Telson leverages Mexican expertise to move forward at Tahuehueto

VANCOUVER — Management of Telson Resources (TSXV: TSN; US-OTC: SOHFF) tell a familiar story of tepid capital markets and stalled project development, but the company has found a path forward through local partnerships at its Tahuehueto epithermal gold-zinc-silver property in Mexico’s Sierra Madre mineral belt.

The company now plans to release a prefeasibility study for a 500-tonne-per-day mine at the site later this year, and hopes it can begin construction in 2017.

Exploration road switchbacks cross-cutting the El Creston zone at the Tahuehueto gold-zinc-silver property in Mexico’s Sierra Madre mineral belt. Credit: Telson Resources.

In mid-2015 Telson signed a letter of intent with Reyna Minas, S.A. to solidify an in-country operating partnership. The company subsequently closed a $2-million private placement, and arranged a $10.5-million line of credit that allows it to complete a 2,000-tonne bulk sample to produce the project’s first concentrate test sales.

“Last year we had a new group enter into the company,” president Ralph Shearing says during an interview. “They’re a Mexican outfit that’s experienced when it comes to mining in the country. Our partners are hands-on in terms of project management, and I’d say it’s the main factor that will allow us to move forward quickly. They’ve also brought in two financial funds from Mexico City that helped us fund the bulk sample, complete our economic study and move towards production. It’s been really tough over the past few years, so it’s been a great relief to get that sort of financial traction.”

Mining engineer Jose Antonio Berlanga Balderas now serves as Telson’s CEO, and previously worked on Cayden Resources’ Morelos Sur and El Barqueno projects, which were acquired by Agnico Eagle Mines (TSX: AEM; NYSE: AEM) for $205 million in late 2014. Shearing adds that project logistics, including equipment acquisitions and contracting, are largely handled by the company’s Mexican technical partner, Reyna Minas.

The bulk sample will underpin a new mine plan that reworks a preliminary economic assessment (PEA) tabled in 2010.

Telson envisions a smaller start-up operation that would produce lead and zinc concentrates via a sulphide-flotation circuit. The goal is to cut upfront capital requirements and speed up cash flow to facilitate mill expansion and exploration ofepithermal targets at Tahuehueto.

“We’re permitting the project as a reactivation of an old mine, so it’s going to really speed up the process. In fact, we’re filing all the final documents right now and don’t anticipate any problems,” Shearing says.

Employees enter underground workings at the Tahuehueto project. Credit: Telson Resources.

“When we published our first economic study nobody was really looking at projects, and frankly, the capital costs were too high,” he concedes. “We’re looking to drop the development capital in a number of ways, including equipment leases and an agreement with a group that’s building a power facility. Our Mexican partners are handling most of the logistics now, which has been great for us.”

Telson will rethink its resource models with higher cut-off grades. Tahuehueto hosts 7.4 million measured and indicated tonnes grading 2.1 grams gold per tonne, 35 grams silver per tonne, 0.3% copper, 1.1% lead and 2% zinc. Contained metals at a 3 gram gold equivalent cut-off grade total 498,000 oz. gold, 8.3 million oz. silver, 45 million lb. copper, 173 million lb. lead and 327 million lb. zinc.

Current metallurgical assumptions are that most of the recovered gold would report to the lead concentrate, while the proposed zinc concentrate could also drive profit at spot metal prices.

“We’re sending out bulk sample through a sulphide flotation circuit that was built within the past several years to process material from small-scale miners,” Shearing adds. “It looks like we’ll produce clean concentrate since the material is coarse-grained, and so far we’ve had great recoveries.”

Mineralization at Tahuehueto consists of epithermal, low-sulphidation, polymetallic silver-gold veins and breccias with copper, lead and zinc. The setting is common within the gold-silver metallogenic Sierra Madre Occidental province.

The company’s previous PEA modelled a US$90-million operation that would have processed material at 3,000 tonnes per day over an 11-year mine life.

“There are a lot of promising elements to the project,” Shearing says. “It could be a zinc or a gold story, and though we’re focused on production right now, there is a lot of untapped exploration potential in what we think could be a mineralized camp that hosts a huge epithermal system. Now that markets have improved, we’ve had  meetings about returning to Canadian equity markets, as well, and people are starting to get really interested in production stories.”

Telson shares have traded in a 52-week range of 3¢ to 55¢ per share, and last closed at 36¢.

The company completed a 2-for-1 share rollback in late 2015, and now has 93 million shares outstanding for a $39-million market capitalization. Estrategica Corporativa en Finanzas is Telson’s largest shareholder.