July 15, 2013 / 12:56 PM / 4 years ago

UPDATE 1-Chile court to suspend work at Barrick's Pascua-Lama mine -report

* Court blocks project until environmental standards met-paper

* Indigenous groups say project hurts water supply, glaciers

* Chile environmental regulator has also suspended gold mine

SANTIAGO, July 15 (Reuters) - A Chilean court is expected to rule unanimously to suspend work on Barrick Gold Corp’s Pascua-Lama gold mine, siding in favor of an appeal lodged by indigenous communities in a fresh blow to the controversial project, a local paper reported on Monday.

El Mercurio said the Copiapo Court of Appeals would issue a ruling later on Monday saying construction can’t go forth until mitigation infrastructure to protect the environment is fully built.

In April, the court had temporarily frozen construction of the $8.5 billion project, which straddles the Chile-Argentine border high in the Andes, to weigh claims by the indigenous communities that it has damaged pristine glaciers and harmed water supplies.

The court has ruled environmental harm in the Estrecho and Huasco rivers’ waters must be “repaired” and called for permanent monitoring of the nearby Toro 1, Toro 2 and Esperanza glaciers, the report added.

But the ruling also says Pascua-Lama is viable because environmental authorities have properly regulated the project.

Chile’s environmental regulator has also suspended Pascua-Lama, citing major environmental violations. The regulator told Reuters that the earliest the project could be reactivated is likely in one to two years.

Analysts say Toronto-based Barrick, the world’s top gold miner, will likely appeal the Copiapo court’s ruling to the supreme court, setting the stage for a protracted legal battle in mining powerhouse Chile.

Barrick said last month it is slowing construction at Pascua-Lama as it looks to rein in spending on the severely delayed project, already billions of dollars over budget.

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