Falconbridge 6K Limited Consolidated Statements of Earnings | SEC 10 May 05

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Exhibit 99.1

FALCONBRIDGE LIMITED
QUARTERLY FINANCIAL STATEMENTS
MARCH 31, 2005

FALCONBRIDGE LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS

		Three months ended March 31,
(unaudited — in millions of United States dollars except per share data)		2005			2004
Revenues		$	903		$	734
Operating expenses
Costs of sales
	Costs of metal and other product sales		492			404
	Depreciation and amortization of property, plant and equipment		62			57

			554			461
Selling, general and administrative (note 6)			34			24
Exploration			5			3
Research and process development			2			2
Other income			(1	)		(23	)
			594			467

Operating income			309			267
Interest expense net of interest income			6			10

Earnings before taxes and non-controlling interest			303			257
Income and mining taxes			80			69
Non-controlling interest in earnings of subsidiaries			2			4

Earnings for the period		$	221		$	184
Dividends on preferred shares			2			2

Earnings attributable to common shares		$	219		$	182

Basic earnings per common share		$	1.22		$	1.02
Diluted earnings per common share		$	1.21		$	1.01

FALCONBRIDGE LIMITED
EARNINGS CONTRIBUTIONS

		Three months ended March 31,
(unaudited — in millions of United States dollars)		2005		2004
Principal operations —
	Integrated Nickel Operations (INO)	$	157	$	131
	Falconbridge Dominicana, C. por A.		33		55

	Nickel Operations		190		186

	Kidd Creek Operations		18		3
	Collahuasi		84		45
	Lomas Bayas		32		24

	Copper Operations		134		72

Income from principal operations			324		258
Corporate costs (income)			15		(9	)

Operating income			309		267
Interest expense net of interest income			6		10
Income and mining taxes			80		69
Non-controlling interest in earnings of subsidiaries			2		4

Earnings for the period			221		184
Dividends on preferred shares			2		2

Earnings attributable to common shares		$	219	$	182

FALCONBRIDGE LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited — in millions of United States dollars)	March 31, 2005		December 31, 2004
ASSETS
Current
Cash and cash equivalents	$	798	$	645
Accounts and metals settlements receivable		364		332
Inventories		645		573

Total current assets		1,807		1,550
Property, plant and equipment (notes 4 and 5)		3,217		3,195
Deferred expenses and other assets		373		373

Total assets	$	5,397	$	5,118

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued charges	$	339	$	335
Income and other taxes payable		45		34
Long-term debt due within one year		255		248

Total current liabilities		639		617
Long-term debt		1,181		1,189
Future income and mining taxes		405		355
Employee future benefits		102		112
Other long-term liabilities (note 7)		252		247
Non-controlling interest		36		35

Total liabilities		2,615		2,555
Shareholders' equity		2,782		2,563

Total liabilities and shareholders' equity	$	5,397	$	5,118

FALCONBRIDGE LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

			Three months ended March 31,
			2005				2004
(unaudited — in millions of United States dollars)			Number	Amount			Number		Amount
Share capital
	Authorized
	Unlimited preferred shares
	Unlimited common shares
	Issued
	Common shares
		Balance, beginning of period	179,770,190	$	1,466		178,792,492		$	1,450
		Issued pursuant to employee stock option plan	953,108		16		700,498			11

		Balance, end of period	180,723,298		1,482		179,492,990			1,461

	Preferred shares Series 1
		Balance, beginning and end of period	89,835		1		89,835			1

	Preferred shares Series 2
		Balance, beginning of period	4,787,283		78		7,910,165			129
		Conversion of units	—		—		(3,122,882	)		(51	)

		Balance, end of period	4,787,283		78		4,787,283			78

	Preferred shares Series 3
		Balance, beginning of period	3,122,882		51		—			—
		Issue of units	—		—		3,122,882			51

		Balance, end of period	3,122,882		51		3,122,882			51

Contributed surplus					2					2

Surplus
	Balance, beginning of period				749					139
	Earnings for the period				221					184
	Dividends
		– Common shares			(15	)				(13	)
		– Preferred shares			(2	)				(2	)
	Balance, end of period				953					308

Cumulative translation adjustment					215					217

Total shareholders' equity				$	2,782				$	2,118

FALCONBRIDGE LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three months ended March 31,
(unaudited — in millions of United States dollars)		2005			2004
Operating activities
Earnings for the period		$	221		$	184
Add (deduct) items not affecting cash
	Depreciation and amortization		62			57
	Future income and mining taxes		60			40
	Non-controlling interest in earnings of subsidiaries		2			4
	Other		(22	)		(15	)
	Contributions to pension fund in excess of expense		(10	)		(7	)

Cash provided by operating activities before working capital changes			313			263
Net change in receivables, inventories and payables			(71	)		(31	)

Cash provided by operating activities			242			232

Investing activities
Capital investments and deferred project costs			(85	)		(101	)
Other			(3	)		(2	)

Cash used investing activities			(88	)		(103	)

Financing activities
Long-term debt, including current portion:
	Repaid		—			(7	)
Dividends paid
	– Common shareholders		(15	)		(13	)
	– Preferred shareholders		(1	)		(2	)
	– Minority shareholders of Falcondo		(1	)		—
Issue of common shares			16			11

Cash used in financing activities			(1	)		(11	)

Cash provided during the period			153			118
Cash and cash equivalents, beginning of period			645			298

Cash and cash equivalents, end of period		$	798		$	416

Supplementary Information:
	Cash paid for interest	$	8		$	9
	Cash paid for income and mining taxes	$	22		$	18

FALCONBRIDGE LIMITED
PRODUCTION DURING THE PERIOD

		Three months ended March 31,
(unaudited)		2005	2004
Sudbury
	Nickel	6,122	4,404
	Copper	5,986	3,803
Raglan
	Nickel	5,978	6,668
	Copper	1,525	1,733
Montcalm
	Nickel	1,950	89	*
	Copper	1,050	49	*
Falcondo
	Ferronickel	6,474	7,999
Kidd Mining Division
	Copper	11,155	9,296
	Zinc	27,428	20,792
	Silver (000's ounces)	827	1,194
Collahuasi
	Copper	46,973	35,369
Lomas Bayas
	Copper	16,323	15,728
Total mine output
	Nickel	20,524	19,160
	Copper	83,012	65,978
Metal production (tonnes)
Sudbury — Smelter output
	Nickel	17,413	11,404
	Copper	5,594	4,234
Nikkelverk — Refinery output
	Nickel	21,456	18,859
	Copper	8,952	9,746
Falcondo
	Ferronickel	6,474	7,999
Kidd Metallurgical Division
	Zinc plant output — zinc	37,965	28,458
	Copper Cathode — refinery output	31,460	33,722
	Blister Copper	34,444	33,500
Collahuasi
	Copper	6,813	6,152
Lomas Bayas
	Copper	16,323	15,728
Total refined output
	Nickel	27,930	26,858
	Copper	63,548	65,348

*: pre-production material.

FALCONBRIDGE LIMITED
SALES OF PRODUCTS AND AVERAGE REALIZED PRICES

		Three months ended March 31,
(unaudited)		2005		2004
Metal sales (tonnes, except precious metals and silver)
Integrated Nickel Operations (INO)
	Nickel		21,266		18,118
	Nickel purchased for resale		—		—

Total			21,266		18,118

	Copper		15,477		13,197
Precious metal revenues ($ millions)			28		22
	Ferronickel		6,515		6,777
Kidd Creek Division
	Zinc (including metal in concentrate)		40,932		26,525
	Copper (including metal in concentrate)		25,419		28,969
	Silver (000's ounces)		1,483		1,004
Collahuasi
	Copper (including metal in concentrate)		46,892		28,879
Lomas Bayas
	Copper		17,505		15,935
Total Sales
	Nickel		27,781		24,895
	Copper		105,293		86,980
Average prices realized (U.S.$ per pound, except silver)
	Nickel	$	7.03	$	6.88
	Ferronickel		6.70		6.80
	Copper Kidd		1.49		1.24
	Collahuasi		1.47		1.17
	Lomas Bayas		1.56		1.18
	Zinc		0.63		0.52
	Silver (U.S.$ per ounce)		6.75		6.42

FALCONBRIDGE LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)

[Tabular figures in millions of United States dollars, except where otherwise noted]

1. ACCOUNTING POLICIES

These unaudited interim consolidated financial statements of Falconbridge Limited ("Falconbridge" or the "Corporation") have been prepared in accordance with Canadian generally accepted accounting principles. The preparation of the financial statements is based on accounting policies and practices consistent with those used in preparation of the audited annual consolidated financial statements except as described in note 2 below. These unaudited interim consolidated financial statements should be read together with the audited consolidated financial statements and the accompanying notes included in the Corporation's 2004 Annual Report.

2. CHANGE IN ACCOUNTING STANDARDS

Effective January 1, 2005, the Corporation adopted the new accounting standard issued by the Canadian Institute of Chartered Accountants (CICA) to account for variable interest entities (VIEs). The new standard recognizes that a controlling financial interest in an entity may exist through arrangements that do not involve a voting interest. Such entities are considered to be variable interest entities and can arise from a variety of legal structures. By definition, these entities either lack enough equity investment at risk to permit the entity to finance its activities without additional subordinated financial support from other parties; has equity owners who are unable to make decisions about the entity; or has equity owners that do not have the obligation to absorb the entity's expected losses or the right to receive the entity's expected residual returns. The primary beneficiary of a VIE is determined by identifying the party that will absorb the majority of the VIE's expected losses, receive a majority of the expected returns, or both. The primary beneficiary is required to consolidate the entity in their consolidated financial statements. Implementation of this standard has had no impact on Falconbridge.

3. FOREIGN EXCHANGE GAINS AND LOSSES

Falconbridge's sales are denominated primarily in U.S. dollars and, to a lesser extent, in Euros, Yen and other foreign currencies, and it incurs expenses that are not denominated in its functional currency. This exposes it to increased volatility in earnings due to fluctuations in foreign exchange rates. Falconbridge uses foreign currency forward exchange contracts and options to reduce these exposures by creating an offsetting position. Falconbridge uses foreign currency exchange contracts to hedge its Canadian dollar operating costs (item 1 below). Falconbridge also uses foreign currency exchange contracts to reduce the exposure to other foreign currency expenditures, and foreign currency denominated monetary assets and liabilities. The gains/losses from these positions are included in other exchange gains and losses (item 2 below) as an offset to the translation gains/losses from the underlying hedged foreign assets and liabilities.

Included in earnings for the three months ended March 31, 2005 and 2004 are exchange gains as summarized below:

		Three months ended March 31,
Source of foreign exchange gains	Income statement grouping	Three months ended March 31,
Source of foreign exchange gains	Income statement grouping	2005	2004
1. Hedging gains	Cost of Sales	11	19
2. Other foreign exchange gains	Other Income	3	5

4. SEGMENTED INFORMATION

								Copper
		Nickel						Copper
		Nickel												Lomas Bayas			Corporate and other
		INO			Falcondo			Kidd Creek			Collahuasi			Lomas Bayas			Corporate and other		Total
Three months ended March 31, 2005
	Ownership		(100%	)		(85.26%	)		(100%	)		(44%	)		(100%	)	(100%	)
	Revenues		442			96			160			145			60		—		$	903
	Operating income (loss)		157			33			18			84			32		(15	)		309
	Depreciation, depletion and amortization		25			2			13			16			5		1			62
	Property, plant & equipment		1,085			116			839			1,040			129		8			3,217
	Capital expenditures & deferred projects costs		41			5			29			8			2		—			85
Three months ended March 31, 2004
	Ownership		(100%	)		(85.26%	)		(100%	)		(44%	)		(100%	)	(100%	)
	Revenues	$	379		$	101		$	133		$	77		$	44		—		$	734
	Operating income		131			55			3			45			24		9			267
	Depreciation, depletion and amortization		28			2			13			9			4		1			57
	Property, plant & equipment		972			104			758			1,014			139		10			2,997
Capital expenditures & deferred projects costs			31			3			31			30			6		—			101
Principal base of operations			Canada			Dominican Republic			Canada			Chile			Chile		Canada

5. CAPITALIZED INTEREST

During the three months ended March 31, 2005, Falconbridge capitalized $ 7 million of interest costs associated with projects under development (2004 — $6 million).

6. EMPLOYEE STOCK OPTION PLAN

During the three months ended March 31, 2005 Falconbridge granted 415,500 stock options (2004 — 380,500) with a value of $ 4 million (2004 — $3 million). Compensation expense of $1 million (2004 — $1 million), associated with the vested portion of stock options, is included in selling, general and administrative expense.

7. ASSET RETIREMENT OBLIGATION

During the three months ended March 31, 2005, the provision for asset retirement obligations, included in other long-term liabilities, increased by $ 1 million from December 31, 2004 as detailed below:

	Three months ended March 31,
	2005		2004
Asset retirement obligation, beginning of period	149		132
Accretion expense	2		2
Foreign exchange	(1	)	(4	)

Asset retirement obligation, end of period	150		130

8. POST-EMPLOYMENT BENEFIT EXPENSE

The post-employment benefit expense for the three months ended March 31 is detailed below:

	Three months ended March 31,
	2005	2004
Defined benefit pension plans	7	8
Defined contribution pension plans	2	2
Other benefit plans	6	6

	15	16

9. GUARANTEES

In the normal course of business, the Corporation enters into numerous agreements that contain indemnification commitments and may contain other features that meet the accounting definition of guarantees. The terms of these indemnification agreements will vary based on the contract and typically do not provide for any limit on the maximum potential liability. Historically, the Corporation has not made any significant payments under such indemnifications and therefore, no amounts have been accrued in the financial statements with respect to these indemnification commitments.

10. PROPOSED TRANSACTIONS

On March 9, 2005 Falconbridge entered into an agreement to combine with its major shareholder, Noranda Inc. The merger would be completed by way of a share exchange take-over bid under which Falconbridge common shareholders (other than Noranda) would be offered 1.77 Noranda common shares for each Falconbridge common share.

11. SUBSEQUENT EVENT

On April 19, 2005, Falconbridge and Barrick Gold entered into a joint venture agreement regarding the Kabanga nickel deposit and related concessions in Tanzania. Under the current terms of the agreement, Falconbridge has acquired a 50% indirect interest in the Kabanga Project for $15 million and will be the operator of the joint venture.

Over the next several years, Falconbridge will fund and conduct a $50 million work plan that will include additional exploration, infill drilling, and technical work to update the resource model for Kabanga. Upon conclusion of the work plan, Falconbridge will fund the first $95 million of project development expenditures. Thereafter, Falconbridge and Barrick will equally share joint venture expenditures.

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FALCONBRIDGE LIMITED QUARTERLY FINANCIAL STATEMENTS MARCH 31, 2005
FALCONBRIDGE LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2005 (Unaudited)

Falconbridge Inactive 6-KFalconbridge Limited Consolidated Statements of Earnings