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Ivanhoe Mines Ltd. said yesterday that it has agreed to buy a 2-per-cent net smelter return royalty interest in its copper-gold deposit in Mongolia from a subsidiary of BHP Billiton Ltd. for $37-million (U.S.).

Under the agreement, Vancouver-based Ivanhoe will pay BHP Billiton in two instalments, with the first payment of $20-million to be made by Feb. 5, 2004.

Ivanhoe held a right of first refusal to acquire the royalty from BHP Billiton and made its offer "based on its understanding that a mining industry third party was attempting to buy the royalty from BHP Billiton," Ivanhoe said in a release.

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The transaction makes Ivanhoe the sole corporate player in the Turquoise Hill project.

BHP Billiton, a mining conglomerate based in Melbourne, Australia, acquired properties in the region in 1996 and did some drilling work between 1996 and 1998.

In 2000, Ivanhoe signed an option to acquire a 100-per-cent interest in the concession from BHP Billiton and early last year completed its spending requirements to earn that interest. BHP Billiton's only remaining interest was the net smelter royalty agreement.

Beginning in July, 2001, Ivanhoe has released a stream of upbeat drilling results from its exploration program at Turquoise Hill that have led to steadily increased estimates of the deposit's size and grade.

Ivanhoe now describes Turquoise Hill as one of the world's largest and highest-grade copper-gold porphyry deposits.

The growth of the discovery "has meant that the net smelter royalty correspondingly has become an increasingly valuable asset that was outside our control," Ivanhoe chairman Robert Friedland said in a release yesterday.

In September, Ivanhoe said it had signed 16 agreements with international mining companies that had initiated unsolicited contacts with Ivanhoe. The agreements restrict the outside companies from acquiring mineral properties in nearby regions and from using confidential information to launch hostile takeover bids.

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Ivanhoe Mines shares closed up $2.45 (Canadian) or 19.29 per cent at a new 52-week high of $15.15 on the Toronto Stock Exchange yesterday. That's up from a 52-week low of $2.66 set Nov. 6, 2002.

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