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UPDATE 1-Copper miners agree on Indonesia's export tax, talks to continue

* Government, foreign miners hold talks on tax, contracts

* Miners agree in principle on export tax - minister

* Talks to continue, but no deal seen this week - minister

* Tax rate to be linked to progress on smelters

(Recasts, updates throughout, adds quotes)

JAKARTA, June 4 (Reuters) - Foreign copper miners in Indonesia have agreed in principle to pay a controversial export tax, the country's deputy finance minister said, following a series of talks aimed at restarting concentrate exports after a near-five-month halt.

The move would signal progress in reaching a deal over the tax that was introduced on Jan. 12 along with a ban on mineral ore shipments as part of moves to force miners to build smelters and processing plants in Southeast Asia's largest economy.

The new export tax halted about $500 million worth of monthly mineral ore and concentrate exports and led Freeport-McMoran Copper & Gold Inc and Newmont Mining , who account for 97 percent of the country's copper output, to slash output, arguing it conflicts with their contracts.

"What has been agreed on is the principle of the export tax," Deputy Finance Minister Bambang Brodjonegoro told reporters after government talks involving Freeport chief executive Richard Adkerson. "They agreed to an export tax."

Adkerson left a meeting with government officials on Wednesday without making any comment. Newmont could not be reached for comment on the talks.

The two U.S. miners have previously argued that they should be exempt from the new export tax, which kicks in at 25 percent and rises to 60 percent in the second half of 2016, before a total concentrate export ban in 2017. They said their current contracts prohibit any extra taxes.

Both companies have also questioned the economic viability of building new copper smelters in Indonesia, but have agreed to study the possibility of building a copper smelter with state-owned miner Aneka Tambang.

Under the new proposal, officials would draft a new tax regulation that would set a lower rate for miners who were progressing with plans to build smelters.

Brodjonegoro said he did not expect the government and miners to reach a deal on the tax this week.

Separately, Indonesia's Industry Minister M.S. Hidayat said the export tax would be reduced. He was unable to give details but said the government and the miners were close to an agreement.

The push to settle the dispute follows the appointment of billionaire businessman Chairul Tanjung as chief economics minister last month. Tanjung made restarting copper exports a top priority, amid a widening trade deficit, a slowdown in first-quarter economic growth and the prospect of job layoffs at mines.

Newmont said on Tuesday it had halted copper concentrate production at its Batu Hijau mine as its storage facilities were full, but had delayed standing down its 8,000 employees and contractors ahead of this week's meetings.

Tanjung led a series of high-level government and industry meetings on Wednesday, aimed at brokering a deal on the tax, as well as resolving long-running contract renegotiations for major miners, many of whose contracts are due to expire in the next few years.

The export stoppage and widening current account deficit have also put pressure on the outgoing government of Indonesian President Susilo Bambang Yudhoyono's outgoing government. A fresh administration is widely expected to take government after July elections.

(Reporting by Wilda Asmarin and Adriana Nina Kusuma; writing by Michael Taylor and Fergus Jensen; Editing by Richard Pullin)