UPDATE 2-Chile court suspends Barrick's Pascua-Lama project
* Project plagued by soaring costs, public opposition
* Indigenous groups protest against effect on glaciers, water
* Company says it has not been notified by court
SANTIAGO, April 10 (Reuters) - A Chilean court has suspended the construction of Barrick Gold Corp's $8.5 billion Pascua-Lama gold and silver mine after indigenous communities said the project was destroying glaciers and harming water supply.
The northern appeals court of Copiapo will analyze the communities' complaints of "environmental irregularities" against Barrick's project, which is already plagued by soaring costs and stiff opposition from environmental groups.
The appeal could take several months, and the dispute will probably end up in the Chilean Supreme Court, a court source told Reuters.
Barrick's shares dropped 3.9 percent to C$26.11 in early trading on the Toronto Stock Exchange.
The suspension is the latest in a series of setbacks to key mining and energy projects in top copper producer Chile that threaten to derail a massive pipeline of investment in the Andean country, as well as a setback to Barrick.
Barrick, the world's top gold miner, told Reuters it could not comment because it had not been notified by the court. It was not immediately clear how long the suspension might last or what legal action the company could take to protect its investment in the project, which is perched high in the Andes on the border between Argentina and Chile.
In July, Barrick delayed its target date for initial production at Pascua-Lama to 2014 from 2013 and said the cost of building the project would probably be 50 percent to 60 percent higher than the top end of its estimate of $4.7 billion to $5 billion.
Then in November, Barrick boosted its cost estimate again, to between $8.0 billion and $8.5 billion from between $7.5 billion and $8.0 billion.
Once completed, Pascua-Lama is set to be one of the largest and lowest-cost gold mines in the world. The mine is expected to produce 800,000 to 850,000 ounces of gold and 35 million ounces of silver in its first full five years of production.
Chile, which produces one-third of the world's copper, has attracted investment with its solid institutions and strong growth. But experts have said the country has not been firm enough in regulating its mining and energy industries, leaving billions of dollars' worth of projects exposed to the risk of lawsuits by local communities.
The government has faced mass protests as Chileans demand a bigger share of copper earnings, and some critics say a regulatory vacuum is allowing opposition groups to jeopardize approved plans for hydro power projects in Patagonia, thermoelectric plants across the country and major copper mines high in the Andes.
Last year, the country's top court suspended the approval of the environmental permit for Goldcorp Inc's El Morro copper-gold project. The court said Goldcorp would have to consult with local communities, and that project has now been suspended since April 30, 2012.
Chile will attract $100 billion in mining investment in the next 10 to 12 years, a slightly longer time frame than previously forecast, as regulatory uncertainty and energy woes loom as key risks, the Sonami mining association said earlier this year.