* Vale, Xstrata, Rio eye $2 bln Mongolian coal mine

* BHP Billiton, Shenhua Energy also bidding - sources

* process at a very early stage (Adds details, analyst quotes, background)

By Joseph Chaney and Michael Flaherty

HONG KONG, Feb 17 (Reuters) - Vale (VALE5.SA ), Xstrata (XTA.L ) and Rio Tinto (RIO.L )(RIO.AX ) are among the companies that have submitted proposals to develop Mongolia's prized $2 billion Tavan Tolgoi coal mine, according to two sources with direct knowledge of the matter.

Mongolia's government has hired Deutsche Bank and JP Morgan to sell up to a 49 percent stake in what is often called the world's biggest untapped coking coal deposit.

BHP Billiton (BHP.AX ) (BLT.L ) and coal giant China Shenhua Energy (1088.HK ) (601088.SS ) have also bid, according to the sources.

Tavan Tolgoi, which has a coal reserve of 6.5 billion tonnes, and holds thermal coal, is also drawing bids from consortiums of Japanese, Russian and Korean firms. Those firms include energy, commodity and trading companies, one of the sources said.

But Shenhua, which analysts long considered the leading bidder because of China's proximity to Mongolia, may not have frontrunner status, the source told Reuters.

"It's not a slam dunk that Shenhua is the party that is going to get that development," said a Hong Kong-based investment banker, adding the Mongolian government is leaning toward an international and diversified player.

The sources declined to be identified due to the sensitive nature of the process, which is at an early stage.

The bids have been put forward in different forms -- some detailed development proposals, some 1-page expressions of interest, the investment banker said.

"Basically good quality hard coking coal is quite a scarce commodity in the long term and such large assets are hard to come by, so companies with a long-term view on coal could find the assets attractive," said Malcolm Southwood, an analyst at Goldman Sachs in Melbourne.

A supply crunch last year helped more than double the price of hard coking coal, which is used in the metals sector, to $300 a tonne as steelmakers across the globe gobbled up huge quantities amid an economic boom.

While prices have since collapsed as demand from steel mills slumps on the back of a global economic downturn, analysts said the long-term outlook for hard coking coal prices remains robust.