Rio2 Back on Track After Chilean Roadblocks

• Rio2 has received approval to move forward with its 4.8M oz Phoenix Gold Project in Chile after 18 months of delays
• While approval is positive, the delays have pushed back construction timeline and led to additional costs
• Financing discussions ongoing; streaming partner Wheaton Precious Metals and banks remain engaged
• Positive project economics, with expanded case showing improved valuation metrics
• Management focused on sensible financing package to move project forward in a challenging market

About Rio2 Limited

Rio2 Limited is a mining company focused on development of its fully permitted Fenix Gold Project in Chile. With 4.8M oz of M&I resources and reserves of 1.7M oz, Rio2 is aiming to build the third large-scale run-of-mine heap leach gold mine in the world. The company is led by Executive Chairman Alex Black, an industry veteran with experience building and operating mines across the Americas.

Interview with Executive Chairman, Alex Black

Approval Provides Path Forward After Extended Delays

After 18 months of waiting, Rio2 has finally received approval from the Chilean authorities to move forward with development of its Fenix Gold Project. This approval comes after a challenging period where initial declines from the Chilean government were challenged and ultimately overturned. With the Environmental Impact Assessment (EIA) now approved, Rio2 has a clear path forward to obtain remaining permits and progress towards a construction decision.

However, the extended delays have pushed Rio2 off of its initial development timeline by over 18 months, and they are now looking to start major construction activities in September 2024. There have also been impacts from inflation over this period, with updated feasibility study numbers in September 2023 showing increased capital costs. Alex Black stated that "unfortunately, what happened to us essentially was government federal government interference in a regional process".

Financing Discussions Ongoing in Challenging Environment

With the project delays and inflationary pressures, Rio2 will be looking to put together an updated financing package to fund the development of Fenix Gold. The company previously had offers from a collection of banks and streaming companies, but the delays and risk-off banking sector introduced significant uncertainty.

Rio2 has continued engagement with key potential financing partners like Wheaton Precious Metals and various project lenders. There is still interest in involvement with Fenix Gold, but modifications to previous agreements will be required given the changed timeline. The company will also need to deal with a very different financing environment, as Alex Black explained:

"When we were doing our financing discussions back 18 months ago we had BNP Paribas as the Lead Bank...BNP are out of the precious metals business. They're not doing it anymore. We still have Wheaton, SocGen..."

In addition to changes on the banking side, interest rates have risen significantly from 0% to 7% over the past 18 months. With metal prices off-setting inflationary pressures on operating costs, the key challenge is obtaining reasonable financing terms.

Attractive Expansion Potential

Despite the delays negatively impacting Rio2's share price and market capitalization, the core investment case for Fenix Gold remains compelling. Updated economic studies show strong returns at $1,650 gold:

• After-tax NPV(5%): US$210 million, rising to $314 million at $1,900 / oz gold
• After-tax IRR: 28.5%, rising to 37.2% at $1,900 / oz gold
• 91,000 oz average annual gold production during initial 12 years
• 54,000 oz average annual gold production during final 5 years
• Construction timeline of 14 months
• $1,237/oz gold Life of Mine AISC

Beyond the initial planned project, Rio2 has significant expansion potential which could establish Fenix Gold as one of the largest run-of-mine heap operations globally. The company is targeting an expanded case with pipeline delivery of water to support increased throughput. Though further complicated by permitting, successful expansion could increase peak production levels substantially from the initial case.

Conclusion

The delays imposed on Rio2 have been outside of management's control and very clearly political in nature. Now with the EIA approved, Alex Black and the Rio2 team have their opportunity to regain credibility in the market and showcase the positive attributes of Fenix Gold.

There are certainly still risks given the early-stage nature of the project, execution challenges in the region, and volatile markets. However, with gold prices remaining strong and Rio2's focus on prudent financing, the risk-reward of involvement appears skewed positively at the currently depressed valuation. Interested investors should closely monitor the company's financing discussions and project permitting progress throughout 2024.