Telson aims for quick restart at Campo Morado

Friday, May 5, 2017

Telson Resources will restart operations at the Campo Morado mine in Mexico following the planned US$20mn acquisition from current owners Nyrstar.

Telson aims to begin operations within six months of closing, with the plan of working toward the polymetallic mine's previous 2,500t/d throughput capacity, company president Ralph Shearing told BNamericas.

The sale is part of Nyrstar's exit from mining operations, to focus on metals processing.

The Belgium-based company placed the mine on care and maintenance in 2015, following security concerns in Guerrero state and declining zinc prices.

Telson plans to restore positive relations with local communities at Campo Morado, and raise operating capital in an offtake deal with a concentrate buyer.

In addition to zinc, copper and lead production, Telson plans to investigate the potential to boost gold recoveries at the mine.

BNamericas: Why Campo Morado?

Shearing: Antonio Berlanga, our CEO, knows it reasonably well. We have followed it and watched it turn into a pretty good mine and then the difficulties Nyrstar had.

We were cognizant of that, but the price it was available to us at was too hard to resist.

We know it's got some challenges but we're not afraid of them. Our hands-on guys working out of Mexico City have the experience to work with the communities and make it work.

Ralph Shearing

BNamericas: What are the strengths of the project?

Shearing: There are still lots of resources there. There are six known zones, and more that aren't drilled off yet. Of those six, only two have been mined, so the others are waiting to be mined.

We recognize there are some metallurgical challenges with the orebodies. Each one is a little different and recoveries of the precious metals have not been spectacular.

The recoveries of the base metals are challenging but you can still make the mine work and make some good money.

We're investigating a number of different mining scenarios and believe we can get it back in operation within six months.

The main thing is to get down there and start discussions to get the community on board.

There was some deterioration in the relationship between Nyrstar and the community, for various reasons which we have a good handle on.

Nyrstar used the community situation as an excuse to shut down the mine, when it was a lot to do with metal prices.

Another benefit is that we are able to pick up all the infrastructure Nyrstar put in to get it up and running, and make it pay off for our shareholders.

BNamericas: What throughput are you looking at for the restart?

Shearing: There are a number of things that will govern that, and one is who our bulk concentrate purchaser is going to be.

We're investigating the possibility of producing and selling a bulk concentrate, rather than separating it into its various components. That will save us a lot of time and energy, and costs.

We're in discussions with some concentrate purchasers, and we also have to get some operating capital in place, and we're planning on doing offtake loan funding with the concentrate purchasers to raise that operating capital.

Once that is in place we can better judge at what rate to start it up.

The preference would be to start up at the 2,500t/d capacity, but more than likely it will start at a lower rate, say 1,000t/d, and scale it up over the first six months of operations.

If we're going to make our own separate lead, zinc and copper concentrates, then we just want to mine one zone at a time and tune up the mill specifically for that deposit, because each one has its own characteristics.

My understanding is that there was mingling of ore going on in order to meet the 2,500t/d. Our mine plan is not finalized but we would like to start at a significant rate and as close to capacity as possible.

BNamericas: What are your next steps once the deal closes?

Shearing: We're already working on them. We're meeting with the tailings facility engineers and Antonio and his group are doing a site visit.

Then we have to close our operating capital, and start talks with the community to get them back onside.

A new union will have to be formed and hiring started. And then we'll work toward production.

BNamericas: What will your approach be with the community?

Shearing: Antonio has had a lot of success dealing with community organizations in various mines.

It is really a matter of engaging them and making them a part of the mine so it's benefiting them. As much as possible we'll be employing people within the community.

Contracting, moving supplies in and out, maybe even concentrate deliveries, as much as possible we'll let those opportunities go to the local community.

BNamericas: How do you see the security situation?

Shearing: Guerrero is recognized as a bit of a tough state. Antonio and his guys are confident they can work there.

We have an independent director, Arturo Bonillas, who recently stepped down from Timmins Gold. He has worked there for a long time and has his contacts and will be helping us out.

BNamericas: What are your exploration aims?

Shearing: It's too early to be specific, but we're going to try to expand existing zones and look for more zones.

There's lots of potential to find more zones, but even with the existing zones there is 17Mt of ore left, so there's a fairly good mine life already.

BNamericas: Why zinc?

Shearing: There's a shortage of zinc, due to mines going out of production, and not many have been brought back into production or been explored in the last 7-10 years due to a lack of money for exploration.

There's a bit of a delay before people will be able to make new discoveries and bring them online, or revamp old projects, so we think we've got a decent mid to long-term pricing on zinc.

But there is a fair amount of gold in Campo Morado too.

Some of the zones are 3-4g/t gold. Recoveries have been poor, about 40% from what we've seen from Nyrstar's most recent production records, but they had their circuits set up for zinc.

We can potentially improve on recoveries of precious metals. Those gold numbers are really quite good, it's just a matter of whether you can recover it or not based on the metallurgy.

There's also a decent amount of copper, and a possibility of recovering a lead concentrate.

About Ralph Shearing

Ralph Shearing is president and corporate secretary at Telson Resources, a company he founded in 1986.

A geologist with more than 20 years' experience, Shearing graduated from the University of British Columbia 1981.

About the company

Telson Resources is a Canadian junior resource company. In addition to the Campo Morado acquisition, Telson is advancing its Tahuehueto gold-silver project in Mexico toward production.