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viewTelson Mining Corporation

Telson Mining has two very advanced assets in Mexico and "excellent" exploration potential at both

Snapshot

Telson's flagship asset is the 7,500 hectare Tahuehueto gold mine where construction is 70% complete

Telson Mining Corporation -

Quick facts: Telson Mining Corporation

Price: 0.28 CAD

TSX-V:TSN
Market: TSX-V
Market Cap: $51.15 m
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  • Building Mexico's next high-grade gold mine
  • Production at Tahuehueto earmarked for second quarter, 2021
  • Campo Morado zinc mine has restarted operations

What Telson Mining does:

Telson Mining Corp (CVE:TSN) (OTCMKTS:SOHFF) is a mine developer in Mexico.

Its flagship asset is the Tahuehueto gold mine project, which spans 7,500 hectares, in north-west Durango state, where construction is 70% complete. The group is building a 1,000 plus tonnes per day (tpd) mine, with production earmarked for the second quarter of 2021 and there is potential to lift that to 3,000 tpd with exploration

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 ton (g/t) and in pre-production toll milling, US$12.4 million was made in cash sales up to the second quarter of 2019.

A pre-feasibility study in the same year based on a 550 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. Average annual earnings before interest tax, depreciation and amortization, was put at US$16.6 million.

Telson also owns the Campo Morado zinc mine in Guerrero State, which has had over US$500 million invested by previous owners, and where operations were suspended in August last year due to falling zinc prices, but mining restarted in January, 2020.

The asset has mining and milling equipment capable of producing up to 2,500 tonnes per day. Future plans for Campo Morado included increasing production to 5,000 tpd over five years with exploration success. In line with that, it is aimed that exploration will double resources in two to three years.

How is it doing:

It has been a busy 2020 so far for Telson.

The firm restarted operations at Campo Morado in January but it was paused at the end of March due to government regulations over the coronavirus (COVID-19) pandemic. At the time, it was operating at an average production rate of between 1,900 to 2,200 tons per day (tpd). Mining and milling at the site then resumed on June 3.

Notably, Telson has around 2,900 tonnes of zinc concentrate and 650 tonnes of lead stored at the site and the firm revealed it had already begun shipping procedures to deliver concentrates to the port in Manzanillo.

In June, the junior mining firm told investors it had moved closer to completing construction at Tahuehueto as it inked an updated term sheet with Accendo Banco over a US$12 million loan.

In a statement, the bank said it aimed to complete final due diligence to close Telson's funding within the next 1 to 2 months. The so-called medium-term loan facility (MTLF) is subject to final due diligence by the bank, has a repayment term of three years and an interest rate of 13.5% a year.

Also on the financing front, in April, Telson announced an agreement with Trafigura Mexico allowing it a waiver to repay an existing loan at a later date.  In essence, Trafigura allowed Telson to defer "interests and principal payments" until June 30, 2021.

Then on June 18, the group said it had reached an agreement with Nyrstar Canada that removes its loan - originally used for the Campo Morado acquisition in 2018 - from default status.

Telson acknowledged its default status and agreed to accept a trust agreement with Trafigura Mexico granting Nyrstar full security subordinate to Trafigura and any new lenders that may provide debt funding for construction at Tahuehueto.

Nyrstar also agreed to restructure Telson’s debt load and update cash flow projections in three cases: if the Tahuehueto project is ramped-up; Campo Morado is able to make payments of $300,000 for at least six consecutive months on a pro-rata basis, or Telson successfully raises sufficient financing to fully fund the final construction and ramp-up of Tahuehueto.

On July 2, Telson announced the upsizing of a non-brokered private placement to $1.4 million to advance the Tahuehueto project.

Inflection points:

  • Accendo Banco loan closing
  • Beginning of restarted construction at Tahuehueto gold mine project
  • Campo Morado production stats

What the boss says:

In late June, Telson's president and CEO Ralph Shearing explained to Proactive's Steve Darling that recent developments, which mean the company is no longer in default on the Nyrstar and Trafigura loans should "give everybody comfort that we're well on our way on getting the company back on its feet". 

And he said that with the closing of the US$12 million Accendo loan, Telson would be well on the way to having Tahuehueto funded and restart the construction, "targeting eight months after completing the funding to get Tahuehueto up and running".

"We are very confident that once we get Tahuehueto into production that we can service all our other debt and should be able to pay it back within two years ... and that's not giving anything for Campo Morado. We're starting to get that mine producing the way it should be and we're expecting better cash flow from that mine as well," he said.

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Telson Mining sees strong numbers for Campo Morado in Q3 production results

Telson Mining (CVE: TSN- OTCPINK: SOHFF) President and CEO Ralph Shearing joined Steve Darling from Proactive with news the company has seen strong numbers from preliminary production results for the third quarter of 2020 at the Campo Morado Mine located in Mexico. Shearing telling...

1 week, 2 days ago

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