Telson Mining Corporation (“Telson” or the “Company”) (TSXV:TSN) is pleased to announce the positive result of an independent Preliminary Economic Assessment study (“PEA”) prepared in accordance with National Instrument 43-101 (“NI 43-101”) on the 100% owned Campo Morado Mine (“Campo Morado” or the “Project”) located in Guerrero State, Mexico.

Campo Morado PEA Highlights1:

  • Pre-tax Net Present Value (“NPV”) at a 8% discount rate of US$81Mn- After-tax NPV at a discount rate of 8% of US$65Mn
  • Undiscounted cash flow before income and mining taxes of US$114Mn
  • Undiscounted cash flow after income and mining taxes of US$91Mn
  • Life of mine (“LOM”) of 12 years, with 9.7 million tonnes of potential mill feed at an average grade of 4.33% zinc grade, 1.00% Lead grade, 0.78% copper grade, 131.9 grams per tonne (“g/t”) of silver and 1.71 grams per tonne (“g/t”) of gold
  • Mining rate of 2,500 tonnes per day (“tpd”)

Jose Antonio Berlanga, Director and CEO, stated: “The positive Preliminary Economic Assessment marks another significant milestone for Telson. It validates the positive economic value of last year’s acquisition of the Campo Morado mine. We expect to improve the Net Present Value of the mine in the short run by implementing several strategies summarized below and we will embark on a Pre-Feasibility Study designed to demonstrate the improvements in mining and milling that we are instituting. The PEA is based on historical operating costs incurred by the previous operator of the Campo Morado mine as Telson is still in the pre-production stage and it is too early to forecast any cost savings resulting from the changes we have implemented. Among the strategies we have identified as drivers of increasing the NPV are:

1. Cost reductions resulting from: i) a reduced local workforce. We are currently operating the mine and approaching similar output as the former operator with approximately 50% of the previous workforce. It should be noted that the former owner was focused only on zinc production and was mining three separate mineralized bodies at the same time which required additional personnel, services, equipment and infrastructure. We are focused on all metals and only mining one mineralized body at a time, such that we can operate with a smaller workforce; ii) a change from room and pillar mining to sub-level caving (see s. 16.3 of the PEA); and iii) a reduction in haulage distance as a result of new egress portal being developed;

2. conducting an aggressive exploration campaign designed to increase the mineral resources at Campo Morado;

3. analyzing leaching processes to increase recoveries of precious metals from concentrate and existing tailings.

While we look forward to optimizing the performance of the Campo Morado mine, we also wish to emphasize that our primary goal for 2018 is to build our new mine at our flagship Tahuehueto project in Durango, Mexico. We point out that we published a NI 43-101 Technical Report Preliminary Feasibility Study Telson Resources Project Durango, Mexico with an effective date of December 6, 2016 and a report date of January 20, 2017 (see Tahuehueto PFS). based on a 550tpd operation at Tahuehueto that assigned a pre-tax Net Present Value, using an 8% discount, of US$138Mn and a post-tax Net Present Value using an 8% discount, of US$77Mn to Tahuehueto, such that the base case scenario NPV of both projects of the Company, Tahuehueto and Campo Morado, adds to US$218Mn on a pre-tax basis and US$142Mn on a post-tax basis. We are building a mill capable of processing 1,000 tpd at Tahuehueto and are also working on an updated PFS to reflect the improved economics of such an operation. We believe this will validate the upside potential of the economics of the Company for our shareholders and look forward to a very exciting year ahead of us.”

Description of Campo Morado Mine and PEA

The Campo Morado Project hosts several polymetallic massive sulphide deposits containing zinc, copper, silver, gold and lead mineralization. Five deposits have been extensively drilled: G9, El Largo, Reforma, Naranjo and El Rey. The Project is comprised of a previously mined underground multi-metal mine with infrastructure, installations and equipment capable of processing 2,500 tonnes of material per day. Farallon Resources Ltd. (Farallon) began mining operations at the G9 Mine at Campo Morado in April 2009. Nyrstar NV (Nyrstar) purchased Farallon and the Campo Morado Mine in December 2010 and continued mining operations at G9 mine with some production from the El Largo deposit until production was suspended in January 2015 and the mine was placed on care and maintenance.

Telson Mining Corporation purchased the Campo Morado Mine from Nyrstar Mining Ltd. and Nyrstar Mexico Resources Corp. (together the “Nyrstar Group”) in June 2017 and restarted mining operations under a preproduction plan and initiated production of zinc concentrates in October 2017. Telson intends to advance preproduction towards full commercial production during 2018. The purchase price of the Nyrstar Group subsidiaries that own the Campo Morado Mine was US$20Mn of which US$3.5Mn has been paid and the balance of US$16.5Mn is due to be paid on or before June 13, 2018.

Mineral Resource Estimate

The current Campo Morado resources occur in five main mineralized zones, G9, El Largo, Naranjo, Reforma and El Rey. Within these main zones, 36 sub-zones of well defined, massive and semi-massive sulphide deposits modeled three dimensionally are used to constrain the resources. The boundaries of these sub-zones are delineated by geological and assay data from extensive drilling and underground excavation. The resource estimate is based on 1,541 surface and underground drill holes and the 33,523 assays obtained from them that intersect and occur within these mineralized zone models. The mined-out volumes of the underground excavations of previous mining operations in turn deplete the resources. Two contiguous 5-metre cube block models were used to cover this area. The overall combined resource of the five zones estimated by ordinary kriging is presented below. The tabulation is based on zinc equivalency (ZnEq) 2 that incorporates the contributions of zinc, copper, gold, silver and lead and metal recovery factors achieved at the processing facility on site. The base case at a 5.5% ZnEq cut-off is highlighted in bold typeface. The effective date for the mineral resource estimates3 for the five individual main mineralized zones is September 30, 2017.

Campo Morado Resource Estimate 2017

Cut-off ZnEq (%) ZnEq (%) Tonnes Au (g/t) Ag (g/t)