Tuesday, July 1, 2008

Ivanhoe Mines stock soars on Mongolia mine optimism

TORONTO (Reuters) - Ivanhoe Mines (IVN.TO: Quote) shares surged 9 percent on Monday as signs that Mongolian voters will elect a majority government raised expectations Ivanhoe would soon conclude a deal to develop the massive Oyu Tolgoi copper and gold mine.

Canada-based Ivanhoe and its partner Rio Tinto (RIO.L: Quote) agreed to a draft investment agreement last year that would give the government a 34 percent stake in Oyu Tolgoi and clear the way for development of the mine.

But the deal was withdrawn earlier this year by the government amid opposition from small populist parties in the coalition government.

According to independent polling group Sant Maral Foundation, the Mongolian People's Revolutionary Party (MPRP) -- which has said it supports the investment agreement -- appeared poised to take at least 44 seats in the country's 76-seat parliament in the vote held on Sunday.

Analyst Ray Goldie of Salman Partners said any signs of a majority government would raise the likelihood of a deal soon.

"It means they can no longer have the agenda dictated by a small party," he said.

Late in the session, Ivanhoe's shares were up 91 Canadian cents at C$11.02 on the Toronto Stock Exchange.

Official election results are not expected until Tuesday at the earliest.

Mongolia has been ruled by an unstable coalition since the last parliamentary election four years ago.

Oyu Tolgoi is eventually expected to produce an average of 440,000 tons of copper and 320,000 ounces of gold per year.

Rio paid $303 million ($297 million) for a 10 percent stake in Ivanhoe in 2006 and plans to raise its interest when the investment deal is approved.

($1=$1.02 Canadian)

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