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Telson Mining on track in Mexico as it provides 2018 production highlights from Campo Morado

The total estimated resources mined at Campo Morado were 582,521 tonnes during 2018

mine site
The Campo Morado site in Mexico

Telson Mining Corporation (CVE:TSN), the Mexico-focused metals producer, said it was on track to become a mid-size operator with two mines soon to be up and running, as it posted production figures from its now commercially running Campo Morado mine in the Guerrero State.

Revenues produced from Campo Morado and pre-production sales from both Campo Morado and its Tahuehueto project last year led to estimated gross concentrate sales of US$45.56 million, with US$40.75 million from Campo Morado and US$4.81 million from Tahuehueto, the firm highlighted.

READ THE BIG PICTURE: Telson Mining will generate C$36M free cash flow per year once its two Mexican mines are up and running

Construction of the Tahuehueto mine in Durango State is due to be completed in 2019.

But the miner noted today that the theft of Campo Morado concentrates, plus some increase in costs, such as electricity which rose by 110% since year-end 2017, has impacted the expected profitability of the mine and the firm is taking steps to rectify the situation.

"The company has identified that some of the concentrate trucks were received in Trafigura warehouses with lower concentrate grades than reported by the Campo Morado mine site laboratory," the Vancouver based firm said in Tuesday's statement.

After analysis, Telson has concluded that there was a sophisticated criminal operation to intercept certain concentrate trucks in transit, remove some parts of the Campo Morado concentrate load from the trailer and replace them with lower quality concentrates.

The firm has now increased security and is considering all available legal remedies. Based on recent results, it reckons it has "substantially eliminated" the concentrate transit theft.

"The estimated impact in the yearly cash selling value, although difficult to determine accurate numbers has been estimated by management through a rigorous statistical analysis to range between US$2 million to US$3 million, to a maximum of approximately 7% of total annual sales from Campo Morado," it told investors.

Speaking to Proactive's Steve Darling, president Ralph Shearing said: "We have corrected it and we have additional security in place. We've got  our trucks leaving in convoys and we have security along the way watching them so we firmly believe that we have this in hand now."

He noted that the firm's operating profit was about $10 million last year and that if the concentrate theft had not occurred, the statistics showed that figure could have been around $12- $13mln.

Turning to the Campo Morado figures, the total estimated mineralized resources mined were 582,521 tonnes during 2018.

The combined estimated total metal sold came in at 36.26 million pounds (16,449 tonnes) of zinc, 4.03 million pounds (1,834 tonnes) of lead, 373,333 pounds (169 tonnes) of copper, 2,870 ounces gold and 622,309 ounces of silver.

The total all in operating costs, including mining, milling, freight, royalties, smelter costs were US$32.46 million, resulting in an estimated cost per ton of US $55 per tonne.

Remarkable growth

"Telson´s growth in the past three years has been remarkable," said José Antonio Berlanga, the group's CEO. "After Telson’s restructuring in November 2015, the company has grown significantly from having one advanced exploration project, Tahuehueto at the PEA stage, to having acquired the Campo Morado mine, advancing it back into full commercial production and advancing its Tahuehueto project through pre-feasibility studies into pre-production by toll milling.

"At Tahuehueto we are now in late-stage mine construction of an on-site 1,000 tonne per day milling and underground mining operation which we expect to commission in 2019."

Pre-production kicked off at Tahuehueto in August 2017 and is currently mining at a rate averaging around 200 tonnes per day and shipping ore to a third-party toll mill for processing.

Telson shares closed up 1.25% in Toronto at $0.405.

--Updates with video and share price--

Contact Giles at [email protected]

Quick facts: Telson Mining Corporation

Price: 0.135 CAD

TSX-V:TSN
Market: TSX-V
Market Cap: $18.84 m
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