Lundin Mining Releases 2010 Second Quarter Results

July 28, 2010
TORONTO, ONTARIO–(Marketwire - July 28, 2010) - Lundin Mining Corporation (“Lundin Mining” or the “Company”) (TSX:LUN)(OMX:LUMI) today reported an unaudited net income of $75.6 million ($0.13 per share) for the second quarter of 2010, up from $43.5 million ($0.08 per share) in the second quarter of 2009.

Mr. Phil Wright, President and CEO commented, “Net income this quarter includes a few non-recurring, partially offsetting, items and is well up on last year.

“Second quarter production was close to our expectations. Zinc and lead production was well ahead of plan; Neves-Corvo, which continued to be affected by industrial action in April, was back above plan in June; Aguablanca was only marginally below plan but is dealing with continuing challenges with rain and its effect on pit operation. Copper production at Tenke was in-line with nameplate capacity of 115,000 tonnes per annum of copper cathode,” Mr. Wright said.

At quarter-end, cash on hand was $149.6 million and net cash(1), after deducting all outstanding debt, was $107.8 million.

                                             Three Months       Six months
                                             Ended June 30     ended June 30
US $ millions (except per share amounts)     2010     2009     2010     2009
Sales                                       183.1    194.8    324.8    318.2
Operating earnings                           80.8     91.0    145.4    129.2
Net income from continuing operations        75.6     43.5    113.5     29.3
Net income                                   75.6     43.5    113.5     34.9
Basic & diluted income per share:
    From continuing operations               0.13     0.08     0.20     0.06
    From discontinued operations                -        -        -     0.01
Total:                                       0.13     0.08     0.20     0.07
Cash provided by operations                  78.8     63.7    163.7      0.4



Production Summary (tonnes)
Wholly-owned    YTD      Q2      Q1       FY      Q4      Q3      Q2      Q1
operations     2010    2010    2010     2009    2009    2009    2009    2009
Copper       34,618  21,774  12,844   93,451  23,868  21,351  23,992  24,240
Zinc         44,076  24,458  19,618  101,401  20,011  15,151  31,962  34,277
Lead         19,196  10,953   8,243   43,852  10,393   8,111  12,478  12,870
Nickel        3,871   1,715   2,156    8,029   2,324   1,784   1,960   1,961

Copper       14,158   7,038   7,120   17,325  7,227   6,019    4,079       -
Cobalt          961     409     552      638    477     159        2       -


(1) Net cash is a Non-GAAP measure defined as available unrestricted cash less financial debt, including capital leases and other debt-related obligations.

--  Net income of $75.6 million (Q2-2009: $43.5 million) or $0.13 per
    diluted share (Q2-2009: $0.08) includes $32.4 million ($27.9 million
    after tax) related to the sale of shares in Chariot Resources, which
    were classified as Available For Sale ("AFS") securities.

    The higher tax charge includes a charge of $14.5 million (current taxes
    payable $0.9, future income tax assets and liabilities of $13.6 million)
    to cover the 2.5% increase in the Portuguese corporate income tax rate
    and also reflects the effect of reduced loss carry-forwards and
    accelerated depreciation. The increase in the Portuguese tax rate was
    initially announced to apply for a two year period only. However, the
    legislation does not provide a limit and the increase has been provided
    for in respect of all future taxes.

Normalized earnings are shown below:
                                                Q2 2010   Q2 2009   Q1 2010
Reported Net Income                                75.6      43.5      38.0
        Derivative (gains) losses pre-tax         (11.2)      9.2       0.5
        AFS securities (gains) losses pre-tax     (32.4)        -      (0.6)
        Tax on above                                7.7      (2.4)     (0.1)
        Other non-recurring tax adjustments      13.6(1)  (6.2)(2)        -
Adjusted Net Income                                53.3      44.1      37.8
Basic and diluted income per share                $0.09     $0.08     $0.07
(1) increase in future tax liability related to the 2.5% tax rate increase
    in Portugal
(2) partial recovery of valuation allowance on loss carry-forwards in Spain

--  Operating earnings(1) decreased by $10.2 million from $91.0 million
    in the second quarter of 2009 to $80.8 million in 2010. Discounting
    the closure of Galmoy ($8.8 million effect), like-for-like operations
    decreased operating earnings by $1.4 million.

    The positive effect of higher metal prices was largely offset by the
    difference in price adjustments when comparing this quarter to the prior
    corresponding quarter (net $16.5 million favourable effect after
    negative price adjustments of $74.7 million) with the largest effect
    coming from nickel. The net favourable price effect and more favourable
    exchange rates ($6.3 million effect) were partially offset by lower
    sales volumes ($5.1 million effect) and higher unit costs ($19.1

    Higher unit costs, included in cost of sales, relate to higher costs
    brought forward from the first quarter in inventory and the costs
    associated with recovery from the disruptions in the first quarter.

    Operating earnings for Aguablanca do not reflect the high nickel prices
    experienced during the March, April, May period. In accordance with the
    flexibility granted the offtaker, under the now expired concentrate
    sales contract (in place when Rio Narcea was acquired), none of
    Aguablanca's concentrate sales this year have been settled. The first
    quarter reflected a positive price adjustment of $12.4 million and this
    unrealized mark-up has been reversed in the current quarter. This has
    reduced the quarter's earnings.

--  Sales for the quarter were $183.1 million compared to sales of $194.8
    million in the second quarter of 2009. Lower volume from continuing
    operations ($8.9 million) and the closure of Galmoy ($19.3 million) were
    largely offset by net effect of metal price improvements and price
    adjustments related to previous quarters' sales ($16.5 million).

    Average metal prices in the second quarter of 2010 were 30% to 70%
    higher than the same quarter in 2009. Closing inventory levels are
    considered 'normal'.


(1) Operating earnings is a Non-GAAP measure defined as sales, less operating costs, accretion of ARO and other provisions, selling, general and administration costs and stock-based compensation.

--  On May 14, 2010, agreement was reached to end industrial action at
    Neves-Corvo based on a new productivity arrangement. This provides for
    additional payment to employees for actual increases in productivity,
    based on a measure of tonnes-per-employee compared to a 2009 baseline.

--  Cash inflow from operations was $78.8 million for the quarter, compared
    to $63.7 million for the corresponding period in 2009.

--  Net cash(1) as at June 30, 2009 of $107.8 million was up from $10.2
    million at the end of the previous quarter and compared to net debt(1)
    of $49.3 million at December 31, 2009. The change in net cash is after:
    $32.4 million of capital expenditure; $6.8 million advanced in respect
    of Tenke; and includes $59.9 million from the sale of investments and
    AFS securities. The revolving credit facility was undrawn at quarter-

--  The Tenke Fungurume mine produced approximately 28,438 tonnes of copper,
    and approximately 24,997 tonnes were sold at an average realized price
    of $2.96 per pound.


Financial Position and Financing

--  The increase in liquidity during the quarter was attributable to:

    --  net cash flow from operations, after allowing for investment in
        mineral properties, plant and equipment of $32.4 million and a
        contribution to Tenke of $6.8 million to cover 2010 exploration,
        expansion studies and sustaining capital investment; and

    --  $59.9 million of proceeds from sale of investments and available for
        sale securities

--  Cash on hand at June 30, 2010 was $149.6 million.


(1) Net cash/debt is a Non-GAAP measure defined as available unrestricted cash less financial debt, including capital leases and other debt- related obligations.


As previously reported, measures have been taken to reduce the annual effect of below trend production in the first quarter and recovery during the second quarter was largely in accordance with expectations.

Aguablanca is largely in accordance with planned nickel production however the effects of the heavy rain in the first quarter, and continued rain in the second quarter, have contributed to the appearance of zones of slope instability in the pit. In addition, Aguablanca has been notified of possible rolling industrial action commencing July 31, 2010 and running for five consecutive Saturdays and Mondays. Contingency plans are being considered.

As a precaution of the two issues affecting Aguablanca, nickel guidance has been reduced to accord with the original guidance of 7,500 tonnes of nickel for the year and copper guidance has been reduced to 6,500 tonnes, both plus or minus 5%.

The revised guidance for 2010, as given at the end of the first quarter, is maintained for all operations, except Aguablanca, as follows:

                                                 2010 Guidance
(contained tonnes)                           Tonnes   C1 Cost(1),(2)
Neves-Corvo                           Cu     77,000          $ 1.25
                                      Zn      6,000
Zinkgruvan                            Zn     75,000          $ 0.30
                                      Pb     36,000
                                      Cu      1,000
Aguablanca                            Ni      7,500          $ 6.25
                                      Cu      6,500
Galmoy                                Zn     14,000
(in ore)                              Pb      4,000
Total: Wholly-owned operations        Cu     84,500
                                      Zn     95,000
                                      Pb     40,000
                                      Ni      7,500
Tenke: 24.75% attributable share      Cu     28,500
(1) Cash costs are dependent upon exchange rates, assumed as follows:
    EUR/US$: 1.40. The TC/RC included in the cash cost of nickel assumes
    $7.75/lb of nickel.

--  Zinc production at Neves-Corvo is expected to resume in 2011 at the
    rate of 50,000 tonnes per annum ("tpa") of contained zinc. The
    estimated cost of the project is EUR43 million and is approximately
    50% complete.

    The expansion of shaft capacity at Neves-Corvo allows consideration
    of an earlier restart of zinc production, albeit at the level of
    25,000 tpa. However, based on the present zinc prices, this
    additional capacity is more likely to be directed towards copper

--  A pre-feasibility study has concluded that Lombador can be
    economically developed.

    In accordance with the study, the first phase of Lombador is
    expected to lift zinc production at Neves-Corvo from a nominal
    50,000 tpa to 140,000 tpa of contained zinc at a capital cost of
    approximately EUR140 million.


(2) Cash cost per pound is a non-GAAP measure.

    A start-up date of 2013 is considered likely and cash costs are expected
    to be in the third-quartile for zinc producers on a normal costing
    basis. A feasibility study is now underway with expected completion
    during the first quarter of 2011.

--  Studies are underway at Zinkgruvan to allow the recently completed
    copper plant to treat zinc ores in addition to copper thereby
    significantly increasing the flexibility of the Zinkgruvan operation.

--  Capital expenditure outlook for the year is expected to be around $190
    million. This includes:

    --  Sustaining capital in European operations of $90 million.

    --  New investment in European operations of $60 million.

    --  Investment in Tenke is now expected to be around $40 million, at the
        bottom of the range previously given of between $40 million and $100
        million depending on development plans. We note that final decisions
        on capital investment levels are made by Freeport-McMoran, as

--  Expenditure on exploration and resource acquisition is expected to be
    around $24 million, up from previous guidance of $20 million, owing to
    the decision to increase near-mine exploration at Neves-Corvo and to
    the commencement of a new exploration program to be carried out in the
    Ossa Morena Belt of southern Spain designed to quickly define and drill-
    test several known copper-gold-iron targets.

--  Inherent risks in the world economy remain large and unpredictable. In
    our view, volatility is likely to remain high in 2010 with an improving
    outlook thereafter.


Selected Quarterly Financial Information

                                  Three months            Six months
                                 ended June 30           ended June 30
(USD millions, except       ----------------------- -----------------------
per share amounts)                 2010        2009        2010        2009
                            ----------- ----------- ----------- -----------
Sales                             183.1       194.8       324.8       318.2
Operating earnings(1)              80.8        91.0       145.4       129.2
Depletion, depreciation
 & amortization                   (32.6)      (38.5)      (68.8)      (82.0)
General exploration and
 project investigation             (5.6)       (4.1)      (10.3)       (9.4)
Other income and expenses          12.4         9.7        19.3         0.6
Gain (loss) on derivative
 contracts                         11.2        (9.2)       10.7        (9.2)
Gain on sale of AFS
 securities                        32.4           -        33.0           -
Income (loss) from equity
 investment in Tenke                8.3        (3.4)       25.5        (4.3)
                            ----------- ----------- ----------- -----------
Income from continuing
 operations before income
 taxes                            106.9        45.5       154.8        24.9
Income tax (expense)
 recovery                         (31.3)       (2.0)      (41.3)        4.4
                            ----------- ----------- ----------- -----------
Income from continuing
 operations                        75.6        43.5       113.5        29.3
Gain from discontinued
 operations                           -           -           -         5.6
                            ----------- ----------- ----------- -----------
Net income                         75.6        43.5       113.5        34.9
                            ----------- ----------- ----------- -----------
                            ----------- ----------- ----------- -----------

Shareholders' Equity            2,839.7     2,845.0     2,839.7     2,845.0
Cash flow from operations          78.8        63.7       163.7         0.4
Capital expenditures
 (incl. Tenke)                     39.1        57.8        77.2        91.4
Total assets                    3,443.2     3,691.2     3,443.2     3,691.2
Net cash(debt)(2)                 107.8      (110.7)      107.8      (110.7)
Key Financial Data:
Shareholders' equity
 per share(3)                      4.90        4.91        4.90        4.91
Basic and diluted income
 per share                         0.13        0.08        0.20        0.07
Dividends                             -           -           -           -
Equity ratio(4)                      82%         77%         82%         77%
Shares outstanding:
 Basic weighted average     579,864,628 552,137,068 579,771,573 519,964,158
 Diluted weighted average   580,261,614 552,170,964 580,203,254 519,971,178
 End of period              579,899,803 579,433,771 579,899,803 579,433,771

($ millions,
except per
share data)       Q2-10 Q1-10 Q4-09   Q3-09   Q2-09   Q1-09   Q4-08   Q3-08
Sales             183.1 141.7 256.7   171.1   194.8   123.4    43.5   191.9
 earnings          80.8  64.6 152.2    91.8    91.0    38.2   (65.8)   68.9
 tax)(5)              -     - (37.1)      -       -       -  (651.5) (201.1)
Income (loss)
 operations        75.6  38.0  35.1     3.7    43.5   (14.1) (707.7) (190.2)
Net income (loss)  75.6  38.0  35.1     3.7    43.5    (8.6) (728.5) (199.0)
Income (loss)
 per share
 basic and
 diluted           0.13  0.07  0.06    0.01    0.08   (0.03)  (1.72)  (0.49)
Income (loss)
 per share,
 basic(6) and
 diluted(6)        0.13  0.07  0.06    0.01    0.08   (0.02)  (1.77)  (0.51)
Cash flow
 from (used in)
 operations        78.8  84.9  97.0    40.0    63.7   (63.3)   46.5    46.8
 (incl. Tenke)     39.1  38.1  39.0    54.7    57.8    33.6   105.7   146.8
Net cash
 (debt)(2)        107.8  10.2 (49.3) (132.2) (110.7) (259.5) (145.5) (194.8)
(1) Operating earnings is a Non-GAAP measure defined as sales, less
    operating costs, accretion of asset retirement obligation ("ARO") and
    other provisions, selling, general and administration costs and
    stock-based compensation.
(2) Net cash/debt is a Non-GAAP measure defined as available unrestricted
    cash less financial debt, including capital leases and other
    debt-related obligations.
(3) Shareholders' equity per share is a Non-GAAP measure defined as
    shareholders' equity divided by total number of shares outstanding
    at end of period.
(4) Equity ratio is a Non-GAAP measure defined as shareholders' equity
    divided by total assets at the end of period.
(5) Includes impairment from discontinued operations.
(6) Income (loss) per share is determined for each quarter. As a result
    of using different weighted average number of shares outstanding, the
    sum of the quarterly amounts may differ from the year-to-date amount.


The 2010 second quarter consolidated interim financial statements and management’s discussion and analysis are available on SEDAR ( or the Company’s website (

About Lundin Mining

Lundin Mining Corporation is a diversified base metals mining company with operations in Portugal, Sweden, Spain and Ireland, producing copper, zinc, lead and nickel. In addition, Lundin Mining holds a development project pipeline which includes expansion projects at its Zinkgruvan and Neves-Corvo mines along with its equity stake in the world class Tenke Fungurume copper/cobalt project in the Democratic Republic of Congo.

On Behalf of the Board,

Phil Wright, President and CEO

Forward Looking Statements

Certain of the statements made and information contained herein is “forward-looking information” within the meaning of the Ontario Securities Act. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, risks and uncertainties relating to foreign currency fluctuations; risks inherent in mining including environmental hazards, industrial accidents, unusual or unexpected geological formations, ground control problems and flooding; risks associated with the estimation of mineral resources and reserves and the geology, grade and continuity of mineral deposits; the possibility that future exploration, development or mining results will not be consistent with the Company’s expectations; the potential for and effects of labour disputes or other unanticipated difficulties with or shortages of labour or interruptions in production; actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations; uncertain political and economic environments; changes in laws or policies, foreign taxation, delays or the inability to obtain necessary governmental permits; and other risks and uncertainties, including those described under Risk Factors Relating to the Company’s Business in the Company’s Annual Information Form and in each management discussion and analysis. Forward-looking information is in addition based on various assumptions including, without limitation, the expectations and beliefs of management, the assumed long term price of copper, nickel, lead and zinc; that the Company can access financing, appropriate equipment and sufficient labour and that the political environment where the Company operates will continue to support the development and operation of mining projects. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements. 


Lundin Mining Corporation
Sophia Shane
Investor Relations, North America
+1 604 689 7842


Lundin Mining Corporation
John Miniotis
Senior Business Analyst


Lundin Mining Corporation
Robert Eriksson
Investor Relations, Sweden
+46 8 545 015 50
Lundin Mining Corporation

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