TORONTO, ONTARIO–(Marketwire - May 10, 2011) - Lundin Mining Corporation (“Lundin Mining” or the “Company”) (TSX:LUN)(OMX:LUMI) today reported net income of $71.2 million ($0.12 per share) for the first quarter of 2011, an increase of $19.3 million from the $51.9 million ($0.09 per share) (1) for the first quarter of 2010.

Mr. Phil Wright, President and CEO commented, “Production for the quarter was in-line with guidance and our production outlook for the year is unchanged. It should be noted however, that the production has come at a higher cost owing to lower than expected average head-grade at Neves-Corvo and milling difficulties caused by wet weather in January. Caution also needs to be exercised on cost outlook given the on-going weakness of the US dollar.

“Given the strong copper price, the increase in net income is less than we would have liked and has been affected by suspension of operations at Aguablanca and by shipping disruptions at quarter end resulting in sales tonnages being well below production for the quarter.

“On the Tenke front, we are pleased with receipt of the Presidential Decree that formalizes the conclusion of the contract review process by the DRC government. This now clears the way for consideration of further development of this outstanding asset,” Mr. Wright said.

Commenting on developments on the corporate front, Mr. Wright said, “This has been an eventful period resulting in an active review of alternatives to bring value to Lundin Mining shareholders while at the same time focusing on keeping our mines operating safely and efficiently and delivering on our production targets.

“The review process is well underway and we will keep the market informed of any material developments,” Mr. Wright said.

As has previously been announced, the Company is currently undertaking a strategic review of alternatives to maximize value for shareholders. This may or may not result in a corporate transaction and there are no assurances that any proposed transaction resulting from the review process will be completed.

Summary of financial results for the quarter are as follows:

(1) The prior year comparative figures have been restated in accordance with the transition to IFRS.

(2) Operating earnings is a non-IFRS measure defined as sales, less operating costs and general and administration costs.

Operational and Financial Highlights

• Production was in-line with guidance: Neves-Corvo copper metal production was in-line with annual market guidance despite lower average head-grade and milling difficulties with wet weather in January; Zinkgruvan is achieving higher throughput with the commissioning of the daylight ramp, albeit costs are elevated as efforts are now made to reduce waste material stored underground (resulting from ore pass failures in 2010); Galmoy is ahead of expectations on higher throughput and grade. 
  
  Copper, zinc and lead production was above the comparable quarter of the prior year owing to: low copper production as a result of industrial action at Neves-Corvo in 2010; higher throughput at Zinkgruvan; and recommencement of mining of remnant zinc/lead high-grade ore at Galmoy. There has been no nickel production from Aguablanca since suspension of mining activities in December 2010. 
  
  Total production was as follows:

• Operating earnings (1) increased by $47.8 million from $65.8 million in the first quarter of 2010 to $113.6 million in the first quarter of 2011. Higher sales volumes ($35.2 million effect) and favourable price and price adjustments ($54.4 million effect) were partially offset by suspension of production at Aguablanca ($32.4 million effect), higher costs ($7.2 million effect) and exchange rates ($2.2 million effect). 
  
  Sales tonnage for the quarter was less than production tonnage owing to shipping delays resulting from heavy ice in the Baltic and other scheduling issues. Quarter-end inventories are above normal and should result in higher sales and earnings in Q2 2011. 
  
  Of the higher costs incurred ($7.2 million operating earnings effect), $4.8 million relates to costs associated with the planned merger with Inmet Mining Corporation (“Inmet”) and the unsolicited take-over bid from Equinox Minerals Limited (“Equinox”).
• Sales for the quarter were $211.5 million compared $141.7 million for the first quarter of 2010. Higher sales volume from Neves-Corvo, Zinkgruvan and Galmoy ($61.9 million effect) and price improvements and price adjustments ($54.4 million effect) were partially offset by the fall in sales from Aguablanca ($46.5 million effect) where operations were suspended in December 2010. The average copper price was 33% higher than the same quarter in 2010, with lead up 17% and zinc up 5%.
• Net income of $71.2 million ($0.12 per share) was $19.3 million ahead of the $51.9 million ($0.09 per share) for the first quarter of 2010. The increase is a result of:
  • higher operating earnings of $47.8 million. This amount is after accounting for an operating loss of $7.4 million at Aguablanca, following suspension of operations in December 2010, compared to an operating profit of $25.0 million in the prior corresponding period, a reduction of $32.4 million; and
  • an increase in equity earnings from Tenke of $10.4 million.
• Offsetting the improved operating earnings was:
  • a difference in the foreign exchange gain/loss of $24.7 million;
  • and a reduction of $13.3 million in mark to market gains on marketable securities.

(1) Operating earnings is a Non-IFRS measure defined as sales, less operating costs and general and administration costs.

The effect of non-recurring items is shown below:

• Cash flow from operations for the current quarter was $129.3 million, compared to $88.4 million for the corresponding period in 2010. The increase relates mainly to: higher operating earnings and changes in working capital associated with higher collection of receivables, offset by the cash outflows at Aguablanca during the quarter of $17.2 million related to operating costs and working capital movements during the quarter while operations are suspended. Q1 2010 included a payment of $20.4 million to settle derivative contracts in 2010. 
  
  Cash flow from operations does not include cash flow related to Tenke which is referred to on page 4.
• A review of Aguablanca has concluded that full operations are likely to restart around mid-2012 with waste removal likely to commence later this quarter (see also news release dated March 16, 2011 entitled “Lundin Mining Provides Update on Aguablanca Mine”).
• The Company has prepared its March 31, 2011 interim consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, with an effective transition date of January 1, 2010. Adoption of IFRS has not had a material impact on the Company’s financial position, operations and business decisions.

Tenke Fungurume

• On April 18, 2011, Lundin Mining announced that the government of the Democratic Republic of Congo (“DRC”) has issued a Presidential Decree approving the amendments to the Tenke Fungurume Mining SARL’s (“TFM”) mining contracts (see news releases “Lundin Mining Corporation: Tenke Amended Contracts Receive Presidential Decree” and “Lundin Announces Successful Completion of Tenke Fungurume Contract Review Process” dated October 22, 2010).
• The Tenke Fungurume mine is now running consistently above design capacity and, with the procurement of more mine equipment and changes to the mine plan, Freeport-McMoRan Copper & Gold Inc. (“Freeport”) is expecting annual copper production of 130,000 tonnes in 2011. 
  
  For the quarter ended March 31, 2011, Tenke production was 30,336 tonnes of copper; 26,965 tonnes of copper were sold at an average realized price of $4.19 per pound.
• As at March 31, 2011, the amount outstanding for the Excess Overrun Cost facility (“EOC facility”) related to the Company’s proportionate share of the Phase I development at Tenke was $70.6 million, a reduction of $37.8 million during the quarter. At present metal prices, it is expected that the EOC will be repaid in the third quarter of 2011.

Attributable cash flow from Tenke, including repayments of the EOC facility, was as follows:

Corporate Highlights

• On January 12, 2011, Inmet and Lundin Mining announced that they had entered into an arrangement agreement (the “Arrangement Agreement”) to merge and create Symterra Corporation.
• On February 28, 2011, Equinox announced an unsolicited take-over bid for the shares for Lundin Mining. The bid offered Lundin Mining shareholders consideration of either C$8.10 in cash or 1.2903 shares of Equinox for each Lundin Mining common share, subject to maximum cash and share issue considerations.
• On March 20, 2011, the Company’s Board of Directors unanimously recommended that Lundin Mining shareholders reject the unsolicited offer from Equinox.
• The Company adopted a limited duration Shareholder Rights Plan on March 29, 2011, expiring on May 31, 2011, to allow the Company’s Board of Directors sufficient time to identify, develop and negotiate alternatives to maximize shareholder value (see news release dated March 29, 2011 entitled “Lundin Mining Adopts Shareholder Rights Plan And Commences Pursuit of Alternatives to Maximize Shareholder Value”).
• On March 29, 2011, Lundin Mining and Inmet Mining Corporation jointly announced the termination of the Arrangement Agreement dated January 12, 2011 because a position could not be reached, regarding the merger, that was likely to be supported by the shareholders of both companies.
• On April 25, 2011, Equinox announced the withdrawal of its offer to acquire the common shares of Lundin Mining.
• Lundin Mining is undertaking a process to review strategic alternatives to maximize shareholder value. There is no assurance that this process will result in the sale of all or a part of the Company.

Financial Position and Financing

• Net cash (1) at March 31, 2011 was $262.0 million compared to $159.2 million at the end of 2010. 
  
  The increase in net cash during the period was primarily attributable to cash flow from operations ($129.3 million) and foreign exchange on cash balances ($14.2 million) offset by: investment in mineral property, plant and equipment ($40.5 million) and Tenke funding obligations ($5.4 million). The Aguablanca mine consumed $18.6 million of cash during the quarter, comprised of the current period operational losses ($7.4 million) and a reduction in operating payables and accruals of $21.4 million, offset by net collections of receivables in the amount of $12.4 million.
• Cash on hand at March 31, 2011 was $293.8 million.
• As at May 9, 2011, cash on hand is approximately $364.1 million.

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

Outlook

2011 Production and Cost Guidance

• Production targets for 2011 remain unchanged from the guidance provided in the 2010 annual Management’s Discussion and Analysis, except for C1 cost guidance at Neves-Corvo which has been increased from $1.30/lb to $1.40/lb, and are as follows:

• Neves-Corvo: As previously reported, the zinc plant will be used to process low-grade copper ore in the first six months of 2011 with zinc production starting in Q3 2011 once the plant expansion is complete. C1 cost guidance has increased to $1.40/lb of copper to reflect higher throughput at lower grades.
• Zinkgruvan: Copper production was on target for the first quarter and is expected to reach annual guidance. C1 costs for the year are expected to remain in the lowest-cost quartile with the reduction from prior years based on higher by-product credits which now include copper credits.
• Aguablanca: An assessment of alternatives for recommencement of mining operations indicates that full operations are likely to restart around mid-2012. Reserves represent approximately five years of production. 
  
  The total investment required from Q2 2011 to recommencement of full ore production at Aguablanca is estimated to be approximately €40 million (€25 million in 2011) representing all operating expenditures plus an estimated €4 million capital expenditure. Operating expenditures (waste removal; care and maintenance; and general and administration) will be expensed as incurred.
  
  The payback period on the €40 million cash outlay required to recommence production is expected to be within 18 months from recommencement, with an expected mine life, post recommencement of milling, of five years.

2011 Capital Expenditure Guidance

Guidance for capital expenditures for the year is unchanged and expected to be approximately $290 million which includes:

• Sustaining capital in European operations: $100 million (2010 - $74 million). The increase is related to: at Neves-Corvo, the replacement of underground mobile equipment and additional service water dam; at Zinkgruvan, expenditure to increase mine production capacity to provide higher throughput.
• New investment capex in European operations: $70 million (2010 - $56 million). The majority of this is related to Lombador development ($50 million):
  • The Lombador orebody access ramp is being accelerated to reach a depth of 900 metres below surface by Q2 2012 in order to facilitate further exploration that will be key to gaining a full understanding of the zinc and, more importantly, copper mineralization associated with Lombador.
  • The Lombador feasibility study, based on a small upper section of Lombador South, is now expected to be completed in Q2 2011 and commissioning of the expanded zinc plant to cater for production from Lombador is targeted for mid-2013.
  • The Zinkgruvan copper plant will be converted to treat zinc ores in addition to copper, thereby significantly increasing the flexibility of the Zinkgruvan operation. The conversion is expected to be complete by Q4 2011 giving Zinkgruvan the combined plant capacity to produce around 100,000 tonnes per annum of zinc metal contained in concentrates, if warranted by metal prices.
• New investment in Tenke: For planning purposes, we continue to assume an expansion at Tenke to commence in mid-2011 and we contemplate our share of expansion funding to be up to $120 million for the year. This is contingent on a number of factors not within the control of Lundin Mining. Final decisions on capital investment levels for 2011 are ultimately made by Freeport, the mine’s operator.

Selected Quarterly and Annual Financial Information

The Q1 2011 unaudited financial statements and management’s discussion and analysis are available on SEDAR (www.sedar.com) or the Company’s website (www.lundinmining.com).

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 an expansion project at its Neves‐Corvo mine 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.