TORONTO (miningweekly.com) – Vancouver-based Farallon mines continues to look at potential corporate transactions that could see it merging with another company, CEO Dick Whittington said on Thursday.

Farallon produces zinc, copper, silver and gold from its G-9 mine in Mexico, and said in June it plans to start up a second mine at the site by 2013.

The company is looking for “accretive transactions that will enable us to merge with a like-minded company,” Whittington said.

“And essentially have a situation where one plus one equals three and we have complementary assets, complementary skill sets that can bring more value to the market.”

Farallon has achieved ongoing production increases at G-9, and reported throughput in the second quarter of 1 816 t/d, compared with 1 650 t/d in the first three months of the year, and well above the 1 500-t/d nameplate capacity of the mill.

Although the company still plans to increase throughput to 2000 t/d in the fourth quarter, the better-than-expected performance from the mill has left mining operations struggling to keep pace.

“Unfortunately, the mine could not sustain that level and we need to recoup, regroup and have it catch up with the mill,” Whittington said.

To make sure that it does not get caught short on ore being delivered to the mill, Farallon said this week that it will scale back to 1 500 t/d for the third quarter, while focusing attention and investment on underground development work.

But as the mine operations ramp up, the company believes it can achieve and sustain a capacity of 2 300 t/d “without major capital”, Whittington said.

Farallon reported second-quarter net earnings of $2-million, down from $6,2-million in the first quarter. Profit was affected by a noncash charge of $2,1-million for stock-based compensation, an unrealised foreign exchange loss of $2-million and a $1,1-million noncash loss related to the  restructuring of the company's long-term debt.

The firm produced 25 342 t of zinc concentrate and 9 011 t of copper concentrate, containing an estimated 26,3-million pounds of zinc, 2,3-million pounds of copper, 595 309 oz of silver and 6 722 oz of gold in the second quarter.

Cash costs declined to just $0,05/lb of zinc, making G-9 one of the lowest cost zinc producers in the world, Whittington commented.

Farallon shares declined 3,6% on Thursday, to C$0,40 apiece by 14:20 in Toronto.

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