Ivanhoe Mines Ltd., seeking approval to develop a copper and gold deposit in Mongolia, agreed to sell its 42 percent stake in Jinshan Gold Mines Inc. to China National Gold Group Corp. for C$218 million ($214 million).

Beijing-based China National Gold will pay C$3.1115 a share for the 67.5 million shares and acquire a C$7.5 million promissory note issued by Jinshan, Vancouver-based Ivanhoe said in a statement. The price is 9.2 percent higher than Jinshan's closing price on the Toronto Stock Exchange yesterday.

Ivanhoe is facing losses caused by delays in completing an agreement with Mongolia's government to start production at the Oyu Tolgoi project. Ivanhoe said last month that its fourth- quarter loss widened to $253.6 million from $68.7 million a year earlier.

``The transaction gives them more staying power with the Oyu Tolgoi project in Mongolia, where an investment agreement leading to commencement could still be as much as a year away,'' Raymond Goldie, an analyst at Salman Partners Inc., said in an interview.

The signing ceremony between China National Gold and Ivanhoe in Beijng, China on April 10, 2008.

Ivanhoe rose 52 cents, or 4.7 percent, to C$11.54 at 4:21 p.m. in Toronto trading. Jinshan fell 5 cents, or 1.8 percent, to C$2.80.

The transaction announced today, which is expected to close on May 10, also grants Ivanhoe the right to buy as many as 1.5 million Jinshan shares at C$2.50 each until June 26, 2009, Ivanhoe said.

Chang Shan Hao

Jinshan's main asset is the Chang Shan Hao gold mine in China's Inner Mongolia province, which has 3.92 million ounces of measured and indicated reserves, according to the company's Web site. About 33,280 ounces of the metal have been produced since output started last year, and the site is expected to yield 120,000 ounces this year, the company said.

Ivanhoe acquired its initial stake in Vancouver-based Jinshan in May 2002.

Rio has called Oyu Tolgoi ``the world's largest undeveloped copper-gold resource.'' The site, about 80 kilometers (50 miles) north of the Mongolia-China border, contains 78.9 billion pounds of copper and 45.2 million ounces of gold on a measured, indicated and inferred basis.

Under a 2007 draft investment agreement, the Mongolian government would have the right to a 34 percent equity stake in the project and related taxes equivalent to 55 percent of the profits, Rio Chief Executive Officer Tom Albanese said Feb. 22.