Tesoro Gold Ltd (ASX: TSO) shares have been pretty much flat over the past year, but the team at Morgans believes some recent news could be the catalyst for a significant rerating.
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Maiden gold reserve bolsters confidence
The company has in the past few days reported a maiden gold reserve at its Ternera deposit in Chile, with the project containing 1.28 million ounces of gold.
The reserve lies within a planned single open-pit and represents 87% of the project's overall 1.47 million-ounce gold resource.
Tesoro said further:
The Ore Reserve supports a substantial, long-life development at the planned 3.0Mtpa process rate. The Reserve pit was designed based on a US$3,000/oz gold price optimal pit shell. It is underpinned by Pre-Feasibility (PFS) mine designs and schedules and the application of Modifying Factors informed by work completed across mining, geotechnical, metallurgy, processing, infrastructure, environmental and cost workstreams.
The company will now progress to a definitive feasibility study for the deposit, and will "evaluate further opportunities to optimise the Project as the technical and development workstreams are refined''.
Tesoro said the gold reserve supports a project production life of more than 13 years.
The company said the project was close to road, power, and water infrastructure, and just 57km by road to the port of Caldera.
Further growth potential was also being tested through an ongoing drilling program.
Tesoro Managing Director Zeff Reeves said:
The Ternera Gold Deposit represents a rare, single open pit development opportunity in a world class mining friendly country. Establishing this initial 1.28Moz Ore Reserve is a significant step for our El Zorro Gold Project. We now have a substantial Ore Reserve contained entirely within a single open pit which supports more than 13 years of production at the planned 3.0Mtpa processing rate. This gives us a strong development base at Ternera, which still has significant upside to be unlocked from further drilling.
ASX gold shares looking cheap
Morgans said in a note to clients that the maiden reserve further reinforced their view that the project was technically robust and financeable.
They said:
The Ternera deposit supports a simple open-pit development scenario, with a single pit-constrained mining inventory and favourable geometry resulting in a moderate life of mine strip ratio of 6.3:1. We believe the combination of strong project economics, low technical complexity and favourable mining conditions should support development financing and enhance corporate appeal.
Morgans said they saw multiple catalysts over the next 12 months that could further derisk the project.
They have a price target of $2.64 on the company compared to 87.5 cents currently. Tesoro Gold is valued at $157.3 million.
