- Tesoro Resources (TSO) has changed the terms and structure of its acquisition of the El Zorro Gold Project to now be a fully contributing joint venture (JV)
- Through a purchase option agreement, Tesoro’s 95-per-cent-owned Chilean subsidiary holds 70 per cent of the Chile-based project
- However, this agreement has been terminated to remove timing risks on Tesoro’s milestone targets due to the project’s ongoing expansion
- This means shareholders can contribute to the JV’s capital requirements, and, if they don’t, their ownership will be diluted
- Essentially, Tesoro can immediately increase its 70 per cent interest in the project by funding exploration and development if the minority shareholder doesn’t contribute
- Tesoro’s shares are down 2.5 per cent and trading at 19.5 cents
Tesoro Resources (TSO) has changed the terms and structure of the acquisition of the El Zorro Gold Project in Chile.
This decision comes from the Ternera deposit, and the project itself, being much larger than contemplated by the existing purchase option agreement,m which was signed in July 2017.
Tesoro’s 95-per-cent-owned Chilean subsidiary, Tesoro Mining Chile, currently owns 70 per cent of the holder of the El Zorro concessions, El Zorro S.C.M.
To reach an 80 per cent ownership under the existing agreement, Tesoro needed to make a final US$50,000 (roughly A$64,521) stage four project payment by January 17 2022 and deliver a feasibility study.
However, the purchase option agreement has been terminated and the joint venture (JV) will be operated as a fully contributing JV, which will remove any timing risk for Tesoro to deliver the milestones.
This means all shareholders will get an opportunity to contribute to the JV’s capital requirements and if they choose not to contribute, their ownership will be diluted.
Tesoro will be able to increase its participating interest in the El Zorro Gold Project by funding exploration and development if the minority 30 per cent shareholder chooses not to contribute.
This benefits Tesoro as under the prior agreement, it could only increase its interest through expenditure after meeting certain milestones, such as completing a feasibility study by January 2022.
At a shareholder meeting in early February, majority of shareholders approved a 12-month work plan and budget for the project and called for another capital contribution of CLP 4.3 billion (roughly A$7.6 million) to the JV to support the work plan and budget, for which 100 shares will be issued.
They also approved that within 30 days of the meeting, shareholders will confirm their subscription for the new issue of shares by providing their capital contribution.
If the 30 per cent shareholder doesn’t subscribe for shares as part of the capital increase, Tesoro Mining Chile will subscribe for the shares and increase its ownership to 85 per cent.
Tesoro’s shares are down 2.5 per cent and trading at 19.5 cents at 10:56 am AEDT.