Rio2's Fenix Gold Project Approaches 2026 Production Targeting 300,000 Annual Ounces Amid Soaring Gold Value

• Rio2 Limited (TSX:RIO) is developing the Fenix Gold project in Chile with first gold production scheduled for January 2026, backed by a 5 million ounce resource base and $50 million in secured funding from Wheaton Precious Metals.
• The project demonstrates strong execution with construction remaining on schedule and slightly under budget, featuring completed earthworks across 12 hectares and a systematic construction approach led by an experienced management team with a significant track record.
• Operations will target 20,000 tons per day processing capacity by August-September 2026 using heap leach technology with a 90-day cycle, though 50% of gold recovery occurs within the first 30-40 days for rapid cash flow generation.
• Long-term expansion potential includes plans for 300,000 ounces annual production over 10 years, requiring a 160-kilometer desalination pipeline from Copiapó with an estimated $350 million capital investment that could create over $3 billion in additional value.
• The company benefits from favorable market timing with gold prices exceeding $3,600 per ounce compared to feasibility study assumptions of $1,800, while representing genuine new production in a market dominated by merger and acquisition activity rather than organic growth.

As gold prices surge to near-record levels, Rio2 Limited stands positioned to capitalise on the price environment with its Fenix Gold project in Chile approaching first production in January 2026. The company's recent transition to the TSX mainboard reflects growing investor confidence in a project that represents one of the few new gold production stories in a market increasingly dominated by merger and acquisition activity rather than genuine production growth.

Construction Progress

The Fenix Gold project demonstrates exceptional execution discipline, with CEO Andrew Cox confirming the operation remains on schedule and slightly under budget. The earthworks phase has been completed, including the construction of leach pads and process solution ponds across 12 hectares of prepared ground. The company has already begun moving mineral to the pad, sourcing material from haul road construction to the mining pits.

Cox emphasised the project's systematic approach to construction sequencing:

"The internal aim of the company and the project is to start circulating solution in November. And as we finish off the plant, we sort of follow the sequence of processing. So we go to the absorption, finish that, and then the gold room will be the last part of the construction - probably late December."

This methodical construction approach reflects the management team's extensive experience, having previously built two similar operations with the same contractor relationships. The workforce has peaked at 1,600 people during the intensive construction phase, though the company targeted higher local employment percentages than the achieved 40% due to limited trained personnel availability in the Copiapó region.

Funding Certainty

Rio2 has secured its path to production through a gold prepayment arrangement with Wheaton Precious Metals, providing $50 million in remaining funding expected to be accessed in November. This financing structure eliminates the typical development-stage funding uncertainties that plague many mining projects approaching production.

The company's financial discipline extends to its construction contracting strategy, utilising fixed-cost arrangements for plant construction that protect against cost overruns while ensuring timeline delivery. This approach has enabled the deployment of additional personnel to maintain schedule integrity without affecting the project budget.

Interview with Rio2 Limited President & CEO Andrew Cox

Production Ramp-Up

The Fenix Gold project targets a processing rate of 20,000 tons per day, with production ramp-up beginning earnestly in January 2026. The transition from construction to mining operations will employ the same equipment fleet, comprising 40-ton trucks and 70-ton excavators, supplemented by additional trucks as mining capacity expands.

Cox outlined the operational timeline:

"We expect to achieve 20,000 ton a day, which is our processing rate that the project's designed for in about August-September, and then we'll carry that through until we can expand the project."

The heap leach operation employs a 90-day cycle, though approximately 50% of gold recovery occurs within the first 30-40 days, providing relatively rapid cash flow generation following production commencement.

Resource Base and Expansion Potential

The Fenix Gold project sits on a substantial resource base of approximately 5 million ounces of gold, acquired when Rio2 purchased the asset in 2018. The company deliberately avoided additional exploration expenditure during development, recognising that resource expansion would not enhance project valuations in the prevailing market environment.

However, with production approaching, exploration activities will resume to target the conversion of one million ounces of inferred resources to measured and indicated categories, along with testing depth extensions and boundary areas. The geological structure represents a massive, bulk-mineable deposit suitable for large-scale operations rather than selective mining approaches.

Water Security and Long-Term Expansion

The most significant long-term value driver involves securing sustainable water supply for expansion beyond the current trucked water arrangement. Rio2 is advancing discussions with two desalination providers operating in Copiapó, aiming to establish partnerships for scoping study development.

The proposed solution involves expanding existing desalination capacity and constructing a 160-kilometer pipeline with four pumping stations to overcome 4,000 vertical meters of elevation. While conceptual estimates suggest approximately $350 million in capital requirements, this infrastructure would enable expansion to 300,000 ounces annual production for 10 years.

Cox described the expansion value proposition:

"The resource supports basically 10 years of 300,000 ounces a year, right? And we haven't got hard numbers because we don't have hard water costs, but yes, it's over $3 billion worth of value in a rough estimate on what that looks like."

Risk Management

The decision to utilise on-site power generation rather than grid connection eliminates permitting complexities and construction delays, while providing operational flexibility. These generators were required for standby power regardless, minimizing additional capital requirements. While management remains committed to advancing the expansion phase, the initial environmental permit rejection has reinforced the importance of asset diversification. The company continues evaluating acquisition opportunities to reduce single-asset concentration risk.

Rio2's emergence as a new gold producer occurs during a period of significant industry consolidation, where much activity derives from corporate combinations rather than genuine new output. This positioning provides the company with strategic optionality as larger producers seek growth opportunities.

The Investment Thesis for Rio2

• Immediate Production Catalyst: First gold production in January 2026 provides near-term value realisation with established timeline and budget certainty
• Favorable Gold Price Environment: Project economics benefit significantly from current gold prices above $2,400, substantially higher than feasibility study assumptions
• Experienced Management Team: 11-year partnership between key executives with proven track record of successful mine construction and operation
• Funded to Cash Flow: Wheaton prepayment arrangement eliminates development financing risk, with cash flow generation beginning within 90 days of production start
• Substantial Expansion Optionality: Resource base supports 10+ years of expanded production at 300,000 ounces annually, potentially creating $3+ billion in additional value
• Strategic Acquisition Target: New production profile and established operations platform attractive to major producers seeking growth opportunities
• Simplified Operations: Heap leach processing with minimal mechanical complexity reduces operational risk and maintenance requirements
• Exploration Upside: One million ounces of inferred resources provide near-term conversion opportunities without significant exploration risk

Rio2's Fenix Gold project represents a compelling investment opportunity combining near-term production certainty with substantial long-term expansion potential. The company's disciplined execution approach, experienced management team, and strategic positioning during favourable gold market conditions create multiple pathways for value creation. While single-asset concentration remains a consideration, the immediate production timeline and established expansion framework provide investors with both income generation and growth optionality in a proven geological setting.

Macro Thematic Analysis: New Gold Production in a Consolidating Market

The global gold mining industry faces a fundamental supply challenge as existing mines mature and new discoveries become increasingly rare and expensive to develop. Major producers have responded through aggressive merger and acquisition activity, with companies like Newmont, Barrick, and Kinross pursuing scale through consolidation rather than organic growth. This trend has created a scarcity premium for new production sources, particularly those with expansion potential and established operational frameworks.

Rio2's Fenix Gold project emerges during this supply constraint environment, representing genuine new gold production rather than corporate reshuffling of existing assets. The company's timing proves fortuitous, with gold prices exceeding $3,600 per ounce compared to feasibility study assumptions around $1,800, dramatically enhancing project economics and cash flow generation potential.

The broader macroeconomic environment supports continued gold strength through monetary policy uncertainty, geopolitical tensions, and inflation concerns driving safe-haven demand. Central bank purchases remain robust, while retail and institutional investment demand has accelerated with gold's breakout above previous resistance levels.

For junior miners like Rio2, this environment creates strategic optionality beyond organic growth. Larger producers increasingly view established operations with expansion potential as acquisition targets, particularly when management teams demonstrate execution capability and operational expertise. The Fenix project's substantial resource base, proven processing technology, and clear expansion pathway align with industry consolidation trends.

TL;DR

Rio2 is developing Chile's Fenix Gold project for January 2026 production, funded through to cash flow with $50M from Wheaton. The project sits on 5M ounces, targeting 20,000 tpd processing with potential expansion to 300,000 oz/year creating $3B+ value. Experienced management executing on-time, under-budget construction while gold prices hit $3,600 - double feasibility assumptions. Represents rare new production in consolidating market with both near-term cash flow and transformational growth potential.

Frequently Asked Questions (FAQs) AI-Generated

Q: What makes Rio2's timeline credible given the industry's track record of delays?‍

A: Rio2's management team has an 11-year partnership with a proven track record of building two previous operations using the same contractor relationships. The systematic construction approach, fixed-cost contracting arrangements, and current on-time, under-budget performance provide credible evidence of execution capability. The January 2026 production target is supported by completed earthworks and a methodical construction sequence already underway.

Q: How does the water solution for expansion actually work and what are the risks?

‍A: The expansion requires a 160-kilometer pipeline from desalination facilities in Copiapó, involving existing providers who already operate desalination plants. The infrastructure includes four pumping stations to overcome 4,000 vertical meters of elevation. While the $350 million capital estimate needs refinement through scoping studies, the technical solution leverages proven desalination technology and existing operational expertise in the region.

Q: Why should investors believe the $3 billion expansion valuation estimate?

‍A: The valuation is based on the resource base supporting 10 years of 300,000 ounce annual production at current gold prices exceeding $3,600 per ounce. While management acknowledges these are rough estimates pending detailed water costs, the underlying resource geology supports the production profile, and current gold pricing provides substantial economic margins even with conservative cost assumptions.

Q: What are the main risks to the investment thesis?

‍A: Key risks include single-asset concentration in Chile with potential political/regulatory changes, water infrastructure execution complexity, and dependence on sustained high gold prices for optimal returns. The company's previous experience with environmental permit rejection demonstrates regulatory risk, though management has simplified the current project scope. Operational risks are mitigated by proven heap leach technology and experienced management, while expansion risks can be evaluated through scoping studies before major capital commitment.

Q: How does Rio2 compare to other gold developers approaching production?

‍A: Rio2 represents genuine new gold production rather than corporate restructuring common in current M&A activity. The combination of secured funding, experienced management, substantial resource base, and clear expansion pathway differentiates it from typical development-stage companies. The project's advanced construction status and near-term production timeline provide less execution risk compared to earlier-stage developers, while the expansion optionality offers growth potential beyond initial production scenarios.