Interview with Zeff Reeves, Managing Director of Tesoro Resources (ASX: TSO). Tesoro Resources Limited is an Australian public company with exploration stage gold assets in Chile.
Founded in 2017 by the members of the Board and Tesoro is focused on acquiring developing high-grade gold assets that have the potential to be district scale mining projects. Tesoro is managed by experienced mining professionals with strong geological and finance backgrounds as well as significant in-country expertise. Tesoro executed an earn-in agreement over the El Zorro Gold Project in 2017 from a local Chilean vendor and is currently undertaking exploration programs.
Matthew Gordon: Why don’t you give everyone like a 1-minute overview of Tesoro for people new to the story and we'll pick it up from there.
Zeffron Reeves: Yeah, so Tesoro’s a Gold exploration and development company. We’re focused on the El Zorro Gold project, which is in the Northern part of Chile, only 1-hour air flight away from Santiago. It’s located on the coast and Tesoro was listed on the ASX at the beginning of 2020, in February. Since then, we’ve defined what’s shaping up to be a high-quality Gold deposit at Ternera, one of the prospects we’re drilling at El Zorro and we’ve seen some huge drilling to come out of that and we’ve taken this company now from a listing valuation market cap of around $8M to around $135M market cap today. We’re well funded, we’ve got approximately AUD$20M in the bank and we’ve got our foot flat to the floor drilling out Ternera, getting it through Scoping and Feasibility and trying to get this project through development as quickly as possible.
Matthew Gordon: I noticed that the last time we spoke you were about $0.16, $0.25 today but you did get up to the dizzying heights of just over $0.50. What was going on there?
Zeffron Reeves: Yeah I think during that period, I mean the period from probably June through to October last year, the whole Gold sector on the ASX, we’re all reaping the benefits of a fairly bull Gold market. Obviously, the Gold price has come up a touch, but look we’re still looking at record highs, right, so. But some of that money’s probably come out of the Gold sector now and the whole Gold equity market in Australia and Canada when you’re looking at some comparative companies that have steadily declined since October, but things were certainly quite overheated in that period immediately after mid-year. But things seemed to have settled down a bit now, seeing probably more realistic valuations. But look certainly all the Gold stocks had a good run and look we used that elevated share price as an opportunity to raise some capital and hence sitting on a pretty healthy treasury at the moment and able to get on with getting El Zorro through development and into production.
Matthew Gordon: I think people were wandering around looking at different things, Silver, Gamestop, things like that aren’t they?
Zeffron Reeves: Yeah, well nothing probably in the last 2 weeks or so, or certainly since the New Year, there’s certainly money coming out of the Gold sector going into the battery scene and has had a number of Lithium mines increasing in value and some of the speciality metal companies are starting to gain some attention again. But, I think just given the general economic state of the world, we’re seeing still plenty of volatility, particularly in the resources and material sectors and probably going to continue to do so. But Tesoro can’t control that, what we can control is the work that we do, and we think we've got a high-quality asset that's speaking for itself so far. I think we’ve drilled over 80 holes into El Zorro now and not one of them has come back with a negative result, so quite amazing actually how things have gone for us.
Matthew Gordon: I think Oz are probably going to have a good year, so don’t fear about that.
Zeffron Reeves: No, we’re of the same belief. I think it’s going to continue to go and I think anything above $1,600 or US announces, is still pretty bull Gold territory, right.
Matthew Gordon: You took the opportunity to raise some capital, AUD$20M, I guess everyone just wants to understand what’s the plan about how you’re allocating that and what you hope to be able to be able to deliver by the end of 2021?
Zeffron Reeves: Yeah, sure. So, obviously, we’re very well-funded now and we’ve hit the ground running again this year. I’ve currently got 4 Diamond drill rigs at El Zorro drilling away and they’re actually achieving some pretty huge production rates. We’ve already drilled nearly 5,000m since the beginning of the year which is good. But at the moment we’ve got about 30,000m of Diamond drilling planned for the immediate Ternera area, so Ternera’s the deposit that we’re drilling at El Zorro. We’re trying to find the edges of it, we haven’t done so yet which is a good problem to have and the more drilling we do, the bigger it gets. At some point in time, we’re going to have to probably draw a line in the sand and say, okay, let’s go and infill all this area, get a maiden resource out and that’s really our key focus for this first half of this year. But looking in conjunction with that we’re already commencing some of our Scoping Study works to basically determine what the optimum programme or optimal pathway for this project is in terms of things like power supply, water supply, processing methods and those sorts of things. But look the project’s located in such a favourable location to build a Gold mine, we’ve got lots of options at our disposal, which is a really big point of difference between us and a lot of our peers, I think is that we do have those options due to the location of the project. So, between now and I guess the end of this year, we’d expect to see a maiden resource estimate on the table. Obviously a steady flow of drill results leading up to that and probably beyond if we continue to grow it and certainly the results of an Initial Scoping Study and moving this project through into a Feasibility as quickly as we can.
Matthew Gordon: Given every hole has hit mineralisation, given the grades that you are seeing, are you in discussions and the Board thinking, we think the maiden resource should look something like X number. Are you putting a number on it?
Zeffron Reeves: Yeah sure, obviously we’re looking at all those and having those discussions pretty regularly as we’re modelling our drilling information as we go. That all gets done on the fly continuously, so we perhaps plan our drilling as well as beginning to understand the scale of the project. So, yeah we do have some numbers in the back of our mind what we think we would need to achieve to build a mine here but keeping in mind this is likely to be a lower grade but high tonnage operation initially, albeit we’ve seen some really nice, juicy results in the core of the deposits and when I say juicy it’s fairly common for us to produce results like 30m or 40m width at 3g/t or 4g/t, but this sits in a sea of lower grade material. But that’s all starting to hang together in 3D now and it's starting to find over quite a large area and we see mineralisations well-formed from the surface down to 400m depth. We think at the moment we’ve defined an area that’s probably 800m long by about 400m or 500m wide. So, I think as we mentioned while we were chatting before the interview kicked off, we haven’t found the edges of it yet, which is a good problem to have. But in terms of overall numbers, I think I mentioned before, ultimately, we’d like to see something in the realm of a 100,000oz plus production rate coming out of a mine built in this part of the world at the sort of grades that we’re seeing. So, at the moment we’re seeing all those results coming in and nothing to deter us from pushing on to achieve that.
Matthew Gordon: Do you say this company’s about getting into early production, getting cash flowing and we know we can keep building the scale of this thing out? Or are you tempted just to keep drilling and to delivering multi-million-ounce resource, maybe make that someone else's problem?
Zeffron Reeves: Yeah, I mentioned probably in the last interview with you that it was always our intent to get this project into production, it’s one of the reasons that we went and targeted the coastal belt, accessed the infrastructure, all of those sorts of things. Whereby it’s not inconceivable that a junior company can take a project from discovery through development and into production, we’re still on that same pathway and strategy. It’s not to say that there hasn’t been knocks on the door by mid-tiers and majors who are interested in some of our fairly spectacular drill results, and that door’s always open, of course, to have those discussions, but at this stage, look the Board and the company are fully focused on taking this through to production as quickly as possible. I think we’re on the record of saying and it’s been in our section announcements and presentations previously that we are aiming for a mid-year this year to have a maiden resource around and we think that the resource that we announce will be an economical resource but is part of the world to take it through to the next stage of pushing through to Feasibility and so on. So, my strategy hasn’t changed, that’s not to say that maiden resource won’t continue to grow, but we’ll certainly put some economics around something by mid-year we think.
Matthew Gordon: You will continue to prove up the scale of this as well as concurrently with the Scoping Study, trying to understand the economics of what you’ve got today, so what does that mean? So, where are you with that Scoping Study and again, what’s the timing of that?
Zeffron Reeves: Yeah, so we’re already in the sort of data collection side where we’re looking at our options in terms and we’re talking to people like power providers, there’s a number of power options for the project. We’re looking at different water options and we’ve already pegged concessions, for example, for all of our access from the highway. We’ve pegged along the ocean to gain access to seawater. So, we’re just starting to do all of that work with commencing some of the environmental work that needs to be done for permitting and beginning to have discussions about generally how the site would be laid out, for example, where we’d put a waste dump and where you’d put a tailings dam and those sorts of things. I suppose it’s also important to mention, we’re also currently working at building our team and our internal capability of people able to execute that work. So, we’re currently in the process of engaging a Study Manager and we’re also considering making additional appointments to our Board for advice to our Board from individuals who have had that experience in taking a project right through this part of its development, if you like, from discovery through to building it.
Matthew Gordon: How are you finding conversations around water? Because that seems to be always a sticking point in Chile.
Zeffron Reeves: Yeah, well we’re only 13kms from the ocean, so in Chile it's really common to use ocean water, the seawater in the mineral processing plant. There’s actually a permit that’s already granted to another water user that’s only 20kms away from the mine or from the deposit that we’re having a chat to, so these are all forming parts of our Scoping Study. But in a Gold plant, saltwater is no problem if you’re using it in a typical cyanide extraction process. I mean the Goldfields here in Western Australia are using groundwater, which is thousands of times saltier than seawater, with no issues. But there’s a permitting process involved to do that and where we’re getting all those processes now because they’re sort of our long-lead items if you like. So, as we go through this process and we start ticking all of those boxes we go through, so by the time we have the maiden resource on the table, we’ve got an order of the scale of an order of magnitude of the project, the conceptual scale of it. Probably one of the best options for processing power, water, infrastructure and so on and then we can move directly into Feasibility. So, it’s always our intent and what we’re working on is to have some of these processes in parallel across multiple teams to be able to deliver the project as quickly as we can.
Matthew Gordon: Talk to me about sort of this earning that you’ve got because you need to deliver a Feasibility Study to get what is it, 80% of the company plus $50,000 I suspect, so is the current funding in place, does that get you there because you’re doing it in an accelerated timeframe, or will there be another raise between now and then?
Zeffron Reeves: We think we’re probably just about there in terms of funding. Again, it will come down to the ultimate size of the deposit. If things continue to grow it might not, and we spend more money on drilling, but look we think we’ll get … if we don’t get all the way through Feasible, we’ll certainly be a good way down that road with the current funding. There’ll be plenty of value to be created between now and then and we hope investors, they’re able to see us grow into that with what we’ve seen, obviously a very attractive deposit at this point in time from what we’re seeing.
Matthew Gordon: You guys are the Management Team, just to remind everyone. You’re significant holders at the moment, aren’t you?
Zeffron Reeves: Yeah, that’s right. We’ve obviously funded the company prior to listing as well as I guess the swift equity in 6 years’ prior to even forming Tesoro was the first time I actually saw the project. So, it’s taken some time and effort to work out an appropriate deal with the vendor and then funding the company through its infancy via the listing. So, we’re heavily aligned to our existing shareholders, obviously, by being major shareholders in the company and I think that’s a pretty positive thing because that’s what we’re all motivated here for is to see that share price grow and the value of the company grow.
Matthew Gordon: Can we just talk about where you’re going to be drilling, the order of play if you don’t mind, in terms of the targets that you’re looking at.
Zeffron Reeves: Yeah, look we’ve had some recent success on, particularly, the North East flank of Ternera we’ve seen some pretty spectacular results come out of there. I think our biggest drilling was set or best drilling was set, what I classify as our best drilling to set that’s come out of there recently, we’ve done a number of follow up holes. So, when I say big, we’re sort of talking 200m to 250m over a gram with high grading levels within that. That whole zone is sort of starting to really expand now and is open to the North-East so there’s been quite a focus on, I guess, understanding the geometry of that and its continuity. We’ve also drilled some deep holes of that part of the Orebody and had some good success there so the focus has been there and now we’re coming back to infill that. So, there’s a split between those 4 drill rigs that are on-site at the moment, 3 of them are essentially doing infill and extensional drilling on the immediate Ternera area that logical place is to go and drill out a little bit wider and doing a little bit more high-risk drilling on Ternera. We’ve also now drilled 2 holes into another target called Toro Gordo which is immediately South of Ternera and we’ll be looking to probably drill some holes in some of our other targets, keeping in mind this is an emerging, large district. Ternera’s the first of 6 targets that we’ve identified significant Gold mineralisation at, that we’ve drilled. So, we see a fair bit of potential there, it’s an additional upside to what we’ve got at El Zorro over the year as well there’s been some drilling in some of those other targets.
Matthew Gordon: Brilliant. Look, Zeff appreciate the update, we liked the story the first time we heard it.
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