Jul 10
6
Farallon Mining has been making steady progress on many fronts through the first half of 2010, operations have exceeded the original design capacity by 20% to 30%, cash costs are now in the lowest 10% of zinc producers worldwide. At the same time, exploration is continuing with more strong results anticipated in the near future, on both the zinc front and the also the newly announced gold zones adjacent to the mining areas at the G-9.
The most recent announcement from the Company relates to the original four deposits at Campo Morado (Reforma, El Largo, El Rey, and Narnano) These deposits host just under 1 million ounces of gold and approximately 60 million ounces of silver. (see the Farallon news release from June 29, 2010 for further details on the resource). The company has initiated a study on these deposits to determine the economic viability of building a second mining operation at the Campo Morado property. In this gold price environment, and with the existing infrastructure in place with the current mining operations at G-9 it makes very good sense to look at the viability of bringing these existing deposits into production as well. There has been a quantum change in the price of gold – and I have been and continue to be bullish on gold – so this is definitely an idea whose time has come. So don’t expect Farallon to dilly dally here.
Exploration news from the G-9 mine is expected shortly. Given their track record I am eagerly awaiting these results. The likelihood for future exploration success and therefore resource growth is strong. With these types of deposits it is very common to continue to add resources to the mine-life especially when you are underground and drilling off areas that are adjacent to the exisiting operations.
The newly announced high-grade gold zones in April 2010 are also very significant for the company, particularly as they are apparently very easily accessible from current mine workings. Therefore the company can take full advantage of these highly economic gold zones. The company is currently studying the metallurgy in these gold zones and this will help determine what kind of recoveries can be expected with this ore.
The company is also vigorously pursuing M&A activities with an eye to building a multi-mine, mid-tier, low-cost mining company. The company is evaluating potential mergers with like-minded mining companies that are either producing cash flow from their operations currently or at a late-stage development point where they could be very quickly brought into a cash flow positive position. Transforming Farallon from a single mine company to a multi-mine company can, in my view, have a near term effect on share price.
Farallon is now at a point where they are set to grow. The tough sledding through the early years has now passed and with the experience and expertise that has been gained through the entire construction and ramp-up process behind the company, the focus can be on maximizing the shareholder value through an array of activities that should fairly quickly put Farallon on the centre stage of the mid-tier mining space. Get ready as it appears it’s going to be a very interesting 2010 and beyond!
