QUITO, Sept 9 (Reuters) - Xstrata Copper, Chile's Codelco and China's Tongling are eyeing a potential partnership to develop one of Ecuador's major copper plays, the Panantza-San Carlos copper property owned by Canada's Corriente Resources, government officials told Reuters on Tuesday.

Corriente (CTQ.TO: Quote, Profile,Research, Stock Buzz) has been looking since early this year for partners to develop the property in southern Ecuador, and has already hosted due diligence trips from interested parties.

Two senior mining ministry officials who spoke on condition of anonymity said China's Tongling Nonferrous Metals 000630.SZ, Xstrata Copper (XTA.L:Quote,Profile, Research, Stock Buzz) and No. 1 copper producer Codelco, a state-run Chilean company, have visited the site.

"Those three companies have met with us and been briefed on the country's goals in the sector," said one of the senior officials, adding that the companies are part of Corriente's majority partnership marketing process carried out by Citi and CanaccordAdams. (Reporting by Alonso Soto; additional reporting by Pav Jordan in Sanatiago)

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This comes as no big surprise. I've been arguing the Codelco model for months now, and lo and behold, there they are. Not confident enough to take on all the risk, but on the ground sniffing around nonetheless.

I predict the new Ecuadorean State Mining company will quickly tire of digging sand and gravel and move on to bigger things. We had a chance to help them develop this model, but we blew it. Now watch Kinross do a JV with the govt. which we could have done ourselves if we'd had sharper management.

It may even be that all this draconian mandate WFT stuff was intended to create just this situation. If you were Ecuadorean, what would you want? A mining industry run by foreigners for the benefit of foreigners and selected locals, or something you can control that's oriented towards national development, even if it takes a bit longer and the learning curve is steeper?

Too bad they chose to run with the majors though, if that's the case. The analogy of Ecuador taking advice from majors is just too close to Aurelian taking advice from Kinross for my comfort. The majors talk a good line, and they may have something to offer Ecuador in the short run, but in the end they're out for themselves, and one of their main goals is to shut out competition.

So, how does NOT having dozens of thriving mid-tier and junior producers out there competing with each other for the discoveries of junior explorers help Ecuador? Short answer, it doesn't.

Instead you're left with few big companies who'll drive a hard bargain, and maybe undermine you in the process, the same way we were undermined. Like that's going to attract the grassroots explorers you need to keep the ball rolling. NOT!

As I see it, you had two models for growth of the Ecuadorean mining industry. Organic, bottom up, using small and mid-tier companies in partnership with the govt and their banks to the benefit of all concerned, or a top down approach using majors to develop known resources based on a fiscal model with tax levels only a major could tolerate.

The latter starts out as an equal partnership (in the minds of Ecuadoreans) but very quickly becomes a captive situation, as you've already driven out the mid-tier and junior players. Once you realize your mistake it's too late, and now guess who's in charge? Now who's threatening a shutdown because the cost of exploration is too high, and you know... we'd be only too happy to stay, but you guys drove out all the greenfield players, so what else can we do?

Well, at least they'll get some jobs out of the deal, and the Big Nanny state can move forward until the next crisis hits. I just felt the Ecuadorean people deserved more is all. Teach a man to fish, then have a damn big fish fry with your new friends. That's my idea of development.

ebear