Telson Mining Corporation (CVE:TSN) is in full-steam-ahead mode and hitting its stride as zinc prices rebound, according to a research report New York City-based investment bank Hallgarten & Company.
Hallgarten has assigned a Long recommendation for Telson shares with a 12-month target price of $1.10, an upside of about 197% based on the current share price of C$0.37.
Telson is one of the few companies to have entered the zinc mining space with two mines, both located in Mexico.
WATCH: Telson Mining provides update on Campo Morado and Tahuehueto Projects
The company's "production ramp-up is gaining pace with excellent volumes in 2018 and Q1 2019," wrote Hallgarten principal and mining strategist Christopher Ecclestone, whose report primarily highlights Telson's flagship project, Camp Morado. Campo Morado is a Mexican polymetallic mine producing around 2,000 tons per day of zinc and lead concentrates with gold, silver and copper as byproducts.
The Vancouver-based company is also developing its Tahuehueto project in northwestern Mexico, with full production expected to commence in 2019.
Telson is currently producing zinc and lead concentrates with gold, silver and copper as byproducts.
"Campo Morado with existing resources could feed the mill at 2,500 tons per day for over 12 years and at Tahuehueto current reserves should provide for a 12-year mine life at 1,000 tonnes per day," wrote Ecclestone in the research report. "There are another three and a half million tons of resources that could extend the life by two times should Telson be able to convert the resources to reserves."
Camp Morado has strong potential
According to the report, at Camp Morado, Telson processed 585,601 tonnes of mineralized resources in 2018 and at the current production run rate would process 600,000 tonnes, however, it now expects production to be closer to 750,000 tonnes per annum for 2019.
On the back of the production ramp-up gaining pace, there was also a significant reduction in operating costs from those projected in past studies and realized by
past operators, according to Ecclestone.
"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. These 2018 costs are approximately 45% lower than the estimated equivalent costs of US$98.74 per tonne used for the same categories in the PEA," according to the report.
Zinc under pressure in 2018 but future looks bright
According to the report, the price of the zinc has tried to creep higher again since the New Year, which has revived interest in some zinc miners and to a lesser extent, developers, however, that hasn't quite translated into equities markets, and moving the likes of zinc producers higher.
"We would expect there will be a moment of collective awakening that should benefit Telson and set its price climbing again as the extent of its future importance as a Zinc producer becomes known," wrote Ecclestone.
Contact Katie Lewis at katie@proactiveinvestors.com