Farallon Announces First Quarter Financial and Operating Results

$6.2 Million Net Earnings

25m lb of Zinc Produced at a Total Cash Cost(1) of $0.38/lb payable zinc

VANCOUVER, May 12 /CNW/ - Farallon Mining Ltd. ("Farallon" or the "Company") (TSX:FAN) announces its financial and operating results for the three months ended March 31, 2010. Currency amounts are stated in United States Dollars, unless otherwise noted.

The Company's G-9 mine produced a record 25.0 million pounds of zinc and 2.1 million pounds of copper in concentrates at a total cash cost(1) of $0.38/lb of payable zinc. Farallon reported net earnings of $6.2 million and the Company generated $6.0 million in cash from operations before changes in non-cash working capital.

"The G-9 mine has increased production every quarter since production began in the first quarter of 2009" said President and CEO Dick Whittington. "Quarterly production has steadily increased from 1,180 tpd to 1,650 tpd, a 40% increase over the last 15 months. With improvements in throughput to over 1,900 tonnes per day in March and April and metallurgical improvements being made, the G-9 mine is now providing steady cash flow and a base from which we can deliver on our objective of becoming a mid-tier, multi-mine company."

Highlights for the three months ended March 31, 2010 ("Q1") compared to the three months ended December 31, 2009 ("Q4") are as follows:

    
    Financial
    ---------

      -  Operating earnings of $9.1 million and net earnings of $6.2 million,
         up from operating earnings of $3.9 million and net earnings of nil
         in Q4.

      -  Cash flow from operations before changes in non-cash working capital
         of $6.0 million, up from $2.2 million in Q4.

      -  Gross revenues of $37.6 million, up from $32.3 million in Q4.

      -  Non-GAAP Adjusted EBITDA(1) of $9.0 million, up from $4.5 million
         in Q4.

      -  Total cash cost per payable pound of zinc(1) of $0.38/lb (including
         $0.31/lb for the month of March 2010), down from $0.44/lb in Q4.

      -  Working capital of $18.2 million at March 31, 2010, up from
         $14.9 million at Dec 31, 2009.

    Operations
    ----------

      -  Processed 152,178 tonnes of ore (average throughput 1,691 tonnes
         per day - "tpd") grading 9.1% zinc, 1.1% copper, 174 g/t silver and
         2.5 g/t gold. Increased throughput rates for the month of March
         2010, processing 59,715 tonnes of ore for an average rate of
         1,926 tpd or 128% of design.

      -  Produced 23,365 tonnes of zinc concentrate and 6,952 tonnes of
         copper concentrate, containing an estimated 25.0 million pounds of
         zinc, 2.1 million pounds of copper, 420,911 ounces of silver and
         4,322 ounces of gold from the G-9 mine.

      -  Sold approximately 22,420 tonnes of zinc concentrate grading 48%
         zinc and 9,480 tonnes of copper concentrate grading 14% copper.
         Payable metals contained in concentrate were 20.0 million pounds of
         zinc, 2.7 million pounds of copper, 336,000 ounces of silver and
         4,106 ounces of gold. Realized metal prices on sales of $0.99/lb
         zinc and $3.23/lb copper.

      -  Given the success of increasing mill throughput to over 1,900 tpd
         in March and April, the Company is revising the scope of the Mill
         Expansion project to determine the maximum throughput that can be
         obtained within the approved capital budget of $5.3 million.
         However, the Company continued with procurement of additional
         regrind and flotation equipment for the Mill Expansion Project. The
         project was originally designed to increase mill capacity from
         1,500 tpd to 2,000 tpd by July 2010.

    Exploration
    -----------

      -  Continued exploration drilling at Campo Morado with two surface
         drills and one underground drill operational as part of a
         $5.4 million program for 2010.

      -  Updated the G-9 mineral resource estimate as at December 31, 2009
         which includes 3.0 million tonnes of Measured and Indicated
         Resources at 9.4% zinc and 1.3% copper as well as 0.9 million
         tonnes of Inferred Resources at 9.2% zinc and 1.1% copper (at a 3.0%
         zinc cut-off)(2).

      -  Upgraded a portion of the mineral resources as at December 31, 2009
         to mineral reserves, including 2.0 million tonnes of Proven and
         Probable Reserves at 10.0% zinc and 1.34% copper(2).

      -  Initiated an engineering study on the treatment of El Largo, Naranjo
         and El Ray deposits. The study is investigating the mining and
         processing of 4.9 million tonnes of Indicated Mineral Resources at
         6.4% zinc, 2.1 g/t gold and 165 g/t silver (at a 5% zinc cut-off
         grade) with the existing mining equipment and processing
         facilities(2).

      -  As part of its preliminary assessment of the potential for high
         grade gold zones being present below the main zinc orebodies, the
         Company announced on April 21, 2010 the discovery of three distinct
         high-grade gold zones outside the current mineral resources (at a 5%
         zinc cut-off grade) at the G-9 mine. These zones contain estimated
         Inferred Mineral Resources of 225,038 tonnes grading 8.6 g/t gold
         and 407 g/t silver (at a 5 g/t gold cut-off grade)(3).
    

Dick Whittington said "The exploration program at Campo Morado is continuing on three fronts. First, the Company has two surface drills exploring north of the Abajo zone, targeting new lenses on the Abajo horizon. Second, we continue to utilize underground drilling to delineate new high-grade zinc resources in and around the existing G-9 mining operations. Third, the program to evaluate and expand upon the newly announced gold zones is advancing."

This new release should be read in conjunction with the Company's financial statements and MD&A which are available on SEDAR and the Company's website. Farallon will hold a conference call tomorrow, Thursday May 13, 2010, at 8:00 am Pacific time (11:00 am Eastern) to discuss these results. The call can be accessed at (647) 427-7450 or toll-free at (888) 231-8191. A live webcast will also be available at www.farallonmining.com.

Farallon operates the G-9 zinc mine on its Campo Morado Property in Guerrero State, Mexico. G-9 is a 1,500 tonnes per day, underground, zinc mine with important by-product credits of copper, gold and silver. The Company is targeting to produce at an annualized production rate of 120 million pounds of zinc and 15 million pounds of copper per year.

For further details on Farallon, 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.

    
    ON BEHALF OF THE BOARD OF DIRECTORS
    J.R.H. (Dick) Whittington, President & CEO


    Production                                            Q1 2010    Q4 2009
    -------------------------------------------------------------------------
    Metals (contained in concentrate)
    Zinc (000's Pounds)                                    24,950     23,383
    Copper (000's pounds)                                   2,139      2,443
    Silver (ounces)                                       420,911    382,120
    Gold (ounces)                                           4,322      4,224

    Ore Mined (tonnes)                                    154,580    150,984
    Ore Processed (tonnes)                                152,178    142,752
    tonnes per day                                          1,691      1,552
    Zinc grade (%)                                            9.1        9.3
    Copper grade (%)                                          1.1        1.4
    Silver grade (%)                                          174        182
    Gold grade (%)                                            2.5        3.0

    Concentrate
    Zinc (DMT)                                             23,365     21,584
    Zinc (%)                                                 48.4       49.1
    Silver (g/t)                                              290        295
    Gold (g/t)                                                2.3        2.4
    Copper (DMT)                                            6,952      7,157
    Copper (%)                                               14.0       15.4
    Silver (g/t)                                              909        766
    Gold (g/t)                                               11.6       11.0


    Recovery                                              Q1 2010    Q4 2009
    -------------------------------------------------------------------------
    Zinc (%)                                                   82         80
    Copper (%)                                                 59         56
    Silver (%)                                                 49         47
    Gold (%)                                                   39         32


    Costs                                       Mar-10    Q1 2010    Q4 2009
    -------------------------------------------------------------------------
    Site Costs (US$/t milled)                   $67.17     $76.74     $81.42
    Total Cash Costs (US$/payable lb zinc)(1)    $0.31      $0.38      $0.44



    FARALLON MINING LTD. (Expressed in Thousands of United States Dollars)

    Summary of Consolidated Balance Sheets (USD '000s)

                                                        31-Mar-10  31-Dec-09
    -------------------------------------------------------------------------
    Assets
      Cash and equivalents                                 20,900     21,574
      Other Current Assets                                 19,680     17,744
    -------------------------------------------------------------------------
    Current Assets                                         40,580     39,318

    Property, Plant and Equipment                         125,832    127,530
    -------------------------------------------------------------------------
    TOTAL ASSETS                                          166,412    166,848
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
      Accounts payable and accrued liabilities             14,564     15,428
      Other Current Liabilities                             7,778      9,007
    -------------------------------------------------------------------------
    Current liabilities                                    22,342     24,435

      Long term debt (Credit Suisse)                       21,900     24,319
      Silver Wheaton deferred revenue                      72,037     74,499
      Site closure and reclamation obligation                 583        561
    -------------------------------------------------------------------------
    Long term liabilities                                 116,862    123,814

    -------------------------------------------------------------------------
    Shareholders' equity                                   49,550     43,034

    -------------------------------------------------------------------------
    TOTAL LIABILITIES & EQUITY                            166,412    166,848
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Working Capital                                        18,238     14,883
    -------------------------------------------------------------------------



    Summary of Consolidated Statements of Operations and Comprehensive Loss
    (USD '000s)

                                                               Q1         Q4
                                                             2010       2009
    -------------------------------------------------------------------------
    Gross Sales Revenue                                    37,595     32,343
    Cost of Sales                                         (25,457)   (25,142)
    Depreciation, depletion and amortization               (3,018)    (3,244)
    -------------------------------------------------------------------------
    Earnings (loss) from operations                         9,120      3,957

      Exploration                                           1,443        599
      Office Costs                                          1,675      2,058
      Other Expenses (income)                                (241)     1,182
    -------------------------------------------------------------------------
    Expenses (income)                                       2,877      3,839
    Current income tax (recovery) expense                      41         74
    -------------------------------------------------------------------------
    Net Earnings (loss)                                     6,202         44
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Non-GAAP Adjusted EBITDA                                9,020      4,544
    -------------------------------------------------------------------------



    Summary of Consolidated Statement of Cash Flows (USD 000's)

                                                               Q1         Q4
                                                             2010       2009
    -------------------------------------------------------------------------
    Earnings (loss) for the period                          6,202         44
    Amortization of Deferred Revenue                       (2,462)    (2,304)
    Items not involving cash                                2,267      4,511
    -------------------------------------------------------------------------
    Cash Flow from Operations before changes in
     non-cash working capital                               6,007      2,251
    Changes in non-cash working capital                    (6,529)     2,156
    -------------------------------------------------------------------------
    Cash Flow from (used in) Operations                      (522)     4,407

    Investing Activity - Additions to Property
     Plant Equipment                                       (1,298)    (1,919)
    Financing Activity                                         46      9,894
    Foreign Exchange Gain (loss)                            1,100     (1,854)
    -------------------------------------------------------------------------
    Increase (Decrease) in cash and equivalents              (674)    10,528
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and equivalents, beginning of period              21,574     11,046
    Cash and equivalents, end of period                    20,900     21,574
    -------------------------------------------------------------------------
    Notes:
    (1) Total Cash Costs and Adjusted EBITDA are Non-GAAP Financial Measures.
        Please read page 11 of the Company's MD&A for further information.
    (2) Further information on these mineral resource and reserve estimates
        is included in the Company's March 29, 2010 news release. The Mineral
        Reserves are stated at a 3% zinc grade cut-off for the Abajo, West
        Extension and South East zones and a 5% zinc grade cut-off for the
        North zone.
    (3) Further information on the mineral resources in the gold zones is
        included in the Company's April 21, 2010 news release.
    

No regulatory authority has approved or disapproved the information contained in this news release

Forward Looking Information

This news 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. 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.

Information Concerning Estimates of Measured, Indicated and Inferred Resources

This news release uses the terms "measured resources", "indicated resources" and "inferred resources". Farallon advises investors that although these terms are recognized and required by Canadian regulations (under National Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S. Securities and Exchange Commission does not recognize them. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. In addition, "inferred resources" have a great amount of uncertainty as to their existence, and economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, or economic studies except for Preliminary Assessment as defined under 43-101. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.

SOURCE Farallon Mining Ltd.

For further information: For further information: on Farallon, 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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