“Fenix Gold is the largest undeveloped gold heap leach project in the Americas, and is now fully financed to production. It already contains 5 million ounces (Moz) of gold, but we believe this could grow through exploration to closer to 10 Moz.”

Alex Black

PRESIDENT & CEO, RIO2 LIMITED

March 08, 2022

Can you briefly introduce Rio2 and the company’s Fenix Gold project?

Rio2 was established as a private company in 2016, before listing in 2017. In 2017, we came across a company named Atacama Pacific, and completed a merger with them in mid 2018 which gave us ownersip of the Cerro Maricunga project, which we renamed Fenix Gold. Fenix Gold is the largest undeveloped gold heap leach project in the Americas, and is now fully financed to production. The technical characteristics of Fenix Gold are very similar to the two mines which the Rio2 management team built in Peru – La Arena and Shahuindo – under our previous company, Rio Alto Mining, which was acquired by Tahoe Resources for C$1.2 billion in 2015.

How is the project financing for Fenix Gold structured between equity, streaming and debt?

We wanted to structure the financing to minimize dilution from an equity perspective, and to give us the flexibility to start construction before we get our final construction permit for the mine. We raised C$35 million in equity in August 2021, and also agreed to a US$50 million stream with Wheaton Precious Metals. Half of the stream will be drawn down in Q1 2022, with the second tranche being drawn upon EIA approval, which we expect in Q2. We already have permits and easements in place to access the land where we will be mining, which has allowed us to start pre-construction activities. Once we have a construction permit, we plan on securing senior secured debt in the order of US$50 million to US$60 million, for which BNP Paribas have agreed to be the lead arranger. BNP is currently in the middle of completing their detailed due diligence to finalize the debt package.

What is the development timeline to move the project into production?

It takes a few months between getting the EIA, which we expect in Q2 2022, and the construction permit, which we expect in Q3. In the meantime, we bought an infrastructure site about 20 km from the Fenix  Gold mine site, at the turnoff from the main road that goes from Copiapó to Argentina and close to Kinross’ La Coipa camp. It is 3,200 m above sea level, with Fenix Gold up the hill at 4,900 m altitude. This infrastructure site allows us do a lot of fabrication of plant components at the site, so when we receive the construction permit it becomes an assembly project at the mine site. We want to move quickly and expect to achieve the first gold pour at Fenix Gold early in the new year of 2023.

What were some of the hurdles you faced when building and operating the La Arena and Shahuindo mines in Peru that you think hold you in good stead while going through the same transition at Fenix Gold?

We understood the permitting process in Peru well, and have researched the process in Chile with lawyers, environmental consultants and our technical team on the ground, working within this system to accelerate development. It is important to note that Fenix Gold is unique in the Maricunga region which has plenty of projects, including La Coipa, Yamana Gold’s La Pepa, Hochschild’s Volcán and Gold Fields’ Salares Norte to the north. Fenix is the only 100% gold oxide project in the region, with oxides that go down to our deepest hole which is 600 m below surface. The other projects typically have a leach cap, then a transition zone and sulfides. This involves complex metallurgy because those projects need to go from a heap leach operation, to a crush grind mill, float and tails mining operation. Rio2 has a simple gold oxide heap leach project, which we have demonstrated can commence on a run-of-mine basis, meaning we do not have to crush the mineralized material. This was the same scenario at La Arena and Shahuindo.

In recent months there have been a number of high-profile capex increases at gold development projects. How are you managing to keep the construction of Fenix within budget?

Fenix is a low capex build because it’s a gold oxide heap leach project which requires a simple ADR (adsorption, desorption and recovery) plant, consisting of tanks, pumps and pipes. There are no real moving parts like crushers, grinders or flotation cells. When you talk about inflation, a 10% increase on a US$120 million build is a lot more manageable than on a US$1 billion build. From our experience, we know we can move construction activities around to save costs in different areas.

In January 2022, the second phase test work of Sixth Wave Innovations Inc.’s IXOS purification polymer began at Fenix. What does this technology aim to achieve?

We are going to be building the first part of our plant with carbon absorption, but if the tests with Sixth Wave are successful, we would consider replacing carbon with the polymers for the expansion of the project. In an ADR plant, carbon absorbs the gold in tanks and the gold is then extracted, but you have to regenerate carbon which uses energy. The polymer process replaces the use of carbon and doesn’t require regeneration. We are testing whether the gold recovery process will be as efficient as using carbon, and how much it will cost. If the efficiency and economics work out, this could improve the project from a cost and ESG perspective.

Can you tell us about Rio2’s industrial water supply agreement with Nueva Atacama, and how you intend to source water economically and sustainably as the project grows?

We are starting the project at 20,000 tonnes per day (tpd) of ore to pad, which requires about 25 liters of water per second for the leach process. Water will be brought to the mine in tankers from Copiapó, from retreated water supplied by Nueva Atacama. The trucking of water has enabled us to fast-track the project development, and we have had no pushback on trucking water during the EIA process.

Fenix Gold already contains 5 million ounces (Moz) distributed amongst 410 million tonnes of ore, but we believe this could grow through exploration to closer to 10 Moz. As the mine ramps up to produce 250,000+ oz of gold per year, optimal production should be in the region of 80,000 to 100,000 tpd, to really turn Fenix Gold into a world-class gold mine. There are a number of desalination projects, such as ENAPAC, which is building a desal plant in Copiapó and looking for clients plus some sub-surface water options which we are investigating. In the not too distant future we hope to show where we are going with our longer term water strategy, but the priority now is to get the mine into production.

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