Tesoro Resources (TSO) - Gold Mine Builder with Real Vested Interested

Tesoro Resources is an Australian public company with exploration stage gold assets in Chile. Founded in 2017 by the members of the Board, Tesoro is focused on acquiring and developing high grade gold assets that have potential to be district scale mining projects.

We caught up with Zeff Reeves, Managing Director of Tesoro Resources to discuss their plans for this year with their El Zorro project in Chile.

Share Price Drop: Reasons & Reassurance

As the Gold price has recently started to come off a little, the Tesoro share price has also reduced, but Tesoro is a well funded company with the ability to ride the bumps in the market. The company has the next 12-18 months well planned out in growing the El Zorro project going forward. 

Company & Project Overview 

Chile is a solid mining jurisdiction and has a long history of mining investment. The country is well supported by excellent infrastructure and it is comparatively easy to complete the permitting process and there is also a cost advantage of mining in Chile. 

The El Zorro Gold Project is Tesoro’s main focus and covers over 500km

 and is located 140km by road from the city Copiapo in Region III, northern Chile. El Zorro is 100km north of Santiago in one of the best mining regions of Chile. El Zorro is situated on the coast, 15km from the Pan-American highway, 20km from grid power and 20km from the detail plant so has good infrastructure, is not at altitude and is near to a port. 

At the moment Tesoro is focused on drilling out the Ternera deposit, and the more work they do, the bigger it grows.

Mining in Chile: Political Concerns or Open for Business?

Chile has a very stable legal system, particularly in regards to property and mining law. The mining code was established in the late 1920s during a democratic period in Chile's history. They went through a communist uprising during the 1960's and a dictatorship when Pinochet was in power and that law didn't change. The laws are more or less the same today but backed up with an operating democracy.

Chile is going through some constitutional changes regarding the election of parliamentarians and the power given to the President. At the moment, it is a pure presidential democracy and ultimate executive power rests with the president to the point where they elect the parliamentarians. This is changing to more of a democratic system such as operates in the UK or Australia. There are no proposed changes regarding property law, mining law, or basic constitutional rights in regards to ownership and doing business.

There is a lot of governmental support to the mining industry in terms of investment and wanting to attract investment into the country for mining and business so Tesoro don't see any major changes ahead for the company. There is a boom in the Copper price at the moment so there are a lot of eyes on Chile, particularly from the larger mining companies interested in Copper assets in Chile.  

Revenues generated from the mining industry are being pumped back into regional areas. Tesoro Resources has a good relationship with the Director of Mines in the region who is keen to see another mine built, people employed and revenue generated for the region and for Chile. Chile is an attractive destination due to the tax regime as there are no royalties on minerals. When a mine is built and it starts recording profits it is taxed at the Chilean corporate tax rate, which is around 23%.

Management Shareholding & Remuneration

Zeff Reeves and Geoff McNamara, who is the non-exec director of the company founded the company back in 2017 and put in a bit of capital initially when they had identified El Zorro. They did a couple of rounds of capital raises as a private company and prior to listing, between themselves and raising from external funds they put about AUD$3.5M-4M into the project.

Currently, Zeffron Reeves and his co-founders own about 15% of the company, and are in it for the equity rewards, rather than for salaries. Generally, a common metric for measuring the value of a Gold company, would be resource ounces in the ground pre-production. Tesoro Resources is creating value for their shareholders and they will be rewarded by delivering resource ounces in the ground at El Zorro and for delivering a Feasibility Study.   

Zeffron Reeves and Geoff McNamara were involved in mining production and met at an underground Gold mine in Western Australia. They have worked in the mining industry for almost 25-years, working with projects from all aspects, from discovery through Feasibility, building them, running them and working for the administrators.

5 Rigs Turning 24/7 and More Coming: Goals, Targets, & Expectations 

Tesoro Resources did well last year and they are well-received in the market. They have a linear pathway and realise they have a real project going forwards. Geologically, El Zorro is an intrusive, related Gold system and Tesoro is focused on drilling out the Ternera deposit. They have 5 rigs turning 24/7 and are shortly looking to increase that to 6. They have gone from a 30,000m drill programme to now budgeting for a further 35-40,000m drill programme for infill drilling and resource definition. The step out holes are well mineralised and the aim is to get as many holes into the ground as possible to form the basis of a scoping study and get the maiden resource out by mid-year 2021. 

Tesoro Resources needs to demonstrate that they have a real project and they are currently working on Scoping and Engineering Studies. Once they have a resource published, then the market has got some real metrics to provide a valuation for the company, plus see the exploration upside. There are lots of targets outside of Ternera that they haven't drilled yet which have surface Gold mineralization in outcropping rock. They are convinced that it is a big district, but will focus on delivering the resource that will have some engineering around it, start the permitting processes and get the mine permitted in Chile, which is a fairly linear straightforward process, but will take time.

Tesoro Resources wants to deliver the project as quickly as possible and as soon as they can show what El Zorro might look like from a resource size and geometry, the market will start to take notice of the project in this world-class jurisdiction. It’s an easy place to build a mine, right on the coast next to a port with infrastructure around it in terms of electricity and water.

Achieving Ambitions: No Easy Path & Quick Wins in Mining?

The resource will come out mid-year and hopefully the market reacts to that but there are no quick wins in the mining game. This is a medium to long-term story. Tesoro Resources has a team that has been able to deliver results so far pretty quickly. In just under 18-months since they listed, they have drilled 40,000m and are starting to see a major deposit emerge. They are starting the background work to be able to deliver the project and the aim for Tesoro has always been to build a mine.

Tesoro Resources is well-capitalized and is not looking for a partner. They set up the company to build a mine at El Zorro and are going through that process and continuing to grow the business towards production.

The fundamentals which underpin this project are scale, grade, operating costs and capex, and all together ultimately build a robust project for the company which is planning to build a mine and are not looking for strategic partners at this point. 

We have done a couple of interviews with Tesoro Resources over the past year, in February and in August 2020 . It is interesting to see what the company has been doing and how far they have got to at this point. We are keen to stay in touch and follow the story going forward.  

To find out more, go to the Tesoro Resources Website.