* Three iron ore projects handed to mystery firm
* Project cancellations come as iron ore prices hit record highs
* Sundance, Equatorial seek talks with Congo government
* Miners to seek arbitration in 2021 if no resolution
By Sonali Paul
MELBOURNE, Dec 22 (Reuters) - Congo Republic has cancelled iron ore projects with three Australian miners, two of the companies said, and handed them to a firm "nobody knows anything about", prompting one to seek $8.76 billion in damages from the central African nation.
The sudden cancellation sparked alarm among the project owners after years of working closely with the government of Congo Republic.
Sundance Resources Ltd and Equatorial Resources Ltd EQX.AX both said this week they had been notified through an official journal that their mining or exploration permits had been cancelled on Nov. 30.
Mining permits for their projects were awarded to a company called Sangha Mining Development Sasu. said Sangha Mining also won a mining permit for the Avima iron ore project, previously held by Avima Iron Ore Ltd. The three projects together have about 1 billion tonnes of high-grade iron ore, Sundance said.
"Ours is the most advanced and the biggest of them all. All three permits have been issued to a company that nobody knows anything about," Sundance Managing Director Giulio Casello said.
Avima CEO Socrates Vasiliades had no immediate comment.
Casello and Equatorial said they did not know what motivated the move to hand the projects to Sangha Mining in breach of the country's mining code.
"There's lots of rumours and comments from in-country that they are Chinese-backed. I don't have any proof," Casello told Reuters.
The mining code requires a company to have done exploration work before applying for a mining permit.
Congo's official gazette said Sundance's permit was revoked because the resource had yet to be developed and Sundance had failed to pay royalties. Royalties are due once production begins.
The transfer of the three projects in northwest Congo comes just as iron ore prices hit record highs above $170 a tonne amid strong demand from steel makers in China, the world's biggest steel producer.
Sundance has spent A$400 million ($303 million) over a decade exploring and trying to line up financing for rail and port infrastructure, including from Chinese firms, for its Mbalam-Nabeba iron project straddling the border of Cameroon and Congo.
Equatorial has spent A$100 million on its Badondo project.
Equatorial Executive Chairman John Welborn said the issuing of a mining licence to Sangha Mining for the Badondo project ran counter to all of the company's work with the government until recently.
"It's highly unusual," he said.
Equatorial said if the issues were not resolved in the next six months, it would seek international arbitration for full compensation from the Congo government.
Congo's government spokesman was not available for comment when contacted on Monday.
($1 = A$1.3)