AKIPRESS.COM - Mongolia's mining sector is set for a comeback from a few troubled years, after the country's investor-friendly opposition party regained control of parliament, according to CNBC.

The Mongolian People's Party (MPP) won an impressive 85 percent majority in parliamentary elections last Wednesday, sweeping back to power following a four-year hiatus and ending the ruling Democratic Party's (DP) reign. Next year will see the landlocked nation hold presidential elections.

"The landslide electoral victory of the MPP in the general parliamentary elections is a boon for investors and miners alike," Travis Hamilton, founder of Khan Investment Management, a wealth management and advisory group that specializes in Mongolia, told CNBC.

Mongolia has long relied on the exploitation of its vast mineral resources, which include coal, copper and gold, for economic development. The World Bank estimated mining's contribution to gross domestic product (GDP) at 20 percent currently, twice the ratio of a decade ago. But the country suffered amid the global commodity rout, with GDP tumbling to 2.3 percent in 2015, from 7.9 percent in 2014.

While the DM made significant legislative progress in liberalizing resource investment, policy flip-flops and a prevailing sense of nationalism dampened interest from foreign investors. In May 2012, the government passed a controversial law aimed at curbing foreign ownership in certain sectors, including mining, which Reuters reported led to a 43 percent annual crash in overseas investment during the first half of 2013, before the law was abolished.

Sentiment took another hit in October 2012, when Mongolia detailed Australian lawyer Sarah Armstrong, who was working in the country for SouthGobi Resources. Mongolia claimed Armstrong was a potential witness in a tax evasion case, but SouthGobi told journalists the move was payback for a dispute the company had with the government over mining licenses. Mongolia lifted the travel ban on Armstrong two months later following intervention from the Australian government.

Now that the MPP is back in power, economists anticipate improved policy coordination going forward, pointing to the party's robust track record of unity and leadership.

"MPP's victory will reduce political friction within the parliament given that MPP appears to be an older party with stronger structure and discipline, as compared to DP, which is operated by several factions," Citi economist Adrienne Lui commented in a note this week.

Moreover, MPP's parliamentary majority meant they could govern without the need to form a coalition government, thereby avoiding political compromise, a factor that plagued the DP, Hamilton said. Almost all anti-mining populists were ousted from parliament in last week's vote, paving the way for a healthier business environment, he added.

That's good news for foreign miners, such as Australia's Rio Tinto, that have suffered under the DM.

Rio is the majority shareholder in Turquoise Hill Resources (TRQ), a Canadian miner that has a 66 percent controlling interest in Mongolia's Oyu Tolgoi (OT) mine, which has one of the world's largest copper reserves. Following a two-year dispute with the Australian company, Mongolia's outgoing Prime Minister Chimed Saikhanbileg finally allowed Rio to restart work on OT last May. The miner recently announced it would invest about $5 billion in OT over the next four years.

"We believe OT will remain free of politics," said Lui, noting that the MPP was also a key player in orchestrating the 2015 peace deal with Rio.

Investors could also take comfort that the OT project was being supported by the World Bank, "rendering it effectively bulletproof from further alteration or political investment risk," Hamilton said.

Optimism is also high for progress on the Tavan Tolgoi (TT) mine, one of the world's biggest untapped coking and thermal coal deposits, which also experienced difficulties under the DM's rule.

"The three local companies that operate TT – Energy Resources, state-owned Erdenes Tavan Tolgoi (ETT) and Tavan Tolgoi Joint Stock Company – have all scaled back operations since the mining economy began slowing down in 2014," researchers at University College London write in a June note.

But the new government is expected to honor investment agreements that support TT, including building a power plant as a joint project with Japan's Marubeni, and resolve outstanding debt that state-owned ETT owes Chinese aluminum producer Chalco Group.

Mongolia's mining outlook and overall growth profile will also be bolstered by the China-Mongolia-Russia Economic Corridor, a project aimed at strengthening transport links and trade between the three nations that was signed last month.

"Post-elections, there will be three to four years of certainty, and the Mongolian risk premium is thus improving," Joseph Naemi, independent director at Sharyn Gol Joint Stock Company, a local thermal coal supplier that's 70 percent owned by Manhattan-based private equity fund Firebrand Resources, told CNBC last week.

He predicted a string of mergers and acquisitions, on the heels of Trade Development Bank of Mongolia's $500 million deal this week to acquire gold, copper and iron ore mining interests from Russian conglomerate Rostec.

In particular, Naemi anticipates a potential take-over of TRQ. Over the past year, speculation has risen that Rio may buy out the remaining shares in TRQ, but Naemi believes Chinese firm Chinalco could be a viable contender.

"If my call proves to be correct, and should Chinalco evolve as the major player in bidding for the TRQ minority, their involvement would further de-risk the Oyu Tolgoi project, which by necessity de-risks Mongolia as an investment destination and sovereign."