By Alexandra Ulmer and Fabian Cambero
SANTIAGO (Reuters) - Barrick's suspended Pascua-Lama gold project will likely be reactivated in 1 to 2 years at the earliest, given the infrastructure that needs to be built to avoid water pollution, Chile's environmental regulator told Reuters on Thursday.
Barrick's shares pared back their 6.14 percent rally after the news to trade 5.5 percent stronger.
On Friday, the new regulator ordered the $8.5 billion project be halted and fined the company $16 million, citing serious environmental violations.
A Chilean court in April had already temporarily halted the controversial project, which straddles the border of Chile and Argentina, to weigh claims by indigenous communities that Barrick has damaged pristine glaciers and harmed water supplies.
The water management canals and drainage systems that were only partially implemented cannot be built "from one day to the next," environmental regulator Juan Carlos Monckeberg said in an interview.
"It could be one year, two years," he noted, underlining that the potential reactivation hinges on how diligent the company is.
Monckeberg also stressed that predicting time frames is tricky given that the regulator, which started operating in December, is navigating in uncharted territory.
Once Barrick completes the required works, the regulator will take a "reasonable time" to assess whether the mine is upholding environmental standards, "given the seriousness of the issue," Monckeberg added.
"As long as the project meets all the requirements, it shouldn't face a permanent paralyzation," he said. He declined to comment on whether the regulator was looking into other potential environmental harm at Pascua-Lama.
Chilean President Sebastian Pinera said on Thursday he hoped the project would proceed as long as the company complied with the requirements.
OPPOSITION TO MINING PROJECTS
Opposition by environmental, indigenous and community groups to mega mining and power projects has led to a series of setbacks to billion dollar investments in Chile, the world's No. 1 copper producer.
Despite being one of Latin America's most stable, prosperous countries, Chile suffers from high levels of income inequality, and many in the Andean nation feel a mining boom has bypassed them and harmed the environment.
Pascua-Lama is one of the most unpopular mining endeavors in Chile. Many opponents are incensed that it has produced "irreparable" environmental harm, according to the regulator. Greenpeace deemed the fine "laughable."
Separately, Chile's judiciary is seen taking all of 2013 to weigh the indigenous allegations against the project, setting the stage for a protracted, costly legal battle.
Critics say unclear Chilean regulations have contributed to a legal limbo that has led to the suspension of plans for hydropower projects in Patagonia, thermoelectric plants across the country and major copper mines high in the Andes.
(Reporting by Alexandra Ulmer and Fabian Cambero; Writing by Alexandra Ulmer; Additional reporting by Randall Palmer and David Ljunggren in Ottawa; Editing by David Gregorio and Richard Chang)