UPDATE 1-Namibia court refuses to block mine water plan

(Adds company comment, lawyer reaction, background)

By John Grobler

WINDHOEK, April 21 (Reuters) - A Namibian court has found that water permits issued to Forsys Metals Corp (FSY.TO: Quote, Profile, Research) were technically invalid but stopped short of blocking the Canadian company from using underground water in the construction of a uranium mine.

Forsys said on Feb. 12 Namibia's agriculture, water and forestry ministry had issued it with a two-year permit to extract 1,000 cubic metres per day from underground sources in the Namib Desert for its Valencia mine.

The validity of the permits were challenged in court last week by two local farm owners, who argued that the extraction of the water would endanger their nearly eco-tourism business.

In a ruling on Friday, High Court Judge Collins Parker rejected their bid to stop Forsys from extracting the water.

But the judge added that there was no evidence that the subterranean water resource had been formally proclaimed, making the Forsys permits technically invalid.

"As far as this Court is concerned, the legal reality is that the aforementioned permits do not exist: it is as if they had not been issued at all," Parker wrote in his ruling.

Forsys spokesman Bruce Hall, however, said the ruling meant the water sources were not controlled and that the company's extraction permits were valid.