PRESS RELEASE

Telson Mining reports Mexico concentrate theft

By
Wednesday, February 13, 2019

PRESS RELEASE

VANCOUVER, British Columbia--(BUSINESS WIRE)-- Telson Mining Corporation ("Telson" or the "Company") (TSX Venture - TSN.V) is pleased to present an operational and financial update for full year 2018 for its 100% owned Campo Morado Mine ("Campo Morado") located in Guerrero State, Mexico.

Start your 15 day free trial now!

cta-arrow

Already a subscriber? Please, login

Campo Morado 2018 Pre-Production and Commercial Production Highlights

  • Mill processed 585,601 Tonnes of mineralized resources during 2018, (231,757 tonnes of pre-production to May 15, 2018 and 353,844 of commercial production since May 16, 2018) Average head grade of 4.26% Zinc, 0.37% Copper, 1.10% Lead, 1.02 g/t Gold, 118 g/t Silver
  • Sold on a combined basis an estimated total of 39,333 tonnes of Zinc concentrate with estimated average grades of 41.82% Zn, 363 g/t Ag and 1.27 g/t Au for estimated total gross proceeds of US $35.17 million. *
  • Sold on a combined basis an estimated total of 7,666 tonnes of lead concentrate with estimated average grades of 23.93% Pb, 662 g/t Ag, 5.15 g/t, Au and 2.21% Cu for estimated gross proceeds of US $5.58 million. *
  • Combined estimated total all in operating costs, including mining, milling, freight, royalties, smelter costs, etc. were US $32.46 million, resulting on an estimated cost per ton of US $55/tonne.
  • Combined estimated total metal sold - 36.26 million lbs (16,449 tonnes) zinc, 4.03 million lbs (1,834 tonnes) lead, 373,333 lbs (169 tonnes) copper, 2,870 oz gold and 622,309 oz silver. *
  • Mill throughput processing rate increased from 1,500 tonnes/day in January to an average of 1,800+ tonnes per day by year end, achieving maximum daily rates of over 2,200 tonnes/day.
  • Total estimated mineralized resources mined was 582,521 tonnes during the year. Mine development totaled 2,659 meters: 1,682 meters developed in mineralized resources and 977 meters in waste (access ramps and auxiliary workings).

José Antonio Berlanga, CEO and Director, states: "Telson´s growth in the past three years has been remarkable. 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.

2018 marked a significant milestone in the history of the Company. It was the first time since its foundation that the Company recorded revenues from concentrate sales on its financial statements, after declaring commercial production at Campo Morado. Revenues produced during commercial production from Campo Morado and pre-production cash sales from both Campo Morado and Tahuehueto mines during 2018 resulted in estimated gross concentrate sales of US $45.56 million (US $40.75 from Campo Morado and US $4.81 million from Tahuehueto) We believe we are in the right track to become a mid-size mining operator in Mexico with 2 mines soon to be full operation, once Tahuehueto construction is completed during 2019.

Unfortunately, the theft of concentrates (explained below) plus some increase in costs, such as electricity which increased by 110% since year end 2017, affected the expected profitability of the Campo Morado Mine. Management is taking proper measures to correct this situation for 2019.

Telson is fully confident of its capability to advance into a mid-tier successful producer by continuing to advance its success story with operational improvements at Campo Morado and with initiation of on-site processing at Tahuehueto upon completion of mine construction. Shareholder value is sure to increase as Telson's management delivers on its goals towards becoming a significant producer in Mexico."

Campo Morado Concentrate Thefts

Management has determined from inconsistent assay results between sampling of concentrate loaded on trucks at the mine site and check assaying competed at the point of sale in Manzanillo, that Campo Morado concentrates were subjected to dilution by theft while in transit. 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. After considerable analysis with the various labs and with security contractors, Telson has concluded that there was a sophisticated criminal operation to intercept certain concentrate trucks in transit, remove some part of the Campo Morado concentrate load from the trailer and replace same with lower quality concentrates. For additional information view an interview with Ralph Shearing, President at https://youtu.be/ZJY9xngY5D8

Once the Company received the preliminary findings of its investigation into the theft, it has taken various measures to eliminate this issue with increased security including performing monitored and guarded concentrate transport from the mine to point of sale, 24X7 GPS tracking, having all transport trucks now travel together in a convey non-stop to point of sale, increasing assay monitoring on a truck by truck basis at point of sale with more rapid turn-around of results to quickly compare results at delivery to assays from mine site at truck departure. Furthermore, Telson immediately had all drivers compromised in the theft process employment terminated. Telson is considering all available legal remedies in conjunction with ongoing investigations by the appropriate authorities and based on recent results believes 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.

*Management points out that if not for the above noted concentrate theft, concentrate gross sales from the Campo Morado mine would have increased by the value of the concentrate stolen. In addition, the average grade of zinc concentrates sold, as quoted above, would have been higher by approximately 2%.