Filed by Automated Filing Services Inc. (604) 609-0244 - Farallon Resources Ltd. - Exhibit 4.08






No securities regulatory authority in Canada has expressed
an opinion about these securities and it is an offence to claim otherwise. This
short form prospectus constitutes a public offering of these securities only in
those jurisdictions where they may be lawfully offered for sale and therein only
by persons permitted to sell such securities. These securities have
not been and will not be registered under the United States Securities Act of
1933, as amended (the “U.S. Securities Act”). Accordingly, subject to certain
exceptions, these securities may not be offered or sold within the United States
of America and this short form prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, any of these securities within the United
States of America. See “Plan of Distribution”.

Information has been incorporated by reference in this
prospectus from documents filed with the securities commissions or similar
authorities in Canada. Copies of the documents incorporated herein by
reference may be obtained on request without charge from the Secretary, Farallon
Resources Ltd., #1020, 800 West Pender Street, Vancouver, British Columbia, V6C
2V6 (Telephone (604) 684-6365), and are also available electronically at
www.sedar.com. 

SHORT FORM PROSPECTUS

	New Issue 	January 9, 2008 


 

$20,000,400 
28,572,000 Common Shares

     This short form prospectus
qualifies the distribution (the “Offering”) of 28,572,000 common shares (“Common
Shares”) of Farallon Resources Ltd. (“Farallon” or the “Company”) at a price of
$0.70 per Common Share (the “Offering Price”). The Common Shares are offered
pursuant to an underwriting agreement dated December 3, 2007 between the Company
and Paradigm Capital Inc. (“Paradigm”), Canaccord Capital Corporation, MGI
Securities Inc. and Raymond James Ltd., (collectively the “Underwriters”). The
Offering Price was determined by negotiation between the Company and the
Underwriters. The outstanding common shares are listed and posted for trading on
the Toronto Stock Exchange (“TSX”) under the symbol “FAN” and quoted on the
OTCBB under the symbol “FRLLF”. The Company will apply to list the Common Shares
issuable pursuant to this Offering, as well as the Common Shares issuable upon
the exercise of the Compensation Options (as defined herein), on the TSX.
Listing will be subject to the Company fulfilling all the requirements of the
TSX. The closing price of the Common Shares on the TSX on January 8, 2008 (the
last trading day before the date hereof) was $0.69.

     Investing in the Common Shares
involves risk. Prospective investors should consider the risk factors described
under “Risk Factors” before purchasing Common Shares.

	________________________________________ 	 
	 	 
	 Price: $0.70 per Common
      Share  	 
	________________________________________ 	 
	  	 	  	 	 	  	 	 	  	 
	  	 	  	 	 	  	 	 	  	 
	  	 	  	 	 	Underwriters’ 	 	 	Net Proceeds to the 	 
	  	 	Price to Public 	 	 	Commission(1) 		 	Company(2)
    	
	  	 	  	 	 	  	 	 	  	 
	Per Common Share 	$	0.70 	 	$	0.042 	 	$	0.658 	 
	Total(3) 	$	20,000,400 	 	$	1,200,024 	 	$	18,800,376 	 



	___________________
	(1) 	
      In consideration of the services rendered by the
      Underwriters in connection with the Offering, the Company has agreed to
      pay a cash commission to the Underwriters equal to 6% of the gross
      proceeds raised in the Offering.

	(2) 	
      Before deducting the expenses of the Offering, estimated
      to be $325,000, which will be paid out of the proceeds of this
      Offering.

	(3) 	
      In addition, the Company has granted to the Underwriters
      an option (the ‘‘Over-Allotment Option’’) to purchase up to that number of
      common shares equal to 15% of the Common Shares sold in the Offering (the
      “Over-Allotment Shares”) at the Offering Price within 30 days after the
      Closing Date (as defined herein) solely to cover over-allotments, if any,
      and for market stabilization purposes. If the Over- Allotment Option is
      exercised in full, the Price to Public, Underwriters’ Commission and Net
      Proceeds to the Company will be $23,000,460, $1,380,028 and $21,620,432,
      respectively. This Prospectus also qualifies the grant of the
      Over-Allotment Option and the distribution of the Over-Allotment Shares
      issued upon exercise of the Over-Allotment Option. See “Plan of
      Distribution”.







     This Prospectus also qualifies
the issue by the Company of non-transferable compensation options to each
Underwriter (the “Compensation Options”). The Compensation Options entitle the
Underwriters to purchase an aggregate number of common shares equal to 6% of the
number of Common Shares sold pursuant to the Offering, including any
Over-Allotment Shares issued, (the “Option Shares”) at the Offering Price at any
time until 5:00 p.m., Vancouver time, for a period of 24 months after the
Closing Date

	  	 	  	 	 	  	 	 	Exercise Price or 	 
	  	 	Maximum Size or Number of 	 	 	Exercise Period / 	 	 	Average 	 
	Underwriters’
      Position 	 	Securities Held 	 	 	Acquisition Date 	 	 	Acquisition Price 	 
	Over-Allotment Option 	 	4,285,800 Common Shares 	 	 	30 days 	 	$	0.70 	 
	Compensation Option 	 	1,971,468 Common Shares 	 	 	24 months 	 	$	0.70 	 
	Any other option granted by 	 	Nil 	 	 	N/A 	 	 	N/A 	 
	issuer or insider of issuer 	 	  	 	 	  	 	 	  	 
	Total Securities under option 	 	6,257,268 Common Shares 	 	 	N/A 	 	 	N/A 	 
	Other Compensation 	 	Nil 	 	 	N/A 	 	 	N/A 	 
	Securities 	 	  	 	 	  	 	 	  	 


     The Underwriters, as principals,
conditionally offer the Common Shares, subject to prior sale, if, as and when
issued by the Company and accepted by the Underwriters in accordance with the
conditions contained in the Underwriting Agreement referred to under “Plan of
Distribution” and subject to the approval of certain legal matters on behalf of
the Company by Lang Michener LLP, Vancouver, British Columbia, and on behalf of
the Underwriters by Heenan Blaikie LLP, Toronto, Ontario. See “Plan of
Distribution”.

     Subject to applicable laws and in
connection with the Offering, the Underwriters may over-allot or effect
transactions which stabilize or maintain the market price of the Common Shares
at levels other than those which otherwise might prevail on the open market.
Such transactions, if commenced, may be discontinued at any time. See “Plan of
Distribution”.

     Subscriptions will be received
subject to rejection or allotment in whole or in part and the right is reserved
to close the subscription books at any time without notice. It is expected that
certificates evidencing the Common Shares will be available for delivery at
closing, which is expected to take place on or about December 18, 2007 or such
later date as may be agreed between the Company and the Underwriters, but in any
event not later February 20, 2008 (the “Closing Date”).

     All currency amounts in this
prospectus are in Canadian dollars unless otherwise indicated. On January 8,
2008, CDN$1.00 was equivalent to US$1.00 as reported by the Bank of Canada. Note
that the Company presents its consolidated financial statements in United States
dollars.

     Paradigm Capital Inc. has
agreed to fund 50% of a US$20 million bridge facility loan to be used by the
Company for further pre-development of the Campo Morado Project. Accordingly,
the Company may be considered to be a “connected issuer” of Paradigm, one of the
Underwriters, under applicable securities legislation. See “Plan of
Distribution”.

- ii -




TABLE OF CONTENTS

	Documents Incorporated by
      Reference 	2 	 	Interests of
      Experts 	15 
	Eligibility for Investment 	3 	 	Risk Factors 	15 
	Forward Looking Statements
      	3 	 	Auditors, Transfer
      Underwriter and Registrar 	16 
	The Company 	4 	 	Purchasers’ Statutory
      Rights 	16 
	Recent Developments 	7 	 	Auditors’
      Consent 	17 
	Use of Proceeds 	11 	 	Certificate of the Company
      	C-1 
	Capitalization 	12 	 	Certificate
      of the Underwriters 	C-2 
	Plan of Distribution 	12 	 	  	  




	 	In this Prospectus: 	  
	 	 	 
	 	Company 	
      means Farallon Resources Ltd.; 

	 	 	
       

	 	Farallon, we, our, us 	
      means the Company and its subsidiaries; 

	 	 	
       

	 	g/t 	
      means grams per tonne; 

	 	 	
       

	 	lb 	
      means pound; 

	 	 	
       

	 	m 	
      means metre; 

	 	 	
       

		NI 43-101 	
      means Canadian Securities Administrators’ National
      Instrument 43-101, Standards of Disclosure for Mineral Projects;


	 	 	
       

		Offered Shares 	
      means the Common Shares offered under this Prospectus and
      the Over- Allotment Shares, collectively; 

	 	 	
       

	 	ounce 	
      means Troy ounce; 

	 	 	
       

		Qualifying Jurisdictions 	
      means all of the provinces of Canada, except Québec;
    

	 	 	
       

		SEDAR 	
      means the Canadian securities regulatory filings website
      where the Company’s filings including the AIF, Technical Report and other
      documents referred to herein can be reviewed and downloaded; 

	 	 	
       

		Technical Report 	
      means “The Revised Technical report on the 2007 Program
      and Preliminary Assessment of the G-9 Deposit of the Campo Morado Project”
      authored by David Stone, P.Eng., and Stephen Godden, FIMMM, C.Eng., of
      MineFill Services, Inc., independent qualified persons, and David Gaunt,
      P.Geo., a qualified person who is not independent of the Company, dated
      December 27, 2007 and filed on SEDAR; 

	 	 	
       

	 	ton 	
      means 2,000 pounds; 

	 	 	
       

	 	tonne 	
      means metric tonne, equalling 1,000 kilograms; and
  

	 	 	
       

	 	U.S. Securities Act 	
      means the United States Securities Act of 1933, as
      amended. 







DOCUMENTS INCORPORATED BY REFERENCE

     The following documents filed
with the securities commission or similar regulatory authority in each of the
provinces of Canada except Québec are specifically incorporated by reference
into, and form an integral part of, this Prospectus:

	
  the Amended and Restated Annual Information Form of the Company dated
  September 21, 2007, as amended January 4, 2008 for the year ended June 30,
  2007; 

  
	
  the audited consolidated financial statements and the notes thereto for the
  years ended June 30, 2007 and 2006, together with the auditors’ report thereon
  and management’s discussion and analysis of financial condition and results of
  operations for the fiscal year ended June 30, 2007; 

  
	
  the unaudited comparative interim financial statements for the three months
  ended September 30, 2007 and 2006 and the notes thereto, except for the notice
  provided under section 4.3(3)(a) of National Instrument 51-102 Continuous
  Disclosure Obligations, and management’s discussion and analysis of
  financial condition and results of operations for the three months ended
  September 30, 2007; 

  
	
  the management information circular dated October 9, 2007 in connection
  with the annual general meeting of shareholders held on November 8, 2007; 

  
	
  the material change report dated October 18, 2007 related to the approval
  of a new Shareholder Rights Plan; and 

  
	
  the material change report dated December 28, 2007 announcing the
  preliminary assessment of the G-9 deposit. 



     Material change reports (other
than confidential reports), business acquisition reports, interim financial
statements and all other documents of the type referred to above and any other
document of the type required by National Instrument 44-101 Short Form
Prospectus Distributions to be incorporated by reference in a short form
prospectus, filed by the Company with a securities commission or similar
regulatory authority in Canada after the date of this Prospectus and before
completion or withdrawal of this Offering, will be deemed to be incorporated by
reference into this Prospectus.

     Any statement contained in a
document incorporated or deemed to be incorporated by reference herein will be
deemed to be modified or superseded for the purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that is also incorporated or is deemed to be incorporated by reference
herein modifies or supersedes such statement. The modifying or superseding
statement need not state that it has modified or superseded a prior statement or
include any other information set forth in the document that it modifies or
supersedes. The making of a modifying or superseding statement will not be
deemed an admission for any purpose that the modified or superseded statement,
when made, constituted a misrepresentation, an untrue statement of a material
fact or an omission to state a material fact that is required to be stated or
that is necessary to make a statement not misleading in light of the
circumstances in which it was made. Any statement so modified or superseded will
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

     Information has been
incorporated by reference in this prospectus from documents filed with the
securities commissions or similar authorities in Canada. Copies of the
documents incorporated herein by reference may be obtained on request without
charge from the Secretary, Farallon Resources Ltd., #1020, 800 West Pender
Street, Vancouver, British Columbia, V6C 2V6 (Telephone (604) 684-6365), and are
also available electronically at www.sedar.com. The Company’s filings through SEDAR are
not incorporated by reference in this Prospectus except as specifically set out
herein.

- 2 -




ELIGIBILITY FOR INVESTMENT

     In the opinion of Lang Michener
LLP, counsel to the Company, and Heenan Blaikie LLP, counsel to the
Underwriters, based on provisions of the Income Tax Act (Canada) (the
“Tax Act”), the regulations thereunder and the proposals to amend the Tax Act
and the regulations thereunder publicly announced by, or on behalf of, the
Minister of Finance (Canada) prior to the date hereof, the Common Shares offered
hereby, if issued and listed on the Toronto Stock Exchange on the date hereof,
would be “qualified investments” under the Tax Act and the regulations
thereunder for trusts governed by registered retirement savings plans,
registered retirement income funds, registered education savings plans and
deferred profit sharing plans.

FORWARD LOOKING STATEMENTS

     This Prospectus, including the
documents incorporated by reference, contains forward-looking statements which
may not be based on historical fact. Forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the actual
results of exploration activities, actual results of reclamation activities, the
estimation or realization of mineral reserves and resources, the timing and
amount of estimated future production, capital expenditures, costs and timing of
the development of new deposits, requirements for additional capital, future
prices of precious and base metals, possible variations in ore grade or recovery
rates, failure of plant, equipment or processes to operate as anticipated,
accidents, labour disputes and other risks of the mining industry, delays in
obtaining governmental approvals, permits or financing or in the completion of
development or construction activities, currency fluctuations, title disputes or
claims limitations on insurance coverage and the timing and possible outcome of
pending litigation. Although the Company has attempted to identify important
factors that could cause actual actions, events or results to differ materially
from those described in forward-looking statements, there may be other factors
that cause actions, events or results not to be as anticipated, estimated or
intended.

     Prospective investors can
identify many of these statements by looking for words such as “believe’’,
“expects’’, “will’’, “intends’’, “projects’’, “anticipates’’, “estimates’’,
“continues’’ or similar words or the negative thereof. There can be no assurance
that the plans, intentions or expectations upon which these forward-looking
statements are based will occur. Forward-looking statements are subject to
risks, uncertainties and assumptions, including those discussed under “Risk
Factors” in this Prospectus and in the Company’s Annual Information Form. 

     The forward-looking statements
contained herein are made as of the date of this Prospectus and are expressly
qualified in their entirety by this cautionary statement. Readers should not
place undue reliance on the forward-looking statements, which reflect
management’s plans, estimates, projections and views only as of the date hereof.
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect subsequent events or circumstances, except as required by
applicable law.

- 3 -




THE COMPANY

General

     The Company was incorporated on
July 4, 1991 under the laws of the province of British Columbia. The head office
of the Company is located at Suite 1020, 800 West Pender Street, Vancouver,
British Columbia, V6C 2V6.

     The Company is engaged in the
business of acquiring ownership of, and exploring and developing precious and
base metals deposits. For the past three years the Company has focused on
exploring the “Campo Morado Project” which is located in Guerrero State, Mexico
and comprises six government-granted mining concessions totalling approximately
11,813 hectares, located approximately 160 km south-southwest of Mexico
City.

     As at September 30, 2007,
Farallon had incurred aggregate exploration expenditures of approximately
US$72.3 million and acquisition costs of approximately US$9 million on the Campo
Morado Project. During the three months ended September 30, 2007, the Company
had incurred US$10.1 million of exploration expenses.

Campo Morado Project

     The area comprising the Campo
Morado Project contains former producing mines which produced limited amounts of
lead, silver and gold from oxidized massive sulphide material. The property
hosts a number of zinc-copper-gold-silver-lead mineral deposits and zones;
mineral resources estimates have been completed for five of the deposits. In
2006, the Company re-focused its work on one of these deposits called G-9. In
2007, further exploration and development work took place at G-9 which is
described in “Revised Technical Report on the 2007 Program and Preliminary
Assessment at the G-9 Deposit, Campo Morado Project, Guerrero State, Mexico”
dated December 27, 2007 (the “Technical Report”) as filed on www.sedar.com and prepared by David Stone, P.Eng., and
Stephen Godden, C.Eng, FIMMM, each of whom is an independent qualified person as
defined by NI 43-101, and David Gaunt, P.Geo., a qualified person as defined by
NI 43-101 who is not independent of the Company.

     During fiscal 2008, Farallon
plans to continue its exploration and development of the G-9 deposit at the
Campo Morado Project. The Company has ordered long lead time equipment which has
enabled the Company to secure all critical pieces of equipment required to have
on site in order to advance towards a final production decision in the third or
fourth quarter of the Company’s current fiscal year.

Estimates of Mineralization at Campo Morado
Project

     These estimates were completed
according to the standards of the Canadian Institute of Mining and Metallurgy
(2000) as required for mining projects under NI 43-101.

     Reforma, El Rey, Naranjo and El
Largo Deposits

     The mineral resource estimates
for the Reforma, El Rey, Naranjo and El Largo Deposits at Campo Morado were
completed by Qingping Deng, CPG, of Behre Dolbear & Company (USA) Inc.
(“Behre Dolbear”), an independent qualified person as defined by NI 43-101 in
June and September 2005 and summarized in the December 2006 “Technical Report on
the Campo Morado Project Revised Update on the Exploration, Resources and
Metallurgical Activities for the G-9 Deposit, Guerrero State, Mexico” by R.
Banner, P.Eng., D. Gaunt, P.Geo., D. Kilby, P.Geo., P. Taggart, P.Eng., Q. Deng,
CPG, and D. Dreisinger, P.Eng.. The estimates are tabulated below.

- 4 -




Mineral Resource Estimates by Zinc Grade Cut-off for the

El Largo, El Rey, Naranjo and Reforma Deposits, June and September
2005


	Deposit 
	Category 
	Zinc Cut-off 
	Tonnes 
(000’s) 	Gold 
(g/t) 	Silver 
(g/t) 	Copper 
(%) 	Zinc 
(%) 	Lead 
(%) 
	Reforma 




	Indicated 




	3% 
4% 
5% 
6% 
7% 
8%
    	3,432 
2,130 
1,173 
416
      
92 
20 	3.91 
4.37 
4.74 
4.72
      
6.88 
10.23 	208 
238 
262 
264 
351
      
486 	0.64 
0.61 
0.58 
0.54
      
0.52 
0.76 	4.59 
5.27 
5.90 
6.69
      
7.66 
8.52 	1.63 
1.86 
2.02 
2.10
      
2.95 
4.75 
	El Rey 





	Indicated 





Inferred 	3% 
4% 
5% 
6% 
7% 
8%
      
3% and 4% 	1,350 
820 
323 
106 
33
      
14 
15 	2.13 
2.39 
2.98 
3.51
      
5.45 
6.96 
2.37 	126 
138 
162 
185 
230
      
196 
91 	0.50 
0.52 
0.53 
0.48
      
0.57 
0.72 
0.54 	4.46 
5.01 
5.88 
6.99
      
8.32 
9.69 
4.63 	1.02 
1.13 
1.33 
1.65
      
2.45 
3.24 
1.47 
	Naranjo 





	Indicated 





Inferred 	3% 
4% 
5% 
6% 
7% 
8%
      
3% 	1,954 
1,124 
557 
237 
97
      
5 
7 	2.45 
2.74 
3.11 
3.63
      
3.44 
2.38 
2.71 	128 
153 
178 
194 
182
      
132 
101 	0.67 
0.67 
0.66 
0.53
      
0.54 
0.37 
0.41 	4.49 
5.24 
6.00 
6.79
      
7.21 
8.07 
3.25 	1.22 
1.46 
1.82 
2.25
      
2.33 
2.85 
0.94 
	El Largo 










	Indicated 





Inferred
      




	3% 
4% 
5% 
6% 
7% 
8%
      
3% 
4% 
5% 
6% 
7% 
8% 	6,507 
4,503 
2,860 
1,748
      
990 
472 
1,200 
539 
241 
114 
70 
41 	0.89 
0.85 
0.79 
0.74
      
0.73 
0.71 
1.49 
1.49 
1.41 
1.31 
1.16
      
0.90 	106 
115 
124 
133 
146
      
157 
121 
138 
151 
153 
155 
144 	0.36 
0.35 
0.34 
0.34
      
0.33 
0.33 
0.60 
0.53 
0.42 
0.36 
0.32
      
0.28 	5.15 
5.89 
6.69 
7.47
      
8.23 
9.08 
4.33 
5.30 
6.43 
7.48 
8.09
      
8.58 	1.11 
1.24 
1.39 
1.53
      
1.72 
1.89 
0.85 
1.02 
1.30 
1.53 
1.73
      
1.96 
	Total 










	Indicated 





Inferred
      




	3% 
4% 
5% 
6% 
7% 
8%
      
3% 
4% 
5% 
6% 
7% 
8% 	13,243 
8,577 
4,933 
2,507
      
1,212 
511 
1,222 
554 
241 
114 
70 
41
    	2.03 
2.12 
2.14 
1.79
      
1.54 
1.27 
1.51 
1.51 
1.41 
1.31 
1.16
      
0.90 	138 
153 
166 
163 
167
      
171 
121 
137 
151 
153 
155 
144 	0.49 
0.47 
0.45 
0.40
      
0.37 
0.36 
0.60 
0.53 
0.42 
0.36 
0.32
      
0.28 	4.84 
5.57 
6.37 
7.26
      
8.11 
9.06 
4.33 
5.28 
6.43 
7.48 
8.09
      
8.58 	1.25 
1.41 
1.59 
1.70
      
1.88 
2.05 
0.86 
1.03 
1.30 
1.53 
1.73
      
1.96 



- 5 -




G-9 Deposit

The mineral resources for the G-9 deposit were estimated by
David Gaunt, P.Geo., who is a qualified person, but not independent of Farallon
as defined under NI 43-101. These mineral estimates have been reviewed by the
authors of the Technical Report as part of their due diligence for the
preliminary assessment. The G-9 deposit is comprised of several zones. The
mineral resources in each zone and for the total deposit, at 2% and 8% zinc
cut-offs, as of November 2006 are tabulated below:

Inferred Mineral Resources Estimates by Zinc Grade Cut-off
for the G-9 Deposit 
at 2% and 8% Zinc Cut-offs – November 2006


	
Zone 	Cut-off 
% Zn 	Tonnes 
(000’s) 	Gold 
(g/t) 	Silver 
(g/t) 	Copper 
(%) 	Lead 
(%) 	Zinc 
(%) 
	Southeast 
	2.0
    	1,460 	2.7
    	202
    	1.9
    	1.2
    	11.5
    
	8.0
    	890
    	2.3
    	179
    	2.1
    	1.3
    	15.7
    
	North 
	2.0
    	2,370 	3.7
    	223
    	1.3
    	1.1
    	7.0
    
	8.0
    	790
    	3.6
    	231
    	1.6
    	1.2
    	11.0
    
	Southwest 
	2.0
    	1,250 	2.0
    	136
    	0.9
    	0.8
    	3.8
    
	8.0
    	10
    	2.3
    	183
    	1.0
    	1.4
    	8.7
    
	Replacement 
	2.0
    	490
    	1.3
    	86
    	1.0
    	0.8
    	5.4
    
	8.0
    	70
    	1.8
    	156
    	2.2
    	2.0
    	12.6
    
	Total 
	2.0
    	5,570 	2.8
    	186
    	1.3
    	1.0
    	7.3
    
	8.0
    	1,770 	2.9
    	201
    	1.9
    	1.3
    	13.4
    



     Mineral resources that are not
mineral reserves do not have demonstrated economic viability. None of the
foregoing mineralization has been determined to be ore nor is considered to be a
mineral reserve.

The Company’s “Parallel-Track” Strategy

     The Company is employing a
parallel-track strategy for the G-9 deposit meaning that it is currently
incurring some expenditures as if a positive production decision had already
been made, when in fact such a decision has not yet been made. This strategy can
be contrasted with a more conventional approach whereby expenditures of a post
production-decision nature such as ordering plant and equipment, constructing
heavy duty roads and power lines and site preparation are deferred until a
formal production decision has been made, usually based on the results of a
final feasibility study. The parallel-track strategy accepts the risks that some
of these expenditures will prove to have been wasted if the production decision
is negative and the property ultimately abandoned, or inefficient if a positive
decision is made using a different mine plan, but weighs this risk against the
benefits of potentially being in production sooner. The strategy takes into
account that some of the parallel-track expenditures will benefit the project if
a production decision is merely deferred. Parallel-tracking also has the
advantage that in a rising market for mining plant and equipment, securing
and/or acquiring equipment sooner can save money. Parallel-track costs incurred
by Farallon include placing deposits for long lead-time mining and processing
equipment and costs related to commencing construction of some project
infrastructure such as heavy-duty access roads and power lines, site preparation
and a production sized exploration access decline instead of an exploration use
only decline.

     The Company based its
parallel-track strategy on several factors related to the nature of the G-9
deposit that are referred to in the Technical Report. These factors include a
preliminary assessment (see also below) that suggests relatively robust
projected financial returns, the fact that the G-9 deposit comprises
volcanogenic massive sulphide (VMS) mineralization which tends to occur in
discrete sulphide rich lenses, in which problematic metal zoning is less likely
to occur, and because G-9 has shown lateral persistence of grades and consistent
robust metallurgical results over four separate recovery studies. As well,
surface exploration drilling step-outs have 

- 6 -




continued to increase the known deposit size and continuity and
the apparent amenability of the G-9 deposit to high grade stoping in the
projected early stages have together led the Company to conclude that the
potential benefits of a parallel-track strategy outweigh its risks. In weighing
the risks of advancing some parallel-track expenditures before a positive
feasibility study is in-hand, the Company also considered that a final
feasibility study is itself no guarantee of capital and operating cost estimates
and the overall project economics that those estimates imply.

     The Company has the flexibility
to use a parallel-track strategy both because it is the sole owner of the G-9
project and because it is of the view that the G-9 project is of a quite modest
size relative to the multi-billion dollar mine projects under construction
elsewhere which project in the high tens of thousands of tonnes of ore being
processed per day. The Company’s risk assessment also included reviews of
analogous zinc-based VMS projects such as the Tizapa Project, located
approximately 90 kilometers from G-9, which is currently mining lesser grade
mineralization at a rate of 2000 tonnes per day (source: mining consultants,
Brook Hunt & Associates Ltd, 2007 report).

     Estimating the financial
investment which can be said to be at additional risk due to use of the
parallel-track strategy is somewhat subjective but can be analyzed as follows.
In the nine months to September 30, 2007 the Company spent approximately $32.3
million at G-9 of which $5.9 million was spent on parallel-track expenditures
related to mine process plant and power supply. Spending has ramped up since
September 30, 2007, and it is currently running at approximately $10 million per
month in order to complete the $55 million program recommended for 2007 in a
December 14, 2006 technical report. This program was modified by the Company by
about 10% by re-allocating more surface exploration and reducing the length of
the decline access. Based on the expected recoverability of plant and equipment
purchases and deposits, the Company estimates about one-third of the
parallel-track strategy expenditures are at additional risk of being later
determined to have been wasted or used inefficiently to some degree, however,
the Company believes that the potential time savings merits the risk.

     Subject to receipt of new 2008
program recommendations and Board approval of a budget, the Company expects that
the rate of monthly expenditures could remain relatively constant through March
31, 2008, although operations can be curtailed on fairly short notice given that
many costs are pursuant to short term or cancelable contracts. The Company’s
goal is to have in hand a technical report recommending a final feasibility
study program by March 31, 2008 leading to a near-term production decision. The
Company had approximately $45.4 million cash on hand at September 30, 2007,
which coupled with the $20 million bridge financing from the October 29, 2007
agreement described herein, provides sufficient working capital for this rate of
expenditures through March 31, 2008. The Technical Report recommends a US$24.89
million budget through this period of time. For accounting purposes
substantially all of the parallel-track costs (except equipment purchases) are
being expensed so the parallel-track strategy is largely treating these costs
for reporting purposes as if they were exploration expenses.

Operations

     Farallon does not have any
operating revenue although, historically, it has had annual interest revenue as
a consequence of investing surplus funds pending the completion of exploration
programs.

RECENT DEVELOPMENTS

Recent Work 

     Encouraging drill results and
preliminary metallurgical tests that indicate that the mineralization can be
treated by flotation techniques, led Farallon to re-focus all its efforts toward
advancement of the G-9 deposit in 2006 and 2007.

- 7 -




Preliminary Assessment of G-9

The following information on the preliminary assessment is
summarized from the Technical Report.

     A preliminary assessment has been
completed for a 1,500 tonnes per day underground operation at the G-9 deposit at
the Campo Morado Project. The pre-tax results from the study indicate a 54%
internal rate of return (IRR) and net present value (NPV) of US$141.8 million at
an 8% discount rate. 

     The preliminary assessment was
based on estimated inferred mineral resources for the G-9 deposit as at November
2006. As the study uses inferred mineral resources that are geologically
speculative, there is no assurance that the results of the preliminary
assessment will be realized.

     The study was done in United
States dollars, using long term metal prices. Key parameters and results,
presented as Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA), are summarized below:


	Inferred resources (diluted) 
Above a 5% Zn cut-off
      



	3,130,000 tonnes grading 
3.05 g/t Au
      
200 g/t Ag 
1.58% Cu 
1.15% Pb 
9.69% Zn 
	Average Annual Metal Recovery 
(Life-of-Mine = 6.3
      years) 


	8,400 oz Au 
1,106,000 oz Ag 
11,113,000
      lb Cu 
5,213,000 lb Pb 
72,450,000 lb Zn 
	Total Recovered Metal 



	52,800 oz Au 
6,970,000 oz Ag 
70,010,000
      lb Cu 
32,884,000 lb Pb 
456,530,000 lb Zn 
	Average On-site
      Operating Cost 	$48.22
      per tonne milled 
	Start-up Capital
      Cost 	US$124.3 million 
	Net Cashflow 	US$223.6 million 
	NPV (8%) 	US$141.8 million 
	NPV (12%) 	US$113.1 million 
	IRR 	54%
  
	Payback Period 	Slightly more than one year 



- 8 -




     Metal prices used in the
preliminary assessment were based on a review of historical trends over the past
five years and general industry forecasts, and are summarized below:


	
Metal 
	Production Year End (same as fiscal year end) 
	June 30, 
2009 	June 30, 
2010 	June 30, 
2011 	June 30, 
2012 	June 30, 
2013 	June 30, 
2014 	June 30, 
2015 
	Gold (US$/oz) 	550 	500 	500 	500 	500 	500 	500 
	Silver (US$/oz) 	8.00 	7.00 	6.00 	6.00 	6.00 	6.00 	6.00 
	Copper (US$/lb) 	2.59 	2.33 	2.11 	1.40 	1.40 	1.40 	1.40 
	Lead (US$/lb) 	0.49 	0.44 	0.40 	0.40 	0.40 	0.40 	0.40 
	Zinc (US$/lb) 	1.30
    	1.10
    	0.88
    	0.75
    	0.75
    	0.75
    	0.75
    



     The preliminary financial results
were subjected to sensitivity analyses to examine the impact of varying the
capital costs, operating costs and zinc metal prices. The following shows
variability of the IRR and NPV (at a 0% discount rate). The analysis indicates
that the Campo Morado Project is most sensitive to changes in capital costs and
zinc prices and least sensitive to changes in operating costs.


	 NPV and IRR with varying Capital and Operating
      Costs   
	Variable
      Changed 	 
    	-20% 	-10% 	0% 	10% 	20% 
	Operating Cost 
	NPV (US$ millions) 	253.1 	238.4 	223.6 	208.9 	194.1 
	IRR 	58%
    	56%
    	54%
    	52%
    	51%
    
	Capital Cost 
	NPV (US$ millions) 	255.6 	239.6 	223.6 	207.6 	191.6 
	IRR 	72%
    	62%
    	54%
    	47%
    	41%
    





	NPV
      and IRR with varying Zinc Metal Prices  
	  	-20% 	-10% 	0% 	10% 	20% 
	NPV (US$
      millions) 	135.1 	179.4 	223.6 	267.8 	312.1 
	IRR 	37%
    	46%
    	54%
    	62%
    	69%
    



     The study is based on compiled
capital and operating costs as of September 2007, and the then current
information on the mining method and rate, and metallurgical recoveries.

     Four phases of metallurgical
testing has taken place on G-9 mineralization, indicating that it is amenable to
conventional flotation processing. The proposed flowsheet results in production
of three metal concentrates. Assumed average metal recoveries from G-9
concentrates utilized for the study are tabulated below:


	
Product 	Metallurgical Recoveries 
	Gold 	Silver 	Copper 	Lead 	Zinc 
	Copper Concentrate 
Lead Concentrate 
Zinc
      Concentrate 	3% 
10% 
10% 	10% 
25% 
13% 	75% 
- 
- 	- 
45% 
- 	- 
- 
85% 



     The preliminary assessment
assumes that copper, lead and zinc concentrates will be toll-smelted and that
the metals will be refined in the Far East, for sale in the Far East. The option
of toll-smelting and metal refining within Mexico is being investigated by the
Company. The option that yields the better financial return will likely be
employed.

The preliminary assessment does not include:

	
  resources for the Southwest Zone; 

  
	
  potential additional G-9 resources outlined by diamond drilling that has
  been completed since the mineral resource estimates were compiled (see “Recent
  Developments - Ongoing Work” below): 



- 9 -





	 		
      	

	
      the Company has announced in various news releases
      significant intersections of massive sulphides that include intersections
      in step-out holes in the high-grade Southeast Zone, and

	 	 	 	 
	 		
      	

	
      the discovery of a new mineralized zone (the Abajo Zone)
      of high-grade material that is immediately to the north of the area in
      which the November 2006 resources are located.

	 	 	 	 
	 	
      	

	
      either the upside benefit of processing, at some (as yet
      unspecified) future date, indicated resources from the El Largo, El Rey,
      Naranjo and Reforma deposits; or

	 	 	 	 
	 	
      	

	
      the cost of rehabilitation that has not yet been defined
      due to further anticipated changes to the production schedule for the G-9
      operation (grade and tonnes, the latter leading to a longer life-of-mine
      that is currently 6.3 years for a production rate of 1,500 tonnes per
      day), as well as the likely continued use of the G-9 plant site for future
      processing operations.



Ongoing Work

     The G-9 deposit was discovered in
2005 and a preliminary resource was estimated based on drilling to late in the
year. Drilling in 2006 expanded the deposit leading to an update of the resource
estimates in November 2006 (see “The Company – Campo Morado Project - Estimates
of Mineralization at Campo Morado Project” above). Results in 2007 have
continued to be positive, further expanding the area of mineralization in the
G-9 deposit. Mine planning and design, as well as equipment acquisition and site
preparation activities were also advanced in 2007 and the Company is continuing
to advance the necessary onsite activities to work towards a final production
decision in the third or fourth quarter of the Company’s current fiscal
year.

     Seventy-five holes, totalling
approximately 32,820 metres, were drilled at G-9 during the 2007 fiscal year
(July 2006-June 2007). Another 59 holes, totalling approximately 26,170 metres,
were drilled to November 30, 2007. The most important results from 2007 drilling
were the expansion of the deposit through the discovery of a new sulphide lens,
called Abajo, to the northeast and on the other side of the San Raphael fault.
Drilling also revealed concentrations of higher precious metals grades within
the deposit.

     Infill drilling of the Southeast
zone was completed in October 2007. Behre Dolbear of Denver has been retained to
review Farallon’s internal estimates and to assess the inferred, indicated
and/or measured categories for the Southeast zone. The results of the new
estimate are expected in January 2008. Ongoing infill drilling is testing the
North zone and Abajo zone. Promising results have recently been released from
initial infill drilling at the North Zone.

     A 4.5 metre by 4.5 metre
exploration decline is currently being excavated to access the Southeast zone.
The planned length of the decline is approximately 1,400 metres at a slope of
-8.3%, and an additional length of 400 metres in two parallel 4.5 x 4.5 metre
crosscuts are also planned, which could be used for underground drilling and
test mining. At the end of November 2007, the decline had been advanced 484
metres and the ventilation decline advanced 392 metres. It is scheduled for
completion in the last quarter of fiscal 2008.

Bridge Loan Facility Agreement

     Farallon Minera Mexicana, S.A. de
C.V., as borrower, the Company, Farallon Resources Corp., Grupo Minero Farallon,
S.A. de C.V., Grupo Minero HD, S.A. de C.V. and Minas de Arcelia, S.A. de C.V.,
as guarantors, N M Rothschild & Sons Limited, as agent and as a lender, and
Paradigm Capital Inc., as a lender, entered into a Bridge Facility Agreement
dated for reference October 29, 2007 establishing a US$20 million non-revolving
bridge facility for the purpose of financing a portion of the costs of equipment
acquired for the G-9 project. The obligation of the lenders to make advances
under the bridge facility is subject to the satisfaction of conditions
precedent, including the completion of technical, environmental, social, tax and
legal due diligence and contribution of at least US$70 million in upfront equity
(of which at least US$60 million must have been expended on G-9 project costs
and the balance held in a manner satisfactory to the agent). The availability of
the bridge facility will be cancelled if the first advance thereof is not made
by January 31, 2008 (or such later date as may be agreed). The bridge facility
is to be repaid by March 31, 2008. The interest rate payable under the bridge
facility will be LIBOR plus 6% per annum.

- 10 -




The obligations of the borrower and guarantors under the Bridge
Facility Agreement and related guarantees will secured by charges and security
interests over substantially all of their assets. In the Bridge Facility
Agreement, the Company covenants to maintain a consolidated tangible net worth
(including amounts expended on G-9 project costs) of at least US$65 million and
to ensure that it has at all times (on a consolidated basis) sufficient
resources to meet its and its subsidiaries' obligations as they fall due. The
Bridge Facility Agreement also contains other typical conditions,
representations, warranties, covenants and events of default.

     With respect to the proceeds from
the offering in connection to the Bridge Loan, the Bridge Loan requires that the
Company maintain at all times a tangible net worth of at least $65 million and
to ensure that it has at all times sufficient resources to meet its obligations
as they fall due.

     The Company and lenders have also
agreed to material indicative terms of a Refinancing and Development Facility of
$70 million (of which $20 million is to be used to retire the Bridge Loan), the
formal drafting and documentation of which has not yet been finalized. However
the indicative term sheet agreed to by the Company and the lenders includes the
following covenants, typical of a debt facility this size:

	
  Debt Service Coverage Ratio ranging from 1.25 to 2; 

  
	
  Loan Life Coverage Ratio of at least 1.5; and 

  
	
  Current Ratio of at least 1.20 after July 1, 2008. 



     The proceeds of the current $20
million equity financing will assist the Company to stay within the restrictive
covenants under the Bridge Loan and those envisioned under the larger
Refinancing and Development Facility. In particular the Current Ratio covenant
requires the Company to augment its current working capital position.

Accident at Campo Morado

     A vehicle accident occurred on
the Campo Morado site on October 13, 2007. The driver of a truck belonging to a
local contractor lost control, struck one of our employees and rolled over the
side of the road and down a hill, resulting in two fatalities. The matter has
been the subject of a detailed investigation. The Company believes that the
results of the investigations will not have a material financial impact on the
Company.

Appointment of New Chief Financial Officer

     Effective December 3, 2007,
Jeffrey Mason has resigned as the Company’s Chief Financial Officer and Larry
Yau, B.Sc., MBA, CA, has been appointed in his place. 

USE OF PROCEEDS

     The net proceeds to be received
by the Company from the sale of the Common Shares, after deducting the
Underwriters’ Commission and before deducting expenses of the Offering estimated
to be $325,000, are estimated to be approximately $18.8 million. 

     We intend to use net proceeds of
this Offering, without taking into consideration the Over-Allotment Option, as
follows:

	 	Use of Proceeds 	 	Amount 	 	 	 	 
	 	  	 	  	 	 	 	 
	 	General Corporate 	$	5,000,000 	 	 	 	 
	 	  	 	  	 	 	 	 
	 	Working Capital (to maintain 
financial
      position to remain 
compliant with financial covenants 	

	

	

	

	

	




- 11 -





	 	Use of Proceeds 	 	Amount 	 	 	 	 
	 	related to the Bridge Loan (as 	$	13,800,376 	 	 	 	 
	 	defined below)) 	 	  	 	 	 	 
	 	  	 	  	 	 	 	 
	 	Total 	$	18,800,376 	 	 	 	 


     Pending the uses described above,
the Company may invest all or a portion of the net proceeds in high quality
short-term interest-bearing corporate securities. See also “Recent Developments
- Bridge Loan Facility Agreement”.

     If the Over-Allotment Option is
exercised in full the net proceeds to be received by the Company, after
deducting the Underwriters’ Commission and before deducting expenses of the
Offering, are estimated to be approximately $21.62 million. Those additional
funds will be added to working capital.

CAPITALIZATION

     The authorized share capital of
the Company consists of an unlimited number of common shares without par value,
of which 289,705,318 were issued and outstanding as at January 8, 2008, and an
unlimited number of preferred shares without par value, of which none are
currently issued or outstanding.

     The following table shows the effect
of the Offering on the issued common shares of the Company:


	Description of 
Security 	Authorized 
	Issued at 
September 30,
      2007 	Issued at 
January 8, 2008
    	Issued after giving 
effect to
      Offering(1) 
	Common Shares
	Unlimited 	289,705,318 	289,705,318 	324,534,586 




	(1) 	
      Assumes issuance of 4,285,800 Common Shares on full
      exercise of the Over-Allotment Option and 1,971,468 Common Shares on full
      exercise of the Compensation Option.



     As at January 8, 2008, the
Company had outstanding share purchase options to purchase up to 10,485,500
common shares with a weighted average exercise price of $0.75.

     As at January 8, 2008, the
Company had the following share purchase warrants, each exercisable into one
common share:


	Number of
      Warrants 	Exercise Price 	Expiry Date 
	15,953,350 	$0.60 	November 17, 2008 
	79,945,000 	$0.70 	December 21, 2008 
	9,600,000 	$0.50 	December 21, 2008 



     Since September 30, 2007, there
have been no common shares issued pursuant to the exercise of employee stock
options or share purchase warrants. The Company has granted 1.275 million stock
options pursuant to its stock option plan since September 30, 2007. An aggregate
of 35,000 employee stock options have been cancelled since September 30,
2007.

PLAN OF DISTRIBUTION

     Pursuant to an agreement dated
December 3, 2007 (the “Underwriting Agreement”) between the Company and the
Underwriters, the Company has agreed to sell the Common Shares to the
Underwriters and the Underwriters 

- 12 -




have severally agreed to purchase, subject to compliance with
all necessary legal requirements and the terms and conditions of the
Underwriting Agreement, all of the Common Shares, on December 18, 2007 or such
other date as the Company and the Underwriters may agree, but in any event not
later than January 8, 2008. The Common Shares are being sold at the price of
$0.70 (the “Offering Price”), payable in cash against delivery of share
certificates for the Common Shares. The Offering Price was negotiated between
the Company and the Underwriters in the context of prevailing market
conditions.

     The Underwriting Agreement
provides for payment by the Company of a commission to the Underwriters equal to
6% of the gross proceeds raised in the Offering for various services rendered to
the Company in connection with the Offering. The Company has also agreed to
issue to the Underwriters the Compensation Options, which entitle the
Underwriters to purchase an aggregate number of Option Shares equal to 6% of the
number of Common Shares sold under the Offering at the Offering Price for a
period of 24 months after the Closing Date. This Prospectus also qualifies the
issue by the Company of the Compensations Options. No additional fee has been or
will be paid to the Underwriters in connection with the issue of any Option
Shares, other than the 6% cash commission.

     The Company has also granted to
the Underwriters an Over-Allotment Option, exercisable not later than 30 days
after the Closing Date, to purchase that number of Over-Allotment Shares which
is equal to 15% of the number of Common Shares issued in the Offering, at the
Offering Price. The Over-Allotment Option is exercisable in whole or in any part
only for the purpose of covering over-allotments, if any, made by the
Underwriters in connection with the Offering and for market stabilization
purposes. If the Underwriters exercise the Over-Allotment Option in full, the
number of Common Shares issued under the Offering will be 32,857,800. This
Prospectus also qualifies the distribution of the Over-Allotment Option and
Over-Allotment Shares issuable on exercise thereof.

     The obligations of the
Underwriters under the Underwriting Agreement are several and not joint and may
be terminated at their discretion on the basis of their assessment of the state
of the financial markets and upon the occurrence of certain stated events.
However, if any of the Common Shares are purchased under the Underwriting
Agreement, the Underwriters are obligated to take up and pay for all of the
Common Shares that are to be purchased under the Underwriting Agreement
(excluding Over-Allotment Shares that may be purchased under the Over-Allotment
Option). The Underwriting Agreement also provides that the Company will
indemnify the Underwriters and their directors, officers, employees and agents
against certain liabilities and expenses or will contribute to payments that the
Underwriters may be required to make in respect thereof.

     Pursuant to policies of certain
Canadian securities regulatory authorities, the Underwriters may not, throughout
the period of distribution under the Offering, bid for or purchase common shares
of the Company for their own account or for accounts over which they exercise
control or discretion. The foregoing restriction is subject to certain
exceptions, on the condition that the bid or purchase not be engaged in for the
purpose of creating actual or apparent active trading in or raising the price of
the common shares. These exceptions include a bid or purchase permitted under
the Universal Market Integrity Rules for Canadian marketplaces administered by
Market Regulation Services Inc. relating to market stabilization and passive
market making activities, and a bid or purchase made for or on behalf of a
customer where the order was not solicited during the period of distribution.
Subject to the foregoing, the Underwriters may over-allot or effect transactions
which stabilize or maintain the market price of the Company’s common shares at
levels other than those which otherwise might prevail on the open market. Such
transactions, if commenced, may be discontinued at any time.

     This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
Company’s common shares in the United States. The Offered Shares being issued in
this offering have not been and will not be registered under the U.S. Securities
Act or any state securities laws and may not be offered or sold within the
United States except in transactions exempt from the registration requirements
of the U.S. Securities Act. Each Underwriter has agreed that it (or such U.S.
broker-dealer affiliate of the Underwriter which conducts offers and sales in
the United States) will not offer or sell the Offered Shares within the United
States except in accordance with exemptions from the registration requirements
under the U.S. Securities Act. The Underwriting Agreement provides that certain
of the Underwriters, through their U.S. broker-dealer affiliates, may offer and
sell the Common Shares on a substituted basis to accredited investors, as
defined in Rule 501(a) of Regulation D of the U.S. Securities Act or entities
owned entirely by such investors, provided such offers and sales are made in
accordance with Rule 506 of Regulation D under the U.S. Securities Act.
Moreover, the Underwriting Agreement provides that the Underwriters 

- 13 -




will offer and sell the Common Shares outside the United States
only in accordance with Regulation S under the U.S. Securities Act. The
certificates representing the Common Shares which are sold in the United States
in reliance on Rule 506 of Regulation D under the U.S. Securities Act will
contain a legend to the effect that the Common Shares represented thereby have
not been registered under the U.S. Securities Act and may only be offered for
sale pursuant to certain exemptions from the registration requirements of the
U.S. Securities Act.

     Each of the Underwriters and the
U.S. broker-dealer affiliates has agreed that it will not offer to sell the
Common Shares, (a) as part of its distribution at any time or (b) otherwise,
until 40 days after the later of the commencement of the offering and the issue
date of the Common Shares, within the United States or to, or for the account or
benefit of, U.S. persons, and that it will have sent each distributor, dealer or
person receiving a selling concession, fee or other remuneration which purchases
Common Shares from it during the distribution compliance period a confirmation
or notice in substantially the following form:

		
      “The securities covered hereby have not been registered
      under the United States Securities Act of 1933, as amended (the
      “Securities Act”) and may not be offered or sold within the United States
      or to, or for the account or benefit of, U.S. persons, (a) as part of
      their distribution at any time or (b) otherwise until 40 days after the
      later of the commencement of the offering and the closing date, except in
      either case in accordance with Regulation S under the Securities Act.
      Terms used above have the meanings given to them by Regulation S.” 
	
	  	 	  


     In addition, until 40 days after
the commencement of this Offering, an offer or sale of the Common Shares
distributed under this Offering within the United States by any dealer (whether
or not participating in this offering) may violate the registration requirements
of the U.S. Securities Act if such offer or sale is made otherwise than in
accordance with an available exemption from such registration requirements.

     The Company has agreed in the
Underwriting Agreement that, during the period ending 90 days after the closing
of this Offering, the Company will not (subject to certain exceptions), without
the prior consent of the Underwriters, issue or announce the issuance of any
common shares or any securities convertible into or exchangeable for or
exercisable to acquire common shares, except (i) common shares required to be
issued pursuant to share purchase options now outstanding, (ii) issued after the
date of this prospectus pursuant to share purchase options issued under the
Company’s share incentive plan or common shares issued in respect of other
rights currently outstanding, (iii) pursuant to a bona fide arm’s-length
acquisition by the Company or one of its affiliates, or (iv) pursuant to the
concurrent non-brokered private placement of up to $5.75 million of common
shares to certain accredited investors.

     The Company has agreed to
indemnify the Underwriters against certain liabilities and expenses, including
liabilities under applicable securities legislation in certain circumstances, or
to contribute to payments the Underwriters may have to make in respect
thereof.

     Subscriptions for Common Shares
will be received subject to rejection or allotment in whole or in part and the
right is reserved to close the subscription books at any time without notice.


     Paradigm Capital Inc. has agreed
to fund 50% of a US$20 million bridge facility loan (the “Bridge Loan”) that the
Company has entered into with N.M. Rothschild & Sons Limited. The funds
available under the Bridge Loan will be used by the Company for further
pre-development of the G-9 deposit at the Campo Morado Project. Accordingly, the
Company may be considered to be a “connected issuer” of Paradigm, one of the
Underwriters, under applicable securities legislation. The borrower under the
Bridge Loan is the Company’s wholly-owned subsidiary, Farallon Minera Mexicana,
S.A. de C.V. (“Farallon Minera”) and the Bridge Loan is guaranteed by the
Company, Farallon Resources Corp., Grupo Minero Farallon, S.A. de C.V., Grupo
Minero HD, S.A. de C.V. and Minas de Arcelia, S.A. de C.V. Security for the
Bridge Loan includes all present and after-acquired assets of Farallon Minera,
which includes all right and title in and to the Campo Morado Project. The
Company is in full compliance with the terms and covenants of the Bridge Loan
and no breaches of the Bridge Loan have occurred. The terms of the Offering were
negotiated by Paradigm, on behalf of the Underwriters. The decision to
underwrite the Offering was made independent of this relationship between the
Company and Paradigm and such relationship had no influence as to the
determination of the terms of the Offering. No portion of the proceeds of the
Offering will be used to repay the Bridge Loan. Paradigm will not receive any
benefit in connection with this Offering other 

- 14 -




than that they will receive a portion of the cash commission
and the Compensation Options payable and issuable by the Company.

INTERESTS OF EXPERTS

     The following individuals are
named, either in this Prospectus or in our Annual Information Form, as having
prepared or co-prepared a technical report on various aspects of the Campo
Morado Project: David Stone, P.Eng., Stephen Godden, C.Eng, FIMMM, Qingping
Deng, Ph.D., C.P.G., David Gaunt, P.Geo., Ross Banner, P.Eng., P.Geo., Daniel
Kilby, P.Geo., Peter Taggart, P.Eng., and David Dreisinger, P.Eng..

     None of those individuals holds,
directly or indirectly, more than one percent of the issued and outstanding
common shares of the Company.

     Certain legal matters in
connection with this Offering will be passed upon by Lang Michener LLP on behalf
of the Company and by Heenan Blaikie LLP, on behalf of the Underwriters. As at
the date hereof, the partners and associates of Lang Michener LLP and Heenan
Blaikie LLP, as a group, beneficially own, directly or indirectly, less than one
percent of the outstanding Common Shares of the Company.

RISK FACTORS

     An investment in the Company’s
Common Shares is highly speculative and subject to a number of risks. A
prospective purchaser of Common Shares should carefully consider the information
described in this Prospectus as well as the Risk Factors set out in our Annual
Information Form incorporated herein by reference and the following:

A shortage of mining equipment, supplies and services may
affect the Company’s production activities and development.

     Recent high metal prices and the
resulting growth in global mining activities have created a demand for mining
equipment, related supplies and services that exceeds supply. For example,
equipment orders often require a substantial lead time, given the competition
for equipment supply. The Company has ordered critical pieces of long lead time
equipment, but if additional equipment or other supplies cannot be procured on a
timely basis or at a reasonable cost, expansion activities, production,
development or operations could be negatively affected.

Mining is inherently dangerous and subject to conditions
or events beyond the Company’s control, which could have a material adverse
effect on the Company’s business, particularly if such conditions or events
result in losses that are not recoverable through the Company’s insurance
policies.

     Mining involves various types of
risks and hazards, including: environmental hazards; industrial accidents;
metallurgical and other processing problems; unusual or unexpected rock
formations; structural cave-ins or slides; flooding; fires; metals losses; and
periodic interruptions due to inclement or hazardous weather conditions.

     These risks could result in
damage to, or destruction of, mineral properties, production facilities or other
properties, personal injury, environmental damage, delays in mining, increased
production costs, monetary losses and possible legal liability. The Company may
not be able to obtain insurance to cover these risks at economically feasible
premiums. Insurance against certain environmental risks, including potential
liability for pollution or other hazards as a result of the disposal of waste
products occurring from production, is not generally available to the Company or
to other companies within the mining industry. The Company may suffer a material
adverse effect on its business if it incur losses related to any significant
events that are not covered by it insurance policies.

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Exploration and development projects are uncertain and
consequently it is possible that actual cash operating costs and economic return
will differ significantly for those estimated for a project prior to
production.

     Mineral resource exploration and
development is a speculative business, characterized by a number of significant
risks including, among other things, unprofitable efforts resulting not only
from the failure to discover mineral deposits but also from finding mineral
deposits that, though present, are insufficient in quantity and quality to
return a profit from production.

     Estimates of mineral resources
and resources and cash operating costs are, to a large extent, based upon the
interpretation of geological data obtained from drill holes and other sampling
techniques.

The Company’s mineral resources are estimates only and
may not reflect the actual deposits or the economic viability of
extraction.

     The figures presented for mineral
resources herein and in the documents incorporated herein by reference are
estimates only. The estimating of mineral resources is a subjective process and
the accuracy of reserve and resource estimates is a function of the quantity and
quality of available data and the assumptions used and judgments made in
interpreting engineering and geological information. There is significant
uncertainty in any resource estimate, and the actual deposits encountered and
the economic viability of mining a deposit may differ materially from our
estimates.

     Estimated mineral resources may
have to be recalculated based on changes in metals prices, further exploration
or development activity or actual production experience. This could materially
and adversely affect estimates of the volume or grade of mineralization,
estimated recovery rates or other important factors that influence resource
estimates.

Loss of Entire Investment

     An investment in the Common
Shares is speculative and may result in the loss of an investor’s entire
investment. Only potential investors who are experienced in high risk
investments and who can afford to lose their entire investment should consider
an investment in the Company.

AUDITORS, TRANSFER UNDERWRITER AND REGISTRAR

     The auditors of the Company are
KPMG LLP, Chartered Accountants, Vancouver, British Columbia. The transfer agent
and registrar for the Common Shares is Computershare Investor Services Inc. at
its principal office in Vancouver, British Columbia.

PURCHASERS’ STATUTORY RIGHTS

     Securities legislation in certain
of the provinces of Canada provides purchasers with the right to withdraw from
an agreement to purchase securities. This right may be exercised within two
business days after receipt or deemed receipt of a prospectus and any amendment
thereto. In several of the provinces, the securities legislation further
provides a purchaser with remedies for rescission or, in some provinces, damages
where the prospectus and any amendment contains a misrepresentation or is not
delivered to the purchaser, provided that the remedies for rescission or damages
are exercised by the purchaser within the time limit prescribed by the
securities legislation of the purchaser’s province. The purchaser should refer
to any applicable provisions of the securities legislation of the purchaser’s
province for the particulars of these rights or consult with a legal
adviser.

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AUDITORS’ CONSENT

	To: 	The Board of Directors of 
	  	Farallon Resources Ltd. 


     We have read the short form
prospectus of Farallon Resources Ltd. (the “Company”) dated January 9, 2008
relating to qualification for distribution of common shares of the Company. We
have complied with Canadian generally accepted standards for an auditors’
involvement with offering documents.

     We consent to the incorporation
by reference in the above-mentioned short form prospectus of our report to the
shareholders of the Company on the consolidated balance sheets of the Company as
at June 30, 2007 and 2006 and the consolidated statements of operations and
deficit and cash flows for each of the years in the three-year period ended June
30, 2007. Our report is dated September 11, 2007.

(Signed) KPMG LLP

Chartered Accountants 
Vancouver, Canada

January 9, 2008

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CERTIFICATE OF THE COMPANY

Dated: January 9, 2008

     This short form prospectus,
together with the documents incorporated herein by reference, constitutes full,
true and plain disclosure of all material facts relating to the securities
offered by this Prospectus as required by the securities legislation of British
Columbia, Alberta, Manitoba, Saskatchewan, Ontario, Nova Scotia, Newfoundland,
Prince Edward Island and New Brunswick.

	(Signed) J.R.H. (Dick) Whittington 	(Signed) Larry Yau 
	Chief Executive Officer 	Chief Financial Officer 


On Behalf of the Board of Directors

	(Signed) Jeffrey R. Mason 	(Signed) Ronald W. Thiessen 
	Director 	Director 


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CERTIFICATE OF THE UNDERWRITERS

Dated: January 9, 2008

     To the best of our knowledge,
information and belief, this short form prospectus, together with the documents
incorporated herein by reference, constitutes full, true and plain disclosure of
all material facts relating to the securities offered by this short form
prospectus as required by the securities legislation of British Columbia,
Alberta, Manitoba, Saskatchewan, Ontario, Nova Scotia, Newfoundland, Prince
Edward Island and New Brunswick.

	  	PARADIGM CAPITAL
      INC. 	  
	  	By: (Signed) ANDREW PARTINGTON 	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  
	CANACCORD CAPITAL
      CORPORATION 	MGI SECURITIES
      INC. 	RAYMOND JAMES
      LTD. 
	By: (Signed) ALI PEJMAN 	By: (Signed) JOSHUA H.H. KINGSMILL 	By: (Signed) JOHN M. MURPHY



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