FNX Earns $12.5 Million in Second Quarter

TORONTO, ONTARIO--(Marketwire - Aug. 14, 2009) - FNX Mining Company Inc. (TSX:FNX) ("FNX" or the "Company") reports financial and operational results for the quarter ending June 30, 2009 for its Sudbury Mining Operations and its DMC Mining Services business ("DMC").

Consolidated net earnings for the second quarter were $12.5 million ($0.14 per share) on revenues of $61.9 million, compared to net earnings of $11.3 million ($0.13 per share) on $112.2 million in revenues for the same period of 2008. For the first six months of 2009, the Company had a net loss of $13.7 million (($0.16) per share) on revenues of $110.8 million, compared to net earnings of $35.4 million ($0.42 per share) on revenues of $252.9 million for the first six months of 2008. Excluding the first quarter's Gold Wheaton Gold Corp. ("GLW") dilution loss, the Company had adjusted earnings of $17.5 million ($0.20 per share) for the first six months of 2009.

Cash and cash equivalents and working capital as at June 30, 2009 improved to $131.1 million and $137.7 million respectively, compared to $129.6 million and $130.1 million respectively as at December 31, 2008 and $114.6 million and $137.2 million respectively, as at March 31, 2009. FNX continues to have zero debt.

Terry MacGibbon, Chairman and CEO of FNX stated that, "The benefits of our earlier prudent and decisive actions to optimize our 2009 operational plans and the implementation of strict controls on capital, operating and corporate expenditures to preserve cash are evident in our positive second quarter results. Not only did the Company generate positive earnings, but we also strengthened our balance sheet with increases in our cash balance and working capital, while continuing to aggressively develop our most valuable asset, the Levack Mine's LFD Deposit."

"However, the Company continues to face challenges at its Sudbury operations with the extended shutdown of its primary custom processor's Sudbury operations due to their ongoing labour disruption. The Company suspended all ore shipments to its primary custom processor at the end of May and to the start of August has stockpiled on surface over 120,000 tons of Cu-Ni-precious metal ore from its Podolsky and McCreedy West Mines."

He also stated, "The Company is pleased to announce that it has concluded an agreement with Xstrata Nickel to process at their Strathcona Mill up to 150,000 tonnes of the Company's stockpiled ore. The terms of the Xstrata Nickel processing agreement will remain confidential. If the Company's primary custom processor's facilities continue to be shut down for an extended period, the Company will continue to mine as planned and to stockpile ore through at least the rest of 2009. The stockpiled ore will be processed at its primary custom processor's facilities when their operations resume or possibly at the Strathcona Mill, if the Xstrata Nickel processing agreement is extended. The Company has sufficient working capital to continue to mine and stockpile its production into 2010, if required."

Mr. MacGibbon added, "We will continue to monitor the Company's situation in light of economic challenges and changes in the global commodity markets and in the Sudbury mining camp during the balance of 2009. I am confident that, with its new processing agreement with Xstrata Nickel, a strong balance sheet and streamlined operations, the Company will not only continue to prosper with improvements in global markets, but to grow and take advantage of business opportunities that may emerge."

/T/

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Table 1 -
Financial and Operating Highlights Q2 2009 Q2 2008 YTD 2009 YTD 2008
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Consolidated
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Revenue 61,869 112,200 110,822 252,916
Net Earnings (Loss) (C$000) 12,453 11,341 (13,698) 35,404
Basic Earnings (Loss) per Share (C$) $0.14 $0.13 ($0.16) $0.42
Diluted Earnings (Loss) per Share (C$) $0.14 $0.13 ($0.16) $0.42
Cash and Cash Equivalents (C$000) 131,076 39,472 131,076 39,472
Cash Flow from Operating Activities
(C$000) 18,076 13,531 15,403 69,327
Cash Flow per Share (C$) $0.21 $0.16 $0.18 $0.82

Adjusted EBITDA (C$000) 17,765 31,645 30,150 79,926

Mining Operations
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Total Revenue (C$000) 50,196 75,192 85,681 166,515
Cash Operating Costs (C$000) 28,533 51,066 51,439 96,298
Cash Operating Margin (C$000) 21,663 24,126 34,242 70,217
Depreciation and Amortization (C$000) 1,734 12,520 4,766 21,113
Operating Margin (C$000) 19,929 11,606 29,476 49,104
Net Earnings (Loss) (C$000) 13,723 12,957 (11,465) 37,728
Cash Flow From Operating Activities
(C$000) 10,609 10,914 11,962 66,067

Total Ore Sold (tons) 192,023 352,765 297,067 637,664
Nickel Ore Sold (tons) 29,615 220,579 34,030 419,633
Grade of Nickel Ore Sold (%Ni) 2.0 1.1 2.0 1.2
Payable Metal Sold - Nickel (000 lbs) 1,545 3,491 2,722 6,983
Copper Ore Sold (tons) 162,408 132,186 263,037 218,031
Grade of Copper Ore Sold (%Cu) 2.5 2.9 3.8 3.4
Payable Metal Sold - Copper (000 lbs) 7,857 7,262 17,575 14,154

Payable Metal Sold - Total Precious
Metals (oz) 16,532 11,582 23,947 18,854

Minesite Revenue per Ton Sold (C$) 274 213 306 261
Cash Operating Costs per Ton Sold (C$) 148 145 173 151
Minesite Cash Operating Margin per
Ton Sold (C$) 126 68 133 110

Realized Nickel Price (US$/lb) 7.55 9.21 6.45 11.82
Realized Copper Price (US$/lb) 2.51 3.70 2.10 3.77
Exchange Rate (C$ /US$) 1.17 1.01 1.21 1.01

DMC Mining Services
-------------------
Total Revenue (C$000) 11,673 37,008 25,141 86,401
Cash Operating Costs (C$000) 11,269 35,215 24,542 82,199
Cash Operating Margin (C$000) 404 1,793 599 4,202
Net Earnings (Loss) (C$000) (1,270) (1,616) (2,233) (2,324)
Cash Flow from Operating Activities
(C$000) 7,467 2,617 3,441 3,260
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Certain of the above items are considered to be non-GAAP performance
measures (see below)

/T/

Cash flow from operating activities and adjusted EBITDA for this quarter were $18.1 million and $17.8 million respectively, compared to $13.5 million and $31.6 million respectively in the same period of 2008. For the first half of 2009, cash flow and adjusted EBITDA were $15.4 million and $30.2 million respectfully, compared to $69.3 million and $79.9 million respectfully in the first six months of 2008. The net change in cash balance as a result of operating, financing and investing activities was a net inflow of $16.5 million during the 2009 second quarter and a net inflow of $1.5 million year to date, compared to $10.3 million and $4.3 million respectively in 2008.

Mining Operations

Production from the Sudbury Mining Operations during second quarter generated revenues of $50.2 million and $85.7 million year to date 2009, compared to $75.2 million and $166.5 million respectively for the same periods of 2008. Sudbury Mining Operations shipped a total of 192,000 tons of ore during the second quarter bringing total ore shipped for the first half of 2009 to 297,000 tons. This compares to 353,000 tons and 638,000 tons for the second quarter and first half of 2008, respectively. The second quarter production consisted of 162,000 tons of footwall ore from PM and Podolsky and 3,249 tons of transition nickel-copper ore from the up-dip extension of the LFD (formerly Rob's Deposit) operational earning during second quarter contained a provisional price adjustment of $13.6 million.

Tables 2 and 3 summarize second quarter and year to date production statistics from the Podolsky operations and Levack Complex, respectively.

/T/

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Table 2 - Production and Sales Summary Three months ended Six months ended
June 30 June 30
Podolsky Mine 2009 2008 2009 2008
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Copper Ore Sold (tons) 64,029 54,895 156,378 79,007
Grade of Copper Ore Sold (%Cu) 4.5 5.4 5.6 7.3

Payable Metal Sold
Nickel (000s lbs) 306 377 1,105 718
Copper (000s lbs) 5,428 4,845 14,780 9,480
TPM (ozs) 7,751 5,349 11,674 8,075

Metal Sales and Costs
Net Minesite Revenue ($/ton of ore sold) 431 519 372 687
Cash Cost ($/ton of ore sold) 175 212 198 257
Minesite Cash Operating Margin ($/ton of
ore sold) 256 307 174 430
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Table 3 - Production and Sales Summary Three months ended Six months ended
June 30 June 30
Levack Complex 2009 2008 2009 2008
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Nickel Ore Sold (tons) 29,615 220,579 34,030 419,633
Copper Ore Sold (tons) 98,379 77,291 106,659 139,024
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Total Ore Sold 127,994 297,870 140,689 558,657
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Grade of Nickel Ore (%Ni) 2.0 1.1 2.0 1.2
Grade of Copper Ore (%Cu) 1.3 1.2 1.3 1.2

Payable Metal Sold
Nickel (000s lbs) 1,239 3,114 1,617 6,265
Copper (000s lbs) 2,429 2,417 2,795 4,674
TPM (ozs) 8,781 6,233 12,273 10,779

Metal Sales and Costs
Net Minesite Revenue ($/ton of ore sold) 195 157 233 201
Cash Cost ($/ton of ore sold) 135 132 145 136
Minesite Cash Operating Margin ($/ton of
ore sold) 60 25 88 65
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/T/

Total payable metals for the second quarter consisted of 1.5 million pounds of nickel, 7.9 million pounds of copper, 3,195 ounces of gold, 5,926 ounces of platinum and 7,411 ounces of palladium. For the first half of 2009, payable metals totaled 2.7 million pounds of nickel, 17.6 million pounds of copper, 3,532 ounces of gold, 8,705 ounces of platinum and 11,710 ounces of palladium. This compares to payable metals in the second quarter of 2008 of 3.5 million pounds of nickel, 7.3 million pounds of copper and 11,582 ounces of TPM, and 7.0 million pounds, 14.2 million pounds and 18,854 ounces respectively in the first half of 2008.

The average realized prices for metals in this quarter were US$7.55 per pound for nickel, US$2.51 per pound for copper, US$931 per ounce for gold, US$1,292 per ounce for platinum and US$279 per ounce for a palladium, compared to US$9.21, US$3.70, US$862, US$2,041, and US$453 respectively in the same period in 2008. Year to date the average realized metal prices were US$6.45 per pound for nickel, US$2.10 per pound for copper, US$1,000 per ounce for gold, US$1,481 per ounce for platinum and US$279 per ounce for palladium, compared to US$11.82, US$3.77, US$911, US$2,308, and US$524 respectively for the first half of 2008.

The average minesite revenue per ton during this reporting quarter was $274 while the average cash operating cost per ton was $148, leaving an average minesite cash operating margin per ton of $126, compared to $213, $145 and $68 in the same period of 2008. For the first half of 2009, the average minesite cash operating margin per ton was $133, compared to $110 in the first half of 2008.

Shipping of ore from the company's Sudbury Mining Operations was suspended at the end of May, when the Company's third party processor implemented an extended shutdown, which subsequently became a labour disruption. FNX has continued to produce ore according to our 2009 production plan and is stockpiling ore on surface sites for future shipment.

This reporting quarter, the Podolsky Mine shipped 64,000 tons (see Table 2) of footwall ore with an average copper grade of 4.5%, compared to 55,000 tons at an average grade of 5.4% copper in the same period last year. Year to date shipped production from Podolsky totaled 156,000 tons at an average copper grade of 5.6%, compared to 79,000 tons grading 7.3% copper in the six months to June 30, 2008. These production numbers refer only to shipped ore and exclude ore in stockpile reported as inventory.

Production during the second quarter from the Levack Complex (see Table 3) consisted of footwall ore from the PM Deposit, limited contact nickel ore from the Inter Main and transitional nickel-copper ore from the up-dip extension of the LFD. Total ore shipped from the Levack Complex in this quarter was 128,000 tons producing 1.2 million pounds of payable nickel, 2.4 million pounds of payable copper and 8,781 ounces of TPM, compared to 298,000 tons yielding 3.1 million pounds of payable nickel, 2.4 million pounds of payable copper and 6,233 ounces of TPM shipped in the same period of 2008. Year to date the Levack Complex shipped 141,000 tons, compared to 559,000 tons in the first half of 2008. Ore stockpiled and unshipped since the end of May is excluded from these totals and included in the inventories.

The second quarter safety performance for the Sudbury Mining Operations included one Lost Time Injury and five Medical Aid Injuries, compared to three Lost Time Injuries in the 2008 second quarter. The Lost Time Injury Frequency Rate for Sudbury was 0.9 and the Total Medical Injury Frequency Rate was 5.2, compared to 1.1 and 8.9, respectively in 2008.

There were no reported environmental incidents in this reporting quarter and year to date.

Development

The primary development focus for the Company continues to be advancing the LFD toward commercial production start up in 2010. The advance of the access decline ramp to the LFD remains on schedule. During the second quarter, the ramp face advanced 190 vertical feet to the 3500 Level. Three ore accesses were established at the 3390, 3450 and 3510 Levels and an access heading to the fresh air raise commenced. Extension of a ventilation and secondary egress raise was completed to the 3220 Level during this quarter. Three underground diamond drill rigs were active all through second quarter supporting optimal access ramp planning and targeting sub-level access locations. All three drills will remain active during the third quarter.

Reconditioning of the Levack #2 Shaft below the 2900 Level continued to progress during the second quarter, limited by water inflow management. Shaft reconditioning progressed by 175 vertical ft and should reach the target depth at the 3600 Level in the third quarter of 2009. The current timeline for the utilization of the 3600 Level to further develop the LFD remains the fourth quarter of 2009.

Focused narrow vein mining in the up-dip extension of the LFD continued in the second quarter. Several level accesses will be driven into ore during the third quarter in preparation for removal of pre-production LFD development ore late in 2009. Other development work at the Levack Complex during the second quarter included 1,234 ft of drifting on the PM Deposit at the McCreedy West Mine.

Development at the Podolsky Mine during this reporting quarter focused on advancing the main access ramp and related lateral development. Total advancement for the quarter was 1,543 ft, including lateral work on the 2300 and 2375 Levels plus access ramp development up to the 2225 Level. The main access ramp will be completely connected internally later in 2009 to support ongoing stope access. Other development at the Podolsky site included work on the backfill plant and system and work on the new exhaust ventilation raise.

Total capital expenditures for the second quarter were $14.7 million, including $8.5 million for LFD development, $3.4 million at Podolsky and $1.8 million at the Levack Complex. Total capital expenditures for 2009 to the end of June were $27.8 million, compared to $98.4 million to the end of June, 2008.

Exploration

FNX completed a $15.0 million flow-through financing during the second quarter to be used to explore the Company's non-producing properties in Sudbury. This flow-through financing will allow FNX's exploration team to dramatically increase its exploration activity for the balance of 2009 and 2010 without impacting the Company's cash position.

A preliminary flow-through budget of $6.2 million is planned for 2009 and flow-through exploration programs began in June. The focus for 2009 flow-through exploration will be drilling and geophysical programs at Victoria, the Falconbridge Footwall, Kirkwood, Nickel Lake and Foy Offset.

Total exploration expenditures on all projects in Sudbury during second quarter were $0.8 million, bringing the total year to date to $0.9 million. During the second quarter, the focus remained on detailed drilling on the LFD from drill platforms established from the 2650 access ramp. Three underground drill rigs continued to test the up-dip extension of the LFD at the 3400, 3450 and 3500 Levels in order to support lateral development planning and to provide data for resource estimates later in 2009 on the up-dip extension of the LFD. During second quarter, 50 holes were drilled on the up-dip extension of the LFD for a total of 25,935 ft. This brings the 2009 year to date total drilling on the up-dip extension of the LFD to 39,547 ft in 68 holes.

On underground drill rig continued to operate in the McCreedy West PM Deposit in support of production. In the second quarter at the PM Deposit, 67 holes were drilled for a total footage of 12,385 ft. This brings the total footage drilled on the PM Deposit year to date to 38,166 ft in 209 holes.

DMC Mining Services

Revenues from DMC totaled $11.7 million for the three months ended June 30, 2009 and $25.1 million for the first six months of 2009, compared to $37.0 million and $86.4 million, respectively in 2008. Contract costs for the second quarter were $11.3 million and depreciation and amortization expenses totaled $1.1 million.

Cash operating margin, calculated as the operating revenues of DMC less operating costs and excluding depreciation and amortization, was $0.4 million during this quarter, compared to $1.8 million in the same period of 2008. For the six months ended June 30, 2009 the cash operating margin was $0.6 million, compared to $4.2 million in the same period of 2008.

Overall DMC incurred losses of $1.3 million and $2.2 million for the three and six months ended June 30, 2009 respectively, compared to losses of $1.6 million and $2.3 million respectively for the comparable periods in 2008.

Operating cash flow for the second quarter and first half of 2009 was $7.5 million and $3.4 million respectively in 2009. As at June 30, 2009, DMC had a cash balance of $12.5 million compared to $9.4 million December 31, 2008 and $6.3 million at the end of the first quarter of 2009.

The overall climate for the mining contracting business in the US remains positive, while the Canadian segment has shown slightly increased levels of activity, but remains very competitive. At the end of the second quarter, DMC had a work backlog of approximately $36.9 million with $25.6 million of that scheduled for completion in 2009. DMC continues to pursue new clients and contracts to replace expiring contracts. DMC re-structured the organization late in 2008 to ensure the operating costs were appropriate to the volume of business forecast for 2009.

These changes have been effective in containing costs and should allow DMC to break even on a cash flow basis in 2009, based on our current work backlog.

Investments

FNX accounts for its investment in GLW using the equity method and is, therefore, required to include in earnings FNX's share of GLW's earnings or loss for the period and the Company's investment therein is adjusted by an equivalent amount. For the quarter ended June 30, 2009, FNX's 26% share of the earnings of its equity investee, GLW, was $nil, compared to a loss of $0.2 million in the first quarter of 2009.

The note receivable from GLW for $50 million was renegotiated on December 8, 2008 and the due date of the note was extended to July 16, 2010. Due to the nature of the renegotiated note receivable, both a call and put option exist on the derivative, which must be fair valued at each balance sheet date with any changes thereto charged or credited to earnings. As a result of the above, the carrying value of the note receivable at June 30, 2009 was $38.8 million, a difference of $3.0 million from the end of the first quarter.

As at June 30, 2009, the market value of FNX's 360 million GLW shares was approximately $97.2 million, while the market value of the entire investment portfolio was approximately $105.5 million.

Share Capital

During the second quarter, share capital increased to 87,063,190 common shares issued and outstanding as a result of the exercise of 12,500 options and the issuance of 2,173,914 flow-through shares in April. Year to date 2009, share capital has increased by $14.5 million as a result of the 12,500 stock option exercise and the issuance of flow-through shares. As of June 30, 2009 stock options to purchase 3,654,833 million Common shares at a weighted average exercise price of $13.65 were outstanding. Including 320,146 outstanding deferred share units, the fully diluted share total was 90,718,023 as at June 30, 2009.

Forward-Looking Statement

Certain information included in this press release, including information relating to future financial or operating performance and other statements that express management's expectations or estimates of future performance constitute "forward-looking statements." Such forward-looking statements include, without limitation, (i) estimates of future capital expenditures; (ii) estimates regarding timing of future development and production; and (iii) estimates of future costs towards profitable commercial operations. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to, interpretation and implications of drilling and geophysical results; estimates regarding timing of future capital expenditures and costs towards profitable commercial operations. Other factors that could cause actual results, developments or events to differ materially from those anticipated include, among others, increases/decreases in production; volatility in metals prices and demand; currency fluctuations; cash operating margins; cash operating cost per pound sold; costs per ton of ore; variances in ore grade or recovery rates from those assumed in mining plans; reserves and/or resources; the ability to successfully integrate acquired assets; operational risks inherent in mining or development activities, and legislative factors relating to prices, taxes, royalties, land use, title and permits, importing and exporting of minerals and environmental protection. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements are made as at the date hereof and the Company does not undertake any obligation to update publicly or revise any such forward-looking statements or any forward-looking statements contained in any other documents whether as a result of new information, future events or otherwise, except as may be required under applicable securities law. For a more detailed discussion of such risks and other factors, see the Company's latest filings with Canadian securities regulators.

CONFERENCE CALL

FNX will be hosting a Second Quarter Conference Call on August 14, 2009 at 10:00 am Eastern Time.

CONFERENCE CALL numbers are:

Live in North America:
Toll-Free Access: 1-888-789-9572 or 416-695-7806
Ask for the FNX Mining Conference Call or Enter Passcode: 411336#

Replay Access information:
Toll-Free Access: 1-800-408-3053 or 416-695-5800
Passcode: 3186288#
Available until September 18, 2009 at Midnight (Toronto Time)

Slides for the conference call may be accessed on the Company's website www.fnxmining.com.

Note: The unaudited balance sheet, statement of operations and statement of cash flow are appended to this news release.

/T/

Consolidated Balance Sheets
(in thousands of Canadian dollars)
(Unaudited) June 30 December 31
As at 2009 2008
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$ $
Assets
Current
Cash and cash equivalents 131,076 129,561
Accounts receivable 44,523 59,324
Inventory 5,145 2,307
Prepaid and other assets 2,025 1,504
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182,769 192,696
Investments 8,234 4,009
Investment in Gold Wheaton 187,846 215,620
Property, plant and equipment 455,515 435,114
Reclamation deposits 6,485 6,485
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840,849 853,924
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Liabilities
Current
Accounts payable and accrued liabilities 26,858 36,136
Deferred revenue 18,180 26,433
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45,038 62,569
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Long-term deferred revenue 369,852 368,969
Mine closure and site restoration 5,554 5,393
Future income and resource taxes 56,850 60,499
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432,256 434,861
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477,294 497,430
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Shareholders' equity
Share capital 586,280 571,750
Contributed surplus - stock-based compensation 16,287 13,741
Retained earnings (deficit) (234,278) (220,580)
Accumulated other comprehensive income (loss) (4,734) (8,417)
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363,555 356,494
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840,849 853,924
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Consolidated Segmented Balance Sheets
(in thousands of Canadian dollars) (Unaudited)
As at June 30, 2009 Mining DMC Total
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Assets $ $ $
Cash and cash equivalents 118,622 12,454 131,076
Accounts receivable 36,015 8,508 44,523
Other current assets 5,606 1,564 7,170
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160,243 22,526 182,769
Investments 8,234 - 8,234
Investment in Gold Wheaton 187,846 - 187,846
Property, plant and equipment 432,332 23,183 455,515
Reclamation deposits 6,485 - 6,485
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795,140 45,709 840,849
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Liabilities
Accounts payable and accrued liabilities 20,095 6,763 26,858
Deferred revenue 18,090 90 18,180
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38,185 6,853 45,038
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Long-term deferred revenue 369,852 - 369,852
Mine closure and site restoration 5,554 - 5,554
Future income and resource taxes 56,017 833 56,850
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431,423 833 432,256
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469,608 7,686 477,294
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As at December 31, 2008 Mining DMC Total
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Assets $ $ $
Cash and cash equivalents 120,131 9,430 129,561
Accounts receivable 44,459 14,865 59,324
Other current assets 2,823 988 3,811
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