RPT-UPDATE 1-Indonesia mineral export ban uncertainty starts to bite
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JAKARTA, Jan 7 (Reuters) - Indonesia's third-largest nickel miner halted output at its 2-million-tonne-a-year mine on Tuesday, the first company to stop production as uncertainty grips the industry ahead of a looming ban on unprocessed metal ore exports.
Indonesia, the world's top exporter of nickel ore, thermal coal and refined tin, will from Sunday require miners to process their ore before shipping it overseas under a measure aimed at boosting the value of its exports.
An increase in shipments of processed minerals would bolster the country's foreign revenue and help narrow a current account deficit, which has undermined investor confidence and battered the rupiah.
However, the move has drawn protests from small mining companies, as well as from international majors, including U.S. giants Freeport-McMoRan Copper & Gold and Newmont Mining Corp.
It has also raised fears that export earnings could be slashed in the short term as miners scramble to build the required smelters. Mining contributes about 12 percent of gross domestic product to Southeast Asia's largest economy.
Singapore's Ibris Nickel Pte Ltd is the first miner to announce it has put operations on hold ahead of the ban.
Ibris Chief Operating Officer Agus Suhartono told Reuters it halted operations at the start of the month and may be forced to lay off some of its 1,400 workers at its mine in Southeast Sulawesi. Ibris does not have a refinery and exports all of its nickel ore production.
"Workers have already stopped working because there is nothing they can do," Suhartono said.
The miner, which is part of the Ibris Group, announced plans in June to build a $1.8 billion nickel pig iron plant.
President Susilo Bambang Yudhoyono's administration is working on a special regulation that will likely ease the export restrictions on companies already processing some ore domestically, although moves to water down the ban have been opposed by the country's parliament.
The Indonesian Mining Association said it was told by the government the new regulation would exempt Freeport and Newmont from the ban, but maintain the restrictions on hundreds of other miners that do not process any of their ore domestically.
Freeport and Newmont, which refine only about a third of their copper output in Indonesia, account for 97 percent of the country's copper production.
Officials with the energy and mining ministry declined to comment on the pending regulation, which is expected to be announced before Sunday's ban.
The ore export ban has come at an unwelcome time for the government, as Indonesia scrambles to cut a large account deficit that has been undermining confidence in its currency, which was Asia's weakest last year after falling more than 20 percent to the dollar.
Any cut in exports will only mean a bigger deficit. Indonesia's central bank said on Friday the current account deficit could exceed 3 percent of GDP due to the risks from lower commodity prices and the mineral export ban.
Southeast Asia's largest economy reported a current account deficit of 3.8 percent in the third quarter of 2013, easing from a record high of 4.4 percent the previous quarter.
The mineral export ban is part of a 2009 mining law that aimed to increase the export value of Indonesia's commodities.
Under the ban, the government estimates processed minerals will boost foreign revenue from metals to $25 billion in 2016 from $11 billion last year, said Sukhyra, director general of coal and minerals.
(Additional reporting by Yayat Supriatna and Andjarsari Paramaditha in Jakarta; Writing by Randy Fabi; Editing by Richard Pullin)