ASX-listed gold explorer Tesoro Resources has modified the terms and structure of its acquisition of the El Zorro gold project in Chile, as both the project and the Ternera deposit are now materially larger than contemplated by the existing purchase option agreement.

Under the existing purchase option agreement, Tesoro was required to make a final $50 000 Stage 4 project payment by January 17, 2022, and deliver a feasibility study to reach 80% ownership.

Currently, Tesoro’s 95%-owned Chilean subsidiary and joint venture (JV) partner, Tesoro Mining Chile owns 70% of El Zorro, the holder of the El Zorro concessions.

Going forward, the existing purchase option agreement has been terminated, meaning that the JV company will now be operated under normal Chilean company regulations, which includes that all shareholders must be given the opportunity to contribute proportionally to the JV company’s capital requirements. As such, if a shareholder elects not to contribute to a capital raising, then their ownership will be diluted.

Under Chilean company regulations, as the 70% controlling shareholder of the JV company, Tesoro has full control over board and shareholder decisions at the JV company level, including determining the amount and timing of any calls for capital contributions by shareholders in the JV company.

This change means that any future capital requirements for the JV company will be subject to a contribute or dilute mechanism.

Also, going forward, Tesoro will be able to increase its participating interest in the El Zorro project by contributing to exploration and development expenditure if the minority shareholder elects not to contribute.

By terminating the purchase option agreement, Tesoro also removes any timing risk to delivery of the milestones that may arise as a result of the continued expansion of the Ternera deposit. It also enables Tesoro to immediately commence increasing its ownership in El Zorro, by contributing exploration and development expenditure and diluting the minority shareholder should they elect not to contribute.

Meanwhile, a February 11 meeting with shareholders approved a 12-month workplan and budget for the development of the El Zorro project and the approval of an additional capital contribution of about $4.3-billion peso to the JV company to support the approved workplan and budget – for which 100 shares will be issued.

In addition, the meeting also saw the approval for shareholders, within 30 days, to confirm their subscription for the new issue of shares by providing their proportionate capital contribution.