The Indonesian unit of Newmont Mining Corp. (NEM.N: Quote) expects copper production to increase by 60 percent this year as it starts to mine higher grade ore, the company said in a statement on Thursday.

PT Newmont Nusa Tenggara, which operates the Batu Hijau copper and gold mine in Sumbawa island in eastern Indonesia, expects to produce 455 million pounds of copper concentrate this year, up from 284 million pounds in 2008.

The firm also expects to produce 486,000 ounces of gold this year, up 80.6 percent from 269,000 ounces in 2008.

Although copper prices are expected to decline in 2009, higher metal output due to better ore grades will cushion the impact, Martiono Hadianto, director of Newmont Nusa Tenggara, said in a statement read to Indonesia's parliament.

The mine has a copper concentrate grade of between 25-30 percent.

Hadianto warned, however, that operations at the mine may end earlier than planned if the government did not approve a land-use permit.

If the land-use permit is not granted mining operations may end in 2011 while processing activity may end in 2017 against the planned 2027, he said.

The company had said last year that it may have to lay off as many as 700 of its 8,300 workers and cut back on operations in the first quarter of 2009 because of delays in permits.

Newmont had not been able to renew a permit from the forestry ministry that would allow it to clear an area for waste disposal, a company official said in April last year.

In 1997, Newmont was granted a forestry permit valid for 20 years, a company spokesman said last year.

Two years later, the forestry ministry issued a law banning open-pit mining in protected forest areas, but Newmont was later granted another permit allowing it to extend its mining area: that permit still has not been renewed, company officials said.

Newmont is also involved in an arbitration dispute over moves to sell some of its shares in Newmont Nusa Tenggara to the local government.

Under its contract, Newmont must sell 51 percent of its shares to local investors, but talks collapsed last year and both the government and Newmont filed cases against each other in arbitration courts.

The arbitration had started at the end of 2008 and a decision was expected on March 31 this year.

We will follow the decision of the arbitration court, Hadianto said.

(Reporting by Fitri Wulandari; Editing by Ed Davies)

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