January 31, 2008 / 4:21 PM / in 10 years

UPDATE 1-Lundin to restate profit lower, shares sink

(Adds details, share price. In U.S. dollars)

TORONTO, Jan 31 (Reuters) - Lundin Mining (LUN.TO) said on Thursday it will restate two years of results and reduce past earnings by at least $55 million due to a tax mix-up at its Portuguese operations.

The company’s shares sank more than 6 percent after the news.

The Canadian base metals miner, which operates mines in Portugal and across Europe, said its operating subsidiary, Somincor, had misinterpreted tax legislation and under-declared tax contributions.

Lundin will restate and refile financial statements for 2006 and 2007 to reflect the tax underpayment and to reflect changes in the accounting of its purchase of EuroZinc in late 2006.

“The company’s financial statements, as previously published and filed in respect of the periods noted above, should no longer be relied upon,” Lundin said in a statement.

The company said its 2006 earnings will likely not be significantly affected, but that restatement of the first nine months of 2007 should result in a reduction in net earnings of about $55 million.

This will include an increase in current tax expenses of about $16 million, and a reversal of future income tax recovery of about $46 million.

It said it expects to file the restated results before it issues its year-end results, which are expected to be released in about a month.

Lundin’s shares were down 48 Canadian cents at C$7.37 on the Toronto Stock Exchange.

Earlier this month, Lundin announced a head office shake-up. Chief Executive Karl-Axel Waplan resigned to pursue other interests, while the company said it would shift its corporate headquarters to Vancouver, British Columbia, from Geneva, Switzerland.

Waplan was replaced by Phil Wright.

Company Chairman Lukas Lundin told Reuters recently that Waplan had quit because he did not want to move to Vancouver.

$1=$1.00 Canadian Reporting by Cameron French, additional reporting by Scott Anderson; Editing by Peter Galloway

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