UPDATE 1-US may block China-backed mine dvlpt near Navy site

(adds U.S government, other comments)

By Lucy Hornby

BEIJING, Dec 18 (Reuters) - A company developing a gold mine in Nevada has warned that the United States may reject its proposed partnership with a Chinese mining firm on national security grounds because the mine is near a military installation.

Toronto-listed FirstGold said the Committee on Foreign Investment in the United States (CFIUS) planned to recommend to U.S. President Barack Obama on Monday that he reject a plan to develop Relief Canyon mine, near Lovelock, Nevada, due to its proximity to the Fallon Naval Air Station.

If rejected, the deal would be only the second time a U.S. president has intervened to block an investment on national security grounds, a trade attorney said.

Usually, companies decide themselves to abandon a project if they can not reach an agreement with CFIUS on how to mitigate national security concerns.

"What's extraordinary here is that these companies might actually force the president himself to do it," said Timothy Keeler, a former U.S. trade official now in private law practice.

"It very well could be the right decision. But nestled in the broader context of U.S.-China relations right now, it's big deal."

A spokeswoman for the U.S. Treasury Department, which chairs the CFIUS, said the department were bound by law not to comment on specific cases that could be under review.

"CFIUS's statutory obligation is to protect national security, while maintaining an open investment environment, a responsibility that we take very seriously," U.S. Deputy Secretary Neal Wolin added in a statement first given to The New York Times.

"Foreign investments in the U.S. are critical to economic growth and job creation here at home but we have an obligation to prioritize national security when a particular transaction threatens to impair national security," he said.

For China, U.S. refusal would form part of a growing roster of overseas resources deals that have been blocked following foreign government intervention, in what the Chinese see as a trend of protectionism in Western nations.

Australia's defence department, for instance, this year objected to a joint venture between Wuhan Iron and Steel and Western Plains Resources near the Woomera missile testing site. Another investment, by Chinese state trading firm Minmetals into Oz Minerals, was only cleared after a mine near Woomera was stripped out.

"We fail to see the connection between U.S. national security and our principal asset, the Relief Canyon mine, which has existed at its present location since the early 1980s," FirstGold CEO Terry Lynch said in a press release late on Thursday.

"Our property is over 50 miles away from the Fallon base and surrounded by several other mining properties."

Lynch said he was hopeful the deal would not be rejected.

China's Northwest Nonferrous International Investment Co Ltd agreed in July to buy 51 percent of FirstGold for $9.5 million, and loan it $5.5 million for working capital for the mine, pending government approval.

A senior executive at its parent firm said the Chinese side had only just found out about the military base, which had not come up during initial discussions.

The U.S. Navy uses Fallon for tactical aviation training.

"A developed country should have clear laws, for instance, what kind of perimeter around military installations is allowed," said the executive at the Northwest Mining and Geological Bureau, the parent company.

The executive said his firm had not appealed to the Chinese central government for help in the case. (Additional reporting by Doug Palmer in Washington; Editing by Ian Geoghegan and Bill Trott)