Telson Mining Corporation (CVE:TSN) (OTCMKTS:SOHFF) (FRA:TSGN) said it has now closed its purchase of the variable purchase price (VPP) royalty for its Campo Morado mine, a significant step as it means realizing additional production from the asset in Mexico, while the company also revealed that construction had accelerated at its Tahuehueto gold mine in the country.
Details of this royalty deal were given when the miner, in February this year, announced a US$25 million funding agreement and Telson, Accendo Syndicate and Trafigura Mexico SA de CV struck a memorandum of understanding (MoU) to negotiate a potential definitive agreement to restructure Telson’s debt obligations to Trafigura and Nyrstar Canada.
To buy the royalty, the company issued 14.6 million shares at C$0.345 each, which was approximately a 64% premium to Telson’s trading price as of February 22, 2021 – when the parties executed the royalty acquisition agreement.
“The closing of the VPP Royalty is a major positive step for Telson and the Campo Morado Mine and will increase revenue at Campo Morado on an ongoing basis,” said Ralph Shearing, Telson’s CEO, in a statement.
“To put this into context, at average March 2021 realized zinc sale prices, purchasing the VPP Royalty, that would have been at its highest variable rate of 4.25% on the production of zinc, Telson has realized additional revenue of over US$450,000 for March 2021 production. This along with accelerating our Tahuehueto construction should be welcome news to our shareholders and investors.”
At Tahuehueto, Telson is building a 1,000 tonnes per day (tpd) mining operation and last week, additional construction crews arrived to re-start assembly work of the processing facility and are preparing for the start of work on other major infrastructure initiatives such as the tailings storage facility, water pumping station and the water supply line.
To complete and commission the mine an estimated US$15.4 million is needed, including US$12.6 million for equipment and construction including a 15% contingency, plus US$2.8 million of working capital to support operations until positive cash flow is achieved.
As of March 30, 2021, Telson had closed a C$10,080,000 private placement and on April 16, 2021, the company executed the Empress Silver Stream agreement that will provide an additional US$5 million in two tranches.
The final US$12 million Accendo Banco loan facility is also in the late stages of documentation and expected to close in the coming weeks along with the restructuring of Telson outstanding loans with Trafigura and Nyrstar, the miner said.
At Tahuehueto, the company is targeting initial production by the end of 2021 and a ramping up to full production capacity during the first quarter of 2022.
Meanwhile, Campo Morado is an operating polymetallic base metal mine currently producing at an average of 2,150 tonnes per day and is estimated to be Mexico’s sixth-largest zinc producer.
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Story by ProactiveInvestors
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