Sep 10
7
The Company has been focused on operational improvements and efficiencies in all aspects of the G-9 operation. Management is focused on delivering 2,000 tpd at reserve grades of 10% by Q4 2010. Improvements in metallurgical performance will also be high on the list of priorities for the company. The G-9 Mine has proven to be one of the lowest cash cost zinc producers in the world at $0.05/lb of zinc in Q2 2010 and the company intends to maintain that low-cost advantage that mine enjoys on the global scale. The plan is to add the new G-9 “gold zones” into the mine plan going forward and will be additive to current zinc resource base that the company has established. This should help further improve the economics of the operation at G-9.
From an exploration perspective, Farallon has recently completed a Titan 24 IP survey along the Abajo horizon to focus on anomalies that are present on the property. Once the data has been analyzed against the current geological information that the company has, new targets should become the focus of the surface exploration program. The company currently has two surface drills on site and plans to quickly engage them when the targets are identified. Further good news from the drill bit is highly anticipated. These types of volcanogenic massive sulphide (VMS) deposits are known to be complex by their nature, however once a company is operating in an area of VMS deposits; the likelihood for future discoveries is very strong. Farallon has numerous untested anomalies on the Campo Morado property that give the company significant exploration upside.
Additionally, Farallon Mining has engaged engineering consultants to produce a Pre-Feasibility Study on the original deposits on the Campo Morado property including Reforma, Naranjo, El Rey and El Largo. These deposits host 11.2 million tonnes of indicated resources that contain close to 1 million ounces of gold and 60 million ounces of silver. Since the last time these deposits were review, three major developments have occurred that should help add to the economic viability of opening a second mine on the property. First, the price of gold has tripled from $400/oz to over $1,250/oz today. Second, the property now has the infrastructure built on-site to enable a much cheaper and smoother transition into production. The existing G-9 mill could potentially treat the ores from the original deposits. Finally, the understanding of the metallurgy on-site has been greatly enhanced, and with the company’s ability to produce a precious-metals rich copper concentrate at G-9 that is very marketable in the global concentrates trade, this allows the company greater options to pursue a similar-type precious metal rich copper concentrate from these original deposits as well.
Farallon is still strategically focused on growing both organically through the existing opportunities mentioned above; however there is also the external strategy to grow through merger and acquisition opportunities. The intention is to eliminate the “one-mine” discount in the market-place, through a strategic merger with the resulting entity receiving greater valuation multiples in the marketplace by the fact that risk is diversified across two cash-flow positive mining operations.
There are few opportunities in the marketplace to play the zinc market. Farallon is an opportunity that allows the shareholder to add a zinc story to their portfolio. Many of the other metals have had strong runs in the past 6 months or so. Zinc on the other hand, has been sitting on the sidelines waiting for an opportunity to break-out. Farallon is well-positioned to take full advantage of any upswing in zinc prices. Going forward the Board and Management of Farallon Mining Ltd. are focused on greater rewards and growth for all the shareholders.
