As cash-flush mining companies grapple for control of the next Mother Lode, an outside player has joined the frenzy: The hedge fund.

Merger-oriented funds like New York-based Atticus Capital LP have claimed stakes in a slew of mining firms, the latest sign of how heady the interest in commodities has become.

They like cash, and they're not afraid of making themselves heard.

Take the recent battle over Canadian nickel miner Inco Ltd. (N)

Over the last four months, it received public offers from three takeover candidates. But investors in at least one of the would-be buyers – Arizona's Phelps Dodge Corp. (PD) – balked at the bid.

Atticus, which owns about 10% in the copper miner, has said for the last several months that Phelps Dodge shareholders would be best served if the company used the tremendous gains from the recent rally in copper to buy back its own stock – or sell itself.

"We continue to believe that either the direct return of capital to shareholders or an outright sale of the company is a preferable means to increasing shareholder value," said Atticus spokesman Rob Coburn last week.

And if it didn't follow its suggestions, Atticus was "prepared to work with other shareholders and/or potential acquirers," said fund chairman Timothy Barakett and vice chairman David Slager in a February letter to Phelps Dodge's chairman.

Barakett founded the $12 billion fund in 1995. In August, after Phelps Dodge pursued what Atticus felt was a misguided takeover of Inco, the fund threatened to go so far as soliciting proxies from shareholders to scuttle the deal.

A Phelps Dodge spokesman wouldn't comment on Atticus' demands.

Atticus never had to take the proxy route. And to some extent, the fund got its way.

On Tuesday, Phelps Dodge and Inco said they terminated their planned, $17.9 billion union. Inco realized it was unlikely to receive enough shareholder votes needed to complete the deal with a rival, all-cash offer from Companhia Vale do Rio Doce (RIO) competing for its investors' interest.

Phelps Dodge shares jumped 3.01% to $93.48 on Tuesday. Atticus' Phelps Dodge stake, based on the fund's June 30 SEC filing, surged to $1.5 billion.

Atticus also owned over 3.6 million call options in Phelps Dodge plus two million call options in CVRD – Phelps' former rival for Inco. Buyers of call options have the right to buy a security at a specific price in the future.

Atticus says it doesn't invest in deals with the aim of arm-twisting management. It becomes active in less than 5% of its individual investments, said Coburn.

But it has spoken out on a number of high-profile mergers, including other heavyweight deals in the commodities sector.

In February, it pushed management in Luxembourg-based steel giant Arcelorto accept a hostile takeover offer by Mittal Steel (MT) . At the time, Atticus owned shares or rights to about 1.3% of Arcelor plus 0.5% of Mittal.

By July, Mittal said it had received 92% of the votes needed to seal the $34 billion union.

For funds, cash is king

Hedge funds have plowed into the commodities sector during the three-year rally, using strategies from investing in metal and energy futures to shares in the companies that produce the commodities.

Among Inco's top 25 holders, for instance, hedge fund managers Amber Capital Investment Management, TPG Axon Capital and Eton Park Capital Management, LLC all own over 1% stakes in the company, according to Thomson Financial data.

York Capital Management leads a pack of hedge fund investors in Mittal Steel, with over 3.8 million shares representing a 0.4% stake. Big hedge fund managers Highbridge Capital Management, which is part-owned by J.P. Morgan Chase & Co. (JPM) , Och-Ziff Capital Management and GLG Partners, LLC also own stakes.

And hedge fund manager Ospraie Management LLC specializes in investments in commodities.

The funds' presence may have shifted the outcome of deals where investors had to choose between cash and a stock offer of equal or even higher value.

In late July, Toronto-based Inco lost out on its offer to buy fellow Canadian nickel producer Falconbridgewhen Switzerland's Xstrata Plcswept in with an all-cash bid.

Based on Inco's current share price, Inco's cash and stock offer would have been worth more for Falconbridge investors now, says Ian Howat, a base metals analyst at National Bank Financial in Toronto.

But the all-cash deal won many investors looking for a clean exit.

"As far as hedge fund activity, they're being consistent – they're trying to get the higher cash value in any transaction," said Ian Howat, a base metals analyst at National Bank Financial in Toronto.