo, head of mining think tank CESCO in Chile, who said a cancellation of the environmental license would have been "the most complicated scenario" for Pascua-Lama. "This lessens one uncertainty," he added.
The project's supporters say its environmental impact will be limited, and that the massive mine will provide employment and help boost copper powerhouse Chile's mining-dependent economy.
Environmental and social groups counter that the mega mining project will damage pristine glaciers, strain and pollute the water supply and harm agricultural activity in the area.
Barrick has stopped construction on the project and submitted a plan for water management infrastructure to the SMA. The miner said in June that Pascua-Lama, on which it has already spent $5.4 billion, had been delayed until mid-2016.
Chile's environmental regulator told Reuters in May the complex will likely be reactivated in one to two years at the earliest.
A Barrick spokesman declined to comment until the company has reviewed the ruling.
Lorenzo Soto, the lawyer for the indigenous Diaguita group, said he "regretted" that the permit hadn't been revoked, but said the freeze ratified by the country's top court was historic for a massive mining project.
The court orders "an indefinite suspension of the construction of the Pascua-Lama mining project until all environmental commitments taken up with the environmental evaluation system are adopted."
The ruling also calls on the environmental authorities to "adopt all the administrative measures necessary for the adequate re-establishment of the state of law that guarantees the rights of those affected."
The company also has to present all information regarding the monitoring of glaciers to the SMA, the ruling stated.
Several big mining and power projects have faced legal setbacks in recent months in Chile, the world's No. 1 copper producer.
Around 60 percent of Chile's export revenue comes from the metal, but many in the economically stratified country feel mining profits have bypassed them and hurt the environment and are increasingly taking their demands to court.