07:15:49 EDT Thu 28 Mar 2024
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Telson's Morado concentrates diluted, stolen in transit

2019-02-11 19:12 ET - News Release

Mr. Ralph Shearing reports

TELSON PROVIDES FULL YEAR 2018 OPERATIONAL UPDATE FOR ITS CAMPO MORADO MINE AND REPORTS CONCENTRATE THEFT

Telson Mining Corp. has provided an operational and financial update for full year 2018 for its 100-per-cent-owned Campo Morado mine, located in Guerrero state, Mexico.

Campo Morado 2018 preproduction and commercial production highlights:

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

Jose Antonio Berlanga, chief executive officer 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 [preliminary economic assessment] stage, to having acquired the Campo Morado mine, advancing it back into full commercial production and advancing its Tahuehueto project through prefeasibility studies into preproduction 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.

"Two thousand eighteen 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 preproduction cash sales from both Campo Morado and Tahuehueto mines during 2018 resulted in estimated gross concentrate sales of $45.56-million (U.S.) ($40.75 (U.S.) from Campo Morado and $4.81-million (U.S.) from Tahuehueto). We believe we are in the right track to become a mid-size mining operator in Mexico with two 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 per cent 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, on-line.

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, 24-hour-a-day, seven-day-a-week GPS (global positioning system) tracking, having all transport trucks now travel together in a convoy non-stop to point of sale, and increasing assay monitoring on a truck-by-truck basis at point of sale with more rapid turnaround of results to quickly compare results at delivery with 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 continuing 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 $2-million (U.S.) to $3-million (U.S.), to a maximum of approximately 7 per cent of total annual sales from Campo Morado.

(1) 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 per cent.

About Telson Mining Corp.

Telson Mining is a Canadian-based mining company with two Mexican gold, silver and base-metal mining projects. Effective May 15, 2018, Telson declared commercial production at its 100-per-cent-owned Campo Morado mine. Telson is currently producing zinc and lead concentrates with gold, silver and copper as byproducts.

Qualified persons

This press release was prepared under the supervision and review of Ralph Shearing, PGeol, president and director of Telson Mining, a professional geologist registered in Alberta as a member of the professional association APEGA, and a qualified person as defined by National Instrument 43-101. Data verification by Mr. Shearing includes personal inspection of the Campo Morado mine site, reviewing mining facilities, drill core and underground development, and discussing work programs and results with geology and mining personnel.

We seek Safe Harbor.

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