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Mark Eaton, president and ceo of Belo Sun Mining is photographed in the company's Toronto offices on March 6 2014.

Fred Lum/The Globe And Mail

A Brazilian court has suspended the environmental and provisional licences of Toronto-based gold miner Belo Sun Mining Corp., putting a significant new obstacle in the way of the company's plans to develop Brazil's largest gold mine on a tributary of the Amazon river.

Last November a federal court suspended the company's environmental permit, saying Belo Sun had not taken necessary steps to analyze the mine's potential impact on indigenous peoples who live within a few kilometers of the mine site.

In December, Belo Sun won temporary permission to keep operating while awaiting a final ruling on that case. But when the ruling came last week, the judge said that the mine stood to cause "negative and irreversible damage to the quality of life and cultural heritage" of the Juruna and Arara peoples and that Belo Sun must complete a study of this issue before it can proceed.

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Mark Eaton, Belo Sun's CEO, said the indigenous impact study is already under way and that the new ruling does not extend the company's timeline for production. "It's had an impact on market psyche as these things always do," Mr. Eaton said in a telephone interview from Toronto. "But it hasn't come completely out of the blue."

Mr. Eaton said the company needs another five months to finish the study, and will "probably appeal" the federal court suspension. "We will be applying for installation licence by end of year," he said.

However Leonardo Amorim, the lawyer for an environmental organization called the Social Environmental Institute which has been trying to block the mine, said that timeline would be astonishingly fast for such an impact study, which must be co-ordinated with Brazil's indigenous people's agency, FUNAI. "These things are extremely complex," he said.

He said that the ruling "is very big news" and may represent a significant step toward protecting indigenous rights if it is upheld on appeal.

Belo Sun cannot apply for an installation license, and begin work, at the site until it has the environmental license.

In response to the news, some analysts revised the timeline for gold production from Belo Sun from 2016 back as far as 2020.

Belo Sun's stock price has fallen sharply over the past year, closing Monday at 18 cents.

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Ubiratan Cazetta, a federal prosecutor who worked on the case, said that is theoretically possible for Belo Sun to obtain approval from FUNAI but that the company will have to show thoughtful and thorough measures to protect the indigenous people, who are already facing significant changes in their way of life due to construction of the mammoth Belo Monte dam 11 km upriver. "They will have to prove that the mine's impact will be extremely superficial and unimportant."

Belo Sun's efforts to build the Volta Grande mine have emerged as a battleground in the power struggle between Brazil's state and federal authorities. The State Secretariat for the Environment in Para, where the future mine is located, had authorized the project to proceed, to the dismay of federal prosecutors, and said in a statement last week that this federal ruling is unfair to the company and may jeopardize the economic well-being of Para.

Brazil's activists view the ruling as a significant push back.

"Belo Sun has already shown they want to do the absolute minimum to receive their license to drill and it's encouraging that the federal courts have shown they are not going to let this slide," said Christian Poirier, an activist with the organization Amazon Watch. "Clarifying that you're going to use this much arsenic or dump that much slag by the Xingu River is not enough. If they say clearly what everyone knows is going to happen, do they get an environmental license in any case?"

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