Tesoro Resources (TSO) - Applying for Permits & Maiden Resource Due

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 spoke with Zeff Reeves, managing director at Tesoro Resources. He shared with us Tesoro’s recent activity revolving around their Chilean gold asset and how they plan to move forward with the project.

Company Overview

Tesoro Resources is an Australian company with exploration-stage gold assets in the Coastal Cordillera region of Chile. The company is focused on acquiring and developing high-grade gold assets that have the potential to be district-scale mines. The company has over 499,000,000 outstanding shares, which trade on the ASX.

Tesoro is involved with the emerging El Zorro Gold Project. This asset is proximal to multiple world-class gold mines. Tesoro owns 85% of the El Zorro Gold Project.

Tesoro’s Leadership

Experienced mining professionals who have strong geological and finance backgrounds, as well as significant in-country expertise manage Tesoro. In addition to Reeves, the team consists of John Toll, Non-Executive Chairman; Geoff McNamara, Non-Executive Director; and Shannon Coates, Company Secretary.

El Zorro

The El Zorro Gold Project is Tesoro’s main focus. It covers over 500km2 and is located 140km by road from the city Copiapo in northern Chile. Geologically, the El Zorro Project comprises an intrusive-related gold system. Tesoro has an aggressive exploration and development campaign planned and is focused on delivering a maiden resource estimate. 

Historical mining by artisanal workers at El Zorro is limited and has largely concentrated on early-stage quartz veins occurring within the El Zorro intrusive tonalitic rock. Since becoming involved in the project in mid-2017, Tesoro has carried out a number of exploration programs including drilling which has reported some promising results, including some holes that have penetrated over 100 g/m gold intercepts.

Maiden Resource Plans

Tesoro is engaged in an aggressive work program, including a focused drilling campaign, intended to provide sufficient results to publish a Maiden Resource Estimate (MRE). Much of the activity is focused on the Ternera deposit at El Zorro. Based on what they're seeing they expect a considerable upgrade in the resource side towards the end of the year. They are also funded to do a scoping study over the project at some time this year.

Of course, at this point, the actual numbers are not ready, but they are expected to be in the 500,00 to 1 M oz. or more range, which is sufficient to build a mine.

In the short term, the MRE will focus on an area proximal to the Ternera deposit. As Tesoro continues the drill and evaluates the whole of the El Zorro asset, management is hopeful and optimistic that Ternera joins with numerous other targets and ultimately proves up a single, much-bigger resource. 

The MRE is really a stepping stone. It's going to be released in order to map their trajectory forward for a couple of reasons. 

·         One is to demonstrate there's a sufficient deposit at El Zorro so that they can start to look at economics and prepare a Scoping Study later in the year.

·         Also, they intend to enter the permitting process with the Chilean government and as part of that, they need to give them some resource numbers. 

In summary, they would like to demonstrate that the ore at El Zorro is recoverable, that it's in world-class jurisdiction, and that it can be developed as a low CAPEX, low OPEX mine. Reeves definitely sees a pathway to an asset that produces 100,000 oz. a year over a ten-year mine life. They just need to get something out so we can get it moving and we can start to talk about the economics publicly, which they can’t do yet because they haven't published a resource estimate.

Recent Drilling Results

The company has drilled about 185 holes so far in the current drilling campaign. Drilling has been highly focused, much of it assessing the ore quality along several major fault trends within the overall deposit. Great assay results are coming in, in some cases greater than 30g/t coming over one-to-two m intervals. They expect that the majority of the ounces that will be put into the MRE would come out of those fault zones. 

Reeves showed us a map that detailed the drilling activity at the asset. All holes have gold so far, and the results so far are suggesting that an open-pit mining solution is likely.

The deposit is somewhat unusual compared to other gold occurrences in the region. Most of them are iron oxide copper gold (IOCG) deposits. El Zorro appears to be a bit different in having big, wide widths of beautiful high-grade gold that is amenable to bulk open-pit mining. There is underground potential as well.

The gold at El Zorro is controlled by big regional structures that come off of the Atacama fault system. These faults communicate deeply, even to the mantle. They serve as a conduit for thermal fluids that generate ore-bearing alteration. Regionally, the ore consists of copper and gold. At El Zorro, it's mainly gold. There is limited associated copper at El Zorro as well, but their asset is actually about 30 to 40 km away from the main northern Chilean copper trend. 

Chilean Political Situation

Tell us a bit about Chilean politics. How will the political situation affect your plans, we asked? To be honest, it's an unusual political environment for sure, he replied. General elections are coming up in November and there's been a recent election of the Constitutional Congress, which is going to try to reform the existing Chilean Constitution. It's going to probably change the way that the Parliament operates and how people are elected. It's just a wait-and-see game but they don’t expect the landscape to change massively regarding finding investment and developing gold projects at Tesoro.

Do you expect any civil unrest as of 2018, we asked? Reeves doesn’t anticipate that. He thinks that a majority of the Chilean population tends to agree that Constitutional reform is a good thing and that it is good to be a progressive democratic society.

We dug a bit deeper indicating to Reeves that since Chile is a big copper producer, there may be a fair amount of concern regarding tax hikes on copper. Could that affect the gold producers as well, we asked? 

He thinks that at the end of the day copper is likely to get taxed more in line with other jurisdictions around the world. Obviously, they're coming off a pretty low base at the moment, he added. As far as they know, there is unlikely to be a trickle-down effect on gold, he offered. 

He further commented on the political situation by considering it in light of Tesoro’s recent share price. He didn’t think that any perceived Chilean political situation had affected the share price. He rather believes that because all gold stocks have come off heavily in the last couple of months it affected Tesoro as well, but they're starting to see some interest come back. 

Tesoro’s Financial Situation

Reeves told us that they have plenty of money on hand to do the work needed to get the MRE done and more. The only barrier that may intrude is COVID and that's usually regarding supply chain and logistics-type issues due to restrictions in the movement of people and goods. Outside of that, it's business as usual for the company.

Plans After Maiden Resource Disclosure

Give us a clue as to your plans post PRE, we asked?  One thing Reeves believes will evolve is additional targeted drilling away from Ternera but still within the El Zorro asset, likely to result in there being a much larger body or ore-grade rock. So they anticipate further infill drilling plans going forward. 

In addition, that information will be plugged into a scoping study.  This will naturally feed into a permitting process and some real numbers around the mining potential. It’s all about continuing to grow the resource, he added. 

Regarding the ultimate size of the prize, they “honestly we've got no idea of how big this ultimately is going to be. They haven’t found the ends of the ore zones yet; the more they drill the more gold they find", Reeves stated. 

The whole process of going from resource to a mine can take three to four years in Chile. They have already started a lot of that work so they are compressing that time frame even now. They hope to kick off the feasibility study early next year, he maintained. 

As the drilling programs continue and they keep intercepting and announcing more 100 g/kg lengths, he believes that investors will see that there is a real development project being set up at El Zorro. He expects to see more intermediate- and long-term money coming back to the stock. 

To find out more, go to the Tesoro Resources Website