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World's largest zinc producer to buy Farallon Mining in friendly C$409mn cash deal
Belgian-based Nyrstar has been acquisition-minded, snapping up companies in the U.S., Australia, and Peru. Canada's Farallon Mining is about to join its suite of miners and explorers.
Author: Dorothy Kosich
Posted: Tuesday , 16 Nov 2010
RENO, NV -
The world's largest zinc producer, Nyrstar (NYSE Euronext Brussels: NYR), has scheduled a conference call Tuesday morning to explain its friendly Cdn$409 million or 80-cents per share all-cash offer to acquire Vancouver's Farallon Mining (TSX: FAN).
Farallon owns the Campo Morado polymetallic mining operation in Guerrero State, Mexico, 160 kilometers south-southwest of Mexico City. The deposit currently being exploited is the G9 Mine which has produced high-grade zinc, copper, lead, gold and silver.
In addition to the G9 Mine, there are four additional deposits including Reforma, El Largo, El Rey and Naranjo.
During the third quarter of this year, the G9 Mine produced 18.9 million pounds of zinc and 2 million pounds of copper at a total cash cost of US$0.35-cents per pound. For the first nine months of this year, Farallon produced 69.21 million pounds of zinc, 11.18 million pounds of copper, 1,327,858 ounces of silver, and 13,970 ounces of gold.
Farallon has targeted annual production of 1,500tpd yielding 1.5 million ounces of silver, 120 million pounds of zinc, 15 million pounds of copper, 14,500 ounces of gold and 6 million pounds of lead.
Nyrstar intends to ramp-up production to a rate of 2,500tpd of ore by the end of 2012, representing annual production of 70,000 tonnes per year of zinc in concentrate, 8,000 tonnes of copper, 7,000 tonnes of lead, 3 million ounces of silver and 35,000 ounces of gold.
Once fully ramped up, the G9 Mine is expected to have a cash cost of less than US$500 per tonne of payable zinc due to significant by-product credits. Nyrstar believes if all deposits are mined, it will support a mine life of more than 10 years.
On Oct. 20, 2010, Farallon announced the discovery of a new zinc-rich polymetallic
Nyrstar CEO Roland Junck said, "Farallon comprises an outstanding set of assets at an early stage of their development that will complement Nyrstar's existing multi-metals business." Nyrstar operates mines in Tennessee, Peru, Finland, and has exploration projects in Australia and Greenland.
He added that the acquisition will increase Nyrstar's zinc metal production capacity by 6% to 31%.
"Whilst the rapid development of the G9 Mine has meant that Farallon has not yet undertaken a comprehensive exploration program, we believe there exists significant exploration potential," Junck said.
The most recent reserve and resource statement for the G9 Mine estimated 1,950,000 tonnes of proven and probable reserves grading at 10% zinc, 1.34% copper, 211 grams per tonne of silver, and 3.03 grams per tonne of gold. Total resources including reserves are 3,954,000 tonnes with 9.34% zinc, 1.27% copper, 205 grams per tonne of silver and 3.00 grams per tonne of gold.
Nyrstar has also locked up 16.3% of outstanding shares of Farallon belonging to Acuity Investment Management, as well as 2.6% of the shares held by Farallon's board members and officers.
Nyrstar also intends to convene an emergency general meeting on December 14 and asks its shareholders to vote on a proposed rights offering of up to EUR500 million.
Paradigm Capital is acting as financial advisor to Farallon. The junior miner has agreed to pay Nyrstar a break fee of C$12 million, while Nyrstar has agreed to pay a break fee of C$1.5 million. Nyrstar has the right to match any competing bid.
If you don't trust GOLD,the only asset with a 6000 year track record, do you trust the logic of taking a $1,000 pine tree, cutting it up, turning it to pulp, putting some ink on it, and then calling it one billion $ dollars?