* Mongolia to choose stock exchange operator in October
* Tavan Tolgoi mine operating license given in October
* Studying establishment of budget stabilization fund
* 2010 GDP to be in 7 to 8 percent growth range (Adds details, comment, background, byline)
By Daniel Bases
NEW YORK, Sept 20 (Reuters) - Mongolian Prime Minister Sukhbaatariin Batbold said on Monday the London Stock Exchange is the front-runner in a bid to manage a new local stock exchange, expected to be up and running by year-end.
"London is the front-runner" to run this exchange, building it up from scratch," Batbold told reporters on the sidelines of the United Nations General Assembly meeting.
Mongolia is trying to make the most of its natural resource wealth. It is one of the last places on earth with huge untapped mining resources for coal, copper, gold and uranium.
The government's international tender offer for a management 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, NASDAQ OMX, Deutsche Borse, and the Korean Stock Exchange.
The idea is to have established companies with listings elsewhere add a dual listing on the Mongolian exchange.
"First, what we would ask from them is to have a dual listing on the Mongolian stock exchange from those already listed companies," he said.
"Secondly, there will be (large) state-owned enterprises through the privatization program. So we will have a quite serious change in our privatization concept so that state-owned enterprises, especially the large ones, will go through IPO on the Mongolian stock exchange and possibly in combination with international stock exchanges," Batbold said.
Even as the global financial crisis has wrought havoc on developed economies and put a crimp in generally robust emerging markets, economic growth will remain strong, Batbold said, albeit down from the almost 10 percent per year average growth of the last decade.
"Despite the financial crisis and difficulties we face in different industries, especially the livestock and others because of the harsh winters, still we have 7-8 percent growth of GDP this year. That is quite promising, I think for Mongolia," he said.
Batbold said the massive Tavan Tolgoi coal mine, a deposit of approximately 7.5 billion tons, is a "unique deposit." It is believed to be the world's largest untapped coking coal deposit and is expected to be capable of producing 50 million tons per year.
A tender for an operating license will be granted in one month, but Batbold gave no indication of front-runners.
In addition, he said the government plans to list up to 50 percent 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 the government has embarked upon following the $5 billion Oyu Tolgoi project, jointly owned by Ivanhoe Mines (IVN.TO) and the government. The copper mine is expected to be the largest in the world outside of Chile once operations start in 2013.
Batbold would not give an estimate of revenues from Oyu Tolgoi.
With the increase in investment and revenues thrown off from the mining sector, Mongolia's currency, the tugrug MNT=, has strengthened against the U.S. dollar since the acute impact of the global financial crisis has softened.
The tugrug trades at around 1,325 per dollar, according to Thomson Reuters data. In order to limit the impact of money flowing in and to start saving for future needs, the government has submitted a budget stabilization fund law in parliament.
Mongolia, a massive landlocked nation of fewer than 3 million people, is sandwiched between Russia and China. It is trying to navigate its way in developing its economy while shedding its historical vulnerability to its two neighbors.
Batbold made a point of "encouraging other friends" to invest in Mongolia to provide more balanced economic development and greater sophistication in its industry.
There is concern over China's growing influence in the economy, as it bought 70 percent of Mongolia's exports last year. While Beijing relinquished its claim to Mongolia in 1950, there remains a deep concern that Chinese workers will lead to increasing immigration into Mongolia for work, especially if Chinese firms grab a large swath of the mining sector.
Batbold said the current work force at Oyu Tolgoi is 60 percent Mongolian and 40 percent international, mostly Chinese, because higher-skilled workers from outside Mongolia are needed to complete construction of the mine.
"We have a certain plan to prepare Mongolian workers through certain vocational training. Gradually this ratio of 60/40 will be increased up to 90 (percent) and above, within two to three years," Batbold said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For the latest update on Mongolia's political risks, click: here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Daniel Bases; Editing by Dan Grebler)