Rio2 looks to repeat Peru success with start-up | Australian Markets

Heap leach gold mining – the method of stacking crushed ore on a thick polyethylene pad and spraying it with a chemical answer to dissolve and extract the gold – shall be unfamiliar territory to main miners however not so unfamiliar to smaller scale gamers.

However, the smaller scale operators may discover it more durable to get their heads round scaling up the usually cheaper method to deal with million-ounce-plus orebodies.

Management at Canadian-listed Rio2 nevertheless is planning to just do that – construct a giant scale mine utilizing heap leaching technology – and at an all-in sustaining price per ounce that may make West Perth miners inexperienced with envy.

Rio2, led by Perth-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 yr at a greater grade 0.54g/t for 12 years. Over 17 years it can average 82,000 ounces a yr 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 beforehand instrumental in developing one other Canadian-listed company Rio Alto Mining. That company additionally used heap leaching on its deposit that had very related grades to Fenix.

Notably, Rio Alto was finally taken out by one other Canadian-listed company for more than US$1 billion.

According to Rio2, Fenix is the most important permitted and absolutely financed gold heap leach project within the Americas.

Rio2 set its sights on Fenix, then often known as the Cerro Maricunga project, in 2017.

The company was attracted by the deposit’s dimension and prime location in Chile’s huge 65-million-ounce Maricunga mineral belt. It additionally had untapped potential.

The orebody was found in 2010 by Canadian-listed Atacama Pacific, which finally merged with Rio2 in 2018.

The path to manufacturing has not come with out its challenges, nevertheless. The project was hampered by environmental allowing delays due to a change in authorities, then COVID-19 hit, additional delaying the allowing course of.

Every cloud has a silver lining and Rio2 now finds itself on the sting of manufacturing at a time when the gold price is testing all-time highs.

Fenix, which shall be an open pit operation, sits at an spectacular 4500-metre elevation and covers 2000 hectares in Chile’s fabled however distant Maricunga gold belt.

The project’s 2023 feasibility examine has estimated a internet current worth after tax of US$210.3 million (A$333m) utilizing a 5 per cent low cost charge and an inner charge of return of 28.5 per cent utilizing a gold price of US$1750 per ounce.

With gold costs presently trading at virtually double the examine’s assumed degree, there seems to be lots of upside potential. Notably, Rio2’s sensitivity calculations indicate a internet current worth of US$546m (A$866m) and an inner charge of return of 64 per cent at a gold price of US$2250 per ounce.

The project additionally has an uber-low stripping ratio of 0.85:1, which is a key factor of the project’s sturdy economics. By minimising waste removing and operational prices, the remarkably low all-in-sustaining-cost (AISC) of manufacturing is predicted to are available in at simply US$1250 per ounce.

The AISC additionally contains the associated fee of trucking the whole project’s water provide from the regional capital, Copiapó, 160 kilometres southwest of the mine.

The water shall be equipped by a Chilean-owned utility company, Aguas Chanar, which additionally offers desalinated water to the area people. Aguas will accumulate and deal with industrial effluent wastewater to resell to Rio2 as a non-potable water source that shall be appropriate for heap leach irrigation.

Rio2 is conducting research on a section two growth of the project to probably scale up manufacturing to 250,000–300,000 ounces of gold per yr by pushing the processing charges up from 20,000 tonnes per day (tpd) to 80,000tpd.

To alleviate the water bottleneck, the company is in energetic discussions with Kinross Mining, which owns the neighbouring La Coipa mine, to share the infrastructure price of building a direct water pipeline from Aguas Chanar’s amenities immediately to the mine websites.

Rio2 is within the uncommon place of being absolutely funded for construction. In October 2024, the company secured a US$100m pre-pay financing package deal from United States-based Wheaten Precious Metals Investment.

The debt finance was complemented by US$49m in contemporary equity from a capital raising to new and present shareholders.

Rio2 additionally has entry to US$25m of a US$50m gold stream loan – repaid at a charge of 15,000 ounces a yr for seven years – and an additional US$20m as a standby loan facility, each organized by Wheaten.

Management plans to allocate US$127m for construction capex and US$47m for added infrastructure prices.

After packing his baggage to transfer to Lima in South America, Black was satisfied by an outdated Perth-based finance pal to take the reins of a TSX-listed shell company, Chariot Resources.

Chariot spent the subsequent couple of years testing the water on numerous exploration tenements in Peru earlier than the mining junior landed its first large project, efficiently buying full control of the Marcona copper project for US$45m. The company then introduced Korean-based LG-Nikko Copper on board to fund a 30 per cent stake in that project.

Having developed up the 290mt copper useful resource, the Black-led Chariot obtained a 2010 takeover bid from China Sci-Tech Holdings for a helpful US$170m ($A270m). The bid included Chariot’s 70 per cent holding in Marcona.

The Chinese-backed miner promptly bought its place to Peruvian-based Minsur in 2012 for US$505m, double its buy price.

The Marcona mine finally price US$1.5b to construct and was commissioned in 2021. It produces virtually 160,000 tonnes of copper each year.

By the time of the Chariot takeover, Black had determined to re-roll the cube and shaped a new personal exploration company, Rio Alto Mining.

Before too long, one other Peruvian deal got here knocking – this time within the form of the undeveloped La Arena gold project that may finally be held by Rio Alto.

By the top 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 have been put to work.

La Arena was commissioned 12 months later, spitting out 200,000 ounces of gold a yr to shortly turn into one of Peru’s lowest-cost gold producers.

After a $300m merger with Sulliden Gold Corporation the massive boys got here knocking and, in 2014, Rio Alto obtained a huge US$1.1 billion (A$1.75b) takeover bid from Canadian-based Tahoe Resources.

Fast ahead to 2025 and Black is again on the verge of manufacturing with Rio2’s Fenix.

With a absolutely funded section one construction plan underway and a high-potential section two growth within the pipeline, the Fenix gold project is on monitor to turn into a main gold mine.

If Rio Alto might obtain such success with a related wanting deposit at La Arena during a time of depressed gold costs, the sky is the restrict for Rio2 with the dear yellow steel hitting all-time highs.

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