* Small West African miners out of favour with Westerninvestors
* Chinese mining companies moving away from full takeovers
* Chinese infrastructure firms now main investors intoregion
By Stephen Eisenhammer and Sonali Paul
LONDON/MELBOURNE, Nov 12 (Reuters) - When a Chinese officialsaid his country wanted half its iron ore imports to come fromfirms with Chinese involvement in five to 10 years, investorsbet West Africa would benefit.
Nearly three years on, many have been disappointed.
But executives and analysts say China, the world's largestconsumer of iron ore, is tying up supply of the steel-makingcommodity in the region, as forecast - but through sales dealsand associated infrastructure rather than acquisitions.
Iron ore explorers in the region are out of favour withtraditional, Western investors. Firms like Bellzone,Sundance, and West African Minerals have seenshares fall about 70 percent this year, as, in some cases,operational issues added to price and confidence woes.
China has also been more cautious, smarting frommultibillion dollar projects like CITIC Pacific's Sino Iron thathave yet to ship ore and investments that soured.
The type of Chinese firms looking to invest in West Africaniron ore is changing, with much of the interest coming fromrailway and construction firms - whose role is critical in aregion with little or no infrastructure - and import companies,rather than heavyweight mining state-owned enterprises (SOEs).
"The big SOEs entered the overseas market earlier. None ofthem have been successful. They have been left with a badtaste," Guocheng Pan, chief executive at iron ore miner ChinaHanking Holdings, told Reuters.
"Those (West African) projects will go ahead, it's just amatter of time," he added.
Chinese investors are also happier to look to the long term.
"One year, two years, five years means nothing to mostChinese firms," said Hunter Hillcoat, analyst at Investec. "Theymay still be very much heading towards building up capacity outof West Africa... but they'll do it in their own time."
West Africa has yet to meet expectations it could be theregion's equivalent of Australia's Pilbara. But at stake aredozens of smaller mining projects in Cameroon, Republic ofCongo, Gabon, Guinea, Liberia and Sierra Leone looking toproduce at least 115 million tonnes a year of iron ore.
They are vying to help feed the construction boom in Chinawhich is expected to drive demand for iron ore imports to 1billion tonnes by 2018, according to Australia's Bureau ofResources and Energy Economics.
Heads of smaller miners in West Africa say Chinese firms arestill at the table as the country looks to ease its dependenceon the three mega producers, Vale, Rio Tinto and BHP Billiton , but are notinterested in taking over entire companies as in the past.
"From what we have seen the Chinese would very much likecollaboration and to work in partnership," Haresh Kanabar,chairman of IMIC, which is buying Cameroon-focusedminer Afferro , told Reuters.
IMIC has positioned itself as an investment company withstrong Chinese contacts, looking to buy stakes in West Africanminers while securing infrastructure deals with Chinese firms.
"The appetite is there," Kanabar added.
Before even bidding for Afferro, IMIC sorted partnershipswith a subsidiary of China Railway Group (CREC) to build theinfrastructure and iron ore importer China Railway Materials(CRM) to arrange offtake from Afferro's Nkout mine.
This marks a shift from just a few years ago, when bignational Chinese miners were taking equity stakes in WestAfrican projects. These have had mixed success.
National Aluminium company, Chalco , leda Chinese consortium which bought just under 45 percent of theSimandou iron ore deposit in Guinea from Rio Tinto in2010. Yet, though it is one of the biggest untapped iron oredeposits in the world, Simandou is still years from production.
In 2012, Shandong Iron and Steel took a 25percent stake in Sierra Leone-focused African Minerals for $1.5 billion, including a sales agreement. A slower thanexpected ramp-up has led to the miner paying a charge.
Sundance, whose Mbalam-Nabeba iron ore minestraddles Cameroon and the Republic of Congo, was expected to benext. But the takeover by China's Hanlong Group fell through this year, leaving Sundance to raise money though other means.
Sundance Chief Executive Giulio Casello told Reuters Chinesestate-owned construction companies and other internationalconstruction firms were interested in the project, one of thebiggest in the region, with all key approvals in hand.
He was confident a partnership would be sorted by early 2014and would not have the same problems as the Hanlong deal.
"This is different. This is not a takeover," Casello said.
"This is about construction companies building port andrail, providing debt and us using the resource to pay that off."
- Commodity Markets
- West African
- iron ore