Following the acquisition, Lundin Mining has initiated various drill programs in order to verify old data and to upgrade the resource model. During 2007 work continued to delineate the deposit and metallurgical testing significantly advanced during the fourth quarter 2007 at both Russian and offshore laboratories. In addition to ore reserve drilling, ground water supply wells were drilled to investigate potable and industrial water sources. Further advancements during the year included completion of a 350 person construction camp at the site, local roads were improved, and a bridge across a local river was installed to support both project access and improved year round transportation for the local population in the Ozernoe area. Headed by a Social Committee which included representatives of the local population, the local major and regional authorities, a number of social programs were conducted through the year in the areas of medical support, education and training.

International independent consultants were retained to conduct the feasibility study and a specialized mining consultant was retained for independent assessment of mineral resources and reserves, mine planning and plant throughput optimization studies. In addition, the environmental and social impact assessment study started in last quarter of 2007 headed by an internationally recognized UK based consultant. Project activities are being conducted to facilitate the objective of full production at Ozernoe in 2012.

A number of challenging issues are being addressed on the project including renegotiation of certain milestones contained within the original mineral license. These milestones need to be extended and while there is no indication that such extensions will not be given, there is no guarantee that these extensions will be granted. New "strategic sector investment policy" affecting natural resource development in Russia has now passed through the 2nd reading of 3 stages. This new policy has potentially far reaching affects on mining project developments for deposits of the scale of Ozernoe. The Company is following this issue closely. Partner discussions are ongoing related to the needed license revisions, shareholders terms, project organization, study and project funding and other important project issues. The Company has initiated a review of whether evolving investment terms, license amendment progress, and local issues meet the Company's criteria for ongoing involvement.

Quarterly Operations Update