ALL you need to know about TSO! Please read before investing!

TSO

Highlights:

• Market cap only 35M.
• SP 7.9c. SOI 450M
• Tier 1 location.
• Tier 1 team.
• Soon to be Tier 1 gold deposit.
• 8M cash. CR oversubcribed. EV = 27M
• Ternera: very advanced stage of exploration! A total of 6 years of work. 27 diamond drill holes. Confirmed mineralization from near surface & open at depth. Multiple holes > 100g/m!
• Ternera: 10 fault zones identified. Higher grade associated with faults & most have never been drilled.
  
• Toro Blancos, Buzzards, Drone Hill, Toro Gordo: never been drilled. Potential for triple high grade zones!
• Excellent Metallurgy: up to 99% recovery, average grade 2.39g/t. Excellent cyanide leaching, amenable to conventional gravity & CIL processing. Potential for cheap CAPEX/OPEX
• Open pit! Large scale. Easy to mine. Potential for very low all-in-sustaining cost (AISC)!
• District scale gold system.10,744ha. Proven mineralization with Strike length > 5km.

Immediate news flow:

• Surface assays of Ternera & Toro Gordo: 1-2 weeks
• Assays for the first few holes of phase 2: 3-5 weeks
• Follow up assays for the remaining 20 holes of phase 2: August to October 2020
• Detailed Met Work: Oct 2020
• Release of maiden resource Nov 2020
• District target drilling: Nov, Dec 2020
• Assays for district target drilling: Jan 2021
• Scoping study: Jan 2021

PART I: ALL FACTS!

1. Tier 1 geological & mining jurisdiction with outstanding infrastructure

The Country:

• Latin America attracting more exploration capital than any other region in the world.
• According to S&P Global, Latin America received 28% of the total global mining exploration budget.
• $74Bn will be spent in Chile in the coming years.
• According to the US Geological Survey, Chile has the world’s largest reserves of both copper and lithium and the seventh-largest silver reserves. Mining makes up roughly 15% of Chile’s GDP.
• The Fraser Institute is a Canadian think tank that publishes a global ranking of mining jurisdictions. It judges both the mineral endowment and the policy framework to score the overall attractiveness for investors. Latin America and the Caribbean was the standout performer in the latest reportChile is the best performer in the Fraser list for South America, leaving a big gap ahead of the runner-up Peru and Mexico.
• With a 3 years average score of 82. Chile outperformed ALL THE STATES in Australia (except for WA, probably the best region in the world), together with most of US & Canadian States.Chile legislative regime is supportive for smaller explorers and developers.

The Region: It's all about LOCATION! LOCATION! LOCATION!

• World class mining region
• Atacama Desert host a wealth of Gold, Silver, molybdenum, iron, zinc and especially Copper!
• Escondida mining alone is responsible for 5% of world copper output. Collahuasi is the world largest copper mine. El Tienente is world's sixth largest copper mine.
• Pascua Lama is a world class Gold-silver-copper deposit: can produce 850koz Gold & 35 million ounces silver each year. Mine life 25 years.
• ElZorro is 10km from Pan American Hwy & Pacific Ocean.
• Low altitude existing infrastructure (water, roads, ports & power), skilled workers and constructors.
• Cost effective exploration/mining all year round.
• Mining giants: Incade Oro, Codelco, Mantoverde (Anglo American), Candelaria (Lundin Mining) & Maricunga (Kinross) operations within a 90km radius.

2. Tier 1 Team:

• Experienced and well credentialled team (commented by PAC partner)
• Exceptional knowledge of the region.
• Finished phase 1 drilling as planned during the 3 peak months of COVID19!
• Phase 2 started 2 weeks earlier than planned.
• Assays are always delivered in a timely manner
  

3. Outstanding hits: high grade & thick intercepts

• Quoted from Zeff's interview “In my career as a geo I have never seen a hit rate like this”
• A third party’s preliminary review of the diamond hole drilling results (Cube) has confirmed Tesoro’s interpretation of higher-grade mineralisation is associated with the CC structures at El Zorro.
• 10 CC structures at Ternera alone, most are undrilled.
• Ternera: Mineralised zone >1.5km, from surface down to 300m, up to 100m thick intercepts. Open in all directions.
• High grade open pit mine (defined as an average grade of >1.5g/t, Ternera has an initial met of 2.39g/t).

4. Very advanced stage of exploration: 6 years of progress

• 2014 until 2017 the current vendor of the project undertook additional mapping and compilation of the historic datasets.
• Since acquiring the project in 2017 Tesoro has undertaken: geological mapping, rock chip sampling, channel sampling (trenching) and most importantly diamond drilling of 16 holes (for 3,085m).
• Previous results have been invaluable in understanding the geology and structures hosting the gold. This has helped TSO target the current drilling and return the positive results seen so far.
• Exploration & drillings is usually long & expensive. But not a single cent was wasted in this campaign. 11 holes all hit target mineralization.
• Phase 2: infill & extensional drilling in progress. Together with further IP survey of Ternera, Ternera North and Drone Hill.
• MRE in Nov 2020 and scoping study in Jan 2021.

5. A district scale system, IRG system

• El Zorro has been classified as an IRG system. Very rare to see an IRG system in South America!
• IRGS are globally significant gold producers.
• MD Zeff Reeves: “El Zorro is similar to those in the Tintina belt”.
• Tintina Province (Canada & US), host numerous multi million ounces, low cost deposits, examples are: Pogo (10Moz) and Fort Knox (7Moz).
• Cheap cost! Feasibility of Eagle zone (same mineralised system as TSO) if with cut-off grade of 1g/t is only 0.9Moz. Real cut-off is at 0.15g/t which increased the resource to 3.6Moz.
• El Zorro: 10,744ha. Proven mineralization with Strike length > 5km.
• Recent surface sampling at Buzzard: extensive gold bearing vein system.
• Further sampling and IP survey are in progress

6. Phase 2 infill & extensional drilling in progress:

• Test previous high grade zones
• Overlapping some high grade CDE holes (CDE holes are non JORC compliant, grades therefore can be lower or higher):
• TAR019 79 metres @ 20 g/t hole max depth 87 metres
• TAR040 46 metres @ 6.44 g/t hole max depth 67 metres
• TAR036 93 metres @ 6.72 g/t hole max depth 120 metres
• TAR035 102 metres @.86 g/t hole max depth 110 metres

PART II: THE ENORMOUS POTENTIAL!

Please DYOR. This part contained analysis that can be speculative & subjective and should not be used as financial advice.

GRADES AREN'T KINGS!

• In gold exploration, high-grade discoveries excite the market. This is because retail investors expect a high-grade deposit, if it ever becomes a mine, to be more profitable. But a closer look at high margin projects shows that high grade isn’t always king. Here are examples:
• Ernest Henry, one of the most profitable and lowest cost mine in Australia. It has an AISC of negative 500$/oz. So for every ounce produced at the current gold price EVN is earning 2200$ after cost! It has an average grade is just 0.6g/t much lower than the average grade of underground mines which is 5.33g/t.
• Newcrest Mining’s Cadia Valley operations with an AISC of $174/oz and grade of also less than 1g/t.
• Newmont Yanacocha one of the largest and lowest cost open pit gold mine in Per. Head grade of only 0.9g/t. More than 40Moz of gold mined. 3.5Moz produced in 2005 alone.
• On the other hand, DTR a few years back released a series of announcements about hitting gold with grade of 250g/t. And "visible gold at surface". SP was pumped to 4c. Later on, reality punched grade hunters hard in the face, SP fell into a blackhole and capital raise was done at... 0.4c. Now sitting at 0.2c.Well, I can tell you endless stories of low grade miners that succeeded and high grade ones that failed. But please DYOR.
• Major only take over a project if it’s economically feasible to develop a mine.
• Grade, size, metallurgy and capital costs/ operating costs are among the most important factors.
• Production numbers from gold mines are meaningless if costs aren’t given.
• TSO has the potential of a high grade, district scale gold system, with exceptional metallurgy & ultra low operating costs!
  
  • Orebody Size & Thickness.The scale of the operation is important, which generally relates to the ‘geometry’ of the orebody. Smaller operations are generally higher cost than larger operations.TSO is a district scale system with strike length of >5kmTernera: proven mineralization >750m, from top to bottom, open in all directions.
  • Metallurgy:Low CAPEX95% gold recovery is considered GREAT. TSO has up to 99% recovery rate.
  • Strip ratio: High-grade gold contained in narrow veins that can only be mined by excavating shafts and hoisting the ore to surface via low tunnels
  • For example a typical quartz vein that is 0.5 meters wide. At minimum another meter must be added to the vein to mine it. The width is now 1.5m. But logistically, in order to drill, blast, and muck the ore, the vein width must be stretched to 3m.
  • This means the deposit, first estimated at 10 g/t, is now only 5 g/t because the gold has been “diluted” by the waste rockDilution can drastically affect the economics of mining the deposit. Rock that was originally estimated at $420 a tonne is now worth $210/t – cutting the internal rate of return (IRR) and the net present value (NPV) in half.
  • TSO might have a super low strip ratio. Please see image below.
  • Location & infrastructure:Tier 1 location, tier 1 country
  • Proximity to surface:Mineralization from near surface
  • Refractory ore:Chesapeake Minerals has 18.5 million ounces. However its ore is refractory. Breaking the gold free requires both physical (ultra-fine grinding, autoclaves) and chemical processes that are energy-intensive and very costly.If this price of gold is $1400 and the AISC is also $1400. A deposit of even 100Moz would still not be feasible.In contrast, the simplest most inexpensive method is gravity recovery. TSO will be using conventional gravity and CIL processing method.

Now we know why some companies had take over offer of just $6/EV/oz, while Mariana got an offer of $222/EV/oz from Sandstorms. Because Mariana got an incredible AISC of just $400/oz.

Where can you find an IRG system that is accessible all year round? Not affected by thaw season (Alaska). Close to ports, highways, electricity & water with abundant of low cost skilled workers?

Probably one of the best explorers on ASX

Conservative share price valuation:

• By PAC partners: basing on a very conservative resource estimate of 1Moz for Ternera alone (Toro Blancos, Buzzards, Drone Hill, Toro Gordo not included) TSO should be at 16c/share to be at a fair value compared to its peers. This estimate was only based on first batches assays of phase 1. All up-to-date data was not included.

A close comparison: TSO's neighbour: Fenix Gold, Rio2

• 1 project7000m drilling campaign.
• Best grade 192m @ 0.81 g/t Au and 124m @ 0.77 g/t
• PFS: Head grade 0.49g/t Au at 1.4 Moz
• Current Market cap: $150 millions
• The water for the Fenix Gold project will be transported by 30 tonne capacity water tankers, at a distance of approximately 158 km. In TSO presentation we can see that they put thei water source from the Pacific Ocean which is 20km away.
• Fenix's Workforce is 140km away. TSO: workforce 53km away.
• Fenix high grade zone is 0.57g/t. TSO should be 1.5-2.3g/t
• Fenix Gold Recovery is 75%.TSO is up to 99%.

TSO Resource estimate by 123david321:



TSO Resource estimate by Hateful8




P/S: As we all noticed from the beginning of June. Most undervalued gold stocks had their breakout 1.5x to 10x in only 6 weeks time. TSO will have its day under the sun. It's just a matter of how soon the market will wake up to this.
And guys! please add/repost your analysis after this as well! Thank you!