VALLEYFIELD, QUEBEC -- (Marketwire) -- 07/29/10 -- Noranda Income Fund (the "Fund") (TSX: NIF.UN) reported net earnings of $8.5 million for the second quarter of 2010, compared to a net loss of $0.7 million in the same quarter a year ago.

"We've had a good quarter with net earnings of $8.5 million. Production was on target, and strong sales reduced the Fund's finished inventories. Sulphuric acid netbacks recovered strongly from a year ago supported by improved spot pricing." said Mario Chapados, President and Chief Executive Officer of the Fund's Manager. "While economic activity in the United States is expected to be slower in the second half, manufacturing activity is still healthy. In 2010, the Fund will continue to be negatively impacted by the low zinc premiums and a stronger Canadian dollar."

As previously reported on April 19th, the Fund entered into an amendment with a syndicate of Canadian chartered banks (the "Syndicate") to extend the maturity date of its existing credit facility (the "Revolving Facility") from May 3, 2010 to November 3, 2010 (the "Extension Period"). One of the restrictions of the extension of the maturity date of the Revolving Facility is that cash distributions cannot be paid to Unitholders during the Extension Period. Going forward, the ability for the Fund to make distributions will be dependant on the terms and the repayment requirements of the refinancing of the debt.

The Fund expects to complete the refinancing of both the Revolving Facility and its outstanding $153.5 million senior secured notes due December 20, 2010 (the "Notes") prior to the November 3, 2010 maturity date of the credit facility. In addition, the Fund expects that the terms and conditions of the refinancing will include the obligation to repay the refinanced notes by May 3, 2017, which is the remaining term of Xstrata Canada Corporation ("Xstrata Canada")'s supply obligations under the current Supply and Processing Agreement. These mandatory repayments are expected to reduce the Fund's future free cash flow and cash available for distributions. For more details, see Limitation on Distributions below.

The Independent Committee of the Board of Trustees of the Fund continues to work with its financial and legal advisors to review strategic alternatives available to the Fund, as well as review financing alternatives for the Revolving Facility and Notes, proposed by management. The Independent Committee has retained Gryphon Partners to act as financial advisor and Heenan Blaikie LLP to act as legal counsel.

Outlook

Industrial activity in the United States continues to recover strongly from 2009 levels, although there are signs that the pace of growth is slowing. Going forward, it is expected that demand growth, rather than inventory adjustment, will drive manufacturing. The Purchasing Manager's Index ("PMI") for the United States continues to predict expansionary economic conditions with a reading of 56.2 in June. Spending on residential construction in the United States has shown modest improvement during the second quarter, while non-residential construction spending is no longer declining and has stabilized. In the automotive market, light vehicle sales in the United States were steady at an average annual rate of 11.3 million units, up 3% compared to the first quarter.

These trends continue to positively impact the Fund's zinc and sulphuric acid sales. Capacity utilization rates at North American steel mills' continuous galvanizing operations are high. Second quarter sales to the steel sector increased 7% versus the previous quarter. The Fund also saw sales improve in the die-cast alloy, brass and chemical sectors, supporting the view that a broad-based recovery in manufacturing is underway.

Zinc demand for the balance of 2010 is expected to remain firm, except for some potential weakness in the fourth quarter around the holiday period.

The fundamentals for sulphuric acid have rebounded from the first half of 2009. The May 2010 closure of Xstrata's Kidd copper and zinc metallurgical facilities in Timmins, Ontario and the strike at Vale Inco's operations in Sudbury, Ontario have positively impacted the regional supply/demand balance for sulphuric acid. Demand for sulphuric acid outside of the industrial market has been strong and regular contract customers are witnessing a pick-up in demand from their customers. While the strike at Vale Inco's Sudbury operations has ended, the market is expected to remain balanced.

Although the Fund's sales are focussed on the North American market, we cannot ignore the outlook for the global economy. Near-term uncertainty surrounds the prospects for the developed world as governments manage fiscal policy after the recent period of stimulus spending and the resulting higher sovereign debt. Within China, the focus is on managing a more sustainable level of growth following their efforts to stimulate the economy. In addition, the stimulus packages of 2009 did not address the structural issues of unemployment and excess capacity in developed economies and asset inflation in China.

The Fund reported net earnings of $8.5 million for the second quarter of 2010. Second quarter earnings were positively impacted by the decline that has occurred in zinc prices since mid-April. The Supply and Processing Agreement provides a natural hedge against zinc metal price fluctuations during the period in which the concentrate is transformed into zinc metal, by pricing the payable zinc metal contained in zinc concentrate at the LME zinc reference price in the second month following its delivery. This results in matching the timing of pricing of the purchase of zinc concentrate with the expected timing of sales of the refined zinc metal produced from that concentrate. In the second quarter, this pricing mechanism positively impacted concentrate payables because zinc prices were declining. At the same time, however, the Fund's inventory is recorded at the higher historical costs as of June 30, 2010, resulting in a write-down of $1.1 million. As this high-cost inventory is liquidated, margins are expected to be lower and this is forecast to negatively impact the Fund's results over the balance of the year.

The Fund provides guidance on its key drivers. Since the Fund reported on May 3, 2010 it has increased its sales forecast by 5,000 tonnes and capital expending by $1 million.

Production:                         265,000 tonnes
Sales:                              270,000 tonnes
Premiums:                           4 cents U.S. per pound
Processing fee:                     38.5 cents per pound
Capital expenditures                $25 million

The outlook for zinc, sulphuric acid fundamentals and net earnings is subject to various risks and uncertainties. The Fund's ability to meet the targets identified above is subject to the various risks and the assumptions. Some of these risks and assumptions underlying this information can be found in the "Forward-looking Information" below.

Conference Call

The Noranda Income Fund will host an Investor Conference Call to discuss its Q2/2010 financial results at 16:00 Eastern time on Thursday, July 29, 2010.

For those preferring to listen by phone, please dial 416-340-8061 or toll free 1-866-225-0198.

--  A live audio webcast of the conference call, together with supporting
    presentation slides, will be available on our website at
    www.norandaincomefund.com.
--  A recording of the webcast will be available at 416-695-5800 or toll
    free at 1-800- 408-3053 with the pass code of 2873 701# until midnight
    on August 12, 2010.

Financial Results

This press release of the financial position and results of operations of the Fund should be read in conjunction with the unaudited consolidated interim financial statements of the Fund for the three and six months ended June 30, 2010 and with the audited consolidated financial statements of the Fund and the notes thereto for the period ended December 31, 2009. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP").

The board of trustees carries out its responsibility by reviewing this disclosure, principally through the audit committee, and it approves this disclosure prior to publication.

This press release is based on various assumptions (see "Forward-looking Information" below.) All dollar amounts are shown in Canadian dollars unless otherwise specified. The MD&A has been prepared as of July 29, 2010. Additional information relating to the Fund, including the Fund's annual information form is available on SEDAR at www.sedar.com.

Q2 2010 Highlights

                                          Second Quarter        Year-to-date
                                            2010    2009       2010     2009
                                         ------- -------   -------- --------
Zinc metal production (tonnes)            65,144  53,062    131,610  111,142
Zinc metal sales (tonnes)                 70,568  50,591    137,122  112,839
Processing fee (cents/pound)                38.5    38.0       38.5     38.0
Zinc recovery (%)                           97.3    98.3       97.1     97.7
Zinc metal premiums (U.S.$/pound)          0.041   0.047      0.041    0.033
Byproduct revenues ($ millions)              6.8     3.5       12.6     14.4
Average U.S./Cdn. exchange rate            1.028   1.167      1.034    1.206

--  Zinc metal production and sales were 23% and 39%, respectively higher
    than the corresponding quarter last year.
--  Byproduct revenues were almost twice last year's revenues.
--  Long-term debt was reduced by $16.3 million during the quarter.

RESULTS OF OPERATIONS

Consolidated Net Earnings (Second quarter 2010 compared to second quarter 2009)

Revenues less raw material purchase costs ("Net Revenues") in the second quarter of 2010 were $81.3 million, compared to $37.5 million in the same quarter of 2009. The more than doubling of Net Revenues was due to higher zinc metal sales, higher sulphuric acid netbacks and the positive impact of the declining zinc price on our concentrate payables partially offset by a lower zinc premiums and a stronger Canadian dollar.

Production Cost Breakdown
($ millions)
                                                    Second
                                                   Quarter
                                               2010   2009   Increase
                                              -----------------------
Labour                                         16.0   13.8        2.2
Energy                                         14.2   13.5        0.7
Operating supplies                              9.4    7.4        2.0
Other                                           4.5    3.4        1.1
                                              -----------------------
Production cost before changes in inventory    44.1   38.1        6.0

Change in inventory                             4.0  (2.6)        6.6
                                              --------------
                                               48.1   35.5       12.6
                                              -----------------------
                                              -----------------------

Production costs before changes in working capital in the second quarter of 2010 were $44.1 million, $6.0 million higher than the $38.1 million recorded in the second quarter of 2009. Production during the second quarter of 2009 ran at 80% of the 2008 level, resulting in lower energy and operating supplies costs. The increase in costs in 2010 is mostly due to an increase in the cost of labour and operating supplies, as a result of higher zinc metal production in the second quarter of 2010 than in the corresponding period of 2009.

Selling, general and administration costs in the second quarter of 2010 were $5.3 million, compared to $4.7 million in the same period of 2009.

The foreign exchange loss for second quarter of 2010 was $5.8 million, compared to a gain of $2.9 million in the second quarter of 2009. The foreign exchange loss was primarily a result of the impact of the weakening of the Canadian dollar on the Fund's net U.S. monetary liabilities. The foreign exchange loss was largely offset by an increase in the value of in-process and finished inventory. The increase in the value of inventory is realized in Net Revenues as the metal is sold to customers (thereby increasing the Net Revenue recorded by the Fund). The Fund's main U.S. denominated balances are comprised of cash and cash equivalents, accounts receivable, accounts payable and a portion of long-term debt.

In the second quarter of 2010, the commodity hedging gain was $0.6 million and the financial instruments gain was $2.3 million. In the second quarter of 2009, the commodity hedging gain was $0.1 million and the financial instruments gain was $4.9 million. During the period, the change in the market value of the Fund's financial instruments resulted in these amounts being recorded.

In the second quarter of 2010, amortization was $9.3 million compared to $8.1 million in the second quarter of 2009. The increase in the amortization was due to the drawdown of inventory during the second quarter of 2010. During the first quarter of 2010, the Fund reviewed and increased the useful life of certain property, plant and equipment, based on experience with these assets, to better reflect their use in time. These changes were applied prospectively from January 1, 2010. The impact on amortization expense for the three month period ended June 30, 2010 was to decrease amortization expense by $1.1 million.

In second quarter of 2010, net interest expense was $4.1 million compared to $2.4 million in the second quarter of 2009. The increase in net interest expense during the second quarter of 2010 was due to higher average outstanding debt, higher interest spreads on the Revolving Facility and transaction costs on the extension of the Revolving Facility, partially offset by a lower variable interest benchmark rate compared to the second quarter of 2009.

Minority interest in earnings of subsidiaries in the second quarter of 2010 was an expense of $2.9 million, down from a credit of $0.2 million in the second quarter of 2009. The decrease was due to the Fund's higher earnings in 2010.

The Fund reported net earnings of $8.5 million for the second quarter of 2010, compared to a net loss of $0.7 million in the same quarter a year ago.

Consolidated Net Earnings (Six months 2010 compared to six months of 2009)

In the first six months of 2010, the Processing Facility ran at its normal operating level; whereas in 2009, the Processing Facility operated at 80% capacity utilization from March 1 to June 30 because of the weakness in the sulphuric acid market.

Net Revenues in the first half of 2010 were $147.9 million, compared to $98.4 million in the same period of 2009. The $49.5 million increase was due to higher sales volumes for zinc and sulphuric acid, higher premiums and the positive impact of the declining zinc price on our concentrate payables partially offset by a stronger Canadian dollar, lower sulphuric acid netbacks and copper sales.

Production Cost Breakdown
($ millions)                                    Year-to-date
                                                 2010   2009  Increase
                                               -----------------------
Labour                                           30.8   28.8       2.0
Energy                                           31.1   29.8       1.3
Operating supplies                               17.8   16.0       1.8
Other                                             7.5    6.3       1.2
                                               -----------------------
Production cost before changes in inventory      87.2   80.9       6.3

Change in inventory                               3.6  (1.3)       4.9
                                               -----------------------
                                                 90.8   79.6      11.2

Production costs before changes in working capital in the first half of 2010 were $87.2 million compared to $80.9 million recorded in the first half of 2009. As noted above, production from March 1 to June 30 ran at 80% of capacity. The increase in costs in 2010 is mostly due to an increase in the cost of labour and operating supplies, as a result of higher zinc metal production in the first half of 2010 than in the corresponding period of 2009.

Selling, general and administration costs in the first six months of 2010 were $10.5 million, compared to $9.3 million in the first half of 2009.

The foreign exchange loss in the first half of 2010 was $3.8 million, compared to a gain of $1.1 million in the first six months of 2009. The foreign exchange gain was a result of a weakening Canadian dollar on the Fund's net U.S. dollar monetary liability. The foreign exchange loss was largely offset by an increase in the value of in-process and finished inventory. The increase in the value of inventory is realized in Net Revenues as the metal is sold to customers (thereby increasing the Net Revenue recorded by the Fund).

In the first six months of 2010, the commodity hedging gain was $0.2 million and the financial instrument gain was $5.1 million. During the period, the change in the market value of the Fund's financial instruments resulted in these amounts being recorded.

In the first half of 2010, amortization was $17.8 million, compared to $16.5 million which incurred in the first half of 2009. The increase in the amortization expense resulted from the drawdown of zinc inventory during the first six months of 2010. During the first quarter of 2010, the Fund reviewed and increased the useful life of certain property, plant and equipment, based on experience with these assets, to better reflect their use in time. These changes were applied prospectively from January 1, 2010. The impact on amortization expense for the six month period ended June 30, 2010 was to decrease amortization expense by $2.2 million.

In the first half of 2010, reclamation expense was $0.4 million, compared to a recovery of $4.1 million which was recorded in the first half of 2009. During the second quarter of 2009, a review of the site restoration and reclamation expenditures was completed by the Fund, including work from a third-party engineering firm. The recovery was due to a decline in the expected future reclamation spending, which has resulted in a reduction in the present value of future site restoration and reclamation liabilities.

In the first half of 2010, net interest expense was $7.1 million compared to $4.8 million in the same period of 2009. The increase in net interest expense in 2010 was due to higher average outstanding debt, higher interest spreads on the Revolving Facility, and transaction costs on the extension of the Revolving Facility, partially offset by a lower variable interest benchmark rate compared to the same period in 2009.

Minority interest in earnings of subsidiaries in the first half of 2010 was an expense of $5.7 million, down from a credit of $1.2 million in the same period of 2009. The decrease was due to the Fund's higher earnings in 2010.

Net earnings for the first six months of 2010 totalled $15.6 million, compared to a net loss of $3.5 million in the first half of 2009.

KEY PERFORMANCE DRIVERS

The following table provides a summary of the quarterly key performance
drivers for the second quarters and year-to-date 2010 and 2009:

----------------------------------------------------------------------------
                                           Second Quarter       Year-to-date
                                            2010     2009      2010     2009
----------------------------------------------------------------------------

Zinc metal production (tonnes)            65,144   53,062   131,610  111,142
Zinc metal sales (tonnes)                 70,568   50,591   137,122  112,839
Zinc concentrate processed (tonnes)      115,380  104,502   236,683  222,361
Zinc recovery (%)                           97.3     98.3      97.1     97.7
Processing fee (cents/pound)                38.5     38.0      38.5     38.0
Zinc metal premiums (U.S.$/pound)          0.041    0.047     0.041    0.033
Byproduct revenues ($ millions)              6.8      3.5      12.6     14.4
Copper in copper cake production
 (tonnes)                                    822      604     1,520    1,432
Copper in copper cake sales (tonnes)         406      440       896    1,274
Sulphuric acid production (tonnes)        95,080   88,173   198,257  186,155
Sulphuric acid sales (tonnes)            108,290   94,978   210,780  180,542
Average LME zinc price (U.S.$/pound)        0.92     0.67      0.98     0.60
Average LME copper price (U.S.$/pound)      3.19     2.12      3.23     1.84
Sulphuric acid netback (U.S.$/tonne)          46        3        34       34
Average U.S./Cdn. exchange rate            1.028    1.167     1.034    1.206
----------------------------------------------------------------------------

PRODUCTION

The Processing Facility ran at its normal operating level in the first half of 2010. Zinc metal production for the second quarter of 2010 was 23% higher at 65,144 tonnes, compared to 53,062 tonnes in the second quarter of 2009. In the second quarter of 2009, production was negatively impacted by the fact that the Processing Facility ran at 80% of its normal operating level.

The production target for 2010 is 265,000 tonnes. Production in 2010 is expected to be slightly lower than plant capacity because of the cell house rehabilitation program, which began this year. The rehabilitation program requires two cells to be off-line throughout the year, which reduces availability by approximately 2%. Rehabilitation of the entire cell house is expected to take 3 to 4 years to complete. The rehabilitation progressed as expected during the second quarter.

The production target is subject to various risks and uncertainties. Some of the assumptions underlying this information can be found in the "Forward-looking Information" below.

RECOVERIES

Recoveries for the second quarter of 2010 were 97.3% compared to the 98.3% for the second quarter of 2009. The Fund pays for 96% of the zinc in the concentrate it purchases; therefore, any recovery over 96% results in metal recovery revenue for the Fund.

SALES

Zinc metal is used in a wide range of industries. Its major use, which accounts for 50% of the total zinc metal consumption in North America, is in the production of galvanized steel.

Zinc sales in the second quarter were solid at 70,568 tonnes, exceeding production, and up from 50,591 tonnes in the second quarter of 2009. Zinc sales reflect a better customer mix, with the steel sector showing the strongest growth in demand. In addition, the Fund has been able to benefit from the reduction in regional supply as a result of the closure of the zinc metallurgical facility at the Kidd site in Timmins in May 2010.

As a result of strong sales in the second quarter, inventories of finished zinc metal were 5,000 tonnes lower at the end of the second quarter.

The Fund's target for 2010 sales has been increased to 270,000 from 265,000 tonnes as a result of the strong second quarter sales.

The sales target is subject to various risks and uncertainties. Some of the assumptions underlying this information can be found in the "Forward-looking Information" below.

PREMIUMS

Premiums averaged 4.1 cents U.S. per pound in the second quarter of 2010, compared to 4.7 cents U.S. per pound in the second quarter of 2009. The decrease in realized premiums compared to the second quarter of the previous year reflects the impact of lower annual contract premiums in 2010 compared to 2009.

The forecast for zinc premiums for 2010 remains at approximately 4.0 cents U.S. per pound, based on the current expected sales mix.

The Fund's premium target for 2010 is subject to various risks and uncertainties. Some of the assumptions underlying this information can be found in the "Forward-looking Information" below.

PROCESSING FEE

In 2010, the processing fee was contractually increased to 38.5 cents per pound, compared to 38.0 cents per pound in 2009. The processing fee is adjusted annually: (i) upward by 1% and (ii) upward or downward by 10% of the year-over-year percentage change in the average cost of electricity per megawatt hour for the Fund.

BYPRODUCTS

In the second quarter of 2010, the Fund generated $6.8 million in revenue from the sale of its copper cake and sulphuric acid, compared to $3.5 million in the second quarter of 2009.

Copper revenues during the second quarter of 2010 were $1.5 million lower than a year ago at $1.3 million as a result of lower sales volumes and the negative price settlements that resulted from a decline in copper price. In 2009, the Fund's copper cake production was being shipped to Xstrata's Kidd copper metallurgical facility for conversion. With the closure of this facility in May 2010, new arrangements are being made to place the annual tonnage. The Fund expects copper inventories to be reduced over the next six to twelve months and be back to normal during the first half of 2011.

Revenues from the sale of sulphuric acid rose to $5.1 million from $0.3 million in the second quarter of 2009. Sulphuric acid netbacks, supported by higher spot pricing, improved significantly to U.S.$46 per tonne compared to U.S.$3 per tonne in the second quarter of 2009. Sales volumes were also higher in the most recent quarter at 108,290 tonnes compared to 94,978 tonnes a year ago.

Sulphuric Acid

The Fund produces sulphuric acid, a byproduct of the zinc refining process. Xstrata Canada has an agency agreement with the Fund to sell its sulphuric acid. The production of zinc and sulphuric acid is linked.

The following table provides a summary of the sulphuric acid production,
sales, selling price and netbacks in the second quarters and first half of
2010 and 2009:

----------------------------------------------------------------------------
                                           Second Quarter         First Half
                                            2010     2009      2010     2009
----------------------------------------------------------------------------

Sulphuric acid production (tonnes)        95,080   88,173   198,257  186,155
Sulphuric acid sales (tonnes)            108,290   94,978   210,780  180,542
Average pool selling price
 (U.S.$/tonne)                               106       67        93       94
Sulphuric acid netback
 (U.S.$/tonne)(1)                             46        3        34       34
----------------------------------------------------------------------------
(1) after deduction for selling and transportation costs and reseller profit

In the second quarter of 2010, the Fund ran at the normal operating level and therefore, sulphuric acid production was in line with historical results.

The netback in the second quarter of 2010 increased to U.S.$46 per tonne from U.S.$3 per tonne in the second quarter of 2009 because of higher selling prices on spot business.

Second quarter 2009 netbacks were negatively impacted by a one-time charge that was incurred to establish additional third-party storage facilities and due to the low market price on spot business at that time that were required to be made to manage inventories.

The majority of the Fund's sulphuric acid is sold to the U.S. and Canadian industrial market. In 2010, approximately 75% of the Fund's sulphuric acid is expected to be sold under annual contracts in order to ensure the continued sale of sulphuric acid in a timely, safe and efficient manner on a long-term basis. The remaining 25% of the sulphuric acid is expected to be sold on spot prices that are negotiated between the buyer and the seller. The Fund's netback for 2010 is expected to be less volatile than in 2009 as a result of the reduction in spot sales and the stabilizing effect of the long-term contracts.

During the second quarter, the fundamentals for sulphuric acid continued to improve as supply has tightened and industrial demand grew in step with increased manufacturing activity. Demand for sulphuric acid outside of the industrial market was strong and regular contract customers witnessed a pick-up in demand from their customers. While the strike at the Sudbury operations of Vale Inco has ended, and while it is expected that they will resume full production in the near-term, the market is forecast to remain balanced.

EXCHANGE RATE

A stronger Canadian dollar has a negative impact on the Fund's financial results. In the second quarter of 2010, a one-cent Canadian appreciation in the average Canadian/U.S. exchange rate would have negatively impacted the Fund's cash from operations by approximately $0.125 million ($0.5 million on an annual basis).

COSTS

Production costs include labour, energy, supplies and other costs directly associated with the production process. Production costs in the second quarter of 2010 were higher at $48.1 million, compared to $35.5 million in the second quarter of 2009 due to higher production levels and the impact of inventory being drawn down during the quarter.

CAPITAL EXPENDITURES

Capital expenditures in the second quarter of 2010 were $6.5 million, compared to $7.5 million in the second quarter of 2009.

For 2010, the forecast for capital spending is $25 million, up from $24 million in 2009. The bulk of the spending will be on sustaining capital, including $4 million to replace the liners in the cell house.

In addition, $1 million will be spent on a storage area for a fleet of 45 rail cars (which correspond to a unit train) that transport sulphuric acid. Until now, CN stored the empty tank cars on its site near Valleyfield. The Fund expects to recover this investment by the end of 2011.

The Fund's target for capital spending is subject to various risks and uncertainties. Some of these assumptions underlying this information can be found in the "Forward-looking Information" below.

Operating Cash Flows

Cash realized from operations, before net changes in non-cash working capital items in the second quarter of 2010 was $17.2 million compared to $(2.0) million in the second quarter of 2009. During the second quarter of 2010, non-cash working capital decreased by $4.6 million due to a reduction in accounts receivable and inventories partially offset by a decrease in accounts payable and accrued liabilities.

Distribution Policy

The Fund has not paid any distributions to Priority Unitholders or Ordinary Unitholders in 2010. The Fund's long-term goal is to provide stable, monthly distributions (dividends) to unitholders (shareholders) whether the Fund is a trust or a corporation.

When not restricted by its Revolving Facility or otherwise, the Fund's policy is to make cash distributions to unitholders equal to cash flows from operations, before variations in working capital and after permanent debt reductions and such reserves for operating and capital expenditures as may be considered appropriate by the trustees.

In addition, to the extent not distributed in a year, the Fund is required by its Trust Indentures to distribute amounts equal to its taxable income and net capital gains for a year, if any, on December 31 of such year. Such distributions are to be made in cash, unless the Fund is restricted from distributing same or cash is not otherwise available, in which case such distributions are to be satisfied by an in specie distribution of units (which units are automatically consolidated such that each certificate representing a number of units prior to the distribution of additional units is deemed to represent the same number of units after the distribution of additional units and the consolidation).

When management and the board of trustees consider making a distribution decision, they review the current and prospective performance. Some of the factors considered include cash amounts required to service debt obligations, current business conditions, capital expenditures, taxes, banking covenants, working capital requirements and other items considered to be prudent.

Limitation on Distributions

On April 19th, 2010, the Fund entered into an amendment with the Syndicate to extend the maturity date of its Revolving Facility from May 3, 2010 to November 3, 2010. The extension will enable the Fund to pursue the refinancing of its existing indebtedness with regard to the Revolving Facility and the Notes.

One of the restrictions of the extension of the Revolving Facility is that cash distributions cannot be paid to Unitholders during the Extension Period.

The Fund expects to complete the refinancing of both the Revolving Facility and the Notes prior to the November 3, 2010 maturity date of the credit facility. In addition, it expects that the terms and conditions of the refinancing are expected to include the obligation to repay the refinanced notes by May 3, 2017, the remaining term of Xstrata Canada's supply obligation under the current Supply and Processing Agreement.

These mandatory repayments are expected to reduce the Fund's future free cash flow and cash available for distribution.

During the second quarter of 2010, the notional operating reserve increased by $10.8 million to $39.3 million. In spite of the improvement during the quarter, as mentioned above, cash distributions cannot be paid to Unitholders during the Extension Period. Going forward, the ability for the Fund to make distributions will be dependant on the terms and the repayment requirements of the refinancing of the debt.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2010, the Fund's total debt (short and long-term) was $193.1 million, down from $207.9 million at the end of December 2009. The Fund's cash and cash equivalents at June 30, 2010 totalled $2.1 million, down from $2.9 million at December 31, 2009.

The Fund has a Revolving Facility in place that is used for general corporate purposes, including financing working capital. Under the extension of the Revolving Facility, the amount available to be drawn will continue to vary on a quarterly basis and will continue to be based on the same percentages of the Fund's inventory and accounts receivable from the previous quarter. The maximum available to be drawn at any time has been reduced to $120 million from $200 million to reflect the lower zinc price environment since the amendment in the fourth quarter of 2007. The decrease in the maximum available credit will reduce the standby fees that the Operating Trust is currently paying.

The Fund has the ability to draw down the Revolving Facility in both Canadian and U.S. dollars. The amount available based on the Fund's June 30, 2010 balance sheet was $109 million of which $42.5 million was drawn.

Fluctuations in working capital balances as a result of operations are generally funded by, or used to repay, the Revolving Facility. During the second quarter of 2010, $88.4 million of debt was drawn and $104.7 million was repaid related to the fluctuations in working capital.

The Fund has $153.5 million of Notes outstanding. The Notes have a term of seven years and will mature on December 20, 2010.

Both the Revolving Facility and the Notes contain customary representations, warranties, covenants and conditions to funding. The Fund's inability to meet these representations, warranties, covenants and conditions may require it to seek additional funding sources and may impact upon the Fund's ability to make distributions. All of the assets of the Fund have been pledged in support of the obligations under the Notes and the Revolving Facility.

The main covenants under the Revolving Facility agreement require the Fund to maintain, at the end of each quarter, a leverage ratio, an interest coverage ratio, and a current ratio.

--  The leverage ratio at the end of each quarter, on a rolling four-quarter
    basis, is calculated by dividing the total debt at the end of the period
    by the earnings before interest, taxes, depreciation and amortization
    ("EBITDA") for the period, as defined in the Revolving Facility
    agreement, and must not exceed 4.25 to 1.
--  The interest coverage ratio at the end of each quarter, on a rolling
    four-quarter basis, is calculated by dividing the EBITDA for the period
    by the total interest expense for that period net of the interest
    expense related to any subordinated loans, as defined in the Revolving
    Facility agreement, and must be no less than 3 to 1.
--  The current ratio is calculated at the end of each quarter by dividing
    the current assets by the total of the current liabilities plus the
    Revolving Facility, as defined in the Revolving Facility agreement, at
    the balance sheet date, and must be no less than 1 to 1.

All of the covenants under the Revolving Facility agreement were met as at
June 30, 2010 and are summarized below:

------------------------------------------------------------------------
                                                           June 30, 2010
------------------------------------------------------------------------
Leverage ratio(1) (must not exceed 4.25 to 1)                   2.6 to 1

Interest coverage ratio(1) (must be no less than 3 to 1)        5.6 to 1

Current ratio (must be no less than 1 to 1)                     1.9 to 1

------------------------------------------------------------------------
(1) four rolling-quarter average

The Revolving Facility agreement lists events that constitute an event of default should they occur. Events that constitute a default include the non payment by the Fund of principal, interest or other obligations of the Fund in respect of the Revolving Facility agreement and a breach of any covenant pursuant to the Revolving Facility agreement. If any event of default occurs under the Revolving Facility agreement, the Revolving Facility lenders will be under no further obligation to make advances to the Fund and may require the Fund to repay any outstanding obligation pursuant to the Revolving Facility agreement, which may impact the Fund's ability to make cash distributions. There were no conditions of default existing as at June 30, 2010.

The Fund has provided covenants to its noteholders, including the commitment to the punctual payment of principal and interest accrued on the Notes, in accordance with the terms of the Trust Indenture. The Fund is required to maintain a letter of credit or cash, for the benefit of the holders of the Notes, for an amount equal to or greater than three months' interest expense. The letter of credit amounted to $2.8 million as at June 30, 2010.

All of the covenants under the Trust Indenture were met for the three month period ending June 30, 2010.

As at June 30, 2010, the Fund had a working capital deficiency of $73 million, due to the upcoming maturity in 2010 of the Revolving Facility and the Notes. As discussed above, the Fund expects to approach the Syndicate and the Noteholders in the course of 2010 with the goal of refinancing the Revolving Facility and the Notes on a long-term basis. The refinancing is expected to eliminate the current working capital deficiency. The Fund's inability to further extend the Revolving Facility or refinance the Notes may require it to seek additional financing sources. The refinancing may be done at less favourable terms than what currently exist and may restrict future distributions. There is no assurance that such indebtedness could be renewed or refinanced, which can have a material adverse effect on the Fund.

The Fund has provided forward-looking information regarding a longer-term extension of the Revolving Facility and the refinancing of the Notes and it is subject to various risks and uncertainties. Some of the assumptions underlying this information can be found in the "Forward-looking Information" below.

INCOME TAXES

The Fund follows the liability method of accounting for future income taxes. Under the liability method, future income tax assets and liabilities are determined based on differences between the accounting basis and the tax basis of the assets and liabilities, and are measured using the currently substantively enacted tax rates and laws expected to apply when these differences reverse. The effect of a change in income tax rates on future tax liabilities and assets is recognized in income in the period in which the change occurs.

On June 2007, the Federal Government substantively enacted its tax legislation relating to the taxation of existing income and royalty trusts, at effective rates similar to Canadian corporations commencing in 2011. Prior to June 22, 2007, the Fund estimated the future income taxes on certain temporary differences between amounts recorded on its balance sheet for book and tax purposes at a nil effective tax rate. Under the legislation, the Fund has estimated the effective tax rate on post 2010 reversal of these temporary differences to be 28%. Temporary differences reversing before 2011 will still give rise to nil future income taxes. The Fund has estimated its future income taxes based on its best estimates of future results of operations, available CCA deduction and cash distributions and assuming no material changes to the Fund's organizational structure. The Fund estimates that the unrecognized temporary differences outstanding as of June 30, 2010 that will remain outstanding as of January 1, 2011 are approximately $57 million. The Fund's estimate of its future income taxes may vary based on actual results of the factors described above, and such variations may be material.

Taxable income and net capital gains for the year that are not distributed to unitholders in cash or in units is generally taxed in the Fund at the highest federal and provincial tax rates that are applicable to individuals. Commencing in 2011, distributions of taxable income will be taxed at the Specified Investment Flow-Through Entity rate.

OTHER DEVELOPMENTS

It is with great sadness that we report the passing of Jim Bacon on July 14, 2010. Jim had been a Trustee with the Fund since its inception in 2002. He brought sound judgment, resourcefulness and a wide-ranging intellect to board meetings. His guidance and input will be missed by the Fund's board and Manager.

The board is taking the necessary steps to address this vacancy.

FORWARD-LOOKING INFORMATION

This report, including the "Outlook" section, contains forward-looking statements within the meaning of securities laws. Amongst others, the Fund has made forward-looking statements for 2010 on second half earnings, production, sales, premiums, the processing fee and capital expenditures. The Fund provides this information because they are the key drivers of the business. Readers are cautioned that this information may not be appropriate for other reasons.

These statements are based, among others, on the Fund's current assumptions, expectations, estimates, objectives, plans and intentions regarding projected revenues and expenses, the economic and industry environments in which he Fund operates or which could affect the Fund's activities, the Fund's ability to attract and retain clients and consumers as well as the Fund's operating costs, raw materials and energy supplies which are subject to a number of risks and uncertainties.

Examples of such risks, uncertainties and other factors include, but are not limited to, the following: (1) the Fund's ability to operate at normal production levels; (2) the dependence upon the continuing supply of zinc concentrates (terms of the Supply and Processing Agreement); (3) the demand for zinc metal, sulphuric acid and copper in cake; (4) the ability to manage sulphuric acid inventories; (5) changes to the supply and demand for specific zinc metal products and the impact on the Fund's realized premiums; (6) the impact of month prior pricing; (7) the ability of the Fund to continue to service customers in the same geographic region; (8) the sensitivity of the Fund's Net Revenues to reductions in realized zinc metal prices including premiums, copper prices, sulphuric acid prices; the strengthening of the Canadian dollar vis-a-vis the U.S. dollar; and increasing transportation and distribution costs; (9) the sensitivity of the Fund's production costs to increases in electricity rates, other energy costs, labour costs and operating supplies used in its operations, the sensitivity of the Fund's interest expense to increases in interest rates; (10) changes in recoveries and capital expenditure requirements; (11) the negotiation of collective agreements with its unionized employees; (12) general business and economic conditions; (13) transportation disruptions; (14) the legislation governing air emissions, discharges into water, waste, hazardous materials and workers' health and safety, as well as the impact of future legislation and regulations on expenses, capital expenditures, taxation and restrictions on the operation of the Processing Facility; (15) potential negative financial impact from regulatory investigations, claims, lawsuits and other proceedings; (16) loan default and refinancing risk; and (17) reliance on Xstrata Canada for the operation and maintenance of the Processing Facility.

Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "would", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective" or "continue" or the negative of these terms or variations of them or words and expressions of similar nature. Actual results could differ materially from the conclusion, forecast or projection stated in such forward- looking information. As a result, the Fund cannot guarantee that any forward-looking statements will materialize. Assumptions, expectations and estimates made in the preparation of forward-looking statements and risks that could cause the Fund's actual results to differ materially from the Fund's current expectations are discussed throughout this document and in our most recently filed Annual Report which is available on SEDAR at www.sedar.com. Forward-looking information contained in this report, including the "Outlook" section, is based on management's current estimates, expectations and assumptions, which management believes are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Except as required by law, the Fund does not undertake to update these forward-looking statements, whether written or oral, that may be made from time to time by the Fund or on the Fund's behalf.

Noranda Income Fund is an income trust whose units trade on the Toronto Stock Exchange under the symbol "NIF.UN". The Noranda Income Fund owns the CEZinc processing facility and ancillary assets (the "CEZinc processing facility") located in Salaberry-de-Valleyfield, Quebec. The CEZinc processing facility is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America, where the majority of its customers are located. It produces refined zinc metal and various by-products from zinc concentrates purchased from mining operations. The Processing Facility is operated and managed by Canadian Electrolytic Zinc Limited.

Further information about the Noranda Income Fund can be found at www.norandaincomefund.com.

                        NORANDA INCOME FUND

                INTERIM CONSOLIDATED BALANCE SHEETS

                            (unaudited)

                           ($ thousands)


                                                 June 30    Dec. 31
                                                    2010       2009
                                               ---------  ---------
ASSETS

Current assets:
Cash and cash equivalents                          2,080      2,895
Accounts receivable
 Trade                                            75,101     77,126
 Xstrata Canada                                   10,813      8,270
Commodity hedging instruments                          -      4,409
Commodity financial instrument                     1,494          -
Firm commitments                                   7,087          -
Inventories                                       75,283    110,875
Prepaids and other assets                          1,473        949
                                               ---------  ---------
                                                 173,331    204,524

Long-term commodity hedging instrument               165      1,110
Property, plant and equipment                    291,838    295,756
                                               ---------  ---------
                                                 465,334    501,390
                                               ---------  ---------

LIABILITIES AND EQUITY

Current liabilities:
Accounts payable and accrued liabilities
 Trade                                            18,727     16,254
 Xstrata Canada                                   27,664     72,477
Commodity financial instruments                        -      3,587
Commodity hedging instrument                       6,553          -
Firm commitments                                       -      4,112
Current portion of the long-term debt            193,078    207,886
                                               ---------  ---------
                                                 246,022    304,316

Long-term firm commitments                           178      1,111
Future tax liability                              14,641     13,147
Future site restoration and reclamation            9,341      9,006
Interests of Ordinary Unitholders                 54,328     48,619

Unitholders' Interest:
Unitholders' equity                              191,273    191,273
Deficit                                         (50,449)   (66,082)
                                               ---------  ---------
                                                 140,824    125,191
                                               ---------  ---------
                                                 465,334    501,390
                                               ---------  ---------



                             NORANDA INCOME FUND

       INTERIM CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND DEFICIT
                       AND COMPREHENSIVE INCOME (LOSS)

                                 (unaudited)

                                ($ thousands)

                                        Three months              Six months
                                       ended June 30           ended June 30
                             -----------------------  ----------------------
                                    2010        2009        2010        2009
                              ----------  ----------  ----------  ----------

Revenues
Sales                            157,733      85,583     328,890     191,685
Transportation and
 distribution costs              (3,876)     (2,980)     (7,426)     (6,605)
                              ----------  ----------  ----------  ----------
                                 153,857      82,603     321,464     185,080

Raw material purchase costs       72,600      45,119     173,611      86,636
                              ----------  ----------  ----------  ----------

Revenues less raw material
 purchase costs                   81,257      37,484     147,853      98,444
                              ----------  ----------  ----------  ----------

Other expenses
Production                        48,074      35,485      90,765      79,638
Selling, general and
 administration                    5,298       4,655      10,478       9,328
Foreign exchange (gain) loss       5,830     (2,895)       3,762     (1,047)
Commodity hedging gain             (605)        (79)       (224)         (7)
Financial instruments gain       (2,260)     (4,887)     (5,081)     (2,118)
Amortization of property,
 plant and equipment               9,291       8,123      17,842      16,493
Reclamation                          182     (4,326)         359     (4,074)
                              ----------  ----------  ----------  ----------
                                  65,810      36,076     117,901      98,213
                              ----------  ----------  ----------  ----------

Earnings before interest,
 minority interest and income
 tax                              15,447       1,408      29,952         231
                              ----------  ----------  ----------  ----------

Interest expense, net              4,052       2,355       7,116       4,829
                              ----------  ----------  ----------  ----------

Earnings (loss) before
 minority interest and income
 tax                              11,395       (947)      22,836     (4,598)
                              ----------  ----------  ----------  ----------

Minority interest in earnings
 for Ordinary Unitholders          2,849       (237)       5,709     (1,150)
                              ----------  ----------  ----------  ----------

Net earnings (loss) before
 income tax                        8,546       (710)      17,127     (3,448)
                              ----------  ----------  ----------  ----------

Future Income tax expense              -           -       1,494           -
                              ----------  ----------  ----------  ----------

Net earnings (loss) and
 comprehensive income (loss)       8,546       (710)      15,633     (3,448)
                              ----------  ----------  ----------  ----------

Deficit beginning of period     (58,995)    (61,016)    (66,082)    (52,091)
                              ----------  ----------  ----------  ----------

Distributions to Priority
 Unitholders                           -     (4,500)           -    (10,687)
                              ----------  ----------  ----------  ----------

Deficit end of period           (50,449)    (66,226)    (50,449)    (66,226)
                              ----------  ----------  ----------  ----------

Net earnings (loss) per
 Priority Unit (basic and
 diluted)                    $      0.23 $    (0.02) $      0.42 $    (0.09)

Weighted average Priority
 Units outstanding            37,497,975  37,497,975  37,497,975  37,497,975



                             NORANDA INCOME FUND

                INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (unaudited)

                                ($ thousands)

                                            Three months           Six Month
                                           ended June 30       ended June 30
                                    -------------------- -------------------
                                          2010      2009      2010      2009
                                     --------- --------- --------- ---------

Cash realized from (used for)
 operations:
Net earnings (loss) for the period       8,546     (710)    15,633   (3,448)
Items not affecting cash:
 Amortization of property, plant and
  equipment                              9,291     8,123    17,842    16,493
 Reclamation                               182   (4,326)       359   (4,074)
 Minority interest in earnings for
  Ordinary Unitholders                   2,849     (237)     5,709   (1,150)
 Future income tax expense                   -         -     1,494         -
 Mark-to-market gain on commodity
  hedging instruments                    (605)      (79)     (224)       (7)
 Mark-to-market loss (gain) on
  financial instruments                  2,340   (4,887)     1,059   (2,118)
 Change in fair value of embedded
  derivatives                          (6,693)     (198)   (8,863)     3,736
 Accretion on long-term debt                63        64       126       128
 Loss from sale of property, plant
  and equipment                            155       275       337       732
 Write-down of inventory                 1,144         -     1,144         -
Site restoration expenditures             (27)         9      (24)      (72)
                                     --------- --------- --------- ---------
                                        17,245   (1,966)    34,592    10,220
                                     --------- --------- --------- ---------
Net change in non-cash working
 capital items                           4,638    19,928   (7,905)    23,414
                                     --------- --------- --------- ---------
                                        21,883    17,962    26,687    33,634
                                     --------- --------- --------- ---------

Cash realized from (used for)
 investment activities:
Purchases of property, plant and
 equipment                             (6,484)   (7,512)  (12,707)  (13,298)
Proceeds on sales of property, plant
 and equipment                             131         -       139         -
                                     --------- --------- --------- ---------
                                       (6,353)   (7,512)  (12,568)  (13,298)
                                     --------- --------- --------- ---------

Cash realized from (used for)
 financing activities:

Distributions - Priority Unitholders         -   (4,499)         -  (12,374)
 - Ordinary Unitholders                      -         -         -   (2,125)
Long-term debt issued under the
 Revolving Facility                     88,387    53,000   198,602   118,000
Long-term-debt repaid under the
 Revolving Facility                  (104,736)  (55,777) (213,536) (123,490)
                                     --------- --------- --------- ---------
                                      (16,349)   (7,276)  (14,934)  (19,989)
                                     --------- --------- --------- ---------

Change in cash and cash equivalents
 during the period                       (819)     3,174     (815)       347

Cash and cash equivalents, beginning
 of period                               2,899       628     2,895     3,455
                                     --------- --------- --------- ---------
Cash and cash equivalents, end of
 period                                  2,080     3,802     2,080     3,802
                                     --------- --------- --------- ---------