Nagging court case settled for Farallon

Farallon Resources (FAN-T) is generating positive news despite being a base metal producer in a slumping metals market.

The good news comes by way of what it hopes will be the end to a legal nuisance that has pestered the company for the last eight years.

A court in Mexico City dismissed a third appeal made by David Hermiston, who argued he was defrauded of ownership rights in shares of Minera Summit de Mexico, S.A – the prior owner of the Campo Morado property which Farallon now owns.

Hermiston first launched a civil case in Mexico back in September of 2004. Before that he had launched a case against Farallon in Nevada, where he was also ruled against and ordered to pay roughly US$700,000 to Farallon.

The Mexican court ordered Hermiston to cover the Farallon’s legal fees with regards to the case.

Dick Whittington, Farallon’s president and chief executive, estimates such costs, when combined with the Nevada ruling,  to be over a million dollars and says the company is doing all it can to reclaim them.

And while no company likes to have a court case, no matter how frivolous, hanging over it head – especially when it disputes the ownership of a project it is developing – Farallon showed supreme confidence by continuing to develop a mine on the property while the case was still open.

“The case didn’t hold up development in anyway,” Whittington says. “It could have done, but it didn’t. We had enough confidence in the veracity of our case and were able to sway a number of people along the way including several banks and other parties that we did have solid case.”

Whittington called the Mexican verdict gratifying.

With the case settled, Farallon can focus all of its attention on the G-9 polymetallic mine which sits on the Campo Morado property.

The company recently announced that it had begun shipping of zinc, copper, and lead concentrates from the Port of Manzanillo in Mexico to smelters in Asia.

“This initiates our off-take agreements with Trafigura Beheer BV Amsterdam and revenue generation has now started for the company. Everyone associated with Farallon should be very proud as the start of vessel shipments is a very important step in that process,” Whittington said in a statement.

The G-9 mine sits roughly 160 km southwest of Mexico City. For 2009 the mine is targeting processing 1,500 tonnes of ore per day for total production of 1.5 million oz. of silver, 120 million lbs of zinc, 15 million lbs of copper, 14,500 oz of gold, 6 million lbs of lead.

Despite weak zinc prices – it was trading for just 49¢ per lb. in London on Feb. 23 — Whittington says the company is continuing to push towards designed production capacity. It had originally said it would be there in January, and now says it will come some time in February.

“We are continuing the ramp-up in production,” he says, “and given the early stage that we’re in, we’re pleased with the progress we’re making.”

At press time, Farallon shares were trading for 18¢. The company’s shares have moved between 84¢ and 10¢ over the last 52-week period and it has 352.8 million shares outstanding.