FNX Mining Company Inc.
TSX : FNX

FNX Mining Company Inc.

November 06, 2008 06:30 ET

FNX Reports Third Quarter 2008 Results

TORONTO, ONTARIO--(Marketwire - Nov. 6, 2008) - FNX Mining Company Inc. (TSX:FNX) ("FNX" or "the Company") reports operational and financial results for the quarter ending September 30, 2008 for its Sudbury Mining Operations and Mining Services segments. FNX incurred a net loss of $26.5 million ($0.31 per share) in the third quarter on revenues of $76.4 million, compared to net earnings of $12.5 million ($0.15 per share) on revenues of $56.8 million for the third quarter of 2007. Year to date ("YTD") net earnings were $8.9 million ($0.10 per share) on revenues of $329.3 million, compared to net earnings of $77.7 million ($0.93 per share) on revenues of $216.4 million in the first nine months of 2007. Table 1 summarizes the Q3-2008 key financial and operating measures.

FNX Chairman and CEO, Terry MacGibbon stated that, "While we continued to execute our production plans during the third quarter, our financial results were negatively impacted by rapidly changing market conditions and dramatically declining commodity prices. The financials were also negatively affected by pre-tax negative provisional price adjustment of $21.3 million and write-downs totaling $18.3 million. In these turbulent market conditions, the Company is conserving cash and reduced its 2008 capital expenditure budget at the end of the second quarter by $51 million and further reduced it at the end of the third quarter by an addition $11 million. Capital expenditures for 2009 have not been finalized, but will be drastically reduced from 2008 levels and limited to a minimum to satisfy near term production plans and to ramp up production from our higher margin copper-nickel-precious metal footwall ore deposits at Podolsky and Levack. The Company has a very strong balance sheet with $151 million cash, approximately $ 130 million in current Gold Wheaton Corp. securities and $50 million in future Gold Wheaton Corp. securities, zero debt and a US$100 million line of credit".

Mr. MacGibbon further added that, "FNX is strategically well positioned to ride out the economic downturn because the expected growth in production from its high margin footwall ore deposits and its flexibility and ability to quickly and economically increase, decrease or suspend its production levels. The Company will endeavor to maximize profitability by concentrating on its highest margin and most profitable deposits. In addition, we will continue to closely monitor economic and operational conditions and will quickly make whatever changes are required to maximize the viability and profitability of its operations in the best interest of the Company, its employees and shareholders.

As at September 30, 2008, the cash position and the current value of the investment portfolio were $151.1 million and $5.2 million respectively, compared to $35.2 million and $35.6 million respectively at the end of December 2007. Working capital at the end of the third quarter was $165.1 million, a $113.2 million increase from the $51.9 million at the end of the second quarter 2008. During the third quarter, the Company repaid an outstanding balance of $20.4 million on its US$100 million line of credit facility. FNX currently has zero debt.

Net change in cash balance as a result of operating, financing and investing activities was a net inflow of $111.6 million in the third quarter of 2008 and a net inflow of $115.9 million YTD, compared to net outflows of $1.7 million and $6.9 million respectively in 2007.

Capital expenditures during this quarter and YTD-2008 were $41.2 million and $139.6 million respectively, compared to $55.4 million and $149.7 million respectively in the same periods of 2007. The revised 2008 capital budget was $186.6 million, which was reduced in Q2 from the original 2008 budget of $237.4 million. A program of additional capex savings for 2008 has further reduced the 2008 capex budget to $175.0 million, a total reduction of $62.4 million during the year. The 2009 capital budget forecast is not approved yet but it will be drastically reduced as the Company cuts costs and reviews priorities focused on development of the Levack Footwall Deposit ("LFD"), completion of start up development at the Podolsky Mine and sustaining capital for the McCreedy West Mine.



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Table 1 - Unaudited Financial Three Months Ended Nine Months Ended
and Operating Highlights September 30 September 30
2008 2007 2008 2007
----------------------------------------------------------------------------
Consolidated
------------
Revenue ($000) 76,423 56,767 329,339 216,427
Net Earnings ($000) (26,542) 12,485 8,862 77,667
Basic Earnings per Share ($) (0.31) 0.15 0.10 0.93
Fully Diluted Earnings per Share ($) (0.31) 0.15 0.10 0.91
Cash Flow from Operations ($000) (127) 27,586 69,200 116,365
Cash Flow per Share ($) (0.00) 0.33 0.82 1.39
EBITDA ($000) 1,378 26,005 79,341 137,601

Mining Operations
-----------------
Total Revenue ($000) 51,178 56,767 217,693 216,427
Cash Operating Costs ($000) 48,289 26,015 144,587 74,874
Cash Operating Margin ($000) 2,889 30,752 73,106 141,553

Revenue per Ton Sold ($) 147 229 221 315
Cash Operating Costs per Ton Sold ($) 139 105 147 109
Cash Operating Margin per Ton Sold ($) 8 124 74 206

Cash Cost per lb of Ni net of
by-product credits (US$)(1) 4.56 2.39 2.70 2.78

Net Earnings (Loss) ($000) (16,974) 12,485 20,934 77,667
Cash Flow from Operating
Activities ($000) 2,354 27,586 68,421 116,365
EBITDA ($000) 1,130 26,005 74,584 137,601

Total Ore Sold (tons) 346,987 248,272 984,651 687,815
Nickel Ore Sold (tons) 159,419 156,232 579,052 449,057
Grade of Nickel Ore Sold (%Ni) 1.3 1.3 1.2 1.3
Payable Metal Sold - Nickel (000 lbs) 3,146 3,198 10,129 8,931
Average Ni Price Received (US$/lb) 6.61 11.65 10.20 16.98
Copper Ore Sold (tons) 187,568 92,040 405,599 238,758
Grade of Copper Ore Sold (%Cu) 3.0 1.4 3.1 1.4
Payable Metal Sold - Copper (000 lbs) 9,558 2,929 23,712 7,617
Average Cu Price Received (US$/lb) 2.93 3.57 3.43 3.36
Payable Metal Sold - Total
Precious Metals (ozs) 16,379 8,073 35,233 19,317
Payable Metal Sold - Cobalt (000 lbs) 42.3 43.6 146.2 115.7

Mining Services
---------------
Total Revenue ($000) 25,245 - 111,646 -
Cash Operating Costs ($000) 25,063 - 107,262 -
Cash Operating Margin ($000) 182 - 4,384 -
Net Earnings (Loss) ($000) (9,568) - (12,072) -
Cash Flow from Operating
Activities ($000) (2,481) - 779 -
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(1) Cash cost per pound of nickel sold is net of by-product credits.


The average cash operating revenues per ton of ore sold during this quarter and YTD were $147 and $221 respectively, while the average cash operating costs per ton sold were $139 and $147 respectively, leaving an average cash operating margin per ton of $8 and $74, respectively. This compares to average cash operating revenues per ton sold for Q3-2007 and YTD-2007 of $229 and $315 respectively, while average cash operating costs per ton were $105 and $109 leaving an average cash operating margin per ton of $124 and $206 respectively. The average cash operating cost per ton sold declined from $145 in Q2-2008 to $139 in Q3-2008.

Consolidated cash flow from operations was essentially nil and EBITDA was $1.4 million for this quarter, compared to $27.6 million or $0.33 per share and $26.0 million, respectively for the third quarter of 2007. Consolidated YTD-2008 cash flow and EBITDA are $69.2 million ($0.82 per share) and $79.3 million, compared to $116.4 million ($1.39 per share) and $137.6 million for the comparable period in 2007.

Operations

Total ore mined and shipped to third party processing facilities during Q3-2008 was 347,000 tons consisting of 159,400 tons of contact nickel ore and 187,600 tons of copper-precious metal ore, compared to a total of 248,000 tons consisting of 156,000 tons and 92,000 tons of nickel and copper-precious metal ore respectively in Q3-2007. This represents a 40% increase in total ore tons from the comparable period in 2007. Payable nickel during the quarter was 3,146,000 pounds, payable copper was a record 9,558,000 pounds (+226%) and total TPM were also a record at 16,379 ounces, compared to 3,198,000 pounds, 2,929,000 pounds and 8,073 ounces respectively in Q3-2007.

YTD-2008 total ore mined and shipped was a record 985,000 tons and represented a 43% increase compared to 688,000 tons for the same period in 2007. Payable metals YTD were 10,129,000 pounds of nickel, a record 23,712,000 pounds of copper (+211%) and a record 35,233 ounces (+82%) of TPM, compared to 8,931,000 pounds, 7,617,000 pounds and 19,317 ounces respectively for the first nine months of 2007. The steep increase in payable copper and TPM's year over year reflects the build up of commercial production of the Podolsky footwall mine since declaration of commercial production on January 1, 2008. Tables 2 and 3 summarize operating results from the third quarter and YTD 2008 and 2007 for the Levack Complex and Podolsky Mine, respectively.



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Table 2 - Production and Sales Three Months Ended Nine Months Ended
Summary Levack Complex September 30 September 30
2008 2007 2008 2007
----------------------------------------------------------------------------
Ore sold (tons)
Nickel ore 159,419 156,232 579,052 449,057
Copper ore 105,353 92,040 244,377 238,758
----------------------------------------------------------------------------
Total ore sold 264,772 248,272 823,429 687,815
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Grade of ore sold
Nickel ore (%Ni) 1.3 1.3 1.2 1.3
Copper ore (%Cu) 0.5 1.4 0.4 1.4

Payable metal sold
Nickel (000s lbs) 2,660 3,198 8,925 8,931
Copper (000s lbs) 2,611 2,929 7,284 7,617
TPM (ozs) 8,584 8,073 19,363 19,317
Cobalt (000s lbs) 42.3 43.6 146.2 115.7

Metal sales and costs
Revenue ($/ton of ore sold) 102 229 169 315
Cash cost ($/ton of ore sold) 122 105 132 109
Cash operating margin ($/ton of
ore sold) (20) 124 37 206
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Table 3 - Production and Sales Three Months Ended Nine Months Ended
Summary Podolsky Mine September 30 September 30
2008 2007 2008 2007
----------------------------------------------------------------------------
Ore sold (tons)
Copper ore 82,215 - 161,222 -
----------------------------------------------------------------------------
Grade of ore sold
Copper ore (%Cu) 5.6 - 6.3 -

Payable metal sold
Nickel (000s lbs) 486 - 1,204 -
Copper (000s lbs) 6,948 - 16,428 -
TPM (ozs) 7,795 - 15,870 -

Metal sales and costs
Revenue ($/ton of ore sold) 294 - 486 -
Cash cost ($/ton of ore sold) 194 - 225 -
Cash operating margin ($/ton
of ore sold) 100 - 261 -
----------------------------------------------------------------------------


The average metal prices received in the third quarter were lower than for the comparable period in 2007. The average realized metal prices per pound for the third quarter for nickel and copper were US$6.61 and US$2.93 respectively, compared to US$11.65 and US$3.57 per pound respectively for the third quarter of 2007. The YTD-2008 average realized metal prices per pound for nickel and copper were US$10.20 and US$3.43 respectively, compared to US$16.98 and US$3.36 respectively for the first nine months of 2007. TPM prices also fell significantly year over year.

Third quarter capital expenditures were $41.2 million dominated by capital development to extend the production ramp to support the continuing development of operations at the Podolsky Mine, development to support McCreedy West nickel production and reconditioning of the Levack #2 Shaft and deepening of the development ramp at Rob's Deposit. The largest capital expenditure during this quarter was $13.8 million on the LFD development followed by $9.8 million at the Levack Complex, $9.4 million at Podolsky Mine, $5.5 million for Mining Services and $1.7 million for Victoria exploration.

New production guidance was provided to the market in October (see October 21, 2008 news release) reducing annual production from 1.45 million tons of ore to 1.30 million tons for 2008. Payable nickel for fiscal 2008 is now forecast to be 13.5 million pounds, payable copper 38.0 million pounds and 56,000 ounces of TPM.

During the third quarter, the Sudbury Mining Operations and contractors had a Total Medical Injury Frequency Rate ("TMIFR") of 8.1, compared to 9.1 in the previous quarter and 11.6 in the third quarter of 2007. Sudbury Mining Operations did incur two time lost accidents in this reporting quarter, bringing the Lost Time Injury Frequency Rate ("LTIFR") to 0.8, compared to 1.1 in Q2-2008 and 0.8 in Q3-2007. YTD the TMIFR is 8.0 and a total of five lost time accidents occurred at Sudbury Mining Operations, compared to a 2007 TMIFR of 9.0 and six lost time accidents. One reportable environmental incident occurred during this quarter due to equipment malfunction. It was reported and remediated immediately.

Development

The development and advanced exploration of the Upper LFD and reconditioning of the Levack #2 Shaft to access the LFD are currently FNX's largest capital projects. The access decline into Rob's Deposit and the Upper LFD from the Levack Mine 2650 Level reached the 3100 Level. Sub-level access to Rob's Deposit on the 2900 and 2950 Levels is complete and is progressing on the 3035 and 3090 Level. Work also continues on rehabilitation of the Levack #2 Shaft from the 2900 Level to bottom at the 3600 Level. Ramp access from the 3600 Level will provide development into the main LFD at approximately the 4000 Level to support future production. Related infrastructure development for ventilation, pumping, hoisting and backfilling capabilities is underway.

At the McCreedy West Mine, development work related to preparing additional areas of known nickel contact reserves and resources for production and to sustain current production levels are ongoing.

Completion of the haulage ramp at Podolsky Mine is a priority in order to support production growth and allow the mine's stoping sequence to be effective. The ramp has progressed from the 2450 Level upward close to the 2300 Level with a sub-level being completed on the 2375 Level. Development of the upper portion of the haulage ramp from the 1750 Level also continued in Q3-2008 with the ramp completed to below the 1925 Level. Sub-level development is underway on the 1925 Level to access 2000 Deposit ore. This level was also developed into ore grade material in the Grey Gabbro Deposit. The exhaust fan permitting is underway and backfilling is currently utilizing a temporary cement slurry plant. Engineering and initial construction of a permanent backfill system also started during third quarter.

Mining Services

For the three months ending September 30, 2008, revenues from the Mining Services totaled $25.2 million and revenues YTD-2008 were $111.6, compared to $37.0 million in the second quarter of 2008. Mining Services generated a loss of $9.7 million for Q3-2008 and a loss of $12.1 million for the first nine months of 2008.

Mining Services experienced zero lost time accidents and had a TMIFR of 0.5 in third quarter, compared to a LTIFR of 0.7 and TMIFR of 6.3 in Q3-2007.

During this quarter, Strategic Resource Acquisition Corporation ("SRA") announced the closing of it's Mid-Tennessee zinc mine ("MTZ"), FNX recorded a write-down of its $10.0 million investment in SRA and established a provision for doubtful accounts of $4.2 million for work completed by Mining Services for MTZ that has not been paid.

On October 14, 2008, William Shaver, P.Eng. was hired as President of Mining Services. During the three months ending September 30, 2008, Mining Services signed new revenue contracts totaling $18.0 million of which $1.4 million was completed during the quarter. Mining Services at quarter end had 604 employees and a total backlog of work to be completed of $52.0 million with $15.5 million scheduled for completion in the balance of 2008. The level of work Mining Services is currently bidding on continues to be strong, however the potential impact of the economic downturn will be closely monitored and appropriate action will be taken to mitigate any negative developments.

Exploration

Total exploration drilling by the FNX exploration team in Q3-2008 consisted of 78 holes for a total of 82,085 ft, bringing the total exploration drilling to date in 2008 to 259,815 ft in 241 holes. The LFD exploration project attracted the majority of holes with 46 holes (24,295 ft) in this quarter and 134 holes (82,436 ft) YTD-2008. The results from continuing drilling of Rob's Deposit will be integrated with new mapping to develop an updated geological and mineral resource model in Q4-2008. New geological interpretation of the Rob's and Upper LFD from the most recent diamond drill results in the area confirms that the deposits are part of the same sulphide mineralized system and it is expected that the 3400 Level will likely mark the key break between Rob's pyrrhotite-rich Ni-Cu-TPM veins above and LFD-style chalcopyrite-rich Cu-Ni-TPM veins below. It is currently unclear whether that transition between the two styles of veining will be gradual, sharp or more structurally complex.

During Q3-2008, the initial mineral resource estimate was completed on a 250 ft vertical slice centered on the 4000 Level from the current 2,500 ft open plunge-length of the Rob's/LFD environment. The NI 43-101 compliant indicated mineral resource for the 250 ft vertical slice totaled 754,000 tons grading 8.09% Cu, 1.26% Ni and 7.76 g/t TPM. Significant second order veins were also defined during detailed drilling within the 250 ft slice of the LFD, which will eventually expand the existing mineral resource estimate. However, due to their complex orientation, the current 50 ft drill centers only allow an unclassified resource estimate for these second order vein systems. The definition drill program from the Craig Mine 4000 Level exploration drift was expanded during Q3-2008 to the east and both up-and down-dip. Recent significant selected intersections from the 4000 Level drilling on the LFD include:



Hole # Width (ft) Cu (%) Ni (%) TMP (g/t)

7381 17.2 15.1 3.0 12.0
and 11.7 28.5 1.6 16.3

7382 9.1 28.0 1.2 33.7
and 15.9 22.8 0.6 25.2

7431 30.3 9.1 1.7 14.8
including 10.3 24.9 4.6 26.9

7432 9.4 23.6 3.8 22.7


Two underground rigs are currently positioned on the 4000 Level to continue expanding the LFD resource drilling.

Other footwall exploration during this quarter focused on the well-developed Sudbury Breccia behind the Levack #1, #2, #3 and #7 Deposits. Test holes were completed from underground drill stations on the Levack Mine 1200, 1800 and 2650 Levels during Q3-2008 and results are currently being evaluated. Other drilling during this quarter included contact nickel at McCreedy West's Boundary area, the Podolsky Grey Gabbro footwall mineralization, Podolsky offset/footwall targets and completion of this phase of surface drilling at the Nickel Ramp Deposit. Another area of surface drilling during Q3-2008 occurred at the Victoria Property, where quartz diorite segments were tested for offset mineralization. Initial positive results are being followed up using two surface drill rigs. Finally, surface drilling of two holes at the Falconbridge Footwall joint venture property occurred in Q3-2008 with results pending.

Investments

On September 30, 2008, the Company held 350 million common shares and $50 million of deferred warrants in Gold Wheaton Corp., representing approximately 37.5% of their issued and outstanding shares, 1.5 million common shares of Lake Shore Gold Corp, 7.7 million common shares and 3.2 million warrants of International Nickel Ventures Corp., 6.9 million common shares of Superior Diamonds Inc., 6.5 million common shares of Fieldex Exploration Inc., 1.1 million common shares of Visible Gold Mines Inc. and 3.5 million common shares of SRA. The investment portfolio fair value was $5.2 million at the end of the third quarter, resulting in a revaluation loss of $15.7 million, net of tax, recognized in Accumulated Other Comprehensive Income.

On September 30, 2008, the Company determined that the decline in the value of its investment in SRA was other than temporary (see Mining Services section) and the original $10.0 million investment was written off.

Provision for Income and Resource Taxes

Income and resource tax expense was recorded at a year to date rate of 32%, compared to 38% in 2007. As a result of the loss in the third quarter, a $2.4 million recovery of current taxes was recorded while a future income tax expense of $10.6 million was recorded. The future income tax liability was $186.1 million at September 30, 2008.

Subsequent Event

On October 21, 2008, the Company announced that, due to low commodity prices and poor metal payables, Levack Mine nickel contact mining was being suspended, effective immediately. Current plans call for removal from the Levack nickel contact deposits of a 35,000 ton batch test sample to be completed and delivered to FNX's third party processor by year end. The Levack Mine suspension will be reviewed at year end 2008, meanwhile Rob's Deposit and development of the LFD production will continue through the Levack Mine infrastructure.

Non-GAAP Performance Measures

This press release contains certain non-GAAP measures like cash operating margin, EBITDA, etc. Please see the Company's MD&A on SEDAR for discussion of non-GAAP performance measures.

Forward-Looking Statement

Certain information included in this press release, including information relating to future financial or operating performance and other statements that express management's expectations or estimates of future performance constitute "forward-looking statements." Such forward-looking statements include, without limitation, (i) estimates of future capital expenditures; (ii) estimates regarding timing of future development and production; and (iii) estimates of future costs towards profitable commercial operations. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to, interpretation and implications of drilling and geophysical results; estimates regarding timing of future capital expenditures and costs towards profitable commercial operations. Other factors that could cause actual results, developments or events to differ materially from those anticipated include, among others, increases/decreases in production; volatility in metals prices and demand; currency fluctuations; cash operating margins; cash operating cost per pound sold; costs per ton of ore sold; variances in ore grade or recovery rates from those assumed in mining plans; reserves and/or resources; the ability to successfully integrate acquired assets; operational risks inherent in mining or development activities, and legislative factors relating to prices, taxes, royalties, land use, title and permits, importing and exporting of minerals and environmental protection. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements are made as at the date hereof and the Company does not undertake any obligation to update publicly or revise any such forward-looking statements or any forward-looking statements contained in any other documents whether as a result of new information, future events or otherwise, except as may be required under applicable securities law. For a more detailed discussion of such risks and other factors, see the Company's latest filings with Canadian securities regulators.



CONFERENCE CALL

FNX will be hosting a Third Quarter Conference Call on November 6, 2008 at
10:00am EST.

CONFERENCE CALL numbers are:

Live in North America:
Toll-Free Access: 1-888-300-0053 or 647-427-3420
Ask for "FNX Mining Conference Call" or Conference ID# 69499025

Replay Access information:
Toll-Free Access: 1-800-695-3382 or 402-220-1756
Passcode: 69499025#
Available until December 6, 2008 at Midnight

Slides for the conference call may be accessed on the Company's website
www.fnxmining.com

Note: The unaudited balance sheet, statement of operations and statement
of cash flow are appended to this news release.



Consolidated Balance Sheets As at
(in thousands of Canadian dollars) September 30 December 31
(Unaudited) 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $
Assets
Current
Cash and cash equivalents 151,069 35,160
Accounts receivable 80,829 103,257
Inventory 876 4,060
Prepaid and other assets 2,449 1,142
----------------------------------------------------------------------------
235,223 143,619
Investments 5,228 35,603
Investment in Gold Wheaton Gold Corp. 228,357 -
Property, plant and equipment 909,501 815,376
Intangible assets - 6,605
Reclamation deposits 6,485 6,485
----------------------------------------------------------------------------
1,384,794 1,007,688
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities 42,952 72,405
Deferred revenue 27,152 975
----------------------------------------------------------------------------
70,104 73,380
----------------------------------------------------------------------------
Long-term deferred revenue 369,785 -
Mine closure and site restoration 5,316 5,087
Future income and resource taxes 186,088 178,180
----------------------------------------------------------------------------
561,189 183,267
----------------------------------------------------------------------------
631,293 256,647
----------------------------------------------------------------------------
Shareholders' equity
Share capital 571,751 567,700
Contributed surplus - stock-based compensation 12,707 9,816
Retained earnings 176,822 167,960
Accumulated other comprehensive income (7,779) 5,565
----------------------------------------------------------------------------
753,501 751,041
----------------------------------------------------------------------------
1,384,794 1,007,688
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Consolidated Segmented Balance Sheets
(in thousands of Canadian dollars)
(Unaudited) Mining Mining
As at September 30, 2008 Operations Services Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $
Assets
Cash and cash equivalents 145,369 5,700 151,069
Accounts receivable 50,020 30,809 80,829
Inventory 518 358 876
Prepaid and other assets 1,753 696 2,449
----------------------------------------------------------------------------
197,660 37,563 235,223
Investments 233,585 - 233,585
Property, plant and equipment 876,839 32,662 909,501
Reclamation deposits 6,485 - 6,485
----------------------------------------------------------------------------
1,314,569 70,225 1,384,794
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Accounts payable and accrued liabilities 28,963 13,989 42,952
Deferred revenue 27,002 150 27,152
----------------------------------------------------------------------------
55,965 14,139 70,104
----------------------------------------------------------------------------
Long-term deferred revenue 369,785 - 369,785
Mine closure and site restoration 5,316 - 5,316
Future income and resource taxes 183,540 2,548 186,088
----------------------------------------------------------------------------
558,641 2,548 561,189
----------------------------------------------------------------------------
614,606 16,687 631,293
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Mining Mining
As at December 31, 2007 Operations Services Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $
Assets
Cash and cash equivalents 24,247 10,913 35,160
Accounts receivable 63,148 40,109 103,257
Inventory 3,384 676 4,060
Prepaid and other assets 982 160 1,142
----------------------------------------------------------------------------
91,761 51,858 143,619
Investments 35,603 - 35,603
Property, plant and equipment 785,054 30,322 815,376
Intangible assets - 6,605 6,605
Reclamation and other deposits 6,485 - 6,485
----------------------------------------------------------------------------
918,903 88,785 1,007,688
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Accounts payable and accrued liabilities 48,402 24,003 72,405
Deferred revenue - 975 975
----------------------------------------------------------------------------
48,402 24,978 73,380
----------------------------------------------------------------------------
Mine closure and site restoration 5,087 - 5,087
Future income and resource taxes 175,807 2,373 178,180
----------------------------------------------------------------------------
180,894 2,373 183,267
----------------------------------------------------------------------------
229,296 27,351 256,647
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Consolidated Statements of Operations
(in thousands of Canadian dollars Three months ended Nine months ended
except earnings per share) September 30 September 30
(Unaudited) 2008 2007 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $ $
Operating revenues 76,423 56,767 329,339 216,427
----------------------------------------------------------------------------

Operating expenses
Expenses, excluding depreciation
and amortization 73,352 26,015 251,849 74,874
Depreciation and amortization 16,233 7,080 41,949 17,910
----------------------------------------------------------------------------
89,585 33,095 293,798 92,784
----------------------------------------------------------------------------
(13,162) 23,672 35,541 123,643
----------------------------------------------------------------------------

Expenses
Administration 4,896 1,958 11,912 6,428
Capital taxes - 594 (1,803) 1,316
Depreciation 206 138 624 345
Stock-based compensation 856 777 3,419 2,355
Other expenses (income) 14,227 1,550 3,388 (5,827)
----------------------------------------------------------------------------
20,185 5,017 17,540 4,617
----------------------------------------------------------------------------
Earnings (loss) before taxes and
other items (33,347) 18,655 18,001 119,026

Income and resource taxes recovery 7,814 (6,170) (8,130) (41,359)

Loss of equity investee (1,009) - (1,009) -
----------------------------------------------------------------------------
Net earnings (loss) for the period (26,542) 12,485 8,862 77,667
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Basic earnings (loss) per share (0.31) 0.15 0.10 0.93
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted earnings (loss) per share (0.31) 0.15 0.10 0.91
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Consolidated Segmented Statements of Operations
(in thousands of Canadian dollars)
(Unaudited) Mining Mining
Three months ended September 30, 2008 Operations Services Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $

Operating revenues 51,178 25,245 76,423
----------------------------------------------------------------------------

Operating expenses
Expenses, excluding depreciation and
amortization 48,289 25,063 73,352
Depreciation and amortization 13,863 2,370 16,233
----------------------------------------------------------------------------
62,152 27,433 89,585
----------------------------------------------------------------------------
(10,974) (2,188) (13,162)
----------------------------------------------------------------------------
Expenses
Administration 4,896 - 4,896
Depreciation 206 - 206
Stock-based compensation 371 485 856
Other expenses (income) 5,979 8,248 14,227
----------------------------------------------------------------------------
11,452 8,733 20,185
----------------------------------------------------------------------------
Earnings (loss) before taxes and
other items (22,426) (10,921) (33,347)
Income and resource taxes (recovery) (6,461) (1,353) (7,814)
Loss of equity investee (1,009) - (1,009)
----------------------------------------------------------------------------
Net earnings (loss) for the period (16,974) (9,568) (26,542)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Mining Mining
Nine months ended September 30, 2008 Operations Services Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $

Operating revenues 217,693 111,646 329,339
----------------------------------------------------------------------------

Operating expenses
Expenses, excluding depreciation and
amortization 144,587 107,262 251,849
Depreciation and amortization 34,976 6,973 41,949
----------------------------------------------------------------------------
179,563 114,235 293,798
----------------------------------------------------------------------------
38,130 (2,589) 35,541
----------------------------------------------------------------------------
Expenses
Administration 11,912 - 11,912
Capital taxes (1,803) - (1,803)
Depreciation 624 - 624
Stock-based compensation 1,801 1,618 3,419
Other expenses (income) (4,393) 7,781 3,388
----------------------------------------------------------------------------
8,141 9,399 17,540
----------------------------------------------------------------------------
Earnings (loss) before taxes and
other items 29,989 (11,988) 18,001
Income and resource taxes 8,046 84 8,130
Loss of equity investee (1,009) - (1,009)
----------------------------------------------------------------------------
Net earnings (loss) for the period 20,934 (12,072) 8,862
----------------------------------------------------------------------------
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Consolidated Statements of Cash Flow Three months ended Nine months ended
(in thousands of Canadian dollars) September 30 September 30
(Unaudited) 2008 2007 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $ $
Operating activities
Net earnings (loss) for the period (26,542) 12,485 8,862 77,667
Non-cash items
Depreciation and amortization 16,439 7,218 42,573 18,255
Amortization of line of credit
transaction costs 156 - 156 -
Stock-based compensation 856 777 3,419 2,355
Future income and resource taxes 62 7,046 10,559 23,822
Interest on deferred payment
obligation - 63 - 188
Gain on disposal of shares - (3,960) (8,461) (15,480)
Gain on disposal of fixed assets (3) (97) -
Gain on sale of mineral exploration
properties - - - 1,077
Write-down of mineral exploration
properties - - - (2,354)
Write-down of investment 10,000 - 10,000 -
Write-down of intangible assets 4,128 - 4,128 -
Provision for doubtful accounts 4,242 - 4,242 -
(Increase) decrease in value of
investments held for trading 474 788 727 (146)
Loss of equity investee 1,009 - 1,009 -
Other 544 (136) 443 (306)
----------------------------------------------------------------------------
11,365 24,281 77,560 105,078
Net change in non-cash working
capital (11,492) 3,305 (8,360) 11,287
----------------------------------------------------------------------------
(127) 27,586 69,200 116,365
----------------------------------------------------------------------------

Financing activities
Common shares issued 2,173 1,027 2,814 4,049
Bank indebtedness - advance - - 45,837 -
Bank indebtedness - payment (20,372) - (45,837) -
----------------------------------------------------------------------------
(18,199) 1,027 2,814 4,049
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Investing activities
Investments - - (10,000) (2,821)
Property, plant and equipment (41,224) (55,443)(139,625)(149,689)
Proceeds on sale of gold
equivalent units 175,000 - 175,000 -
Gold Wheaton transaction costs (4,366) - (4,366) -
Proceeds from disposal of investments - 25,512 21,441 25,512
Other - (334) - (334)
----------------------------------------------------------------------------
129,410 (30,265) 42,450 (127,332)
----------------------------------------------------------------------------
Effect of exchange rate changes on cash 513 - 1,445 -
----------------------------------------------------------------------------
Change in cash and cash equivalents
for the period 111,597 (1,652) 115,909 (6,918)
Cash and cash equivalents - beginning
of period 39,472 109,851 35,160 115,117
----------------------------------------------------------------------------
Cash and cash equivalents - end
of period 151,069 108,199 151,069 108,199
----------------------------------------------------------------------------
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Consolidated Segmented Statements of Cash Flow
(in thousands of Canadian dollars)
(Unaudited) Mining Mining
Three months ended September 30, 2008 Operations Services Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $
Operating activities
Net earnings (loss) for the period (16,974) (9,568) (26,542)
Non-cash items
Depreciation and amortization 14,069 2,370 16,439
Write-downs 10,000 8,370 18,370
Loss of equity investee 1,009 - 1,009
Other 1,607 482 2,089
----------------------------------------------------------------------------
9,711 1,654 11,365
Net change in non-cash working capital (7,357) (4,135) (11,492)
----------------------------------------------------------------------------
2,354 (2,481) (127)
Financing activities
Common shares issued 2,173 - 2,173
Bank indebtedness (20,372) - (20,372)
Investing activities
Property, plant and equipment (35,694) (5,530) (41,224)
Other 170,634 - 170,634
Effect of exchange rate changes on cash - 513 513
----------------------------------------------------------------------------
Change in cash and cash equivalents for
the period 119,095 (7,498) 111,597
Cash and cash equivalents - beginning
of period 26,274 13,198 39,472
----------------------------------------------------------------------------
Cash and cash equivalents - end
of period 145,369 5,700 151,069
----------------------------------------------------------------------------
----------------------------------------------------------------------------


For the nine months ended Mining Mining
September 30, 2008 Operations Services Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $
Operating activities
Net earnings (loss) for the period 20,934 (12,072) 8,862
Non-cash items
Depreciation and amortization 35,600 6,973 42,573
Write-downs 10,000 8,370 18,370
Loss of equity investee 1,009 - 1,009
Other 5,225 1,521 6,746
----------------------------------------------------------------------------
72,768 4,792 77,560
Net change in non-cash working capital (4,347) (4,013) (8,360)
----------------------------------------------------------------------------
68,421 779 69,200
Financing activities
Common shares issued 2,814 - 2,814
Investing activities
Property, plant and equipment (132,188) (7,437) (139,625)
Other 182,075 - 182,075
Effect of exchange rate changes on cash - 1,445 1,445
----------------------------------------------------------------------------
Change in cash and cash equivalents
for the period 121,122 (5,213) 115,909
Cash and cash equivalents - beginning
of period 24,247 10,913 35,160
----------------------------------------------------------------------------
Cash and cash equivalents - end of period 145,369 5,700 151,069
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars)
(Unaudited) Three months Nine months
ended ended
September 30 September 30
2008 2007 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $ $

Net earnings (loss) for the period (26,542) 12,485 8,862 77,667
Other comprehensive income, net of tax
Unrealized gains (loss) on available
for sale investments (7,879) (2,289) (15,681) 3,745
Cumulative translation adjustment 513 - 1,074 -
----------------------------------------------------------------------------
Comprehensive income (loss) (33,908) 10,196 (5,745) 81,412
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Consolidated Statements of Retained Earnings
(in thousands of Canadian dollars)
(Unaudited) Three months Nine months
ended ended
September 30 September 30
2008 2007 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ $ $ $

Retained earnings - beginning
of period 203,364 123,195 167,960 58,013
Net earnings (loss) for the period (26,542) 12,485 8,862 77,667
----------------------------------------------------------------------------
Retained earnings - end of period 176,822 135,680 176,822 135,680
----------------------------------------------------------------------------
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Contact Information

  • FNX Mining Company Inc.
    A. Terrance MacGibbon
    Chairman and Chief Executive Officer
    (416) 628-5929
    or
    FNX Mining Company Inc.
    Ronald P. Gagel
    Senior Vice President and Chief Financial Officer
    (416) 628-5929
    or
    FNX Mining Company Inc.
    David Constable
    Vice President Investor Relations
    (416) 628-5929
    Email: info@fnxmining.com
    Website: www.fnxmining.com