Approximately one million ounces of gold in indicated resources
Studies to target building a second mine by July 1, 2013
VANCOUVER, June 29 /PRNewswire-FirstCall/ - Farallon Mining Ltd. ("Farallon" or the "Company") (TSX:FAN) announces that as a result of the recent rapid rise in gold prices, the Company is formally initiating studies to re-evaluate the Reforma, Naranjo, El Largo and El Rey deposits to assess the feasibility of building a second mine at Campo Morado, with a target start date of July 1, 2013. The Company already has one operation at Campo Morado - the G-9 mine - currently operating at 20 - 30% above design capacity. The second mine would piggy back on infrastructure already in place and be "incremental" to the current G-9 mine operation.
Indicated resources for the Reforma, El Rey, Naranjo and El Largo deposits total 11.2 million tonnes of 4.7% zinc, 0.7% copper, 1.4% lead, 165 grams per tonne of silver and 2.7 grams per tonne of gold (see news release dated September 19, 2005 and Table 1 attached). Contained gold totals 960,000 ounces and contained silver totals 60 million ounces. A map showing the location of these deposits, relative to the Company's operating G-9 mine is attached. (To view the Campo Morado Deposits Map, please visit: http://files.newswire.ca/844/FAN_NewsRel_AllDeposit.pdf) The Company ceased evaluation of these deposits in late 2005 after the richness of the G-9 deposit became apparent, and since that time has been exclusively focused on building the G-9 mine and ramping it up to full production, which was achieved in the fourth quarter of last year.
Low metal prices in late 2005, particularly for by-product metals - a key component of any polymetallic deposit, the need for substantial initial capital investment, and testwork indicating low metallurgical recoveries, rendered the deposits uneconomic at that time; however, three significant developments have occurred since then:
1) The price of gold has tripled from $425/oz to $1240/oz as highlighted in the attached price chart for gold; To view the Gold Price USD chart please visit: http://files.newswire.ca/844/Gold_Price_USD_(3).pdf
2) Infrastructure for the G-9 mine, including the mine, a mill, access road, power lines and administration offices has been put in place, and
3) The G-9 mine is fully operational with an established cost profile. Consequently, operating costs for the mining and milling of these deposits can be estimated with a much higher degree of certainty.
Dick Whittington said: "I have continually said that the potential of these deposits is not reflected in Farallon's share price. With approximately one million ounces of contained gold in a gold price environment of $1240/oz and an outlook of continued strength for gold going forward, as well as a fundamental change in the prices of the other metals involved, the value of these deposits has increased significantly since we last looked at them in detail. In combination with mine and mill infrastructure that is already in place and operating costs stabilized, it's time to formally revisit unlocking their value.
Our strong balance sheet and the low cost profile of the G-9 mine will provide the operating and financial platform upon which to build a second mine at Campo Morado. We are initiating studies to re-evaluate these deposits with a target goal of having a second mine in operation by July 1, 2013."
Dr. David Stone, P.Eng, a qualified person and a consultant to Farallon Mining has reviewed this news release on behalf of the Company.
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, and with operating costs in the lowest 10% of zinc producers worldwide. 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.
ON BEHALF OF THE BOARD OF DIRECTORS
J.R.H. (Dick) Whittington, President & CEO
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 Indicated Resources
This news release uses the term "indicated 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 this category will ever be converted into reserves.
------------------------------------------------------------------------- Table 1 - Indicated Resources September 2005 ------------------------------------------------------------------------- Au Ag Deposit 000s Zn Cu Pb Au Ag contained contained Tonnes % % % g/t g/t (oz) (oz) Reforma 3,972 3.86 0.92 1.71 4.20 224 536,300 28,605,900 El Rey 1,051 4.45 0.52 1.20 2.74 154 92,600 5,203,800 Naranjo 2,056 4.12 0.82 1.24 2.77 136 183,100 8,990,000 El Largo 4,130 5.76 0.40 1.33 1.12 128 148,700 16,996,400 Total 11,209 4.66 0.67 1.44 2.67 165 960,700 59,796,100 Notes: 1. The mineral resources shown in Table 1 above for the Reforma, Naranjo, El Largo and El Rey deposits have been estimated using a US $90 GMV/t Cutoff, as reported in a news release on September 19, 2005. 2. Gross Metal Value (GMV) is the sum of Zn, Cu, Pb, Au, Ag grades multiplied by the following metal prices: Zn -US$0.51/lb; Cu-US $1.00/lb; Pb-US$0.25/lb; Au-US$375/oz; Ag-US$5.50/oz. 3. These resources were also reported at a 5% Zn cutoff in a March 29, 2010 news release to enable comparison to the resources in the zinc- rich G-9 deposit.
SOURCE Farallon Mining Ltd.