Australia’s largest gold miner Newcrest has suspended production at its flagship Lihir mine in Papua New Guinea amid a dispute with land owners.

Newcrest is negotiating the benefits it pays local land owners as part of a five-yearly review of its arrangements with the local community.

It is in a dispute with the Lihir Mining Area Landowners Association (LMALA), and production will be impacted until the dispute has been resolved, Newcrest said on Tuesday.

“The processing plant remains on stand-by and all facilities have been secured,” Newcrest said in a statement.

Newcrest shares fell as a result, down 52 cents, or 1.9 per cent, to $26.70.

All stakeholders, including LMALA and representatives from all levels of government are meeting at Lihir to resolve the dispute, Newcrest said.

The open pit Lihir mine is located on Niolam Island, also known as Lihir Island, 900 kilometres north of Port Moresby.

Newcrest has been working on a major expansion of the mine, and recently said the project was due to be completed in the final quarter of calendar 2012.

It began production in 1997 under the control of Lihir Gold, which merged with Newcrest in 2010.