US mining giant Newmont said Wednesday it would likely cease production at its Indonesian gold and copper mine in June and send most employees on leave due to controversial new rules governing the sector.
Southeast Asia's top economy introduced a ban on the export of some unprocessed minerals in January, as well as higher taxes for some commodities that can still be shipped out of the country.
Copper concentrate, a major export for Newmont and its US peer Freeport McMoRan, was exempt from the ban but the companies still faced paying the new, higher taxes on shipments of the product.
Newmont says the new levies conflict with its original agreements in Indonesia and has been engaged in talks with the government.
The Indonesian unit of Newmont has not been able to send shipments overseas since the new rules were introduced, and the talks are aimed at reaching a deal so they can export again.
On Wednesday the unit said there was still no breakthrough, and its copper concentrate storage facilities at the Batu Hijau gold and copper mine would be full by the end of May.
"The Batu Hijau mine... expects to ramp down production on or about June 1, unless ongoing discussions with the government lead to completion of the process to secure an initial export permit," it said in a statement.
"Once the mine's copper concentrate storage is filled, (the company) will move to cease mining and milling."
It added that most employees at the mine, on Sumbawa island in central Indonesia, would be placed on leave at reduced pay starting in early June.
"This is a very unfortunate and difficult situation for all of us, as it will disrupt the lives of our 8,000 employees and contractors," said Martiono Hadianto, head of Newmont's Indonesian unit.
The new rules governing the mining sector are aimed at forcing foreign companies to smelt raw minerals in resource-rich Indonesia and keep more profits from the sector in the country.
But the industry has criticised their introduction as badly planned and analysts say the move has added to increased business uncertainty.