Management at Canadian-listed Rio2 Ltd has put the band back together to repeat its prior success at Peruvian gold mine, La Arena. Rio2 has a similar looking massive heap leach gold operation in Chile that is about to spring into production. Initially, its 4.8m-ounce Fenix gold mine is forecast to pump out 91,000 ounces of gold a year for the first 12 years at an uber-low cost of US$1250 per ounce.
Heap leach gold mining - the process of stacking crushed ore on a thick polyethylene pad and spraying it with a chemical solution to dissolve and extract the gold - will be unfamiliar territory to major miners but not so unfamiliar to smaller scale players.
However, the smaller scale operators might find it harder to get their heads around scaling up the typically cheaper technique to handle million-ounce-plus orebodies.
Management at Canadian-listed Rio2 however is planning to do just that – build a large scale mine using heap leaching technology – and at an all-in sustaining cost per ounce that would make West Perth miners green with envy.
Rio2, led by Adelaide-born mining man Alex Black, is planning to kick off a large-scale heap leach gold operation at its Fenix gold mine in Chile.
The Fenix deposit has 389 million tonnes grading 0.38 grams per tonne (g/t) gold for a whopping 4.8m measured and indicated ounces. The company’s initial plan is to pump out 91,000 ounces a year at a higher grade 0.54g/t for 12 years. Over 17 years it will average 82,000 ounces a year at 0.48g/t gold.
For Black, the latest project carries a distinct sense of déjà vu as this isn’t his first rodeo. He was previously instrumental in developing another Canadian-listed company Rio Alto Mining. That company also used heap leaching on its deposit that had very similar grades to Fenix.
Notably, Rio Alto was eventually taken out by another Canadian-listed company for more than US$1 billion.
According to Rio2, Fenix is the biggest permitted and fully financed gold heap leach project in the Americas.
Rio2 set its sights on Fenix, then known as the Cerro Maricunga project, in 2017.
The company was attracted by the deposit’s size and prime location in Chile’s vast 65-million-ounce Maricunga mineral belt. It also had untapped potential.
The orebody was discovered in 2010 by Canadian-listed Atacama Pacific, which eventually merged with Rio2 in 2018.
The path to production has not come without its challenges, however. The project was hampered by environmental permitting delays due to a change in government, then COVID-19 hit, further delaying the permitting process.
Every cloud has a silver lining and Rio2 now finds itself on the edge of production at a time when the gold price is testing all-time highs.
Fenix, which will be an open pit operation, sits at an impressive 4500-metre elevation and covers 2000 hectares in Chile’s fabled but remote Maricunga gold belt.
The project’s 2023 feasibility study has estimated a net present value after tax of US$210.3 million (A$333m) using a 5 per cent discount rate and an internal rate of return of 28.5 per cent using a gold price of US$1750 per ounce.
With gold prices currently trading at almost double the study’s assumed level, there appears to be plenty of upside potential. Notably, Rio2’s sensitivity calculations imply a net present value of US$546m (A$866m) and an internal rate of return of 64 per cent at a gold price of US$2250 per ounce.
The project also has an uber-low stripping ratio of 0.85:1, which is a key element of the project’s robust economics. By minimising waste removal and operational costs, the remarkably low all-in-sustaining-cost (AISC) of production is expected to come in at just US$1250 per ounce.
The AISC also includes the cost of trucking the entire project’s water supply from the regional capital, Copiapó, 160 kilometres southwest of the mine.
The water will be supplied by a Chilean-owned utility company, Aguas Chanar, which also provides desalinated water to the local community. Aguas will collect and treat industrial effluent wastewater to resell to Rio2 as a non-potable water source that will be suitable for heap leach irrigation.
Rio2 is conducting studies on a phase two expansion of the project to potentially scale up production to 250,000–300,000 ounces of gold per year by pushing the processing rates up from 20,000 tonnes per day (tpd) to 80,000tpd.
To alleviate the water bottleneck, the company is in active discussions with Kinross Mining, which owns the neighbouring La Coipa mine, to share the infrastructure cost of building a direct water pipeline from Aguas Chanar’s facilities directly to the mine sites.
Rio2 is in the rare position of being fully funded for construction. In October 2024, the company secured a US$100m pre-pay financing package from United States-based Wheaten Precious Metals Investment.
The debt finance was complemented by US$49m in fresh equity from a capital raising to new and existing shareholders.
Rio2 also has access to US$25m of a US$50m gold stream loan – repaid at a rate of 15,000 ounces a year for seven years - and an extra US$20m as a standby loan facility, both arranged by Wheaten.
Management plans to allocate US$127m for construction capex and US$47m for additional infrastructure costs.
Earth moving equipment preparing the 20,000 tonnes per day heap leach pad at Rio2’s Fenix gold project in Chile. Credit: File
Black’s journey into mine development began in the late 1990s when he sold his Kalgoorlie-based pit design company.
After packing his bags to move to Lima in South America, Black was convinced by an old Perth-based finance pal to take the reins of a TSX-listed shell company, Chariot Resources.
Chariot spent the next couple of years testing the water on various exploration tenements in Peru before the mining junior landed its first big project, successfully acquiring full control of the Marcona copper project for US$45m. The company then brought Korean-based LG-Nikko Copper on board to fund a 30 per cent stake in that project.
Having developed up the 290mt copper resource, the Black-led Chariot received a 2010 takeover bid from China Sci-Tech Holdings for a handy US$170m ($A270m). The bid included Chariot’s 70 per cent holding in Marcona.
The Chinese-backed miner promptly sold its position to Peruvian-based Minsur in 2012 for US$505m, double its purchase price.
The Marcona mine eventually cost US$1.5b to build and was commissioned in 2021. It produces almost 160,000 tonnes of copper per annum.
By the time of the Chariot takeover, Black had decided to re-roll the dice and formed a new private exploration company, Rio Alto Mining.
Before too long, another Peruvian deal came knocking - this time in the shape of the undeveloped La Arena gold project that would eventually be held by Rio Alto.
By the end of 2010 and with the help of a US$20m capital raising and a US$50m pre-paid financing deal from the US-based Red Kite Resources fund, Rio Alto’s shovels were put to work.
La Arena was commissioned 12 months later, spitting out 200,000 ounces of gold a year to quickly become one of Peru’s lowest-cost gold producers.
After a $300m merger with Sulliden Gold Corporation the big boys came knocking and, in 2014, Rio Alto received a massive US$1.1 billion (A$1.75b) takeover bid from Canadian-based Tahoe Resources.
Fast forward to 2025 and Black is again on the verge of production with Rio2’s Fenix.
With a fully funded phase one construction plan underway and a high-potential phase two expansion in the pipeline, the Fenix gold project is on track to become a major gold mine.
If Rio Alto could achieve such success with a similar looking deposit at La Arena during a time of depressed gold prices, the sky is the limit for Rio2 with the precious yellow metal hitting all-time highs.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
