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FOR: NORANDA INCOME FUND

Noranda Income Fund Reports First Quarter Earnings of $6.3 Million

May 5, 2008 - 12:43 ET

TORONTO, ONTARIO--(Marketwire - May 5, 2008) - The Noranda Income Fund (the "Fund") (TSX:NIF.UN) reported net earnings of $6.3 million for the first quarter of 2008, compared to $14 million in the same quarter a year ago.

"The Fund was negatively impacted by lower premiums, higher production costs, a stronger Canadian dollar, higher amortization and reclamation, and the impact of month prior pricing during the quarter. This was partially offset by stronger byproduct revenues, a higher processing fee and a lower interest expense." said Mario Chapados, President and Chief Executive Officer of the Noranda Income Fund's Manager. "Production and sales are forecast to be higher in 2008 and byproduct revenues are expected to remain strong."

The outlook for 2008 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 Information" below.

Financial Results

This analysis of the financial position and results of operations of the Fund should be read in conjunction with the unaudited consolidated interim financial statements of the Fund for the three months ended March 31, 2008 and with the audited consolidated financial statements of the Fund and the notes thereto for the period ended December 31, 2007.

This press release is based on various assumptions (see "Forward-looking Information" below.) All dollar amounts are shown in Canadian dollars unless otherwise specified.

The analysis has been prepared as of May 5, 2008. Additional information relating to the Fund, including the Fund's annual information form is available on SEDAR at www.sedar.com.

Q1 2008 Highlights



First Quarter

2008 2007

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

Zinc metal production (tonnes) 64,060 62,947

Zinc metal sales (tonnes) 62,157 60,029

Processing fee (cents/pound) 37.5 37.0

Zinc metal premiums (US$/pound) 0.069 0.105

Byproduct revenues ($ millions) 10.8 6.3

Average US/Cdn. exchange rate 1.004 1.172

- All of the monthly distributions were paid at the 8.5 cents per unit

level.

- Zinc metal production and zinc sales were 2% and 4%, respectively

higher than in the first quarter of 2007.

- Byproduct revenues were $10.8 million compared to $6.3 million in the

first quarter of 2007.

- Zinc recoveries in the first quarter of 2008 were 98% compared to

97.3% in the same quarter a year ago.

 


RESULTS OF OPERATIONS

Consolidated Net Earnings (First quarter 2008 compared to first quarter

2007)

Revenues less raw material purchase costs ("Net Revenues") in the first quarter of 2008 were $68.4 million, compared to $69.5 million in the same quarter of 2007. The $1.1 million decrease was due to lower premiums and a stronger Canadian dollar partially offset by higher byproduct revenues and zinc metal sales.

The Fund makes a portion of its sales based on the average price from the previous month (month prior pricing). In a market in which zinc prices are rising, a portion of the Fund's revenues will lag behind the higher zinc prices; while in a market in which 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 that sales volumes do not vary significantly from month to month. In 2008, month prior pricing had a negative impact of approximately $0.6 million on the Fund's Net Revenues, as the average monthly zinc price increased from US$1.07 per pound in December 2007 to US$1.14 per pound in March 2008. This compared to a positive impact of $5 million in the same period in 2007, when zinc prices dropped from US$2.00 per pound in December 2006 to US$1.48 per pound in March 2007.

Production costs in the first quarter of 2008 were $42.1 million, $5.1 million higher than the $37.0 million recorded in the first quarter of 2007. The increase resulted from higher energy and labour costs and a $2.1 million higher positive cost of sales adjustment in 2007 due to the larger build up of inventory in that period.

Selling, general and administration costs in the first quarter of 2008 were $4.9 million, unchanged from the same quarter of 2007.

The foreign exchange loss for first quarter of 2008 was $4.1 million, compared to a gain of $0.6 million in the first quarter of 2007. The foreign exchange loss was a result of a weakening Canadian dollar on the Fund's net monetary liability. The foreign exchange loss was largely offset by an increase in the value of in-process and finished inventory. The increase in the value of inventory is realized in Net Revenues as the metal is sold to customers (thereby increasing the Net Revenue recorded by the Fund). The Fund maintains cash and cash equivalents, accounts receivable and accounts payable and long-term debt in US dollars.

In the first quarter of 2008, the commodity hedging gain was $0.3 million and the commodity financial instruments gain was $2.6 million. In the first quarter of 2007, the commodity hedging gain was $0.1 million and the financial instruments loss was $0.3 million. During the period, the change in the market value of the Fund's financial instruments resulted in these amounts being recorded.

In the first quarter of 2008, amortization was $7.9 million compared to $6.8 million in the first quarter of 2007. The increase was due to higher capital spending in the last 12 months.

Reclamation for the three month period ending March 31, 2008 was $0.2 million compared to a recovery of $3.8 million in the first quarter of 2007. The recovery in 2007 was due to a reduction in the expected future reclamation spending, which resulted in a reduction in the present value of future site restoration and reclamation liabilities.

In first quarter of 2008, net interest expense was $3.8 million compared to $6.3 million in the first quarter of 2007. The decrease in interest expense was due to a reduction of debt outstanding and the elimination of delayed concentrate payments as a result of lower working capital requirements that have resulted from the decline in the zinc price.

Minority interest in earnings of subsidiaries in the first quarter of 2008 was $2.1 million, down from $4.7 million in the first quarter of 2007 due to the Fund's lower earnings.

KEY PERFORMANCE DRIVERS



The following table provides a summary of the key performance drivers for
the first quarter of 2008 and 2007:

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

Q1 2008 2007

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

Zinc metal production (tonnes) 64,060 62,947

Zinc metal sales (tonnes) 62,157 60,029

Zinc concentrate processed (tonnes) 124,768 128,196

Zinc recovery (%) 98.0 97.3

Processing fee (cents/pound) 37.5 37.0

Zinc metal premiums (US$/pound) 0.069 0.105

Byproduct revenues ($ millions) 10.8 6.3

Copper in copper cake production (tonnes) 757 684

Copper in copper cake sales (tonnes) 867 619

Sulphuric acid production (tonnes) 103,329 104,263

Sulphuric acid sales (tonnes) 92,075 105,314

Average LME zinc price (US$/pound) 1.102 1.568

Average LME copper price (US$/pound) 3.536 2.69

Sulphuric acid netback (US$/tonnes) 32.64 19.73

Average US/Cdn. exchange rate 1.004 1.172

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

 


PRODUCTION

In the first quarter of 2008, zinc metal production was 64,060 tonnes, compared to 62,947 tonnes in the same quarter of 2007. Production improved by 2% as a result of lower zinc dust consumption and improved recoveries. The Fund reduced the amperage of the plant during the quarter to manage the lead levels in the cell house. In the month of April 2008, the Processing Facility increased production and met the monthly target level.

The 2008 production target is estimated at 275,000 tonnes. Operating at higher amperage for the remainder of the year and higher grade in the zinc concentrate (starting mid-year), are expected to result in higher production volumes in the last nine-months of the year.

The target for production is subject to various risks and uncertainties. The assumptions for them can be found in the "Forward-looking Information" below.

SALES

Demand for zinc metal in North America in the first quarter started slowly and then began to show signs of recovery during the month of March. The weak US dollar has improved the price competitiveness of US sheet steel products compared to imports and has provided export opportunities that did not exist previously. In addition, rising raw materials costs has pressured steel mills to increase prices, which has stimulated steel consumers to restock. As a result, zinc metal demand is expected to pick up during the second quarter, although the recovery will be muted by continued slow consumer demand from the transportation and construction sectors.

Sales of 62,157 tonnes in the first quarter of 2008 compared to 60,029 tonnes in the first quarter of 2007, and inventories increased by 1,800 tonnes. Contract sales volumes are projected to increase in the second quarter, and spot sales will also be pursued.

The Fund's target sales level for 2008 is to match the target production level of 275,000 tonnes.

The target for sales is subject to various risks and uncertainties. The assumptions for them can be found in the "Forward-looking Information" below.

PROCESSING FEE

In 2008, the processing fee was increased to 37.5 cents per pound, compared to 37.0 cents per pound in 2007. The processing fee is adjusted annually by (i) upward by 1% and (ii) upward or downward by 10% of the year-over-year percentage change in the average cost of electricity per megawatt hour for the Processing Facility.

PREMIUMS

For the first quarter of 2008, premiums averaged 6.9 cents US per pound, compared to 10.5 cents US per pound in the first quarter of 2007. The decrease in realized premiums reflects a decrease in 2008 contract premiums from the high levels achieved in 2007.

The forecast for the premiums in 2008 is 6.5 cents US per pound.

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

BYPRODUCTS

In the first quarter of 2008, the Fund generated $10.8 million in revenue for the sale of its byproduct copper cake and sulphuric acid compared to $6.3 million in the first quarter of 2007. The $4.5 million increase was due to higher sales volumes and prices for copper cake, higher sulphuric acid netbacks and the impact of positive price settlements partially offset by a stronger Canadian dollar.

About 85% of the Fund's 400,000 tonnes of sulphuric acid is sold on 1 to 3 year contracts. The balance is sold on a transaction by transaction basis throughout the year.

The Fund's sulphuric acid netback is based on a realized selling price less transportation cost and a commission for the reseller. In the first quarter of 2008, the Fund had a realized netback of US$33 per tonne based on the contracts that were in place compared to US$20 per tonne in the first quarter of 2007.

The demand for sulphuric acid has increased in the past few months and prices have risen sharply. Higher sulphuric acid prices could significantly benefit the Fund if they were captured in our upcoming contract negotiations. Roughly 50% of our contracts will be renewed by December 2008.

EXCHANGE RATE

A stronger Canadian dollar has a negative impact on the Fund's financial results. In the first quarter of 2008, a one-cent Canadian appreciation in the average Canadian/US exchange rate would have negatively impacted the Fund's cash available for distribution by approximately $0.225 million ($0.9 million on an annual basis). The average Canadian/US exchange rate appreciated from US$1.172 in the first quarter of 2007 to US$1.004 in the first quarter of 2008.

COSTS

Production costs include labour, energy, supplies and other costs directly associated with the production process. Production costs in the first quarter of 2008 were higher at $42.1 million, compared to $37.0 million in the first quarter of 2007. The increase resulted from higher energy and labour costs and a $2.1 million higher positive cost of sales adjustment in 2007 due to the larger build up on inventory in that period.

CAPITAL EXPENDITURES

Capital expenditures in the first quarter of 2008 were $3.2 million, compared to $5.8 million in the first quarter of 2007.

Capital spending is forecast to be $30 million in 2008, down from the original forecast of $33 million. It is expected that $24 million will be spent on sustaining capital, of this amount, $19 million is for regular maintenance capital, and $5 million will be spent to remove the magnesium and selenium from a new feed source called Perseverance. About $6 million is for revenue-generating projects.

The forecasted capital has been reduced due to delay in some of the maintenance capital projects.

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

Operating Cash Flows

Cash realized from operations, before net change in non-cash working capital items in the first quarter of 2008 was $11.8 million compared to $25.2 million in the first quarter of 2007. During the first quarter of 2008, non-cash working capital increased by $4.7 million due to the increase accounts receivable and inventory partially offset by an increase in the accounts payable and accrued liabilities. The average monthly LME zinc price increased from US$1.07 per pound in December 2007, to US$1.14 per pound in March 2008.

Standardized Distributable Cash

During the third quarter of 2007, the Canadian Performance Reporting Board of the Canadian Institute of Chartered Accountants ("CICA") published an Interpretive Release titled Standardized Cash in Income Trusts and Other Flow-Through Entities: Guidance on Preparation and Disclosure. The Fund adopted these recommendations for its December 31, 2007 MD&A disclosure and the table below provides a reconciliation of cash realized from operations to standardized distributable cash.

Standardized distributable cash is defined as the GAAP measure of cash from operating activities after adjusting for capital expenditures, restrictions on distributions arising from compliance with financial covenants restrictive at the time of reporting, and minority interests.

Standardized distributable cash should not be seen as a measurement of liquidity or be used as a substitute for other measures, in accordance with GAAP. Management believes that, in addition to net earnings, standardized distributable cash is a useful supplemental measure for evaluating the Fund's performance as the standardized distributable cash net of the fluctuations in non-cash working capital items provides investors with an indication of cash available for distributions and working capital needs. Investors are cautioned, however, that standardized distributable cash should not be construed as an alternative to the statement of cash flows as a measure of liquidity and cash flows. The method of calculating standardized distributable cash for the purposes of this press release may differ from that used by other issuers and, accordingly, standardized distributable cash in this press release may not be comparable to standardized distributable cash used by others.



A reconciliation of cash realized from operations to standardized
distributable cash for the three months ending March 31, 2008 and 2007
is provided below:

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

($ thousands) 2008 2007

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

Cash realized from operations $ 7,100 $ 2,076

Less: portion attributable to minority interest (1,775) (519)

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

Cash realized from operations attributable to

Priority Unitholders 5,325 1,557

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

Capital adjustments:

Purchase of property, plant and equipment (3,157) (5,838)

Proceeds on sale of property, plant and equipment 75 -

Accretion on long-term debt (64) (63)

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

(3,146) (5,901)

Plus: portion of capital adjustments attributable

to minority interest 786 1,475

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

Capital adjustments attributable to Priority

Unitholders (2,360) (4,426)

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

Standardized distributable cash 2,965 (2,869)

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

Other adjustments including discretionary items:

Increase in non-cash working capital 4,735 23,170

Decrease/(Increase) in operating reserve 4,060 (6,595)

Less: portion of other adjustments attributable

to minority interest (2,198) (4,144)

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

Distributions declared to Priority Unitholders $ 9,562 $ 9,562

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

Weighted average number of Priority

Units outstanding (basic and diluted) 37,497,975 37,497,975

Standardized distributable cash per Priority

Unit $ 0.08 $ (0.08)

Distributions declared per Priority Unit $ 0.255 $ 0.255

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

 


The Fund has included the amortization of deferred financing fees as a capital adjustment. The fees associated with completing a notes offering in 2003 are being spread over the term of the note offering for the calculation of standardized distributable cash.

In the above reconciliation, in order to comply with the guidance of the CICA publication on standardized distributable cash, the item "Increase in non-cash working capital" is excluded from the calculation of standardized distributable cash, and is included in the reconciliation of distributions declared to Priority Unitholders from the standardized distributable cash.

In the first quarter of 2008, standardized distributable cash was $3.0 million and distributions declared to Priority Unitholders were $9.6 million.

Management and the board of trustees periodically review cash distributions, taking into consideration current and prospective performance. Some of the factors considered in decisions related to distributions include cash amounts required to service debt obligations, capital expenditures, taxes, working capital requirements, current business conditions and other items considered to be prudent. The Fund's policy is to make distributions to unitholders equal to cash flows from operations, before variations in working capital and such reserves for operating and capital expenditures as may be considered appropriate by the trustees. The Fund determines the cash available for distribution on a monthly basis for the unitholders of record of the Fund on the last business day of each calendar month and these distributions are to be paid on or about 25 days thereafter.

The amount of monthly distribution to unitholders is a function of Fund's debt management strategy and productive capacity maintenance program. The calculation excludes changes in non-cash working capital as the changes within the working capital components are often temporary by nature and, if needed, can be financed with the Fund's Revolving Facility.

One of the main factors influencing the non-cash working capital balances is the zinc metal price. As zinc metal prices increase, inventory and accounts receivable increase, resulting in higher non-cash working capital balances. When zinc metal prices decrease, inventory and accounts receivable decrease, resulting in lower non-cash working capital balances.

Notional Operating Reserve and Capital and Site Restoration Reserve

In order to meet the Fund's goal to provide a stable, monthly distribution, a notional operating reserve is utilized. In a period in which standardized distributable cash, net of the changes in non-cash working capital attributable to Priority Unitholders, is greater than the distributions declared to the Priority Unitholders, the notional operating reserve will increase. In a period during which standardized distributable cash, net of the changes in non-cash working capital attributable to Priority Unitholders, is less than the distributions declared to the Priority Unitholders, the notional operating reserve will decrease. The notional 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. During the first quarter of 2008, the notional operating reserve decreased by $4.1 million to $14.2 million.

While the operating reserve is greater than the Fund's target three-month payout level, the Fund's financial flexibility has been reduced. The strengthening in the Canadian dollar and the reduced zinc premiums expected in 2008 may negatively impact the Fund's ability to generate cash in 2008. The Fund is also planning to increase capital expenditures in 2008. For these reasons, the Fund considers it prudent at this time not to increase the distribution or issue a special distribution.

The Fund also utilizes a notional capital and site restoration reserve. In a period in which unexpected or unusually high capital expenditures are required, the Fund has the ability to reduce the notional capital and site restoration reserve, while adhering to the Fund's trust indentures and debt covenants. As of March 31, 2008, the notional capital and site restoration reserve was $5.0 million.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2008, the Fund's total debt was $245.9 million, up from $240.3 million at the end of December 2007. The Fund's cash and cash equivalents at March 31, 2008 totalled $0.6 million, down from $3.7 million at December 31, 2007.

The Fund has a Revolving Facility in place that is used for general corporate purposes, including financing working capital. On May 1, 2008, the Revolving Facility was extended to May 3, 2010. The amount available to be drawn on the Revolving Facility varies on a quarterly basis and will be based on percentages of the Fund's eligible inventory and accounts receivable from the previous quarter. The maximum available to be drawn at any time is $200 million and the minimum available to be drawn is $55 million. The Fund has the ability to draw down the Revolving Facility in both Canadian and US dollars. The amount available based on the Fund's March 31, 2008 balance sheet was $160 million of which $93 million was drawn.

Fluctuations in working capital balances as a result of operations are generally funded by, or used to repay, the Revolving Facility. During 2008, $95.6 million of debt was drawn and $90 million was repaid related to the fluctuations in working capital.

The Fund has $153.5 million of senior secured notes (the "Notes") outstanding. The Notes have a term of seven years and will mature on December 20, 2010. The Notes offering was made by way of a private placement and the proceeds were used to repay a term facility that had been outstanding since the inception of the Fund.

OUTLOOK



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

The 2008 targets for the key drivers of the Fund are:

Zinc metal production: 275,000 tonnes

Zinc metal sales: 275,000 tonnes

Processing fee: 37.5 cents per pound

Zinc metal premium: 6.5 cents US per pound

Capital expenditures: $30 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 can be found in the "Forward-looking Information" below.

Forward-Looking Information

The Fund provides Forward-looking Information for the upcoming year on zinc metal production, zinc metal sales, processing fee, zinc metal premiums and capital expenditures. The Fund provides this Information to unitholders and analysts because they are the key drivers of the business. Readers are cautioned that this information may not be appropriate for other reasons.

The Fund updates its Forward-looking Information in each of its quarterly MD&A's.

This press release contains Forward-looking Information concerning the Fund's objectives and 2008 general business outlook, zinc metal production and sales targets, estimated processing fee, zinc premium target, estimated recovery rates and capital expenditures forecast. Forward-looking Information 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 Information involves 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 Information.

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 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, the sensitivity of the Fund's interest expense to increases in interest rates; (9) changes in recoveries and capital expenditure requirements; (10) the negotiation of collective agreements 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 refinancing risk; and (16) reliance on Xstrata Canada for the operation and maintenance of the Processing Facility.

This Forward-looking Information represents our views as of the date of this press release. The Fund anticipates that subsequent events and developments may cause its views to change.

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

INTERIM CONSOLIDATED BALANCE SHEETS

(unaudited)

($ thousands)

Mar. 31 Dec. 31

2008 2007

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

ASSETS

Current assets:

Cash and cash equivalents 562 3,702

Accounts receivable

Trade 91,317 64,210

Xstrata Canada 15,256 22,617

Commodity financial instruments 3,575 964

Firm commitments 3,381 719

Inventories 133,482 129,066

Prepaids and other assets 2,578 2,195

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

250,151 223,473

Property, plant and equipment 309,925 314,489

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

560,076 537,962

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

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable and accrued liabilities

Trade 19,716 18,547

Xstrata Canada 62,034 44,801

Commodity financial instruments 3,107 735

Distributions payable 4,250 4,250

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

89,107 68,333

Future tax liability 13,147 13,147

Future site restoration and reclamation 12,218 12,130

Long-term debt 245,925 240,269

Interests of Ordinary Unitholders 53,211 54,312

Unitholders' Interest:

Unitholders' equity 191,273 191,273

Deficit (44,805) (41,502)

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

146,468 149,771

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

560,076 537,962

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



NORANDA INCOME FUND

INTERIM CONSOLIDATED STATEMENTS OF EARNINGS AND DEFICIT

AND COMPREHENSIVE INCOME

(unaudited)

($ thousands)

Three months

ended March 31

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

2008 2007

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

Revenues

Sales 167,065 272,536

Transportation and distribution costs (4,321) (3,261)

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

162,744 269,275

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

Raw material purchase costs 94,342 199,764

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

Revenues less raw material purchase costs 68,402 69,511

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

Other expenses

Production 42,081 37,014

Selling, general and administration 4,855 4,937

Foreign exchange loss (gain) 4,070 (605)

Commodity hedging gain (290) (110)

Commodity financial instruments loss (gain) (2,612) 348

Amortization of property, plant and equipment 7,912 6,775

Reclamation 243 (3,801)

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

56,259 44,558

Earnings before interest, minority interest

and income tax 12,143 24,953

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

Interest expense, net 3,797 6,289

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

Earnings before minority interest and income tax 8,346 18,664

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

Minority interest in earnings for Ordinary

Unitholders 2,087 4,666

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

Earning before income tax 6,259 13,998

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

Income tax expense - -

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

Net earnings and comprehensive income 6,259 13,998

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

Deficit beginning of period (41,502) (30,624)

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

Distributions to Priority Unitholders (9,562) (9,562)

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

Deficit end of period (44,805) (26,188)

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

Net earnings per Priority Unit (basic and diluted) $ 0.17 $ 0.37

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

Weighted average Priority Units outstanding 37,497,975 37,497,975

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



NORANDA INCOME FUND

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

($ thousands)

Three months

ended March 31

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

2008 2007

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

Cash realized from (used for) operations:

Net earnings for the period 6,259 13,998

Items not affecting cash:

Amortization of property, plant and equipment 7,912 6,775

Accretion of reclamation expense 243 (3,801)

Minority interest in earnings for Ordinary

Unitholders 2,087 4,666

Mark-to-market loss (gain) on commodity

financial instruments (2,902) 238

Change in fair value of embedded derivatives (1,961) 3,172

Accretion on long-term debt 64 63

Loss from sale of property, plant and equipment 287 148

Site restoration expenditures (154) (13)

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

11,835 25,246

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

Net change in non-cash working capital items (4,735) (23,170)

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

7,100 2,076

Cash realized from (used for) investment

activities:

Purchases of property, plant and equipment (3,157) (5,838)

Proceeds on sales of property, plant and equipment 75 -

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

(3,082) (5,838)

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

Cash realized from (used for) financing activities:

Distributions - Priority Unitholders (9,562) (9,562)

- Ordinary Unitholders (3,188) (3,188)

Long-term debt issued under the Revolving Facility 95,592 161,200

Long-term-debt repaid under the Revolving Facility (90,000) (156,400)

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

(7,158) (7,950)

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

Net change in cash and cash equivalents

during the period (3,140) (11,712)

Cash and cash equivalents, beginning of period 3,702 13,712

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

Cash and cash equivalents, end of period 562 2,000

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

 




FOR FURTHER INFORMATION PLEASE CONTACT:

Canadian Electrolytic Zinc Limited
Michael Boone
Vice President & Chief Financial Officer,
Noranda Income Fund's Manager
(416) 775-1561
Email: mboone@xstrata.ca


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