By DEVON MAYLIE

Chinese nickel companies are quietly collecting stakes in junior nickel miners, in a move that guarantees future supplies for China and could help the small companies meet output targets.

With its huge construction projects and export market, China is the world's biggest consumer of stainless steel, of which nickel is an important ingredient. But with the country's consumption of nickel ore outstripping its own mines' output -- China needs to import about 23% of its consumption needs -- the country has traditionally imported large amounts of the refined metal.

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A mine in Ontario is seen here. China is buying stakes in many small Canada-based nickel miners

So, eager to ensure its future supply, China is buying stakes in resource-rich junior nickel miners, many of them based in Canada. And as a further guarantee of supply, it is parlaying some of its holdings into takeovers.

"China isn't self-sufficient in nickel," said Vanessa Davidson, an analyst at consultancy CRU. "If it wants to be self-sufficient, it needs to negotiate new contracts for [raw material] because it doesn't have that much in the ground."

That is where the stakes in small miners come in. Many small miners have been struggling since finance dried up and credit tightened last year. But Chinese nickel companies are offering the small miners an alternative, in the form of stake acquisitions and offtake agreements, where Chinese companies agree to buy part of the miners' output at a fixed price.

In short: The juniors have the material and China has the smelters and the financial firepower. The juniors are able to reduce debt, restart closed projects and resume mine development. And China secures nickel supplies for its expanding smelters.

"My sense is that the Chinese prefer to be an investor with significant stakes that secures stuff for the future," said BMO Capital Markets analyst David Cotterell.

Mr. Cotterell said Western-owned companies tend to be good at producing, and the Chinese companies appear to be happy to let them run the mine and then get the output results.

Taking stakes in several small miners spreads out risk -- at least one of the projects is likely to be fruitful, Mr. Cotterell said. And the lower profile of the junior miners compared with that of big companies such as Rio Tinto Ltd. minimizes the risk of political problems, analysts say.

In May, Jilin Jien Nickel Industry Co. completed a $30 million deal to buy a stake in Canadian nickel miner Liberty Mines Inc. It is now the company's largest shareholder, with 51% of common shares. Liberty restarted mining operations this month as a result of the funding.

"With bleak nickel conditions it's a good opportunity for Chinese companies to be involved in overseas nickel operations," a Jilin Jien spokesman said. "We are the second-largest nickel producer in China and we need more nickel" from overseas. The Jilin spokesman said the company likes small-to-medium mining operations producing ore with a nickel content of at least 1%.

Liberty Chief Executive Gary Nash said the company normally sends half of its output to Jilin and the rest to Xstrata PLC, with price determining whether it is more feasible to ship to Xstrata's smelter in Ontario, Canada, or farther afield to China.

Jilin also has investments in Canada's Victory Nickel Inc. and Goldbrook Ventures Inc.

Victory Chief Executive Rene Galipeau said that with its smelters and refining technology, Jilin is a good destination for Victory's nickel concentrate output. "They're a strong shareholder, a plus for financing and a potential customer," he said.

Write to Devon Maylie at devon.maylie@dowjones.com