Plukka to transform into Chilean gold explorer with reverse takeover of Tesoro Resources

Chile-focused gold explorer Tesoro Resources is getting set to make its ASX debut through an upcoming reverse takeover (RTO) by former Australian jeweller Plukka (ASX: PKA).

After announcing its intentions to make the transformational move in August, Plukka locked in the deal with the execution of a share purchase agreement in early October to acquire 100% of the issued share capital of the Perth-based unlisted company.

Tesoro’s flagship asset is its El Zorro project, one of two gold projects the company holds in the Coastal Cordillera region of Chile.

In a prospectus released at the end of October, Plukka – to be renamed Tesoro Resources – has made a public offering of 150 million shares at $0.03 per each to raise at least $4.5 million to further explore and develop these Chilean assets.

The company said it may accept oversubscriptions of up to $1 million to raise a maximum of $5.5 million.

Re-listing is scheduled for early December, upon which Plukka’s name will change to Tesoro Resources with the ASX ticker code of ‘TSO’.

Chilean gold projects

Tesoro was established in 2017 to acquire, explore and develop mining projects in Chile’s Coastal Cordillera region, which hosts multiple word-class gold and copper mines but still contains large areas of relatively unexplored terrain.

The company holds interests in two gold projects in the area through its 95%-owned subsidiary Tesoro Chile.

The subsidiary currently owns 51% and has the right to acquire up to 80% (and ability to increase to 100%) of the 10,500-hectare El Zorro project, located 130km from Copiapo in Chile’s Atacama region.

Tesoro has undertaken considerable exploration work at the project including a 16-hole diamond drilling campaign at the Coquetas prospect in 2018, and extensive mapping and surface sampling across the broader El Zorro project which has already detected several new gold targets outside of the Coquetas target.

Drilling highlights included: a 10m intersection grading at 4.53 grams per tonne gold from 56m, including 4m at 9.6g/t gold from 57m; and 58.8m at 1.7g/t gold from surface including 20.3m at 4.5g/t gold from 1.7m and 1m at 56.2g/t gold from 3m.

Tesoro managing director Zeff Reeves told Small Caps the drilling results highlighted the potential for El Zorro to hold a significant gold deposit.

He said the project is particularly valuable in terms of “location, scale and grade, plus the fact that everything we’ve drilled to date is open and has had gold in it with multiple 100 g/m intersections having been drilled”.

Tesoro Chile also has the right to acquire up to 100% of the 5,530-hectare Espina gold project, located 50km south of Santiago in Chile’s Maipo Valley.

Espina lies within a well-known epithermal gold region and is about 25km north of Canadian gold producer Yamana Gold’s operating Florida mine.

Exploration work on the project has included mapping, soil sampling and the processing and interpretation of aeromagnetic data.

Two identified structural/fault trends – the Infiernillo and Puertelera trends – are delineated by strong geochemical anomalism, outcropping epithermal gold-bearing veins and associated widespread alteration, which Tesoro believes indicates the presence of a large epithermal mineralising system.

Rock chip samples from outcropping epithermal veins have returned up to 63.3g/t gold.

Use of funds and future exploration plans

In the issued prospectus, Tesoro stated plans to use the RTO funds together with existing cash reserves to “further explore and develop these assets as well as seek out further complementary gold exploration, acquisition and development opportunities in Chile”.

In a detailed breakdown of the use of funds, exploration work at El Zorro has been allocated up to $2.5 million, while $850,000-$1.15 million is earmarked for the Espino project (including exploration activities and the company’s required earn-in expenditure).

According to Mr Reeves, Tesoro has identified numerous drill-ready targets at El Zorro and plans to “infill the existing drilling and rapidly move into resource definition drilling should results stack up”.

“Currently budgeted in the use of funds is 7,500m of drilling at El Zorro and initial metallurgical test work to scope out a larger program … the drilling is targeted to expand the footprint that’s already been defined at Coquetas,” he said.

Mr Reeves said Tesoro will be “drilling on day one” immediately following the RTO.

“Everything’s permitted; we literally have to tell our drill contractor to mobilise and he’ll be there within a week’s notice – so as soon as we’ve locked down the funding we’ll be on the ground,” he said.

According to Mr Reeves, initial results from this campaign are anticipated around the end of January or early February.

Meanwhile, the company is about to submit more than 1,000 rock chip channel samples covering multiple targets across El Zorro to the lab and expects some of those results before the end of the year.

Mr Reeves said Tesoro will be “pushing hard” to get a resource defined at El Zorro by mid-2020, depending on exploration results.

“We’re quite excited and optimistic about the extensions particularly to the north of Coquetas, where we’ve seen what we think are controlling structures becoming more frequent … we can see potential to at least double the Coquetas mineralised footprint with extensional drilling as well as better define and expand the mineralisation around where we’ve already drilled,” he said.

At Espina, Mr Reeves said around 400 soil samples are due to be submitted to the lab. The next steps for the project, anticipated for the first quarter of 2020, will involve “trenching across better parts of the epithermal vein structures with a view to drill those at some stage during 2020”.

“We’ve got about 1,500m budgeted for this maiden drill program,” he said.

Growth strategy

In its prospectus, Tesoro said its growth strategy involved advancing the exploration and evaluation of deposits within its El Zorro and Espina projects close to established mining operations to demonstrate the ability for the projects to be developed into operating mines.

Exploration activities on the projects will aim for the discovery of JORC-compliant resources.

The company also hopes to pursue other prospective opportunities in the resource sector in line with its strategy to develop high-quality assets.

New management

Differing greatly from its previous business venture, it makes sense for a fresh management team when Plukka reforms as a gold explorer.

Plukka team members expected to retire or step down upon the re-listing include non-executive directors Peter Ruse and Cameron Williams, and company secretary Charly Duffy.

Tesoro’s current managing director Zeff Reeves will stay on as the managing director of the new listed entity.

Tesoro chairman Geoffrey McNamara will take up the position of non-executive director while existing Plukka non-executive chairman John Toll will remain in his role upon re-listing.