Exhibit 3

Managements Report

The
accompanying consolidated financial statements of Lundin Mining Corporation and
its subsidiaries are the responsibility of management and have been approved by
the Board of Directors. The financial statements include some amounts that are
based on managements best estimates, which have been made using careful
judgment. The financial statements have been prepared by management in
accordance with Canadian generally accepted accounting principles. Financial
and operating data elsewhere in the annual report are consistent with the
information contained in the financial statements.

The Board of
Directors carries out its responsibility for the financial statements in this
annual report principally through its audit committee, comprising outside
directors. The audit committee reviews the Companys annual consolidated
financial statements and recommends their approval to the Board of Directors.
The Companys auditors have full access to the audit committee, with and
without management being present. These financial statements have been audited
by PricewaterhouseCoopers LLP, Chartered Accountants, and their report follows.

|                                        |                         
|--------------------------------------- | ------------------------
|(Signed) Philip J. Wright               | (Signed) Anders Haker   
|                                        |                         
|President
 and Chief Executive Officer  | Chief
 Financial Officer
|                                        |                         
|Vancouver,
 BC, Canada 
 March 31, 2008 |                         

---



Managements Report on Internal Control over
Financial Reporting

Management is
responsible for establishing and maintaining adequate internal control over
financial reporting. A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A companys
internal control over financial reporting includes those policies and
procedures that:

|      |                                                                                                                                                                                                                                                                                                                                                 
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)   | pertain to
 the maintenance of records that, in reasonable detail, accurately and fairly
 reflect the transactions and dispositions of the assets of the company;                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                                 
|(ii)  | provide
 reasonable assurance that transactions are recorded as necessary to permit
 preparation of financial statements in accordance with generally accepted
 accounting principles, and that receipts and expenditures of the company are
 being made only in accordance with authorizations of management and directors
 of the company; and
|      |                                                                                                                                                                                                                                                                                                                                                 
|(iii) | provide
 reasonable assurance regarding prevention or timely detection of unauthorized
 acquisition, use, or disposition of the companys assets that could have a
 material effect on the financial statements.                                                                                                                                

Due to its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of the
effectiveness of internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Management has
evaluated the effectiveness of the Companys internal control over financial
reporting as at December 31, 2007, based on the criteria established in
Internal Control  Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

Management has
excluded from this evaluation an assessment of the internal control over
financial reporting at Rio Narcea Gold Mining Ltd. (Rio Narcea), which was
acquired on July 17, 2007. Rio Narcea is a wholly owned subsidiary of the
Company and its operations represent $840,206,000 of the total assets,
$75,838,000 of total revenue, and a net loss of $20,344,000 from the Companys
consolidated financial statements as at and for the year ended December 31,
2007.

Management
conducted an evaluation of the design and effectiveness of internal control
over financial reporting and concluded that the Companys internal control over
financial reporting was not effective as at December 31, 2007. At December 31,
2007, the Company did not have the required complement of personnel with
appropriate level of accounting knowledge, experience and training in the
application of generally accepted accounting principles to be able to prepare
and review consolidated financial statements commensurate with the complexity
of the Companys financial reporting requirements. This material weakness
contributed to the material weaknesses in the controls over the allocation of
the purchase price on the acquisition of Rio Narcea, the accounting for the
impairment of goodwill and long lived assets and the calculation of current and
future income taxes. These control deficiencies resulted in material audit
adjustments in the consolidated financial statements for the year ended
December 31, 2007. Until remediated, these deficiencies could result in a
material misstatement to the Companys consolidated financial statements and
disclosures that would not be prevented or detected.

The
effectiveness of the Companys internal control over financial reporting as at
December 31, 2007 has been audited by PricewaterhouseCoopers LLP, our
independent auditors, as stated in their report which appears herein.

|                                       |                         
|-------------------------------------- | ------------------------
|(Signed)Philip J. Wright               | (Signed) Anders Haker   
|                                       |                         
|President
 and Chief Executive Officer | Chief
 Financial Officer
|                                       |                         
|Vancouver,
 BC, Canada                 |                         
|March 31,
 2008                        |                         

- 2 -

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Independent Auditors Report

To the Shareholders of Lundin Mining
Corporation

We have
completed an integrated audit of Lundin Mining Corporations 2007 consolidated
financial statements and of its internal control over financial reporting as at
December 31, 2007 and an audit of its 2006 consolidated financial statements.
Our opinions, based on our audits, are presented below.

Consolidated financial statements

We have
audited the accompanying consolidated balance sheets of Lundin Mining
Corporation (the Company) as at December 31, 2007 and 2006, and the related
consolidated statements of operations, comprehensive income, changes in
shareholders equity and cash flows for each of the years then ended. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted
our audit of the Companys financial statements as at December 31, 2007 and for
the year then ended in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board
(United States). We conducted our audit of the Companys financial statements
as at December 31, 2006 and for the year then ended in accordance with Canadian
generally accepted auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit of financial statements
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. A financial statement audit also
includes assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as at
December 31, 2007 and 2006 and the results of its operations and its cash flows
for each of the years then ended in accordance with Canadian generally accepted
accounting principles.

Internal control over financial reporting

We have also
audited Lundin Mining Corporations internal control over financial reporting
as at December 31, 2007, based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Companys management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the
accompanying Managements Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on the effectiveness of the
Companys internal control over financial reporting based on our audit.

We conducted
our audit of internal control over financial reporting in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was
maintained in all material respects. An audit of internal control over
financial reporting includes obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal
control, based on the assessed risk, and performing such other procedures as we
consider necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A companys
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A companys internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and

- 3 -

---



directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.

Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

As described
in the accompanying Managements Report on Internal Control over Financial
Reporting, management has excluded from its evaluation an assessment of the
internal control over financial reporting at Rio Narcea Gold Mines Ltd., which
was acquired during 2007. We have also excluded Rio Narcea Gold Mines Ltd. from
our audit of internal control over financial reporting. Rio Narcea is a wholly
owned subsidiary of the Company. The Rio Narcea operations represent
$840,206,000 of the total assets, $75,838,000 of total revenue, and a net loss
of $20,344,000 from Lundin Mining Corporations consolidated financial
statements as at and for the year ended December 31, 2007.

A material
weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable possibility that a
material misstatement of the Companys annual financial statements will not be
prevented or detected on a timely basis. As at December 31, 2007, material
weaknesses relating to accounting personnel, purchase price allocation, impairment
charges and income taxes were identified, as described in the accompanying
Managements Report on Internal Control over Financial Reporting.

We considered
these material weaknesses in determining the nature, timing and extent of audit
tests applied in our audit of the December 31, 2007 consolidated financial
statements, and our opinion regarding the effectiveness of the Companys
internal control over financial reporting does not affect our opinion on those
consolidated financial statements.

In our opinion,
the Company did not maintain, in all material respects, effective internal
control over financial reporting as at December 31, 2007 based on criteria
established in Internal Control  Integrated Framework issued by the COSO.

(Signed) PricewaterhouseCoopers LLP

Chartered AccountantsVancouver, BC, Canada 
March 31, 2008

Comments by Auditors for U.S. Readers on
Canada  U.S. Reporting Difference

In the United
States, reporting standards for auditors require an additional explanatory
paragraph (following the opinion paragraph) when there is a change in
accounting principles that has a material effect on the comparability of the
Companys financial statements, such as the change in accounting for financial
instruments as described in Note 3(p) to the consolidated financial statements
under the heading Change in Accounting
Policies. Our report to the shareholders dated March 31, 2008, is
expressed in accordance with Canadian reporting standards which do not require
a reference to such a change in accounting principles when it is properly
accounted for and adequately disclosed in the financial statements.

(Signed) PricewaterhouseCoopers LLP

Chartered Accountants 
Vancouver, BC, Canada 
March 31, 2008

- 4 -

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Lundin Mining CorporationCONSOLIDATED BALANCE SHEETS 
As at December 31,

|                                                                |  |      |                    |      |   |           | 
|--------------------------------------------------------------- |  | ---- | ------------------ | ---- | - | --------- | 
|(in
 thousands of US dollars)                                   |  | 2007 |                    | 2006 |  
|                                                                |  |      |                    |      |  
|                                                                |  |      | (Amended
 - Note 2 | )   
|ASSETS                                                          |  |      |                    |      |   |           | 
|Current                                                         |  |      |                    |      |   |           | 
|Cash and cash equivalents                                       |  | $    | 133,207            |      | $ | 402,170   | 
|Accounts receivable                                             |  |      | 110,873            |      |   | 96,435    | 
|Inventories - Note 6                                            |  |      | 46,791             |      |   | 24,723    | 
|Prepaid expenses                                                |  |      | 11,298             |      |   | 3,125     | 
|                                                                |  |      |                    |      |   |           | 
|                                                                |  |      | 302,169            |      |   | 526,453   | 
|Reclamation
 fund                                               |  |      | 59,174             |      |   | 31,710    | 
|Mineral
 properties, plant and equipment - Note 7               |  |      | 2,233,030          |      |   | 1,656,590 | 
|Investments
 - Notes 5(a) and 8(a) and (b)                      |  |      | 1,525,181          |      |   | 25,882    | 
|Other assets                                                    |  |      | 6,763              |      |   | 2,905     | 
|Goodwill -
 Note 9                                              |  |      | 503,925            |      |   | 616,426   | 
|Future
 income tax assets - Note 11                             |  |      | 80,582             |      |   | 17,261    | 
|                                                                |  |      |                    |      |   |           | 
|                                                                |  | $    | 4,710,824          |      | $ | 2,877,227 | 
|                                                                |  |      |                    |      |   |           | 
|LIABILITIES                                                     |  |      |                    |      |   |           | 
|Current                                                         |  |      |                    |      |   |           | 
|Accounts payable                                                |  | $    | 106,266            |      | $ | 41,845    | 
|Accrued liabilities - Note 12                                   |  |      | 90,865             |      |   | 97,302    | 
|Income taxes payable - Note 11                                  |  |      | 103,526            |      |   | 102,103   | 
|Current portion of long term debt and
 capital leases - Note 13 |  |      | 8,640              |      |   | 3,284     | 
|Current portion of deferred revenue - Note
 14                  |  |      | 7,243              |      |   | 3,264     | 
|                                                                |  |      |                    |      |   |           | 
|                                                                |  |      | 316,540            |      |   | 247,798   | 
|Long-term
 debt and capital leases - Note 13                    |  |      | 89,496             |      |   | 42,851    | 
|Other
 long-term liabilities                                    |  |      | 5,301              |      |   | -         | 
|Deferred
 revenue - Note 14                                     |  |      | 148,878            |      |   | 61,066    | 
|Derivative
 instruments liability - Note 15                     |  |      | 10,502             |      |   | 2,948     | 
|Provision
 for pension obligations - Note 16                    |  |      | 17,074             |      |   | 15,470    | 
|Asset
 retirement obligations and other provisions - Note 17    |  |      | 132,080            |      |   | 95,867    | 
|Future
 income tax liabilities - Note 11                        |  |      | 448,619            |      |   | 282,860   | 
|Non-controlling
 interest                                       |  |      | 528                |      |   | -         | 
|                                                                |  |      |                    |      |   |           | 
|                                                                |  |      | 1,169,018          |      |   | 748,860   | 
|                                                                |  |      |                    |      |   |           | 
|SHAREHOLDERS EQUITY                                            |  |      |                    |      |   |           | 
|Share
 capital - Note 18                                        |  |      | 3,233,682          |      |   | 1,890,275 | 
|Contributed
 surplus                                            |  |      | 14,179             |      |   | 8,887     | 
|Accumulated
 Other Comprehensive Income                         |  |      | 271,301            |      |   | -         | 
|Cumulative translation
 adjustments                             |  |      | -                  |      |   | 52,404    | 
|Retained
 earnings                                              |  |      | 22,644             |      |   | 176,801   | 
|                                                                |  |      |                    |      |   |           | 
|                                                                |  |      | 3,541,806          |      |   | 2,128,367 | 
|                                                                |  |      |                    |      |   |           | 
|                                                                |  | $    | 4,710,824          |      | $ | 2,877,227 | 
|                                                                |  |      |                    |      |   |           | 
|                                                               

Commitments,
contingencies and uncertainties - Notes 7, 8(b)(i), 10 and 22


Approved by the Board

|                         |                        
|------------------------ | -----------------------
|(Signed) Lukas H. Lundin | (Signed) Dale C. Peniuk
|Director                 | Director               

See accompanying notes to consolidated
financial statements

- 5 -

---



Lundin Mining CorporationCONSOLIDATED
STATEMENTS OF OPERATIONS 
For the years ended December 31, 
(in thousands of US dollars, except for shares and per share amounts)

|                                                 |  |                    |             |      |   |             |  
|------------------------------------------------ |  | ------------------ | ----------- | ---- | - | ----------- | -
|                                                 |  | 2007               |             | 2006 |  
|                                                 |  |                    |             |      |  
|                                                 |  | (Amended - Note 2) |            
|                                                 |  |                    |            
|Sales                                            |  | $                  | 1,059,722   |      | $ | 539,729     |  
|                                                 |  |                    |             |      |   |             |  
|                                                 |  |                    |            
|Expenses                                         |  |                    |             |      |   |             |  
|Mining operations                                |  |                    | (379,295    | )    |   | (219,016    | )
|Accretion of asset retirement obligations        |  |                    | (9,085      | )    |   | (1,284      | )
|Depreciation, depletion and amortization         |  |                    | (175,692    | )    |   | (74,448     | )
|General exploration and project
investigation    |  |                    | (35,374     | )    |   | (9,857      | )
|Selling, general and administration              |  |                    | (30,785     | )    |   | (17,051     | )
|Stock-based compensation - Note 18 (b)           |  |                    | (12,024     | )    |   | (2,381      | )
|Impairment charges - Note 10                     |  |                    |             |      |   |             |  
|Goodwill                                         |  |                    | (349,998    | )    |   | -           |  
|Mineral properties, plant and equipment          |  |                    | (193,103    | )    |   | -           |  
|Foreign exchange losses                          |  |                    | (18,622     | )    |   | (16,907     | )
|Gains (losses) on derivative instruments         |  |                    | (34,526     | )    |   | 420         |  
|Interest and other income and expenses           |  |                    | 25,155      |      |   | 8,321       |  
|Interest and bank charges                        |  |                    | (13,470     | )    |   | (1,646      | )
|Gain on sale of investments                      |  |                    | 77,974      |      |   | 9           |  
|                                                 |  |                    |             |      |   |             |  
|                                                 |  |                    | (1,148,845  | )    |   | (333,840    | )
|                                                 |  |                    |             |      |   |             |  
|Earnings
  (loss) before undernoted items        |  |                    | (89,123     | )    |   | 205,889     |  
|Operating
  losses in equity investments         |  |                    | (375        | )    |   |            |  
|Non-controlling
  interest                       |  |                    | 11          |      |   | (183        | )
|                                                 |  |                    |             |      |   |             |  
|Earnings
  (loss) before income taxes            |  |                    | (89,487     | )    |   | 205,706     |  
|Current
  income taxes - Note 11                 |  |                    | (136,463    | )    |   | (52,451     | )
|Future
  income tax (expense) recovery - Note 11 |  |                    | 71,793      |      |   | (1,707      | )
|                                                 |  |                    |             |      |   |             |  
|Net
  earnings (loss) for the year               |  | $                  | (154,157    | )    | $ | 151,548     |  
|                                                 |  |                    |             |      |   |             |  
|Earnings
  (loss) per share                      |  |                    |             |      |   |             |  
|Basic                                            |  | $                  | (0.46       | )    | $ | 1.01        |  
|Diluted                                          |  | $                  | (0.46       | )    | $ | 1.00        |  
|                                                 |  |                    |             |      |   |             |  
|Weighted
  average number of shares outstanding  |  |                    |             |      |   |             |  
|Basic                                            |  |                    | 338,643,242 |      |   | 149,439,546 |  
|Diluted                                          |  |                    | 338,643,242 |      |   | 151,152,105 |  

See accompanying notes to consolidated financial statements

- 6 -

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Lundin Mining CorporationCONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME 
For the year ended December 31, 2007 
(in thousands of US dollars)

|                                                                    |  |      |          |  
|------------------------------------------------------------------- |  | ---- | -------- | -
|                                                                    |  | 2007 |         
|                                                                    |  |      |         
|                                                                   
|Net loss for the year                                               |  | $    | (154,157 | )
|                                                                    |  |      |          |  
|Other comprehensive income                                          |  |      |          |  
|Change in fair value of available-for-sale
securities, net of taxes |  |      | (23,626  | )
|Cumulative translation adjustment                                   |  |      | 239,330  |  
|                                                                    |  |      |          |  
|                                                                   
|                                                                    |  |      | 215,704  |  
|                                                                    |  |      |          |  
|Comprehensive income for
  the year                                 |  | $    | 61,547   |  
|                                                                    |  |      |          |  

See accompanying notes to
consolidated financial statements

- 7 -

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Lundin Mining
CorporationCONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(in thousands of US dollars)

|                                                                       |  |                |           |                      |   |                                      |   |                                           |         |                    |   |         |   |   |          |   |   |           |  
|---------------------------------------------------------------------- |  | -------------- | --------- | -------------------- | - | ------------------------------------ | - | ----------------------------------------- | ------- | ------------------ | - | ------- | - | - | -------- | - | - | --------- | -
|                                                                       |  | Share
 Capital |           | Contributed
 Surplus |   | Cumulative
 Translation
 Adjustments |   | Accumulated
 other
 Comprehensive
 Income |         | Retained
 earnings |   | Total   |  
|                                                                      
|                                                                      
|Balance, December 31, 2005                                             |  | $              | 243,305   |                      | $ | 1,357                                |   | $                                         | (25,399 | )                  | $ | -       |   | $ | 25,253   |   | $ | 244,516   |  
|Exercise of stock options                                              |  |                | 6,320     |                      |   | -                                    |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 6,320     |  
|Exercise of stock appreciation rights                                  |  |                | 1,824     |                      |   | -                                    |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 1,824     |  
|Transfer of contributed surplus on exercise of stock
options           |  |                | 6,088     |                      |   | (6,088                               | ) |                                           | -       |                    |   | -       |   |   | -        |   |   | -         |  
|Shares issued and options granted for EuroZinc acquisition (Note
5(c)) |  |                | 1,632,738 |                      |   | 12,127                               |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 1,644,865 |  
|Stock-based compensation                                               |  |                | -         |                      |   | 1,491                                |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 1,491     |  
|Net earnings for the year - (Amended - Note 2)                         |  |                | -         |                      |   | -                                    |   |                                           | -       |                    |   | -       |   |   | 151,548  |   |   | 151,548   |  
|Effects of foreign currency translation                                |  |                | -         |                      |   | -                                    |   |                                           | 77,803  |                    |   | -       |   |   | -        |   |   | 77,803    |  
|                                                                       |  |                |           |                      |   |                                      |   |                                           |         |                    |   |         |   |   |          |   |   |           |  
|                                                                       |  |                |           |                      |   |                                      |   |                                           |         |                    |   |         |   |   |          |   |   |           |  
|Balance, December 31, 2006 - (Amended - Note 2)                        |  | $              | 1,890,275 |                      | $ | 8,887                                |   | $                                         | 52,404  |                    | $ | -       |   | $ | 176,801  |   | $ | 2,128,367 |  
|Transition adjustment - Note 3 (p)(iv)                                 |  |                | -         |                      |   | -                                    |   |                                           | (52,404 | )                  |   | 55,597  |   |   | -        |   |   | 3,193     |  
|Exercise of stock options                                              |  |                | 6,544     |                      |   | -                                    |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 6,544     |  
|Exercise of stock appreciation rights                                  |  |                | 1,330     |                      |   | -                                    |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 1,330     |  
|Transfer of contributed surplus on exercise of stock
options           |  |                | 7,392     |                      |   | (7,392                               | ) |                                           | -       |                    |   | -       |   |   | -        |   |   | -         |  
|Transfer of fair value on exercise of stock appreciation
rights        |  |                | 1,500     |                      |   | -                                    |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 1,500     |  
|Shares and options issued for Tenke acquisition -Note 5
(a)            |  |                | 1,329,075 |                      |   | 660                                  |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 1,329,735 |  
|Shares issued on the assumption of Tenke obligation - Note
5(a)        |  |                | 1,745     |                      |   | -                                    |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 1,745     |  
|Stock-based compensation                                               |  |                | -         |                      |   | 12,024                               |   |                                           | -       |                    |   | -       |   |   | -        |   |   | 12,024    |  
|Changes in the fair value of available-for-sale securities             |  |                | -         |                      |   | -                                    |   |                                           | -       |                    |   | (23,626 | ) |   | -        |   |   | (23,626   | )
|Normal Course Issuer Bid share buyback                                 |  |                | (4,179    | )                    |   | -                                    |   |                                           | -       |                    |   | -       |   |   | -        |   |   | (4,179    | )
|Net loss for the year                                                  |  |                | -         |                      |   | -                                    |   |                                           | -       |                    |   | -       |   |   | (154,157 | ) |   | (154,157  | )
|Effects of foreign currency translation                                |  |                | -         |                      |   | -                                    |   |                                           | -       |                    |   | 239,330 |   |   | -        |   |   | 239,330   |  
|                                                                       |  |                |           |                      |   |                                      |   |                                           |         |                    |   |         |   |   |          |   |   |           |  
|                                                                       |  |                |           |                      |   |                                      |   |                                           |         |                    |   |         |   |   |          |   |   |           |  
|Balance, December 31, 2007                                             |  | $              | 3,233,682 |                      | $ | 14,179                               |   | $                                         | -       |                    | $ | 271,301 |   | $ | 22,644   |   | $ | 3,541,806 |  
|                                                                       |  |                |           |                      |   |                                      |   |                                           |         |                    |   |         |   |   |          |   |   |           |  

See accompanying notes to consolidated financial statements

- 8 -

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Lundin Mining
CorporationCONSOLIDATED
STATEMENTS OF CASH FLOWS For the years ended December 31,
(in thousands of US dollars)

|                                                                  |  |      |          |                     |   |          |  
|----------------------------------------------------------------- |  | ---- | -------- | ------------------- | - | -------- | -
|                                                                  |  | 2007 |          | 2006                |  
|                                                                 
|                                                                  |  |      |          | (Amended
 - Note 2) |  
|                                                                  |  |      |          |                     |  
|Operating
 activities                                             |  |      |          |                     |   |          |  
|Net earnings (loss) for
 the year                                 |  | $    | (154,157 | )                   | $ | 151,548  |  
|Items not involving cash 
 Amortization of deferred revenue       |  |      | (4,473   | )                   |   | (3,093   | )
|Depreciation, depletion and amortization                          |  |      | 175,692  |                     |   | 74,448   |  
|Impairment write-downs                                            |  |      | 543,101  |                     |   | -        |  
|Stock-based compensation                                          |  |      | 12,024   |                     |   | 2,381    |  
|Gain on sale of investments and other
assets                      |  |      | (79,035  | )                   |   | (9       | )
|Future income tax expense (recovery)                              |  |      | (71,793  | )                   |   | 1,707    |  
|Provision for pensions                                            |  |      | 1,046    |                     |   | 1,333    |  
|Interest accretion and other                                      |  |      | 6,769    |                     |   | 1,018    |  
|Unrealized gain on derivative instruments                         |  |      | (14,159  | )                   |   | (26,354  | )
|Unrealized foreign exchange losses                                |  |      | 5,982    |                     |   | 11,351   |  
|                                                                  |  |      |          |                     |   |          |  
|                                                                  |  |      | 420,997  |                     |   | 214,330  |  
|Changes in non-cash
 working capital items - Note 19              |  |      | (18,872  | )                   |   | 32,891   |  
|Pension payments                                                  |  |      | (640     | )                   |   | -        |  
|Reclamation payments                                              |  |      | (2,018   | )                   |   | -        |  
|Deferred revenue                                                  |  |      | 42,500   |                     |   | -        |  
|Reclamation fund
 contributions                                   |  |      | (16,265  | )                   |   | -        |  
|                                                                  |  |      |          |                     |   |          |  
|Cash flow from operating
 activities                              |  |      | 425,702  |                     |   | 247,221  |  
|                                                                  |  |      |          |                     |   |          |  
|                                                                 
|Financing
 activities                                             |  |      |          |                     |   |          |  
|Common shares issued                                              |  |      | 7,874    |                     |   | 6,320    |  
|Put premium payments                                              |  |      | (9,759   | )                   |   | -        |  
|Proceeds from loans and
 other long-term obligations              |  |      | 753,949  |                     |   | 1,068    |  
|Purchase of treasury
 shares                                      |  |      | (726     | )                   |   | -        |  
|Repayment of debt                                                 |  |      | (716,744 | )                   |   | (3,504   | )
|                                                                  |  |      |          |                     |   |          |  
|                                                                  |  |      | 34,594   |                     |   | 3,884    |  
|                                                                  |  |      |          |                     |   |          |  
|                                                                 
|Investing
 activities                                             |  |      |          |                     |   |          |  
|Acquisition of
 subsidiaries, net of cash acquired                |  |      | (763,259 | )                   |   | -        |  
|Acquisition of cash of
 subsidiary, net of acquisition costs      |  |      | -        |                     |   | 234,284  |  
|Mineral property, plant
 and equipment expenditures               |  |      | (189,413 | )                   |   | (151,349 | )
|Equity investments                                                |  |      | (63,392  | )                   |   | -        |  
|Investments in
 available-for-sale securities                     |  |      | (298,675 | )                   |   | (20,696  | )
|Other                                                             |  |      | (3,996   | )                   |   | -        |  
|Proceeds from sale of
 subsidiary, net of cash                    |  |      | 273,285  |                     |   | -        |  
|Proceeds from sale of
 investments and other assets               |  |      | 307,433  |                     |   | 1,599    |  
|                                                                  |  |      |          |                     |   |          |  
|                                                                  |  |      | (738,017 | )                   |   | 63,838   |  
|                                                                  |  |      |          |                     |   |          |  
|Effect of foreign exchange
 on cash balances                      |  |      | 8,758    |                     |   | 12,818   |  
|                                                                  |  |      |          |                     |   |          |  
|Increase (decrease) in
 cash and cash equivalents during the year |  |      | (268,963 | )                   |   | 327,761  |  
|Cash and cash equivalents,
 beginning of year                     |  |      | 402,170  |                     |   | 74,409   |  
|                                                                  |  |      |          |                     |   |          |  
|                                                                 
|Cash and cash equivalents,
 end of year                           |  | $    | 133,207  |                     | $ | 402,170  |  
|                                                                  |  |      |          |                     |   |          |  

Supplemental cash flow
information - Note 19

See accompanying notes to
consolidated financial statements

- 9 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | NATURE OF
 OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Lundin Mining Corporation
 (the Company) is engaged in base metal mining and related activities,
 including exploration, extraction and processing on properties located in
 Portugal, Spain, Sweden and Ireland. The Companys major products are copper,
 zinc and nickel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Companys principal
 operating mine assets include the Neves-Corvo copper/zinc mine, located near
 Castro Verde, Portugal, the Zinkgruvan zinc/lead/silver mine, located
 approximately 200 kilometres southwest of Stockholm, Sweden, the Aguablanca
 nickel/copper mine in Spain, the Galmoy zinc/lead mine near Kilkenny, Ireland
 and the Storliden zinc/copper mine in the Skellefte District of northern
 Sweden, The Companys mining properties under development include the
 Aljustrel zinc mine under development in Portugal, a 24.75% equity accounted
 interest in the Tenke Fungurume copper/cobalt project under development in
 the Democratic Republic of Congo (DRC), and a 49% joint venture interest in
 the Ozernoe zinc/lead project in Russia. The Company holds exploration
 permits covering substantial areas in Portugal, Sweden and Ireland and
 strategic financial asset holdings in companies with advance stage projects.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | AMENDMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | During the preparation of
 the consolidated financial statements for the year ended December 31, 2007,
 the Company determined that an incorrect tax rate had been used to calculate
 current and future income taxes related to its Portuguese operations. The
 preferential tax rate applicable to enterprises operating in lesser developed
 inland regions of Portugal is applicable to a de minimus amount of income
 over a three year period, whereas the Company had applied this rate to all
 income earned in the region and to all future income tax balances arising
 from temporary differences related to net assets and operations in the
 region. The result was that the Company was found to be applying an effective
 tax rate which was 5% lower than required, in absolute terms. As a result,
 the Company has amended its consolidated financial statements for the year
 ended December 31, 2006, as follows:                           

| |                                                                             |  |                      |           |             |   |         |   |   |           |  
| | --------------------------------------------------------------------------- |  | -------------------- | --------- | ----------- | - | ------- | - | - | --------- | -
| |                                                                             |  | Previously
 Reported |           | Adjustments |   | Amended |  
| |                                                                             |  |                      |           |             |   |         |  
| |                                                                             |  |                      |           |             |   |         |   |   |           |  
| | Consolidated
 Balance Sheets as at December 31, 2006                        |  |                      |           |             |   |         |   |   |           |  
| | Total assets                                                                |  | $                    | 2,829,600 |             | $ | 50,528  |   | $ | 2,880,128 |  
| | Total liabilities                                                           |  |                      | 699,832   |             |   | 51,929  |   |   | 751,761   |  
| | Shareholders equity                                                        |  | $                    | 2,129,768 |             | $ | (1,401  | ) | $ | 2,128,367 |  
| |                                                                             |  |                      |           |             |   |         |   |   |           |  
| | Consolidated
 Statements of Operations for the year ended December 31, 2006 |  |                      |           |             |   |        
| |                                                                             |  |                      |           |             |   |         |   |   |           |  
| | Earnings before income
 taxes                                               |  | $                    | 205,091   |             | $ | 615     |   | $ | 205,706   |  
| | Current income taxes                                                        |  |                      | (50,291   | )           |   | (2,160  | ) |   | (52,451   | )
| | Future income taxes                                                         |  |                      | (1,851    | )           |   | 144     |   |   | (1,707    | )
| |                                                                             |  |                      |           |             |   |         |  
|
| | Net earnings for the year                                                   |  | $                    | 152,949   |             | $ | (1,401  | ) | $ | 151,548   |  
| |                                                                             |  |                      |           |             |   |         |   |   |           |  
|
| | Basic earnings per share                                                    |  | $                    | 1.02      |             | $ | (0.01   | ) | $ | 1.01      |  
|
| | Diluted earnings per share                                                  |  | $                    | 1.01      |             | $ | (0.01   | ) | $ | 1.00      |  

- 10 -

---



|                                                                                                          
|----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                 
|Notes to consolidated
 financial statements                                                               
|For the years ended
 December 31, 2007 and 2006                                                           
|(Tabular amounts in thousands
 of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                          

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3. | SIGNIFICANT ACCOUNTING
POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The consolidated financial
 statements have been prepared in accordance with Canadian generally accepted
 accounting principles (Canadian GAAP). Significant differences between
 Canadian GAAP and United States generally accepted accounting principles (US
 GAAP) as they relate to the preparation of these consolidated financial
 statements are described in Note 23.                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The preparation of
 financial statements in accordance with Canadian and US GAAP requires
 management to make estimates and assumptions that affect the reported amount
 of assets and liabilities and disclosure of contingent assets and liabilities
 at the date of the consolidated financial statements and the reported amounts
 of revenues and expenses during the period. Management exercises significant
 judgment in the determination of the following estimates:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | the amounts of ore
 reserves and resources used in the evaluation of carrying values,
 amortization rates and the timing of cash flows,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | allocation of the purchase
 price to fair values on the acquisition of businesses or groups of assets,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | quantities and net
 realizable value of inventories,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | contingent liabilities,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | tax provisions and future
 income tax balances,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | useful economic
 life of plant and equipment,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | costs of asset retirement
 obligations and other mine closure obligations,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | stock based compensation
 measurements,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | financial and derivative
 instruments valuations,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | impairment charges and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | determination of reporting
 units and the valuation of reporting units for goodwill determination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Actual results could
 differ from estimates made by management during the preparation of these
 financial statements, and those differences may be material.                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The significant accounting
 policies used in these consolidated financial statements are as follows:                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Subsidiaries, variable
 interest entities, investments and interests in joint ventures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Investments over which the
 Company holds a controlling interest are consolidated in these financial
 statements. The Company consolidates subsidiaries and entities that are
 subject to control on a basis other than ownership of a majority of the
 voting interests, or variable interest entities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Investments over which the
 Company has the ability to exercise significant influence are accounted for
 by the equity method. Under this method, the investment is initially recorded
 at cost and adjusted thereafter to record the Companys share of post
 acquisition earnings or loss of the investee as if the investee had been
 consolidated. The carrying value of the investment is also increased or
 decreased to reflect the Companys share of capital transactions, including
 amounts recognized in other comprehensive income, and for accounting changes
 which relate to periods subsequent to the date of acquisition. When there is
 a loss in value of an equity accounted investment which is other than
 temporary, the investment is written down to recognize the loss by a charge
 included in net income during the period of loss.

- 11 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Interests in joint
 ventures arise when the Company enters contractual agreements which provide
 for the sharing amongst two or more parties of the continuing power to
 determine the strategic operating, investing and financing activities of an
 entity. The Company proportionately consolidates its interests in joint
 ventures. Under the proportionate consolidation method, the Companys pro
 rata share of each of the assets, liabilities, revenues and expenses subject
 to joint control are combined with similar items in the Companys financial
 statements.                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| | (b) | Translation of foreign
 currencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| |     | The accounts of
 self-sustaining foreign operations are translated into US dollars at year-end
 exchange rates, and revenues and expenses and cash flows are translated at
 the average exchange rates. Differences arising from these foreign currency
 translations are recorded as cumulative translation adjustments within other
 comprehensive income and as accumulated other comprehensive income until they
 are realized by a reduction in the investment.                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| |     | For integrated foreign
 operations, monetary assets and liabilities are translated into US dollars at
 year-end exchange rates and non-monetary assets and liabilities are
 translated at historical rates. Revenues, expenses and cash flows are
 translated at average exchange rates, except for items related to
 non-monetary assets and liabilities which are translated at historical rates.
 Gains or losses on translation of monetary assets and monetary liabilities
 are included in earnings.                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| | (c) | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| |     | Cash and cash equivalents
 comprise cash on deposit with banks, and highly liquid short-term interest
 bearing investments with a term to maturity at the date of purchase of 90
 days or less from the date of acquisition.                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| | (d) | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| |     | Ore stockpile and
 concentrate stockpile inventories are valued at the lower of production cost
 and net realizable value. Production
 costs include direct costs of materials and labour related directly to mining
 and processing activities, including production phase stripping costs,
 depreciation and amortization of property, plant and equipment directly
 involved in the related mining and production process, amortization of any
 stripping costs previously capitalized and directly attributable overhead
 costs. Materials and supplies inventories are valued at average cost less
 allowances for obsolescence.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| | (e) | Mineral properties, plant
 and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| |     | Mineral properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| |     | Mineral properties are
 carried at cost less accumulated depletion and any accumulated impairment
 charges. Mineral property expenditures include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| |     | i.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Acquisition costs consist
 of payments for property rights and leases, including the estimated fair
 value of exploration properties acquired as part of a business acquisition or
 the acquisition of a group of assets.                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                   
| |     | ii.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Exploration and evaluation
 costs incurred on an area of interest once a determination has been made that
 a property has potential economically recoverable resources and there is a
 reasonable expectation that costs can be recovered by future exploitation or
 sale of the property. Exploration and evaluation expenditures made prior to a

- 12 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN
MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |  |                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                          | determination that a
 property has economically recoverable resources are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | iii.                                                                                                                                                                                                                                                                                     | Development costs incurred
 on an area of interest once management has determined that, based on a
 feasibility study, a property is capable of economical commercial production
 as a result of having established a proven and probable reserve, are
 capitalized as development expenses. Development costs are directly
 attributable to the construction of a mine. When additional development
 expenditures are made on a property after commencement of production, the
 expenditure is deferred as mineral property expenditures when it is probable
 that additional economic benefit will be derived from future operations.                                                                                                  
| |  |                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | iv.                                                                                                                                                                                                                                                                                      | Stripping costs represent
 the cost incurred to remove overburden and other waste materials to access
 ore. Stripping costs incurred prior to the production phase of a mine are
 capitalized and included as part of mineral property costs. During the
 production phase stripping costs which represent a betterment of the mineral
 property are capitalized. Capitalized stripping costs are amortized on a unit
 of production basis over the proven and probable reserves to which they relate.
 All other stripping costs incurred during the production phase of a property
 are accounted for as variable production costs and are included in the cost
 of inventory produced during the period in which the cost is incurred.
| |  |                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | v.                                                                                                                                                                                                                                                                                       | Pre-production
 expenditures net of the proceeds from sales generated, if any, relating to
 any one area of interest are capitalized as mineral property expenditures
 until such time as production rates achieve 70% of designed capacity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Once a mine has achieved commercial
 production, mineral property for each area of interest is depleted on a
 unit-of-production basis using proven and probable reserves.                                                                                                              
| |  |                                                                                                                                                                                                                                                                                         
| |  | Plant and equipment                                                                                                                                                                                                                                                                     
| |  |                                                                                                                                                                                                                                                                                         
| |  | Plant and equipment is
 carried at cost less accumulated depreciation and any accumulated impairment
 charges. Depreciation is recorded on a straight-line basis over the estimated
 useful life of the asset, or over the estimated remaining life of the mine if
 shorter, as follows:
| |  |                                                                                                                                                                                                                                                                                         

| |                     |                                       | 
| | ------------------- | ------------------------------------- | 
| |                     | Years                                
| |                     |                                      
|
| | Buildings           | 20
 - 50                             
| | Plant and machinery | 5
 - 20                              
| | Equipment           | 5                                    
| |                     |                                      
| |                     | Mining equipment under
 capital lease
| |                     |                                      

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
| |  | Leases that transfer
 substantially all of the property ownership benefits and risks to the Company
 are accounted for as capital leases. At the time a capital lease is entered
 into, the asset is recorded together with the related long-term obligation
 and is amortized on a straight line basis over its estimated useful life but
 not to exceed the life of mine. The interest portion of the lease payments
 are charged to earnings as incurred.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Impairment assessment                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | The Company performs
 impairment tests on its mineral properties, plant and equipment when events
 or changes in circumstances indicate that the carrying values of assets may
 not be                                                                                                                                                                                                                                                                      

- 13 -

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|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN
MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | recoverable. These tests
 require the comparison of the expected undiscounted future cash flows derived
 from these assets with the carrying value of the assets. If shortfalls exist,
 the assets are written down to fair value, determined primarily using
 discounted cash flow methods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    
| | (f) | Interest capitalization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Interest and financing
 costs on debt or other liabilities that can be attributed to specific
 projects and that are incurred during the development or construction period
 are capitalized as a cost of the asset under development or construction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    
| | (g) | Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Acquisitions of businesses
 are accounted for using the purchase method of accounting whereby all
 identifiable assets and liabilities are recorded at their fair values as at
 the date of acquisition. Any excess purchase price over the aggregate fair
 value of net assets plus or minus the amounts recognized for future income
 taxes is recorded as goodwill. Goodwill is identified and allocated to
 reporting units by preparing estimates of the fair value of each reporting
 unit and comparing this amount to the fair value of the assets and
 liabilities and related future income tax balances of the reporting unit at
 the date of acquisition. Goodwill is not amortized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Goodwill is tested
 annually for impairment or more frequently if current events or changes in
 circumstances indicate that the carrying value of the goodwill of a reporting
 unit may exceed its fair value. A two step impairment test is used to
 identify potential impairment in goodwill and to measure the amount of
 goodwill impairment, if any. In the first step, the fair value of a reporting
 unit is compared with its carrying value, including goodwill. When the fair
 value of a reporting unit exceeds its carrying amount, goodwill of the
 reporting unit is considered not to be impaired and the second step of the
 impairment test is not undertaken. When the carrying amount of a reporting
 unit exceeds its fair value, the fair value of the reporting units goodwill
 (determined on the same basis as the value of goodwill is determined in a
 business combination) is compared with its carrying amount to measure the
 amount of the impairment loss, if any. When the carrying amount of reporting
 unit goodwill exceeds the fair value of the goodwill, an impairment loss is
 recognized in an amount equal to the excess.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (h) | Derivatives                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company enters into
 derivative instruments to mitigate exposures to commodity price and currency
 exchange rate fluctuations. Unless the derivative instruments qualify for
 hedge accounting, and management undertakes appropriate steps to designate
 them as such, they are designated as held for trading and recorded at their
 fair value with realized and unrealized gains or losses arising from changes
 in the fair value recorded in operations. Fair values for derivative
 instruments held-for-trading are determined using valuation techniques. The
 valuations use assumptions based on prevailing market conditions on the
 reporting date. Realized gains and losses are recorded as a component of
 operating cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Embedded derivatives
 identified in non-derivative instrument contracts are recognized separately
 unless closely related to the host contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    
| | (i) | Deferred revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Deferred revenue consists
 of payments received by the Company in consideration for future commitments
 to deliver silver contained in concentrate at contracted prices. As
 deliveries are made, the Company records a portion of the deferred revenue as
 sales, based on a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

- 14 -

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|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN
MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | proportionate share of
 deliveries made compared with the total estimated contractual commitment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (j) | Provision for pension
 obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |     | The Companys Zinkgruvan
 mine has an unfunded defined benefit pension plan. The cost of the defined
 benefit pension plan is determined periodically by independent actuaries. The
 actuarial valuation is based on the projected benefit method pro-rated on
 service (which incorporates managements best estimate of future salary
 levels, retirement ages of employees and other actuarial factors). Each year
 actuarial gains and losses are calculated and accumulated actuarial gains and
 losses are amortized over the estimated remaining period of services to be
 received.                                                                                                                                                                                                                                                                                           
|
| | (k) | Asset retirement
 obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |     | The Company records the
 fair value of its asset retirement obligation as a long-term liability as
 incurred and records an increase in the carrying value of the related asset
 by a corresponding amount. In subsequent periods, the carrying amount of the
 liability is accreted by a charge to operations to reflect the passage of
 time and the liability is adjusted to reflect any changes in the timing of
 the underlying future cash flows. Charges for accretion and asset retirement
 obligation expenditures are recorded as operating activities.                                                                                                                                                                                                                                                                                                                     
|
| |     | Changes to the obligation
 resulting from any revisions to the timing or amount of the original estimate
 of undiscounted cash flows are recognized as an increase or decrease in the
 asset retirement obligation, and a corresponding change in the carrying
 amount of the related long-lived asset. Upward revisions in the amounts of
 estimated cash flows are discounted using the credit-adjusted risk free rate
 applicable at the time of the revision. Downward revisions in the amount of
 estimated cash flows are discounted using the historical credit-adjusted risk
 free rate when the original liability was recognized.                                                                                                                                                                                                                                           
|
| | (l) | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |     | Revenue arising from the
 sale of metals contained in concentrates is recognized when title and the
 significant risks and rewards of ownership of the concentrates have been transferred
 to the customer in accordance with the agreements entered into between the
 Company and its customers. The Companys metals contained in concentrates are
 provisionally priced at the time of sale based on the prevailing market price
 as specified in the sales contracts. Variations between the price recorded at
 the time of sale and the actual final price received from the customer are
 caused by changes in market prices for the metals sold and result in an
 embedded derivative in the accounts receivable. The embedded derivative is
 recorded at fair value each period until final settlement occurs, with
 changes in fair value classified as a component of sales.
|
| | (m) | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     | The Company follows the
 fair value method with respect to stock-based awards to directors and
 employees, including options, awards that are direct awards of stock that
 call for settlement in cash or other assets, or stock appreciation rights
 that call for settlement by the issuance of equity instruments. Under this approach,
 stock-based payments are recognized as a compensation expense over the
 vesting period of the options or when the awards or rights are granted, with
 a corresponding credit to contributed surplus. With respect to options that
 vest over time, the fair value is amortized using the graded vesting
 attribution method and expensed                                                                                                                                                                                                  

- 15 -

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|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN
MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                    
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------
| |     | on a monthly basis. When
 the stock options or rights are ultimately exercised, the applicable amounts
 of contributed surplus are transferred to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (n) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | The Company accounts for
 income taxes using the liability method. Under this method, future income tax
 assets and liabilities are determined based on differences between the
 financial statement carrying values of assets and liabilities and their respective
 income tax based values (temporary differences). Future income tax assets
 and liabilities are measured using the tax rates expected to be in effect
 when the temporary differences are likely to reverse. The effect on future
 income tax assets and liabilities of a change in tax rates is included in
 operations in the period in which the change is substantively enacted. The
 amount of future income tax assets recognized is limited to the amount of the
 benefit that is more likely than not to be realized.                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (o) | Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | Basic earnings per share
 are calculated using the weighted average number of common shares outstanding
 during the year. Diluted earnings per share are calculated using the treasury
 stock method. In applying the treasury-stock method, the assumed proceeds
 which would be received upon the exercise of outstanding stock options and
 warrants is used to calculate how many common shares could be purchased at
 the average market price during the year and cancelled. If the calculated
 result is dilutive, it is included in the diluted earnings per share
 calculation.                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (p) | Adoption of new accounting standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | Effective January 1, 2007
 the Company adopted the following Canadian Institute of Chartered Accountants
 (CICA) accounting standards:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | i.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Section 1530 
 Comprehensive Income                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                    
| |     | This new standard requires
 the presentation of comprehensive income and its components and the inclusion
 of accumulated other comprehensive income as a component of shareholders
 equity. Comprehensive income is the change in the Companys net assets that
 results from transactions, events and circumstances from sources other than
 the Companys shareholders and includes items that would not normally be
 included in net earnings until realized, such as cumulative translation
 adjustments resulting from the translation of foreign currency denominated
 financial statements to US dollars using the current rate method and
 unrealized gains or losses on available-for-sale securities.                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | ii.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Section 3855  Financial
 Instruments - Recognition and Measurement
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                    
| |     | This new standard requires
 that all financial assets are classified as one of the following:
 held-to-maturity investments, loans and receivables, available-for-sale or
 held for trading. Financial assets and liabilities held for trading are
 measured at fair value with gains and losses recognized in net income.
 Financial assets held-to-maturity, loans and receivables and financial
 liabilities other than those held for trading are measured at amortized cost,
 and amortization is calculated using the effective interest method.
 Available-for-sale instruments are measured at fair value with unrealized
 gains and losses recognized in other comprehensive income. The standard also
 permits the designation of any financial instrument as held for trading upon
 initial recognition. The Company has not designated any financial instruments
 as held for trading.

- 16 -

---



|                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to
  consolidated financial statements
  For the years ended December 31, 2007 and 2006(Tabular amounts in thousands
  of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                                 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                        
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------
| | All derivative instruments,
  including certain embedded derivatives that are required to be separated from
  their host contracts, are recorded on the balance sheet at fair value and
  mark to market adjustments on these instruments are included in net income.
  Under the transitional provisions for the standard only embedded derivatives
  acquired or substantively modified on or after January 1, 2003 are required
  to be considered for recognition and measurement. Transaction costs incurred
  to acquire or issue financial instruments are included in the initial
  carrying amount of the relevant financial instrument.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Where a financial asset
  classified as held-to-maturity or available-for-sale has a loss in value
  which is considered to be other than temporary, the loss is recognized by a
  charge to earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | iii.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Section 3865 - Hedges  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                        
| | This new standard
  specifies the criteria under which hedge accounting can be applied and how
  hedge accounting can be executed for each of the permitted hedging
  strategies: fair value hedges, cash flow hedges and hedges of foreign
  currency exposure of a net investment in self-sustaining foreign operations.
  The Company has not designated any instruments as hedges.                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                        
| | iv.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Transitional provisions
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                        
| | The adoption of Sections
  1530 and 3855 resulted in changes to the Companys earnings for the year
  ended December 31, 2007 and required an adjustment to the balance for
  investments and the initial recognition of accumulated other comprehensive
  income at January 1, 2007.                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                        
| | The cumulative translation
  adjustments and unrealized gain on available-for-sale securities as at
  December 31, 2006 were $52.4 million and $3.2 million, respectively. The
  aggregate of these amounts has been reported as the opening balance of
  Accumulated Other Comprehensive Income in the Consolidated Statements of
  Changes in Shareholders Equity for the year ended December 31, 2007.                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                        

|   |                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------
|4. | NEW
  ACCOUNTING PRONOUNCEMENTS                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                      
|   | The CICA has issued new
  standards which may affect the financial disclosures and results of
  operations of the Company for interim and annual periods beginning on or
  after January 1, 2008. The Company will adopt the requirements on the date
  specified in each respective section and is considering the impact this will
  have on the consolidated financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                      
|   | Section
  1535  Capital Disclosures                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                      
|   | Effective January 1, 2008,
  this Section establishes standards for disclosing information about an
  entitys capital and how it is managed. Under this standard the Company will
  be required to disclose the following, based on the information provided
  internally to the entitys key management personnel:                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                      
|   | i.                                                                                                                                                                                                                                                                                                                                                                                    | qualitative information
  about its objectives, policies and processes for managing capital,                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                  
|   | ii.                                                                                                                                                                                                                                                                                                                                                                                   | summary quantitative data
  about what it manages as capital,                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                  
|   | iii.                                                                                                                                                                                                                                                                                                                                                                                  | whether during the period
  it complied with any externally imposed capital requirements to which it is
  subject and            
|   |                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                  
|   | iv.                                                                                                                                                                                                                                                                                                                                                                                   | when the company has not
  complied with such externally imposed capital requirements, the consequences
  of such non-compliance.
|   |                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                  
|   | Section
  3031 - Inventories                                                                                                                                                                                                                                                                                                                                                         

- 17 -

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|                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to consolidated financial
  statements
  For the years ended December 31, 2007 and 2006(Tabular amounts in thousands
  of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                                 

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                     
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------
|   | Effective January 1, 2008,
  this Section prescribes the accounting treatment for inventories and provides
  guidance on the determination of costs and its subsequent recognition as an
  expense, including any write-down to net realizable value. It also provides
  guidance on the cost formulas that are used to assign costs to inventories.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Section
  3064  Goodwill and Intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | CICA 3064, Goodwill and
  Intangible Assets, will replace CICA 3062, Goodwill and Other Intangible
  Assets, and results in withdrawal of CICA 3450, Research and Development
  Costs, EIC-27, Revenues and Expenditures during the Pre-Operating Period and
  amendments to Accounting Guideline (AcG) 11, Enterprises in the Development
  Stage and CICA 1000, Financial Statement Concepts. The standard intends to
  reduce the differences with International Financial Reporting Standards
  (IFRS) in the accounting for intangible assets and results in closer
  alignment with US GAAP. Under current Canadian standards, more items are
  recognized as assets than under IFRS or US GAAP. The objectives of CICA 3064
  are to reinforce the principle-based approach to the recognition of assets
  only in accordance with the definition of an asset and the criteria for asset
  recognition; and clarify the application of the concept of matching revenues
  and expenses such that the current practice of recognizing assets items that
  do not meet the definition and recognition criteria is eliminated. The
  standard will also provide guidance for the recognition of internally
  developed intangible assets (including research and development activities),
  ensuring consistent treatment of all intangible assets, whether separately
  acquired or internally developed.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Section
  3862 - Financial Instruments  Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Effective January 1, 2008,
  this Section requires entities to provide disclosure of quantitative and
  qualitative information in their financial statements that enable users to
  evaluate (a) the significance of financial instruments to the entitys
  financial position and performance; and (b) the nature and extent of risks
  arising from financial instruments to which the entity is exposed during the
  period and at the balance sheet date, and managements objectives, policies
  and procedures for managing such risks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. | ACQUISITIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Tenke
  Mining Corp.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                     
|   | On July 3, 2007 the
  Company completed the acquisition of 100% of the issued and outstanding
  common shares of Tenke Mining Corp. (Tenke) by issuing 105.4 million common
  shares valued at CAD$13.37 (closing price of the Companys shares on the
  Toronto Stock Exchange on the date of completion) per share and cash payments
  totaling $0.06 million to the former Tenke shareholders. The Company issued a
  further 0.14 million common shares at CAD$13.37 per share to satisfy an
  obligation resulting from a previous agreement between Tenke and one of its
  consultants. In addition, the Company issued 0.09 million stock options to a
  former Tenke director in exchange for the cancellation of Tenke stock
  options. The terms and conditions of these stock options remain the same as
  the Tenke stock options, except for the number of options issued and the
  respective exercise price, which were adjusted according to the exchange
  ratio. This acquisition has been accounted for as a purchase of assets.                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                     
|   | Tenke, through its 30%
  owned subsidiary, Tenke Fungurume Holdings Ltd. (TFH) holds a 24.75%
  interest in the Tenke Fungurume copper/cobalt project under development in
  the DRC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

- 18 -

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|                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to
  consolidated financial statements
  For the years ended December 31, 2007 and 2006(Tabular amounts in thousands
  of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                                 

|                                                                             |  |   |           |  
|---------------------------------------------------------------------------- |  | - | --------- | -
|The allocation of the purchase price is summarized
as follows:               |  |   |           |  
|                                                                             |  |   |           |  
|Purchase price consideration                                                 |  |   |           |  
|Common shares issued (105.4 million
shares)                                  |  | $ | 1,329,075 |  
|Common shares issued on Tenke share issue
obligation (0.14 million
  shares) |  |   | 1,745     |  
|Stock options issued in exchange for Tenke option
obligation                 |  |   | 661       |  
|Acquisition costs                                                            |  |   | 1,026     |  
|Cash                                                                         |  |   | 60        |  
|                                                                             |  |   |           |  
|                                                                             |  |   | 1,332,566 |  
|Less:                                                                        |  |   |           |  
|Cash and cash equivalents acquired                                           |  |   | (82,435   | )
|                                                                             |  |   |           |  
|Net purchase price                                                           |  |   | 1,250,131 |  
|                                                                             |  |   |           |  
|Net assets acquired                                                          |  |   |           |  
|Accounts receivable                                                          |  |   | 160       |  
|Prepaid expenses                                                             |  |   | 22        |  
|Available for-sale-investments                                               |  |   | 1,084     |  
|Investment in TFH - Note 8(b)(i)                                             |  |   | 1,254,229 |  
|                                                                             |  |   |           |  
|                                                                             |  |   | 1,255,495 |  
|Accounts payable and accrued liabilities                                     |  |   | (377      | )
|Future income tax liabilities                                                |  |   | (4,987    | )
|                                                                             |  |   |           |  
|Net assets acquired                                                          |  | $ | 1,250,131 |  
|                                                                             |  |   |           |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                           |                              
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------
| | The purchase consideration
  has been allocated to the fair value of the assets acquired and liabilities
  assumed based on managements best estimates and taking into account all
  available information at the time of acquisition (Note 8 (b)(i)).                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The excess of the purchase
  price over the carrying value of the underlying assets in the accounts of
  Tenke of $1,029.2 million has been assigned to mineral properties.                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                       | Rio
  Narcea Gold Mines, Ltd.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                           |                              
| | On July 17, 2007, the
  Company acquired 85.5% of the issued common shares of Rio Narcea Gold Mines,
  Ltd. (Rio Narcea) in exchange for CAD$5.50 per share and 73.3% of the
  outstanding warrants of Rio Narcea for Cdn$1.04 per warrant. As at December
  31, 2007, the Company had acquired all of the issued and outstanding shares
  of Rio Narcea and all of the outstanding warrants for cash payments totaling
  $918 million.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                           |                              
| | Concurrent with the offer
  to purchase Rio Narcea, the Company signed an option agreement with Red Back Mining
  Inc. for the sale of Rio Narceas Tasiast gold mine for cash consideration of
  $225 million and the assumption of $53.1 million of debt and hedging
  contracts. The sale was completed on August 2, 2007.                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                           |                              
| | The purchase price was
  financed in part by an $800 million syndicated senior credit facility, which
  was reduced by the $225 million proceeds from the sale of the Tasiast gold
  mine.                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                           |                              
| | This acquisition has been
  accounted for as a business combination using the purchase method. These
  consolidated financial statements include Rio Narceas operating results
  commencing July 17, 2007.                                                                                                                                                                                                                              

- 19 -

---



|                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to
  consolidated financial statements
  For the years ended December 31, 2007 and 2006(Tabular amounts in thousands
  of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                                 

|                                                                                                                            |  |   |          |  
|--------------------------------------------------------------------------------------------------------------------------- |  | - | -------- | -
|Rio Narcea owns the
  Aguablanca nickel/copper mine and the Salave gold deposit in Spain.                                  
|                                                                                                                            |  |   |          |  
|The allocation of the
  purchase price to the identifiable assets and liabilities of Rio Narcea is
  summarized as follows:
|                                                                                                                            |  |   |          |  
|Purchase
  price                                                                                                            |  |   |          |  
|Cash                                                                                                                        |  | $ | 917,981  |  
|Acquisition costs                                                                                                           |  |   | 4,257    |  
|                                                                                                                            |  |   |          |  
|                                                                                                                            |  |   | 922,238  |  
|Less: cash and cash
  equivalents acquired                                                                                  |  |   | (67,303  | )
|                                                                                                                            |  |   |          |  
|Net purchase price                                                                                                          |  | $ | 854,935  |  
|                                                                                                                            |  |   |          |  
|Net assets
  acquired                                                                                                       |  |   |          |  
|Restricted cash                                                                                                             |  | $ | 9,174    |  
|Non-cash current assets                                                                                                     |  |   | 51,060   |  
|Mineral properties, plant and equipment                                                                                     |  |   | 562,493  |  
|Assets held for sale                                                                                                        |  |   | 278,181  |  
|Investments                                                                                                                 |  |   | 69,788   |  
|Other long-term assets                                                                                                      |  |   | 939      |  
|Future income tax assets                                                                                                    |  |   | 13,783   |  
|                                                                                                                            |  |   |          |  
|                                                                                                                            |  |   | 985,418  |  
|Current liabilities                                                                                                         |  |   | (70,057  | )
|Current portion of long-term debt                                                                                           |  |   | (40,586  | )
|Long-term debt                                                                                                              |  |   | (6,009   | )
|Other long-term liabilities                                                                                                 |  |   | (16,178  | )
|Asset retirement obligation and other mine closure
costs                                                                    |  |   | (7,341   | )
|Future income tax liability                                                                                                 |  |   | (148,674 | )
|Non-controlling interest                                                                                                    |  |   | (400     | )
|                                                                                                                            |  |   |          |  
|Net identifiable assets                                                                                                     |  |   | 696,173  |  
|Residual price allocated to
  goodwill                                                                                      |  |   | 158,762  |  
|                                                                                                                            |  |   |          |  
|Net assets acquired                                                                                                         |  | $ | 854,935  |  
|                                                                                                                            |  |   |          |  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                              
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------
| | The purchase price has
  been allocated to the fair value of the assets acquired and liabilities
  assumed, with goodwill assigned to the Aguablanca mine, based on managements
  best estimate and taking into account all available information at the time
  of acquisition. The fair values allocated were based in part on a valuation
  report prepared by an independent third party. The amount allocated to
  goodwill is not deductible for tax purposes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                              
| | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | EuroZinc
  Mining Corporation
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                              
| | On October 31, 2006, the
  Company completed the acquisition of 100% of the issued and outstanding
  common shares of EuroZinc Mining Corporation (EuroZinc) by issuing 160.8
  million common shares valued at CAD$11.36 per share (average closing price of
  the Companys shares on the Toronto Stock Exchange the two days before, the day
  of, and two days after August 21, 2006, the date of announcement) and cash
  payments totaling $0.05 million to the former EuroZinc shareholders. In
  addition, the Company issued 2.3 million stock options and 1.5 million stock
  appreciation rights (SARs) to the former EuroZinc employees in exchange for
  the cancellation of the EuroZinc stock options. The terms and conditions of
  these stock options remain the same as the EuroZinc stock options, except for
  the number of options issued and their respective exercise prices, which were
  adjusted according to the exchange ratio.

- 20 -

---



|                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to
  consolidated financial statements
  For the years ended December 31, 2007 and 2006(Tabular amounts in thousands
  of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                                 

| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | This acquisition has been
  accounted for as a business combination using the purchase method. These
  consolidated financial statements include EuroZincs results commencing
  October 31, 2006.
| |                                                                                                                                                                                                   
| | The allocation of the
  purchase price is summarized as follows:                                                                                                                                  

|                                                                                     |  |   |           |  
|------------------------------------------------------------------------------------ |  | - | --------- | -
|Purchase price                                                                       |  |   |           |  
|Common shares issued (160.8 million
shares)                                          |  | $ | 1,632,738 |  
|Stock options issued in exchange for EuroZinc
options (2.3 million
  options)        |  |   | 12,127    |  
|Stock appreciation rightsissued in exchange for
EuroZinc SARs (1.5
  million SARs) |  |   | 10,595    |  
|Acquisition costs                                                                    |  |   | 12,852    |  
|Cash                                                                                 |  |   | 50        |  
|                                                                                     |  |   |           |  
|                                                                                     |  |   | 1,668,362 |  
|Less:                                                                                |  |   |           |  
|Cash and cash equivalents acquired                                                   |  |   | (243,649  | )
|                                                                                     |  |   |           |  
|Net purchase price                                                                   |  | $ | 1,424,713 |  
|                                                                                     |  |   |           |  
|Net assets acquired (amended - Note 2)                                               |  |   |           |  
|Restricted cash                                                                      |  | $ | 4,007     |  
|Non-cash current assets                                                              |  |   | 104,053   |  
|Mineral properties, plant and equipment                                              |  |   | 1,190,515 |  
|Other long-term assets                                                               |  |   | 24,139    |  
|                                                                                     |  |   |           |  
|                                                                                     |  |   | 1,322,714 |  
|Current liabilities                                                                  |  |   | (137,085  | )
|Other liabilities                                                                    |  |   | (88,660   | )
|Reclamation and closure cost obligations                                             |  |   | (66,893   | )
|Future income tax liabilities                                                        |  |   | (205,477  | )
|                                                                                     |  |   |           |  
|                                                                                     |  |   | 824,599   |  
|Residual purchase price allocated to goodwill                                        |  |   | 600,114   |  
|                                                                                     |  |   |           |  
|Net assets acquired                                                                  |  | $ | 1,424,713 |  
|                                                                                     |  |   |           |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
purchase price consideration has been allocated to the fair value of the assets
acquired and liabilities assumed, with goodwill assigned to the Portuguese
reporting unit, based on managements best estimates and taking into account
all available information at the time of acquisition as well as additional
information. The fair values allocated to the assets and liabilities were based
in part on a valuation report prepared by an independent third party. The
amount allocated to goodwill is not deductible for tax purposes.

|   |                                      
|-- | -------------------------------------
|6. | INVENTORIES                          
|   |                                      
|   | Inventories comprise the
  following:

|                        |  |      |        |      |   |        | 
|----------------------- |  | ---- | ------ | ---- | - | ------ | 
|                        |  | 2007 |        | 2006 |  
|                        |  |      |        |      |  
|Ore stock piles         |  | $    | 9,858  |      | $ | 4,522  | 
|Concentrate stock piles |  |      | 11,449 |      |   | 9,305  | 
|Materials and supplies  |  |      | 25,484 |      |   | 10,896 | 
|                        |  |      |        |      |  
|                        |  | $    | 46,791 |      | $ | 24,723 | 
|                        |  |      |        |      |   |        | 

- 21 -

---



|                                                                                                             
|-------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                    
|Notes to consolidated
  financial statements                                                                 
|For the years ended
  December 31, 2007 and 2006                                                             
|(Tabular amounts in
  thousands of US dollars, narrative amounts in US dollars, unless otherwise
  indicated)
|                                                                                                             

|   |                                                      
|-- | -----------------------------------------------------
|7. | MINERAL
  PROPERTIES, PLANT AND EQUIPMENT            
|   |                                                      
|   | Mineral properties, plant
  and equipment consist of:

|                       |  |                     |           |                                                            |   |                        |  |     |         |  |   |           | 
|---------------------- |  | ------------------- | --------- | ---------------------------------------------------------- | - | ---------------------- |  | --- | ------- |  | - | --------- | 
|                       |  | December
  31, 2007 |          
|                       |  |                     |          
|                       |  | Cost                |           | Accumulated
  depreciation,
  depletion and
  amortization |   | Impairment
  (Note 10) |  | Net |        
|                       |  |                     |           |                                                            |   |                        |  |     |        
|Exploration properties |  | $                   | 281,787   |                                                            | $ | -                      |  | $   | -       |  | $ | 281,787   | 
|Mineral properties     |  |                     | 1,874,790 |                                                            |   | 298,775                |  |     | 78,590  |  |   | 1,497,425 | 
|Plant and equipment    |  |                     | 421,962   |                                                            |   | 73,288                 |  |     | -       |  |   | 348,674   | 
|Development            |  |                     | 219,657   |                                                            |   | -                      |  |     | 114,513 |  |   | 105,144   | 
|                       |  |                     |           |                                                            |   |                        |  |     |         |  |   |           | 
|                       |  | $                   | 2,798,196 |                                                            | $ | 372,063                |  | $   | 193,103 |  | $ | 2,233,030 | 
|                       |  |                     |           |                                                            |   |                        |  |     |         |  |   |           | 

|                       |  |                     |           |                                                            |   |            |  |     |   |  |   |           | 
|---------------------- |  | ------------------- | --------- | ---------------------------------------------------------- | - | ---------- |  | --- | - |  | - | --------- | 
|                       |  | December
  31, 2006 |          
|                       |  |                     |           |                                                            |   |            |  |     |  
|                       |  | Cost                |           | Accumulated
  depreciation,
  depletion and
  amortization |   | Impairment |  | Net |  
|                       |  |                     |          
|Exploration properties |  | $                   | 82,858    |                                                            | $ | -          |  | $   | - |  | $ | 82,858    | 
|Mineral properties     |  |                     | 1,334,084 |                                                            |   | 128,478    |  |     | - |  |   | 1,205,606 | 
|Plant and equipment    |  |                     | 360,646   |                                                            |   | 27,655     |  |     | - |  |   | 332,991   | 
|Development            |  |                     | 35,135    |                                                            |   | -          |  |     | - |  |   | 35,135    | 
|                       |  |                     |           |                                                            |   |            |  |     |   |  |   |           | 
|                       |  | $                   | 1,812,723 |                                                            | $ | 156,133    |  | $   | - |  | $ | 1,656,590 | 
|                       |  |                     |           |                                                            |   |            |  |     |   |  |   |           | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Development properties include
  the Companys 49% proportionate interest in the Ozernoe Joint Venture project
  which has a carrying value of $164.9 million (2006 - $150.3 million) (Note
  8(c). The recoverability of the Ozernoe property is dependent upon the
  discovery of economically recoverable reserves, preservation and confirmation
  of the Joint Venture Companys licensed interests in the underlying mineral
  claims, the ability of the Joint Venture Company and the Joint Venture
  partners to obtain the necessary financing to complete the project, and
  future profitable production or alternatively, upon the Companys ability to
  dispose of the interest on an advantageous basis. Changes in future
  conditions of ownership, if any, could result in material reductions to the
  carrying value of the Ozernoe property.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|On July 17, 2007, the
  Company completed the acquisition of Rio Narcea (Note 5(b)), which includes
  the mining assets of the Aguablanca mine. The allocation of the purchase
  price to mineral properties was $319.0 million and to plant and equipment
  $243.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|On October 31, 2006, the
  Company completed the acquisition of EuroZinc (Note 5(c)), which includes the
  mining assets of both the Neves-Corvo and Aljustrel mines. The allocation of
  the purchase price to mineral properties was $868.6 million and to plant and
  equipment $321.9 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

- 22 -

---



|                                                                                                             
|-------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                    
|Notes to consolidated
  financial statements                                                                 
|For the years ended
  December 31, 2007 and 2006                                                             
|(Tabular amounts in
  thousands of US dollars, narrative amounts in US dollars, unless otherwise
  indicated)
|                                                                                                             

|   |                                     
|-- | ------------------------------------
|8. | INVESTMENTS                         
|   |                                     
|   | Investments include the
  following:

|                                             |  |   |           |  |   |        | 
|-------------------------------------------- |  | - | --------- |  | - | ------ | 
|                                             |  |   | 2007      |  |   | 2006   | 
|                                             |  |   |           |  |   |        | 
|Investments in available-for-sale securities |  | $ | 207,814   |  | $ | 25,882 | 
|Equity investments                           |  |   | 1,317,367 |  |   | -      | 
|                                             |  |   |           |  |   |        | 
|                                             |  | $ | 1,525,181 |  | $ | 25,882 | 
|                                             |  |   |           |  |   |        | 

a) Available-for-sale securities

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Investments in
available-for-sale securities consist of marketable securities which had a
market value of $207.8 million at December 31, 2007 (December 31, 2006 - $30.7
million, carried at cost of $25.9 million). These investments consist of shares
in publicly traded mining and exploration companies. Beginning on January 1,
2007, under the provisions of CICA 3855 and 1530 (Note 3) the carrying amount
of these shares became subject to revaluation on a mark to market basis at the
end of each reporting period, and increases or decreases arising on revaluation
are recorded in Accumulated Other Comprehensive Income, a component of
shareholders equity.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|During the year ended
December 31, 2007, the Company recognized a $78.0 million gain from the sale of
available-for-sale securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|The Company does not
exercise significant influence over any of the companies in which investments
in available-for-sale securities are held which in all cases amounts to less
than a 20% equity interest in any one company.                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|   |                                                                          
|-- | -------------------------------------------------------------------------
|b) | Equity
  investments                                                     
|   |                                                                          
|   | The Company accounts for
  the following investments on the equity basis.

|                                      |  |      |           |      |   |   | 
|------------------------------------- |  | ---- | --------- | ---- | - | - | 
|                                      |  | 2007 |           | 2006 |  
|                                      |  |      |           |      |  
|Tenke Fungurume Holdings Ltd.
(TFH) |  | $    | 1,314,814 |      |   |   | 
|Sanu Resources Ltd. (SRL)           |  |      | 2,553     |      |   | - | 
|                                      |  |      |           |      |   |   | 
|                                      |  | $    | 1,317,367 |      | $ | - | 
|                                      |  |      |           |      |   |   | 
|                                      |  |      |           |      |   |   | 
|(i) Tenke
  Fungarume Holdings Ltd.  

The Company holds a 30%
interest in TFH which in turn holds an 82.5% interest in a Congolese subsidiary
company, Tenke Fungurume Mining S.A.R.L (TFM). Freeport McMoRan Gold &
Copper Inc. (Freeport) holds the remaining 70% interest in TFH. TFM holds a
100% interest in the Tenke Fungurume copper/cobalt project (the TFM Project).
The Company and Freeports net interest in the TFM project is 24.75% and 57.75%
respectively. La Generale des Carriers et des Mines (Gecamines), a DRC
Government-owned corporation owns a carried 17.5% interest. Freeport is the TFM
Project operator. The Company exercises significant control over the TFM
investment. Accordingly the Company has used the equity method to account for
this investment since acquisition on July 3, 2007.

- 23 -

---



|                                                                                                             
|-------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                    
|Notes to consolidated financial
  statements                                                                 
|For the years ended
  December 31, 2007 and 2006                                                             
|(Tabular amounts in
  thousands of US dollars, narrative amounts in US dollars, unless otherwise
  indicated)
|                                                                                                             

|                                                  |  |   |           |  
|------------------------------------------------- |  | - | --------- | -
|Balance, December 31, 2006                        |  | $ | -         |  
|Acquisition of TFH                                |  |   | 1,254,229 |  
|Cash advances since
  acquisition on July 3, 2007 |  |   | 60,900    |  
|Share of equity losses
  since acquisition        |  |   | (315      | )
|                                                  |  |   |           |  
|Balance, December 31, 2007                        |  | $ | 1,314,814 |  
|                                                  |  |   |           |  

In connection with a long
announced Government policy to review all mining agreements in the DRC, the
Ministry of Mines recently made a formal request for further discussion with
TFM regarding the TFM Project partnership with Gecamines. Included in the
request for discussion are such matters as the quantum of transfer payments to
the DRC, the percentage of Government ownership in the TFM Project, the degree
of Gecamines involvement in the management of the TFM Project, regularization
of certain issues under Congolese law, and the implementation of social plans.
The Company believes the TFM agreements with the Government are legally
binding, all related issues have been duly addressed under Congolese law and
the overall fiscal terms as previously negotiated and incorporated into the
Congolese Mining Convention as Amended and the TFM agreement terms exceed the
requirements of the Congolese Mining Code. The Company was advised that
Freeport, as operator, has made an appropriate response to the DRC Ministry of
Mines. Until there is resolution in this matter, the carrying value of the
Companys interest is subject to uncertainty.

TFH is reliant in part on
the Company to fund its on-going operational and development financing
requirements.

|                          
|--------------------------
|(ii) Sanu
  Resources Ltd.

Pursuant to the terms of a
private placement agreement dated December 26, 2006, the Company acquired 4
million units in SRL at a price of CAD$0.65 each. Each unit consisted of one
common share and one share purchase warrant entitling the holder thereof to
acquire one additional common share at a price of C$0.90 each at any time for a
period of 2 years. On purchase, the investment consisting of the shares and
share purchase warrants was classified as an available-for-sale investment. On
July 17, 2007 when certain Lundin senior officers or their appointees assumed
key SRL management positions and were appointed to three of the six seats on
the SRL Board, management determined that the Companys 9.9% interest in SRLs
then outstanding shares (approximately 18.0% on a fully diluted basis)
constituted a position of significant influence in the management and control
of the SRL operations. Consequently, the Company has recorded the SRL
investment on an equity basis whereby the Companys proportionate share of
reported SRL income or loss is added to or deducted from the carrying value of
its investment. Changes in the SRL equity investment are as follows:

|                                                                                   |  |   |       |  
|---------------------------------------------------------------------------------- |  | - | ----- | -
|Cost of investment on acquisition                                                  |  | $ | 2,492 |  
|Share of equity losses since establishing
significant influence on
  July 17, 2007 |  |   | (70   | )
|Effect from changes in foreign exchange
rates                                      |  |   | 131   |  
|                                                                                   |  |   |       |  
|Balance, December 31, 2007                                                         |  | $ | 2,553 |  
|                                                                                   |  |   |       |  

At the time of the SRL
acquisition, the excess of the purchase price over the carrying value of the
underlying assets in the SRL accounts of approximately $1.8 million has been
assigned to mineral properties.

As at December 31, 2007 the
market value of SRL was approximately $4.1 million and the Companys interest
in SRL stood at 9.7% of SRL (approximately 16.0% fully-diluted).

- 24 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

c) Joint
 venture investment

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On November 17, 2006, in
 consideration for $115 million cash plus a commitment to pay an additional
 $10 million on the commencement of commercial production, the Company
 acquired a 49% interest in the shares of Morales (Overseas) Limited (Morales)
 whose wholly owned Russian subsidiary holds a mining license covering the
 Ozernoe lead/zinc project located in the Republic of Buryatia, Russia. The
 Morales investment is accounted for as a joint venture under an agreement
 with IFC Metropol LLC OOO, (Metropol), a Russian entity that holds the
 remaining 51% interest in Morales. Under existing agreements, the Company is
 responsible for arranging project financing in an amount equal to 60% of the
 cash required to put the project into commercial production, with the
 remaining 40% contributed as equity by the Company and Metropol on a pro rata
 basis.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Morales is reliant on the
 Company and Metropol to fund its on-going operational and development
 financing requirements and Morales does not have the ability to transfer
 funds to either Metropol or the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | As at December 31, the
 Companys consolidated accounts included the following proportionate share of
 the Morales accounts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                        |  |      |         |      |   |          |  
|--------------------------------------- |  | ---- | ------- | ---- | - | -------- | -
|                                        |  | 2007 |         | 2006 |  
|                                        |  |      |         |      |  
|                                       
|Assets                                  |  |      |         |      |   |          |  
|Cash                                    |  | $    | 476     |      | $ | -        |  
|Other current assets                    |  |      | 604     |      |   | -        |  
|Mineral properties, plant and equipment |  |      | 157,219 |      |   | 150,292  |  
|Other non-current assets                |  |      | 6,634   |      |   | -        |  
|                                        |  |      |         |      |   |          |  
|                                        |  | $    | 164,933 |      | $ | 150,292  |  
|                                        |  |      |         |      |   |          |  
|                                       
|Liabilities and equity                  |  |      |         |      |   |          |  
|Current liabilities                     |  | $    | 3,806   |      | $ | -        |  
|Non-current liabilites                  |  |      | 45,395  |      |   | 34,894   |  
|Equity                                  |  |      | 115,732 |      |   | 115,398  |  
|                                        |  |      |         |      |   |          |  
|                                        |  | $    | 164,933 |      | $ | 150,292  |  
|                                        |  |      |         |      |   |          |  
|                                       
|Statement of operations                 |  |      |         |      |   |          |  
|Other income and expenses, net          |  | $    | 339     |      | $ | -        |  
|Foreign exchange gains                  |  |      | 107     |      |   |          |  
|Provision for income tax expense        |  |      | (83     | )    |   | -        |  
|                                        |  |      |         |      |   |          |  
|                                       
|Income for the year                     |  | $    | 363     |      | $ | -        |  
|                                        |  |      |         |      |   |          |  
|                                       
|Cash flow                               |  |      |         |      |   |          |  
|Financing activities                    |  | $    | 10,472  |      | $ | 115,398  |  
|Investing activities                    |  |      | (9,996  | )    |   | (115,398 | )
|                                        |  |      |         |      |   |          |  
|                                       
|Increase in cash                        |  | $    | 476     |      | $ | -        |  
|                                        |  |      |         |      |   |          |  

- 25 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

9.      GOODWILL

| |                                                                        
| | -----------------------------------------------------------------------
| | The following table
 summarizes changes to the goodwill carrying value:

|                                                |  |          |          |             |   |         |   |      |          |   |                     |         | 
|----------------------------------------------- |  | -------- | -------- | ----------- | - | ------- | - | ---- | -------- | - | ------------------- | ------- | 
|                                                |  | EuroZinc |          | Rio
 Narcea |   | 2007    |   | 2006 |         
|                                                |  |          |          |             |   |         |   |      |         
|                                                |  |          |          |             |   |         |   |      |          |   | (Amended -
 Note 2) |        
|Goodwill, beginning of
 year - Amended - Note 2 |  | $        | 517,559  |             | $ | -       |   | $    | 517,559  |   | $                   | -       | 
|Amendment of prior year
 amount - Note 2        |  |          | 98,867   |             |   |         |   |      | 98,867   |   |                     | -       | 
|                                                |  |          |          |             |   |         |   |      |          |   |                     |         | 
|                                               
|Goodwill, beginning of
 year - Amended - Note 2 |  |          | 616,426  |             |   | -       |   |      | 616,426  |   |                     | -       | 
|Arising from acquisitions                       |  |          | -        |             |   | 158,762 |   |      | 158,762  |   |                     | 600,115 | 
|Impairment charges - Note
 10                   |  |          | (327,658 | )           |   | (22,340 | ) |      | (349,998 | ) |                     | -       | 
|Effect from changes in
 foreign exchange rates  |  |          | 69,188   |             |   | 9,547   |   |      | 78,735   |   |                     | 16,311  | 
|                                                |  |          |          |             |   |         |   |      |          |   |                     |         | 
|                                               
|Goodwill, end of year                           |  | $        | 357,956  |             | $ | 145,969 |   | $    | 503,925  |   | $                   | 616,426 | 
|                                                |  |          |          |             |   |         |   |      |          |   |                     |         | 

10.     ASSET
 IMPAIRMENT

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The annual test for
 impairment of goodwill related to the Portuguese reporting unit resulted in
 an impairment charge of $327.7 million, and identified that the carrying
 value of the Aljustrel mine was unlikely to be recovered, resulting in an
 impairment charge to mineral properties and development costs of $193.1
 million. The impairment charge occurred, in part, due to the decline of the
 US dollar against the Euro, as the Companys operations in Europe incur
 operating and capital costs primarily in Euros, while revenue from
 concentrate sales is denominated in US dollars.                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Due to the decline of the
 US dollar against the Euro and the decline in spot nickel prices over the
 latter part of the year ended December 31, 2007, the Company also concluded
 that the fair value of the Spanish reporting unit was likely to be less than
 its carrying value and conducted a goodwill impairment test, resulting in an
 impairment charge of $22.3 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The fair value of the
 reporting units was estimated using all available information at the
 effective date of the impairment tests, including discounted estimated future
 cash flows, replacement costs and other market related data. Estimated future
 cash flows used to test impairment of goodwill and capital assets included
 managements estimates of operating results and capital requirements over the
 life of the related mineral properties. Key assumptions for metals prices,
 inflation and discount rates and US$exchange rates were based on consensus
 estimates and other information available from third party sources that
 management believed to be reasonable in the circumstances. The fair value of
 the impaired long-lived assets was determined primarily using discounted cash
 flows over the expected life of the mine. Fair values of reporting units and
 long lived assets were based in part on reports prepared by independent third
 parties.

- 26 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | The following table
 summarizes the before and after-tax impairment charges for the year ended
 December 31, 2007:

|                             |  |          |         |                                      |   |         |   |   |         |  
|---------------------------- |  | -------- | ------- | ------------------------------------ | - | ------- | - | - | ------- | -
|                             |  | Goodwill |         | Development
 and mineral
 properties |   | Total   |  
|                             |  |          |         |                                      |   |         |  
|                            
|Rio Narcea Gold Mines,
 Ltd. |  | $        | 22,340  |                                      | $ | -       |   | $ | 22,340  |  
|EuroZinc Mining
 Corporation |  |          | 327,658 |                                      |   | 193,103 |   |   | 520,761 |  
|                             |  |          |         |                                      |   |         |   |   |         |  
|                            
|                             |  |          | 349,998 |                                      |   | 193,103 |   |   | 543,101 |  
|Future income tax recovery   |  |          | -       |                                      |   | (51,172 | ) |   | (51,172 | )
|                             |  |          |         |                                      |   |         |   |   |         |  
|                            
|                             |  | $        | 349,998 |                                      | $ | 141,931 |   | $ | 491,929 |  
|                             |  |          |         |                                      |   |         |   |   |         |  

11.     FUTURE
 INCOME TAXES

| |                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The reconciliation of
 income taxes computed at Canadian statutory tax rates to the Companys income
 tax expense for the years ended December 31, 2007 and 2006 is as follows:

|                                                        |  |      |         |      |   |         |  
|------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                                        |  | 2007 |         | 2006 |  
|                                                        |  |      |         |      |  
|                                                       
|Combined basic federal and
 provincial rates            |  |      | 34.12   | %    |   | 34.12   | %
|                                                       
|Income tax expense based
 on statutory income tax rates |  | $    | (30,533 | )    | $ | 70,246  |  
|Effect of lower tax rates
 in foreign jurisdictions     |  |      | (29,044 | )    |   | (21,747 | )
|Tax benefits recognized on
 prior year losses           |  |      | (8,123  | )    |   | 1,323   |  
|Non-deductible and
 non-taxable items                   |  |      | 125,415 |      |   | 3,159   |  
|Other                                                   |  |      | 6,955   |      |   | 1,177   |  
|                                                        |  |      |         |      |   |         |  
|Income tax expense                                      |  | $    | 64,670  |      | $ | 54,158  |  
|                                                        |  |      |         |      |   |         |  

| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Temporary differences and
 loss carry-forwards which give rise to future income tax assets and
 liabilities as at December 31, 2007 and 2006 are as follows:

- 27 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

|                                                                              |  |      |         |      |                   |         |  
|----------------------------------------------------------------------------- |  | ---- | ------- | ---- | ----------------- | ------- | -
|Future income tax assets:                                                     |  | 2007 |         | 2006 |                  
|                                                                              |  |      |         |      |                   |         |  
|                                                                              |  |      |         |      | (Amended)
 Note 2 |        
|Canadian tax loss carry
 forwards                                             |  | $    | 21,477  |      | $                 | 7,056   |  
|Mine closure costs                                                            |  |      | 2,035   |      |                   | -       |  
|Development properties                                                        |  |      | 18,136  |      |                   | -       |  
|Spanish tax loss carry
 forwards                                              |  |      | 11,408  |      |                   | -       |  
|Irish tax loss carry
 forwards                                                |  |      | 28,019  |      |                   | 33,543  |  
|Portuguese tax loss carry
 forwards                                           |  |      | 10,801  |      |                   | 2,490   |  
|Mineral properties, plant
 and equipment                                      |  |      | 3,502   |      |                   | 5,112   |  
|Provision for pensions                                                        |  |      | 3,924   |      |                   | -       |  
|Working capital                                                               |  |      | 7,269   |      |                   | 3,678   |  
|Derivative assets                                                             |  |      | 1,661   |      |                   | -       |  
|Other assets and
 liabilities                                                 |  |      | 3,882   |      |                   | 2,078   |  
|Share issuance costs                                                          |  |      | 4,869   |      |                   | -       |  
|Asset retirement
 obligations                                                 |  |      | 14,124  |      |                   | 5,312   |  
|                                                                              |  |      |         |      |                   |         |  
|                                                                              |  |      | 131,107 |      |                   | 59,269  |  
|Valuation allowance                                                           |  |      | (37,443 | )    |                   | (9,221  | )
|                                                                              |  |      |         |      |                   |         |  
|Future income tax assets                                                      |  |      | 93,664  |      |                   | 50,048  |  
|                                                                              |  |      |         |      |                   |         |  
|                                                                             
|Future income tax
 liabilities                                                |  |      |         |      |                   |         |  
|Tax-allocation reserve                                                        |  |      | 8,499   |      |                   | 7,644   |  
|Derivatives and others                                                        |  |      | -       |      |                   | 2,030   |  
|Other assets                                                                  |  |      | 15,429  |      |                   | -       |  
|Mining properties, plant
 and equipment                                       |  |      | 437,773 |      |                   | 305,973 |  
|                                                                              |  |      |         |      |                   |         |  
|                                                                              |  |      | 461,701 |      |                   | 315,647 |  
|                                                                              |  |      |         |      |                   |         |  
|                                                                             
|Net future income tax
 liability                                              |  | $    | 368,037 |      | $                 | 265,599 |  
|                                                                              |  |      |         |      |                   |         |  
|                                                                             
|After taking into account
 the right of offset these balances are as follows: |  |      |         |      |                   |         |  
|                                                                             
|Net future income tax
 asset                                                  |  | $    | 80,582  |      | $                 | 17,261  |  
|Net future income tax
 liability                                              |  |      | 448,619 |      |                   | 282,860 |  
|                                                                              |  |      |         |      |                   |         |  
|                                                                             
|                                                                              |  | $    | 368,037 |      | $                 | 265,599 |  
|                                                                              |  |      |         |      |                   |         |  

| |                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At December 31, 2007, the
 Company had accumulated non-capital losses for Irish income tax purposes of
 approximately $112.1 million (2006 - $134.2 million) which has an indefinite
 life. In addition, the Company also has the following non-capital loss carry
 forwards:

| |                     |  |        |        |          |   |        |  |       |        |  |   |         | 
| | ------------------- |  | ------ | ------ | -------- | - | ------ |  | ----- | ------ |  | - | ------- | 
| | Year
 of
 expiry    |  | Canada |        | Portugal |   | Spain  |  | Total |       
| |                     |  |        |        |          |   |        |  |       |        |  |   |         | 
|
| | 2008                |  | $      | 653    |          | $ | 4,530  |  | $     | -      |  | $ | 5,183   | 
| | 2009                |  |        | 695    |          |   | 5,196  |  |       | -      |  |   | 5,891   | 
| | 2010                |  |        | 3,095  |          |   | -      |  |       | -      |  |   | 3,095   | 
| | 2011                |  |        | 7,598  |          |   | 28,146 |  |       | -      |  |   | 35,744  | 
| | 2012 and thereafter |  |        | 67,194 |          |   | 2,885  |  |       | 37,664 |  |   | 107,742 | 
| |                     |  |        |        |          |   |        |  |       |        |  |   |         | 
|
| |                     |  | $      | 79,235 |          | $ | 40,758 |  | $     | 37,664 |  | $ | 157,656 | 
| |                     |  |        |        |          |   |        |  |       |        |  |   |         | 

| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | The utilization of $78.2
 million Canadian non-capital loss carry forwards is restricted as a result of
 a change in control.

- 28 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

|    |                     
|--- | --------------------
|12. | ACCRUED
 LIABILITIES

|                                                     |  |      |        |                   |   |        | 
|---------------------------------------------------- |  | ---- | ------ | ----------------- | - | ------ | 
|                                                     |  | 2007 |        | 2006              |  
|                                                     |  |      |        |                   |   |        | 
|                                                     |  |      |        | (Amended)
 Note 2 |  
|Royalty payable                                      |  | $    | 42,732 |                   | $ | 19,526 | 
|Advances on metal
 concentrates                      |  |      | -      |                   |   | 15,582 | 
|Stock appreciation rights
 liability                 |  |      | 984    |                   |   | 9,222  | 
|Balance due on derivative
 contracts                 |  |      | 1,831  |                   |   | 8,966  | 
|Put premium obligation                               |  |      | -      |                   |   | 9,476  | 
|Unsettled purchases of
 investments                  |  |      | 3,122  |                   |   | -      | 
|Normal course issuer bid
 purchases                  |  |      | 3,429  |                   |   | -      | 
|Unbilled goods and
 services and payroll obligations |  |      | 38,767 |                   |   | 34,530 | 
|                                                     |  |      |        |                   |   |        | 
|                                                     |  | $    | 90,865 |                   | $ | 97,302 | 
|                                                     |  |      |        |                   |   |        | 

|    |                                   
|--- | ----------------------------------
|13. | LONG-TERM
 DEBT AND CAPITAL LEASES

|                                          |  |   |        |  |   |        | 
|----------------------------------------- |  | - | ------ |  | - | ------ | 
|                                          |  |   | 2007   |  |   | 2006   | 
|                                          |  |   |        |  |   |        | 
|Five-year revolving credit
 facility (a)  |  | $ | 40,352 |  | $ | -      | 
|Somincor bonds due 2009
 (b)              |  |   | 39,369 |  |   | 35,689 | 
|Capital lease obligations
 (c)            |  |   | 8,358  |  |   | 6,867  | 
|Deferred employee housing
 sales          |  |   | 274    |  |   | 238    | 
|Investment incentive loan
 (d)            |  |   | 729    |  |   | 1,061  | 
|Aljustrel debt                            |  |   | 2,516  |  |   | 2,280  | 
|Rio Narcea debt (e)                       |  |   | 6,538  |  |   | -      | 
|                                          |  |   |        |  |   |        | 
|                                          |  |   | 98,136 |  |   | 46,135 | 
|Less current portion due
 within one year |  |   | 8,640  |  |   | 3,284  | 
|                                          |  |   |        |  |   |        | 
|                                          |  | $ | 89,496 |  | $ | 42,851 | 
|                                          |  |   |        |  |   |        | 

The
principal repayment obligations are scheduled as follows:

|                     |  |      |        |                 |   |       |  |       |       |  |   |        | 
|-------------------- |  | ---- | ------ | --------------- | - | ----- |  | ----- | ----- |  | - | ------ | 
|                     |  | Debt |        | Capital
 Leases |   | Other |  | Total |      
|                     |  |      |        |                 |   |       |  |       |       |  |   |        | 
|2008                 |  | $    | 3,245  |                 | $ | 4,684 |  | $     | 710   |  | $ | 8,640  | 
|2009                 |  |      | 40,098 |                 |   | 3,579 |  |       | 292   |  |   | 43,968 | 
|2010                 |  |      | 729    |                 |   | 95    |  |       | -     |  |   | 824    | 
|2011                 |  |      | 729    |                 |   | -     |  |       | -     |  |   | 729    | 
|2012
 and thereafter |  |      | 43,975 |                 |   | -     |  |       | -     |  |   | 43,975 | 
|                     |  |      |        |                 |   |       |  |       |       |  |   |        | 
|Total                |  | $    | 88,776 |                 | $ | 8,358 |  | $     | 1,002 |  | $ | 98,136 | 
|                     |  |      |        |                 |   |       |  |       |       |  |   |        | 

- 29 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

Management
estimates that the fair value of long-term debt approximates its carrying
value.

|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ----------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | a)                | During 2007, the Company
 secured a five-year $225 million non-revolving and a $575 million revolving
 credit facility for general corporate purposes collateralized by shares owned
 by Lundin in its subsidiaries. These loan facilities were used in part to
 acquire 100% of the issued and outstanding shares of Rio Narcea (Note 5(b)). Following
 the purchase of Rio Narcea, the Company sold its Tasiast gold project for
 $225 million and retired a part of the non-revolving credit facility;                                                                                                                                                                                                                                                                                                                                                                    
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                   | The credit facility
 contains various covenants that include indebtedness, asset sales and liens,
 and distributions. The amount drawn on the facility bears interest at LIBOR
 plus a spread of 75 to 150 basis points based on the leverage ratio of the
 Company. As at December 31, 2007, the interest rate was 4.7%;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | b)                | On December 17, 2004, the
 Companys wholly-owned Portuguese subsidiary, Somincor, issued 540,000
 unsecured bonds with a nominal value of 50 each for a total of 27.0
 million, which as at December 31, 2007 is equivalent to approximately $36.4
 million. These bonds have a five-year term with 100% of the principal
 repayable at maturity on December 17, 2009 and bear interest at EURIBOR 6
 months plus 0.875%. Interest payments are due on June 17 and December 17 of
 each year;                                                                                                                                                                                                                                                                                                                                                                           
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | c)                | Capital lease obligations
 relate to leases on mining, computer equipment and passenger vehicles having
 three or four year terms and the lease payment obligations have been
 discounted at rates of interest between 1.25% to 1.75% above 3 month and 6
 month EURIBOR;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | d)                | The European Union (EU)
 established special investment programs to promote the development of some
 countries within the EU. The Neves-Corvo mine location in Portugal qualifies
 for investment incentives. Between 2001 and 2002 Neves-Corvo incurred
 approximately $20.0 million of eligible expenditures resulting in a
 non-refundable grant of $0.8 million and an unsecured, interest-free loan of
 $4.6 million. The outstanding balance on the unsecured, interest-free loan at
 December 31, 2007 was $0.7 million and is due on July 30, 2008; and                                                                                                                                                                                                                                                                                                            
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | e)                | The Rio Narcea debt of
 5.5 million (approximately $7. 6 million) was assumed on the acquisition of
 Rio Narcea and is an interest free loan extended by the Spanish Department of
 Trade, Industry and Commerce on which interest is imputed at 4.3%. It is
 repayable in equal annual installments of 0.5 million on December 15 of each
 year through 2017.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|14. | DEFERRED
 REVENUE
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | a)                | Silverstone Resources
 Corp.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                   | On September 28, 2007, the
 Company entered into an agreement to sell all of its silver contained in
 concentrate produced from its Neves-Corvo and Aljustrel mines in Portugal to
 Silverstone Resources Corp. (Silverstone) in consideration for cash and
 securities having a fair value of US $89.1 million on the date of the
 exchange, plus a payment on delivery of silver in concentrate at a rate of
 the lesser of (a) $3.90 per ounce (subject to a 1% annual adjustment after
 three years) and (b) the then prevailing market price per ounce of silver. The
 agreement extends to the earlier of 50 years from the agreement date and the
 end of mine life for each of the Neves-Corvo and Aljustrel mines. During the
 year ended December 31, 2007, the Company delivered concentrate containing
 147,000 ounces of silver in concentrate to Silverstone.
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                   | The Company has determined
 that the embedded derivative value in the contract, related to the ability of
 Silverstone to pay a reduced amount for each ounce of silver contained in
 concentrate if, during the term of the contract, the price of silver falls
 below $3.90 per ounce, is not significant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

- 30 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | Silver Wheaton Corp.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | On December 8, 2004, the
 Company entered into an agreement with Silver Wheaton Corp. (Silver Wheaton)
 whereby the Company agreed to deliver 40 million ounces of silver contained
 in concentrate from the Zinkgruvan mine in Sweden to Silver Wheaton over a
 25-year period in consideration for cash and securities having a fair value
 totaling $72.8 million, plus payment on delivery of silver in concentrate at
 a rate of the lesser of (a) $3.90 per ounce (subject to adjustment based on
 changes in the US consumer price inflation index) and (b) the then prevailing
 market price per ounce of silver.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Under terms of the agreement,
 if, at the end of the 25-year period, the Company has not delivered
 concentrate containing the agreed 40 million ounces, the Company is required
 to pay $1.00 to Silver Wheaton for each ounce of silver not delivered. During
 2007, the Company delivered concentrate containing 1,942,000 ounces (2006 
 1,671,000 ounces) of silver to Silver Wheaton, for an aggregated total of
 5,500,000 ounces since the inception of the contract.                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company has determined
 that the embedded derivative value in the contract, related to the ability of
 Silver Wheaton to pay a reduced amount for each ounce of silver contained in
 concentrate if the price of silver falls below $3.90 per ounce, is not
 significant.                                                                                                                                                                                                                                                                                                                                              

The
following table summarizes the changes in deferred revenue balance:

|                                                   |  |   |         |   |   |        |  
|-------------------------------------------------- |  | - | ------- | - | - | ------ | -
|                                                   |  |   | 2007    |   |   | 2006   |  
|                                                   |  |   |         |   |   |        |  
|Balance, beginning of year                         |  | $ | 64,330  |   | $ | 58,176 |  
|Proceeds from new contracts issued during the year |  |   | 89,060  |   |   | -      |  
|Amortization on delivery of silver in concentrate  |  |   | (4,473  | ) |   | (3,093 | )
|Effect from changes in foreign exchange rates      |  |   | 7,204   |   |   | 9,247  |  
|                                                   |  |   |         |   |   |        |  
|                                                   |  |   | 156,121 |   |   | 64,330 |  
|Less: estimated current portion                    |  |   | (7,243  | ) |   | (3,264 | )
|                                                   |  |   |         |   |   |        |  
|Balance, end of year                               |  | $ | 148,878 |   | $ | 61,066 |  
|                                                   |  |   |         |   |   |        |  

- 31 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

|    |                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|15. | DERIVATIVE
 INSTRUMENTS LIABILITY                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                              
|    | The derivative contracts
 include forward sale contracts for the purpose of managing the related risks
 and are not for trading purposes. As at December 31, 2007, the Company had
 derivative liabilities for forward metal delivery commitments as follows:

|       |  |       |        |          |                        |                |      |          |                  |                |  |          |  |                |           |                                           |  |         |  |   |           |  |   |         |  
|------ |  | ----- | ------ | -------- | ---------------------- | -------------- | ---- | -------- | ---------------- | -------------- |  | -------- |  | -------------- | --------- | ----------------------------------------- |  | ------- |  | - | --------- |  | - | ------- | -
|       |  |       |        |          | Outstanding
 Contracts |                |      |          |                 
|       |  |       |        |          |                        |                |      |          |                 
|       |  |       |        |          | 2008                   |                | 2009 |          | 2010
 and beyond |                |  |          | 
|       |  |       |        |          |                        |                |      |          |                  |                |  |          | 
|       |  | Units |        | Quantity |                        | Average
 price |      | Quantity |                  | Average
 price |  | Quantity |  | Average
 price |           | Estimated
 Fair Value
 December 31,
 2007 | 
|       |  |       |        |          |                        |                |      |          |                  |                |  |          |  |                |           |                                           | 
|Lead   |  |       | tonnes |          |                        | 10,500         |      | $        | 0.71/lb.         |                |  | -        |  |                | -         |                                           |  | -       |  |   | -         |  | $ | (10,059 | )
|Zinc   |  |       | tonnes |          |                        | 2,400          |      | $        | 1.23/lb.         |                |  | -        |  |                | -         |                                           |  | -       |  |   | -         |  |   | 768     |  
|Silver |  |       | ounces |          |                        | 95,000         |      | $        | 11.60/oz.        |                |  | 117,000  |  | $              | 11.60/oz. |                                           |  | 167,000 |  | $ | 11.60/oz. |  |   | (1,211  | )
|       |  |       |        |          |                        |                |      |          |                  |                |  |          |  |                |           |                                           |  |         |  |   |           |  |   |         |  
|       |  |       |        |          |                        |                |      |          |                  |                |  |          |  |                |           |                                           |  |         |  |   |           |  | $ | (10,502 | )
|       |  |       |        |          |                        |                |      |          |                  |                |  |          |  |                |           |                                           |  |         |  |   |           |  |   |         |  

| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | For every $0.10 decrease
 or increase in the prevailing market price from the above contracted price,
 the Company can expect to incur pre-tax income increases or decreases,
 respectively, as follows:

|       |   |      
|------ | - | -----
|Lead   | $ | 2,315
|Zinc   |   | 529  
|Silver | $ | 38   

|    |                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|16. | PROVISION
 FOR PENSION OBLIGATIONS                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                           
|    | The Company has calculated
 its liability relating to the defined benefit plan at the Zinkgruvan mine
 using the Projected Unit Credit Method. Actuarial assumptions used to
 determine benefit obligations at December 31, 2007 and 2006 were as follows:

|                             |  |  |      |   |  |      |  
|---------------------------- |  |  | ---- | - |  | ---- | -
|                             |  |  | 2007 |   |  | 2006 |  
|                             |  |  |      |   |  |      |  
|Discount rate                |  |  | 4.50 | % |  | 4.00 | %
|Rate of salary increase      |  |  | 2.50 | % |  | 2.50 | %
|Long-term rate of
 inflation |  |  | 2.50 | % |  | 2.50 | %

- 32 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | Information about
 Zinkgruvans defined benefit and other retirement plans as at December 31,
 2007 is as follows:

|                                                                |  |   |        |   |   |        |  
|--------------------------------------------------------------- |  | - | ------ | - | - | ------ | -
|                                                                |  |   | 2007   |   |   | 2006   |  
|                                                                |  |   |        |   |   |        |  
|Accrued benefit
 obligation:                                    |  |   |        |   |   |        |  
|Balance, beginning of the
 year                                 |  | $ | 13,383 |   | $ | 12,728 |  
|Current service costs                                           |  |   | 772    |   |   | 684    |  
|Interest costs                                                  |  |   | 509    |   |   | 499    |  
|Actuarial (gains) losses                                        |  |   | (714   | ) |   | (2,066 | )
|Benefits paid                                                   |  |   | (727   | ) |   | (505   | )
|Effects of foreign
 exchange                                    |  |   | (1,029 | ) |   | 2,043  |  
|                                                                |  |   |        |   |   |        |  
|Balance, end of the year                                        |  |   | 12,194 |   |   | 13,383 |  
|Adjustments of cumulative
 unrecognized actuarial losses        |  |   | 167    |   |   | 958    |  
|Unrecognized actuarial
 gains                                   |  |   | 714    |   |   | 158    |  
|                                                                |  |   |        |   |   |        |  
|Accrued benefit liability                                       |  |   | 13,075 |   |   | 14,499 |  
|Provision for indirect
 taxes on non-vested pension obligations |  |   | 2,656  |   |   | 325    |  
|Pension obligations
 covered by insurance policies              |  |   | 1,343  |   |   | 646    |  
|                                                                |  |   |        |   |   |        |  
|Total provision for
 pension obligations                        |  | $ | 17,074 |   | $ | 15,470 |  
|                                                                |  |   |        |   |   |        |  

| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The defined benefit plan is unfunded and,
accordingly, there are no plan assets and the Company made no contributions to
the plan. The Companys pension expense related to the defined benefit plan is
as follows:

|                      |  |   | 2007 |   |   | 2006  | 
|--------------------- |  | - | ---- | - | - | ----- | 
|                      |  |   |      |   |   |       | 
|Current service costs |  | $ | 772  |   | $ | 684   | 
|Interest costs        |  |   | 509  |   |   | 499   | 
|Actuarial losses      |  |   | (714 | ) |   | 42    | 
|Indirect taxes        |  |   | 138  |   |   | 266   | 
|                      |  |   |      |   |   |       | 
|Pension expense       |  | $ | 705  |   | $ | 1,491 | 
|                      |  |   |      |   |   |       | 

| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | In addition, the Company
 recorded a pension expense of $640,000 (December 31, 2006 - $791,000)
 relating to defined contribution plans.

- 33 -

---



|                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to
  consolidated financial statements
  For the years ended December 31, 2007 and 2006(Tabular amounts in thousands
  of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                                 

|    |                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|17. | ASSET
  RETIREMENT OBLIGATIONS AND OTHER PROVISIONS                                                                                                                                  
|    |                                                                                                                                                                                      
|    | The asset retirement
  obligations and other provisions relating to the operations of Neves-Corvo,
  Zinkgruvan, Storliden, Aljustrel, Aguablanca and Galmoy mines, are as
  follows:

|                                            |  |                                  |         |                                |   |        |  |   |         |  
|------------------------------------------- |  | -------------------------------- | ------- | ------------------------------ | - | ------ |  | - | ------- | -
|                                            |  | Asset
  Retirement
  Obligations |         | Other
  Mine
  Closure
  Costs |   | Total  | 
|                                            |  |                                  |         |                                |   |        |  |   |         |  
|Balance, December 31, 2005                  |  | $                                | 16,093  |                                | $ | -      |  | $ | 16,093  |  
|Accretion                                   |  |                                  | 1,284   |                                |   | -      |  |   | 1,284   |  
|Changes in estimates                        |  |                                  | 8,773   |                                |   | -      |  |   | 8,773   |  
|Other provisions                            |  |                                  | (381    | )                              |   | 350    |  |   | (31     | )
|Amounts arising from EuroZinc acquisition   |  |                                  | 62,562  |                                |   | 4,331  |  |   | 66,893  |  
|Effect on changes in foreign exchange
rates |  |                                  | 2,700   |                                |   | 155    |  |   | 2,855   |  
|                                            |  |                                  |         |                                |   |        |  |   |         |  
|Balance, December 31, 2006                  |  |                                  | 91,031  |                                |   | 4,836  |  |   | 95,867  |  
|Accretion                                   |  |                                  | 5,719   |                                |   | 2,273  |  |   | 7,992   |  
|Accruals for services                       |  |                                  | -       |                                |   | 1,335  |  |   | 1,335   |  
|Changes in estimates                        |  |                                  | 12,819  |                                |   | -      |  |   | 12,819  |  
|Amounts arising from Rio Narcea
acquisition |  |                                  | 7,294   |                                |   | 1,108  |  |   | 8,402   |  
|Amounts arising from disposal of Tasiast    |  |                                  | (1,000  | )                              |   | -      |  |   | (1,000  | )
|Effect on changes in foreign exchange
rates |  |                                  | 8,026   |                                |   | 657    |  |   | 8,683   |  
|Payments                                    |  |                                  | (2,018  | )                              |   | -      |  |   | (2,018  | )
|                                            |  |                                  |         |                                |   |        |  |   |         |  
|Balance, December 31, 2007                  |  | $                                | 121,871 |                                | $ | 10,209 |  | $ | 132,080 |  
|                                            |  |                                  |         |                                |   |        |  |   |         |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On July 17, 2007, the
  Company acquired Rio Narcea, the owner of the Aguablanca mine in the Asturias
  province of Spain (Note 5(b)). As part of the allocation of the purchase
  price, the Company allocated $6.2 million for future site restoration and
  mine closure costs and $1.1 million to other mine closure costs. The future
  site restoration and mine closure costs were determined based on the current
  life of mine plan, estimated undiscounted future site restoration costs of
  5.8 million for the mine using a credit-adjusted risk-free interest rate of
  5.0%. Since acquisition, the Company made payments for site restoration costs
  totaling $2.1 million. During 2007, in the period since acquisition, the
  Company recorded accretion expense of $0.4 million. The asset retirement
  obligations for the Aguablanca mine at December 31, 2007 totaled $7.2
  million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | On October 31, 2006, the
  Company acquired EuroZinc, the owner of the Neves-Corvo and Aljustrel mines
  in Southern Portugal. As part of the allocation of the purchase price, the
  Company allocated $62.6 million for future site restoration and mine closure
  costs and $4.3 million to other mine closure costs. The future site
  restoration and mine closure costs were determined based on the current life
  of mine plan, estimated undiscounted future site restoration costs of 100.5
  million for the Neves-Corvo mine and 12.9 million for the Aljustrel mine and
  a credit-adjusted risk-free interest rate of 5.0%. The Company expects the
  payments for site restoration costs to be incurred near the end or following
  the closure of the Neves-Corvo mine in 2021. The Company is in the process of
  preparing updated mine closure plans for both Neves-Corvo and Aljustrel and
  anticipate the reports will be completed late in the second quarter of 2008.
  Any changes in the estimate will be to increase or decrease the carrying
  value of the related asset and charged to earnings through amortization over
  the life of the mine. For the year ended December 2007, the Company recorded
  accretion expense of $3.8 million (two months ended December 31, 2006 - $0.5
  million). The asset retirement obligations and mine closure provisions for
  the Neves-Corvo and Aljustrel mines at December 31,

- 34 -

---



|                                                                                                                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION Notes to consolidated financial
  statements 
  For the years ended December 31, 2007 and 2006 (Tabular amounts in thousands
  of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                                    

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 2007 were $92.6 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The asset retirement
  obligation at the Zinkgruvan mine at December 31, 2007 was $13.4 million
  (December 31, 2006 - $11.7 million). This was based on estimated undiscounted
  future site restoration costs of $37.1 million (SEK240.1 million) and a
  credit-adjusted risk-free interest rate of 5.5%. The Company expects the
  future reclamation costs to be incurred subsequent to the end of the mine
  life.                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In March 2006 Zinkgruvan
  presented a revised closure plan to the Swedish Environmental Supreme Court.
  This closure plan for the tailings facility indicated a final closure cost of
  approximately $1.5 million (SEK10 million). However, the Supreme Court upheld
  the original 2001 closure plan and required the Company to post a $12.4
  million (SEK 80 million) bond. Zinkgruvan is currently updating the closure
  plan for resubmission to the Swedish Environmental Court for approval. Until
  such time as the new closure plan is approved, Zinkgruvan has based its
  estimated asset retirement obligation at December 31, 2007 of $13.4 million
  on the 2001 closure plan.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The asset retirement
  obligation at the Galmoy mine at December 31, 2007 was $15.8 million
  (December 31, 2006 - $13.4 million), which was based on an undiscounted asset
  retirement obligation of 15.4 million and a credit-adjusted risk-free
  interest rate of 5.5%. Expenditures for site restoration costs are scheduled
  to commence from 2008 to 2021. For the year ended December 31, 2007, the
  Company recorded accretion expense of $0.8 million (2006 - $0.8 million) and
  $1.1 million for other mine closure costs.                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company estimates that
  its asset retirement obligations with respect to the Storliden mine are
  insignificant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|18. | SHARE
  CAPITAL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | All shares and stock
  options shown in the tables are calculated as if the three-for-one stock
  split, which was effective February 5, 2007, had occurred at December 31,
  2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                 
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Authorized and issued
  shares                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | The issued and authorized
  share capital consists of an unlimited number of voting common shares with no
  par value and one special non-voting share with no par value of which
  392,489,131 voting common shares (2006  284,800,065) are issued and
  fully-paid.                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | On December 19, 2007, the
  Company announced a normal course issuer bid to purchase up to 19,620,139 of
  its previously issued common shares on the open market. As at December 31,
  2007, the Company had purchased 435,000 shares for a total consideration of
  $4.2 million. These shares were cancelled in January 2008.

- 35 -

---



|                                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION Notes to consolidated financial
  statements For the years ended December 31, 2007
  and 2006 (Tabular amounts in thousands of US
  dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                                   

Changes
in the issued voting common shares were as follows:

|                                                                      |  |                      |             |         |   |           |  
|--------------------------------------------------------------------- |  | -------------------- | ----------- | ------- | - | --------- | -
|                                                                      |  | Number
  of
  shares |             | Amounts |  
|                                                                      |  |                      |             |         |  
|                                                                     
|Fully-paid, issued and outstanding, December 31,
2005                 |  |                      | 122,081,493 |         | $ | 243,305   |  
|Exercise of stock options for cash                                    |  |                      | 1,643,784   |         |   | 6,320     |  
|Exercise of stock appreciation rights for
cash                        |  |                      | 240,240     |         |   | 1,824     |  
|Transfer of contributed surplus on exercise of
stock options          |  |                      | -           |         |   | 6,088     |  
|Shares issued in consideration for EuroZinc
acquisition               |  |                      | 160,834,548 |         |   | 1,632,738 |  
|                                                                      |  |                      |             |         |   |           |  
|                                                                     
|Fully-paid, issued and outstanding, December 31,
2006                 |  |                      | 284,800,065 |         |   | 1,890,275 |  
|Exercise of stock options for cash                                    |  |                      | 1,903,173   |         |   | 6,544     |  
|Exercise of stock appreciation rights for
cash                        |  |                      | 226,160     |         |   | 1,330     |  
|Transfer of contributed surplus on exercise of
stock options          |  |                      | -           |         |   | 8,892     |  
|Return of fractional shares                                           |  |                      | (69         | )       |   | -         |  
|Shares issued to acquire Tenke Mining Corp. - Note
5(a)               |  |                      | 105,421,402 |         |   | 1,329,075 |  
|Shares issued on the assumption of Tenke obligation
- Note 5(a)       |  |                      | 138,400     |         |   | 1,745     |  
|                                                                      |  |                      |             |         |   |           |  
|                                                                     
|Fully-paid, issued and outstanding, December 31,
2007                 |  |                      | 392,489,131 |         |   | 3,237,861 |  
|Shares purchased pursuant to normal issuer bid,
awaiting cancellation |  |                      | -           |         |   | (4,179    | )
|                                                                      |  |                      |             |         |   |           |  
|                                                                     
|Net fully-paid, issues and outstanding, December
31, 2007             |  |                      | 392,489,131 |         | $ | 3,233,682 |  
|                                                                      |  |                      |             |         |   |           |  

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company has an
  incentive stock option plan (the Plan) available for certain employees,
  directors and officers to acquire shares in the Company. At the October 19,
  2006 Special Meeting of Shareholders, the shareholders of the Company
  approved a resolution setting the number of shares reserved under the Plan at
  7,000,000. As a result of a three-for-one stock split of the Companys shares
  on February 5, 2007, the number of shares reserved under the Plan increased
  to 21,000,000, which is less than 10% of the number of issued and outstanding
  shares of the Company. The term of any options granted are fixed by the Board
  of Directors and may not exceed 10 years from the date of grant.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Option pricing models
  require the input of highly subjective assumptions including the expected
  price volatility and expected life. Changes in the subjective input
  assumptions can materially affect the fair value estimate and therefore the
  existing models do not necessarily provide a reliable single measure of the
  fair value of the Companys stock options granted/vested during the year.                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company uses the fair
  value method of accounting for all stock-based payments to employees,
  directors and officers. Under this method, the Company recorded a stock
  compensation expense of $12.0 million for 2007 (2006 - $2.4 million) with a
  corresponding credit to contributed surplus. The fair value of the stock
  options granted at the date of the grant using the Black-Scholes pricing
  model assumes risk-free interest rates of 3.9% to 4.7% (2006 - 3.9% to 4.1%),
  no dividend yield, expected life of 1.5 to 2.5 years (2006  0.5years to
  2.0 years) with an expected price volatility ranging from 36% to 43% (2006 
  36% to 43%).                                                             

- 36 -

---



|                                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to
  consolidated financial statements 
  For the years ended December 31, 2007 and 2006 (Tabular amounts in thousands
  of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                                   

| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | The continuity of
  incentive stock options issued and outstanding during 2007 and 2006 is as
  follows:

|                                                       |  |                                  |            |                                              |   |       | 
|------------------------------------------------------ |  | -------------------------------- | ---------- | -------------------------------------------- | - | ----- | 
|                                                       |  | Number
  of
  Options
  (Shares) |            | Weighted
  average
  exercise price
  (CAD$) |  
|                                                       |  |                                  |            |                                              |  
|                                                       |  |                                  |            |                                              |   |       | 
|Outstanding, December 31,
  2005                       |  |                                  | 2,002,500  |                                              | $ | 3.76  | 
|Granted during the year                                |  |                                  | 360,000    |                                              |   | 10.23 | 
|Granted in exchange for
  EuroZinc options - Note 5(c) |  |                                  | 2,319,549  |                                              |   | 5.41  | 
|Exercised during the year                              |  |                                  | (1,643,783 | )                                            |   | 3.61  | 
|                                                       |  |                                  |            |                                              |   |       | 
|                                                       |  |                                  |            |                                              |   |       | 
|Outstanding, December 31,
  2006                       |  |                                  | 3,038,266  |                                              |   | 5.11  | 
|Granted during the year                                |  |                                  | 4,905,760  |                                              |   | 12.55 | 
|Granted in exchange for
  Tenke options - Note 5(a)    |  |                                  | 86,500     |                                              |   | 5.57  | 
|Cancelled during the year                              |  |                                  | (9,521     | )                                            |   | 9.80  | 
|Exercised during the year                              |  |                                  | (1,903,177 | )                                            |   | 3.86  | 
|                                                       |  |                                  |            |                                              |   |       | 
|                                                       |  |                                  |            |                                              |   |       | 
|Outstanding, December 31,
  2007                       |  |                                  | 6,117,828  |                                              | $ | 11.84 | 
|                                                       |  |                                  |            |                                              |   |       | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During the year ended
  December 31, 2007, the Company granted 4,905,760 incentive stock options to
  employees and officers at a weighted average exercise price of CAD$12.55 per
  share that expire between January 17, 2009 and December 5, 2012. The exercise
  price for each of the options granted during 2007 was based on the closing
  stock price on the date of grant. On the acquisition of Tenke, in 2007, the
  Company issued 0.09 million stock options to a former Tenke director in
  exchange for the cancellation of Tenke stock options (Note 5(a)). In 2006,
  the Company issued 2.3 million stock options to former EuroZinc employees in
  exchange for the cancellation of the EuroZinc stock options (Note 5(c)). The
  terms and conditions of both the Tenke and the EuroZinc stock options remain
  the same as the respective pre-acquisition stock options, except for the
  number of options issued and their respective exercise prices, which were
  adjusted according to the exchange ratios on which the Tenke and EuroZinc
  acquisitions were based.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The following table summarizes
  options outstanding as at December 31, 2007, as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                        |  |                                     |           |                                                               |  |                                                |  |                                     |       |                                                               |  |                                                |  |  |     |  |   |       | 
|--------------------------------------- |  | ----------------------------------- | --------- | ------------------------------------------------------------- |  | ---------------------------------------------- |  | ----------------------------------- | ----- | ------------------------------------------------------------- |  | ---------------------------------------------- |  |  | --- |  | - | ----- | 
|                                        |  | Outstanding
  Options               |           | Exercisable
  Options                                        
|                                        |  |                                     |           |                                                              
|                                        |  |                                     |           |                                                              
|Range
  of
  exercise
  prices
  (CAD$) |  | Number
  of
  Options
  Outstanding |           | Weighted
  Average
  Remaining
  Contractual
  Life
  (Years) |  | Weighted
  Average
  Exercise
  Price
  (CAD$) |  | Number
  of
  Options
  Exercisable |       | Weighted
  Average
  Remaining
  Contractual
  Life
  (Years) |  | Weighted
  Average
  Exercise
  Price
  (CAD$) | 
|                                        |  |                                     |           |                                                               |  |                                                |  |                                     |       |                                                               |  |                                                | 
|$2.28
  - $5.79                         |  |                                     | 187,068   |                                                               |  | 2.1                                            |  | $                                   | 3.41  |                                                               |  | 187,068                                        |  |  | 2.1 |  | $ | 3.41  | 
|$5.80
  - $10.59                        |  |                                     | 1,350,000 |                                                               |  | 3.9                                            |  |                                     | 9.68  |                                                               |  | 757,232                                        |  |  | 3.5 |  |   | 9.53  | 
|$10.61
  - $14.97                       |  |                                     | 4,580,760 |                                                               |  | 4.1                                            |  |                                     | 12.82 |                                                               |  | 2,035,960                                      |  |  | 3.4 |  |   | 12.87 | 
|                                        |  |                                     |           |                                                               |  |                                                |  |                                     |       |                                                               |  |                                                |  |  |     |  |   |       | 
|                                       
|                                        |  |                                     | 6,117,828 |                                                               |  | 4.0                                            |  | $                                   | 11.84 |                                                               |  | 2,980,260                                      |  |  | 3.3 |  | $ | 11.43 | 
|                                        |  |                                     |           |                                                               |  |                                                |  |                                     |       |                                                               |  |                                                |  |  |     |  |   |       | 

| |     |                                                                                             
| | --- | --------------------------------------------------------------------------------------------
| | (c) | Stock appreciation rights                                                                   
| |     |                                                                                             
| |     | In 2006, on the
  acquisition of EuroZinc (Note 5(c)), the Company issued stock appreciation

- 37 -

---



|                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to
 consolidated financial statements
 For the years ended December 31, 2007 and 2006(Tabular amounts in thousands
 of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                              

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | rights to certain former
 EuroZinc employees in exchange for the cancellation of their stock options.
 The terms of the newly issued stock appreciation rights were the same as
 those of the cancelled options, with the exception of the number of shares
 and the exercise prices, which were adjusted for the share exchange ratio of
 the EuroZinc acquisition. Holders of stock appreciation rights have the right
 to either purchase the shares in the Company or receive a cash payout equal
 to the excess of the fair market value of the shares over the exercise price
 on the date of exercise.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | The continuity of stock
 appreciation rights issued and outstanding is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|                                                            |  |                                        |           |                                            |   |      | 
|----------------------------------------------------------- |  | -------------------------------------- | --------- | ------------------------------------------ | - | ---- | 
|                                                            |  | Number
 of stock
 appreciation
 rights |           | Weighted
 average
 exercise
 price
 (CAD$) |  
|                                                            |  |                                        |           |                                            |  
|Outstanding, December 31,
 2005                             |  |                                        | -         |                                            | $ | -    | 
|Granted in exchange for
 EuroZinc options - Note 5(c)       |  |                                        | 1,461,321 |                                            |   | 5.26 | 
|Exercised during the year
 in exchange for shares purchased |  |                                        | (240,240  | )                                          |   | 5.21 | 
|                                                            |  |                                        |           |                                            |   |      | 
|Outstanding, December 31,
 2006                             |  |                                        | 1,221,081 |                                            |   | 5.27 | 
|Exercised during the year
 in exchange for shares purchased |  |                                        | (226,160  | )                                          |   | 6.76 | 
|Exercised during the year
 in exchange for cash payouts     |  |                                        | (688,201  | )                                          |   | 4.14 | 
|                                                            |  |                                        |           |                                            |   |      | 
|                                                            |  |                                        |           |                                            |   |      | 
|Outstanding, December 31,
 2007                             |  |                                        | 306,720   |                                            | $ | 6.69 | 
|                                                            |  |                                        |           |                                            |   |      | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The stock appreciation
 rights are recorded as a current liability and are adjusted based on the
 Companys closing stock price at the end of each reporting period. The
 liability as at December 31, 2007 was $1.0 million (December 31, 2006 - $9.2
 million). For the year ended December 31, 2007, the Company also recognized a
 $1.4 million recovery as a result of changes in the fair value of the
 outstanding stock appreciation rights.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | All stock appreciation
 rights are fully vested and exercisable.                                                                                                                                                                                                                                                                                                                                                                                    

|                                |  |                                        |         |                                            |   |       | 
|------------------------------- |  | -------------------------------------- | ------- | ------------------------------------------ | - | ----- | 
|Expiry date                     |  | Number
 of stock
 appreciation
 rights |         | Weighted
 average
 exercise
 price
 (CAD$) |  
|                                |  |                                        |         |                                            |  
|June 8, 2010                    |  |                                        | 135,360 |                                            | $ | 2.31  | 
|May 11, 2011                    |  |                                        | 171,360 |                                            |   | 10.15 | 
|                                |  |                                        |         |                                            |   |       | 
|                                |  |                                        |         |                                            |   |       | 
|Outstanding, December 31,
 2007 |  |                                        | 306,720 |                                            | $ | 6.69  | 
|                                |  |                                        |         |                                            |   |       | 

- 38 -

---



|                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to
 consolidated financial statements
 For the years ended December 31, 2007 and 2006(Tabular amounts in thousands
 of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                              

|    |                                    
|--- | -----------------------------------
|19. | SUPPLEMENTAL
 CASH FLOW INFORMATION

|                                                                                           |  |      |           |           |   |           | 
|------------------------------------------------------------------------------------------ |  | ---- | --------- | --------- | - | --------- | 
|                                                                                           |  | 2007 |           | 2006      |  
|                                                                                           |  |      |           |           |  
|                                                                                           |  |      |           | (Amended) |  
|                                                                                           |  |      |           |           |  
|                                                                                           |  |      |           | Note
 2   |  
|Changes
 in non-cash working capital items consist of:                                     |  |      |           |           |   |           | 
|Accounts receivable and other
current assets                                               |  | $    | 1,091     |           | $ | 28,139    | 
|Accounts payable and other
current liabilities                                             |  |      | (19,963   | )         |   | 4,752     | 
|                                                                                           |  |      |           |           |   |           | 
|                                                                                           |  | $    | (18,872   | )         | $ | 32,891    | 
|                                                                                           |  |      |           |           |   |           | 
|Non-cash
 financing and investing activities                                               |  |      |           |           |   |           | 
|Common shares issued for
 the Tenke acquisition - Note 5(a)                                |  | $    | 1,330,820 |           | $ | -         | 
|Stock options issued on
 the Tenke acquisition - Note 5(a)                                 |  |      | 660       |           |   | -         | 
|Common shares issued for
 the EuroZinc acquisition - Note 5(c)                             |  |      | -         |           |   | 1,632,738 | 
|Common shares received
 pursuant to option agreements                                      |  |      | 1,375     |           |   | -         | 
|Stock options and stock
 appreciation rights issued on acquisition of EuroZinc - Note 5(c) |  |      | -         |           |   | 22,722    | 
|Equipment acquired through
 capital lease                                                  |  |      | 3,737     |           |   | -         | 
|                                                                                           |  |      |           |           |   |           | 
|                                                                                           |  | $    | 1,336,592 |           | $ | 1,655,460 | 
|                                                                                           |  |      |           |           |   |           | 
|Operating
 activities included the following cash payments                                 |  |      |           |           |   |           | 
|Interest paid                                                                              |  | $    | 2,098     |           | $ | 3,392     | 
|Income taxes paid                                                                          |  | $    | 82,981    |           | $ | 22,232    | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|20. | RELATED
 PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | For the year ended
 December 31, 2007, the Company paid $0.5 million (2006  $0.2 million) for
 rent, corporate secretarial, administrative services and management fees to a
 company owned by the Chairman of the Company. As at December 31, 2007 and
 2006, the Company had no indebtedness on this account.                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | For the year ended
 December 31, 2007 the Company paid legal fees totaling $0.6 million and $0.5
 million (2006 - $0.1 million and $Nil) to two firms in which a Company
 director and the Corporate Secretary are partners. As at December 31, 2007
 the Company had a $0.2 million balance (2006 -$0.1 million) owing to these
 related parties.                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Related party transactions
 are measured at their exchange amount in these consolidated financial
 statements, which is the amount of consideration received as established and
 agreed upon by the Company and the aforementioned related party.                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|21. | SEGMENTED
 INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company is currently
 engaged in mining, exploration and development of mineral properties,
 primarily in Portugal, Spain, Sweden, Ireland, Russia and the DRC.                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company has six
 reporting segments as identified by the individual mining operations at each
 of its five operating mines as well as the Ozernoe and Tenke Fungurume
 development projects. Segments are operations reviewed by the executive
 management. Each segment is identified based on quantitative factors whereby
 revenues represent 10% or more of the total Company revenues or, in the case
 of Tenke Fungurume and Ozernoe, a significant asset.

- 39 -

---



|                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATIONNotes to
 consolidated financial statements
 For the years ended December 31, 2007 and 2006(Tabular amounts in thousands
 of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                                                                                                                                              

| |                                                
| | -----------------------------------------------
| | Segmented operating
 information is as follows:

|                |  |                    |           |                   |   |                     |   |                       |         |          |   |               |  |   |         |  |   |           |  
|--------------- |  | ------------------ | --------- | ----------------- | - | ------------------- | - | --------------------- | ------- | -------- | - | ------------- |  | - | ------- |  | - | --------- | -
|                |  | December
 31, 2007 |          
|                |  |                    |          
|                |  | Sales              |           | Operating
 profit |   | Impairment
 charges |   | Capital
 expenditures |         | Goodwill |   | Total
 Assets | 
|                |  |                    |           |                   |   |                     |   |                       |         |          |   |               | 
|                |  |                    |           |                   |   |                     |   |                       |         |          |   |               |  |   |         |  |   |           |  
|Zinkgruvan      |  | $                  | 206,067   |                   | $ | 130,429             |   | $                     | -       |          | $ | 18,265        |  | $ | -       |  | $ | 455,618   |  
|Storliden       |  |                    | 56,354    |                   |   | 17,434              |   |                       | -       |          |   | 1,096         |  |   | -       |  |   | 62,330    |  
|Galmoy          |  |                    | 99,925    |                   |   | 20,879              |   |                       | -       |          |   | 6,244         |  |   | -       |  |   | 169,547   |  
|Neves-Corvo (1) |  |                    | 621,088   |                   |   | 334,510             |   |                       | 520,761 |          |   | 142,213       |  |   | 357,955 |  |   | 1,888,150 |  
|Aguablanca (2)  |  |                    | 75,838    |                   |   | (6,295              | ) |                       | 22,340  |          |   | 6,290         |  |   | 145,970 |  |   | 840,175   |  
|Ozernoe         |  |                    | -         |                   |   | -                   |   |                       | -       |          |   | 14,145        |  |   | -       |  |   | 164,933   |  
|Tenke Fungurume |  |                    | -         |                   |   | -                   |   |                       | -       |          |   | -             |  |   | -       |  |   | 1,314,819 |  
|Other           |  |                    | 450       |                   |   | (1,307              | ) |                       | -       |          |   | 1,160         |  |   | -       |  |   | (184,748  | )
|                |  |                    |           |                   |   |                     |   |                       |         |          |   |               |  |   |         |  |   |           |  
|                |  |                    |           |                   |   |                     |   |                       |         |          |   |               |  |   |         |  |   |           |  
|Total           |  | $                  | 1,059,722 |                   | $ | 495,650             |   | $                     | 543,101 |          | $ | 189,413       |  | $ | 503,925 |  | $ | 4,710,824 |  
|                |  |                    |           |                   |   |                     |   |                       |         |          |   |               |  |   |         |  |   |           |  

|                |  |                    |         |                     |   |                     |   |                       |   |                     |   |                     |  |   |         |  |   |           |  
|--------------- |  | ------------------ | ------- | ------------------- | - | ------------------- | - | --------------------- | - | ------------------- | - | ------------------- |  | - | ------- |  | - | --------- | -
|                |  | December
 31, 2006 |        
|                |  |                    |        
|                |  | Sales              |         | Operating
 profit   |   | Impairment
 charges |   | Capital
 expenditures |   | Goodwill            |   | Total
 Assets       | 
|                |  |                    |         |                     |   |                     |   |                       |   |                     |   |                     | 
|                |  |                    |         | (Amended
 - Note 2) |   |                     |   |                       |   | (Amended
 - Note 2) |   | (Amended
 - Note 2) | 
|                |  |                    |         |                     |   |                     |   |                       |   |                     |   |                     |  |   |         |  |   |           |  
|Zinkgruvan      |  | $                  | 197,014 |                     | $ | 138,344             |   | $                     | - |                     | $ | 15,043              |  | $ | -       |  | $ | 437,570   |  
|Storliden       |  |                    | 114,323 |                     |   | 44,755              |   |                       | - |                     |   | 156                 |  |   | -       |  |   | 107,082   |  
|Galmoy          |  |                    | 119,223 |                     |   | 38,847              |   |                       | - |                     |   | 10,794              |  |   | -       |  |   | 175,527   |  
|Neves-Corvo (1) |  |                    | 110,899 |                     |   | 24,135              |   |                       | - |                     |   | 9,550               |  |   | 616,426 |  |   | 2,200,566 |  
|Ozernoe         |  |                    | -       |                     |   | -                   |   |                       | - |                     |   | 115,398             |  |   | -       |  |   | 150,292   |  
|Other           |  |                    | (1,730  | )                   |   | (1,100              | ) |                       | - |                     |   | 408                 |  |   | -       |  |   | (193,810  | )
|                |  |                    |         |                     |   |                     |   |                       |   |                     |   |                     |  |   |         |  |   |           |  
|               
|Total           |  | $                  | 539,729 |                     | $ | 244,981             |   | $                     | - |                     | $ | 151,349             |  | $ | 616,426 |  | $ | 2,877,227 |  
|                |  |                    |         |                     |   |                     |   |                       |   |                     |   |                     |  |   |         |  |   |           |  

| |     |                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Includes the Aljustrel
 development property                                                                                                          
| |     |                                                                                                                                                       
| | (2) | Sales and operating profit
 data for Neves-Corvo and Agaublanca include results since acquistion on
 October 31, 2006 and July 17, 2007, respectively.

- 40 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |                                                 
| | ------------------------------------------------
| | Segmented geographic
 information is as follows:

|         |  |       |           |                     |                    |                     |                    |                                            |           |       |   |                     |  |                                            |         |   |   |   |  |   |           | 
|-------- |  | ----- | --------- | ------------------- | ------------------ | ------------------- | ------------------ | ------------------------------------------ | --------- | ----- | - | ------------------- |  | ------------------------------------------ | ------- | - | - | - |  | - | --------- | 
|         |  |       |           |                     | December
 31, 2007 |                     | December
 31, 2006 |                                           
|         |  |       |           |                    
|         |  | Sales |           | Impairment
 charges |                    | Equity
 investments |                    | Mineral
 properties,
 plant and
 equipment |           | Sales |   | Impairment
 charges |  | Mineral
 properties,
 plant and
 equipment |        
|        
|         |  |       |           |                     |                    |                     |                    |                                            |           |       |   |                     |  | (Amended
 - 
 Note 2)                      |        
|         |  |       |           |                     |                    |                     |                    |                                            |           |       |   |                     |  |                                            |         |   |   |   |  |   |           | 
|Sweden   |  | $     | 262,421   |                     | $                  | -                   |                    | $                                          | -         |       | $ | 168,966             |  | $                                          | 311,337 |   | $ | - |  | $ | 163,392   | 
|Ireland  |  |       | 99,925    |                     |                    | -                   |                    |                                            | -         |       |   | 107,001             |  |                                            | 119,223 |   |   | - |  |   | 111,788   | 
|Portugal |  |       | 621,088   |                     |                    | 520,761             |                    |                                            | -         |       |   | 1,242,010           |  |                                            | 110,899 |   |   | - |  |   | 1,230,326 | 
|Spain    |  |       | 75,838    |                     |                    | 22,340              |                    |                                            | -         |       |   | 556,786             |  |                                            | -       |   |   | - |  |   | -         | 
|Russia   |  |       | -         |                     |                    | -                   |                    |                                            | -         |       |   | 157,219             |  |                                            | -       |   |   | - |  |   | 150,292   | 
|DRC      |  |       | -         |                     |                    | -                   |                    |                                            | 1,314,814 |       |   | -                   |  |                                            | -       |   |   | - |  |   | -         | 
|Other    |  |       | 450       |                     |                    | -                   |                    |                                            | -         |       |   | 1,048               |  |                                            | (1,730  | ) |   | - |  |   | 792       | 
|         |  |       |           |                     |                    |                     |                    |                                            |           |       |   |                     |  |                                            |         |   |   |   |  |   |           | 
|Total    |  | $     | 1,059,722 |                     | $                  | 543,101             |                    | $                                          | 1,314,814 |       | $ | 2,233,030           |  | $                                          | 539,729 |   | $ | - |  | $ | 1,656,590 | 
|         |  |       |           |                     |                    |                     |                    |                                            |           |       |   |                     |  |                                            |         |   |   |   |  |   |           | 

|    |                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|22. | COMMITMENTS
 AND CONTINGENCIES                                                                                                                                            
|    |                                                                                                                                                                           
|    | The Companys wholly-owned
 subsidiary, Somincor, which was acquired as part of the EuroZinc acquisition
 on October 31, 2006, has entered into the following commitments:

| |     |                                                                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Royalty payment under a
 fifty year concession agreement to pay the greater of 10% of net income or
 0.75% of mine-gate production revenue. Royalty cost for the year ended 2007
 was $24.5 million (two months ended December 31, 2006 - $0.9 million;
| |     |                                                                                                                                                                                                                                                        
| | (b) | Port facilities rental
 payable to the port authority of Setubal and Sesimbra, Portugal for a
 thirty-year period beginning in 1996 at an annual cost of $0.2 million per
 year;                                                                       
| |     |                                                                                                                                                                                                                                                        
| | (c) | Use of the railways under
 a railway transport agreement for ten years expiring in November 2010 at an
 estimated annual cost of $4.5 million per year;                                                                                                
| |     |                                                                                                                                                                                                                                                        
| | (d) | Setubal bulk terminal
 land and use license commitments totaling approximately $0.7 million per year
 for the duration of the life of the terminal facilities; and                                                                                     
| |     |                                                                                                                                                                                                                                                        
| | (e) | Computer equipment leases
 for the next two years in the amount of approximately $0.9 million per year.                                                                                                                                                

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A major Swedish bank
 issued a bank guarantee to the Swedish authorities in the amount of $12.4
 million (SEK80 million) relating to the future reclamation costs at the
 Zinkgruvan mine. The Company has agreed to indemnify the Swedish bank for
 this guarantee.                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | As disclosed in note 14,
 under agreements with Silverstone and Silver Wheaton, the Company has agreed
 to deliver all future production of silver contained in concentrate produced
 from certain of its mines. The Silver Wheaton agreement includes a guaranteed
 minimum delivery of 40 million ounces of silver over the remaining 22-year
 term. If at the end of the contract the Company has not met its minimum
 obligation, it must pay $1.00 to Silver Wheaton for each ounce of silver not
 delivered.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | In August 2005, the
 regional Government of Asturias rejected Rio Narceas application for change
 in land use required to develop the Salave gold deposit. After a review of
 its legal options, former management of Rio Narcea commenced legal
 applications in local courts seeking reversal of the decision and, or
 monetary compensation for damages. On the acquisition of Rio Narcea, the                                                                                                              

- 41 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Company fair valued the
 Salave property at $50 million, which is included in exploration properties
 as presented in Note 7. The outcome and timing of any legal action on this
 matter is presently uncertain.                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Storliden mine is
 being operated pursuant to an operating agreement between Boliden Mineral AB
 (Boliden) and the Company, whereby Boliden is the main contractor of the
 mine. Ore is processed at a Boliden mill and after all operating costs are
 paid, the remaining cash flow is shared two-thirds by the Company and
 one-third by Boliden. Boliden charges an operators fee to the Storliden mine
 at cost plus 15%. There is also a 1.5% annual royalty based on the Net
 Smelter Revenue.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Company is a party to
 certain operating leases and contracts relating to office rent, office
 equipment and car leases. Future minimum payments under these agreements at
 December 31, 2007 are as follows:                                                                                                                                                                                                                                                                                          

|      |  |   |       | 
|----- |  | - | ----- | 
|2008  |  | $ | 4,520 | 
|2009  |  |   | 2,192 | 
|2010  |  |   | 992   | 
|2011  |  |   | 843   | 
|2012  |  |   | 582   | 
|      |  |  
|Total |  | $ | 9,129 | 
|      |  |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|23. | DIFFERENCES
 BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The consolidated financial
 statements have been prepared in accordance with Canadian GAAP, which differ
 in certain material respects from those principles that the Company would
 have followed had its consolidated financial statements been prepared in
 accordance with United States US GAAP, including practices prescribed by the
 United States Securities and Exchange Commission (SEC). Set out below is a
 description of these material differences and the effect on these
 consolidated financial statements.

- 42 -

---



|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

|                                                                    |  |      |           |           |   |           |  
|------------------------------------------------------------------- |  | ---- | --------- | --------- | - | --------- | -
|Consolidated
 Balance Sheets                                        |  | 2007 |           | 2006      |  
|                                                                   
|                                                                    |  |      |           | (Amended) |  
|                                                                    |  |      |           |           |  
|                                                                    |  |      |           | Note
 2   |  
|                                                                   
|Total Assets under Canadian GAAP                                    |  | $    | 4,710,824 |           | $ | 2,877,227 |  
|Investments (a)                                                     |  |      | -         |           |   | 4,847     |  
|Equity investments (c), (e) and (f)                                 |  |      | 12,004    |           |   | -         |  
|Mineral properties (c)                                              |  |      | (10,034   | )         |   | (3,107    | )
|Future income taxes assets (e) and (f)                              |  |      | 194       |           |   | -         |  
|                                                                    |  |      |           |           |   |           |  
|                                                                   
|Total Assets under US GAAP                                          |  | $    | 4,712,988 |           | $ | 2,878,967 |  
|                                                                    |  |      |           |           |   |           |  
|                                                                    |  |      |           |           |   |           |  
|Total Liabilities under Canadian GAAP                               |  | $    | 1,169,018 |           | $ | 748,860   |  
|Future income taxes (c)                                             |  |      | 1,546     |           |   | 1,386     |  
|                                                                    |  |      |           |           |   |           |  
|                                                                    |  |      |           |           |   |           |  
|Total Liabilities under US GAAP                                     |  |      | 1,170,564 |           |   | 750,246   |  
|                                                                    |  |      |           |           |   |           |  
|                                                                    |  |      |           |           |   |           |  
|Shareholders Equity under Canadian GAAP                            |  |      | 3,541,806 |           |   | 2,128,367 |  
|Unrealized gain on available for sale investments,
net of taxes (a) |  |      | -         |           |   | 3,193     |  
|Future income tax (expense) recovery (e), (f) and
(g)               |  |      | (1,620    | )         |   | -         |  
|Interest expense (e)                                                |  |      | 13,438    |           |   | -         |  
|Equity loss on investments (c), (e) and
(f)                         |  |      | (1,434    | )         |   | -         |  
|Deferred exploration, net of taxes (c)                              |  |      | (9,766    | )         |   | (2,839    | )
|                                                                    |  |      |           |           |   |           |  
|                                                                    |  |      |           |           |   |           |  
|Shareholders Equity under US GAAP                                  |  |      | 3,542,424 |           |   | 2,128,721 |  
|                                                                    |  |      |           |           |   |           |  
|                                                                    |  |      |           |           |   |           |  
|Total Liabilities and Shareholders Equity under US
GAAP            |  | $    | 4,712,988 |           | $ | 2,878,967 |  
|                                                                    |  |      |           |           |   |           |  

- 43 -

---



|                                                                                                          
|----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                 
|Notes to consolidated
 financial statements                                                               
|For the years ended
 December 31, 2007 and 2006                                                           
|(Tabular amounts in thousands
 of US dollars, narrative amounts in US dollars, unless otherwise indicated)
|                                                                                                          

|                                                                     |  |      |             |                     |   |                     |  
|-------------------------------------------------------------------- |  | ---- | ----------- | ------------------- | - | ------------------- | -
|Consolidated
 Statements of Operations                               |  | 2007 |             | 2006                |  
|                                                                    
|                                                                     |  |      |             | (Amended
 - Note 2) |  
|                                                                    
|Net earnings (loss) under Canadian GAAP                              |  | $    | (154,157    | )                   | $ | 151,548             |  
|Equity investment losses (f)                                         |  |      | (1,434      | )                   |   | -                   |  
|Interest (e)                                                         |  |      | 13,438      |                     |   | -                   |  
|Deferred exploration (c)                                             |  |      | (6,927      | )                   |   | (3,107              | )
|Future income taxes (c), (e), (f) and (g)                            |  |      | (1,620      | )                   |   | 268                 |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Net earnings (loss) under US GAAP                                    |  | $    | (150,700    | )                   | $ | 148,709             |  
|                                                                     |  |      |             |                     |   |                     |  
|Basic earnings (loss) per share, US GAAP                             |  | $    | (0.45       | )                   | $ | 1.00                |  
|                                                                    
|Diluted earnings (loss) per share, US GAAP                           |  | $    | (0.45       | )                   | $ | 0.98                |  
|                                                                    
|Statement of Comprehensive Income                                    |  |      |             |                     |   |                     |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Net earnings (loss) under US GAAP                                    |  | $    | (150,700    | )                   | $ | 148,709             |  
|                                                                    
|Other comprehensive income                                           |  |      |             |                     |   |                     |  
|Changes in fair value of available-for-sale
securities, net of taxes |  |      | (23,626     | )                   |   | 3,193               |  
|Foreign currency translation adjustments
(b)                         |  |      | 239,330     |                     |   | 77,803              |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Comprehensive income under US GAAP                                   |  | $    | 65,004      |                     | $ | 229,705             |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                     |  |      |             |                     |   |                     |  
|Consolidated Statements of Cash Flows                                |  |      | 2007        |                     |   | 2006                |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                     |  |      |             |                     |   | (Amended
 - Note 2) |  
|                                                                    
|Operating activities                                                 |  |      |             |                     |   |                     |  
|Operating activities under Canadian GAAP                             |  | $    | 425,702     |                     | $ | 247,221             |  
|Interest (e)                                                         |  |      | 13,438      |                     |   | -                   |  
|Exploration expense (c)                                              |  |      | (6,927      | )                   |   | (3,107              | )
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Operating activities under US GAAP                                   |  |      | 432,213     |                     |   | 244,114             |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Financing activities                                                 |  |      |             |                     |   |                     |  
|Financing activities under Canadian and US
GAAP                      |  |      | 34,594      |                     |   | 3,884               |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Investing activities                                                 |  |      |             |                     |   |                     |  
|Investing activities under Canadian GAAP                             |  |      | (738,017    | )                   |   | 63,838              |  
|Interest (e)                                                         |  |      | (13,438     | )                   |   |                     |  
|Deferred exploration (c)                                             |  |      | 6,927       |                     |   | 3,107               |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Investing
 activities under US GAAP                                  |  |      | (744,528    | )                   |   | 66,945              |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Effect of foreign exchange on cash balances                          |  |      | 8,758       |                     |   | 12,818              |  
|                                                                    
|Increase (decrease) in cash and cash equivalents under US
GAAP       |  |      | (268,963    | )                   |   | 327,761             |  
|Cash and cash equivalents, beginning of year under US GAAP           |  |      | 402,170     |                     |   | 74,409              |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Cash and cash equivalents, end of year under US GAAP                 |  | $    | 133,207     |                     | $ | 402,170             |  
|                                                                     |  |      |             |                     |   |                     |  
|                                                                    
|Basic Shares outstanding                                             |  |      | 338,643,242 |                     |   | 149,439,546         |  

| |     |                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | In 2006, the Companys
 investments in public companies were classified as available-for-sale
 investments under FASB Statement No. 115, Accounting
 for Certain Investments in Debt and Equity Securities. Under US
 GAAP, these investments are recorded at fair value on the balance sheet with
 changes in the fair value recorded as other comprehensive income, net of
 applicable

- 44 -

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|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | income taxes. The unrealized
 $3.2 million gain, net of taxes, relates to investments in shares of various
 public companies valued at $30.7 million. Effective January 1, 2007, the
 Company adopted new CICA accounting standards that comply with US GAAP. The
 unrealized gain on available-for-sale securities as at December 31, 2006 was
 $3.2 million. This amount is included in the aggregate amount of $55.7
 million reported as a transition adjustment during the current year to the
 opening balance of Accumulated Other Comprehensive Income in the Consolidated
 Statements of Changes in Shareholders Equity.                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (b) | Under US GAAP, cumulative
 translation adjustments are included as a component of other comprehensive
 income. Until, January 1, 2007, under Canadian GAAP, cumulative translation
 adjustments were presented as a separate line item within shareholders
 equity. Effective January 1, 2007, the Company adopted new CICA accounting
 standards that comply with US GAAP.                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (c) | Under US GAAP and
 practices prescribed by the SEC, exploration expenditures relating to mineral
 properties, for which commercial feasibility has not yet been established
 through a formal feasibility study, are expensed as incurred. In addition,
 land use costs are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | Under Canadian GAAP, exploration
 expenditures are capitalized once a determination has been made that a
 property has potential economically recoverable resources and there is a
 reasonable expectation that costs can be recovered by future exploitation or
 sale of the property. These costs may be deferred and amortized over the
 estimated life of the property following commencement of commercial
 production, or written-off if the property is sold, allowed to lapse,
 abandoned or impaired. Exploration and evaluation expenditures made prior to
 a determination that a property has economically recoverable resources are
 written off as incurred.                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | During the year ended
 December 31, 2007, under Canadian GAAP, the Company deferred mineral property
 expenditures totaling $6.9 million (2006  $3.2 million) on the Ozernoe
 project, net of taxes, which would have been expensed under US GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (d) | Under US GAAP, investments
 in incorporated joint ventures are accounted for using the equity method. In
 accordance with a concession granted by the SEC, foreign private issuers may
 use the proportionate consolidation method for joint venture accounting if
 their financial statements are presented under Canadian GAAP and contain the
 disclosure outlined in notes 3(a) and 8(c).                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (e) | Under US GAAP, interest
 cost must be capitalized as part of the historical cost of acquiring assets
 that require a period of time to get them ready for intended use or while an
 equity investee has not commenced its planned operations if the effect is
 material. Under Canadian GAAP, interest cost capitalization during the
 construction of capital assets or while an equity investee has not commenced
 its planned operations is acceptable but not mandatory. Under Canadian GAAP,
 the Company has not capitalized any interest cost.                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | Under US GAAP, during the
 year ended December 31, 2007, the Company would have capitalized interest of
 $13.4 million equity investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (f) | Under US GAAP, if an
 investor purchases stock in an investee and is eventually able to exercise
 significant influence over the investee, the investor is required to
 retroactively apply equity accounting from the date any shares were initially
 acquired. Under Canadian GAAP, the investment is accounted for on the equity
 basis only from the date on which the investor is able to exercise
 significant influence. Six months after making its initial investment in SRL
 (Note 8(b)(ii)) management determined that following changes in SRL
 management and the board, the Company was able to exercise significant
 influence over SRL. Under Canadian GAAP, the Company has

- 45 -

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|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | recognized an equity loss
 of $0.1 million since July 17, 2008 but under US GAAP, equity loss would have
 been $0.3 million, net of taxes, since the initial acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (g) | Under US GAAP, cash flow
 from operating activities must be presented as the amount calculated after
 taking into effect the changes in non-cash working capital items. The
 disclosure of a subtotal referring to the amount of cash flow from operating
 activities before changes in working capital items is not permitted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (h) | In July 2006,the Financial
 Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting
 for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the
 accounting for income taxes by prescribing the minimum recognition threshold
 a tax position is required to meet before being recognized in the financial
 statements. FIN 48 also provides guidance on derecognition, measurement,
 classification, interest and penalties, accounting in interim periods,
 disclosure and transition. In addition, FIN 48 clearly scopes out income
 taxes from FASB Statement No. 5, Accounting
 for Contingencies. FIN 48 applies to all tax positions related to
 income taxes subject to FASB Statement No. 109, Accounting for Income Taxes. This includes tax positions
 considered to be routine as well as those with a high degree of
 uncertainty.                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | Under US GAAP, effective
 January 1, 2007, the Company adopted the provisions of FIN 48 that prescribe
 a recognition threshold and measurement attribute for the financial statement
 recognition and measurement of a tax position taken or expected to be taken
 in a tax return. The interpretation requires that the Company recognize the
 impact of a tax position in the financial statements if that position is more
 likely than not of being sustained on audit, based on the technical merits of
 the position. FIN 48 also provides guidance on derecognition, classification,
 interest and penalties, accounting in interim periods and disclosure. In
 accordance with the provisions of FIN 48, any cumulative effect resulting
 from the change in accounting principle is to be recorded as an adjustment to
 the opening balance of deficit. The adoption of FIN 48 did not impact the
 Companys consolidated financial position or results of operations.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (i) | In September 2006, the
 FASB issued FSP No. AUG AIR-1, Accounting for Planned Major Maintenance
 Activities. The FSP permits companies to account for planned major maintenance
 activities using; the direct expensing method, the built-in overhaul method
 or the deferral method. The FSP will be effective for the Company fiscal
 periods beginning after December 1, 2007 and is to be adopted on a
 retrospective basis. The Company believes that the adoption of this standard
 will have no material difference.                                                                                                                                                                                                                                                                                                                                                                                                                                                   

- 46 -

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|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|LUNDIN MINING CORPORATION                                                                                  
|Notes to consolidated
 financial statements                                                                
|For the years ended
 December 31, 2007 and 2006                                                            
|(Tabular amounts in
 thousands of US dollars, narrative amounts in US dollars, unless otherwise
 indicated)
|                                                                                                           

(j)
Recent United States
 accounting pronouncements:(i)
In December 2007, the FASB
 issued FASB Statements No. 141(R), Business
 Combinations and No. 160, Non-controlling Interests in Consolidated Financial
 Statements. SFAS 141(R) and 160 provide standards with respect to
 improving, simplifying and converging the prevailing FASB accounting and
 reporting standards for business combinations and non-controlling interests
 in consolidated financial statements with International Accounting Standards
 Board (IASB) standards for fiscal years beginning after December 15, 2008.FASB 141 (R) requires an
 acquiring entity in a business combination to recognize all (and only) the
 assets acquired and liabilities assumed in the transaction; establishes the
 acquisition-date fair value as the measurement objective for all assets
 acquired and liabilities assumed; and requires the acquirer to disclose to
 investors and other users all of the information they need to evaluate and
 understand the nature and financial effect of the business combination. FASB
 160 requires all entities to report non-controlling (minority) interests in
 subsidiaries in the same way - as equity in the consolidated financial
 statements. The Company is presently evaluating the impact the application of
 this standard will have on the Companys consolidated financial statements.(ii)
In September 2006, the
 FASB issued FASB Statement No. 157, Fair Value Measurements(SFAS 157). SFAS 157 provides enhanced
 guidance for using fair value to measure assets and liabilities and provides
 expanded disclosure about the extent to which companies measure their assets
 and liabilities at fair value, the information used to measure fair value,
 and the effect of fair value measurements on earnings. SFAS 157 applies
 whenever other standards require (or permit) assets or liabilities to be
 measured at fair value; however, it does not expand the use of fair value in
 any new circumstances. SFAS 157 is effective for fiscal years beginning after
 November 15, 2007, and interim periods within those fiscal years, and early
 adoption is permitted. The Company is presently evaluating the impact of this
 standard on the Companys consolidated financial statements.(iii)
In February 2007, the FASB
 issued Statement No. 159 (FAS 159), The
 Fair Value Option for Financial Assets and Financial Liabilities.This
 statement expands the standards under FAS 157, Fair Value Measurement, to provide entities the one-time
 election (Fair Value Option or FVO) to measure financial instruments and
 certain other items at fair value. FAS 159 also amends Statement No. 115 (FAS
 115) to require the presentation of investments in available-for-sale
 securities and trading securities:(a)
in the aggregate of those
 fair value and non-fair-value amounts in the same line item and
 parenthetically disclose the amount of fair value included in the aggregate
 amount; or(b)
in two separate line items
 to display the fair value and non-fair-value carrying amounts.FAS 159 is effective for
 financial statements issued for fiscal years beginning after November 15,
 2007. At the effective date, an entity may elect the fair value option for
 eligible items that exist at that date. The effect of the re-measurement is
 reported as a cumulative-effect adjustment to opening retained earnings


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