* Election was closely watched by mining industry
* Greenland holds vast untapped mineral resources
* Left-wing Inuit Ataqatigiit won 37% of votes
* Long-dominant Siumut party won 29% of votes (Adds details and quotes)
COPENHAGEN, April 7 (Reuters) - A left-wing party that opposes a large rare earth mining project has become the biggest in parliament after securing more than a third of votes in a snap election.
The result of Tuesday's election casts doubt on the mining complex at Kvanefjeld in the south of the Arctic island and sends a strong signal to international mining companies wanting to exploit Greenland's vast untapped mineral resources.
The Inuit Ataqatigiit (IA) party won 37% of votes, compared to 26% in the last election four years ago, overtaking the ruling social democratic Siumut party which secured 29% of votes, according to official results.
The pro-mining Siumut party has been in power most of the time since 1979.
Though not opposed outright to mining, IA has a strong environmental focus. It has campaigned to halt the Kvanefjeld project, which aside from rare earths including neodymium - which is used in wind turbines, electric vehicles and combat aircraft - also contains uranium.
"This will without doubt hamper mining development in Greenland," said Mikaa Mered, lecturer on Arctic affairs at HEC business school in Paris.
While most Greenlanders see mining as an important path towards independence, the Kvanefjeld mine has been a contention point for years, sowing deep divisions in the government and population over environmental concerns.
"It's not that Greenlanders don't want mining, but they don't want dirty mining," Mered said, referring to uranium and rare earth projects. "Greenlanders are sending a strong message that for them it's not worth sacrificing the environment to achieve independence and economic development."
The island of 56,000 people, which former U.S. President Donald Trump offered to buy in 2019, is part of the Kingdom of Denmark but has broad autonomy.
IA leader Mute Egede, 34, will be first to try to form a new government. A potential government ally could be the Naleraq, an independence party that also opposes the Kvanefjeld project.
Support from Prime Minister Kim Kielsen and his governing Siumut party helped license-holder Greenland Minerals gain preliminary approval for the project last year, paving the way for a public hearing.
The Australian firm has already spent more than $100 million preparing the mine and has proven processing technology through its Chinese partner Shenghe Resources.
"The challenge for IA will be to explain to the world that Greenland is still open for business and still an attractive mining jurisdiction," said Dwayne Menezes, head of London-based think-tank Polar Research and Policy Initiative.
(Reporting by Jacob Gronholt-Pedersen; Editing by Andrew Heavens and Timothy Heritage)
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