(Changes "voters" to "citizens" in third-from-last paragraph)
By Maxim Duncan
ULAN BATOR, June 29 The pro-free market Mongolian Democratic Party (MDP), part of a grand coalition until January, said on Friday it was leading in parliamentary elections which are being closely watched to see how the new government handles a spectacular mining boom.
The right-leaning party said it had won at least 36 of 76 seats in the legislature, the Great Khural, though the election commission has yet to confirm the result of Thursday's poll.
It will need 39 seats to form the next government and is front-runner to form a coalition if it doesn't hit that number.
Politicians are under pressure to try to redistribute the proceeds from Mongolia's vast mineral wealth, and analysts had been anticipating a swing to the left following this week's vote.
After the last election in 2008, the MDP formed a "grand coalition" government with its main rival, the centre-left Mongolian People's Party (MPP), but it withdrew from the alliance in January in order to concentrate on campaigning.
The MPP, Mongolia's ruling party during the Communist era, said it was expecting to win 25-26 seats. Its vote is thought to have been split by the breakaway Mongolian People's Revolutionary Party (MPRP), led by former president Nambar Enkhbayar.
The MDP said Enkhbayar's "justice coalition" won three of the 48 constituencies contested. Under the new system, 48 constituency elections are fought on a "first past the post" basis while the remaining 28 seats are allocated to each major party proportionately, depending on their overall share of the vote.
The MPRP was campaigning on a strong "resource nationalism" platform and its inclusion in any new government could have an impact on plans for the mining sector, including the much-coveted Tavan Tolgoi coal project, which the party hopes to keep in Mongolian hands.
Four years ago, election campaigning was angry and ill-disciplined, with major parties ratcheting up their promises to ever more unsustainable levels. Rumours swirled around Ulan Bator about vote rigging, and post-election riots left five people dead.
This year, tough new election laws created a more subdued campaign, which was also reflected in the turnout. Just 65 percent of the 1.833-million electorate cast their vote on Thursday, down from 74 percent in 2008 and 82 percent in 2004.
Foreign investment in Mongolia's mines helped expand the economy at the fastest pace in all of Asia last year. But many of the three million citizens say the bulk of the nation's new wealth still lies in the hands of the political elite.
The end of Communism in 1990 left the economy devastated as old Soviet supply lines broke down. Since then, Ulan Bator's resource policies have been notoriously laissez-faire as it sought to attract foreign investment on whatever terms possible.
Expectations are rising that policies could swing too far in the opposite direction, imposing more controls to redistribute mining wealth in a way that pleases voters.
(Writing by David Stanway; Editing by Nick Macfie)