Oyu Tolgoi speculation boosts Ivanhoe Mines stock

* Approval of Mongolian project expected within days

* Shares rise 11 pct in Toronto, New York (In U.S. dollars unless noted)

TORONTO, July 7 (Reuters) - Shares of Ivanhoe Mines Ltd (IVN.TO) (IVN.N) rose more than 10 percent on Tuesday, on continued speculation that the Mongolian government is likely to approve the company's flagship Oyu Tolgoi copper-gold project in the next few days.

The Canadian exploration company's fortunes are greatly dependent on the success of the Mongolian project and the financial strength of its partner, Rio Tinto, (RIO.AX) (RIO.L) which owns about 10 percent of Ivanhoe. Rio could boost that stake eventually to above 40 percent by meeting funding commitments for Oyu Tolgoi.

Ivanhoe's shares jumped last week soon after Rio Tinto said the bulk of its $15.2 billion rights issue had been successfully completed, this will help cover its immediate debt servicing needs and free up capital to invest in projects like Oyu Tolgoi.

Rio has been struggling to pay down billions in debt from its 2007 acquisition of Canadian aluminum producer Alcan.

Ivanhoe and Rio have been waiting for Mongolia's parliament to vote on a draft investment agreement reached in March that could allow the project to go ahead.

Under the deal -- which revives a similar agreement that fell apart early last year -- Mongolia would take a 34 percent stake in Oyu Tolgoi, which is expected to produce an average of at least 440,000 tonnes of copper and 320,000 ounces of gold over a 35-year mine life.

According to recent media reports, the two main political groups in Mongolia's coalition government have met and agreed to proceed with the prevailing Oyu Tolgoi draft agreement.