Sovereign risk has again emerged to hurt the share price of an Australian-based miner with operations overseas.
Straits Resources shares were more than 5 per cent lower at the open after the company said it had suspended mining operations at its Mt Muro gold operations in Indonesia in response to a directive from a local authority.
The provincial governor of Central Kalimantan has apparently ordered the company to down tools but it is not known exactly why.
"While Straits Resources does not agree with the legal basis of the directive, the company has chosen to voluntarily cease mining activities, on a short term basis, in a sign of good faith while the company seeks to address the matters raised in the directive," Straits said in a statement.
"The Mt Muro mill will continue to operate, treating stockpiled ore."
Straits managing director Andre Labuschagne said it was an extremely disappointing action because it disrupted the continuity of production during a critical period as the company ramped-up production.
"It also has a flow-on financial effect in the local community surrounding the Mt Muro operations, as we will be standing down some of our workforce, during this period," he said.
"Importantly, Straits Resources has secure tenure over its mining leases through its 3rd generation Contract of Work.
"The directive does not have any impact on either the validity or the continuation of the Contract of Work."Straits shares were off half a cent, or 5.56 per cent, to 8.5 cents at 7.15am.
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