|
      
|
| | |||||||||||||||||||||||
 |  | |||||||||||||||||||||||
| G-9 Overview : To Become A World Class Zinc Mine with Low Cash Costs Beyond G-9 : The Path to Future Success Farallon's ultimate goal is to become a multi-mine, mid-tier, low-cost mining company through the advancement of the G-9 Mine which is now in full commercial production. The G-9 Mine is targeted to be in the lowest quartile of zinc producers on a global scale when all the operating targets are achieved. When the mine is producing cash flow, Farallon will reinitiate the exploration program on the entire Campo Morado property. Currently the existing deposits (Reforma, Naranjo, El Rey, and El Largo) host an indicated resource of over 11 million tonnes, which could potentially amount to an additional mine-life of 20 years for Farallon. In addition to operations and exploration potential, Farallon also intends to grow through selective accretive acquisitions that fit into the long-term plans of Farallon to become a multi-mine, mid-tier, low-cost mining company. The pathway is in place for Farallon to succeed, as long as we meet our objectives on a step-by-step basis. The rewards down the road to shareholders will be the creation of a strong long-term viable mining company. Farallon's primary focus for the last 2 years has been to extensively implement the development and operating plan outlined in the Company's December 2007 Preliminary Economic Assessment. That plan involved the rapid development of the G-9 mine resulting in a world class zinc mine that has the potential to have low cash costs relative to the other zinc mines in the world. The plan is now almost complete. Through the "Parallel Track" approach to development, project construction was advanced at a rapid rate and the mine and mill were substantially complete on July 1st, 2008 -- the start-up target date. G-9 has the benefit of significantly high grades of zinc and several significant by-product credits due to the high levels of copper, lead, gold and silver in the G-9 mineralization. Farallon's target is to be in the lowest quartile cost segment of the cost curve for zinc producers worldwide. This will allow the company to operate profitably even in times of low metal prices. Management has worked diligently to ensure that every aspect of the development has gone smoothly. All that remains is for the company to make the final transition to operations and to meet the operating costs that are outlined in the Preliminary Economic Assessment. The final capital cost for G-9 was given as $149.7 million which is within 20% of the original estimate provide in the Preliminary Economic Assessment in December 2007. The annualized production target is to produce 120 million lbs of zinc, 15 million pounds of copper, 1.5 million ounces of silver, 14,500 ounces of gold and 6 million pounds of lead. The mine achieved the design capacity of 1,500 tonnes per day on a sustained basis from March 5, 2009 and commercial production was announced as of April 1, 2009. While production slipped in January and February, the company is on target to advance toward its production goals. Farallon has an off-take agreement for the concentrates produced at the G-9 deposit with Trafigura. In February the first vessel shipments of concentrates were made to smelters in Asia. The Company shipped 10,800 tonnes of zinc concentrate, 1,000 tonnes of lead concentrate, and 1,000 tonnes of copper concentrate. Regular vessel shipments will continue throughout the year. The focus now is on achieving our operating targets. Once this is achieved, the Company will then start to fully explore the other deposits on the Campo Morado property that should ultimately lead to creating a world class mining district. Farallon's goal is to convert the exploration potential into the expansion of G-9 or the development of new mines on the Campo Morado property. Farallon will then be well on its way to becoming a multi-mine, mid-tier, low-cost mining company. Location The G-9 mine forms part of the larger Campo Morado Project located in Guerrero State, Mexico. The Project area comprises 11,813.9 hectares in six mining concessions, in good standing, that are some 160 kilometres south-southwest of Mexico City. Farallon Mining Ltd. (the "Company") is the 100 percent owner of the Campo Morado Project, through its wholly owned Mexican subsidiary Farallon Minera Mexicana S.A. de C.V. ("Farallon").
Mexico is a country with a long history of mining. As a result there is a well established government and industry infrastructure to support mining. Mining in Mexico has the following advantages:
From a blind, greenfield discovery in June 2005, the G-9 Mine has quickly become a fully operational mine. Farallon has advanced the G-9 Mine into Commercial Production that was declared on April 1, 2009. In a period of less than 4 years, the management of staff have succeeded in advancing through a Parallel Track Approach to mine development that is showing to be a very successful method for bringing a mine into production quickly. In June 2005, the first discovery hole #420 was found at G-9 which had very significant grades of zinc over 14%. Management very quickly realized that this new discovery would most certainly be the main thrust of the company moving forward. Activity soon headed toward further exploration activity around the G-9 location through the summer and fall of 2005. Further exploration success at G-9 continued so management soon put into place a preliminary resource estimate that was made available in November 2005. This resource estimate showed that the G-9 had very good potential to be the future engine for growth for the entire Campo Morado district. In the winter months of 2005 and into the spring of 2006, further work continued both in terms of further exploration work and also metallurgical testing on G-9. The G-9 showed promise from a metallurgical stand-point therefore management and directors decided in April 2006 to proceed to build a mine at G-9. Financing activity proceeded to raise funds to pay for the various work programs that would be put into place to lay the ground-work for the mine and mill contstuction. Permitting activities started and the employment of a variety of contractors would begin to start the process behind building the mine at G-9. It is at this timing that company decided to advance on a "Parallel Track Approach" to bring the G-9 Mine to full production. A detailed description of this approach is provided later on this page. In September 2006, work began to focus on building a decline to advance towards the G-9 deposit. Exploration continued under the supervision of Farallon's Mr. Dan Kilby and the results continued to be excellent and the continuation of high-grades in zincs and also in gold and silver continued to be made. Metallurgical work continued on the G-9 and this work was also very positive that recoveries and concentrate grades would be very good once the G-9 mine was in full production. In November/December 2006, the resources at G-9 continued to grow at a rapid pace and financial activities continued on a corporate level to raise additional funds to pay for work programs that were to be put into place during the calendar year in 2007. In later 2006 $80 million was raised to utilize going forward. Beginning, in early January 2007, a variety of equipment purchases started to happen including the purchase of a fully autogenous ball mill. Also grinding mills, flotation cells, and concentrate thickners amongst other items were beginning to be purchased in concert with other activities under the Parallel Track approach. This was deemed to be the quickest and most efficient method to quickly bring the G-9 into production and this would prove true as time passed. In April 2007, Farallon received the mine permit for the G-9 deposit and while planning for construction had been in the works, now construction could begin in earnest. M3 Engineering were engaged to start work on the surface facilities at G-9, while McIntosh Engineering were put in place to advance the decline. Knight Piesold of Vancouver were added to design the tailings facility. In June 2007, the company received the soil permit and also signed an agreement with the National Power utility to supply power to the G-9 Mine. In the fall of 2007, Wabi Development was secured to assist in terms of purchasing/expediting. While at the same time the power line permit was applied for and mill construction advanced. It was a busy time of activity for the company and the contractors as the early stages were being set for the production to move ahead and be producing in 2009. In November 2007, JDS Energy and Mining were secure to provide the EPCM services for the G-9 project. JDS has an excellent reputation and a strong track record in the industry in terms of performance. JDS was instrumental in terms of bringing the G-9 Mine to where we are today as fully operational mining company. In December 2007, the Preliminary Economic Assessment for the G-9 project was completed. Stephen Godden and David Stone of MineFill spearheaded the efforts on the PEA along with Hunter Dickinson's David Gaunt, this PEA proved to be the blueprint for the development of the G-9 Mine. This PEA showed that the project could be robust under the current economic environment at the time and that the G-9 would also have the ability to withstand more serious market corrections. In 2008, the year was filled with a bustle of activity, financing for the project continued to help supplement the on-going effort to build the mine. Farallon received the power line permit in February and new resource estimate was published in March 2008 by David Gaunt and Qinpeng Deng of Behre Dolbear that gave evidence that a mine-life of 7 to 10 years based on the mine-plan at the time could be achieved. This was a significant time for the company because it provided that we had a solid starting point at G-9 that could lay the groundwork for future overall growth at the Campo Morado site. In May 2008, the Silver Wheaton agreement was signed that would give the company $80 million for 75% of the life of mine silver production at Campo Morado. This was a real feather in the cap for Farallon as it signified a very positive outlook from Silver Wheaton in terms of the long-term viability of the whole Campo Morado district. Then in June 2008, Farallon signed off-take agreements with Trafigura for our concentrate production which was another significant step. Throughout the summer of 2008, construction and development was hurrying along and by August 2008, the mill completion was imminent, the decline had advanced to the North zone of G-9 and mining was now underway. In the fall further financing continued including two rounds of notes that raised $32.75 million for final completion of the construction. Union negotiations were also settled to provide for a foundation for future employee relations at the mine. Then in October 2008, everything started to come together. The mine and mill were essentially completed in terms of construction. A new plan was put into place to maximize the potential cash flows during a downtime in the market and the first saleable concentrates were produced. Farallon also started trucking concentrates to the port and receiving payments from Trafigura. At the end of October 2008 Farallon's mine staff took over all activities on site and construction was complete. The commissioning phase was next to come. During November/December 2008, the mine and mill met the commissioning targets for the most part and by-product recoveries were now the focus of improvement. In Ferbuary 2009, Farallon had it's first vessel shipment of concentrates to Asian smelters. Farallon was able to complete two equity placements in Febuary/March 2009. That would be used to take out a portion of the debt of $7.75 million notes from October and shore up the balance sheet to pave a path forward. Also the company took an extension to September 2009 on the $25 million notes outstanding. Then in April 2009, Farallon announced that on April 1, 2009 we were declared to be in commercial production. Less than 4 years after the initial discovery hole #420 at G-9! A truly remarkable achievement! And the G-9 Mine cost $149.7 million to construct which was just 20% above the original PEA estimate in December 2007. In the First Quarter of 2009, the G-9 Mine produced about 17 million lbs of zinc, 1.2 million lbs of copper, 0.3 million lbs of lead, 230,000 ounces of silver and 3,300 ounces of gold. Farallon had it's first Conference call on April 22, 2009 and it is truly a satisfying time for management, staff, and contractors who have all contributed to the point that we are at today. Certainly there are improvements still to be made but with this track record of success it is virtually just a matter of time before we are operating at the full design capacity and then it is onwards and upwards from there! Farallon has had many highlights over the years that have contributed to the overall success of the company, an account of some of these milestones are mentioned here: Highlights:
Farallon's G-9 Mine was discovered, financed, and constructed in under 4 years. This is a remarkable achievement of development for a mining company to bring a blind, greenfield discover into production in under 4 years. Site Advantages: A site layout for the G-9 Mine can be seen in the following figure below. The operation has many distinct advantages as well including:
Farallon's G-9 Project Scope:
Infrastructure:
Farallon's Parallel Track Approach: The Company followed a "Parallel Track" strategy with respect to its approach to the development of the G-9 deposit. In effect the Company advanced exploration, permitting, mine and mill design, equipment acquisition, mill construction and mine pre-development work concurrently. A parallel-track strategy for the G-9 deposit involves incurring some expenditures as if a positive production decision had already been made. This strategy may be contrasted with a more conventional approach whereby expenditures of a post-production decision nature, such as ordering plant and equipment, constructing site access roads and power lines, are deferred until a formal production decision has been made, based usually on the results of a feasibility study. By contrast, the parallel-track strategy accepts that the risks that some of the expenditures outlined might prove to be either wasted if theproduction decision is negative and the property ultimately abandoned; or inefficient if a positive decision is made using a different mine plan (in which case the parallel-track approach weighs this risk against the benefits of potentially being in production sooner). The strategy takes into account that some of the parallel-track expenditures will benefit the project if a production decision is merely deferred. In Farallon's case, the strategy worked remarkably well, with very few hiccups. So much so, that the mine and mill were built substantially on-time and on-budget. The mine and mill were in operation on July 1, 2008 and the final project cost was only 20% above the Company's Preliminary Economic Assessment cost of US$125 million.
Diagram of the Parallel Track Approach
G-9 : Annualized Production & Mine Plan
click to enlarge Farallon's G-9 mine has an economically robust mine plan with an emphasis on maximizing the potential cash flow in an market environment that values operations that are able to generate cash at low metal prices. Annualized Production Targets at G-9 are: Commercial production achieved in April 2009 Annualized Targeted Production
Targeted Annualized Production rate at 550,050 tonnes of mineralized material at average grades of 11.7% Zn, Cu 1.57%, Pb 1.23%, Ag 206.20 g/t, Au 2.95 g/t. Commercial Production was achieved on a sustained basis from March, 5, 2009. The date that commercial production commenced was April 1, 2009. The links below are the Mine Plan for the G-9 Mine
click to play
G-9 Processing:The G-9 Mine has the advantage of high grades for its various minerals. As well, the metallurgy of the G-9 deposit has several advantages including:
 The processing plant is designed to treat 1,500 tpd of mineralized material and to produce selective copper, lead and zinc concentrates. The flowsheet includes:
G-9 Flotation Flowsheet  The G-9 concentrates are currently being shipped to smelters and end-users mainly in Asia, via the port of Manzanillo in Colima State. Farallon has been trucking concentrates from the mine since October 2008. In February 2009 we had our first ocean vessel shipment of concentrates that delivered zinc, copper and lead concentrates to various smelters in China and Korea. G-9 is producing zinc, copper, and lead concentrates, which contain gold and silver by-products, primarily in the lead concentrates. In June 2008, the Company signed a Heads of Agreement (the "Agreement") with the international trading company Trafigura Beheer BV Amsterdam. The Agreement covers treatment of 100 percent of the copper, lead and zinc concentrates produced from the G-9 project. 
|
G-9 Mine : Overview
Location
History of G-9
Development
Production & Mine Plan
Processing
Marketing
| |||||||||||||||||||||||
 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||
