By I Made Sentana

JAKARTA, Indonesia--PT Newmont Nusa Tenggara, the Indonesian unit of U.S. gold miner Newmont Mining Corp. (NEM), may start reducing production at its Batu Hijau gold and copper mine by June 1 if it fails to get permits to export its concentrates, the company said Wednesday.

The Batu Hijau's copper-concentrate storage facilities will reach full capacity in late May, requiring an orderly ramp down of operations, the company said.

"Once the mine's copper-concentrate storage is filled, PTNNT will move to cease mining and milling, along with significantly scaling back contracted services, purchasing, and capital expenditure, with corresponding adjustments in employee work schedules and reductions in overtime," the company's President Director Martiono Hadianto said in a news release.

To minimize expenses and preserve the ability to return to normal operations in a timely fashion, most of Newmont Nusa Tenggara's employees will be placed on leave at reduced pay starting in early June, the company said, adding it will continue talks with the government.

Indonesia, a major producer of commodities such as nickel ore, bauxite, tin, copper and thermal coal, in January banned raw mineral-ore exports to force miners to process their products in Indonesia to boost the value chain of its industry. The government also imposed export duties on mineral concentrates such as copper, iron, zinc and manganese of between 20% and 25%, which would be progressively raised to 60% by late 2016%.

Miners in Indonesia mostly smelt a relatively small part of their minerals in the country. They argued producing the metal from its ore isn't economical in the country and that they can't compete with smelters in the region such as those in China.

Newmont Nusa Tenggara and PT Freeport Indonesia, the local unit of Freeport-McMoRan Copper & Gold Inc. (FCX), have said the export tax is a breach of their contracts with the government.

"While our Contract of Work explicitly guarantees our right to export copper concentrate and establishes all the taxes and duties PTNNT is required to pay, we have taken numerous steps to support the government's desire to increase in-country smelting," Mr. Hadianto said Wednesday.

Newmont Nusa Tenggara has agreed to supply copper concentrates to two companies that will build smelters in Indonesia.

Freeport Indonesia meanwhile has also warned it will have to cut production at its Grasberg mine in east Indonesia if it is banned from exporting.

The government hadn't issued any comment as of the time of publication of this article on Wednesday.

Write to I Made Sentana at i-made.sentana@wsj.com

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