As the world’s largest mining companies look to shed assets as they seek to boost investor returns, the mining sector is drawing interest from private equity firms. Blackstone Group LP (NYSE: BX), The Carlyle Group LP (NASDAQ: CG), and Kohlberg Kravis Roberts & Co. (NYSE: KKR) have all been on the prowl for minerals from iron ore to gold.

Blackstone is reported to be among five or six bidders for the 59% stake in Iron Ore Company of Canada (IOC) currently owned by Rio Tinto plc (NYSE: RIO). Rio Tinto put its stake in IOC up for sale earlier this year as the mining giant tries to get back in the good graces of investors and to reduce its debt of about $19 billion.

Rio Tinto’s stake in IOC is estimated to be worth about $4 billion. Recently merged Glencore Xstrata PLC is also said have bid on IOC although Glencore will have its hands full rationalizing its just-completed merger with Xstrata.

Other possible suitors include steel-making giants like ArcelorMittal (NYSE: MT) and India’s Essar Steel and Tata. But the market for iron ore assets is decidedly cool due to declining prices as a side effect of lower demand for steel. ArcelorMittal, for example, earlier this year sold a 15% stake in a Canadian mine for $1.1 billion as the steelmaker also seeks to reduce roughly $23 billion debt.

Exactly how the private equity firms stand to turn a profit from buying Rio’s stake in IOC is a bit unclear. Most private equity mining takeovers involve a junior mining company that is then spotted by a major. The big mining firm then buys the small firm and the private equity firm makes a profit.

In this case, IOC has been a producing asset for nearly 60 years. Its ore body is less rich than Rio’s Pilbara operations in Australia and the ore quality is not likely to improve markedly in the future.

A PE buyout could still happen, but given the climate among the big miners today, the wait could be longer than a PE firm might be willing to sit still for.

So, what’s up? One possibility is that at a price of $4 billion none of the big private equity firms is really interested, but if other bidders drop out, perhaps one of the PE firms can pick up the asset cheaply. Another possibility is that Rio is keeping Blackstone in the bidding in an effort to draw out some Asian bidders.

Rio’s stock is up 3.4% in the early afternoon today, at $44.18 in a 52-week range of $41.59 to $60.45.

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