Canadian-listed Rio2 Limited has secured US$25 million (A$39.5m) in gold stream funding from its United States-based finance partner, premier precious metals investment company Wheaton Precious Metals International, to help advance Rio2’s flagship Fenix Gold project in Chile’s Maricunga gold belt.
The prepayment marks the second instalment under the precious metals purchase agreement tied to Rio2’s Fenix Gold project and the company sees it as a significant vote of confidence in its development.
Rio says the payment is also an endorsement of its determination to bring the gold mine into production by the end of the year.
Fenix Gold is in Chile’s Atacama region and is one of the largest undeveloped gold oxide heap leach projects in the Americas. The deposit contains 389 million tonnes of measured and indicated material grading 0.38 grams per tonne for a huge total of 4.8 million ounces of gold.
Unlike most other traditional large gold developments, Rio2 is building a run-of-mine heap leach operation at Fenix Gold to process the ore, eliminating the need for crushing or tailings storage facilities. The low-footprint design will lower the project’s initial capital expenditure and reduce its environmental impact in line with Chile’s strict environmental rules.
The fully funded development is forecast to produce an annual average of 82,000 ounces of gold over a 17-year mine life. Rio2 expects it will cost US$135m (A$214m) in up-front development cost and take less than a year to build. The company will employ 550 permanent staff when the site is in full production.
The all-in sustaining cost of processing the gold is expected to come in at just US$1250 per ounce, due in large part to an uber-low 0.85:1 stripping ratio that underpins the project’s healthy economics.
A 2023 feasibility study pegged the project’s after-tax net present value at US$210.3m (A$333m), based on a conservative gold price of US$1750 per ounce and a 5 per cent discount rate to deliver a payback of just 3.5 years.
With the yellow metal currently trading at nearly twice that assumed level, the valuation appears to have plenty of upside. Rio2’s sensitivity analysis suggests that at a gold price of US$2250 per ounce, the project’s net present value skyrockets to US$546m (A$866m), with a remarkable internal rate of return of 64 per cent.
Already plans are afoot to roll out a phase two expansion of the development, with production slated to increase from 20,000 tonnes per day (t/d) to 80,000t/d to produce 250,000-300,000 ounces of gold per year.
To achieve this, Rio2 is in active discussions with fellow TSX-listed explorer Kinross Mining, which owns the neighbouring La Coipa gold mine, to share the infrastructure cost of building a direct water pipeline from the regional supplier to the mine sites.
In delivering Fenix Gold, Rio2 says it isn’t just focused on pushing out the ounces. The company has also employed a “three-pillar” approach of social, environmental and economic responsibility to ensure the development exceeds local environmental standards and becomes a blueprint for mining operations in ecologically sensitive regions.
With funding in place and a streamlined development strategy, Rio2 is setting its sights on getting gold out of the ground - and into the market - as quickly as possible. Punters will likely be watching closely as construction progresses and production targets come into sharper focus.
As the gold price continues to flirt with all-time highs and the market rallies behind cleaner, smarter mining plays, Rio2 might be one of the gold junior miners to watch in 2025.
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By James Pearson
