Rio2 All Eyes for First Gold Pour and Dual Commodity Gold-Copper Production Platform

• Rio2 Limited is advancing toward January 2026 first gold production at its Fenix heap leach project in Chile whilst simultaneously integrating the recently acquired Condestable underground copper mine in Peru, creating a dual-asset platform generating projected combined free cash flow exceeding $150 million annually once Fenix reaches steady-state production of 100,000 ounces by 2027.
• The company delivered the Fenix project on time and on budget at $150-160 million capital cost, with the operation targeting 60-70,000 ounces during the 2026 ramp-up year before achieving nameplate capacity of 20,000 tonnes per day processing by Q3 2026.
• Condestable adds immediate cash generation exceeding $100 million annually at current metal prices with 10 years of proven reserves, minimal sustaining capital requirements under $10 million per year, and clear expansion pathway from 8,400 to 12,000 tonnes per day throughput representing 40% production increase.
• Both assets offer substantial organic growth potential, with Fenix's 5 million ounce resource base providing expansion opportunities beyond the initial 1.7 million ounce starter project and systematic exploration programmes commencing in 2026 at both properties.
• Rio2's successful $205 million financing with $800 million total demand (4x oversubscription) demonstrates institutional confidence in management's 25-year Latin American operating track record, with the company trading at approximately 2x EBITDA on Condestable alone.

Rio2 Limited (TSX:RIO) is executing a strategic transformation from single-asset developer to multi-jurisdictional producer, advancing its Fenix Gold project in Chile toward January production whilst simultaneously integrating the recently acquired Condestable copper mine in Peru. The dual-asset strategy addresses a fundamental vulnerability facing single-asset junior companies whilst capitalizing on favourable precious and base metal pricing environments.

Executive Chairman Alex Black outlined the company's near-term operational milestones and longer-term growth trajectory during a year-end interview, emphasizing Rio2's evolution from a $300 million developer earlier in 2024 to a $1.2 billion multi-asset producer with clear pathways for organic expansion across both operations.

Fenix Gold Commissioning Progresses Toward January First Pour

The Fenix Gold heap leach operation in Chile has advanced through commissioning with all critical infrastructure completed. Black confirmed the project was delivered on time and on budget at $150-160 million total capital expenditure, representing a relatively modest capital intensity for a gold project of this scale.

"With preconstruction money that we [spent] before we got stopped with the EIA, and then the recent construction money that we spent during 2024, it's only about $150-$160 million," Black stated. "It's not been a capital intensive build."

The operation will commence at reduced throughput rates as mining begins from the peaks of the deposit before transitioning to full pit mining. Management projects reaching the nameplate capacity of 20,000 tonnes per day by the third quarter of 2026, with production guidance of 60-70,000 ounces during the 2026 ramp-up year before achieving 100,000 ounces annually from 2027 onwards.

Operational Risk Factors and Mitigation Strategies

Black acknowledged specific technical risks associated with the run-of-mine heap leach operation, characterising oxide heap leaching where actual performance cannot be fully validated until commercial operations commence. The company targets 75% gold recovery from run-of-mine material and will continue metallurgical test work through the ramp-up period and into the phase two expansion planning.

Water logistics represent another key operational variable. The project currently trucks approximately 800 tonnes of water daily to site, a figure that must scale to 2,100 tonnes daily at full production. Black indicated the company is establishing operational rhythms for this logistics chain, with water already visible in the pregnant leach solution ponds demonstrating the viability of the trucking approach.

"The mystery of water is I hope gone from this story," Black noted regarding concerns about the water supply strategy.

The operation will also refine its drill and blast protocols during early operations to optimise fragmentation to the target 4-5 inch size range, representing typical operational learning curves for new mining operations with young, locally-hired Chilean teams.

Interview with Alex Black, Executive Chairman of Rio2 Ltd.

Substantial Organic Expansion Potential Beyond Initial Project Scope

The Fenix Gold starter project represents only 1.7 million ounces of the property's 5 million ounce resource outlined through drilling between 2010 and 2014. This larger resource envelope was defined using an $1,800 per ounce gold price pit shell, creating significant potential for reserve expansion in the current $4,300+ gold price environment.

Rio2 will initiate exploration drilling around the existing orebody in 2026 for the first time since acquiring Atacama Pacific in 2018, targeting extensions rather than satellite deposits. Management expects to announce drill results throughout 2026 and 2027, culminating in a feasibility study for phase two expansion by late 2027 with an updated resource potentially reaching 5-7 million ounces.

This organic expansion pathway provides a clear catalyst timeline whilst the initial operation demonstrates technical and operational performance, with high-margin production revenues available to fund exploration and future expansion capital requirements.

Condestable Acquisition Adds Immediate Cash Generation and Diversification

The December acquisition of Condestable, an operating underground copper mine in Peru, fundamentally altered Rio2's risk profile and financial trajectory. The transaction added 10 years of proven and probable reserves to the company's asset base, representing an unusually long reserve life for any producing operation and eliminating near-term exploration or reserve replacement pressures.

Condestable produces 27,000 tonnes of copper equivalent annually (60 million pounds copper) at current throughput rates of 8,400 tonnes per day, generating clean concentrate grading 80% copper and 20% precious metals. At current metal prices, the operation generates over $100 million in annual free cash flow after taxes with sustaining capital requirements below $10 million per year.

"We didn't want to get into a company that we had to find new people and rebuild it and get it sorted out," Black explained. "This fit us really well because it's a well-run operation that doesn't have social issues, doesn't have technical issues, doesn't have environmental issues."

The transaction exemplifies opportunistic acquisition strategy rather than competitive auction processes. Rio2 identified the opportunity through its extensive Peru networks built over 25 years of in-country operations, acquiring an asset that larger copper producers overlooked due to its modest 60 million pound annual production scale.

Multi-Jurisdictional Risk Mitigation Strategy

The Condestable acquisition directly addresses a vulnerability Black characterised as potentially fatal for single-asset junior companies. Rio2's own experience with a three-year environmental impact assessment delay in Chile between 2018 and 2021, despite the issue not resulting from company actions, demonstrated how external factors beyond management control can derail development timelines.

"After what happened to us in Chile with that EIA issue, we always said to ourselves there is a good example for all junior companies who are one asset companies that you can die in 5 seconds if something bad happens," Black noted. "If you don't have multiple assets, I think that's a big weakness."

The Peru-Chile split provides jurisdictional diversification whilst keeping operations within regions where management maintains deep operational experience and local relationships. Peru currently ranks as the best-performing Latin American economy post-COVID with mining as the primary economic driver, whilst Chile's mining-friendly regulatory environment has historically supported large-scale mineral development.

Strategic Positioning for Further Consolidation or Corporate Transaction

Rio2 positions itself as an active consolidator in the junior to mid-tier space rather than a long-term mine operator building 20-year corporate infrastructure. Black explicitly referenced G Mining as a relevant market comparable, noting that company's $8.5 billion market valuation versus Rio2's current $1.2 billion whilst operating two assets similar to Rio2's emerging profile.

"We're not building a company for the next 20 years. I can tell you that because I don't have 20 years in me," Black stated candidly. "It's really about taking advantage of the situation, taking advantage of the time, the metal prices and building something up that is very very valuable."

The company maintains an active M&A pipeline whilst emphasizing disciplined deal screening. Black noted Rio2 finished second on three gold acquisition opportunities over the past 12 months, demonstrating active sourcing activity even whilst advancing Fenix development. The company's restructured name - Rio2 Limited rather than Rio2 Gold, Copper, or Resources - intentionally provides flexibility to pursue value-accretive opportunities across commodity types.

Management's 15-person Lima office operates as strategic oversight rather than operational management, with local teams at both Fenix and Condestable handling day-to-day operations. This organisational structure provides bandwidth to evaluate and integrate additional assets without proportional overhead expansion, supporting continued M&A activity alongside organic development.

The Investment Thesis for Rio2

• First gold production from Fenix scheduled January 2026 provides immediate transition from developer to producer, with quarterly production reports serving as regular performance validation catalysts through 2026 ramp-up period targeting 60-70,000 ounces before reaching 100,000 ounces annually by 2027.
• Condestable's projected $100+ million annual free cash flow at current metal prices represents 8% annual cash yield on Rio2's $1.2 billion market capitalisation before considering Fenix contribution, with combined operations projected to generate $150-175 million annually once Fenix reaches steady-state production.
• Fenix's 5 million ounce resource base provides clear expansion pathway beyond 1.7 million ounce starter project, with current gold prices substantially above $1,800 pit shell pricing used in resource definition, potentially adding years of mine life through phase two expansion targeted for feasibility study completion by late 2027.
• Current valuation approximately 2x EBITDA on Condestable alone before attributing value to Fenix production or substantial resource expansion potential at either asset, with $1.2 billion market capitalisation representing modest premium to capital invested despite both assets entering production/operating phases where development risk substantially reduced.
• Strong balance sheet from operating cash flows combined with proven acquisition execution creates platform for additional accretive M&A, with management indicating active opportunity pipeline evaluation and successful $205 million financing demonstrating continued capital markets access.
• Multi-jurisdictional diversification across Peru and Chile mitigates single-asset binary risk whilst maintaining operations within regions where management holds deep operational experience, with 15-person Lima oversight office providing bandwidth to evaluate additional assets without proportional overhead expansion.

Macro Thematic Analysis: Multi-Asset Junior Producers Capture Premium Valuations

The junior mining sector faces a structural valuation challenge that Rio2's strategic evolution directly addresses. Single-asset developers trade at persistent discounts reflecting binary risk—permitting delays, technical issues, community opposition, or commodity price volatility can render years of development work worthless overnight. This discount persists even as projects advance through feasibility and permitting stages, as demonstrated by Rio2's own experience trading below intrinsic value during its three-year Chilean EIA delay despite the issue not resulting from operational deficiencies.

The transition to multi-asset producer status fundamentally alters this risk-return profile. Operating cash flows from one asset fund development and exploration at others, eliminating the recurring equity dilution cycle that plagues single-asset stories. Jurisdictional diversification mitigates country-specific regulatory or political risks that cannot be fully hedged through project-level insurance or structuring. Perhaps most importantly, established production provides quarterly performance validation that de-risks management execution capability in ways that even the highest-quality feasibility studies cannot achieve.

Current market dynamics particularly favor this positioning. Precious metals strength driven by monetary policy uncertainty, geopolitical tensions, and persistent inflation concerns has pushed gold toward $4,500 whilst silver approaches $80, creating windfall margins for near-term gold producers. Rio2's comparable positioning at $1.2 billion with production commencing at Fenix in January whilst Condestable contributes immediate cash flow suggests substantial valuation convergence potential as quarterly operational performance validates the strategic thesis.

TL;DR

Rio2 Limited transitions from single-asset developer to dual-producing platform in January 2026 with first gold pour from Chile's Fenix project (targeting 100,000 oz/year by 2027) whilst the recently acquired Condestable copper mine in Peru generates immediate $100+ million annual free cash flow. Management delivered Fenix on time and on budget at $150-160 million capex with 5 million ounce resource providing expansion potential, whilst Condestable offers 10 years reserves and 40% throughput expansion pathway. Combined $150-175 million projected annual free cash flow at current metal prices funds organic growth without dilution. Trading at 2x EBITDA versus comparable producer multiples of 4-6x with proven Latin American operating track record and active M&A platform positioning for eventual corporate transaction within 3-5 years.

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