Tesoro Gold Ltd's Path to Breakeven and Long-Term Value Creation: A Deep Dive into Operational Efficiency and Capital Allocation

Tesoro Gold Ltd (ASX: TSO) has positioned itself as a compelling growth story in the gold sector, with its El Zorro Gold Project in Chile's Atacama region serving as the cornerstone of its value creation strategy. The company's recent operational efficiency gains and disciplined capital allocation decisions underscore its path to breakeven and long-term profitability. By leveraging advanced metallurgy, strategic exploration, and robust financial planning, Tesoro is navigating the challenges of a volatile commodities market while unlocking district-scale potential.

Operational Efficiency: A Foundation for Sustainable Margins

Tesoro's operational efficiency is anchored in its metallurgical capabilities and low-cost production model. According to the company's investor relations materials, metallurgy tests at El Zorro have demonstrated gold recoveries of 94.5% at a coarse grind, with minimal cyanide consumption. This high recovery rate, combined with an estimated all-in sustaining cost (AISC) of $1,200/oz, positions the project to generate strong margins even in a lower gold price environment. These investor relations materials also present NPV and AISC metrics that underpin the project's economics.

Exploration drilling has further enhanced operational efficiency by expanding the resource base. For instance, recent intercepts at Ternera South, such as 132.18m @ 1.28g/t Au and 153.90m @ 1.61g/t Au, highlight the open-ended nature of mineralization, as noted in the scoping study. These discoveries not only extend the Ternera Deposit but also suggest potential for underground extensions, which could add decades to the mine's life, according to the scoping study.

Capital Allocation: Strategic Funding for Feasibility and Growth

Tesoro's capital allocation strategy has been pivotal in advancing El Zorro from exploration to pre-feasibility. In September 2025, the company secured A$34 million through a share issuance at A$0.053 per share, with proceeds earmarked for pre-feasibility studies, permitting, and district-scale exploration. This funding aligns with the project's timeline, with a pre-feasibility study expected by April 2026 and a definitive feasibility study due by year-end 2026 on the El Zorro project page.

The scoping study, released in 2025, outlined a conventional open-pit and processing operation projected to produce 1.26 million ounces of gold over 14 years, with a post-tax internal rate of return (IRR) of 51% under a $2,750/oz gold price assumption. These metrics reflect a capital-efficient approach, as the project's net present value (NPV) is estimated at $663 million at $2,750/oz and $1.3 billion at current gold prices, per the investor relations materials. Such returns justify the capital outlay and underscore the project's economic robustness.

Breakeven Analysis and Long-Term Value Creation

Tesoro's breakeven threshold is closely tied to its AISC of $1,200/oz and the project's 14-year mine life, as detailed in the investor relations materials. With gold prices currently trading above $2,800/oz, the company is well-positioned to generate cash flow once production commences in mid-2029 on the El Zorro project page. The upgraded resource estimate of 2.0Moz @ 1.07g/t Au further strengthens the breakeven profile, as it provides a buffer against price volatility; this upgrade is summarized in the TSO 2024 Annual Report.

Long-term value creation hinges on unlocking the district's full potential. The El Zorro project spans 570km² of tenure, with exploration targets like Drone Hill and Ternera East offering significant upside, as noted in the 2024 annual report on LinkedIn. Additionally, the project's coastal location reduces infrastructure costs, while Chile's status as a premier mining jurisdiction mitigates regulatory risks, as described on the Tesoro Gold website.

Conclusion

Tesoro Gold's strategic focus on operational efficiency and capital discipline has laid a clear path to breakeven and sustained value creation. By advancing El Zorro through feasibility studies and leveraging its district-scale potential, the company is poised to deliver robust returns for shareholders. As the gold market remains resilient, Tesoro's low-cost, high-margin model and exploration-driven growth strategy position it as a standout opportunity in the junior mining sector.