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Iron ore rally lifts Australia shares to 14-mth high

(Updates with closing levels)

MELBOURNE, Oct 9 (Reuters) - Australian shares climbed 0.5 percent to a fresh 14-month high on Tuesday, with miners boosted by a jump in iron ore prices that helped offset concerns about global economic growth.

The benchmark S&P/ASX 200 index

advanced 23.4 points to 4,505.3, breaching the psychological 4,500 level to hit its best close since July 27, 2011. The benchmark fell 0.3 percent to 4,481.9 on Monday.

Miners gained after the price of iron ore surged 6 percent to $110.40, bringing its price recovery to 27 percent from three-year lows hit in September.

"The rally in iron ore prices has put wind in the sails of mining and energy plays," said Ben Taylor, trader at CMC Markets.

"At over $110 a tonne we have seen significant price recovery and that should alleviate the margin concerns seen in September," he said.

No. 3 iron ore miner Fortescue Metals Group

jumped

6.5 percent, while Rio Tinto

rose 1.5 percent. Mid-cap miners Atlas Iron

rose 3.6 percent and Northern Iron

jumped 4.6 percent before ending just 0.9 percent higher.

Traders said that new discoveries and merger activity among the small and mid-cap miners were also helping underpin investor interest.

New Zealand's benchmark NZX 50 index

slid 0.4 percent to 3,908.

Investors welcomed news that surfwear retailer Billabong International Ltd

, which is fending off a $700 million private equity bid, has appointed respected former fashion executive Ian Pollard as chairman to guide a turnaround.

The shares rose as much as 3 percent and ended up 1.5 percent at A$1.025. That remains well below TPG's offer price of A$1.45 per share as the market bets a deal will not eventuate.

Shares in Seven West Media Ltd

, owner of Australia's top-rated free-to-air television network, rose for a second day, adding 2.4 percent after an analyst report on Monday speculated about a buyout by its largest shareholder, Seven Group Holdings.

Troubled retailer Mothercare Australia

asked for its shares to be suspended ahead of an announcement about a deal to put fresh capital into the baby equipment and clothing chain.

(Reporting by Victoria Thieberger; Editing by Richard Pullin)

((victoria.thieberger@thomsonreuters.com +61 3 9286 1421)(Reuters Messaging: victoria.thieberger.reuters.com@reuters.net))

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