Tesoro Resources (TSO) - Resource Update By Year End
Tesoro Resources Limited is an Australian public company with exploration stage gold assets in Chile. The company is focused on acquiring and developing high-grade gold assets that have the potential to be district-scale mining projects. The company is managed by experienced mining professionals with strong geological and finance backgrounds along with significant in-country expertise.
Matt Gordon caught up with Zeffron Reeves, Managing Director, Tesoro Resources. Zeff is a geologist with over 2 decades of experience in the resources sector working on projects ranging from greenfields exploration, discovery, definition, and feasibility, construction, production to closure. He previously served as Managing Director at Kopore Metals Limited which had multiple developmental and operational projects in Chile.
He has also worked in senior management for Cleveland Mining Ltd. and Ashburton Minerals Ltd. His educational credentials include a Bachelor's degree in Applied Geology (Honors), and an MBA from Curtin University. Zeff is a member of the Australia Institute of Geoscientists.
Tesoro Resources is an exploration company founded in 2017, headquartered in Australia. The company is listed on the Australian Stock Exchange (ASX: TSO). The company executed a year-in agreement over the El Zorro Gold Project in 2017 from a local Chilean vendor and is currently undertaking exploration programs. It is currently exploring and developing the El Zorro Gold Project in Region 3 of Chile. This project is being rapidly progressed and expanded.
The recent elections in Chile led to the appointment of a central-left administration from the Socialist party. This indicates that no major changes in the political landscape are expected when it comes to mining. Chile is also moving forward with the Constitutional Convention, the results of which will be observed over the course of the next 8-10 months. Additional elections are due within the next 2 months and once it concludes, the impact will become clear over time.
The Maiden Resource
Tesoro Resources' maiden resource estimate was recently announced to the market and the company considers it as a stepping stone for a larger operation. The company was set up by the founders by investing $10M from personal wealth pre-listing. The founders are aligned with the shareholders to advance the El Zorro Project. The founders and directors hold a majority stake in the company which makes business decisions streamlined.
Tesoro Resources got listed at the start of the global pandemic, this led to capital raise challenges for the company. Prior to the listing, the company was able to drill 16 holes on the asset and made on-time vendor payments. The initial resource was estimated at 0.5Moz with a favorable mine location, however, as additional drilling was carried out, the company found that resource to be significantly larger than previously anticipated.
At the end of Q3, 2021, Tesoro Resources had a cash flow of AUD$13M. The company's monthly expenses range between AUD$1.5M - AUD$1.8M with 6 drill rigs operating to develop the project. Based on the recent MET (Metallurgical Test) results, the project is a simple and straightforward operation.
The Ternera Prospect
Located within the El Zorro Project, the Ternera Prospect features proven gold mineralization over a 1km strike length that is 400m deep and 350m wide. The mineralization is found to be open in all directions.
The company's recent resource update was calculated through 148 drill holes. The company has drilled 242 holes at the deposit and is looking to add the data in the next resource update. The previous 2 drill results for the maiden resource have shown consistent results.
Tesoro Resources hit gold in good width at 100m-200m distances. There are multiple instances of high-grade deposits ranging over 2g. The company also uncovered 30m at 5g within the high-grade zones. It is focused on lineating these zones to further de-risk the operation. The 4 deposits are defined and feature mineralization at the surface. They span a length of 1km each and are drilled up to a depth of 400m.
The multiple rigs operating at the site are focused on infill drilling to increase the size and classification of the resource. This will help grow the indicated resource which would then be used for Economic and Scoping Studies. Additionally, the company is also carrying out extensional drilling at the site.
At the south end of the deposit, the company continues to drill downwards while also exploring targets outside of the Ternera prospect. This region is expected to be part of the same system as the Ternera East, Drone Hill, and Toro Blanco zones, featuring good grades of material. Each drill hole features mineralization and this site is turning out to be a significant gold project.
The resource update for the additional 100 drill holes is planned for 2021 end. This update is dependent on the assays which are due inclusion into the resource model, forming the basis for a Scoping Study. Following this, the company is looking to carry out a Feasibility Study in 2022.
Presently, Tesoro Resources anticipates that this site will turn into a significantly larger gold district. Based on the geology on-site, the Ternera prospect is expected to be at the edge of this resource.
The El Zorro district is located close to the roads, power, water, and a highly skilled workforce. Combined with a well-developed infrastructure, this site is the ideal place to build a gold mining operation. The company is looking to bring this deposit into production.
Based on the reports by the company's mining engineer, the expected production capacity for this deposit is within 70,000oz-100,000oz/ annum. To enter production, the company is looking for a supply of 1.2Moz-1.5Moz to form the basis for a Feasibility Study.
As Tesoro Resources continues to drill, it is yet to find the edge of the district or the deposit itself. The company has found repeated trends of host rocks featuring gold deposits and is systematically identifying opportunities to either develop another deposit or extend the Ternera prospect. The company is considering the establishment of a tailings dam and a waste dump at the site before entering production.
In the past 6 months, the company has collected extensive data on the mining costs, contractor and infrastructure studies, environmental studies, and the permitting process. This data will be crucial to initiate mine-building.
At the Toro Blanco site, the company carried out 12 months of extensive work to define the targets and start initial drilling. The results have shown a material step change in the project's scale as it is open to an additional 3km of strike length towards the north. The company is looking to carry out additional drilling to determine the overall scale of the deposit.
Tesoro Resources is looking to increase its resource past the 1Moz mark. It is anticipating a 5%-10% increase in grades from the fault zones located at the surface. This will allow for a cheap open-pit mining operation.
MET Work Findings
Based on the metallurgical results, the gold reserves at the deposit feature coarse gold reserves 200 microns in size. The company took 10 samples of 50 kg each and blended them to get a representative number for the entire deposit. The resultant grade was between 1.1g/t and 1.12g/t. Through additional test work, it was found that the 200 microns grain featured 94% gold recoveries with 40% accounting for gravity-led recovery. The remaining portion of the recovery was done through a cyanide leach, while the tails grade was 0.07g.
This demonstrates that the gold reserves can be recovered by employing conventional processes. As per the metallurgical test results, this 200 microns grain can be suspended in cyanide tanks without any settling or other issues. This provides an opportunity for economic ways to extract gold from the deposit by carrying out primary crushing and placing the material into a sag mill. A sag mill is significantly cheaper to operate and also provides a larger throughput as compared to a bore mill. This enables the company to make massive gold recoveries with a significantly cheaper processing operation, leading to further project de-risking.