160621_MST Conference Call Transcript
SPEAKERSZeff Reeves - Tesoro, Managing Director; Moderator.
Zeff Reeves - Tesoro,Managing Director 00:00
We've currently got six rigs on-site during 24-7 that mineralizedfootprint at Tenera continues to grow. We're seeing some quite nice material coming out of someof our extensional holes now. So that will add further resource inventory into theresource going forward as well. Multiple targets have been identified across the property. Gold footprint has so far been identified and about a five-kilometre strike and about three kilometres wide and multiple targets within that area that we're yet to test. And we're well funded to carry out the work that we need to do to initially get this resource out. And then to grow that resource and also do begin scoping studies and the next phase of development work that needs to be done to get this project through its development pathway and aiming to get into production sometime in the not too distant future.
Zeff Reeves - Tesoro,Managing Director 01:03
So I'll just touch on this quickly on the Managing Director andFounder of Tesoro, with Geoff McNamara and Sergio Uribe by founders of Tesoro.Geoff and myself are both geologists and Sergio is our in-country manager. Sowe put the business together back in 2017, as a private business, sunk quite abit of our own capital into the business prior to listing, which includedsixteen diamond drill holes into Tenera. And John Cole is our chairman. He's apartner at Azure capital and has a wealth of experience in corporate advisory,focused on equity financing and transactions and the like. Shannon Coates isour Company Secretary. She's a very experienced company secretary and directorand on the board of a number of publicly listed companies.
Zeff Reeves - Tesoro,Managing Director 02:07
We're in a very well endowed mining district. They're predominatelycopper, in an IOCG setting and some porphyry and epithermal gold deposits. Andwhat we think and all the indications of their elbow is an interesting relatedgold system, which is very unusual for Chile, that hasn't been describedbefore. It may have been mined, but certainly hadn't been actively explored byanybody in Chile that we know of. There's certainly nothing in the literature,and so that gives us quite a big commercial advantage in looking for this styleof mineralization, particularly in this region. Currently, Tesoro owns 85% ofthe project in a fully diluting JV. So we made capital injection back inMarch-April and took our ownership up from 70% to 85%. We expect thatownership to continue to grow with further capital injections into the JVcompany and further dilation of our partner. And the projects, as I said,sitting in a world-class mining region, so very easy to get things done. Thisregion is dominated by the mining industry and a majority of its income isderived from mines.
Zeff Reeves - Tesoro,Managing Director 03:27
So when we put Tesoro together, one of the criteria that we want toin a project was to be able to leverage of existing infrastructure. So weweren't looking for projects up in the high Andes. We wanted to focus on thecoastal belt where we could have access to roads, power, workforce, and townsand so on. So as El Zoro ticks a lot of those boxes. You can see our redconcession holdings on this map and Tenera is the yellow diamond in the middle.So where there's a power line 20 kilometres away, we're only 12 kilometres awayfrom the coastline. And as the crow flies, there's a desalination plant nearby,our team stays in the port town of Caldera, which is about a 45-minute drive fromCaldera straight up the Pan American highway and then in a well-maintainedgravel road to the site. And we have all of our facilities set up there forcore logging and processing in the like. The Atacama airport is 76 kilometresaway. That's an hour's flight from Santiago so you could be on the ground in ElZorro within two hours of landing in Santiago. And Copiapo is the majorregional centre in the capital region phrase it's about 150,000 peoplepopulation, major mining-focused economy there. So all of the miningcontractors, assay labs, a lot of the major mining houses and other companieswho've got their offices there. So you could think of it as a Kalgoorlie onsteroids if you like.
Zeff Reeves - Tesoro,Managing Director 05:08
So we're at low altitude, we can work all year round, some of the lowest rainfall in the world in this region seven millimetres, the Brianaverage per year. So it makes it very easy to explore. And it offers multipleoptions for development for this project going forward from a power and waterperspective.
Zeff Reeves - Tesoro,Managing Director 05:32
So this is a map of Tenera and I guess this is what we're gettingexcited about and excited about for quite some time. The more we drill, thebigger this is getting, and the more we understand about it. The map thatyou see there's a basic geology map with the drill colours showing in differentcollars there on gram meter intercepts.
So we've now drilled fourteen holes,which have returned over 100 grand major intercepts some of those holes, andtheir results are listed on that slide there. And what we're seeing is thatthere's bulk mineralization of say, 0.8 up to 1.5 grams per tonne. And withinthat bulk mineralization, we're seeing high-grade zones, which are sometimes upto 50-60 meters wide, which are delineated on this map by those darker pinkareas. That are controlled by North-South trending fault zones. And that thatmaterial within those north-south zones is typically above two and a halfgrams, sometimes higher. So we're seeing those high-grade zones get really welldeveloped. That ridge that I pointed out on that first slide is essentially oneof those north-south fault zones sticking out of the ground within the hostrock that's all mineralized at a good grade.
[We've] drilled down to 400 metersdepth so far, open in all directions, we've defined our mineralized zone fromdrilling up over one kilometre now. But what we've done as we've progressed ourmodelling in preparation for the resource estimate is we began to understand the importance of those north-south fault zones, and the linkingstructures that join the north-south fault zone, so there's a lot ofmineralization between them as well, but of the lower grades. So it starts tooffer quite a lot of optionality, if you like in terms of the mining method andstarting on high grade and all those different types of scenarios which arefavourable to getting a mine up and running in this part of the world. You'llsee on some of those drill results, they're typically for example, how 49 is agood example 111.5 meters at 1.17. So that's drilled through the main host rockand then as the fault zone that grades kicked up to 27.5 meters at 3.57. Sowe're starting to say that hang together really well in 3D now.
We've drilled alot of holes extending to the south into the northeast and saying lots ofreally nice material come out of those holes. One of the recent holes that weannounced the tall 124 down in the southern part of the deposit 71 meters at1.6, again, with that higher-grade zone 19 [meters] at 5.07 as it went throughone of those fault zones. So we're really starting to you know, demonstrate thescale with this, the more we drill it, the bigger it gets and peppering away toget enough coverage in certain parts of it for the initial resource estimate.There's certainly going to be holes that won't be included in that estimatebecause they're simply too far out, but that provides us with plenty of scopeto further grow the resource throughout the year. And we'll be committed todrilling that and coming and growing that resource throughout the year. We'vegot don't envisage stopping drilling for quite some time.
Zeff Reeves - Tesoro,Managing Director 09:06
So this is a couple of sections then marked on the previous slide.It gives you I guess a feel for the scale of the mineralized system and thecontrol of those north-south faults. So we say the host rock's this pink colourunderneath, the green outline is a 0.2-gram cut-off grade envelope, and the redis a 0.5 gram cut off grade envelope. The black dashed lines are the north-south fault. You can see the high grades clustering around North-South faultsand you know, zones like this, we're looking at a design that's about 40 or 50meters wide, true width, within that at pretty basic grade. So they're hangingtogether really well in 3D now. The geology team's done a fantastic job atunderstanding that and being able to predict where Those faults are going to bewithin the house rock and targeting our drilling on that. And we're seeingthat, with our continued success with the drilling results that we've got. Ithink they are the worse result, we've only drilled one hole that really didn'thave an intercept out of the 140 odd holes that we drilled sofar. So quite a phenomenal success rate in terms of, you know, hitting the goldsystem with every single drill hole.
Zeff Reeves - Tesoro,Managing Director 10:30
Just a little bit more on those North-South faults and what we'reseeing within them. This is a plan a slice through the ore body if you like onthe left. Again, the pink is the main Tonalite host rock, you can say that themineralization stretches out into the more rocks, if you like, through these northsouth faults and saying that nice high grade get developed along them.
So we're actually doing alot of drilling down in this area, down the bottom here at the moment, we'reseeing some good results starting to come out of that area, including hole 124, that was just on the previous slide. And asan example of that long section through one of the faults, and we've nowmodeled up four of these, so about 700 meters of strike length each, but justthat great accumulation within that fault zone is quite phenomenal. And I guesswhen you compare it to other companies, you know, we're saying similar, if notbetter gold accumulation through those fault zones. So that pink area inthrough here is a series of over 100 gram-meter intercept. And then the red coloris about 50 gram-meter indices. This is a single fault zone, we've now got four of those that we'vedrilled and modeled and we're peppering those. Now we see that beingpotentially forming the bulk of the deposit and certainly looking like itoffers some nice high grade material to be commencing a mining operation on. Sowe're pretty excited about what we're seeing in these. They're all open in alldirections. You know, that's a 500 meter section, a long down plunge they're.Open at depth and open along strike, so it's starting to, you know, demonstratesome serious scale.
Zeff Reeves - Tesoro,Managing Director 12:29
Outside of Tenera, we've got multiple other targets that we'relooking and with commencing drilling on some of those targets now. We've justcompleted a couple of holes at Tenera East. So that's directly to the east ofTenera. We like to look at the material that came out of those holes, we saythat it could offer a potential continuous extension between Tenera and TeneraEast. We've hit the right rocks, we've hit the fault zones, another series ofNorth our fault zones there. The material looks like it should contain gold. Sowe're just waiting for those essays to come back in. And we've now mapped thehost rocks all the way up to Toro Blanco as well and potentially looking atputting some holes in up at Toro Blanco throughout the year. We have testedDrone Hill and tide goes out to the south by 10. very promising initialresults. So Drone Hill 11.5 meters at 1.13 out of the first hole. And ToroGordo in a high-grade vein system had grades of up to 59 grams a ton out of thefirst holes drilled into Toro Gordo. So plenty of scope for further explorationupside going forward outside of the resource drilling that we're doing, andwe're looking at getting some more holes into that now. But I guess from a strategic point of view,we'd like to see a continuation of mineralization across it to Tenera East.It's certainly gonna offer an order of magnitude increase in any potentialdeposit size that comes out of this project going forward.
Zeff Reeves - Tesoro,Managing Director 14:06
Just quickly on this slide, geophysics has been used to greateffect at El Zorro. It really identifies the north-south faults and there'sbeen a lot of them now mapped and we see them come through in the geology andgeochemistry also. So now that time is going through and basically prioritizingtargets and where those north-south faults hit the main host lithologies,getting those samples to map and generating further drill targets. So we'rereally refining that exploration model as we go forward. And, you know,typically in these intrusive related gold systems, we see clusters of deposit.So at the moment, we've only got the drilling main, body of work of drilling ourof Tenera. But we see multiple targets emerging and the geophysics has beenreally beneficial in helping us delineate that.
Zeff Reeves - Tesoro,Managing Director 14:59
So as I progress through, I guess, the development pathway forthe project, we're doing a lot of other work in the background in preparationfor a scoping study, which will ride off the back of that maiden resourceestimate. That will start to place some economics around what a deposit or amine might look like in this part of the world. As I said, we get to leverageoff all that infrastructure. This is a view looking back to the west from Tenera,about three kilometres west of Tenera. Looking back to the Pacific Ocean, whichis in the distance there, the Pan American hallway runs in the foreground here,just say that it's not mountainous, it's reasonably flat up the valley to getinto the project. So makes it very easy to get in and out and work.
We've done some met-work, extremely good in the initial met-work results, a lot ofgold reporting to the gravity circuit, the gold is amenable to cyanide leach aswell and could be described as free milling. So we're actually doing some more detailed work now and we're hoping that will provide us with enough information to have a look at really tweaking the optionality around that metallurgy. And then wehad gold recoveries up to 99% in our initial met-work, which is quiteastounding, so we're optimistic that we'll be able to get some fairly good met results out of the sampling that we're doing now and the test work that we're doing now, which will add, I guess, more optionality around how the ore is processed from this from the project.
We’re chipping away at getting permitting activities underway, suchas environmental work, and the like, and looking at options in regards totaking, seawater pumped up to the project for processing water, and so on. So,again, the benefits of being close to the coast and access all thatinfrastructure provide multiple options, going forward to develop the project.So our work plan going forward, obviously, resource definitions, drilling's isongoing, got those six rigs there drilling 24-7. Maiden resource estimate,we're working on and obviously liking what we're seeing, coming out of ourmodelling and being able to punch more holes into those North-South fault zonesand producing some fairly exceptional drill results.
We're finding additionalzones of mineralization all the time and that includes in that border El Zorrodistrict, which we'll be looking at build testing, as the year goes on. Andwe're optimistic that the holes that we drilled into it the initial holes we'vedrilled into Tenera East are mineralized. So we're hopeful that that'll be, youknow, an order of magnitude increase in scale for the size of the deposit. We don't have a large regional ground holdingwith sort of holding in on the right areas and causative intrusions but findingmore of the same types of mineralization in our holding. I note that there's been a largeland grab that's been made by one of the mid-tier companies to the west of ussince we've been involved there. So I'd sort of validates the work that we've been doing. But we think we've got the best of the ground and what is needed to find more of the same as what we're saying it to now. And we're going to be pushing all of our studies in development for the year we'd like to see a scoping study published towards the end of the year, probably which wrap some high-level economics and I guess the optimized pathway for this project going forward.
Zeff Reeves - Tesoro,Managing Director 18:56
It's going to be quite anexciting and action-packed balance of the year for us. On the back of, I guess,what we'd like to see is a substantial increase in resource size towards theback end of the year, which will then fade into a feasibility study, which willkick off early in 2022. So we think we've got a real project on our hands, andcertainly offering some scale and now we're starting to see some really nicegrades come out of it that are hanging together. So it's going to be a fairlygood journey for us, we think, in the next 6 - 12 months. So thanks for your time. happy to take anyquestions.
Moderator 19:42
Thanks very much, safe for the rundown. Very interesting. And still lots of lots of drillingto do, we've got a couple of questions from the floor to start off with. Oneis would you be able to give us an idea of what the cutoff grade for the resource estimate will be based on, is there any estimate or any ofthat that can give us at this point in time?
Zeff Reeves - Tesoro,Managing Director 20:10
Probably not. I suppose the only comment to make on that at thisstage is that you know, looking at what the met did in the first round oftesting. That certainly, you know, I mean, in the met results, we saw a verylow tails grade, which means a lot of gold being recovered. So that enables youto drop the head grade considerably. So when, you know, as we run the model,and the final resources estimation, we'll start to have a look at that. But youknow, and that depends on how many ounces are classified into, you know, thedifferent fault zones, and, as opposed to the more disseminated broadermaterial as well. So, probably at this stage is a little bit early to make acall on what the cutoff grade is, but, you know, we're optimistic that we'll beable to actually drop that cut off grade to push the majority of the goldthat's been drilled into a resource.
Moderator 21:06
Okay, thank you. Now, the next question is, can you just show usthe designs that will be included in the resource estimate?
Zeff Reeves - Tesoro,Managing Director 21:17
I can probably throw something up there. So, on this plan, you cansee the drill collars on there. So the areas that have been focused on in Iguess the more recent drilling has been a lot of infill in this main areathrough here. And quite a lot of drilling down in the southern zone. So you cansay quite a few drill holes down there. So we're probably hoping that amajority of that'll end up in the resource. Again, that will just depend on youknow, drawing a line in the sand in terms of getting essays back and so on,because the join is just a continuously evolving process. There is a few holesdown in the south to north up in the northeast, which is probably unlikely tomake the entire resource. Simply because they're too far out. There's quite a large distance between them and a bulk of the rest of the drilling to be ableto accurately estimate into those areas. So provides a lot of scope obviously for further growth and filling that model up with grade with moreinfill drilling going forward.
Moderator 22:31
Thank you, Zeff. There is another question needed to sort of comparewhere you are in a similar to in a similar sort of mining zone to Kalgoorlie.Can you just give us an idea of how many working mines there are in thebroader region?
Zeff Reeves - Tesoro,Managing Director 22:47
Yes, I mean, just the big mines and there's another one or two thataren't on this map here but certainly Candelaria operated by Lundin Mining justoutside a Copiapo. The Maricunga Mine of Kinross up in the high Andes,Goldfields have just had another mine permitted, which is about where my cursoris called Solaris Norte, they'll be the biggest gold mine in Chile in about thefifth or sixth biggest gold mine in the world once it's into full production,that's going to be looking at about half a million ounces a year. Inca de Orois a Codelco copper mine, Manto Verde was an Anglo copper mine, it's now ownedby Mitsubishi. And there are multiple other privately owned majority copper minessort of through this out. And we see some epithermal style and porphyry stylegold mines up in the high Andes further to the East. So, I think Imentioned before, it's in Region three. So in Region three in Chile, I wouldsay, you know, 80% of the income for that region would be generated offthe mining industry in mining-related industry. So there's a lot of miningactivity throughout the region. And you know, we have a very good relationshipwith our director of mines for the region. And you know, the constant, I guessrhetoric coming from them is you know, when are you guys going to build a mom,we want to want to see another mom built in our region and get some more jobson the way.
Moderator 24:29
Okay, another question is on drone Hill will drain who will be includedin the resources time round, or will it just be in Tenera?
Zeff Reeves - Tesoro,Managing Director 24:38
No, it'll just be Tenera. At this stage, Drone Hill’s only got thesingle hole in it. We'veactually been able to model the host rocks that go underneath the valley thereacross the Drone Hill. So we're looking at targeting some more drilling andtrying to connect all of that up, together going forward. And so there'scertainly scope to go East and West. So as to Tenera East and West to DroneHill, and also to the north, all the way up to Toro Blanco, we see the same host rocks, and the same fault system. So, you know, we're optimistic that we'll be able to join that up going forward based on what we've seen what we've mapped in some of the additional drill results.
Moderator 25:24
Alright, thanks. And just just one last question for me, therefore,just be interested in you may have 85% of the ownership in the project, justsort of what, you know how you might get yourself there towards 100%?
Zeff Reeves - Tesoro,Managing Director 25:41
Yes, I had the moments in a fully dilating JV we don't believe thata JV partner is indicating at this stage that he'd be contributing any furthercapital to the JV. So another capital injection site to get this through thefeasibility would probably take us up north of 95%. Based on that, dilution.However, we are in discussions, constant discussions, with him about coming toa sensible valuation to get to 100%. So got a couple of different options thereto increase our ownership up to 100%. Obviously, we'd like to get there at somepoint in time. It certainly makes life a little bit simpler.
Moderator 26:29
And just, we're just about a half hour point. Zephyr we have onelast question from the floor. It says in your latest release the depth for hole149 increase from 250 to 500 meters. Can you come comment on why that was?
Zeff Reeves - Tesoro,Managing Director 26:46
I think in between releases, we may have only been halfway througha drilling that hole. So a lot of the generally when we plan a hole, and nowwe're planning off a progressive model, if you like, in 3D we've modeled theintrusive rock, the El Zorro Tonalite, which has the majority of the gold. So we had a set target, thatfrom that hole, I think it was about 300 meters. And then it gets to the end ofthe hole. If we liked what we say in it, we put it on to geology control, wherethe geologists get to make a call on it. And because it is, you know, a bigstep out hole out there, it's about 500 meters east of where where we'vepreviously drilled. We decided to let that go, the geos were seeing materialcoming out of that hole that looked okay. It wasn't continuous, but certainlythere's, you know, promising looking zones through that, and they let it godown to 500 meters before they decided they'd find enough and canned it.
Moderator 27:56
All right. Well, we just, we just saw half our point xef. So whatI'd like to say thank you very, very much for presenting today at ourconference. And good luck with further drilling and getting towards that, thatmaiden resource. We're looking forward to seeing what that is later in theyear. And many, many thanks for your time.
Zeff Reeves - Tesoro,Managing Director 28:16
Great. Thanks, Michael. And thank you for everybody for taking thetime to listen to the rapidly expanding El Zorro story. Good on you Zeff. Thankyou very much.
