Mongolia's parliament will vote during its spring session on making gold exempt from a windfall profits tax imposed last year, but the tax will remain on copper to help develop the country's downstream capacity, Nadmid Bayartsaikhan, Mongolia's finance minister said Monday.

In a law passed May 12 last year, Mongolia imposed a 68% tax on profits from copper concentrate sales when the price of the commodity reaches $2,600 a metric ton, and on gold when the precious metal reaches $500 a troy ounce.

Both metals recently have been trading above that level, with copper above $7,500/ton and gold around $650/oz.

The parliament's spring session will close at the end of July.

Foreign investors have chaffed under the tax since it was introduced in response to popular demands that Mongolia reap a greater return from the global resources boom.

Ivanhoe Mines Ltd. (IVN) and its partner, diversified miner Rio Tinto Ltd. (RIO.AU), said early April that they had reached an in principle investment agreement with the Mongolian government to develop a copper-gold project near Mongolia's border with China, one of the world's largest undeveloped copper-gold mines.

The Oyu Tolgoi project, is set to eventually produce 140,000 tons of copper and have a life of about 40 years.

Bayartsaikhan said that under the agreement the Mongolian government would purchase a 34% stake in the project but that it was still uncertain how it pay for the share.

"There are a lot of ways to purchase this share. Maybe one option is to use a tax exemption, or a tax holiday," he said. "It's unrealistic to buy the stake directly from Ivanhoe because of a shortage of financing."

The deal requires the approval of both companies' boards as well as the Mongolian cabinet and Mongolian parliament.

Bayartsaikan said the parliament would vote on the issue during the spring session.

In July 2006, the government passed sweeping changes to its minerals law, including giving Mongolia the right to bargain for up to a 34% stake in privately discovered "strategic" deposits that contribute more than 5% to the country's GDP.

In deposits discovered with state aid, the government stake can rise to 50%.

"There is a need to update the mining law, but it's not very suitable to change it soon," the finance minister said.

Prior to last year's changes, Mongolia's mining laws were among the most investor friendly in Asia, prompting foreign miners to flock the previously unknown market to tap into its vast mineral reserves.

Bayartsaikan acknowledged the changes had effected investor sentiment but was unfazed about long-term effects.

"Nowadays we feel interest in investing in Mongolia is increasing," he said.

He said foreign direct investment in Mongolia was $317 million in 2006 and expects that amount to increase this year.

"Our transition from a state planning economy to a free market economy is almost over. We have established a very liberal economy and we see a bright future," Bayartsaikan said. "And we very much welcome investors to Mongolia."