* Observers, officials report large and enthusiastic turnout
* President bids for re-election against ex-military rival
* Counting underway by lantern light, results to take days
* Fast-growing economy looks to iron ore, oil development
By Simon Akam and Pascal Fletcher
FREETOWN, Nov 17 (Reuters) - Sierra Leoneans thronged polling stations on Saturday to vote in a close-fought election they hope can rebrand their poor, war-scarred West African state as an emerging democracy with the potential for fast growth from mining and oil.
Election officials and observers reported a large and enthusiastic turnout in the presidential and parliamentary polls, with eager crowds of voters overwhelming polling stations from the moment they opened in the steamy seaside capital Freetown and across the nation.
In Saturday's ballot, incumbent President Ernest Bai Koroma and his ruling All People's Congress (APC) faced a determined challenge from Julius Maada Bio, a former junta leader who represents the Sierra Leone People's Party (SLPP).
The vote is expected to be close. Former insurance executive Koroma, 59, who wrested the presidency from the SLPP in a hotly disputed 2007 vote, is considered the narrow favourite above Bio, a 48-year-old retired army brigadier who was involved in two military takeovers in the turbulent 1990s.
It was the third national vote held since the end of a 1991-2002 civil war that gave Sierra Leone international notoriety as a "blood diamonds" battleground for rebels and child soldiers.
It passed off with no major disruptions or violence reported and some voters said they could not remember a more peaceful election day. "Everything is now 1,000 percent better than the dark days of the war," said former soldier Ibrahim Sesay, 64.
As dusk fell, the painstaking task of counting ballots by hand was under way in the more than 9,000 polling stations across the country, many of which lacked electric power.
"The process is on ... We have battery-operated lanterns," said Beola Coker, manager of a cluster of 16 voting stations installed in the Laura Dove Secondary School off Kissy Road in the East End of Freetown, a warren of narrow, cluttered streets.
A spokesman for the National Electoral Commission (NEC) said results were expected to be announced in four to 10 days.
To win outright, a candidate must gain 55 percent of the vote and the race may well go to a second round. With rivalry between the APC and the SLPP running high, there are concerns a close result could ignite violence.
The election was held amid rising expectations that foreign-run iron ore mining and oil developments can start lifting Sierra Leone's 5.5 million people out of poverty and allow the country to definitively shed its past image of a nation racked by one of Africa's most brutal civil wars.
"I think the whole world is looking at Sierra Leone at the moment," said Jens Anders Toyberg-Frandzen, the U.N. envoy to the country. He called the vote "a turning point in manifesting that Sierra Leone has graduated from a post-conflict country to one that is now on the path to development".
Although ethnic allegiances still shape Sierra Leone's electoral landscape - Koroma's APC draws support from the Temne and Limba peoples of the north, while the Mende of the south and east traditionally vote SLPP - both candidates face pressure to convert the mineral riches into jobs and improved livelihoods.
"I would like there to be more business, education, health services ... I would like the prices of food to come down," said Aminata Conteh, her sleeping baby strapped to her back, as she cast her vote in the Salafia Primary School in east Freetown minutes before the polls closed.
Koroma, wearing a white robe, voted in a west Freetown polling station set up in an unfinished building, where he was greeted by supporters chanting "world best, world best!".
"We feel very happy that Sierra Leoneans are motivated to vote," the president said, adding the election had been peaceful so far and praising the presence of international observers.
His rival Bio, also wearing white, cast his ballot outside a west Freetown school, in a makeshift polling station made from blue plastic sheeting and poles, with cardboard voting booths.
The election in the former British colony were one of the most closely observed in Africa this year by monitors from the European Union, the Commonwealth and the African Union.
The chief EU election observer, Richard Howitt, told Reuters that apart from some polling stations opening late, there had been no reports so far of any serious problems or violence.
"It's been very smooth, with a very good turnout," he said.
At stake in the vote is the opportunity to oversee millions of dollars of investment in the aid-dependent country's resources that include gold and diamonds, oil and iron ore.
Iron ore shipments by British companies African Minerals and London Mining are expected to buoy the economy to 20 percent growth this year - below original forecasts of more than 50 percent but still one of the highest growth rates on the planet.
Doubts remain over whether the election winner can root out the graft from Sierra Leone's patronage-driven politics, fairly distribute the mineral wealth and unite a society with deep tribal and political divisions.
But most voters seemed hopeful about the outcome.
"The way I see people going around - no gunshots - everything is cool," said John Adams Conteh, a 24-year-old unemployed man. "When the results come out, I think it's going to be cool. They will put the right man in the right place."