Proactive Investors - Run By Investors For Investors
Why invest in TSN?
Telson Mining Corp.: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Telson Mining will generate C$36mln free cash flow per year once its two Mexican mines are up and running

Telson's Mexican mines are set to deliver significant growth
Telson Mining will generate C$36mln free cash flow per year once its two Mexican mines are up and running
INVESTMENT OVERVIEW: TSN The Big Picture
Telson chief executive Antonio Berlanga with concentrate from Tahuehueto

It won’t be long now before the Tahueheuto mine in Mexico is fully up and running and producing ore at the rate of 1,000 tonnes per day.

“We’re in the pre-production phase already,” says Ralph Shearing, president and director of Telson Mining Corporation (CVE:TSN), which owns 100% of the project.

“We’re mining high-grade ore and shipping for cash flow.”

The current run rate is about 200 tonnes per day, with ore sent out to third parties for processing.

But the final push to get into full production and take processing in-house is now well underway, supported by two recent fundraisings.

C$6.8mln has come from the equity markets, and US$5mln has come as part of a wider facility being provided by commodities trading giant Trafigura.

If all goes well, a final tranche of money available as part of the Trafigura facility won’t be needed, and Telson’s Tahuehueto will become a fully-fledged producer in the first quarter of next year.

Exactly how much gold and silver the company is likely to produce isn’t in the public domain, as Telson leapt straight from its pre-feasibility study into production.

But a couple of things are clear. The ballpark numbers will be around 30,000 ounces of gold and 40,000 ounces of silver a year, plus a significant base metals component.

What’s more, it’s likely that Tahuehueto will rank amongst the top three or four highest grade gold producers in the country with grades in the reserves averaging 3.4 grams gold per tonne.

All told, it won’t be long now before actual production numbers come in, and the predictions will be moot.

In the meantime, now that construction is underway, newsflow is likely to come thick and fast from Tahuehueto.

“We’re just pouring the mill foundations,” says Shearing. “And once we get some free cash flow we’ll look to explore new zones.”

Because the full extent of Tahuehueto remains unclear.

“It’s a very large epithermal system,” says Shearing. “We’ve explored one and a half veins. There are still eight more there that we know of and likely many more to discover.”

So Tahuehueto could still have plenty more to give.

Even so, it’s not the only string in Telson’s bow. The company recently acquired the polymetallic Campo Morado mine, also in Mexico, from Nystar, when Nystar beat its retreat from producing assets.

Struggles

Nyrstar struggled with Campo Morado, particularly when zinc prices dipped earlier in the decade, the mine was shut down in January 2015.

“We purchased the project for US$20mln,” explains Shearing.

The deal included all the mining equipment and millions of dollars’ worth of underground development and infrastructure where previous owners invested well over US$600mln in acquisition, exploration and development costs.

Telson had it back into production within four months, helped along the way once again by Trafigura.

Commercial production was declared in 2017, and the current run rate amounts to between 2,000 and 2,200 tonnes per day.

“We’re making all kinds of modifications to the project,” says Shearing.

“We’ve changed the mining method from room and pillar to sub-level caving. We’ve got the mining costs down to around US$54 per tonne all-in, and we’ve been mining there without any difficulties. At the mill, we’ve added an extra cleaning circuit and our zinc concentrate grades are reaching 47-49% zinc.”

There could be more to come too if Telson can work out a way to extract refractory gold from the ore too. It’s just signed a deal with Glencore to test and if successful design the installation of a new proprietary technology to the problem, and if it works margins will shoot up.

“Right now we’re working a lead-zinc mine,” says Shearing. “But if we can transition towards gold and silver then this will become a very profitable mine as, in addition to lead, zinc and copper, Campo Morado’s 10.4 million tonnes of measured and indicated resources include 1.91 grams gold and 146 grams silver per tonne.”

With all these plans in mind, it’s not surprising that Telson is setting itself some pretty ambitious targets. At Campo Morado the aim is to double production in the next five years. And at Tahuehueto the aim is to triple production.

Acquisitions could also add scale, as chief executive Antonio Balderas is well connected in Mexico and keen to do deals.

And given that the projections show that Telson will have upwards of C$36mln in free cash flow in the first year of full production from both mines, he’ll be able to negotiate from a position of some strength.

Overall, says Shearing, the plan is to create a mid-tier mining company in Mexico.

At this rate, it might happen sooner than you think.

 

View full TSN profile View Profile

Telson Mining Corp. Timeline

Related Articles

Lionsgold
July 04 2018
“It is an exciting chapter Lionsgold is entering and we look forward to reporting on the company's many business opportunities and developments throughout the course of the year,” said chief executive Cameron Parry
1517846055_Cradle-Mine.jpg
September 17 2018
Cradle Arc is ramping up copper production at its Mowana project, and further expansion is on the cards
Gold piggy bank
November 19 2018
The Vancouver-based group recently completed the first three diamond drill holes of the 2018 programme at its Gold Drop property near Greenwood, British Columbia
Copyright © Proactiveinvestors.com, 2018. All Rights Reserved - Proactive Investors North America Inc., Proactive Investors LLC

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use