Lundin Mining President and CEO, Karl-Axel Waplan said: "Continued strong commodity prices and good performances from our three mining operations resulted in record earnings and cash flow from operations during the fourth quarter. There is still a shortage of supply in the market for our main metal, zinc, and we are optimistic going into 2006. With the recent alliance and financing agreement with Sunridge, we have expanded our interest s into Africa, one of the most interesting exploration and mining regions in the world."

Other highlights

-      A financing arrangement with Sunridge Gold Corp. was signed in February 2006. Sunridge is a publicly traded Canadian mining company, listed on the TSX Venture Exchange ("TSXV"). Sunridge is currently drilling several advanced exploration projects in Eritrea and northeastern Africa.

-      The acquisition of up to a 19.9% interest in Union Resources Limited was completed during the fourth quarter. Union currently holds a 38% interest in the Mehdiabad Project, one of the largest undeveloped zinc projects in the world. Union has entered into an agreement with Itok with the objective of acquiring Itok’s position in the project. After completion of the agreement, Union’s share of the project will increase to 50%.

-      All of the shares and warrants which Lundin Mining was holding in Silver Wheaton Corporation were sold during 2005. Total net proceeds amounted to $37.1 million of which $11. 9 million was realized in the fourth quarter. The profit before tax during the fourth quarter arising from this transaction was $6.6 million.

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(i) Non GAAP measures
(ii) See page 14

These Management’s comments of the financial condition and results of the operations, analyzes the three and twelve months ended December 31, 2005 and is dated February 16, 2006.

Lundin Mining has entered into a financing arrangement with Sunridge Gold Corp. ("Sunridge"), a publicly traded Canadian mining company listed on the TSXV under the symbol "SGC".

Sunridge is currently drilling several advanced exploration projects in Eritrea in northeastern Africa including the high-grade Adi Nefas Gossan zinc/gold/copper volcanogenic massive sulphide (VMS) project, the high-grade copper/gold Debarwa VMS deposit, the Gupo gold deposit and several other high priority targets. These projects form part of the Asmara Joint Venture Project in which Sunridge currently holds a 40% interest and has an option to earn a 70% interest. The remaining interest is held by Sub Sahara Resources (Eritrea) Ltd., a subsidiary of Sub-Sahara Resources NL, an Australian public company.

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Sunridge currently has a 25,000 metre diamond and reverse circulation drilling program underway on several of its key projects. Sunridge recently reported excellent results from the Adi Nefas high-grade zinc/gold/copper project. Highlights include:

NG-024-D - 7.85 metres grading 3.9 g/t Au, 147.52 g/t Ag, 5.5% Cu and 10.05% Zn

NG-025-D - 10.6 metres grading 3.16g/t Au, 96.08 g/t Ag, 2.23% Cu and 10.68% Zn

NG-026-D - 9.0 metres grading 11.91 g/t Au, 285 g/t Ag, 3.18% Cu and 11.05% Zn

 NG-043-D - 5.25 metres grading 10.81 g/t Au, 239.8 g/t Ag, 6.77% Cu and 6.77% Zn

 NG-046-D - 7.80 metres grading 4.0 g/t Au, 135.44 g/t Ag, 1.12% Cu and 5.62% Zn

Another key project is the Debarwa copper/gold project. Debarawa is at an advanced stage and Sunridge has now commissioned conceptual mine planning studies which will evaluate a potential fast -track development of this high -grade deposit.

Over the coming months, an aggressive drilling program will continue utilizing 4 rigs. Lundin Mining will bring to the strategic alliance technical and financial expertise and assist Sunridge Gold to rapidly advance its projects to the production stage.

Pursuant to the agreement with Sunridge, Lundin Mining has subscribed for 3,150,000 units of Sunridge by way of a non -brokered, private placement at a price of Cdn $1.66 per unit for an investment of Cdn $5,229,000. Each unit consist s of one common share of Sunridge and one common share purchase warrant. Each warrant is exercisable into one additional common share of Sunridge at a price of $2.07 for a period of two years from the closing of the private placement. Upon the completion of the private placement, Lundin Mining will hold just under 10% of the common shares of Sunridge. This private placement is subject to all regulatory approvals. The securities comprising the units will be subject to a four month hold period from the date of closing.

Upon completion of its investment in Sunridge, Lundin Mining will be entitled to two seats on the board of directors of Sunridge.

The technical information contained above has been reviewed by Mr. Michael Hopley, (B.Sc. Geo.) who is a Qualified Person pursuant to NI 43-101. Mr. Hopley is President and CEO of Sunridge.

Acquisition of a 19.9% interest in Union Resources Limited

On August 22, 2005 Lundin Mining announced that its wholly owned subsidiary, Lundin Mining AB, had signed an agreement to acquire up to a 19.9% interest in Union Resources Limited ("Union"), a publicly traded Australian mining company. On October 27, 2005 Lundin Mining announced that the acquisition was completed after Union obtained shareholder approval. Union is listed on the Australian Stock Exchange and on the Alternative Investment Market ("AIM") of the London Stock Exchange.

Union discovered, and is now managing a bankable feasibility study ("BFS") over, the world class Mehdiabad zinc/lead/silver mineralization located in central Iran, on behalf of Mehdiabad Zinc Company ("MZC").

MZC was initially a company owned jointly between Union, IMPASCO and Itok GmbH ("Itok"). IMPASCO , a company owned by the Iranian government, held 50%, Union’s beneficial interest effective March 2005 was 38% and the balance was held by Itok.

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Lundin Mining’s total investment in Union is Australian $4.5 million (US$3.4 million) and initially resulted in Lundin Mining owning slightly less than 19.9% of the issued shares of Union. As a result of its investment, Lundin Mining has two seats on the board of directors of Union.

Union announced on October 27, 2005 that it had reached an agreement with Itok to acquire Itok’s position in MZC. Upon completion of that transaction, Union’s interest in the Mehdiabad Project increased to 50%. Pursuant to the announcement made on October 27, 2005, Union issue d 110,000,000 Union shares to Itok in respect of the acquisition of Itok’s position in the Mehdiabad project.

Union announced on December 13, 2005 that Itok had not settled the share swap agreement within the time that was stipulated in the agreement between Union and Itok. Subsequently, Union allowed an extension of time to assist Itok to complete the settlement. The purpose of the extension was solely to allow MZC to obtain the formal approval of its major government shareholder to the transfer of shares in MZC from Itok to Union, as required under the Iranian commercial code and for no other purpose.

When the transaction between Union and Itok is completed Lundin’s holdings will be diluted to 17.4% of the share capital in Union. However, Lundin has the right to participate in future capital raisings which will help protect the Company from further dilution.

Sale of the holdings in Silver Wheaton Corporation

Pursuant to a transaction initially announced in December 2004, Zinkgruvan Mining AB ("Zinkgruvan") the Corporation’s wholly -owned subsidiary, received 6,000,000 shares and 30,000,000 warrants from Silver Wheaton as partial payment for the sale of all of the Zinkgruvan silver production. During the third quarter of 2005 Zinkgruvan sold the 6,000,000 shares for net proceeds of approximately $25.2 million. The sale of the shares result ed in a realized profit before taxes of approximately $11.2 million, which was recognized during the third quarter.

During the fourth quarter, Zinkgruvan also sold the warrants for net proceeds of approximately $11. 9 million and a profit before tax of approximately $6.6 million.

Hedging of Lead and Copper

Lundin Mining has entered into hedging contracts, during the fourth quarter, with the objective of giving the Company price protection if the prices of the Company’s by-products, lead and copper, were to decline. For 2006, 4,000 tonnes of the copper production from Storliden have been hedged through forward contracts at the price 1.74 US$/pound (3,825 US$/tonne). The Company has also hedged 12,000 tonnes of the lead production from Zinkgruvan and Galmoy for 2006 through an option strategy. The Company has bought put options at the average price 0.39 US$/pound (864 US$/tonne) and has also sold call options at the average price of 0.49 US$/pound (1,073 US$/tonne). For further details of the hedges, see page 14.

Other corporate matters

Abalone Capital Ltd. ("Abalone"), Lorito Holdings Ltd ("Lorito") and Zebra Holdings and Investments Ltd. ("Zebra") have informed Lundin Mining that they have acquired additional Swedish Depository Receipts ("SDRs") in Lundin Mining. Together with Ellegrove Capital "(Ellegrove") these companies currently hold 8,131,250 shares and SDR’s in Lundin Mining, representing approximately 19.98% of the number of outstanding shares of the company.

Abalone, Ellegrove, Lorito and Zebra are investment companies incorporated in Guernsey (Channel Islands) and in Barbados. They are wholly owned by a trust whose settler is Mr. Adolf H. Lundin.

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Effective February 15, 2006, Mr Stefan Månsson has been appointed Managing Director of the Galmoy operations. Mr Månsson previously held the same position at the Zinkgruvan operations and replaces Mr. Steve Gatley. With the experience gained from dealing with the recent changes at the Zinkgruvan operations, Mr Månsson will bring very important knowledge to the ongoing improvement process at Galmoy. Mr. Gatley has been appointed General Manager, Projects and will be closely involved in the development of Lundin’s recent investments in Union Resources and Sunridge. Mr. Gatley has extensive international experience and will strengthen the team responsible for developing projects within the Company. Mr Stefan Romedahl has been appointed Man aging Director of the Zinkgruvan operations, having previously held the position as Mine Superintendent at Zinkgruvan.

Summary of operations – Metal production*

*100% of production at Zinkgruvan, Storliden and Galmoy is included for 2004 and 2005. This does not, however, represent Lundin Mining's actual ownership during these periods. Zinkgruvan was acquired in June 2004. The ownership of NAN (owner of Storliden) was 74% as of December 31, 2004 and 97.5% as of December 31, 2005. ARCON (owner of Galmoy) was acquired in April 2005.

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(i)    The Company has restated its unaudited interim consolidated financial statements for 2004 to allow for the retroactive effect of its change in accounting policy for exploration expenses.

(ii)    The income (loss) per share (basic and diluted) is determined separately for each quarter. Consequently, the sum of the quarterly amounts may differ from the year to date amount disclosed in the unaudited interim consolidated financial statements as a result of using different weighted average numbers of shares outstanding.

(iii)    Restated for the change in the reporting currency of the Company. See note 2 of the consolidated financial statements.

The increase in total sales for the twelve months of 2005 compared to 2004 is partially due to the acquisitions of Zinkgruvan AB ("Zinkgruvan)", North Atlantic Natural Resources AB ("NAN") and ARCON International Resources Plc ("ARCON"). The increased sales in the fourth quarter compared to the third quarter are due to higher production from all mining operations together with higher metal prices. Production during the third quarter 2005 was affected by the Swedish summer vacation periods.

The increase in costs for the twelve months of 2005 over the corresponding period of 2004 is attributed to the increase in corporate activities related to the acquisitions of Zinkgruvan, NAN and ARCON. The cost levels for the fourth quarter of 2005 were similar to the third quarter of 2005.

The Company has significantly increased exploration activities after the acquisition of NAN and ARCON in 2005. During the fourth quarter of 2005, the Company spent $2.6 million on exploration and $7.1 million was spent during 2005. The exploration activities increased during the fourth quarter 2005 compared to the third quarter 2005, primarily due to lower activities in Sweden during the summer period and increased activities in Ireland during the fourth quarter compared to the third quarter.

The increase in net income for 2005, compared to 2004, is due to the acquisitions of the three mines and significantly higher metal prices for all metals produced by the Company. During the third and fourth quarter of 2005 net income was positively affected by the sale of the Silver Wheaton shares and warrants that Lundin Mining received in connection with the sale of the silver production from Zinkgruvan (see note 5 to the Financial Statements). The Company recognized a profit of $17.8 million before tax during 2005 for the sale of the shares and warrants.

Net income during the fourth quarter of 2005 is positively impacted, compared to the third quarter of 2005, by the higher volumes of ore processed and metal produced. The third quarter was affected by the Swedish vacation periods in July and August and by the planned temporary shut down of the mill at Galmoy in September.

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*      Zinc Cash Production Cost is the sum of direct costs, indirect cash costs and by-product credits.

**   The cash production cost number for Zinkgruvan for 2004 has been recalculated. The previously reported number of 23 USc/pound was based on sold volumes of zinc and by-products. The recalculated number is based on volumes produced.

The acquisition of the Zinkgruvan mine, located in South Central Sweden, was completed on June 2, 2004, and the Company’s income statement reflects Zinkgruvan mine operations from this date.

The Company acquired a 100% interest in the Zinkgruvan mine from Rio Tinto Plc ("Rio Tinto"). The purchase price for Zinkgruvan mine was $100 million in cash plus payments of Swedish krona 39.7 million for working capital and a $1 million non -refundable deposit. In addition, the Company was to pay Rio Tinto a maximum of $5 million in price participation payments based on the performance of zinc, lead and silver prices for a period up to two years. In total $5 million has been paid as of December 31, 2005 and no additional payment is therefore required.

The acquisition was financed through a public equity offering in Canada and Sweden. The Company issued 20 million common shares at a price of CAD $8 per common share for net proceeds of approximately CAD $152 million.

In order to provide relevant information for the investor, production data and sales are presented at the mine level for all periods, including periods that ended prior to the date the Company acquired the mine.

The ore milled during the fourth quarter of 2005 was significantly higher compared to the third quarter of 2005 but 20,000 tonnes lower than the fourth quarter of 2004. During October, hoisting at Zinkgruvan was halted for six days due to the unplanned replacement of balance ropes in the P2 shaft. The ropes are normally replaced every six years and were planned to be replaced in 2007. After the ropes were replaced, Zinkgruvan returned to normalized production levels. T he loss of production related to this was approximately 15,000 tonnes of ore. The higher production during the fourth quarter 2005 compared to the third quarter of 2005 is due to the seasonality of the mining and milling activities of Zinkgruvan. The vacation periods in Sweden during the third quarter typically reduces production during the summer months.

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Grades and recoveries during the fourth quarter continued at levels according to plan. Total zinc production was up 1,300 tonnes during the fourth quarter compared to the third quarter of this year mainly due to higher volumes of ore milled. The production of lead was 1,800 tonnes higher during the quarter compared to the third quarter as a result of higher milled ore production and higher lead grades.

The cash production cost during the quarter has increased by 5 cents per pound of zinc compared to the third quarter of 2005. The increase of the cash cost is due to increased price participation charges which are due to increased market prices of zinc. The charges paid to the smelters are partly dependent on the market price of zinc.

The financial results of the mine continued to be strong as a result of increasing metal prices and no major deviations in the mining and milling operations compared to plan.

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* Zinc Cash Production Cost is the sum of direct costs, indirect cash costs and by- product credits.

As of December 31, 2004 Lundin Mining held 74% of the shares of NAN, which is the owner of the Storliden Mine. During the first quarter of 2005 the Company acquired an additional 24% of the shares of NAN and initiated corporate procedures for the compulsory purchase of the remaining shares in NAN.

In order to provide relevant information for the investor, production data and sales are presented at the mine level for all periods, including periods that ended prior to the date the Company acquired the mine.

The production of zinc and copper increased significantly during 2005 compared to 2004. The production of zinc was 43% higher and the production of copper was 31% higher. Ore milled was 11% higher for the twelve months period compared to the corresponding period in 2004. The main reason for the increase was the mining program, which has primarily been carried out in the central zone during 2005. During 2004 the ore was mainly taken from the eastern and western zones. The central zone contains significantly higher head grades of zinc and copper. During the fourth quarter of 2005, the amount of ore milled was higher compared to volumes in 2004. The grades of copper were also higher and zinc grades were on the same level as the fourth quarter of 2004 which resulted in higher production of metals in concentrate. Milled production during the quarter exceeded expectations with approximately 10,000 tonnes and the mine reached record production during 2005. Close to 320,000 tonnes were treated in the mill during the year.

The financial results of the mine exceeded expectations for the quarter and were above the results of all previous quarters due to higher metal prices, stable production and continued high grades of copper and zinc.

The zinc cash costs for Storliden during the fourth quarter of 2005 continued to be less than zero due to the high production of copper. The income from copper was higher than the production costs and the related smelting charges.

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* Zinc Cash Production Cost is the sum of direct costs, indirect cash costs and by- product credits.

Lundin Mining and ARCON, the previous owner of the Galmoy mine, completed a merger during the second quarter of 2005. ARCON has been consolidated in the financial statements of Lundin Mining since May 1, 2005. Lundin Mining offered to acquire all of the issued and to be issued ARCON shares on the following basis: $36.2198 cash (the "cash component") and 3.2196 Lundin Mining Swedish Depository Receipts ("SDRs") (the "share component") for every 100 ARCON Shares. The cash component represent ed a value of $65.3 million and the share component represent ed a value of $56.3 million . The combined value of the offer was $121.6 million.

In order to provide relevant information for the investor, production data and sales are presented at the mine level for all periods, including periods that ended prior to the date the Company acquired the mine.

Ore milled at Galmoy during the fourth quarter 2005 was significantly higher than the third quarter of 2005 and on the same level as the fourth quarter 2004. The production during the third quarter 2005 was low and effected by the planned temporary shutdown in the mill, which was related to the ongoing improvement project. Average zinc head grades were 14.8% during the quarter and mill recoveries were approximately 84%. The production of zinc metal was 23% higher compared to the same quarter 2004 and 21% higher then the third quarter 2005. Lead production was also higher than the corresponding quarter in the previous year as a result of improved recoveries of lead in the mill. Processing improvements made to the lead circuit in the mill have resulted in better recoveries with higher concentrate grades and improving marketability.

The improvement project of the mill that commenced at the end of the second quarter continued according to plan in the fourth quarter. The project is divided in two parts: a mechanical and electrical part for the purpose of improving utilisation and a metallurgical part for the purpose of improving recoveries and quality of concentrates. The two parts are divided into sub -projects with different priorities. Part of the project was a planned four day shutdown of the mill in September when an upgrade of the zinc filter was carried out. The upgraded zinc filter should result in more stable performance and increased capacity of the mill.

Other major activities in the project include the addition of extra tailings line and back-up pumping capacity in the floatation circuit and a reorganized maintenance function in order to support the mill more efficiently. The completion of the project , with improved mill utilization and recoveries, is targeted for the end of the first quarter of 2006.

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Quarterly total cash costs (USc/lb Zn) were 3 cents higher than for the corresponding period in 2004 and above the 2004 year cash cost. Management expects that the zinc cash cost will be reduced when the improvement project is completed.

The properties cover and include the iron oxide copper-gold mineralization discovered by Anglo and Rio at Rakkurijärvi. Exploration has focused on enlarging the Rakkurijärvi discovery zone. Compiled results of recent drilling by Lundin Mining and previous drilling by Anglo and Rio at the Rakkurijärvi discovery zone indicate a moderately plunging zone of copper-gold mineralization that remains open at depth.

Four diamond drill holes were completed during the fourth quarter at the Pahtohavare target, located near to the Rakkurijärvi discovery, testing for an extension of the known, high-grade copper and gold mineralization cropping out at surface. These holes confirmed historic drill results of shallow, discontinuous copper and gold mineralization but also indicated that the mineralization is not extending to depth. No further work is planned on this target. At Rakkurijärvi a winter drill programme is planned for the first quarter of 2006 and will test for an extension of the delineated copper and gold mineralization at depth and along strike to the east.

The Copperstone Project

The Copperstone project is located in the Skelleftea mining district of northern Sweden, about 20 km northeast of the Storliden mine. In the third quarter, drilling of geophysical targets, outlined by Lundin Mining earlier this year, intersected widespread zones of copper-bearing sulphide mineralization of the stringer vein type, breccia type and stratabound disseminated type.

Fourth quarter activities at Copperstone focused on carrying out extensive surface and down-hole electromagnetic geophysical surveying and geological interpretation of the 2005 drill results to define additional drill targets for the first quarter of 2006. Work in the first quarter will include drill-testing for higher grade extensions of the Eva massive sulphide deposit discovered in the second quarter 2005.

Near-mine exploration at Storliden

During the fourth quarter six diamond drill holes were completed in the area adjacent to the Storliden mine, two of which were deepened extensions of previous holes. A narrow extension of the Storliden mine horizon was located approximately 400 metres southwest of the mine over a broad area. Drilling is planned for the first two quarters of 2006 to further test this mineralized horizon in addition to other geological and geophysical targets generated in the vicinity of the mine.

Additional greenfields drill-testing of mostly airborne geophysical targets away from the mine was also carried out in the fourth quarter. T he anomalies tested to date have been sourced to pyrrhotite-bearing graphitic sedimentary rocks, although at one target favourably altered volcanics were also intercepted, warranting additional work.

Zinkgruvan -Bergslagen Exploration

Drilling commenced prior to the 2005 year-end in the Meltorp area located 15 kilometres to the east of the Zinkgruvan mine. The drilling will test for a down-dip extension of the known zinc -lead -silver mineralization at the Meltorp prospect.

Lundin Mining has acquired a large land holding in the historic Bergslagen mining district with an emphasis around the Zinkgruvan mine. A total of 28 properties covering 83,000 hectares have been staked. An extensive brownfields programme near Zinkgruven, in addition to a regional greenfields programme, is planned for 2006 with drilling of more advanced targets to start in the second quarter.

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Keel Property

An additional prospecting license has been added in County Longford, contiguous with two existing Lundin Mining licenses. A program of target definition, including IP/resistivity/gravimetric geophysics, and target testing is planned for 2006.

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The treatment charge s ("TC") and refining charges ("RC") for copper increased during 2005. At the same time the base TC for zinc has continued downwards based on a deficit of concentrate and the Company believe s the TC for zinc will remain at historically low levels over the next years. It should be noted that the smelters benefit from higher zinc prices due to the price participation mechanism in the agreements between the mines and the smelters. The TC for lead has decreased somewhat compared to the end of 2004.

Outlook

The outlook for metal prices for 2006 is, in general, very positive. The growth in demand, especially from Asia, is expected to continue and this is not expected to be met by a similar increase in production. Accordingly, we expect that the price for zinc, copper and lead will remain strong during 2006.

It should be noted that the price of silver for all silver production from Zinkgruvan going forward has been fixed by the silver sale transaction with Silver Wheaton where by Zinkgruvan receives $3.90 cash per ounce or the market price if the market price of silver is less than $3.90 per ounce. The up -front cash payment received from Silver Wheaton in December 2004 has been deferred in the balance sheet and is realized in the income statement when the actual deliveries of silver occur.

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Working Capital, including cash and short term financial debt

At December 31, 2005, the Company had working capital of $63.8 million compared to working capital of $108.5 million at December 31, 2004. Cash was $74.4 million as at December 31, 2005 compared to $86.7 million as at December 31, 2004. The change in the working capital is primarily due to the purchase of ARCON during the second quarter and the sale of the Company’s holdings in Silver Wheaton in the third and fourth quarter.

Accounts receivable

Accounts receivable increased to $ 20.2 million as at December 31, 2005 from $17.2 million at September 30, 2005 and $17.0 million at December 31, 2004. The inclusion of ARCON has increased the Company’s receivables by $5.9 million compared to year-end 2004. The receivables at Zinkgruvan and NAN are $2.6 million lower compared to year-end 2004 and on the same level as September 30, 2005.

Current liabilities

Current liabilities decreased to $41.8 million as at December 31 , 2005 from $63.8 million at September 30, 2005. Compared to December 31, 2004 the current liabilities increased by $18.6 million. The main reason for the decrease during the fourth quarter is the repayment of a short-term bank loan of $23.0 million . The main reason for the increase as of December 31, 2005 compared to year-end 2004 is the short term income tax liabilities which have increased to $13.4 million due to the taxable income generated during 2005.

Long-term liabilities and provisions

Long-term liabilities and provisions have decreased during 2005 compared to December 31, 2004. The main reason for the change is the amortization of the deferred revenue and changes in the conversion rate of Swedish currency to USD. The weakening Swedish currency during 2005 has decreased the long-term liabilities when the Swedish amounts are expressed in USD.

Currency hedging and hedging of metal prices

The Company had no outstanding currency hedging contracts as of December 31, 2005. As of the same date, Lundin Mining had entered into the following metal hedging contracts. Approximately 35% of the expected payable copper production for 2006 has been hedged. The corresponding amount for lead is approximately 25%. The Company has no outstanding zinc hedging contracts as of the same date.

The mark-to-market valuation of the outstanding contracts created an unrealized loss for accounting purposes of $2.1 million as of December 31, 2005.

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Pursuant to the Zinkgruvan acquisition agreement with Rio Tinto, the Company was obliged to pay Rio Tinto a maximum of $5 million in price participation payments based on the performance of zinc, lead and silver prices for a period of up to two years (see Note 4a of the Interim Consolidated Financial Statements). As of December 31, 2005 Lundin Mining has paid the maximum amount of $5 million to Rio Tinto.

The Storliden mine was developed by, and is being operated pursuant to an agreement with, Boliden Mineral AB ("Boliden"). The Company’s subsidiary, NAN, is the operator of the mine and Boliden is the main contractor of the mine. Ore is being processed at the Boliden Area Operations mill. After all costs of the operation are paid, the remaining cash flow is shared in the ratio two-thirds/one -third to NAN and Boliden respectively. The fee charged by Boliden for mining the mine is cost plus 15%. For one-fifth of the Storliden deposit , NAN pays a 1.5% annual royalty on the Net Smelter Return to Cogema SA.

Related party transactions

The Company has transactions with related parties that are disclosed in Note 8 of the consolidated interim financial statements.

Outstanding share data

As at February 16, 2006, the Company had 40,693,831 common shares outstanding and 667,500 share options outstanding under its stock-based incentive plans.

Risks

The Company’s properties/operations are subject to certain risks including but not limited to government regulations relating to mining, metal prices and currency rate fluctuations, competition, receipts of permits and approval from government authorities, operating hazards and other risks inherent to the exploration, development and operation of a mine. The Company’s risk factors are more fully described in the Company’s Annual Information Form.

Cautionary note regarding forward -looking statements

Certain statements contained in the foregoing Management’s Comments and elsewhere constitute forward-looking statements. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statements were made, and readers are advised to consider such forward -looking statements in light of the risks set out above.

Non-GAAP Performance Measures

Zinc Cash Production Cost (US$/pound ) is a key performance measure that management uses to monitor performance. Management uses these statistics to assess how well the Company’s producing mines are performing compared to plan and to assess overall efficiency and effectiveness of the mining operations. These performance measures have no meaning within Generally Accepted Accounting Principles ("GAAP") and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

The following table present s the calculation of Zinc Cash Production Costs (US$/pound) for each of the Company’s operation for the periods indicated.

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