SYDNEY, May 24, 2010 (Dow Jones Commodities News via Comtex) -- Ivanhoe Australia Ltd. (IVA.AU) will spend A$17.4 million on the Osborne copper-gold mining project in northwest Queensland state to help it develop its adjacent Merlin project, the company said Tuesday.

The purchase will give Ivanhoe access to Osborne's existing infrastructure, including a power station, gas pipeline, mining camp, mining fleet, airstrip and concentration facilities.

"This is a fast-track for the Merlin production," Peter Reeve, chief executive of Ivanhoe Australia, told Dow Jones Newswires.

Ivanhoe said that the deal would reduce Merlin's capital development costs by A$100 million, and enable the company to start production at the small Little Wizard site next year before Merlin starts producing in 2012.

It would still need to build a road between the two sites, which are 50 kilometers apart.

The news sent Ivanhoe's shares up on Tuesday, and at 0221 GMT, Ivanhoe shares had climbed 12%, or 39 cents, to A$3.57.

Merlin is the world's highest-grade molybdenum and rhenium resource, with 16 million metric tons of ore containing 0.6% molybdenum and 10 grams of rhenium per ton.

The metals are most-used, respectively, in high-performance steel alloys and jet engines.

Ivanhoe Australia, which is 80% owned by Canadian mining giant Ivanhoe Mines Ltd. (IVN), will purchase the site from Barrick (PD) Australia Ltd., a local subsidiary of Barrick Gold Corp. (ABX).

Ivanhoe will also have to post A$18 million of provisions for environmental rehabilitation of the site, the company said.

The Osborne site also contains attractive copper and gold prospects in the form of the Kulthor deposit, where a 2 kilometer exploration tunnel came to within 150 meters of the ore body before work was halted when Barrick began the sale process.

"The infrastructure to process Merlin is the main gain but Kulthor is more than just a bonus," said Reeve.