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By Fergus Jensen and Wilda Asmarini
JAKARTA, Jan 7 (Reuters) - Indonesia's planned mineral export ban - a policy designed to force miners to process their ores domestically - is sending shudders through the economy, with a Singapore-owned nickel miner suspending operations ahead of the Jan. 12 ban.
Indonesia is the world's top exporter of nickel ore, thermal coal and refined tin, but also has significant exports of iron ore and bauxite, both of which are likely to be stopped after Sunday.
An increase in shipments of processed minerals would bolster the country's foreign revenue and help narrow a current account deficit, which has undermined investor confidence and battered the rupiah.
However, the move has drawn protests from small mining companies, which say they can't afford to build smelters, as well as from international majors, including U.S. giants Freeport-McMoRan Copper & Gold and Newmont Mining Corp .
The plan has also raised fears that export earnings could be slashed in the short term as miners scramble to meet the new regulation. Mining contributes about 12 percent of gross domestic product to Southeast Asia's largest economy.
Privately owned Ibris Nickel Pte Ltd is the first miner to announce it has put operations on hold due to uncertainty over the ban, halting its 2-million-tonne-a-year mine.
Ibris Chief Operating Officer Agus Suhartono told Reuters the company had halted operations at the start of the month and may be forced to lay off some of its 1,400 workers at its mine in Southeast Sulawesi. Ibris does not have a refinery yet, and currently exports all of its nickel ore production.
"Workers have already stopped working because there is nothing they can do," Suhartono said.
The miner, which is part of the Ibris Group, announced plans in June to build a $1.8 billion nickel pig iron plant.
Uncertainty over the requirements of the law has added to miners' concerns and delayed smelting plans, given varying interpretations from government officials and Indonesia's history of backing away from controversial policies.
President Susilo Bambang Yudhoyono's administration is working on a special regulation that will likely ease the export restrictions on companies already processing some ore domestically, although moves to water down the ban have been opposed by the country's parliament.
The Indonesian Mining Association said it was told by the government the new regulation would exempt Freeport and Newmont from the ban, but maintain the restrictions on hundreds of other miners that do not process any of their ore domestically.
Freeport and Newmont, which refine only about a third of their copper output in Indonesia, account for 97 percent of the country's copper production.
Officials with the energy and mining ministry declined to comment on the pending regulation, which is expected to be announced before Sunday's ban.
At least one company remains adamant that it will continue to export its unprocessed minerals whether or not it receives an exemption.
"I will have a lawyer standing by at my mine. We will continue to load ships," Wira Budiman, marketing director for nickel miner Mobi Jaya Persada, told reporters.
"If customs officials or police come they can talk with our lawyer. If they can show us the law in black and white we'll follow it."
Budiman said he planned to ship around 1.8 million tonnes of nickel ore this year.
The ore export ban has come into effect at an unwelcome time for the government, as Indonesia scrambles to cut a large account deficit that has been undermining confidence in its currency, which was Asia's weakest last year after falling more than 20 percent to the dollar.
Any cut in exports will only mean a bigger deficit. Indonesia's central bank said on Friday the current account deficit could exceed 3 percent of GDP due to the risks from lower commodity prices and the mineral export ban.
Southeast Asia's largest economy reported a current account deficit of 3.8 percent in the third quarter of 2013, easing from a record high of 4.4 percent the previous quarter.
The mineral export ban is part of a 2009 mining law that aimed to increase the export value of Indonesia's commodities.
Under the ban, the government estimates processed minerals will boost foreign revenue from metals to $25 billion in 2016 from $11 billion last year, said Sukhyar, director general of coal and minerals.
However, a recent World Bank report suggests that an optimistic view of the export ban would result in "a significant, negative shock to Indonesia's trade balance of around $6 billion in 2014. [IDn:nL3N0JY2DU] (Additional reporting by Yayat Supriatna and Andjarsari Paramaditha in Jakarta; Writing by Randy Fabi; Editing by Richard Pullin)