Farallon Announces Third Quarter Operating and Financial Results
Mill Expansion Project at G-9 Underway
This news release should be read in conjunction with the Company's financial statements and MD&A, which are available on SEDAR. Currency is
The Company generated cash flow from operations of
In addition, the Company's Board of Directors has approved capital expenditure of
President and CEO
Financial and operational highlights for the three months ended
- Loss of $0.6 million, down from a loss of $8.0 million for Q2.
- Cash flow from operations of $0.3 million, up from cash used of $0.4
million in Q2.
- Gross profit of $2.9 million, down from $5.7 million in Q2.
- Production of 20,462 tonnes of zinc concentrate and 4,894 tonnes of
copper concentrate containing an estimated 22.1 million pounds of
zinc, 1.8 million pounds of copper, 301,202 ounces of silver and
3,355 ounces of gold from the G-9 mine. Zinc and copper production
was up from 21.3 million pounds and 1.7 million pounds, respectively,
in Q2.
- Processed 117,318 tonnes of ore with a grade of 10.8% zinc, 1.5%
copper, 203 g/t silver and 2.7 g/t gold. Production was up from
114,644 tonnes of ore in Q2.
- Sold approximately 27,004 dry metric tonnes of zinc concentrate
averaging 51% zinc, 5,947 dry metric tonnes of copper concentrate
averaging 15% copper and 2,234 tonnes of lead concentrate averaging
20% lead. Sales were up from 25,750 tonnes of zinc concentrate, 2,310
tonnes of copper concentrate and zero lead concentrate in Q2.
Subsequent to the quarter end, the Company:
- Exceeded design throughput rates in the mill during the month of
October, processing approximately 49,600 tonnes of ore (1,600 tpd or
107% of design).
- Closed a bought-deal equity financing with net proceeds of
approximately $10.2 million, increasing cash on-hand to approximately
$22.5 million as at November 1, 2009.
- Initiated a Mill Expansion Project to 2,000 tpd with anticipated
capital cost of $5.3 million and completion by July 2010.
- Re-started exploration drilling at Campo Morado with two surface
drills and one underground drill operational.
G-9 Operations
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During the period, mining continued in the high-grade Southeast zone as well as the North zone and West Extension. Development activity was completed in the Southeast zone opening up access to the area from the south and the east and there are currently thirteen open mining faces at G-9, nine of which are in the Southeast zone. As well, an ore pass was completed at the end of the quarter, significantly improving the efficiency of ore hauling from the Southeast zone to the mill. Cemented rock backfilling was initiated during the period in the lower portion of the North zone to allow for mining of high-grade pillars.
In the mill, the design capacity of 1,500 tonnes per day was achieved for extended periods of time during Q3. However, mill availability was lower than design leading to production rates averaging 1,270 tonnes per day, compared to 1,260 tonnes per day in Q2. At the same time, enhanced maintenance programs were implemented in the quarter and various capital projects were undertaken to improve availability and throughput. As a result, during the month of
Metallurgy continues to be a key focus for the operations. As a result, zinc recovery has improved to 79% in Q3 from 77% in Q2. This trend has continued into the fourth quarter with average zinc recovery of 83% during the month of October. Copper recovery was 46% in Q3, down from 55% in Q2; however, continued improvements were observed into the fourth quarter with an average copper recovery of 55% in October. During the third quarter, the Company did not produce lead concentrate and continued not to do so into the fourth quarter.
During the period, the Company formed a Technical Support Team to assist in improving metallurgical recovery in the milling operations. The team includes 24 hour metallurgical coverage at the mill site as well as off-site metallurgical test work support. Continued enhancements are expected to improve zinc and copper recovery to 85% and 75%, respectively, during the fourth quarter. Changes to mill management have also strengthened mill operating performance.
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Month Recovery (%)
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Zinc Copper Silver Gold
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July 77 40 35 39
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August 80 45 35 29
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September 79 52 47 33
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October 83 55 47 31
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Key operating and sales metrics for the three and nine months ended
Mill Expansion Project
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The Company's Board of Directors has approved a project to expand the existing milling operations from 1,500 tpd to 2,000 tpd. Axxent Engineering has been engaged to provide engineering, procurement and construction management services for the project. Capital cost is anticipated to be approximately
The Company expects to fund the project from current cash on hand and cash flow generated by operations.
Exploration Program
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As announced on
The objectives of the exploration program are, as follows:
1. Increase resources in and around the G-9 deposit.
2. Investigate known Abajo horizon targets to the north of G-9.
3. Test previously untested gravity anomalies to the South of the San
Raphael fault for stringer or sulphide zones that would indicate the
potential for another G-9-style deposit.
It is expected that exploration drilling will continue for the remainder of 2009 and through 2010.
Financial Results
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The Company reported a loss of
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US$ (000) Q3 Q2
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Revenue 29,942 20,145
Cost of Sales (27,015) (14,401)
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Gross Profit 2,927 5,744
Depreciation (3,041) (4,329)
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Operating Profit (Loss) (114) 1,415
Expenses (464) (9,450)
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Earnings (Loss) (578) (8,035)
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The gross profit in Q3 was lower than Q2 due to three factors:
1. A portion of the concentrate sold, including all of the lead
concentrate sales, in Q3 was from inventory from earlier stages of
production and commissioning and, as such, carried a higher cost of
sales. The higher cost concentrate from inventory has now all been
sold and concentrate inventory consisted of less than one month's
production at September 30, 2009, all of which was produced in Q3.
2. Higher concentrate treatment charges were incurred in Q3 as a result
of strengthening zinc prices. The Company's zinc concentrate off-take
agreement includes price participation with a basis zinc price of
$1,300 per metric tonne for the balance of 2009 and then reverts to a
basis zinc price of $2,000 per metric tonne for 2010.
3. The Q2 cost of sales were reduced due to a reclassification of
depreciation from the first quarter of 2009 as the Company made the
transition from commissioning to commercial operations.
The total cash costs(1) were
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Jul-09 Aug-09 Sep-09
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Average LME Zinc Price ($/lb) $0.72 $0.84 $0.85
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Cost to Concentrate ($/lb) $0.46 $0.52 $0.50
Freight ($/lb) $0.10 $0.10 $0.10
Smelter Charges ($/lb) $0.28 $0.35 $0.37
Credits ($/lb) ($0.35) ($0.47) ($0.64)
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Cash Costs ($/lb) $0.49 $0.50 $0.33
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The Company had
Q3 2009 Q2 2009 Q1 2009 YTD 2009
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Production (contained in
concentrate)
Zinc (000's Pounds) 22,137 21,319 16,895 60,351
Copper (000's pounds) 1,776 1,740 1,180 4,696
Lead (000's pounds) 0 588 328 916
Silver (ounces) 301,202 284,352 229,539 815,093
Gold (ounces) 3,355 4,443 3,309 11,107
Ore Mined (tonnes) 125,978 134,970 115,978 376,926
Ore Processed (tonnes) 117,318 114,644 106,265 338,227
tonnes per day 1,270 1,260 1,180 1,239
Zinc grade (%) 10.9 11.0 9.2 10.4
Copper grade (%) 1.6 1.3 1.1 1.3
Lead grade (%) 1.2 1.2 0.9 1.1
Silver grade (%) 205 165 170 180
Gold grade (%) 2.2 2.3 1.7 2.1
Recovery Q3 2009 Q2 2009 Q1 2009 YTD 2009
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Zinc (%) 79 77 79 78
Copper (%) 46 55 45 49
Lead (%) 0 20 16 12
Silver (%) 39 47 40 42
Gold (%) 34 52 43 43
Concentrate(2)
Zinc (DMT) 20,462 18,567 14,829 53,858
Zinc (%) 49.1 52.1 51.7 50.9
Silver (g/t) 259 206 252 239
Gold (g/t) 1.7 2.0 2.4 2.0
Copper (DMT) 4,894 5,603 3,015 13,512
Copper (%) 16.5 14.1 17.8 15.8
Silver (g/t) 822 572 694 690
Gold (g/t) 13.3 8.7 10.4 10.7
Lead (DMT) 0 1,280 650 1,930
Lead (%) 20.9 22.9 21.6
Silver (g/t) 1,540 2,005 1,697
Gold (g/t) 41.4 56.5 46.5
Site Costs (US$/t milled) $ 77.29 $ 76.28 $ 70.64 $ 74.86
Total Cash Costs
(US$/payable pound
zinc)(1) $ 0.45 $ 0.39 $ 0.44 $ 0.43
(1) See "Non-GAAP Financial Measures" on pg.15 in September 30, 2009 MD&A
for more information.
(2) These are provisional assays, subject to finalization.
DMT means Dry Metric Tonnes
The conference call can be accessed by telephone at the following numbers (416) 644-3426 or the toll-free number (800) 731-5319. A live webcast will also be available at www.farallonmining.com. The replay of the conference call will be on the website after the call is completed.
Farallon's G-9 zinc, copper, silver, gold and lead mine at the Campo Morado Property in
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 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. There are no mineral reserves at Campo Morado and there is no assurance that the mineralization at Campo Morado will ever be classified as mineral reserves. 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.
For further information: on Farallon Mining Ltd., 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
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