* Small cap mining listings struggle on London market
* Bankers say firms looking for other ways to raise capital
* GRAPHIC-Performance of newly listed miners: reut.rs/2y39eFr
* GRAPHIC-FTSE small cap miners vs majors reut.rs/2ldb015
By Clara Denina and Barbara Lewis
LONDON, Oct 25 (Reuters) - Lacklustre performances by small mining companies on the London Stock Exchange are driving rivals in need of cash to find alternative ways to raise capital, either by merging or turning to other markets such as Toronto.
Six small miners have listed in London this year, up from two last year, but four of those are now trading below their offer price despite a rally in metals, led by a 27 percent jump in copper and aluminium prices and a 10 percent rise for gold.
London hosts the world's biggest mining companies, including Rio Tinto and BHP Billiton , but the poor performance of newly listed miners and other small miners trading in London is pushing some to change their plans.
On Tuesday, Condor Gold, a Nicaraguan gold miner whose share price is down 10 percent this year, said it had received conditional approval for a secondary listing in Toronto, where it hopes valuations will be higher.
"London is not a great place to be listed as a junior explorer. There is not a clear understanding of what we do," said Mark Child, the company's chairman and chief executive.
Metal development company Phoenix Global Mining, which listed in London at the end of June, will also consider North American listings at a future date, its CEO Dennis Thomas said.
Toro Gold, which operates in Africa, started preparing for a London listing with the help of Bank of Montreal (BMO) and corporate advisor Numis Securities earlier this year but has shelved its plans, sources said.
Toro Gold, Numis and BMO were not immediately available for a comment.
"It is still a difficult time to raise money through IPOs for the mining sector ... because the price recovery is in its reasonably early stages," said Lee Downham, head of EY's global mining & metals transaction advisory services.
Small mining companies, which are often betting on exploiting valuable resources in a few concessions, can eventually enjoy far bigger stock market price increases than major firms with sometimes limited opportunities for growth.
But in the early years, they may struggle to balance the heavy spending needed to get mines up and running with a lack of revenue, meaning some need regular capital injections.
London's big institutional investors, however, are seen as more risk averse than those in major mining centres such as Canada and Australia, particularly when it comes to relatively illiquid shares they cannot get out of quickly, bankers say.
Besides Russia's Polyus, which has China's Fosun International as its cornerstone investor, and Rainbow Rare Earths, which mines rare earth materials needed for renewable energy storage, the miners that listed in London this year are down 13 percent on average. Precious metals specialist Jangada Mines is down more than 20 percent.
Condor Gold's Child says figures from RBC Capital Markets show some emerging gold producers listed in Toronto can be valued at roughly three times as much as in London, based on their estimated gold reserves.
Canada, like Australia, has a strong base of retail and institutional investors interested in resources companies.
The Toronto stock exchange, which is home to more than half the world's public mining companies, has seen a flurry of listings this year, with many taking advantage of a doubling in zinc prices since late 2015.
Brazil-based zinc producer Nexa Resources and at least three other zinc miners are planning listings on the Toronto Stock Exchange or the TSX Venture Exchange (TSX-V) market for start-ups, according to company filings, on top of six other small mining companies that have listed already this year.
In London, the FTSE AIM Basic Resources Index is up less than 10 percent since the start of the year, compared with a near 20 percent rise for larger firms in the FTSE 350 Mining Index, as investors opt for established, diversified players over riskier, smaller firms.
"They want to have some exposure but then why invest in something small which is hard to trade out of?" said Raj Khatri, senior managing director at Macquarie Capital.
Some bankers say they are now advising companies to avoid London listings, saying there are better ways to expand. Some are turning their back on equity markets and are instead looking for mergers and acquisitions (M&A).
Last month, Bermuda-based zinc and lead miner Lynx Resources agreed to a $402.5 million reverse-takeover deal with Kazakhstan-focused copper miner Central Asia Metals after ruling out a listing, industry sources said.
"Although we have started to see an increase in mining companies considering IPOs in London, there isn't yet a strong conviction that another sustained cycle upwards is on the way and so we caution clients who want to list to explore M&A options in parallel, or to hold off," said Macquarie's Khatri. ($1 = 0.7584 pounds)
Graphics by Alistair Smout and Ritvik Carvalho; editing by David Clarke