Farallon Announces First Quarter Financial and Operating Results
$6.2 Million Net Earnings
25m lb of Zinc Produced at a Total Cash Cost(1) of $0.38/lb payable zinc
VANCOUVER, May 12 /PRNewswire-FirstCall/ - Farallon Mining Ltd. ("Farallon" or the "Company") (TSX:FAN) announces its financial and operating results for the three months ended March 31, 2010. Currency amounts are stated in United States Dollars, unless otherwise noted.
The Company's G-9 mine produced a record 25.0 million pounds of zinc and 2.1 million pounds of copper in concentrates at a total cash cost(1) of $0.38/lb of payable zinc. Farallon reported net earnings of $6.2 million and the Company generated $6.0 million in cash from operations before changes in non-cash working capital.
"The G-9 mine has increased production every quarter since production began in the first quarter of 2009" said President and CEO Dick Whittington. "Quarterly production has steadily increased from 1,180 tpd to 1,650 tpd, a 40% increase over the last 15 months. With improvements in throughput to over 1,900 tonnes per day in March and April and metallurgical improvements being made, the G-9 mine is now providing steady cash flow and a base from which we can deliver on our objective of becoming a mid-tier, multi-mine company."
Highlights for the three months ended March 31, 2010 ("Q1") compared to the three months ended December 31, 2009 ("Q4") are as follows:
Financial
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- Operating earnings of $9.1 million and net earnings of $6.2 million,
up from operating earnings of $3.9 million and net earnings of nil
in Q4.
- Cash flow from operations before changes in non-cash working capital
of $6.0 million, up from $2.2 million in Q4.
- Gross revenues of $37.6 million, up from $32.3 million in Q4.
- Non-GAAP Adjusted EBITDA(1) of $9.0 million, up from $4.5 million
in Q4.
- Total cash cost per payable pound of zinc(1) of $0.38/lb (including
$0.31/lb for the month of March 2010), down from $0.44/lb in Q4.
- Working capital of $18.2 million at March 31, 2010, up from
$14.9 million at Dec 31, 2009.
Operations
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- Processed 152,178 tonnes of ore (average throughput 1,691 tonnes
per day - "tpd") grading 9.1% zinc, 1.1% copper, 174 g/t silver and
2.5 g/t gold. Increased throughput rates for the month of March
2010, processing 59,715 tonnes of ore for an average rate of
1,926 tpd or 128% of design.
- Produced 23,365 tonnes of zinc concentrate and 6,952 tonnes of
copper concentrate, containing an estimated 25.0 million pounds of
zinc, 2.1 million pounds of copper, 420,911 ounces of silver and
4,322 ounces of gold from the G-9 mine.
- Sold approximately 22,420 tonnes of zinc concentrate grading 48%
zinc and 9,480 tonnes of copper concentrate grading 14% copper.
Payable metals contained in concentrate were 20.0 million pounds of
zinc, 2.7 million pounds of copper, 336,000 ounces of silver and
4,106 ounces of gold. Realized metal prices on sales of $0.99/lb
zinc and $3.23/lb copper.
- Given the success of increasing mill throughput to over 1,900 tpd
in March and April, the Company is revising the scope of the Mill
Expansion project to determine the maximum throughput that can be
obtained within the approved capital budget of $5.3 million.
However, the Company continued with procurement of additional
regrind and flotation equipment for the Mill Expansion Project. The
project was originally designed to increase mill capacity from
1,500 tpd to 2,000 tpd by July 2010.
Exploration
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- Continued exploration drilling at Campo Morado with two surface
drills and one underground drill operational as part of a
$5.4 million program for 2010.
- Updated the G-9 mineral resource estimate as at December 31, 2009
which includes 3.0 million tonnes of Measured and Indicated
Resources at 9.4% zinc and 1.3% copper as well as 0.9 million
tonnes of Inferred Resources at 9.2% zinc and 1.1% copper (at a 3.0%
zinc cut-off)(2).
- Upgraded a portion of the mineral resources as at December 31, 2009
to mineral reserves, including 2.0 million tonnes of Proven and
Probable Reserves at 10.0% zinc and 1.34% copper(2).
- Initiated an engineering study on the treatment of El Largo, Naranjo
and El Ray deposits. The study is investigating the mining and
processing of 4.9 million tonnes of Indicated Mineral Resources at
6.4% zinc, 2.1 g/t gold and 165 g/t silver (at a 5% zinc cut-off
grade) with the existing mining equipment and processing
facilities(2).
- As part of its preliminary assessment of the potential for high
grade gold zones being present below the main zinc orebodies, the
Company announced on April 21, 2010 the discovery of three distinct
high-grade gold zones outside the current mineral resources (at a 5%
zinc cut-off grade) at the G-9 mine. These zones contain estimated
Inferred Mineral Resources of 225,038 tonnes grading 8.6 g/t gold
and 407 g/t silver (at a 5 g/t gold cut-off grade)(3).
Dick Whittington said "The exploration program at Campo Morado is continuing on three fronts. First, the Company has two surface drills exploring north of the Abajo zone, targeting new lenses on the Abajo horizon. Second, we continue to utilize underground drilling to delineate new high-grade zinc resources in and around the existing G-9 mining operations. Third, the program to evaluate and expand upon the newly announced gold zones is advancing."
This new release should be read in conjunction with the Company's financial statements and MD&A which are available on SEDAR and the Company's website. Farallon will hold a conference call tomorrow, Thursday May 13, 2010, at 8:00 am Pacific time (11:00 am Eastern) to discuss these results. The call can be accessed at (647) 427-7450 or toll-free at (888) 231-8191. A live webcast will also be available at www.farallonmining.com.
Farallon operates the G-9 zinc mine on its Campo Morado Property in Guerrero State, Mexico. G-9 is a 1,500 tonnes per day, underground, zinc mine with important by-product credits of copper, gold and silver. The Company is targeting to produce at an annualized production rate of 120 million pounds of zinc and 15 million pounds of copper per year.
For further details on Farallon, please visit the Company's website at www.farallonmining.com or contact Neil MacRae, Investor Relations Manager, at (604) 638-2160 or within North America at 1-877-688-2050.
ON BEHALF OF THE BOARD OF DIRECTORS
J.R.H. (Dick) Whittington, President & CEO
Production Q1 2010 Q4 2009
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Metals (contained in concentrate)
Zinc (000's Pounds) 24,950 23,383
Copper (000's pounds) 2,139 2,443
Silver (ounces) 420,911 382,120
Gold (ounces) 4,322 4,224
Ore Mined (tonnes) 154,580 150,984
Ore Processed (tonnes) 152,178 142,752
tonnes per day 1,691 1,552
Zinc grade (%) 9.1 9.3
Copper grade (%) 1.1 1.4
Silver grade (%) 174 182
Gold grade (%) 2.5 3.0
Concentrate
Zinc (DMT) 23,365 21,584
Zinc (%) 48.4 49.1
Silver (g/t) 290 295
Gold (g/t) 2.3 2.4
Copper (DMT) 6,952 7,157
Copper (%) 14.0 15.4
Silver (g/t) 909 766
Gold (g/t) 11.6 11.0
Recovery Q1 2010 Q4 2009
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Zinc (%) 82 80
Copper (%) 59 56
Silver (%) 49 47
Gold (%) 39 32
Costs Mar-10 Q1 2010 Q4 2009
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Site Costs (US$/t milled) $67.17 $76.74 $81.42
Total Cash Costs (US$/payable lb zinc)(1) $0.31 $0.38 $0.44
FARALLON MINING LTD. (Expressed in Thousands of United States Dollars)
Summary of Consolidated Balance Sheets (USD '000s)
31-Mar-10 31-Dec-09
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Assets
Cash and equivalents 20,900 21,574
Other Current Assets 19,680 17,744
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Current Assets 40,580 39,318
Property, Plant and Equipment 125,832 127,530
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TOTAL ASSETS 166,412 166,848
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Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities 14,564 15,428
Other Current Liabilities 7,778 9,007
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Current liabilities 22,342 24,435
Long term debt (Credit Suisse) 21,900 24,319
Silver Wheaton deferred revenue 72,037 74,499
Site closure and reclamation obligation 583 561
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Long term liabilities 116,862 123,814
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Shareholders' equity 49,550 43,034
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TOTAL LIABILITIES & EQUITY 166,412 166,848
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Working Capital 18,238 14,883
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Summary of Consolidated Statements of Operations and Comprehensive Loss
(USD '000s)
Q1 Q4
2010 2009
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Gross Sales Revenue 37,595 32,343
Cost of Sales (25,457) (25,142)
Depreciation, depletion and amortization (3,018) (3,244)
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Earnings (loss) from operations 9,120 3,957
Exploration 1,443 599
Office Costs 1,675 2,058
Other Expenses (income) (241) 1,182
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Expenses (income) 2,877 3,839
Current income tax (recovery) expense 41 74
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Net Earnings (loss) 6,202 44
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Non-GAAP Adjusted EBITDA 9,020 4,544
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Summary of Consolidated Statement of Cash Flows (USD 000's)
Q1 Q4
2010 2009
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Earnings (loss) for the period 6,202 44
Amortization of Deferred Revenue (2,462) (2,304)
Items not involving cash 2,267 4,511
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Cash Flow from Operations before changes in
non-cash working capital 6,007 2,251
Changes in non-cash working capital (6,529) 2,156
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Cash Flow from (used in) Operations (522) 4,407
Investing Activity - Additions to Property
Plant Equipment (1,298) (1,919)
Financing Activity 46 9,894
Foreign Exchange Gain (loss) 1,100 (1,854)
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Increase (Decrease) in cash and equivalents (674) 10,528
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Cash and equivalents, beginning of period 21,574 11,046
Cash and equivalents, end of period 20,900 21,574
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Notes:
(1) Total Cash Costs and Adjusted EBITDA are Non-GAAP Financial Measures.
Please read page 11 of the Company's MD&A for further information.
(2) Further information on these mineral resource and reserve estimates
is included in the Company's March 29, 2010 news release. The Mineral
Reserves are stated at a 3% zinc grade cut-off for the Abajo, West
Extension and South East zones and a 5% zinc grade cut-off for the
North zone.
(3) Further information on the mineral resources in the gold zones is
included in the Company's April 21, 2010 news release.
No regulatory authority has approved or disapproved the information contained in this news release
Forward Looking Information
This news release includes certain statements that may be deemed "forward-looking statements." All statements in this release, other than statements of historical facts, that address future production, reserve or resource potential, continuity of mineralization, exploration drilling, operational activities, production rates, costs to completion and events or developments that the Company expects, or is targeting, are forward-looking statements. Although the Company believes that the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward looking statements and may require achievement of a number of operational, technical, economic, financial and legal objectives. The likelihood of continued future mining at Campo Morado is subject to a large number of risks, including obtaining lower than expected grades and quantities of mineralization and resources, lower than expected mill recovery rates and mining rates, changes in and the effect of government policies with respect to mineral exploration and exploitation, the possibility of local disputes including blockades of the company's property, the possibility of adverse developments in the financial markets generally, fluctuations in the prices of zinc, gold, silver, copper and lead, obtaining additional mining and construction permits, preparation of all necessary engineering for ongoing underground and processing facilities as well as receipt of additional financing to fund mine construction, development and operation, if needed. Such funding may not be available to the Company on acceptable terms or on any terms at all. For more information on the Company and the risk factors inherent in its business, investors should review the Company's Annual Information Form at www.sedar.com.
Information Concerning Estimates of Measured, Indicated and Inferred Resources
This news release uses the terms "measured resources", "indicated resources" and "inferred resources". Farallon advises investors that although these terms are recognized and required by Canadian regulations (under National Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S. Securities and Exchange Commission does not recognize them. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. In addition, "inferred resources" have a great amount of uncertainty as to their existence, and economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, or economic studies except for Preliminary Assessment as defined under 43-101. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.
SOURCE Farallon Mining Ltd.
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