TORONTO (miningweekly.com) – Vancouver-based Farallon Mining believes now is the right time to start looking around for companies or assets that would fit with the firm's objective of building a multimine, midtier company, says CEO Dick Whittington.

Farallon achieved commercial production at its G-9 polymetallic mine, in Mexico, in April this year, and is already looking at expanding the operation.

“And definitely, it's time to start looking on the M&A front,” Whittington said in an interview.

Simultaneously, Farallon has started pumping money into exploration again at its Campo Morado property where G-9 is located, and sees another mine there as a possibility too, he said.

When it comes to acquisition prospects, Whittington will look pretty much anywhere in the world, except for Russia, China and most of Africa.

“We will leave that to companies that have different skill sets to our own,” he commented.

The firm will, however, consider targets across the development spectrum.

“I think that we have shown we can make the transition from being an exploration play to a production play, we can find mines, build mines, and we can finance mines.

“So, if there's a good greenfield exploration play that gets our attention and interest, then we would look at that, but if there's an operating entity that would be accretive to shareholders and a good match, we would look at that too.”

ROLLER COASTER

Between the belt-cinching implications of the financial crisis and the challenges of starting up a new mine, Farallon has had “a real roller coaster of a year”, Whittington commented.

During the second quarter, the firm tackled its high level of short-term debt, and was able first to issue equity to repay some of the debt, but, more importantly, secured a $30-million, four-year loan with Credit Suisse, at an interest rate of just 6,9%.

The Credit Suisse facility was a watershed moment for the company and its mine, Whittington said.

“I think that was really the final stamp of credibility on the project."

The firm was able to eliminate its short-term debt, and now, with its restructured balance sheet, enjoys a solid financial position.

“And that has immediately attracted interest from institutional investors, and also from analysts that now wish to start following us.

“Because all of a sudden we have an operating asset, we have a strong balance sheet, and obviously we are a company that is on a mission.”

During the third quarter, Farallon made some management changes, worked to get a better grip on the metallurgy at G-9 and started making plans to restart exploration, which had been halted

“And really, I think the fourth quarter is going to be when we truly earn our stripes in terms of operating credentials, and start putting exploration back on the table,” Whittington said.

At design capacity, the G-9 mine is expected to produce yearly 120-million pounds of zinc, 15-million pounds of copper, 2,5-million ounces of silver and 28 000 oz of gold.

The company is also already looking at expanding the mill at G-9, and aims to reach 2 000 t/d by July 1 next year.

The expansion is already based on the premise that Farallon “fully expects” to be continue to discover significant quantities of metal.

“To begin with, we really just focused on getting the G-9 mine up-and-running, but we have by no means exhausted the exploration potential in and around G-9,” Whittington commented.

The firm has already established indicated resources of 313 000 t and inferred resources of 316 000 t, at 10% zinc, at the Abajo zone at Campo Morado, and has confirmed that G-9 is part of a deeper stratigraphic horizon compared with earlier targets found on the property.

“The bottom line is that we just didn't drill deep enough to begin with,” Whittington said.

“It's a pretty common story in the mining business, but the good news is that we kept the project, and we were the ones who discovered our own 'folly', if you will.”

Before the drills were shut down last year, Farallon was putting out excellent results “every month or two”.

“We are truly in a unique exploration environment and all we did was turn the tap off.

“And now we are going to turn it back on. There is no reason why we can't just start up where we left off,” Whittington said.

JUST IN TIME

Impressively, commercial production was declared at the G-9 mine on April 1, less than four years after the original discovery hole for the deposit, and without bothering with a bankable feasibility study in between.

Whittington said that he plans to follow the same approach with any further discoveries and mines on the Camp Morado property.

“We will basically build up a critical mass, start the ball rolling and then the engineers and the geologists can fill in the blanks before we start production in that area.

“Call it 'just in time' mine planning if you will, but really it's all you need,” he said.

“When does the mine plan need to be ready? If you're not dealing with banks, or you're not dealing with other stakeholders, the mine plan needs to be ready the day before you start mining.

“So let's not clutter up the process in the meantime.”