UPDATE 1-Indonesia court scraps mineral export regulations-industry body

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JAKARTA, Nov 5 (Reuters) - Indonesia's supreme court has scrapped a government ban on the export of unprocessed minerals, the country's chamber of commerce said on Monday, and urged the government to draft new mineral export rules.

The decision appears to clear the way for a resumption of mining by small scale producers hard-hit by regulations this year that led to a suspension of much of their activity and sent shockwaves through the industry.

It also represents an apparent setback for the government, which instituted the reforms to increase revenue, conserve resources for domestic needs and boost the downstream mining sector as it pushes to make Indonesia a top 10 world economy.

The May 6 rules aimed to push miners into processing raw ores domestically to export higher-value finished metals. Mining executives said they hurt the sector at a time when commodity prices and investment faced pressure due to a global slowdown.

The latest decision could add uncertainty to an industry already uneasy over regulation.

``With the Supreme Court decision all the chapters (of the ban) have to be dropped as soon as possible and mineral exports will be regulated by the Trade Ministry,'' Natsir Mansyur, a senior official of the chamber of commerce, told Reuters.

He was referring to portions of the legislation that authorise the central government to oversee mineral processing and ban mineral exports.

``The Energy and Mineral Resource ministry has no right any more to regulate exports, including determining the mineral export quota,'' Mansyur added.

The regulations sent exports of nickel and other minerals soaring ahead of the ban and then plummeting when it was implemented. It hit exporters who operate with government-issued IUP contracts hard, especially small scale producers in areas such as Sulawesi.

Trade Minister Gita Wirjawan told Reuters he was looking into the issue and did not give further comment.

(Additional reporting by Neil Chatterjee in Jakarta and Yuko Inoue in Tokyo; Writing by Matthew BiggEditing by Alex Richardson)