Telson Mining is on track to become Mexico’s next high-grade gold miner

• Production pending from its Tahuehueto project
• Revenue-generating polymetallic base metal mine in Mexico   
• Experienced management team

What Telson Mining does:

Telson Mining Corp (CVE:TSN) (OTCMKTS:SOHFF) is set to become the next high-grade gold miner out of Mexico.

The Vancouver, British Columbia-based company’s flagship Tahuehueto mining project, a 7,500-hectare property located in northwestern Mexico’s Durango State, is currently under construction, having advanced to about 70% completion and is waiting for final funding to finish construction of the processing plant and related assets to produce gold, silver, lead and zinc in concentrates within its own on-site mineral processing facility, with a designed capacity of at least 1,000 tonnes per day. The company is targeting completion of construction during 2021, six to eight months after securing final funding.

According to a 2017 estimate, Tahuehueto has a total Measured and Indicated (M&I) resource of nearly 490,000 ounces of gold at a grade of 2.5 grams per tonne (g/t) and in pre-production toll milling, US$12.4 million was generated in cash sales up to the second quarter of 2019.

A pre-feasibility study completed in the same year, based on a 550 tonnes per day (tpd) operation and a 21-year mine life, put the pre-tax net present value at US$137.8 million with a capital cost of US$37.6 million.

Telson also owns Campo Morado, a polymetallic base metal mine in Mexico with mining and milling equipment capable of producing up to 2,500 tpd. Four months after purchasing Campo Morado, Telson brought the mine back into operation initiating pre-production in October 2017 and declared commercial production in May 2018, operating the mine continuously for 22 months until August 2019 when the project was put on care and maintenance as a result of declining zinc prices and community issues. With improving conditions, Telson brought the mine out of care and maintenance and reinitiated mining and milling operations in January 2020.

Telson Mining is led by CEO Ralph Shearing, a geologist with more than 32 years of experience managing and directing publicly listed companies.

How it is doing:

In April 2021, Telson reported preliminary 1Q revenue of US$11.9 million from its Campo Morado mine, which would represent a 35% improvement from the previous quarter.

About 174,400 tonnes of ore was milled during the period, up 4% sequentially, and there was an improvement in average head grades and average recoveries across gold, silver, lead and zinc compared to the preceding quarter.

The average price realized for an ounce of gold in 1Q was US$1,763, down from US$1,843 in the fourth quarter of 2020, but the price for a tonne of zinc was up 15% at US$2,679.

Earlier in the year, the company announced a new US$25 million funding agreement with Accendo Banco SA de CV, Empress Royalty Corp, and Endeavour Financial to complete the construction of its Tahuehueto project.

Telson estimates the remaining amount needed to complete mine construction and commissioning at Tahuehueto is about US$15.4 million, including $12.6 million for equipment and a 15% contingency, plus $2.8 million of working capital to support operations until it reaches positive cash flow. 

The funding package also allows the company to negotiate a potential restructuring of its loan debt with Trafigura and Nyrstar. As part of this debt restructuring, Telson and Nyrstar have agreed to exercise the US$4 million option to purchase the Campo Morado royalty in exchange for 14.6 million Telson shares. The exercise price at current exchange rates is equivalent to about C$0.345 per share. Additionally, Telson will make payment in cash of US$838,935.85 representing past due royalty.

Also on the financial front, Telson closed a C$10.1 million private placement financing in March, at a price of C$0.20 per unit, which will be directed towards construction of the Tahuehueto project.

Inflection points:

• Production at Tahuehueto targeted during 2H 2021
• Significant resource upside at Campo Morado though exploration
• Potential acquisitions     

What the boss says:

Commenting on the company’s recent US$25 million funding agreement, Telson Mining CEO Ralph Shearing said in a statement: “This funding package now allows Telson to immediately re-initiate construction at the Tahuehueto mine site after which we expect to rapidly advance construction targeting to commence initial pre-production within 10 to 12 months and full-scale production 12 to 14 months after funding.” 

Shearing added: “After many months of extensive hard work and negotiation, I am delighted on behalf of the Telson Team to deliver to Telson shareholders and investors this excellent news.”

Contact Sean at [email protected]

Story by ProactiveInvestors