Rio2 off to the races in belle epoch

After two years in the wilderness fighting a rejection of its environmental permit for its Fenix gold oxide project in the Maricunga district of Chile, RIO2 is off to the races after closing a supersized financing of C$23 million.

Timing is everything in resource development, and the serendipity of the company's permit coming through at a time when the gold price is going higher and higher and where third-party actors could provide a water solution for its expansion scenario is not lost on chief executive Alex Black.

"It is almost deja vu with Rio Alto Mining. When we started building La Arenas [in northern Peru], gold was at US$1000/oz, but in 2012, our first full year of production, it was $1800/oz. We made $100 million in that first year, which can potentially be repeated here," Black told Mining Journal.

Rio Alto was later bought by Tahoe Resources in 2015 for C$1.4 billion.

Rio2 issued a feasibility study on Fenix in September 2023 detailing a 20,000tpd first phase mining and heap leach operation to produce 91,000ozpa during its initial 12 years following an initial capital cost of $117 million. The project economics were calculated using a $1750/oz gold price.

A second stage would expand mining to 80,000-100,000tpd, increasing annual gold production to more than 250,000ozpa. This would require water infrastructure development, which the company estimated could take up to five years to permit. Its workaround for phase one is to truck water 158km in tankers from the Nueva Atacama water retreatment facility near Copiapo, with whom Rio2 has a supply agreement.

However, while Black was chewing his fingernails on the Fenix environmental permit and the collapse of the company's share price to 14c in 2022, Energías y Aguas del Pacífico (ENAPAC) has been advancing on a desalinated seawater and solar power project with Israeli company Solaer, which may be financed by Goldman Sachs, and aims to supply up to 2500lps of water and 150MW of solar power in the region. The project includes two water distribution routes, one of which goes past the Fenix property.

"ENAPAC has received environmental approval for its northern route and is waiting for approval for its eastern route, which would benefit us. It thinks it should have its approval in two or three months," said Black.

The ENAPAC project could shorten the timelines for piped water for Rio2 and reduce the costs it pays for water. Other potential mining clients in the region include Capstone Mining, Kinross Gold, Codelco, and lithium developers at the Maricunga salt flat.

"We anticipate that the unit cost of water would be less than we pay to truck water to the project, and so with our expansion, our opex would come down for both mining and the plant. We need to get time and cost expectations from them so we can build these numbers into a study to show," said Black.

Belle epoch

Rio2 has entered a belle epoch that has seen it become one of the most coveted junior gold developers, with investors, banks, and even mining companies lining up to facilitate its vision.

The C$23 million financing Rio2 just closed began as a $10 million raise, yet the interest from existing shareholders and some new institutional investors was such that the company more than doubled it.

"I thought I could raise $3-4 million from our existing list, but after I had called around, I had $16 million. This blew me away. I have never experienced what I experienced in this financing in over 25 years in this business," said Black. On top of that. Eight Capital delivered the $7-8 million it said it could raise for the company.

The additional funds means RIO2 can complete its permitting process, which it estimates will be in July, and then close the final project financing in September while still having a solid treasury of up to $7 million.

With an estimated US$110 million to raise to complete the 12-14-month build, RIO2 has received several expressions of interest from banks, funds and strategic investors. Work on the financing package will continue in the coming months.

"Since the EIA approval came through [in December 2023] some corporates have woken up. The gold industry in Chile is tiny. It is Gold Fields, Kinross, Pan American Silver and us. We are getting inbound calls so we could end up having a strategic as an investor," said Black.

RIO2 has advanced on several work streams for the build, with a camp and other early works for the plant and leach pads started, with the first gold possible in the September or December quarter of 2025.

Shares in RIO2 are trading at 45c, valuing the company at C$143 million.