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

LionOre Mining International Ltd.

August 09, 2006 23:00 ET

LionOre Reports Second Quarter 2006 Results

Record Earnings of $62 million or $0.28 per share - Production in Line with Forecasts

TORONTO, ONTARIO--(CCNMatthews - Aug. 9, 2006) - LionOre Mining International Ltd. ("LionOre"), (TSX:LIM)(ASX:LIM)(LSE:LOR)(BSE:LIONORE) today reported its second quarter and half year 2006 financial and operational results. All amounts are in U.S. dollars unless otherwise noted.

Quarterly Highlights

- Group production (100% basis) of 7,016 tonnes of payable nickel at a cash cost of $3.90/lb (Q2 2005: 6,748 tonnes of payable nickel at a cash cost of $3.74/lb).

- Net mineral sales of $187.5 million (Q2-2005: $95.8 million)

- Net earnings of $62.0 million or $0.28 per share (Q2-2005: $21.3 million or $0.10 per share)

- Operating earnings of $85.2 million (Q2-2005: $19.6 million)

- Operating cash flow before changes in non-cash working capital items of $98.0 million (Q2-2005: $62.7 million)

- Payable nickel inventory estimated 2,375 tonnes, representing an approximate unrealized after-tax profit of $15.8 million or $0.07 per share

- Cash and cash equivalents of $206.0 million

- Metal production for the Company was in line with forecast as follows:



------------------------------------------------------------------------
Production
Summary Q2 2006 Q2 2005
------------------------------------------------------------------------
Tonnes payable Tonnes payable
nickel produced nickel produced
100%(1) Attrib. Cost/lb 100%(1) Attrib. Cost/lb
------------------------------------------------------------------------
Lake Johnston 2,227 2,227 $3.46 2,953 2,953 $2.51
------------------------------------------------------------------------
Black Swan 1,351 1,081 $6.12 1,493 1,194 $5.86
------------------------------------------------------------------------
Tati 2,877 2,445 $3.96 1,913 1,626 $4.45
------------------------------------------------------------------------
Nkomati 561 561 $0.04 389 389 $1.46
------------------------------------------------------------------------
Total 7,016 6,314 $3.90 6,748 6,162 $3.74
------------------------------------------------------------------------

Production
Summary 1st Half 2006 1st Half 2005
------------------------------------------------------------------------
Tonnes payable Tonnes payable
nickel produced nickel produced
100%(1) Attrib. Cost/lb 100%(1) Attrib. Cost/lb
------------------------------------------------------------------------
Lake Johnston 4,122 4,122 $3.55 5,983 5,983 $2.48
------------------------------------------------------------------------
Black Swan 3,164 2,531 $5.63 3,115 2,492 $5.07
------------------------------------------------------------------------
Tati 5,224 4,440 $3.81 3,752 3,189 $4.22
------------------------------------------------------------------------
Nkomati 1,230 1,230 $0.23 389 389 $1.46
------------------------------------------------------------------------
Total 13,740 12,323 $3.83 13,239 12,053 $3.55
------------------------------------------------------------------------


(1) 100% of production except for the Nkomati mine which is shown at 50% (LionOre's share of the Nkomati mine). Nkomati production is included from June 1, 2005.

Commenting on the results, Colin Steyn, President and CEO of LionOre, said "LionOre achieved record profits for the quarter of $62 million, or $0.28 per share, as a result of solid production and the high metal prices experienced during the second quarter, with nickel averaging $9.09 per pound.

The Company has delivered first half production in line with our forecast, with three out of the four nickel operations exceeding production targets. We anticipate continuing to benefit from the strong nickel price during the remainder of the year as we ramp up production during the second half to meet our 2006 target of 34,100 tonnes of payable nickel.

The current outlook for the earnings in the second half of the year is encouraging with a number of positive factors. These include unrealized profit related to nickel concentrates in inventory at June 30, 2006, amounting to $0.07 per share, strengthening nickel prices in the third quarter, and production increases at all of our operations. In addition, the $32.5 million Nikkelverk-related break fee received from Inco in the third quarter will contribute approximately $24.5 million or $0.11 per share, net of transaction expenses. These net proceeds are expected to incur little or no tax expense.

The approval to proceed with the Activox® Project at Tati Nickel in Botswana is a defining moment in LionOre's history and marks the commencement of our transformation into a major vertically integrated nickel producer."

Quarterly Operational Highlights

Corporate

- Board approves Activox® Project at Tati Nickel for a total cost of $620 million which comprises a DMS plant ($114 million), an Activox® Base Metals Refinery ($482 million) and power infrastructure installation ($24 million) - see press release dated August 9, 2006

- Subsequent to the end of the quarter, LionOre received a break fee of $32.5 million related to the termination of the agreement to purchase the Nikkelverk refinery and certain related marketing organizations from Falconbridge Limited. The fee will be used to pay for the costs related to the transaction, including those incurred during the performance of necessary due diligence, establishment of bank financing, legal, advisory, accounting and other related fees, estimated to be $8.0 million

- LionOre Australia (LIA) restructured its A$150 million credit facility, postponing payments originally due in 2006 to 2007 and 2008, thereby aligning the repayment schedule to the timing of the cash flows expected to be generated by LIA's expansion projects (see press release dated June 28, 2006)

Africa

- Subsequent to June 30, 2006, the Company announced a new NI 43-101 compliant resource at Tati Nickel's Selkirk deposit (see press release dated August 8, 2006)

- Project 5 Million at Tati successfully completed at a cost of $19 million, ahead of schedule and $1 million under budget

- Commissioning of the $4.7 million Interim Dense Media Separation Plant at Tati scheduled for the third quarter of 2006

- Nkomati cash cost of $0.04/lb of nickel due to significant by-product credits

- Chrome ore mining operation announced and expected to be in full production by the first quarter of 2007. The chrome ore overlays the nickel mineralized zones in the disseminated orebody and would ultimately be removed as part of the pre-strip requirements for the Main Expansion. Saleable chrome in the pre-strip material enhances the expansion's overall economics (see press release dated July 7, 2006)

Australia

- Maggie Hays Upgrade currently within budget and on track for completion during the third quarter, ramping up to full production during the fourth quarter

- Black Swan Disseminated 2 project within budget and on track for completion during the third quarter, ramping up to full production during the fourth quarter

- Production at the Black Swan Nickel Operations for the six months ended June 30, 2006 was 10% under target of 3,500 tonnes at 3,164 tonnes of payable nickel at a cash cost of $5.63/lb. Management focus continues to be directed toward improving the production and cost profiles at this operation and expects increased second half production

- 38,403 ounces of gold produced (Q2-2005: 43,724 ounces) at a cash cost of $394 per ounce (Q2-2005: $282 per ounce)

- LionOre has terminated its review of strategic options for the Thunderbox gold mine and has determined that it will operate the mine to the end of its mine life, expected in mid-2007. The Company will also commit limited resources to seek an extension of the mine life

LionOre's Consolidated Interim Financial Statements for the quarter 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.

Teleconference and Webcast Details:

LionOre will host a teleconference / webcast on Thursday August 10, 2006 at 9:00 am EDT. The webcast can be accessed at www.lionore.com and will be archived on the site for 90 days. The replay will be available for 2 weeks at 617-801-6888 or 1-888-286-8010, passcode: 95290372.

Contact Information

  • UK / Europe
    LionOre Mining
    Colin Steyn
    President & CEO
    +44 (0)20 7590 8888
    or
    Africa
    LionOre Africa
    Peter Breese
    Managing Director
    +27 (0)11 463 4223
    or
    Canada
    LionOre Mining
    Ted Mayers
    Chief Financial Officer
    +1 (416) 777 1670
    info@lionore.com
    or
    Australia
    LionOre Australia
    Glenn Jardine
    Managing Director
    +61 (0)8 9426 0100
    www.lionore.com