UPDATE 3-Indonesia's Inco says protesters lift mine blockade

* Inco says operating normally despite job cut protest

* Villagers due to meet Inco directors Thursday

* Inco’s shares end up 5.76 percent

SOROWAKO, Indonesia, Aug 6 (Reuters) - PT International Nickel Indonesia INCO.JK said on Thursday that protesters had lifted blockade of a road leading to its nickel mine in Sulawesi and it would hold talks next week on a dispute over job cuts.

About 500 villagers had blocked a key road leading to Inco’s nickel mine in Sorowako, South Sulawesi, earlier in the day to protest against job cuts.

Last month, Inco said it planned to cut 87 jobs, or nearly 3 percent of its workforce, to reduce costs in response to the global financial crisis, which has reduced demand for stainless steel and thus nickel, a key input.

Brazil's Vale Inco Ltd. VALE5.SA has a 60.8 percent stake in Inco: the Indonesian firm's Sulawesi mine is its only operation.

The protesters lifted the road blockade after meeting Inco officials and agreed to continue negotiation next week, Tri Rachman Batara, an Inco spokesman in Sorowako, said.

“They opened the road blockade. Protesters are still there but they aren’t disrupting the traffic. Workers are able to travel home,” Batara said.

“Mining operations were running as usual,” he said.

Several global mining firms have cut jobs and slowed mining projects as weaker demand has hit metal prices. Inco, which produced 72,400 tonnes of nickel-in-matte in 2008, or about 5 percent of world output, acording to Reuters data, has said it could cut output by 20 percent this year if prices remain weak.

Villagers around Inco’s mine in Sulawesi were concerned about further job cuts by the firm, which employs many locals, Andi Duding, the head of the Sorowako Indigenous Group (KWAS), said.

“We want the company to ensure that locals do not lose their jobs. If they lose their job, they can’t go anywhere because there is no farmland any more,” Duding told Reuters.

Nickel prices MNI3 at the London Metal Exchange traded at $19,980 a tonne on Thursday, about two-thirds below the record high of $51,800 a tonne hit in May 2007.

Inco has around 3,400 employees, most of whom work at its mining site in Sorowako, South Sulawesi. It said the job cuts, which will affect workers near retirement age and some foreigners, will not affect this year’s production.

In May, Inco announced it had revised down its capital expenditure this year to $166.4 million, from $228.8 million initially planned in February, reflecting a slump in global demand.

Inco’s shares ended up 5.76 percent to 5,050 rupiah, while the overall market was up 1.85 percent.

Additional reporting by Fitri Wulandari and Telly Nathalia; Editing by Ed Davies