Focused on fast-tacking the Tahuehueto mine, which is already 70% built
Pre-production is generating cash to fund other activity
Undervalued with a market cap lower than value of assets
What Telson Mining does:
Telson Mining Corp (CVE:TSN) (OTCMKTS:SOHFF) is a junior resource group focused on developing mines in Mexico. The flagship asset is the Tahuehueto gold mine project in north-western Durango state, which is currently in pre-production at around 200 tonnes per day (tpd) using a toll mill for processing.
Construction at Tahuehueto is 70% complete and the plan is to produce gold at its own mineral processing plant capable of milling at least 1,000 tonnes per day.
The project is awaiting final funding to complete the processing plant and related assets to produce its own concentrates. Completion of construction is targeted towards the end of the first quarter of 2020.
Tahuehueto lies within the prolific Sierra Madre mineral belt and consists of 28 mining concessions over five non-contiguous blocks totaling nearly 7,500 hectares.
According to a 2017 resource 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)
Last week, the company said it will focus efforts at Tahuehueto after it said it would curtail operations at its Campo Morado zinc mine in Guerrero State and put it on care and maintenance.
This was due to a number of factors including an improving gold market, fears over the health and welfare of its workforce, and the "substantial' decline of zinc prices.
How it is doing:
On August 18 this year, Telson said that more processing of ore from the Tahuehueto gold mine in Mexico was set to begin next week.
Around 5,000 tonnes of ore at a cut-off grade of 8 g/t gold equivalent will be available for processing in the latest campaign for the Atocha toll mill, the company said.
Processing is expected to be completed within two weeks and the produced lead and zinc concentrates sold immediately under the group's offtake agreement with Trafigura Mexico.
It is the firm's previous toll milling campaigns, which have led to excellent recoveries of gold, silver, copper, lead and zinc and produced excellent quality lead and zinc concentrates. The sale of the latter has helped fund the construction thus far of the Tahuehueto mine.
Meanwhile, also ongoing is exploration at Tahuehueto, which has identified numerous veins outside of the current published reserves and resources.
The issues at Campo Morado has meant construction has fallen back somewhat at Tahuehueto and it needs more funding to complete that but the firm is confident it can secure bank financing in the next couple of months.
In addition, once that funding is secured, Telson plans to also conduct an extensive drill campaign in a bid to increase the resources and thereby further consider the possibilities of expanding the Tahuehueto operation. A 2017 prefeasibility study for Tahuehueto put its net present value (NPV) at C$100 million. The firm has a market cap currently of around C$24 million.
- Completion of financing
- Drill campaign and exploration results
- Completion of Tahuehueto gold mine build
What the boss says:
Telson president Ralph Shearing recently told Proactive Investors: "Tahuehueto is a very robust project. It's a gold mine. We're in an expanding gold market. On US$1,200 gold calculations we expect it to produce maybe US$25 million US$30 million free cash flow in its first full year of operations.
"That's after we got it built and after we've got it up to the full production capacity of about 1,000 tpd. That's the kind of numbers we hope to achieve on that project so it's a great project and it's been one we've been working on for a long period of time."