* Expects parliament to agree on coal mine development next week
* Signals government unlikely to keep stake in gold mine
* Says will comply on Khan arbitration award
By Silvia Antonioli
LONDON, July 1 (Reuters) - Mongolia's prime minister sees signs of progress in developing the country's biggest coal mine and a gold project, hoping to win back much needed foreign investment after resolving a dispute with miner Rio Tinto.
Mongolia gets almost 90 percent of its revenue from the mining sector and was hit by a fall in commodity prices last year.
An impasse with global miner Rio Tinto over underground development of the giant Oyu Tolgoi copper mine also tarnished its image as an investment destination. It contributed to an 87 percent decline in direct foreign investment last year which left the country struggling to stabilise its balance of payments.
After reaching an agreement with Rio to resume work on the stalled $5 billion Oyu Tolgoi development in May, the government wants to push ahead with two more projects -- the big Tavan Tolgoi coking coal mine and the Gatsuurt gold mine.
"After unlocking Oyu Tolgoi and also solving the Tavan Tolgoi project this is giving good signals to the investment community," Prime Minister Chimed Saikhanbileg said in an interview on Wednesday, adding he was targeting a growth in foreign direct investment to $4.5 billion a year in around 2-3 years.
His cabinet was close to an agreement with a consortium of foreign companies to invest $4 billion in the 1.8 billion tonne coal mine before parliament halted the deal in April, saying it may breach Mongolian law.
But on Wednesday Saikhanbileg said he was "quite confident" that his latest proposal would be approved by parliament next week. "After that, the government will be able to finalise negotiations with investors and move on," he said.
The prime minister also said he would soon find an agreement with Canadian miner Centerra over the royalty regime that will apply to the Gatsuurt gold mine it owns.
Parliament has indicated the country should not keep an equity stake in the project but should instead raise the mining royalty, he said. This would more directly benefit the country helping it relieve debt pressures.
Saikhanbileg also indicated he was intending to abide by international arbitration which ordered Mongolia to pay more than $100 million to Canadian uranium explorer Khan Resources Inc in a licensing dispute.
In an April statement the justice minister said the Mongolian government would "work for the invalidation of the arbitration award."
"When an arbitration court makes its final call everybody should comply," he said. "Is there any other option?" (Additional reporting by Terrence Edwards in Ulan Bator; editing by Keith Weir)
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