UPDATE 2-Indonesia sees copper, tin output surging in 2008

(Adds quotes from industry, official)

By Muklis Ali

JAKARTA Dec 28 (Reuters) - Indonesia's copper output will climb 23 percent next year and tin production will surge as booming commodity markets drive mining investment across the mineral-rich nation, the government forecast on Friday.

Production of copper, used in cabling, is expected to reach 1.04 million tonnes in 2008, up from an estimated 843,460 tonnes this year, the government ministry said in a statement. Tin output is expected to soar by more than 40 percent to 90,000 tonnes, it said, in line with previous forecasts.

"Producers plan to raise investment to change their machinery so that they can increase their production," said Simon Sembiring, director general of geothermal and mineral resources at the energy ministry.

Indonesia has some of the world's largest deposits of coal, copper, tin, nickel and gold and is keen to earn more from the sector as strong demand from India and China has been driving up prices for many commodities to record level.

Benchmark London copper prices MCU3 have fallen from their record high of $8,800 hit in May 2006, but are still up nearly 12 percent since the start of the year. Copper for delivery in three months traded at $6,835/$6,855 a tonne on Friday.

Demand growth for the industrial metal is expected to slow next year, with China's copper consumption rising 6 percent after a 23 percent surge in 2007, the inter-governmental International Copper Study Group said in November.

MORE OUTPUT RISES

The government also expects output from other key mining products to increase next year.

Gold production is expected to rise by nearly 10 percent to 134.56 tonnes in 2008 from 122.33 tonnes this year, while output of ferro-nickel used in stainless-steel manufacture by state mining firm PT Aneka Tambang Tbk (ANTM.JK) is expected to reach 17,980 tonnes in 2008, up nearly 10 percent from 16,350 tonnes.

Output of nickel-in-matte from PT International Nickel Indonesia Tbk (INCO.JK) is seen to rise marginally to 79,450 tonnes in 2008 compared to around 79,060 tonnes this year.

The government expects investment on geothermal and mining products to reach $1.55 billion from about $1.35 billion this year.

The expected increase in metals output was because producers are taking opportunity on stronger demand for metal products, said Arief Siregar, chairman of Indonesia Mining Association.

"There is opportunity to increase production because demand is still strong although metal prices are likely to soften," said Siregar, who is also president director for PT International Nickel Indonesia.

Indonesia is the world's second-largest producer of tin, used in electronic solders and for corrosion resistance for other metals, after China.

It is also home to Grassberg mine run by U.S. mining firm Freeport McMoran Copper & Gold (FCX.N), which is believed to have the world's third-largest copper reserves.

But analysts said protracted approval by parliament of a new mining law has held back billions of dollars of fresh funds from the sector, as overseas investors were wary about their future investment in one of the country's most vital sectors. (Additional reporting by Andreas Ismar; writing by Fitri Wulandari; Editing by Ramthan Hussain)