Hi everyone! Yes, I do believe that TSO is one of the best (if...

Hi everyone! Yes, I do believe that TSO is one of the best (if not the best) gold explorers on the ASX and I will explain why shortly. Most of the stuffs below are just facts, combined from hours and hours of research from our dedicated team here (we all know who they are). Due to time constraints, I could not include many other great research/discussions so please feel free to add below.

TSO
Company presentation: https://https//vimeo.com/468806742/a78a98c861

Highlights:

• $158M MC. SP 28.5c.
• SOI 555M
• Tier 1 mining jurisdiction & location.
• Tier 1 team.
• Tier 1 gold deposit.
• $25M cash. Recent CR heavily oversubscribed.
• Ternera: Advanced stage of exploration! 6 years of work. Phase 4 infill & extensional drilling ongoing with 4 rigs + 6 geologists onsite, drilling 24/7.
• 81 Diamond holes drilled to date. Gold was found in ALL holes, 12 of which had grade of 100g/m-300g/m!
• 15 high grade CC faults identified, associated with a Major 5km North-South fault.
• Huge exploration potential: Ternera is only 1 out of 7 gold systems at El Zorro, the other 6 has never been drilled. So far, Ternera is still expanding and has tripled in size since last year!
• Exceptional Metallurgy: up to 99% recovery, average grade 2.39g/t. Excellent cyanide leaching, amenable to conventional gravity & CIL processing.
• Ternera and its nearby targets are shaping up well to form a Superpit! Low strip ratio! Protrusion of mineralization into mountains of gold up to 60m height, easy to mine. Potential for very low all-in-sustaining cost (AISC)!
• El Zorro is a district scale gold system. Proven mineralization by trenching with Strike length > 5km.
• Ternera is a proven massive gold system by drilling “Gold mineralization has now been confirmed over an area of 800m by 850m, from surface to over 400m depth and is open in all directions” -quoted from company’s announcement.
• Dominant player in a new highly prospective gold belt. Low altitude mining & low social/environmental impact

I. Capital structure. Rating: 4/5

• 555M SOI after recent CR.
• Management owns 15%.
• If we include 146M shares in performance right, management would own 32% of the company!
• Currently TSO has 70% ownership of the project. 80% ownership would be given after Feasibility study. Management is keen on obtaining the remaining 20% in friendly negotiations with the team in Chile.
• Second biggest SH recently bought $ 2 Mil worth of shares on market at 27c!

Cash position

• 25M+ cash including:
• 4.5M cash from previous quarter
• 18M placement to instos/profs
• 3M SPP heavily oversubscribed. Successfully raised even when SP was below the CR price which has shown utmost support and trust from existing holders.

Cash burn: quoted from Corgi, now with 4 rigs onsite. Cash Expenditure in Aggregate for Sep 2020 Qtr is - $1,814 Mil

• Total Meters Drilled - 8,065m
• Approximate Cost Per M (diamond drill) - $225/m
• Cash Remaining - $25.5 Mil
• Approximate Drill Meters Available - ($25.5Mil / $225/M) = 115.000m of diamond drill.
• Average Length Per Drill - 280m
• Approximate Drill Qty Available - 410 Drills
• Approximate Drills Completed Per Week = 6 Drills
• Time to complete 410 Drills (based on 4 rigs) = 68 Weeks

II. Management. Rating: 5/5

"Mines are made not found” is a good start to “How to Build a Mine”. There are thousands of mineral discoveries with very few that reach the positive feasibility stage and fewer yet where a profitable mine is actually built". Hundreds of gold stocks on the ASX but less than 5% would really go into production, so be very careful about where would you put your money into! "There are a few key components to building a mine, starting with a competent, experienced management team". The TSO team is probably one of the best teams on the ASX! What make me think so? Don’t listen to what the Boards say, or be blinded by their previous glories, just look at what they are actually doing! Please tell me which mgt team could have archived better than what TSO did last year:

• Experienced and well credentialled team. Always over delivered (commented by PAC partner)
• Exceptional knowledge & connection in the region. We would never be able to obtain such a great project in Chile without them!
• Prior to the IPO had raised capital privately, risked their own money to undertake exploration work to derisk the project. Market did not consider all the money spent on 6 years of work before IPO.
• Finished phase 1 drilling as planned during the 3 peak months of COVID19!
• During the lockdown in April/May, management sent the drill cores from Chile to a lab in Peru. When the lab in Peru also got into lockdown, they decided to ship the cores all the way to Canada so that hungry investors did not have to wait too long for results!
• Phase 3 started 2 weeks earlier than planned.
• Drill assays are always delivered in a timely manner (every 2-3 weeks).
• Phase 4 with the addition of 2 more rigs started immediately after new year. Assays should be delivered every week from the middle of Feb as now we have a total of 4 rigs & 6 geologists onsite.
• Trenching assays for Toro Gordo was delivered >1 month ahead of schedule (supposed to be early 2021 as in previous announcement but was given 10/12/2020)
• In total the Company has drilled 81 diamond drill holes for 21,700.76m at Ternera since its IPO in February 2020.
• 87% of Funds Spent in the Ground (Sept 2020 quarter)
• Completed Induced Polarization (IP) Survey – Correlates well with Gold
• Completed Initial Metallurgy – Free Milling Ore
• Expanded Ground Position to ≈540km2
• Completed trenching for 4 mineralized surface targets outside of Ternera which remain undrilled.

III. Location. Rating 5/5

Chile

• Tier 1 geological & mining jurisdiction with outstanding infrastructure
• 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.
• With a 3 years average score of 82. Chile outperformed ALL THE STATES in Australia (except for WA, probably the best mining region in the world), together with most of US & Canadian States. Chile legislative regime is also supportive for smaller explorers and developers.

Atacama 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.
• El Zorro is 10km from Pan American Hwy & Pacific Ocean (water source).
• Low altitude, existing infrastructure (water, roads, ports & power), skilled workers and constructors.
• Cost effective exploration/mining all year round.
• Mining giants within a 90km radius. 6 giants gold producers - Goldcorp (teaming up with Barrick): World No.1 Gold producer - Barrick: World No.2 - Newmont: World No.3 - Yamana: World No.6 - Kinross: World No.7 - Anglo Gold: World No.8
• Atacama Desert is very poor in social/environmental values. No problem for the company to mount a large-scale open-pit project.

For comparison with a peer and to understand why location could be more important than grade, please look here: 47380277 https://hotcopper.com.au/posts/47380277/single

Cauca Valley, for example, is also very rich in resource and hosting a number of multimillion ounces deposits, but has continuously failed to mount a large-scale production. Buritica, once starts production, would be the first large scale gold mine in Colombia!

Meanwhile, let’s review the production throughput of all gold miners in Atacama. This is only gold, the production output of other metals such as Cooper are also shocking! Most probably this is one of the best mining regions in the world!

1. El Penon (Yamana): output is 252,000 ounces of gold/pa and 8.4Moz of silver/pa.
2. Norte Albierto (Barrick, Newmont): 23.2 Moz gold & 5.8 Bn pounds of copper.
3. Pascua Lama (Barrick): 21.3 Moz of gold and 676 Moz of silver.
4. La Coipa (Kinross): output is 690,000 ounces of gold/pa.
5. Salares Norte: output is 450,000 ounces of gold/pa.
6. Lobo Marte (Kinross): reserve is 6.4Moz of gold.
7. Refugio (Kinross): outputs is 260,000 oz/pa. Grade of 0.86 g/t for 3.5Moz of gold.
8. Caspiche: average grade of 0.55 g/t Au for 19.3 Moz of gold and 2.1 Mt of copper.
9. Cerro Casale (Barrick, Kinross): proven and probable gold reserves of 17.4 Moz. 4.3 billion pounds of copper.
10. Volcan (Hochschild): output is 287,000 oz/pa. AISC of US$586 per oz of gold.
11. Fenix (Rio2): Reserve can be up to 4-5Moz. Production target in 2 years is 250,000 oz/pa.

IV. Drilling assays. Rating: 5/5

• Firstly, we need to know what drilling is all about. The purpose of drilling is to prove up the scale and the economic viability of a deposit. Drilling is definitely not about throwing up some meaningless "high grade intercept" assays to satisfy traders whom won’t even read pass the headlines. Grade alone is never enough to make a deposit economically viable. TSO is not only having a clear pathway to production, it is also shaping to be a large scale, low cost, bulk tonnage, world class deposit in a Tier 1 mining jurisdiction.
• “Grade is king” is a well-worn adage in mining circles, the assumption being that the higher the grade, the more financially robust the mine will be. But a quick look at some of the big gold mines in Alaska’s multi-million-ounce Tintina Belt tells you the adage does not hold true in every circumstance as geology and geometry come first.
• Operations such as Kinross Gold’s Fort Knox mine in Alaska and Victoria Gold’s Dublin Gulch mine in Canada run at grades well under a gram of gold per tonne (g/t). In Fort Knox’s case, the resource grade is 0.32g/t. Yet they are highly profitable at US$1500 gold, each producing more than 200,000 ounces of gold a year at all-in sustaining costs (AISC) of US$570-850 an ounce. Another example in history is Newmont Yanacocha, one of the largest and lowest cost open pit gold mine in Peru. Head grade of only 0.9g/t. More than 40Moz of gold mined. 3.5Moz produced in 2005 alone.

TSO’s hits are outstanding: 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 mineralization is associated with the CC structures at El Zorro.
• TSO is an IRGS with 15 CC faults, mineralised from surface with average of grade 3-10g/t, between each CC faults are mineralised halo and connecting veins, grade from 0.3-2g/t.
• IRGS are world major Gold Producers, low cost, highly economical with very low cut-off grades.

• Understand CC faults: https://hotcopper.com.au/posts/47085351/single https://hotcopper.com.au/posts/48470934/single https://hotcopper.com.au/posts/48327529/single https://hotcopper.com.au/posts/49878624/single

• Geo model: https://hotcopper.com.au/posts/50354013/single https://hotcopper.com.au/posts/49625230/single https://hotcopper.com.au/posts/49197350/single

V. Scale & Exploration potential. Rating 5/5

• For updated birds eye view, please look here: 50082535
• Corgi’s superpit theory: 47474586
• Dominant player in the region, 540km2 with 54km strike length.
• Similar other Gold belts. Deposit like Ternera is likely to appear in clusters.
• El Zorro: 5km of mineralization system proven with trenching.
• Ternera is expanding rapidly and has at least tripled in size https://hotcopper.com.au/posts/50104700/single
• El Zorro is only the beginning. H8 has found that our land has geo’s markers all over it and evidences of previous artisan mining.

From the company: “Major north-south faults are key controls on mineralisation with stronger zones of mineralisation close to and within these faults where they interact with the east-west CC fault system. Best results to date from the Ternera drilling are closely associated with the north-south fault with high grade locally occurring within the branching east-west CC faults.”

How big is this NS fault? 5km strike length! Wherein Ternera’s strike length (proven with drilling) is only 800m so far! We are only at the beginning of discovering something HUGE!

Ternera is only 1 out of 7 targets in El Zorro:

1. Toro Blanco
2. Ternera North
3. Drone Hill: Surface sampling up to 12.75g/t
4. Toro Gordo: Large surface gold target defined by trenching: 23.00m @ 2.16g/t Au, 40.00m @ 1.23g/t Au, 18.00m @ 1.23g/t Au and grades up to 42.70g/t Au. Extensive surface gold mineralisation defined over an area of 650m by 500m, immediately south of the Ternera Gold Deposit.
5. Buzzard: Extensive gold bearing vein system identified. Channel sampling results include 6.00m @ 7.06 g/t Au and 3.00m @ 5.23g/t Au.
6. New Easterly Target (Ternera Replica)

Resource size estimation (Ternera only):

• Broker’s coverage: 28c valuation by PAC Partners for a minimum MRE of 1Moz at El Zorro: 47208588
• David came up with a fantastic model that adds ounce after every drilling assays. He stopped at 1.7Moz after hole 69 because the model is getting too complicated. https://hotcopper.com.au/posts/47073220/single
• H8’s model: 6.2Moz if using Fort Knox as an example https://hotcopper.com.au/posts/50097217/single https://hotcopper.com.au/posts/50354013/single
• Minimum 4Moz by Corgi https://hotcopper.com.au/posts/49752393/single
• David’s 4Moz calculation using NS fault: 49742347

VI. Derisked level. Rating: 4/5

Low all-in-sustaining cost

• https://hotcopper.com.au/posts/45653189/single
• There are hundreds of gold deposits around the world that will never be developed because they lack access to infrastructure – power, water and roads – making them too expensive.
• Mines located close to population centers do not need to fly workers in and out, their supply lines are short, and they can tap into an existing electricity grid rather than paying for a new power line and servicing it. TSO is at a Tier 1 location!
• Dublin Gulch & ATAC Resources are at the same region but ATAC is more remoted so their mine developed at a much slower pace with twice the cost!
• Labor represents the largest component of a mining operation, 53% according to SRK Consultants. In Australia & Canada the mining industry has the highest wages and salaries with the average annual pay exceeding $110,000. Labor cost in Chile is much lower.
• Other major factors that affect cost are below:

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 >5km

Metallurgy:

• 95% gold recovery is considered GREAT. TSO has up to 99% recovery rate.
• Amenable to Gravity Concentration
• Free milling, up to 75% of Gold Reports to Gravity

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 rock
• Dilution 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. Bulk tonnage system with a high grade central zone that mineralised from near surface!

Location & infrastructure:

• Tier 1 location, tier 1 country

Refractory ore:

• TSO’s ore is non-refractory.
• El Zorro has similar mineralization system to Fort Knox or Dublin Gulch: which has very low gold recovery cost!
• Feasibility of eagle zone 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. https://hotcopper.com.au/posts/46482905/single

Highway towards production:

• Unlike many other explorers, TSO is operating in a Tier 1 country, Tier 1 location alongside with giant gold producers! Exploitation right granted! https://hotcopper.com.au/posts/47787472/single
• Zeff, in several interviews, stated that he thinks doing mining in Chile is even better than WA and he is seeing no road block all the way towards production.

Low CAPEX.

• Fenix Gold in the same region is building a 100koz/pa plant with an expansion capacity up to 300koz/pa for less than $100 Mil. https://hotcopper.com.au/posts/48489610/single

The only risk is TSO hasn’t provided a MRE and FS yet! This is indeed a blessing in disguise for non-spoon-feeding investors who know how to do their own research. MRE will be provided around June this year and by then there would be no more speculations regarding how huge this deposit is!

VII. News flow. Rating: 5/5

• Initial four diamond drill rigs operating 24 hour per day to complete an initial 30,000m drill program to continue to define and expand the Ternera deposit at El Zorro.
• The Company has also commenced data collection for initial scoping study inputs and will run scoping study work in parallel with drilling programs at El Zorro.
• In the coming months, the Company will also commence detailed metallurgical, geotechnical, hydrological and infrastructure studies to advance the El Zorro Gold Project as quickly as possible.
• Drill assays is expected every week from February onward, with update of other work above. All are price sensitive information that could lead to a rerate or adding more values to the project. Richest news flow on the ASX!

• 

VIII. Summary: a 5 stars, world class gold explorer!

• “The whole is greater than the sum of its parts”. TSO is one of a kind because it has ticked all the boxes!
• It’s relatively easy to find stranded few hundred-thousand-ounce deposits all over the ASX. But to find a near surface multi-million-ounce deposit like TSO is super rare!
• We could only name a few explorers with multi-millions-ounce in Tier 1 mining jurisdictions, ie NVA & DEG. That's why investors are willing to pay a premium for them. Look at the EV/oz of DEG for example, which is at least twice the average of its peers.
• "We are definitely past the peak of finding new gold deposits," said Mark Bristow, chief executive of Barrick Gold Corp., the world's second-largest gold miner by market capitalization. He estimates that the new metal added to miners' reserves since 2000 replaces only half of the gold they mined in that period.
• The average cost to find an ounce of gold was $62 between 2009 and 2018, more than double the cost for the previous decade, according to Minex. "What new fresh discoveries have been made? Not a lot," said Sean Boyd, the chief executive of Agnico Eagle Mines Ltd, a Canada-based mining company that has turned to the Arctic to find higher quality deposits. "If they have, they've been found in tough parts of the world," he said.
• TSO could be the best single Super Pit deposit + strong underground potential (as Zeff has mentioned several times in the interview) within a IRGS district scale footprint with 6 other deposits identified.
• Low strip ratio, the high-grade central zone, bottom of pit aligning with the high grade & high changeability zones.
• Phenomenal metallurgy with really high gravity recoveries up to 75%, with CIL up to 99% recovery.
• Low socio-environmental impact, favorable climate, cheap exploration/mining all year round, world-class mining region, is close to everything (workforce, water, road, ports, etc).
• And I could go on and on…
• With all of the above. I think it's reasonable to speculate a MRE of 2.5Moz-5Moz would be released in June after the current 30.000m drilling campaign. With a fair EV/oz of at least $150-$200/oz for this 5-stars asset. Therefore, a target market cap from $375 Mil to $1Bn in short to medium term.