Nagging Court Case Over For Farallon

Farallon Resources (FAN-T, FRLLF-O) 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 — the previous owner of the Campo Morado property that Farallon now owns.

Hermiston first launched a civil case in Mexico back in September 2004. Hermiston also lost an earlier case against Farallon in Nevada, and was ordered to pay the company roughly US$700,000.

In this latest case, the Mexican court ordered Hermiston to cover Farallon’s legal fees.

Farallon president and chief executive Dick Whittington estimates such costs, when combined with the Nevada ruling, to be over $1 million and says the company is doing all it can to reclaim them.

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

“The case didn’t hold up development in any way,” 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 a 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, on the Campo Morado property.

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

“This initiates our offtake 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 is about 160 km southwest of Mexico City. For 2009, the mine is targeting 1,500 tonnes of ore per day for total production of 1.5 million oz. silver, 120 million lbs. zinc, 15 million lbs. copper, 14,500 oz. gold and 6 million lbs. lead.

Despite weak zinc prices — it was trading at just US49¢ 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 presstime, Farallon shares were trading at 15¢ in a 12-month range of 10-84¢. The company has 352.8 million shares outstanding.