(Corrects headline, paragraph 1 to changing role of Timis)
* Director says should not have done business with GIO
LONDON, Aug 13 (Reuters) - The board of iron ore producer African Minerals is considering changing the role of its executive chairman Frank Timis, who was recently at the centre of an investigation into a $50 million payment he authorised, a company director said on Wednesday.
African Minerals director Roger Liddell, replying to questions from a shareholder at the company's annual general meeting, said the board was considering replacing Timis as chairman in the medium term.
"Frank's hands-on role is very important but this is not an ideal structure longer term," said Liddell, a senior independent non-executive director chairing the meeting in Timis' absence.
It is unlikely however that Timis will quit the board voluntarily soon because if he does, a deal with Chinese partner Shandong Iron and Steel Group (SISG) means SISG can exercise an option to sell back its 25 percent stake in the Tonkolili project in Sierra Leone to African Minerals.
Timis, who founded the Sierra Leone-focused iron ore miner in the early 2000s, has come under fire in the last few weeks following allegations he and another company director - Dermot Coughlan, had personally benefited from a payment to Global Iron Ore Ltd (GIO), a business registered in Cyprus.
Coughlan, whose son Craig partially owned GIO, resigned from the board on July 15. GIO was set up in 2011 and its first and main activity was to sell African Minerals iron ore in 2011 and 2012, a source close to the company said.
An internal probe found no "direct evidence" that the $50 million settlement agreed by Timis without the board's approval had benefited them, African Minerals said last week.
The miner said the payment was made in exchange for cancellation of a marketing deal it had with GIO, after African Minerals signed a new offtake contract with SISG.
Shareholders at the meeting questioned the decision to entrust the company's sales to a small firm with no experience in the mining sector.
"We had to settle because we quite simply oversold and underproduced. GIO was doing an effective job and we had no reason not be satisfied at that time," Liddell said.
The internal investigation failed to trace where the $50 million paid by African Minerals went as the money went to two bank accounts in Switzerland that left no trail, Liddell said.
Shares in AIM-listed African Minerals have lost almost 90 percent of their value so far this year, partly hit by a fall in iron ore prices, concerns about credit tightness and worries about the deadly Ebola virus that is afflicting West Africa. (Reporting by Silvia Antonioli; editing by David Evans)