* Ottawa leaves door open for Taseko to submit new development proposal
* Taseko spokesman says decision will not kill project
* Taseko shares close up 4 Canadian cents
By Nicole Mordant
VANCOUVER, Feb 26 (Reuters) - Canada's government has blocked the development of a controversial copper and gold mine owned by Taseko Mines Ltd, the second time in just over three years that it has halted the mine plan.
The decision came after Environment Minister Leona Aglukkaq concluded that the New Prosperity mine project is "likely to cause significant adverse environmental effects that cannot be mitigated", a statement from the minister's office said.
However, Ottawa left the door open for Taseko, a small Canadian copper miner, to submit a new development proposal for the open-pit mine in south-central British Columbia.
"The government will continue to make responsible resource development a priority and invites the submission of another proposal that addresses the government's concerns," Aglukkaq said.
In making its decision, the federal government considered an October 2013 report from an independent review panel on the project and agreed with its conclusions that the mine plan poses significant threats to the environment and nearby communities.
Taseko spokesman Brian Battison said the company was "terribly disappointed" with the government's decision but that it would not kill the project.
"This is not the end," Battison said, adding that Taseko would spend the next few days working out what other course of action was available to it.
The company will also press on with an existing judicial review application that it has launched in which it argues that the review panel's findings on water quality and mine seepage were partly based on an error in the information it reviewed.
Ottawa blocked the project in November 2010 when it overruled British Columbia's provincial government and refused to allow the development of what was then called the Prosperity project because of worries over its environmental impact.
Taseko revised its mine plan to address regulator concerns and reapplied in 2012, but aboriginal groups and other opponents say the revised proposal, if approved, would still harm a local lake and the rights of indigenous groups in the area.
Taseko, which owns and operates the Gibraltar copper mine in British Columbia, is challenging the findings of the government-appointed review panel. The company has launched a judicial review
New Prosperity has a measured and indicated resource of 5.3 billion pounds of copper and 13.3 million ounces of gold, with an estimated 20-year plus mine life. Taseko expects the project to create close to 2,000 jobs and generate more than $1 billion in government revenue.
Taseko shares, which have dropped 22 percent over the last twelve months along with other mining stocks, closed at C$2.37 on the Toronto Stock Exchange on Wednesday, up 4 Canadian cents.