UPDATE 1-Mongolia ends $2 bln Tavan Tolgoi stake sale-sources

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* Mongolia to hold 100 pct of Tavan Tolgoi coal mine

* JP Morgan, Deutsche Bank no longer advising on sale

* Mongolia seeking extraction agreement with global miner

By Joseph Chaney, Asia Resources Correspondent

HONG KONG, Feb 4 (Reuters) - Mongolia's government has canceled the auction of an estimated $2 billion stake in one of the world's largest undeveloped coal deposits, ending hopes of global mining giants eager for a slice of the project, sources said.

JP Morgan (JPM.N) and Deutsche Bank (DBKGn.DE) were no longer advising on the sale of the 49 percent stake, three sources familiar with the matter told Reuters on Thursday. The two banks were retained more than a year ago to run the auction.

Shortlisted bidders for the stake in the Tavan Tolgoi mine included heavyweights BHP Billiton (BHP.AX), India's Jindal, Brazil's Vale (VALE5.SA), U.S. coal miner Peabody (BTU.N), and China's Shenhua (1088.HK).

The Mongolian government could not be immediately reached for comment. Deutsche Bank and JP Morgan both declined to comment.

Mongolia's government had decided to hold 100 percent of the huge Tavan Tolgoi coal deposit, the sources said. The reversal shows the determination of the government to, in the case of Tavan Tolgoi, fully control one of its most prized natural resources.

Late last year, Mongolia struck a deal to develop a massive copper and gold project with Ivanhoe Mines (IVN.TO) and Rio Tinto (RIO.L)(RIO.AX).

A South Korean COPEC consortium, a group of Japanese companies, and a Russian consortium including Gazprom (GAZP.MM) and Renova were also named as bidders.

Mongolia's state-owned Erdenes MGL was originally slated to own at least 51 percent of the project [ID:nPEK305507]

Now, the sources said, the country's government hoped to strike a deal with a global miner to develop Tavan Tolgoi on a contract basis, without a significant equity holding in the project.