NORANDA INCOME FUND

NORANDA INCOME FUND

February 19, 2007 13:24 ET

Noranda Income Fund Reports 2006 Earnings of $33.2 Million, Fourth Quarter Earnings of $4.0 Million and the February Monthly Distribution of 8.5 Cents Per Unit

VALLEYFIELD, QUEBEC--(Marketwire - Feb. 19, 2007) -

Attention Business/Financial Editors:

The Noranda Income Fund (the "Fund") reported net earnings of $33.2 million for 2006, compared with net earnings of $32.8 million for 2005. The $0.4 million increase was due to higher zinc metal premiums, processing fee, recoveries and byproduct revenues offset by lower volumes of zinc metal production and sales, the impact of month prior pricing, higher foreign exchange losses and a higher interest expense.

Net earnings of $4.0 million were reported for the fourth quarter of 2006, compared to $10.3 million in the same quarter a year ago. The drop in net earnings was due to lower zinc metal sales, the impact of prior month pricing and higher foreign exchange losses and interest expense partially offset by higher premiums and processing fee.

"Strong byproduct revenue and premiums largely account for the favourable results in 2006." said Mario Chapados, President and Chief Executive Officer of the Noranda Income Fund's Manager. "However, weaker zinc metal sales, higher interest expense and the impact of month prior pricing negatively impacted fourth quarter results. Looking forward to 2007, production is forecast to be higher than last year, and premiums and byproduct revenue are expected to remain strong."

The outlook for 2007 and the estimate for production, sales, premiums and byproduct revenue are subject to various risks and uncertainties. The assumptions can be found in the "forward-looking statements" below.

Financial Results

This analysis of the financial position and results of operations of the Fund should be read in conjunction with the unaudited interim consolidated financial statements of the Fund for the three months and twelve months ended December 31, 2005 and with the audited consolidated financial statements of the Fund and the notes thereto for the period ended December 31, 2005.

This discussion is based on various assumptions (see "forward-looking statements" below.) All dollar amounts are shown in Canadian dollars unless otherwise specified.

The analysis has been prepared as of February 19, 2007. Additional information relating to the Fund, including the Fund's annual information form is available on SEDAR at www.sedar.com.



2006 Highlights

Year Fourth Quarter

2006 2005 2006 2005
---- ---- ---- ----

Zinc metal production (tonnes) 266,427 272,418 68,147 69,002
Zinc metal sales (tonnes) 259,446 271,830 62,035 67,912
Processing fee (cents/pound) 36.5 36.1 36.5 36.1
Zinc metal premiums (US$/pound) 0.072 0.060 0.075 0.067
Byproduct revenues ($ millions) 35.7 24.6 8.2 8.1
Average US/Cdn. exchange rate 1.134 1.211 1.139 1.173

- Cash Generated(1) by the Fund was $53.2 million and distributions
paid out were $51 million.
- All the monthly distributions were paid at the 8.5cents level.
- Realized premiums were higher - 7.2 cents US in 2006 vs. 6 cents
US in 2005.
- Byproduct revenue rose to $35.7 million in 2006 from $24.6 million
in 2005.


RESULTS OF OPERATIONS

Consolidated Net Earnings (Twelve months 2006 compared to twelve months 2005)

Net revenues less raw material purchase costs ("Net Revenues") in 2006 were $273.8 million compared to $265.9 million in 2005. The $7.9 million variance was due to higher revenues from byproducts, premiums and processing fee as well as better recoveries partially offset by a stronger Canadian dollar and lower volumes of zinc metal sales.

The Fund makes a portion of its sales based on the average price from the previous month (month prior pricing). This form of pricing is often used for those customers where cash-in-advance terms have been negotiated as a way to manage the Fund's liquidity position and credit exposure. In a market where zinc prices are rising, a portion of the Fund's revenues will lag behind the higher zinc prices; while in a market where zinc prices are falling, a portion of the Fund's revenues will benefit from higher zinc prices from the month prior. Month prior pricing sales are closely monitored to ensure sales volumes do not vary significantly from month to month. In 2006, month prior pricing had a negative impact of approximately $10 million on the Fund's Net Revenues as the zinc price rose from 83 cents per pound US in December 2005 to US$2.00 per pound in December 2006.

Selling, general and administration ("SG&A") costs for 2006 were similar at $18.8 million, compared to $18.5 million in 2005.

The foreign exchange loss for 2006 was $5.6 million, compared to a loss of $3.1 million for 2005. The increase was the result of a foreign exchange loss in the fourth quarter. The Fund maintains cash and cash equivalents, accounts receivable and accounts payable in US dollars.

Amortization and reclamation was $28.6 million in 2006 compared to $29.4 million recorded in 2005. The decrease was due to changes in the expected timing of future reclamation spending. This has resulted in a reduction in the present value of future site restoration and reclamation liabilities.

In 2006, net interest expense was $17.8 million compared to $11.1 million in 2005 due to an increase in interest rates and debt outstanding as a result of higher working capital requirements, and higher interest expense related to delayed concentrate payments.

Minority interest in earnings of subsidiaries in 2006 was $11.1 million up from $10.9 million in 2005 due to the higher earnings of the Fund.



--------------------------------

(1) Cash Generated is not a measure defined by generally accepted
accounting principles. Cash Generated as calculated by the Fund may not
be comparable to similar measures presented by other issuers. See
Distribution Policy, Distributable Cash and Operating Reserve.


Consolidated Net Earnings (Fourth quarter 2006 compared to fourth quarter 2005)

Net Revenues for the fourth quarter of 2006 totalled $67.3 million, compared to $68.8 million in the same period of 2005. The $1.5 million decrease was due to lower volumes of zinc metal sales and a stronger dollar offset by higher premiums, byproduct revenue and processing fee.

As we mentioned in the third quarter press release, stronger zinc prices were expected to negatively impact fourth quarter results due to the impact of month prior pricing. For the quarter, this pricing had a negative impact of approximately $5 million on the Fund's Net Revenues as the zinc price rose from US$1.54 per pound in September 2006 to US$2.00 per pound in December 2006.

SG&A costs for the fourth quarter of 2006 were $4.9 million, compared to $4 million in the same quarter a year ago due to higher insurance costs.

The foreign exchange loss in the fourth quarter of 2006 of $6.1 million compared to a foreign exchange loss of $0.5 million for the same period in 2005. The $5.6 million increase was due to the impact of a weakening Canadian dollar on the Fund's net monetary liability. The foreign exchange loss was partially offset by an estimated $4.0 million increase in the value of in-process and finished inventory. This increase in value is realized in Net Revenues as the metal is sold to customers.

Amortization and reclamation costs in the quarter were $6.9 million, a decrease of $0.5 million from the same period in 2005.

Minority interest in earnings of subsidiaries in the fourth quarter of 2006 was $1.3 million, down from $3.4 million in 2005 due to the lower earnings of the Fund.

PRODUCTION AND SALES

Zinc metal production in 2006 was 266,427 tonnes, compared to 272,418 tonnes in 2005. Production in 2006 was negatively impacted by equipment failure in the first quarter, and by a lower concentrate grade and a new process to recover copper in the second half of the year. In the fourth quarter of 2006, zinc metal production was 68,147 tonnes, compared to 69,002 tonnes in the same period of 2005.

For 2007, production is forecast to be 275,000 tonnes.

With high zinc prices in 2006, an alternate processing method was implemented to recover zinc from our jarosite pond water. In the first nine months of 2006, $8.8 million of additional revenue was generated from this process. During the fourth quarter of 2006, no additional water was processed. A further $1.8 million was generated from a project to increase zinc recoveries. Approximately $3-4 million of additional revenue is expected in the first half of 2007 from zinc recovered from the jarosite pond water.

Offsetting this positive for zinc recoveries was higher internal zinc consumption. The new process to treat copper cake without arsenic negatively impacts zinc metal production by requiring higher zinc dust consumption. A program is currently in place to address this issue.

The softening in US demand for zinc negatively impacted the Fund's sales in 2006. The combination of a slowdown in the US automobile market as well as destocking at the steel mills negatively impacted zinc sales in December. For the year, sales of zinc metal totalled 259,446 tonnes, 5% lower than the 271,830 tonnes sold in 2005. Zinc sales for the fourth quarter of 2006 were 9% lower at 62,035 tonnes, compared to 67,912 from a year ago.

The target for 2007 sales is 282,000 tonnes. The volume is greater than production because the Fund plans to reduce inventories to normal levels.

The preceding targets for production and sales are subject to various risks and uncertainties. The assumptions for them can be found in the "Forward-Looking Statements" below.

PREMIUMS

Zinc fundamentals strengthened in 2006, with strong demand and delays to new projects offsetting production growth in China. With a drop in LME zinc stocks from 393,550 tonnes at the end of 2005 to 90,475 tonnes at year end 2006, stocks are at a critically low level - 3 days of consumption. LME prices responded to this tightness, rising from an average of US$0.63 per pound in 2005 to US$1.49 per pound in 2006.

The tightness in the zinc market was reflected in premiums. For 2006, they averaged 7.2 cents US per pound, compared to 6 cents per pound in 2005. For the fourth quarter of 2006, premiums rose to 7.5 cents US per pound compared to 6.7 cents US per pound for the same period in 2005.

The target for 2007 premiums has been increased to 10 cents US per pound, reflecting expected realizations from spot and contract sales.

BYPRODUCTS

Copper fundamentals began to weaken in May of 2006, reflecting the signs that the physical market was easing. By year end, total exchange stocks of copper had increased to 252,790 tonnes from 156,251 tonnes a year in 2005. The market ended 2006 with a small surplus (60,000 tonnes), and it is expected to have a further surplus of 240,000 tonnes in 2007. LME copper prices in 2006 averaged US$3.05 per pound compared to US$1.70 per pound in 2005.

In 2006, copper prices were 183%, respectively higher than in 2005. This increase explains the substantial increase in 2006 byproduct revenues to $35.7 million from $24.6 million in 2005. Sulphuric acid netbacks were weaker than in 2005 because of higher transportation costs. The average realized netback in 2006 was US$16.90 per tonne compared to $20.50 per tonne in 2005. For the fourth quarter, byproduct revenues were largely unchanged from a year earlier at $8.2 million.

The Fund's target for premiums is subject to various risks and uncertainties. The assumptions can be found in the "Forward-Looking Statements" below.

CAPITAL EXPENDITURES

In 2006, the Fund initiated a number of capital projects to improve productivity and increase revenues over the next few years. The completion of the projects is now scheduled for March 2007, due to difficulties to purchase specific stainless steel products.

For 2006, capital expenditures rose to $22.2 million from $15.8 million in 2005 as a result of the revenue generating projects being developed. Roughly $15 million was sustaining capital and $7.2 million was invested in revenue generating projects. Capital expenditures exceeded the $21.5 million budget because of higher stainless steel costs for some of the components. Capital expenditures in the fourth quarter were $7.4 million compared to $5.9 million in the fourth quarter of 2005.

For 2007, capital spending is forecasted at $22 million - $16 million will be spent on sustaining capital and $6 million will be for revenue generating projects. The focus of these expenditures is to increase zinc concentrate throughput towards the maximum available concentrate supply under the terms of the Supply and Processing Agreement with Falconbridge. The Fund currently processes approximately 535,000 tonnes, which are 15,000 tonnes below the Supply and Processing Agreement's maximum level. Closing the gap to 550,000 tonnes will increase processing fees, and revenue from zinc premiums and byproducts. The extra capital expenditures will be allocated toward de-bottlenecking the plant to increase capacity, with a potential to generate an additional $4 million in incremental cash flow starting in 2008.

In 2006, the Fund participated in Hydro-Quebec's "Industrial Initiatives Program - Major Customers" program. The Fund recognized $56,000 in the form of incentives during the fourth quarter and $1.8 million for the year. These incentives have been recorded as a reduction of property, plant and equipment as they relate to capital expenditures incurred to reduce electricity consumption. In 2007, the Fund is expecting a similar level of grants, providing all of our projects are approved.

The Fund's target for capital spending is subject to various risks and uncertainties. The assumptions can be found in the "Forward-Looking Statements" below.

Cash Flows, Liquidity and Capital Resources

Cash realized from operations, before changes in non-cash working capital for 2006, was $73.2 million compared to $74.6 million at the end of 2005. For the fourth quarter of 2006, cash realized from operations, before changes in non-cash working capital was $12.6 million compared to $21.8 million for the same periods in 2005.

During 2006, non-cash working capital increased by $52.9 million, due to higher zinc prices. Zinc prices impacted the value of in-process and finished product inventories. The average monthly LME zinc price rose to US$2.00 per pound in December 2006 from US$0.83 per pound in December 2005.

For 2006, capital expenditures rose to $22.2 million from $15.8 million in 2005. In the fourth quarter of 2006, they were $7.4 million compared to $5.9 million in the fourth quarter of 2005.

Distributions paid to unitholders in the fourth quarter were $12.8 million, unchanged from the same period in 2005. Distributions to unitholders for both 2006 and 2005 were $51 million.

The Fund has a Revolving Facility in place that is used for general corporate purposes, including financing working capital. On June 30, 2006, the Revolving Facility was extended to May 3, 2008 and was increased from $65 million to $100 million to finance the higher working capital levels. The Revolving Facility was extended at essentially the same terms that were in place with the prior Facility. As a result of the high zinc price, the Fund is now operating at the limit of its credit facilities and is currently receiving credit from Falconbridge by way of delayed payment terms. The Fund continues to review its options with respect to financing its working capital as well as monitor the impact of the changing zinc pricing environment on its working capital requirements.

Fluctuations in working capital balances as a result of operations are generally funded by or used to repay the Revolving Facility. During the quarter, $158.7 million of debt was drawn and $163.5 million was repaid related to the fluctuations in working capital.

At December 31, 2006, the Fund's total debt was $244.5 million, up from $180.4 million at the end of December 2005.

Distribution Policy

The Fund makes monthly distributions to its Unitholders based on the monthly Distributable Cash (see "Distributable Cash" below) declarations. The Fund's goal is to provide stable monthly distributions and will seek to increase distributions through sustainable improvements, such as operating efficiencies and revenue enhancing opportunities.

The Fund announced today the monthly cash distribution for the month of February 2007 of $0.085 per unit. The distribution will be payable on March 26, 2007 to unitholders of record at the close of business on February 28, 2007.

The schedule below sets out the history of the Fund's cash distributions for the past six months:



-------------------------------------------------------------------------
RECORD DATE PAYMENT DATE DISTRIBUTION PER UNIT
-------------------------------------------------------------------------
February 28, 2007 March 26, 2007 8.5 cents
January 31, 2007 February 26, 2007 8.5 cents
December 31, 2006 January 25, 2007 8.5 cents
November 30, 2006 December 27, 2006 8.5 cents
October 31, 2006 November 27, 2006 8.5 cents
September 30, 2006 October 25, 2006 8.5 cents
-------------------------------------------------------------------------


In order to meet the Fund's goal to provide a stable monthly distribution the Fund utilizes a notional operating reserve. In a period during which Cash Generated is greater than the distribution declared, the operating reserve will increase. In a period during which Cash Generated is less than the distribution declared, the operating reserve will decrease. The operating reserve provides flexibility so that the Fund can maintain a stable, monthly distribution, while adhering to the Fund's trust indentures and debt covenants.

Distributable Cash

Distributable Cash is not a measure defined by generally accepted accounting principles and is dependant upon the definition as contained in the trust indentures establishing the Fund. Distributable Cash under the Fund's indenture is based on 100% of the net earnings adjusted to account for non-cash transactions such as amortization, reclamation and minority interest, reduced by additions to capital assets, site restoration expenditures, reasonable reserves and repayment of long-term debt. Fluctuations in working capital balances as a result of operations are generally funded by or used to repay the Revolving Facility.

Cash Generated is defined as Distributable Cash before changes in operating reserves. Distributable Cash as calculated by the Fund may not be comparable to similar measures presented by other issuers. The Distributable Cash for the period is as follows:



Three Three Twelve Twelve
months months months months
ending ending ending ending
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005
-------------------------------------------------------------------------

Net earnings $4,015 $10,334 $33,190 $32,809
Add:
Amortization, and reclamation 6,938 7,443 28,612 29,397
Minority interest in earnings 1,338 3,444 11,063 10,936
Loss from sale of assets 380 193 624 542
Proceeds from sales of assets - 8 595 9

Less:
Additions to property, plant
and equip. (7,384) (5,940) (22,230) (15,826)
Hydro-Québec - incentives 56 - 1,837 -
Site restoration expenditures (100) (102) (543) (102)
Redemption of Priority Units (20) - (20) -

Increase (decrease) in capital
and site restoration reserve - 570 87 (1,972)
----------------------------------------
Cash Generated during the period 5,223 15,950 53,215 55,793
----------------------------------------
Decrease/(Increase) in
operating reserve 7,527 (3,200) (2,215) (4,793)
----------------------------------------
Distributable Cash for the period $12,750 $12,750 $51,000 $51,000
----------------------------------------

The following provides an alternative reconciliation of Distributable Cash
based on the Fund's Consolidated Statement of Cash Flows:

Three Three Twelve Twelve
months months months months
ending ending ending ending
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005
-------------------------------------------------------------------------

Cash realized from (used for)
operations $28,400 $9,735 $20,255 $50,592

Increase/(decrease) in non cash
working capital (15,765) 12,045 52,945 24,032
Mark-to-market gain/(loss) on
derivative financial instrument - (404) - (773)

Add:
Proceeds from sales of assets - 8 595 9

Less:
Additions to property plant and
equip. (7,384) (5,940) (22,230) (15,826)
Hydro-Québec - incentives 56 - 1,837 -
Amortization of deferred
financing fees (64) (64) (254) (269)
Redemption of Priority Units (20) - (20) -

Increase (decrease) in capital
and site restoration reserve - 570 87 (1,972)
----------------------------------------

Cash Generated during the period 5,223 15,950 53,215 55,793
----------------------------------------

(Increase) decrease in operating
reserve 7,527 (3,200) (2,215) (4,793)
----------------------------------------

Distributable Cash for the period $12,750 $12,750 $51,000 $51,000
----------------------------------------


In 2006, Cash Generated (Distributable Cash before changes in operating reserves) was $53.2 million and Distributable Cash to unitholders was $51 million: $38.3 million paid to Priority Unitholders and $12.7 million paid to Ordinary Unitholders. In the fourth quarter of 2006, Cash Generated (Distributable Cash before changes in operating reserves) was $5.2 million and Distributable Cash to unitholders was $12.8 million: $9.6 million paid to Priority Unitholders and $3.2 million paid to Ordinary Unitholders.

Notional Operating Reserve

During the fourth quarter of 2006, the notional operating reserve decreased by $7.5 million to $11.1 million. This compares to a reserve of $8.9 million at the end of 2005.

The Fund also utilizes a capital and site restoration reserve. As of December 31, 2006, the capital and site restoration reserve was $5.0 million (December 31, 2005 - $5.1 million).

Revenue Recognition

The Fund recognizes revenue from the sale of refined metals and byproducts at the time of the sale, when the rights and obligations of ownership pass to the buyer. This generally occurs upon shipment. Prices for provisionally priced sales are based on market prices and exchange rates prevailing at the time of shipment and are adjusted based upon market prices and exchange rates until final settlement with customers, pursuant to the terms of sales contracts. Price changes for shipments waiting final pricing at quarter-end could have a material effect on future revenues. As of December 31, 2006, there was $15 million in revenues waiting final pricing.

The Fund makes a portion of its sales based on the average price from the previous month (month prior pricing). This form of pricing is often used for those customers where cash-in-advance terms have been negotiated as a way to manage the Fund's liquidity position and credit exposure. In a market where zinc prices are rising, a portion of the Fund's revenues will lag behind the higher zinc prices; while in a market where zinc prices are falling, a portion of the Fund's revenues will benefit from higher zinc prices from the month prior. With zinc prices coming off the December highs, month prior pricing is expected to have a positive impact on the first quarter results.

OTHER DEVELOPMENTS

Today the Board of Trustees appointed Gerard A. Limoges and John M. Whyte as Trustees of the Board.

Mr. Gerard Limoges was the former Deputy Chairman of Ernst & Young Canada until his retirement in 1999, after a 37-year career with the firm. He has a long experience in the areas of accounting, audit, mergers and acquisitions. He also has extensive experience with governmental projects. Mr. Limoges serves on the boards of numerous public and private companies as well as several not-for-profit organizations. He received the Order of Canada in 2002. Mr. Limoges graduated from HEC Montreal as a chartered accountant. He will be an independent trustee serving as Chair of the Governance and Nominating Committee and a member of the Audit Committee.

Mr. John Whyte joined Noranda in 1991 after being in private practice for several years with a Toronto law firm - Beard, Winter and has since held a variety of senior positions within the legal department and the recycling business. Most recently, Mr. Whyte held the position of Vice-President and Assistant General Counsel of Falconbridge Limited, and currently holds the position of Vice-President, Legal of Xstrata Zinc Canada. Mr. Whyte is a member of the Law Society of Upper Canada, the Canadian Bar Association of Ontario and is a member of several business associations. He holds a B.A. (Hons.) from the University of Toronto (Victoria College), and an L.L.B. from Queen's University.

The Processing Facility was originally served with a class action motion presentable before the Québec Superior Court in August 2004, subsequent to an accidental discharge of sulphur trioxide. In February 2007, it was served with a re-amended motion whereby the amount of damages claimed was increased to $100 million from $25 million. The case is expected to resume before the courts in 2007. The Fund continues to believe that this action is unfounded and is contesting it vigorously.

RISKS AND UNCERTAINTIES

The Fund is monitoring the strike at CN Rail and taking action as required to limit delays to production and deliveries. At this point, there has been no negative impact.

On November 1, 2006, the Federal Government released the Tax Fairness Plan. The proposed new tax structure has the intended impact of eliminating any tax advantage enjoyed by the trust structure over the corporate structure from the perspective of Canadian tax-exempt investors and foreign investors. These changes would be effective for existing trusts in 2011, unless they exceed allowable growth thresholds, and for corporations considering a trust structure from November 1, 2006 onwards.

As a trust currently under the terms of the Income Tax Act (Canada), the Fund is not subject to income taxes to the extent that its taxable income in a year is paid or payable to a unitholder. If enacted in its current form, the proposed legislation will result in a change in which the earnings of the Fund will be subject to income tax, either in 2011 or earlier if the Fund exceeds the allowable growth threshold, regardless of whether amounts are distributed to the Unitholders or not.

Cash distributions on Ordinary Units are subordinate to distributions on Priority Units until 2017, except on the occurrence of certain events. With respect to the Proposed Tax Fairness Plan, the Fund expects that the subordination will remain unchanged.

OUTLOOK

The Fund's primary goal is to continue to provide stable monthly distributions.



The 2007 targets for the key drivers of the Fund are:
Zinc metal production: 275,000 tonnes
Zinc metal sales: 282,000 tonnes
Processing fee: 37 cents per pound
Zinc metal premiums: 10 cents US/pound
Capital expenditures: $22 million


The Manager's ability to provide for stable monthly distributions and meet the targets identified above is subject to the various risks and the assumptions that can be found in the "forward-looking statements" below.

Forward-Looking Statements

This news release contains Forward-Looking Statements concerning the Noranda Income Fund's ("Fund") objectives and 2007 general business outlook, zinc metal production and sales targets, estimated processing fee, zinc premium target, capital expenditures forecast and cash flow projections. Forward-Looking Statements can be identified by the use of words, such as "are expected", "is forecast", approximately or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-Looking Statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, or performance to be materially different from any future results or performance expressed or implied by the Forward-Looking Statements.

Examples of such risks, uncertainties and other factors include, but are not limited to the following: (1) the Fund's ability to operate at normal production levels; (2) the dependence upon the continuing supply of zinc concentrates (terms of the Supply and Processing Agreement); (3) the demand for zinc metal, sulphuric acid, and copper cake; (4) changes to the supply and demand for specific zinc metal products and the impact on the Fund's realized premiums; (5) the impact of month prior pricing; (6) the ability of the Fund to continue to service customers in the same geographic region; (7) the sensitivity of the Fund's net revenues to reductions/increases in realized zinc metal prices including premiums, copper prices, sulphuric acid prices; the strengthening of the Canadian dollar vis-à-vis the US dollar; and increasing transportation and distribution costs (8) the sensitivity of the Fund's production costs to increases in electricity rates, other energy costs, labour costs and operating supplies used in its operations; (9) changes in recoveries and capital expenditure requirements; (10) the negotiation of collective agreement with its unionized employees; (11) general business and economic conditions; (12) transportation disruptions; (13) the legislation governing air emissions, discharges into water, waste, hazardous materials and workers' health and safety as well as the impact of future legislation and regulations on expenses, capital expenditures, taxation and restrictions on the operation of the Processing Facility; (14) potential negative financial impact from regulatory investigations, claims, lawsuits and other proceedings; (15) loan default and (16) reliance on Falconbridge Limited for the operation and maintenance of the Processing Facility. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied in the forward-looking statements contained herein.

These Forward-Looking Statements represent our views as of the date of this Report. The Fund anticipates that subsequent events and developments may cause the Fund's views to change. The Fund does not undertake to update any forward-looking statements, either written or oral, that may be made from time to time by or on behalf of the Fund subsequent to the date of this release.

Noranda Income Fund is an income trust whose units trade on the Toronto Stock Exchange under the symbol "NIF.UN". The Noranda Income Fund owns the CEZinc processing facility and ancillary assets (the "CEZinc processing facility") located in Salaberry-de-Valleyfield, Quebec. The CEZinc processing facility is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America, where the majority of its customers are located. It produces refined zinc metal and various by-products from zinc concentrates purchased from mining operations. The Processing Facility is operated and managed by Canadian Electrolytic Zinc Limited.

Further information about the Noranda Income Fund can be found at www.norandaincomefund.com.



NORANDA INCOME FUND

CONSOLIDATED BALANCE SHEETS

(unaudited)

($ thousands)

Dec. 31 Dec. 31
2006 2005
---------- ----------

ASSETS

Current assets:
Cash and cash equivalents 13,712 175
Accounts receivable
Other 143,361 72,022
Falconbridge 35,894 13,120
Inventories 188,161 60,519
Prepaids and other assets 3,566 3,133
---------- ----------
384,694 148,969

Deferred financing fees 1,009 1,263

Property, plant and equipment 324,063 334,641
---------- ----------
709,766 484,873
---------- ----------

LIABILITIES AND EQUITY

Current liabilities:
Accounts payable and accrued liabilities
Other 17,596 16,155
Falconbridge 218,780 51,942
Distributions payable 4,250 4,250
---------- ----------
240,626 72,347

Future site restoration and reclamation 15,205 15,924

Long-term debt 244,500 180,400

Unitholders' Interest:
Interests of Ordinary Unitholders 52,363 54,050

Unitholders' capital accounts 191,273 191,293
Retained earnings (Deficit) (34,201) (29,141)
---------- ----------
157,072 162,152
---------- ----------
709,766 484,873
---------- ----------



NORANDA INCOME FUND

CONSOLIDATED STATEMENTS OF EARNINGS

AND RETAINED EARNINGS (DEFICIT)

(unaudited)

($ thousands)

Three months Twelve months
ended December 31 ended December 31
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenues
Sales 311,771 152,517 1,055,069 525,250
Transportation and
distribution costs (3,955) (3,923) (15,799) (14,457)
---------- ---------- ---------- ----------
Net revenues 307,816 148,594 1,039,270 510,793
---------- ---------- ---------- ----------
Raw material purchase costs 240,469 79,767 765,464 244,878
---------- ---------- ---------- ----------
Net revenues less raw material
purchase costs 67,347 68,827 273,806 265,915
---------- ---------- ---------- ----------
Other expenses
Production 38,716 40,299 158,756 160,074
Selling, general and
administration 4,916 4,017 18,798 18,504
Foreign exchange loss 6,092 462 5,575 3,085
Amortization and reclamation 6,938 7,443 28,612 29,397
---------- ---------- ---------- ----------
56,662 52,221 211,741 211,060
---------- ---------- ---------- ----------
Earnings before interest
expense and minority
interest 10,685 16,606 62,065 54,855
---------- ---------- ---------- ----------
Interest expense, net 5,332 2,828 17,812 11,110
---------- ---------- ---------- ----------
Earnings before minority
interest 5,353 13,778 44,253 43,745
---------- ---------- ---------- ----------
Minority interest in earnings
for Ordinary Unitholders 1,338 3,444 11,063 10,936
---------- ---------- ---------- ----------
Net earnings 4,015 10,334 33,190 32,809
---------- ---------- ---------- ----------
Deficit, beginning of period (28,653) (29,912) (29,141) (23,700)
Distributions to Priority
Unitholders (9,563) (9,563) (38,250) (38,250)
---------- ---------- ---------- ----------
Deficit, end of period (34,201) (29,141) (34,201) (29,141)
---------- ---------- ---------- ----------

Net earnings per Priority Unit
(basic and diluted) $ 0.11 $ 0.28 $ 0.89 $ 0.87



NORANDA INCOME FUND

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

($ thousands)

Three months Twelve months
ended December 31 ended December 31
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------

Cash realized from (used for)
operations:
Net earnings for the period 4,015 10,334 33,190 32,809
Items not affecting cash:
Amortization 7,369 7,291 28,788 28,350
Reclamation (431) 152 (176) 1,047
Minority Interest in earnings
for Ordinary Unitholders 1,338 3,444 11,063 10,936
Mark-to-market loss on
derivative financial
instruments - 404 - 773
Amortization of deferred
financing fees 64 64 254 269
Loss from sale of assets 380 193 624 542
Site restoration expenditures (100) (102) (543) (102)
---------- ---------- ---------- ----------
12,635 21,780 73,200 74,624
---------- ---------- ---------- ----------
Net change in non cash working
capital items 15,765 (12,045) (52,945) (24,032)
---------- ---------- ---------- ----------
28,400 9,735 20,255 50,592
---------- ---------- ---------- ----------

Cash realized from (used for)
investment activities:
Hydro-Québec - electricity
conservation grants 56 - 1,837 -
Purchases of property,
plant and equipment (7,384) (5,940) (22,230) (15,826)
Proceeds on sale of property,
plant and equipment - 8 595 9
---------- ---------- ---------- ----------
(7,328) (5,932) (19,798) (15,817)
---------- ---------- ---------- ----------

Cash realized from (used for)
financing activities:
Redemption
- Priority Unitholders (20) - (20) -
Distributions
- Priority Unitholders (9,563) (9,562) (38,250) (38,250)
- Ordinary Unitholders (3,187) (3,187) (12,750) (12,750)
Long-term debt issued from
the Revolving Facility 158,700 74,000 558,800 223,300
Long-term debt repaid to
the Revolving Facility (163,500) (73,600) (494,700) (217,900)
---------- ---------- ---------- ----------
(17,570) (12,349) 13,080 (45,600)
---------- ---------- ---------- ----------

Change in cash and cash
equivalents during the
period 3,502 (8,546) 13,537 (10,825)

Cash and cash equivalents,
beginning of period 10,210 8,721 175 11,000
---------- ---------- ---------- ----------

Cash and cash equivalents,
end of period 13,712 175 13,712 175
---------- ---------- ---------- ----------

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