Construction at Barrick Gold Corp’s Pascua-Lama gold mine, on the border of Chile and Argentina, was formally suspended by a Chilean court on July 15. The court ruled in favor indigenous groups who opposed the mine and ordered work be stopped until the company builds infrastructure that will prevent water pollution, Reuters reported.

Work at the troubled $8.5 billion project was first suspended in April when the Copiapo Court of Appeals temporarily and preventively froze construction of the project, which straddles the Chile-Argentine border high in the Andes, while it examined claims by indigenous communities that it has damaged pristine glaciers and harmed water supplies.

The court said it was ordering a freeze on construction of the project until all measures required in the government’s environmental license for adequate water management, “as well as urgent and transitory measures required by the environmental regulator,” are adopted.

Chile’s environmental regulator has also suspended Pascua-Lama, citing major environmental violations, and asked Barrick to build water management canals and drainage systems. Barrick has said it is fully committed to complying with all aspects of the regulator’s order.
The court ruling also called for the project’s environmental license to be reviewed and for all data on nearby glaciers to be presented to the regulator.

A source close to the company said Barrick is not likely to appeal the decision, Reuters reported on July 15.

The Diaguitas could contest the ruling if they deem the measures imposed by the court are too weak, and could potentially ask the top court to seek Barrick’s permit be revoked, lawyer Lorenzo Soto told Reuters.

“If we appeal it would be because the safeguard as ordered aren’t sufficient,” Soto said.

A potential decision from the Supreme Court would likely be issued this year, but it is tricky to anticipate how it might rule on Pascua-Lama, originally forecast to produce 800,000 oz to 850,000 oz of gold per year in its first five years of full production.

Last year, the Supreme Court suspended a key permit for Canadian miner Goldcorp Inc’s El Morro copper-gold project, and rejected the planned $5 billion Central Castilla thermo-electric power plant.

But it also cleared the way for the unpopular HidroAysen hydro-power project.

A full court-ordered halt of the project would be a major hit for Barrick as 80 percent of the metal reserves are on the Chilean side. It would also be a further blow to Chile’s business-friendly reputation.

It remains unclear what kind of legal action Barrick could take if the permit for its project - whose construction was already well underway - were canceled or placed under review.