Lappland Goldminers AB (publ): Interim report January - March 2010

Lappland Goldminers present improved earnings and positive cash flow from
operations during the first quarter 2010.

First quarter 2010

  * Sales were 57,3 MSEK (20,2 MSEK)
  * Result before depreciation was 5,1 MSEK (-19,9 MSEK)
  * Net loss was -0,8 MSEK (-24,9 MSEK)
  * Basic result per share was -0,01 (-0,39)
  * Goldproduction was 180 kgs (117 kgs)

Overview


Comments by CEO, Kjell Larsson

It is encouraging that we now generate positive cash flow from the operations
and can present improved earnings. We have also, to a large extent, been able to
replace the ore mined at Pahtavaara during 2009 with new ore. The convertible
issue with preferential rights for the shareholders now gives us the possibility
to realize our targets for Fäboliden, Ersmarksberget and Pahtavaara.


 Highlights during the first quarter 2010

  * The update of the feasibility study for the Fäboliden gold project continued
    during the first quarter. The ongoing study indicates lower gold grades,
    compared to the previous study from 2008, which result in lower mineral
    reserves and mineral resources. However, the study is positively affected by
    an increasing goldprice.
  * Lappland Goldminers completed a 100% guaranteed issue of convertibles with
    preferential rights for the existing shareholders. An extraordinary
    shareholders meeting held on 16 March approved the transaction. The issue
    generated 122.2 MSEK before associated costs. The transaction was completed
    in April 2010. For complete information of the terms of the issue see the
    press release issued by Lappland Goldminers on 19 February, 2010 and the
    prospectus dated 29 March, 2010.
  * Lappland Goldminers presented new estimates of the mineral reserves and
    mineral resources at the Pahtavaara mine. The estimates confirm an extended
    life of mine until the end of June 2011. As of 1 January, 2010, the mineral
    reserves were 678,000 tonnes containing 2.79 grams of gold per tonne.

Segmented Financial Information



Pahtavaara

Mining and milling operation performed well, during the quarter, with the
exception of lower grades than expected from the mine in March. The grades
continue to fluctuate while the recoveries during the quarter exceeded
expectations and were higher than the fourth quarter 2009. The program initiated
during the third quarter 2009 continues and aims to improve the knowledge about
the inconsistency of the ore and how mining production can be planned. The
geometry of the ore bodies are difficult to predict prior to mining.

Underground core drilling has been carried out since April 2008 in order to
increase the ore reserves and the mineral resources. The surroundings of the
present mine are considered unexplored by the company and therefore systematic
exploration around the open pits was initiated in June 2009. Four earlier partly
explored targets adjacent to the open pits were drilled during the second half
of 2009. Totally 5 700 meters of surface drilling was done. The majority of the
drilling, 3 900 meters, was concentrated on a mineralization called Länsi
 (West) located north-west of and adjacent to the old open pits.


The results from the exploration campaign are under compilation and are expected
to be available during the second quarter of 2010. Focus on exploration 2010 is
to continue the drilling to delineate the Länsi mineralization which still is
open both towards the depth and to the north-west. Further exploration is
planned within the exploration licenses that the company has around the mining
concession in order to increase the existing mineral reserves and mineral
resources, which are expected to be depleted during the second quarter of 2011
if not increased. As of January 1, 2010 the ore reserves at Pahtavaara were
678,000 tonnes containing 2.79 grams per ton.


Ersmarksberget

During the fourth quarter 2009 the company resumed the core drilling program
towards depth and strike of the indicated gold lenses on the Ersmarksberget
mining lease. A total of eight deep drill holes, totaling 3,500 meters, are
planned before the end of the second quarter 2010. Five of the eight drillholes
have now been drilled. The present verified measured and indicated resources,
from 2009, are 448,000 tonnes with 2.85 grams of gold per ton. The objective is
to significantly increase the mineral resources before opening of the mine.

The plan is to evaluate a possible start-up of mining operations as soon as the
drill results, pilot mining and metallurgical tests, have been analyzed and
completed. The information necessary for a decision is expected to be available
during the third quarter 2010. The mill, at the mine site, is well equipped for
future production and is running on standby mode to prevent it from
dilapidation. At the same time any excess water on site is treated in the plant.


Fäboliden

The feasibility study, dated April 2008, is presently being updated by Golder
Associates. The work is scheduled to be finalized during the third quarter
2010. The definitive feasibility study will include a mining plan and
evaluations of all financial parameters of the project. The ongoing study
indicates lower gold grades, compared to the previous study from 2008, which
result in lower mineral reserves and mineral resources. However, the study is
positively affected by an increasing goldprice.

Outlook
The previously communicated forecasted production for 2010, of more than 800 kgs
of gold, remains unchanged.



Income Statement

Sales increased significantly during the first quarter 2010 compared to the
first quarter 2009 and reached SEK 57.3 million compared to SEK 20.2 million.
Sales increased by SEK 9.6 million compared to the fourth quarter 2009. The
increase is due to increased deliveries of gold from Pahtavaara which impacted
sales. A total of 219 kgs of gold were delivered from Pahtavaara during the
quarter at an average price of 1,133 USD per ounce.



The Pahtavaara operations contributed with a profit before depreciation of SEK
15,2 million during the quarter. Environmental costs at Ersmarksberget of SEK
4.2 million, exploration costs of SEK 1.0 million and corporate costs partly
offset the quarterly profit at Pahtavaara. The group recorded a profit before
depreciation of SEK 5.1 million which can be compared to a loss of SEK 19.9
million for the corresponding quarter 2009.



The environmental charges at Ersmarksberget are due to the mill running on
standby mode to prevent it from dilapidation and treatment of excess water from
the old mining site.



Depreciation charges during the quarter of SEK 6.3 million are primarily due to
depreciation of capitalized ore development at Pahtavaara. Depreciation charges
are calculated using of a unit of production method in relation to the remaining
ore reserves.



The net loss for the group during the first quarter was SEK 0.8 million compared
to a net loss of MSEK 24.9 million for the corresponding quarter 2009. The
improved result is primarily due to the Pahtavaara operations being in a
start-up phase during the first quarter 2009 which resulted in higher unit of
production costs. The activities at the mill in Ersmarksberget were also higher
during the first quarter 2009 compared to today as the operations had initiated
preparatory production work.  The activities at Ersmarksberget are now limited
with lower costs as a result. The costs at Ersmarksberget have been decreased
with SEK 3.0 million compared to the first quarter 2009.



Cashflow

The net change in cash position was negative SEK 1.4 million during the quarter.
Cash flow from operations, before working capital changes, was positive during
the quarter and reached SEK 4.3 million which can be compared to negative SEK
20.8 million for the first quarter 2009 and negative SEK 61.3 million for the
full year 2009. The Pahtavaara operations generated positive cash flow and
contributed SEK 15.2 million during the quarter, before working capital changes.



Total capital expenditures during the quarter were SEK 16.8 million of which
Pahtavaara accounted for SEK 8.8 million and costs associated with the
feasibility study at Fäboliden were SEK 6.5 million. Capital expenditures at
Pahtavaara are primarily related to ore development when the operations are
moving into new areas within the existing mine.



Lower inventory at Pahtavaara and lower account receivables contributed to
reduced working capital. The net positive change of working capital was SEK 3.1
million.



Financial position

The company believes the recently completed convertible bond issue, of SEK 122
million before costs, brings sufficient capital to complete the ongoing
feasibility study at Fäboliden and carry out the ongoing drilling programs at
Ersmarksberget and Pahtavaara. Cash and bank balances were, as of 31 March
2010, SEK 14.4 million and undrawn overdraft facilities were SEK 10.4 million.


Parent company

Sales, which are mainly internal, were SEK 1.1 million during the first quarter
2010. The operating costs are mainly group overhead costs for geology,
administration and group management and were SEK 7.1 million during the first
quarter 2010. Financial costs of SEK 10.3 million for the quarter relate mainly
to exchange differences on intra-group loans.


Unit costs and realized gold prices.

The Gold Price

Other information

Major customers
The sales of the group presently come from the Pahtavaara mine. Pahtavaara
produces three types of gold concentrate - gravimetric concentrate, middling
concentrate and flotation concentrate. Currently, all concentrate is shipped to
three major customers in Europe and Asia.

Risks and uncertainties
A number of risk factors can have a negative impact on the operations of the
group and the parent company. External and internal factors can influence the
financial position and the growth of Lappland Goldminers. Factors, among others,
which can influence the company are the price of gold, currency risks, estimates
of mineral reserves and mineral resources, interest risks, liquidity- and
financing risks, electricity- and energy prices, key staff and employees,
permits, environmental factors and political risks. For further information
regarding risks and uncertainties see page 23 of the 2009 Annual Report of
Lappland Goldminers.

Environment
The operations of the company require, in many cases, permissions from
authorities. See page 23 of the 2009 Annual report of Lappland Goldminers for
further information regarding environmental impact.

Employees
The company and subsidiaries have 62 employees (2009 - 62). In addition to this,
the Company engages consultants and contractors for various projects on a
continuing basis. Altogether the company and subsidiaries engage the equivalent
of 110 (2009 - 100) full time employees.

Reporting dates

Interim report January-June 2010      August 12, 2010

Interim report January-September 2010 November 11, 2010



Annual General Meeting
Lappland Goldminers' annual general meeting will be held May 19, 2010 in
Stockholm. An information meeting, following the AGM, will be held May 20, 2010
in Lycksele.

Dividends
The Board of Lappland Goldminers proposes the annual general meeting that no
dividends are paid for 2009.

Annual Report
The Annual Report is found on the Company's web site with possibility for
downloading and printing.

Accounting principles
This report has been prepared in compliance with IAS 34 - Interim Financial
Reporting and according to Swedish "Årsredovisningslagen". The company applies
IFRS 3r and IAS 27r but concludes they have no material impact on the financial
statements. The same accounting principles have been applied as in the last
issued Annual Report. For detailed information regarding accounting principles,
see the Annual Report 2009.

                             Lycksele, May 19, 2010
                                 Kjell Larsson
                            Chief Executive Officer

The interim report for the period January - March 2010 has not been reviewed by
the company's auditors.

For further information please contact:

Kjell Larsson, CEO Tel: 0950-275 06, 070-385 03  57
E-mail:kjell.larsson@lgold.se
 <mailto:kjell.larsson@lgold.se>

Anders Haker, CFO, Tel: 0708-108559,
E-mail:anders.haker@lgold.s <mailto:anders.haker@lgold.se>e


The full press release including tables and chart can be downloaded from the
following link.



[HUG#1417027]