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Chile Blocks World's Highest Mine Project

"Even though we seem so small, we could beat Barrick, which is a giant," said Osvaldina Guzman Villegas, who lives in Diaguita community of Chipasse Tamaricunga. "And with the help of our ancestors, we're going to beat them."

President Sebastian Pinera's spokeswoman, Cecilia Perez, said the government is "very much in agreement" with the sanctions.

"What should happen is that until they remedy all the requirements of the environmental permit, fix all the issues that the Environmental Superintendent is asking for, and finally until this is decided by the Supreme Court, they cannot keep operating," she said.

The sanctions also were praised by independent mining experts, who noted that the containment structures Barrick failed to build were fundamental to obtaining environmental approval.

"Twenty years ago, maybe nobody would have required these fixes, and perhaps wouldn't even have required the canal to divert rainwater, but today it's necessary, more than anything because there's agriculture down below," said Gustavo Lagos, mining professor at Santiago's Universidad Catolica.

The strong sanctions show the mining industry that Chile's independent environmental regulator intends to use its new enforcement powers, he said: "This sets a tough example and I think it should show other companies, not just in mining but in all industries, that this is becoming serious."

How the ruling might affect the bottom lines of many other international mining companies in Chile also wasn't immediately clear, but Lagos said it sends a good message.

"It shouldn't be forgotten that new environmental institutions were required of Chile as a condition for its entry into the OECD," he said, referring to the Organization for Economic Co-operation and Development, which represents the world's leading economies. "It's a good signal to the world that in Chile there are controls, that there's a new institutionality that is working."

Environmentalists say regulators have been much less demanding on the Argentina side of the project, where mining is regulated at the provincial level. Barrick and other pro-mining groups obtained injunctions to block enforcement of a national glacier protection law passed in 2010 in response to the Pascua-Lama project.

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