"One of the shortages we have had is the mining assets. We are very strong metallurgically, but our assets on the mining side have been depleting over the years and we needed to do something to keep a balance," said Noranda's president and chief executive, David Kerr in an interview.

The companies launched a hostile C$1.5 billion ($1 billion), or C$24.50 cash a share, offer for Toronto-based Rio Algom this week. Noranda said it would sell half of Rio's assets to Codelco (Corporacio Nacional del Cobre) for the same price as the offer, once the deal was done.

They plan to jointly manage the assets. Rio Algom has said the bid was unsolicited and not permitted under its shareholder rights plan. "We were hesitant at first because we have been comfortable nibbling away, buying a few shares and growing our position in Rio Algom, but after some consideration we decided it was probably the right thing to do at this point in time," said Kerr, adding that he believed the offer price would discourage others from bidding.

Noranda, with revenues in 1999 of C$2 billion, is primarily a copper producer but also has interests in zinc, nickel, refined copper, primary and fabricated aluminum, lead, silver, gold and cobalt. It is also about to launch a C$733 million magnesium plant in Quebec which will extract magnesium from asbestos tailings that represent more than 200 years of supply. The plant will produce about 63,000 tonnes annually.

While some might argue the logic behind a partnership with a 100 per cent government-owned company, Kerr said it made sense because there are advantages a Canadian company would have for bidding for another Canadian company.

"They would've seen we were adding to our position in Rio Algom and that if they were going to find a partner other than us, there was a good chance that we would be a counter-bidder against them," Kerr said.

Codelco, whose board of directors includes top government ministers, has over the past six years accounted for over 18 per cent of Chile's exports and about 3.4 per cent of gross domestic product. It controls about 20 per cent of the world's total known copper reserves. "Codelco is an excellent choice as a partner. They have the strengths of being a strong influence in Chile and are strong financially," said Kerr.

Kerr said Noranda was mainly attracted by Rio's copper assets, especially its underdeveloped Spence copper deposit in Chile. Additionally, Noranda and Rio Algom each own 33.75 per cent of the Peru's massive Antamina mine with another Canadian miner Teck Corp.

The acquisition would give Noranda a 50.6 per cent controlling share of the project, which when completed in 2001 will be the largest zinc/copper mine in the world. "We have made some good additions to our mining assets but still it wasn't quite enough.