UPDATE 1-Newmont Indonesia mine output to fall - government

JAKARTA, Oct 14 - Output at Newmont Mining Corp's <NEM.N> Indonesia copper and gold mine may fall by 1.5-2 percent annually for the next five years after problems at its mine, a senior government mining official said on Wednesday.

Newmont said in September that there had been a "geotechnical failure" in the west wall of its open-pit Batu Hijau mine on Sumbawa island, which produces most of Newmont's copper, along with a small amount of gold. [ID:nN22343422]

"Newmont has submitted a report. They may have to make new designs and submit a new environmental study," Bambang Setiawan, director general of mining, coal and geothermal at the mining and energy ministry told reporters.

"Their total production may fall by 1.5-2 percent annually over the next five years because of the incident," he said.

PT Newmont Nusa Tenggara will continue to process ore from stockpiles at the Batu Hijau mine, Setiawan said.

The mine had been expected to produce 500 million pounds of copper concentrate and 525,000 ounces of gold this year, the mine operator PT Newmont Nusa Tenggara said before the incident at the mine occured.

Rubi Purnomo, a Newmont spokesman, confirmed the possible fall in production.

"There will be an adjustment in the production over the next five years," Purnomo said.

PT Newmont Nusa Tenggara is also in the process of selling a stake to local investors.

Last year, the government filed an arbitration case against the owners of PT NNT after they missed a deadline to sell a 10 percent stake in 2006-2007. The arbitration court ruled in March 2009 that foreign owners had to complete that sale within six months.

But the government and Newmont reached an agreement to extend the deadline to complete the stakes sale to Nov. 12 from initial deadline on late September.

For Q+A on Indonesia's dispute with Newmont unit over share sale, click [ID:nJAK465121]