Video has emerged showing Indonesian police firing on protesters who were demonstrating against a planned Australian-owned gold mine.

Two people were killed and 10 others injured in the incident in the town of Bima on the island of Sumbawa, east of Bali.

The confrontation occurred on Saturday when nearly 1,000 villagers refused to end a week-long blockade of a local port.

Police were ordered to fire directly into the crowd.

Later they can be seen dragging and beating one of the injured protesters.

The group was trying to block the construction of a gold mine, owned by Indonesia's PT Sumber Mineral Nusantara and Australian company Arc Exploration.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 2 minutes 57 seconds 2 m 57 s Arc Explorations denies mining has begun ( By Matt Peacock ) Download 1.4 MB

The company said in its June quarterly report that no exploration work was possible in the quarter because of protests.

Villagers fear the project will destroy their land, threaten forests and drain water supplies.

The two men killed are believed to have been students.

Police allege the demonstrators were armed with knives and Molotov cocktails.

The authorities say they were forced to open fire after demonstrators burned down dozens of government buildings and a police station.

Nearly 50 protesters were arrested.

The protest is the latest in a series of incidents in Indonesia as locals fight for land rights and workers push for a greater share of profits.

ABC/Reuters