Farallon Mining Ltd. ("Farallon" or the "Company") (TSX:FAN) Q3 Report

Mill Expansion Project at G-9 Underway





VANCOUVER, Nov. 16 /CNW/ - Dick Whittington, President and CEO of Farallon Mining Ltd. ("Farallon" or the "Company") (TSX:FAN) is pleased to announce the quarterly operating and financial results for the Company for the three months ending September 30, 2009 and to provide a G-9 mill update.


This news release should be read in conjunction with the Company's financial statements and MD&A, which are available on SEDAR. Currency is United States dollars unless otherwise indicated. Farallon will hold a conference call tomorrow, Tuesday November 17th, at 8:00 am Pacific time (11:00 am Eastern) to discuss these results. Call-in details are provided at the end of this release.


The Company generated cash flow from operations of $0.3 million and a loss for the period of $0.6 million. Production included zinc contained in zinc concentrates of 22.1 million pounds, copper in copper concentrate of 1.8 million pounds and additional by-product silver and gold. The total cash cost(1) including transportation, treatment and refining charges and by-product credits, was $0.45/lb of payable zinc.


In addition, the Company's Board of Directors has approved capital expenditure of $5.3 million to proceed with a mill expansion to increase production at the G-9 mine from 1,500 tonnes per day ("tpd") to 2,000 tpd. The Company has engaged Axxent Engineering for engineering, procurement and construction management services related to the project which is expected to be complete by July 2010.


President and CEO Dick Whittington said "The third quarter was an exciting period for the Company in which underground development activity at the mining operations at G-9 were completed. We are now producing high-grade ore at over 1,500 tpd on a consistent basis. As well, many initiatives were undertaken in the milling operations that allowed us to exceed our design throughput rates in the mill during the month of October, operating at an average rate of 1,600 tpd. These initiatives have us well placed to capitalize on strong base metal prices during the fourth quarter, and the initiation of the mill expansion project will further enhance our position as a low-cost zinc producer. We are also very enthusiastic about the resumption of exploration drilling on the property".


Financial and operational highlights for the three months ended September 30, 2009 ("Q3" or "the period") compared to the three months ended June 30, 2009 ("Q2") are as follows:




<< - 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 -------------- >>



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 October 2009, the mill processed approximately 49,600 tonnes of ore or an average of 1,600 tonnes per day (107% of design).


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.

Locker Room Humour...Guts or Balls?

Guts or Balls?

There is a medical distinction. We've all heard about people having guts or balls, but do you really know the difference between them?
In an effort to keep you informed, the definitions are listed below:
GUTS - Is arriving home late after a night out with the guys, being met by your wife with a broom, and having the guts to ask:
“Are you still cleaning, or are you flying somewhere?

BALLS - Is coming home late after a night out with the guys, smelling of perfume and beer, lipstick on your collar, slapping your wife on the butt and having the balls to say:
“You're next, Chubby.”

Hope this clears up any confusion on the definitions.

Medically speaking there is no difference in the outcome. Both result in death.

NGD-T New Gold VS Mexican Enviromental Shut Down Fears

Even if New Gold loses this appeal, it would only have to re-file the document. The mine will continue to remain open. New Gold’s permits and authorizations are subject to more than 100 environmental conditions which are audited each year and have consistently been 100 per cent compliant.

Cerro de San Pedro Fact Sheet

The Mexican Federal Court’s decision does not affect New Gold’s land usage permit or in any way impact the continued operation of the mine The court has not declared New Gold’s mining operation illegal The court ruling deals specifically with a point of law related to the Environmental Impact Statement (EIS) and this can be appealed New Gold filed its appeal Oct 28th on the grounds the court had no legal basis or jurisdiction to resurrect a previous 2004 decision nullifying the original EIS and allowing the company to apply for a replacement EIS. It has also applied for an injunction suspending the court’s order to cancel the EIS pending its appeal.

The EIS is a document that outlines a project’s positive and negative impacts and proposes mitigation measures. Even if New Gold loses this appeal, it would only have to re-file the document. The mine will continue to remain open. New Gold’s permits and authorizations are subject to more than 100 environmental conditions which are audited each year and have consistently been 100 per cent compliant.

Over the last 10 years, a small group opposed to the mine has conducted a series of challenges, appeals and counter appeals to the EIS. This is the latest in a decade of legal tactics that have yet to be successful.

There is overwhelming local support for New Gold because the local residents appreciate the benefits it brings to them and their community. Opponents to the mining operations are almost exclusively from outside of the immediate community.

Each week, the company provides free medical services, including doctor visits, ambulance service and dental care, to Cerro de San Pedro and 10 neighbouring communities. New Gold has spent hundreds of thousands of dollars paving roads, building sewage lines and flood drains to better the lives of local citizens.

Updated: November 6, 2009 Page 2

New Gold has improved the local environment and preserved the historic character of the town

1. cleaned up mining waste abandoned by previous miners
2. built new homes and schools for residents
3. rehabilitated historic churches that had suffered from many decades of neglect
4. built a new church building
5. trade skills training
6. equipped schools with computers
7. supported cultural festivals
8. provided jobs to a significant percentage of the population.

New Gold has the support of the local community, both its leaders and its residents for being a good neighbor.

New Gold has a history of operating in a socially and sustainable manner in all three countries where it has a mining presence. Resources relevant to this fact sheet including links to Mexican and Canadian government/ministry websites:

http://delicious.com/CerroDeSanPedro

Pescod Talks about...

AN INTERVIEW WITH DAVID COFFIN

EDITOR OF THE HARD ROCK ANALYST

We are here with David Coffin of the Hard Rock Analyst and

it looks like East Asia is starting to attract a little more atten-

tion largely through his efforts.

David Pescod: I guess Dave, someone has to ask the silly

question first…how come more brokers and analysts aren’t

following this story?

David Coffin: The appropriate answer is that you need to

ask them, but I think it’s a matter of the company has had a

large institutional share holding base and has done only one

placement recently, most of which went to a single public

company. There has probably been some concern that there

would be some selling from that placement which just came

free (it was a $0.51 placement and the warrants are priced at

$0.75). The other point is they haven’t had a lot of people on

site to look at the deposit and do the final confirmation that

analysts like to do before recommending a stock.

D.P: Why don’t you give us a background on this project

because it looks like there is quite a number of small plus

some very big deposits grouped together in Sumatra?

D.C: Sumatra is a northwest trending belt of volcanic and

intrusive rocks with highly mineralized sections along pretty

much the length of the island, and beyond. There are sepa-

rate belts in Java and the other islands, a number of which I

have visited in the past. What distinguishes north Sumatra

in particular from most of Indonesia is that historically there

have been some terrorist activities in an attempt to move the

northern end of the island into a separate state. What East

Asia did was come in and pick up a bunch of projects after

the politics changed; the politics changed for two reasons.

One was unfortunately a natural disaster – the tsunami that

hit the island a few years back - and the other has been a

basic change of heart in Jakarta. There have been important

moves to de-centralize the Indonesian government and give

greater autonomy to areas like Ache. Recognizing the

changed climate, these guys went in and picked up this

ground. Its highly prospective and was recognized as such

because there was a several year exploration window in the

1990’s when people were in working in the area and Miwah

had been drilled.

So the data was there, and for a number of the other pro-

jects that they picked up in Sumatra, so really what they did

was be smart about recognizing the change in the geopoli-

tics and going in and acquiring ground ahead of the crowd.

D.P: There are a number of deposits in this area, correct?

And is there not production already on this island?

D.C: Oh definitely. There’s at least one plus 5 million

ounce deposit already in production. There are also a num-

ber of smaller ones. These epithermal systems can be rela-

tively small – relatively small meaning a few million ounces,

but quite high grade. What they are dealing with is slightly

different. It’s more analogous to the Pierina deposit in

Peru; in fact it is very analogous to the Pierina deposit in

Peru. And the other thing that they have picked up is a sec-

ond (these are epithermal gold deposits we are talking

about) deposit on Sumatra that they have already drilled

and has a different configuration but is looking like a one to

two million ounce deposit. The third set of projects is large

scale porphyry targets, some of which have had work in the

past and others of which have never been drilled. If any of

these work out they could potentially be the large 10 to 20

million ounce bulk tonnage gold-copper deposits.

D.P: If you could take a look at the different projects they

have and how big you think their size might be?

D.C: There is one other project in Indonesia that is on a

separate island plus the smaller project on Sumatra that

they’ve drilled. Based on last year’s drill results, which

unfortunately they were delivering into a market that was

falling apart, these probably represent at this point one and

a half to two million ounces. Both are quite open to expan-

sion when they get back to testing them. Based on the

previous guesstimates, and they were based on limited

drilling but a lot of surface sampling, the Main Miwah zone

is a target in the five million ounce scale. I’m talking guess-

timates and that’s not meant to be an accurate number, but

it has a solid basis from existing results and target scale.

On top of that, their own work has located the South Miwah

mineralization which they’ve only put a couple of drill holes

on – it’s hard to put a precise target scale in it. But what it

does have definitively from the surface sampling and the

initial drilling are areas of quite high grade at surface. It

could be at the same scale roughly as the Main Miwah

zone. It certainly is too soon to say that, but what it should

do at a minimum is a significant amount, and significant to

me is in the ½ million ounce range, of higher grade material

plus whatever is there once they get a proper test of it. So

you are looking at a company which in three projects, and

again these are not official numbers these are my guessti-

mates, that already has the feel of being in the 8 to 10 mil-

lion ounce class amongst three projects, and with a big

lump of that being at Miwah.

D.P: Am I also correct that they also have a few additional small projects in the area?

D.C: They have a few additional small projects only in the sense that there has been limited work on them. The por-phyry projects are large-scale. There simply isn’t enough work to quantify them in terms of their real potential.

Within that region system is the largest gold/copper mine in the world that belongs to Freeport McMoran, and Newmont also has a significant producer in Indonesia. So these are projects with good potential

D.P: Canaccord is using this rule of thumb that to value gold companies these days, they give it $70.00 an ounce in the ground. So how can you use that to come up with potential targets for East Asia?

D.C: If you did the math on $70.00, what I just described would be in that $8.00 target range. Our take is that the $70.00 number is valid and partially that is based on what the market is telling us. When you actually sit down and figure out the value of a specific project, it’s not an exercise of using a rule of thumb, it’s an exercise of CAPEX and operating costs.

In other words, working through what the actual bottom line would be. So in a nutshell, higher quality ounces are going to be worth more and the bigger a deposit is, because it brings in bigger players, are also generally worth more.

In both cases, Miwah fits the bill. If my assumption of a five million plus ounce deposit, that puts it in line for all of the players in the business. The grade so far, given that it should be a very simple process to extract the gold, puts it in the high-quality category.

D.P: You have been following this story firsthand for a while, what kind of an investor should be looking at this, because it still sounds speculative even though you previously had a target of $5.00 to $12.00, but now seem to be focusing on the $8.00 number?

D.C: We are not going to get overly focused on the $8.00 – those are conceptual targets. We pretty much save our targeting for producers where it is a nuts and bolts exercise. The type of investors that should be looking at this are

a: people who want to be in gold;

b: are looking for something that has speculative upside and

c: are willing to take some risk.

We are comfortable with Indonesia. I have worked there in the past so I have stayed on top of the political changes and I am comfortable. That doesn’t mean that the market will get comfortable, nor can you ever assume anywhere that adverse changes won’t come.

Indonesia is still in a political process whereby it has democratized – the

democracy that has been established there is real, but you still have bureaucratic issues to deal with. It can take quite a while to get things done sometimes because the bureaucracy set a pace based on when it was a dictatorship which I don’t think they have worked through yet. It doesn’t mean it never gets done, but it can make timing difficult and when people are looking at valuations, they are going to fit that in as one of the parameters. I am saying the quality is

there and the scale is there, others will argue and reasonably, but yes then you have to apply a discount because it is in Indonesia and people aren’t sure what to think of the place. I do think that will change by the way – I think a “I” is going to be added to the BRIC countries and that will be for Indonesia.

D.P: I guess the question is, if you could only buy one stock these days, would it be East Asia?

D.C: It would be East Asia, which doesn’t preclude me from liking others, but on the basis of what I can see – the fact that they are working actively and its current valuation, yes it would be East Asia.

The timeframe for significant lift with the gold price taking a big jump on the announcement that India bought half of the IMF gold sale could be soon – the EAS volumes have stayed up and I think it is a matter of working through enough volume and it could pop up as it

did from the $0.50 level or $0.40 level where we started. It was a matter of some accumulation on volume and then it popped and I think the same thing will probably happen again. How quickly? I am not going to try and guess that, but there will be a shift in the market in January (there always is) and I think between now and then, but if not then cer-

tainly early year. At which point I will put in my wine order!

D.P: Thank you very much Mr. Coffin!