We've bred horses since before my DD was born. When she was tiny, she'd often be sat in her pushchair, facing the action, while my DH & I handled the mare & the stallion.
My DD has grown up knowing the facts of life - due to what we do, we have pretty frank conversations about sperm, semen, ovulation, wash outs, etc.
Now in secondary school, she is actually one of the youngest in her year - physically & mentally. She's not naive, but she is innocent. Knowing the facts hasn't made her any less innocent. But it has made her switched on to how bodies work in general, her own rights to her body, and what the near and further future holds for her.
It's just life to her, it's all completely natural. I don't get this whole hiding the facts of life from children. You give them the facts they need as you go along, as they ask the questions. I tend to go with the idea that if they're old enough to ask the question, they're old enough for the answer - couched in terms appropriate for their age.
So like others have said, at this point in a childs life, I'd have said they were making babies, and this is how pigeons do it. Then field any further questions from there.