By Daniel Bases

NEW YORK (Reuters) - Mongolian Prime MinisterSukhbaatariin Batbold said Monday the London Stock Exchangeis the front-runner in a bid to manage a new local stockexchange, expected to be up and running by year-end.

"London is the front-runner" to run this exchange, buildingit up from scratch," Batbold told reporters on the sidelines ofthe United Nations General Assembly meeting.

Mongolia is trying to make the most of its natural resourcewealth. It is one of the last places on earth with hugeuntapped mining resources for coal, copper, gold and uranium.

The government's international tender offer for amanagement contract for a new stock exchange drew 12 bidders,with the field now narrowed to four.

Batbold said the four are the London Stock Exchange, NASDAQOMX, Deutsche Borse, and the Korean Stock Exchange.

The idea is to have established companies with listingselsewhere add a dual listing on the Mongolian exchange.

"First, what we would ask from them is to have a duallisting on the Mongolian stock exchange from those alreadylisted companies," he said.

"Secondly, there will be (large) state-owned enterprisesthrough the privatization program. So we will have a quiteserious change in our privatization concept so that state-ownedenterprises, especially the large ones, will go through IPO onthe Mongolian stock exchange and possibly in combination withinternational stock exchanges," Batbold said.

Even as the global financial crisis has wrought havoc ondeveloped economies and put a crimp in generally robustemerging markets, economic growth will remain strong, Batbold said, albeit down from the almost 10 percent per year averagegrowth of the last decade.

"Despite the financial crisis and difficulties we face indifferent industries, especially the livestock and othersbecause of the harsh winters, still we have 7-8 percent growthof GDP this year. That is quite promising, I think forMongolia," he said.

TAPPING THE EARTH

Batbold said the massive Tavan Tolgoi coal mine, a depositof approximately 7.5 billion tons, is a "unique deposit." It isbelieved to be the world's largest untapped coking coal depositand is expected to be capable of producing 50 million tons peryear.

A tender for an operating license will be granted in onemonth, but Batbold gave no indication of front-runners.

In addition, he said the government plans to list up to 50percent of the mine through an initial public offering process,but with the government maintaining ownership of the assets.

The Tavan Tolgoi mine would be the second big project thegovernment has embarked upon following the $5 billion OyuTolgoi project, jointly owned by Ivanhoe Mines and thegovernment. The copper mine is expected to be the largest inthe world outside of Chile once operations start in 2013.

Batbold would not give an estimate of revenues from OyuTolgoi.

With the increase in investment and revenues thrown offfrom the mining sector, Mongolia's currency, the tugrug ,has strengthened against the U.S. dollar since the acute impactof the global financial crisis has softened.

The tugrug trades at around 1,325 per dollar, according toThomson Reuters data. In order to limit the impact of moneyflowing in and to start saving for future needs, the governmenthas submitted a budget stabilization fund law in parliament.

Mongolia, a massive landlocked nation of fewer than 3million people, is sandwiched between Russia and China. It istrying to navigate its way in developing its economy whileshedding its historical vulnerability to its two neighbors.

Batbold made a point of "encouraging other friends" toinvest in Mongolia to provide more balanced economicdevelopment and greater sophistication in its industry.

There is concern over China's growing influence in theeconomy, as it bought 70 percent of Mongolia's exports lastyear. While Beijing relinquished its claim to Mongolia in 1950,there remains a deep concern that Chinese workers will lead toincreasing immigration into Mongolia for work, especially ifChinese firms grab a large swath of the mining sector.

Batbold said the current work force at Oyu Tolgoi is 60percent Mongolian and 40 percent international, mostly Chinese,because higher-skilled workers from outside Mongolia are neededto complete construction of the mine.

"We have a certain plan to prepare Mongolian workersthrough certain vocational training. Gradually this ratio of60/40 will be increased up to 90 (percent) and above, withintwo to three years," Batbold said.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^For the latest update on Mongolia's political risks, click:http://graphics.thomsonreuters.com/gfx/Risks/Mongolia.pdf ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Daniel Bases; Editing by Dan Grebler)