* Chile-Argentina project proceeding to construction
* Initial cost estimate $2.8 bln to $3.0 bln
* Seen yielding gold at low $20-$50/oz
* Should have mine life of more than 25 years (Adds details from conference call, analyst comments; figures in U.S. dollars unless noted)
By Cameron French
TORONTO, May 7 (Reuters) - Barrick Gold (ABX.TO) gave a long-awaited green light to its Pascua Lama gold project on Thursday, after Chile and Argentina settled a dispute over taxation for the deposit, which straddles the borders of the two countries.
One of the world's last know mega-gold finds, Pascua Lama holds an estimated 17.8 million ounces of gold and will provide Canadian-based Barrick with production of between 750,000 to 800,000 ounces a year over its first five years.
It is also one of the world's largest silver deposits, with initial annual production of 35 million ounces.
"It is a low-cost, long-life project which is expected to have a significant impact on our future production, cash costs, cash flow and earnings," Aaron Regent, chief executive of Barrick, said on a conference call.
Development of the project has dragged on for years, facing opposition initially from environmental groups concerned about the impact on glaciers and water supply, and then the dispute between Chile and Argentina on how to tax a project that sprawls into both countries.
The two sides finally reached a deal late last month, allowing Barrick to give the construction go-ahead for the project, which sits about 5,500 metres (18,000 feet) above sea level in the Andes.
"This is the first binational mining project that will be developed in the world," Chile Mines Minister Santiago Gonzalez told a news conference. "This will mean gold production in the country will rise by 50 percent."
Chile currently produces about 1.4 million ounces of gold a year.
Pascua Lama will yield ounces at a rock-bottom cost of $20 to $50 an ounce initially, when factoring in silver output as a cost offset.
If the mine were currently in operation it would reduce Barrick's average cost per ounce by about $40, it said. The company's average cost per ounce during the first quarter was $484.
Pascua Lama should have a mine life of more than 25 years, and Barrick expects production to begin in early 2013.
The mine will not be cheap to build, however, with construction costs estimated at $2.8 billion to $3.0 billion.
This follows news that Barrick's 50 percent-owned Donlin Creek mine -- which has far less compelling economics than Pascua Lama -- should cost about $4.5 billion to build.
"The numbers are huge," said said John Ing, president of Toronto investment dealer Maison Placements, referring to both the costs and expected production.
Barrick shares rose 10 Canadian cents to C$38.55 on the Toronto Stock Exchange.
$1=$1.17 Canadian Additional reporting by Euan Rocha in Toronto and Manuel Farias in Santiago