Telson Mining (TSXV:TSN) announced on Tuesday it has signed a letter of intent with a group of syndicates led by Mexican bank Accendo Banco for a financing of up to $25 million to complete the construction and ramp-up of its Tahuehueto gold mine. The proceeds will also be used to meet debt service obligations and for working capital purposes.
The Accendo syndicate members are investing by way of debt, a silver stream and equity. Accendo is providing a $12 million loan, of which $500,000 has been advanced to date. The company would receive a further $5 million from a stream agreement for the first 1.25 million payable ounces of silver production. Another $8 million will be secured through a private placement.
Telson, the syndicates and Trafigura Mexico have also executed an MOU that provides a non-binding framework for the parties to negotiate definitive agreements of the proposed transactions, including the potential restructuring of Telson’s debt obligations to Trafigura and Nyrstar Canada.
The capital expenditure investment needed to complete the Tahuehueto mine construction and commissioning of the project is estimated at $15.4 million. This includes $12.6 million for equipment and construction including a 15% contingency, plus $2.8 million of working capital to support the operations until the mine has achieved positive cash flow.
Work on the project will begin immediately upon closing the private placement that forms part of the financing, the company said.
“This funding package now allows Telson to immediately reinitiate construction at the Tahuehueto mine site, after which we expect to rapidly advance construction targeting to commence initial pre-production within 10 to 12 months and full-scale production 12 to 14 months after funding,” Telson CEO Ralph Shearing said in a news release.
Telson’s Tahuehueto project is in northwestern Durango state within the Sierra Madre mineral belt, which hosts most of Mexico’s active exploration and development projects. Construction of the project has been advanced to an estimated 60% of completion.
With final funding in place, the company expects to finish construction of a 1,000 tpd processing facility to produce gold, silver, lead and zinc in concentrates within its own on-site mineral processing facility.
Shares of Telson Mining surged 32.5% by midday Tuesday, sending the company’s market capitalization to C$49.3 million.