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Private equity is mining the metals sector for deal nuggets.

Apollo Management's $1.15 billion plan to acquire Swiss Xstrata's aluminum business, unveiled earlier this month, underscores private equity's attraction to mining. And increasingly, the story goes well beyond silver and gold.

Instead, hard assets such as steel and aluminum -- and even rare metals such as uranium -- are luring private equity investors who expect demand for these commodities to spike as supplies dwindle, says one industry observer.

Private equity's interest comes as the publicly traded miners are undergoing a fierce round of consolidation. Big mining companies have been using their hefty cash hoards and resurgent shares to buy up rivals.

Freeport McMoran

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last month sealed its $26 billion buy of U.S. copper titan Phelps Dodge. Last week,

Lundin Mining

( LMC) agreed to buy Canada's Tenke.

But Chris Snow, metals and mining analyst at independent research firm CreditSights in New York, doesn't expect private equity to cross swords with bigger players.

"I don't see financial buyers going up against the bigger players and pitting their balance sheets up against strategic players," he says.

That said, there are several factors driving interest in mining.

Construction and development internationally has driven up steel prices. Industrial companies such as aluminum manufacturer


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also have benefited, as shown by last week's report of a 9% rise in first-quarter net income on higher-than-expected revenue. And uranium is becoming a much more attractive metal, given the endorsement by many energy companies of the nuclear option.

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( TXU), the subject of a huge private equity buyout deal announced in February, has set plans to forgo development of carbon-dioxide-belching coal-fired plants in favor a spate of nuclear facilities.

Such moves aren't going unnoticed by shops such as TPG Capital, Carlyle Group, Blackstone and high profile investor Wilbur Ross.

According to research firm Dealogic, the metals and mining sector last year played host to 102 private equity buyouts totaling $16.4 billion. That compares to 79 deals worth $7 billion a year earlier and 43 transactions worth $5.4 billion back in 2004.

So far this year, 12 metals buyouts have been completed, totaling $2.3 billion. Those figures don't count the recent Apollo-Xstrata deal.

One of the bigger private metals-and-mining deals has been TPG's $3.2 billion buyout of Aleris International, announced back in August.

Even tiny metals firms are getting some play.

Idaho General Mining

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has received a letter from Chicago-based Coghill Capital Management asking it to discuss "possible business combination transactions," according to a regulatory filing with the

Securities and Exchange Commission

. Last Tuesday, the company's shares saw a 23% run-up on speculation that a deal might be in the works.

Coghill has a 26% stake in the Idaho mining operation, which has a market capitalization of about $290 million.