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With this years iron ore contract prices still up in the air, many Chinese steelmakers are taking a different approach, rather than wait on Rio Tinto.

The alternate route is to find small and medium-sized Australian miners for equity cooperation to enable them to avoid having much to do with the world’s three monster iron ore providers.

Business data provider Dealogic says that Chinese companies’ planned & completed investment in Australian mining firms has reached $9.7 billion so far in 2009, about triple that in 2008  & the trend is gathering pace.

Most small and medium-sized iron ore projects in Australia are open to foreign investment, and are now under increasing Chinese scrutiny. China’s steel firms have technological advantages & demand, but it is their solid finances that these mining companies find truly attractive.

In early September, Baotou Iron & Steel (Baogang) set up a joint venture company with the Australian iron ore exploration company Centrex Metals (ASX:CXM) on the Bungalow Magnetite project, aiming to establish a project with an annual output of three million tons of fine ores. Baogang is required to invest AU$40 million, paid in three phases, and as a result, will gain a 50% stake in the project.

Late August saw Australian miner Aquila Resources (ASX:AQA) signing a strategic cooperation agreement with China’s largest steel group Baosteel to develop iron ore, coal and manganese projects. Baosteel will invest AU$285.6 million to obtain a direct 15% stake in Aquila through the placement of 43.95 million shares at AU$6.50 per share, making Baosteel its second largest shareholder.

The deal marks Baosteel first direct investment in an Australian mining company.