SANTIAGO, Jan 14 (Reuters) - The operations of global miner BHP's Cerro Colorado copper mine in water-parched northern Chile have been thrown into doubt after the country's Supreme Court upheld local indigenous communities' complaint about the project's water use.

The court ruled late on Wednesday night that a routine evaluation of the mine's environmental project, including by a committee of ministers, failed to take into account warnings by locals that its operations were overdrawing water and impacting local wetlands.

It said the complaint, filed by the San Isidro de Quipisca Indigenous Agricultural Association against the environmental approval granted on Nov. 12, 2016, was upheld.

Cerro Colorado, a small mine in BHP's Chilean portfolio, produced about 1.2% of Chile's total copper output in 2019. The country is the largest copper producer in the world.

Lawyers acting for the indigenous group said the mine would have to suspend while a fresh environmental review already underway is completed.

BHP, however, said the mine could continue to operate while the review was conducted based on the terms of an earlier finding on the same dispute by the Environmental Court.

"Cerro Colorado is already working on the compliance with the measures required by the Environmental Court before the Environmental Evaluation Service (SEA) and ... reaffirms its willingness to establish dialogue processes based on respect, good faith and the principles of BHP's Indigenous Peoples Plan," the company said in a statement.

Lorenzo Soto, a lawyer for the indigenous group, told Reuters on Thursday that water pumping to feed Cerro Colorado's operations had almost entirely dried out high-altitude wetlands around its operations in the Tarapaca region.

"We have been raising this for several years," he said. "The surrounding communities are victims of dust and noise emissions, and any water they have is contaminated."

He said the Supreme Court ruling was the culmination of a five-year legal battle.

"Cerro Colorado's environmental operating permit is annulled and, that permit being annulled, the company must stop," he said. (Reporting by Fabian Cambero, Writing by Aislinn Laing Editing by Paul Simao)