LionOre Mining International Ltd.
TSX : LIM
ASX : LIM
LSE : LOR
BOTSWANA : LIONORE

LionOre Mining International Ltd.

February 26, 2007 18:00 ET

LionOre Reports 2006 Fourth Quarter Results

Record Production and Record Earnings of $205.3 million or $0.85 per share

TORONTO, ONTARIO--(CCNMatthews - Feb. 26, 2007) - LionOre Mining International Ltd. ("LionOre"), (TSX:LIM)(LSE:LOR)(ASX:LIM)(BSE:LIONORE) today reported its fourth quarter and full year 2006 financial and operational results. All amounts are in U.S. dollars unless otherwise noted.

Commenting on the results, Colin Steyn, President and CEO of LionOre, said "LionOre delivered an outstanding performance in the fourth quarter, setting new records to report an impressive $205.3 million in earnings for the quarter on payable nickel production of 12,543 tonnes and net mineral sales of $377.1 million. Record net earnings for the year of $428.5 million were also achieved on net mineral sales of just under $1 billion."



Highlights

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($millons except per share Q4 2006 Q4 2005 FY 2006 FY 2005
amounts)
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Net mineral sales 377.1 127.3 968.1 417.6
Operating earnings 242.7 24.6 533.3 90.4
Net earnings (loss) 205.3 (128.5) 428.5 (76.4)
Fully diluted EPS 0.85 (0.59) 1.80 (0.35)
Operating cash flow, before
changes in working capital 227.5 70.6 568.4 196.2
Cash and cash equivalents
(including restricted cash) 411.7 229.5 411.7 229.5
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- Group annual nickel production of 34,094 tonnes of payable nickel at a cash cost of $3.76/lb and for the fourth quarter, 12,543 tonnes at a cash cost of $3.73/lb, a 52% increase in production over the fourth quarter of 2005

- Strong nickel price which averaged $11.02/lb for the year and $15.00/lb for the quarter underpins performance (2005: $6.68/lb for the year, and $5.73/lb for the fourth quarter)

- Unprecedented level of nickel in inventory, representing nickel produced but not yet sold, at 5,158 tonnes, with an embedded after-tax profit of $73.4 million or $0.30 per diluted share

- Included in the quarterly net earnings are the following non-recurring items:

-- $13.6 million ($19.4 million before tax) or $0.06 per diluted share recorded as income resulting from divestment of certain non-strategic exploration tenements

-- Tax adjustment of $39.4 million comprises $18.9 million due to reduction of Tati Nickel's tax rate from 25% to 12.5% attributable to the first three quarters of the year and a credit of $20.5 million from the reassessment of the future income tax liabilities

Mr. Steyn noted, "We have met our production targets, whilst at the same time implementing capital expansion projects at all our operations during the year. These expansions will enable production growth to continue, with a 30% increase forecast for this year at 44,300 tonnes of payable nickel. Costs have been trending downwards reflecting increased volumes, despite the increased price participation due to higher nickel prices.

Our strategy of vertical integration is underway with the construction of the world's first Activox® base metals refinery at Tati Nickel in Botswana. This strategic initiative into refining will add significant value as we reclaim the margin currently lost to third parties and ultimately seek to control the entire pipeline, from rock to finished metal, to further enhance shareholder value.

The outlook for 2007 is positive with a robust commodity price environment and LionOre is well positioned to take advantage of these high prices with our growing production profile."

Production

A summary of the Group's quarterly and annual nickel production is as follows:



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(tonnes) Q4 2006 Total 2006
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100%(1) Attrib. Cost/ lb 100%(1) Attrib. Cost / lb
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Lake
Johnston 3,353 3,353 $ 3.83 9,737 9,737 $ 3.70
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Black Swan 2,812 2,250 $ 5.10 7,190 5,752 $ 6.02
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Tati 4,910 4,174 $ 3.10 13,677 11,625 $ 3.25
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Waterloo 944 944 $ 4.86 1,077 1,077 $ 4.86
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Nkomati 524 524 $(0.33) 2,413 2,413 ($0.26)
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Total 12,543 11,245 $ 3.73 34,094 30,604 $ 3.76
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(1) 100% of production except for the Nkomati mine which is shown at 50%
(LionOre's share of the Nkomati mine)


Operational Overview

Tati Nickel

- 59% increase in annual payable nickel produced to a record 13,677 tonnes at a cash cost of $3.25/lb and quarterly production increase of 94% to 4,910 tonnes of payable nickel at a cash cost of $3.10/lb

- Milling record set at 4,676,000 tonnes following successful commissioning of Project 5 Million

- New tax rate of 12.5% effective from 2006 for a period of ten years, negotiated in relation to the Activox® Growth Projects

- Positive pre-feasibility study to develop the Selkirk orebody

Nkomati

- Annual attributable (50%) production of 2,413 tonnes at a negative cash cost of $0.26/lb and for the fourth quarter of 524 tonnes at a negative cash cost of $0.33/lb

- Interim expansion well underway, currently within budget and on track for commissioning during the third quarter of 2007, with full production by the end of 2007

- Nickel reserves increased 50% to 485,377 tonnes of contained nickel

Lake Johnston

- Annual production of 9,737 tonnes of payable nickel at a cash cost of $3.70/lb and quarterly production of 3,353 tonnes of payable nickel at a cash cost of $3.83/lb

- Maggie Hays Upgrade Project commissioned

- 2007 focus will be on near-mine exploration to extend the life of mine by a further 2 - 3 years

Black Swan

- Annual production of 7,190 tonnes payable nickel at a cash cost of $6.02/lb and quarterly production of 2,812 tonnes of payable nickel at cash cost of $5.10/lb

- Cash costs improved marginally quarter on quarter, although remained high due to the increased metal prices and resulting price participation with refiners

- The Black Swan Disseminated 2 plant was commissioned in the fourth quarter

- 2007 focus will be on near-mine exploration to extend the life-of-mine by a further 2 - 3 years

Waterloo

- Annual production of 1,077 tonnes of payable nickel. Fourth quarter production of 944 tonnes of payable nickel at cash cost of $4.86/lb

- Commercial production started during the fourth quarter of 2006

- Drilling program underway to prove up an initial resource for the Amorac deposit, as well as extensions to Waterloo - results expected during the first half of 2007

Thunderbox

- Annual production of 155,203 ounces of gold at a cash cost of $352/oz and quarterly production of 43,184 ounces of gold at cash cost of $251/oz

- Production is expected to cease during the fourth quarter 2007

Corporate Highlights

- Outstanding 20% interest in Activox® acquired and a new division, LionOre Technology, created with Gary Johnson appointed Managing Director of the division

- Brian Hill and Gerhard Potgieter appointed Managing Directors of LionOre Australia and LionOre Africa, respectively

LionOre's Consolidated Financial Statements and Management's Discussion and Analysis can be found at www.lionore.com.

Forward-Looking Statements

Certain statements contained herein are forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant uncertainties and contingencies. Many known and unknown factors could cause actual events or results to differ materially from estimated or anticipated events or results reflected in such forward-looking statements. Such factors include, but are not limited to: exploration, development and operating risks, uninsurable risks, ore reserve and resource estimates, additional funding requirements, dependence on smelting facilities, foreign countries and regulatory requirements, and environmental regulation and liability. For further information concerning certain such factors, see the Company's most recent annual information form filed with Canadian securities regulatory authorities on SEDAR at www.sedar.com. The Company disclaims any intent or obligation to update any forward-looking statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and, accordingly, not to put undue reliance on such statements.

Webcast Details:

LionOre will host a teleconference / webcast on Tuesday, February 27, 2007 at 7a.m. EST. The webcast can be accessed at www.lionore.com and will be archived on the website for 90 days.

A presentation will accompany the webcast, and will be available on our website at www.lionore.com.

Audio replay will be available for 2 weeks at 1-888-286-8010 or 1-617-801-6888 (passcode: 8662693). An audio file will also be available for download from the website (www.lionore.com) after the call.



LIONORE MINING INTERNATIONAL LTD.
Consolidated Balance Sheets
(Expressed in thousands of US Dollars)
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December 31 December 31
2006 2005
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ASSETS

CURRENT
Cash and cash equivalents $ 411,688 $ 127,329
Restricted cash - 94,656
Accounts receivable 328,176 105,264
Inventories 72,056 29,009
Other 10,557 7,109
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822,477 363,367
Restricted cash - 7,500
Property, plant and equipment 534,674 298,157
Mineral exploration and development properties 323,997 381,073
Deferred stripping costs 12,890 5,192
Long-term investments and other assets 26,598 15,159
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$ 1,720,636 $ 1,070,448
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LIABILITIES

CURRENT
Accounts payable and accrued liabilities $ 108,570 $ 75,263
Deferred revenue 24,184 -
Income taxes payable 22,205 4,401
Current portion of long-term debt 67,116 8,925
Current portion of asset retirement obligations 25,126 -
Current portion of future income tax liabilities 59,623 41,413
Current portion of metal contract obligations 11,749 7,714
Short-term financing 4,336 90,148
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322,909 227,864
Long-term debt 186,405 142,311
Asset retirement obligations 61,976 44,386
Future income tax liabilities 141,307 125,230
Metal contract obligations 1,689 8,678
Other liabilities 4,587 3,967
Non-controlling interests 75,862 36,788
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794,735 589,224

SHAREHOLDERS' EQUITY

Share capital 470,173 463,473
Equity component of convertible notes 24,780 24,780
Contributed surplus 5,865 4,530
Retained earnings (deficit) 403,584 (24,964)
Cumulative translation adjustments 21,499 13,405
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925,901 481,224
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$ 1,720,636 $ 1,070,448
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LIONORE MINING INTERNATIONAL LTD.
Consolidated Statements of Earnings (Loss) and Retained Earnings (Deficit)
(Expressed in thousands of US Dollars, except per share amounts)
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For the three months ended For the twelve months ended
December 31 December 31
-------------------------- ---------------------------
2006 2005 2006 2005
------------- ----------- -------------- -----------
(unaudited) (unaudited)

REVENUES
Gross mineral sales $ 421,726 $ 161,348 $ 1,116,444 $ 518,337
Third party
treatment and
refining costs (44,578) (34,041) (148,368) (100,780)
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Net mineral sales 377,148 127,307 968,076 417,557
Contract revenue
and other 724 587 1,399 1,174
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377,872 127,894 969,475 418,731
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EXPENSES
Operating costs 96,150 68,303 303,014 218,078
Depreciation and
amortization 28,321 25,224 93,032 84,899
General and
administrative 8,645 6,899 30,355 20,825
Other expenses 2,035 2,822 9,760 4,544
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135,151 103,248 436,161 328,346
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OPERATING EARNINGS 242,721 24,646 533,314 90,385
Foreign exchange
(loss) gain (18,465) 3,099 6,228 30,026
Impairment of gold
and nickel assets - (183,709) - (183,709)
Interest expense (7,133) (5,483) (25,756) (20,543)
Interest and
investment income 4,833 1,876 14,023 12,906
Loss from metal
forward sales
contracts (1,541) (8,072) (8,959) (11,990)
Other income 19,392 - 49,623 -
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EARNINGS (LOSS)
BEFORE TAXATION AND
NON-CONTROLLING
INTERESTS 239,807 (167,643) 568,473 (82,925)
Current income tax
(expense) recovery (13,473) 14,456 (68,358) 421
Future income tax
(expense) recovery (372) 25,318 (29,926) 15,625
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EARNINGS (LOSS)
BEFORE NON-CONTROLLING
INTERESTS 225,962 (127,869) 470,189 (66,879)
Non-controlling
interests (20,706) (668) (41,641) (9,535)
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NET EARNINGS (LOSS) 205,256 (128,537) 428,548 (76,414)
RETAINED EARNINGS
(DEFICIT), BEGINNING
OF PERIOD 198,328 103,573 (24,964) 51,450
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RETAINED EARNINGS
(DEFICIT), END OF
PERIOD $ 403,584 $ (24,964) $ 403,584 $ (24,964)
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Basic earnings (loss)
per share $ 0.94 $ (0.59) $ 1.97 $ (0.35)
Diluted earnings (loss)
per share $ 0.85 $ (0.59) $ 1.80 $ (0.35)

Weighted average
number of common
shares outstanding 218,369,080 217,079,895 217,697,224 216,516,750
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Diluted weighted
average number of
common shares
outstanding 244,677,941 217,079,895 243,387,734 216,516,750
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LIONORE MINING INTERNATIONAL LTD.
Consolidated Statements of Cash Flows
(Expressed in thousands of US Dollars)
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For the three months ended For the twelve months ended
December 31 December 31
-------------------------- ---------------------------
2006 2005 2006 2005
------------- ----------- -------------- -----------
(unaudited) (unaudited)

CASH FLOWS FROM
OPERATING ACTIVITIES
Net earnings (loss) $ 205,256 $ (128,537) $ 428,548 $ (76,414)
Items not
involving cash:
Depreciation and
amortization 28,321 25,224 93,032 84,899
Future income tax
expense (recovery) 372 (25,318) 29,926 (15,625)
Gain on sale of
exploration
properties (19,096) - (24,179) -
Gain on sale
of investments - - (561) (4,595)
Impairment of
gold and nickel
assets - 183,709 - 183,709
Non-controlling
interests 20,706 668 41,641 9,535
Stock-based
compensation 575 535 2,242 2,062
Unrealized (gain)
loss on metal
forward sales
contracts (2,229) 8,072 (4,160) 13,350
Other (6,435) 6,289 1,896 (710)
Changes in non-cash
working capital (67,412) (35,416) (171,373) (33,668)
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160,058 35,226 397,012 162,543
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CASH FLOWS FROM
INVESTING ACTIVITIES
Cash paid to acquire
MPI Mines Limited,
net of cash acquired - - - (109,579)
Cash paid to acquire
Nkomati, net of
cash acquired - - - (20,102)
Cash security for
credit facilities - - 102,156 (94,656)
Development of
mineral properties (17,735) (22,875) (107,978) (66,488)
Exploration (13,589) (495) (23,267) (15,497)
Investment in property,
plant and equipment (25,429) (20,084) (119,618) (45,876)
Proceeds from
(payments for) sale
of assets 19,723 (2,695) 19,820 7,117
Other 3,367 (582) 2,161 (1,088)
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(33,663) (46,731) (126,726) (346,169)
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CASH FLOWS FROM
FINANCING ACTIVITES
Gross proceeds of
borrowings 3,562 - 136,347 115,477
Repayment of borrowings (12,290) (10,914) (131,764) (35,722)
Proceeds from the
issue of share capital 2,865 - 5,792 557
Other (1,661) 3,125 10 (1,261)
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(7,524) (7,789) 10,385 79,051
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Effect of exchange rate
changes on cash and
cash equivalents 12,446 (6,085) 3,688 (23,085)
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INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS 131,317 (25,379) 284,359 (127,660)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 280,371 152,708 127,329 254,989
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 411,688 $ 127,329 $ 411,688 $ 127,329
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Contact Information

  • LionOre Mining International Ltd.
    Colin Steyn
    President and CEO
    +44 (0)20 7590 8888
    or
    LionOre Mining International Ltd.
    Peter Breese
    Chief Operating Officer
    +27 (0)11 463 4223
    or
    LionOre Mining International Ltd.
    Ted Mayers
    Chief Financial Officer
    (416) 777-1670
    Website: www.lionore.com
    or
    BuckBias
    Alex Buck
    Media & Investors
    +44 7932 740 452