US Secretary of State Kerry visits 'plucky' Mongolia

Kerry will stop in the capital Ulan Bator for several hours, where he is scheduled to meet with President Tsakhiagiin Elbegdorj, launch a new USAID programme and attend a festival of horse-racing and Mongolian wrestling.

"I think the label that attaches itself pretty naturally to Mongolia is 'plucky democracy'," a senior State Department official said ahead of Kerry's visit.

Mongolia is "in a very, very tough neighbourhood", the official added, noting the country depends on Russia for three-quarters of its oil and China for about 90 percent of their trade.

"So it's not an easy place to operate," the official said, adding "Mongolia is a terrific partner to the United States and a good friend".

Former secretary of state Hillary Clinton and US Vice President Joe Biden are among other top officials to have visited the country in recent years as America "pivots to Asia".

The former Soviet nation of about three million people possesses enormous mineral resources and deposits of gold, copper and uranium, still largely untapped.

Its mineral resources saw the country achieve over 17 percent growth in 2011, but that has since drastically fallen to under 3 percent last year along with plummeting metal prices and capital flight.

Anglo-Australian mining giant Rio Tinto, one of the country's key investors, has been hit by rising nationalist sentiment among Mongolians concerned about the growth of foreign firms as well as environmental damage from mining.

In 2012 the country passed a strict law on investment in "strategic" sectors and foreign direct investment collapsed.

Parliament has since cancelled the controversial law.

In May Rio Tinto announced it would start work on an expansion of its giant gold and copper Oyu Tolgoi mine after years of gridlock, a huge project requiring a 5.3 billion investment.

The State Department official acknowledged, in an answer to a question posed by a member of the press, that a US bid for the Tavan Tolgoi coal mine several years ago was hampered by a very slow process. The bid ultimately went to a Chinese contractor.

"We think that the regulatory environment and the legal environment in Mongolia needs to be improved," the official said, after he was asked about transparency within the key sector.