MANILA – A nickel mining hub in the southern Philippines, which produces mostly high-grade material, has suspended extraction operations indefinitely as the regional government conducts an industry audit, a top government official told Reuters on Monday.

The government of Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) has suspended operations of all four mining companies in its jurisdiction, said Environment, Natural Resources and Energy Minister Abdulraof Abdul Macacua.

The Philippines was the world's second-largest nickel ore producer in 2018 after Indonesia, with both Southeast Asian nations as the top two suppliers to biggest buyer China.

By next year, when Indonesia bans nickel ore exports, China is expected to rely mainly on the Philippines for supply of the material for stainless steel and electronic vehicle battery.

The suspension was based on a memorandum order dated August 5 issued by the regional government, Macacua said in an e-mail reply to Reuters' queries about the status of mining in the region's Tawi-Tawi province.

Latest available industry data showed that 2.34 million wet metric tonnes (wmt) of high-grade ore, or nearly 90% of 2.66-million wmt of the high-grade material the Philippines exported to China in the first half of 2018 came from Tawi-Tawi.

Tawi-Tawi accounted for 27% of overall nickel ore exports, totalling 15.8-million wmt, to China during the six-month period.

"The suspension order was due to the ongoing review of mining policy in BARMM," Macacua said.

The audit is being conducted as the local government prepares to push for the enactment of a Bangsamoro Responsible Mining Law that will serve as a road map for the region's mining industry, Macacua said, without elaborating.

A "performance assessment and evaluation team" has been created to review the mining firms' operations, with no definite timeline as to how long the suspension will be, he said.

The BARMM suspension order covers four mining companies actively operating in Tawi-Tawi out of seven that have been given permits, Macacua said, without identifying the four.

Tawi-Tawi is where SR Languyan Mining Corp, the country's top supplier of high-grade material to China, operates.

SR Languyan is expected to shut its mining operations later this year as ore deposits at its project are nearly depleted, Jaynul Ali Sambarani, head of mines and geoscience services at BARMM's environment ministry, told Reuters last month.

SR Languyan's average monthly ore exports this year is around 416 500 wmt, Macacua said. There is no government data available about the size of ore deposits left at SR Languyan's project.

The bulk of the Philippines' total nickel ore output usually comes from the main mining region of Caraga, also in the south.

Philippine nickel miners may ramp up ore output by next year as they expect the Indonesian ore export ban and brisk demand to keep prices elevated.

Their production capacity, however, is limited by a number of factors, including government-imposed mining curbs, industry executives said at a Philippine mining conference last week.