June 26, 2014 / 8:34 PM / 5 years ago

UPDATE 1-Brazil court revokes license for Canadian gold mine in Amazon

(Adds company comment, stock price)

BRASILIA, June 26 (Reuters) - A federal court has revoked the environmental license for a large gold mine planned by Belo Sun Mining Corp on the Xingu River in the Amazon, ruling that the company had failed to assess the impact on local indigenous communities.

The ruling published on Tuesday can be appealed. Belo Sun’s stock fell 7 percent on the Toronto Stock Exchange to 19 Canadian cents.

“This is an important victory for justice. It can still go to an appeals court, but we think it will be difficult to overturn,” said Helena Palmquist, a spokeswoman for the federal prosecutors office in the northern state of Para.

The Volta Grande, or Big Bend, open-pit project is slated to start operating in 2016 and become Brazil’s largest gold mine. It is next to another controversial project, Belo Monte, which is designed to become the worlds third largest hydroelectric dam and has also been the target of lawsuits by prosecutors.

Belo Sun could not immediately be reached for comment, but the Toronto-based company said in a news release that a federal judge in Para had ruled that the company needed to complete an indigenous study for its preliminary license to be valid.

To this end, Belo Sun said it had engaged a local environmental consultancy in January to carry out the study and is waiting for government approval, which it expects shortly, to be able to access indigenous lands. Belo Sun expects the study will take five months.

Judge Claudio Henrique de Pina said it was “unquestionable” that the mine would have a “negative and irreversible” impact on the quality of life and cultural heritage of the Paquiçamba, Arara da Volta Grande and Ituna/Itatá indigenous communities that straddle the Xingu river.

The licensing process for the mine cannot go ahead without studying the impact on the local communities that are already being affected by the Belo Monte dam, he ruled, agreeing with environmentalists who say the double impact of the two massive projects on the Indians’ habitat has not been properly studied.

Brazil’s federal Indian affairs agency, Funai, said in December that the biggest impact on the Indian communities that live along a 100-km (60-mile) stretch of the river will be a drop in water flows by 80 percent to 90 percent when the Belo Monte dam starts up.

Belo Sun, a small company with a market value of about C$50 million ($46.07 million), estimates average production of 313,100 ounces of gold per year over a mine life of 10 years, with production starting in early 2016, according to a pre-feasibility study published in May.

The study found that 2.8 million ounces of its estimated 4.7 million ounces of measured and indicated gold resources were economically viable reserves, but it said recent exploration work could boost reserves and extend the life of the mine. ($1 = 1.0853 Canadian Dollars) (Reporting by Anthony Boadle in Brasilia. Additional reporting by Nicole Mordant in Vancouver; Editing by Jonathan Oatis)

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