* Newcrest suspends gold output at flagship Lihir mine, shares tumble
* Says landowner dispute to blame
* Move comes as mine undergoes expansion work (Adds detail, Newcrest comments)
SYDNEY, Aug 28 (Reuters) - Shares in Australia's Newcrest Mining tumbled by nearly 5 percent on Tuesday after it was forced to suspend production at its flagship Lihir gold mine in Papua New Guinea over a dispute with landowners.
Lihir produced 163,059 ounces of gold in the June quarter and has been undergoing major expansion work due to be completed in the final quarter of calendar 2012.
The processing plant at the mine remains on standby and all facilities had been secured, the company also said.
The dispute stems from negotiations over benefits paid to landowners near the mine site, located 900 kilometres (550 miles) across the Bismarck Sea from Port Moresby.
Adhering to Melanesian culture, landowners employed taboo markers made from a ginger root plant, known locally as a gorgor, as a non-violent way to raise grievances and disputes related to the operation of the mine and to initiate negotiations, the spokeswoman said.
"We respect that custom and have responded accordingly."
At 0315 GMT, the stock had partially recovered to A$26.31, down 3 percent. The stock traded as low as A$25.63, according to Reuters data.
There were no reports of violence or vandalism at the mine, the Newcrest spokeswoman said.
(Reporting by James Regan; Editing by Eric Meijer)