By Terrence Edwards
ULAN BATOR, April 7 (Reuters) - Mongolia's parliament has stepped in at the last minute to halt a landmark deal with a consortium of foreign firms to develop the giant Tavan Tolgoi coal mine near the Chinese border, saying it needs the approval of legislators before going ahead.
A series of delays at major mining projects such as Tavan Tolgoi and the Oyu Tolgoi copper mine run by Rio Tinto have taken a toll on Mongolia's tiny economy, with foreign investment slipping 74 percent last year.
The government asked a consortium consisting of the Mongolian Mining Corp, China's Shenhua Energy and Japan's Sumitomo Corp to invest $4 billion in the project and had hoped to sign off on it this week following four months of negotiations.
Prime Minister Chimed Saikhanbileg said in a televised address at the weekend that the talks were in their final stages.
However, parliamentary speaker Zandaakhuu Enkhbold said the deal might be in breach of Mongolian law and the government has now agreed that it should be approved by legislators before going ahead.
"It seems the prime minister did not keep the speaker apprised of developments," said Badral Munkhdul, chief executive officer of market intelligence group Cover Mongolia.
A government spokesman confirmed that representatives of both Shenhua and Sumitomo were in Ulan Bator on Monday to sign the deal, which would see the consortium take over management at Erdenes Tavan Tolgoi, the state-owned entity in charge of the project, and expand capacity.
Sumitomo and Shenhua were not immediately available for comment on Tuesday.
The much-delayed 1.8 billion tonne coking coal project, located 240 km (150 miles) north of the Chinese border, was regarded as one of the most promising untapped deposits in the world.
But commercial activity at the mine has been halted repeatedly as a result of financial constraints. In February, the former chief executive officer of Erdenes Tavan Tolgoi, Yaichil Batsuuri, was jailed on corruption charges.
Saikhanbileg took over as prime minister in November after political infighting and a flagging economy resulted in a vote of no-confidence in his predecessor, Norov Altankhuyag. (Additional reporting by Ruby Lian in SHANGHAI and Aaron Sheldrick in TOKYO; Editing by David Stanway and Alan Raybould)
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