UPDATE 1-Mongolia closer to Oyu Tolgoi approval - Ivanhoe

* Says government to advance approval discussions

* Still unclear how long the parliament will take

* Ivanhoe shares up 5.9 percent at C$9.50

TORONTO, July 9 (Reuters) - Ivanhoe Mines Ltd (IVN.TO) said on Thursday that the Mongolian government has moved a step closer to approval of its flagship Oyu Tolgoi copper-gold project.

The Canadian exploration company said Mongolia's parliament has voted to advance approval discussions of the comprehensive investment agreement relating to the project, located in the South Gobi region.

Under Mongolian law, the agreement will now be presented for its first official reading. However, it is still unclear how long parliament, the State Great Khural, will take to discuss the proposal before voting on it.

Ivanhoe's fortunes depend to a great extent on the success of Oyu Tolgoi and the financial strength of its partner, Rio Tinto (RIO.L), which owns about 10 percent of Ivanhoe. Rio could boost that stake to above 40 percent by meeting funding commitments for the Mongolian project.

Under the terms of the current proposal -- 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.

Ivanhoe's shares, which have risen about 200 percent year-to-date on speculation that approval is imminent, rose 5.9 percent to C$9.50 on the Toronto Stock Exchange on Thursday morning. (Reporting by Euan Rocha; editing by Rob Wilson)