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RIO: The Largest Permitted & Financed Project in the Americas

What you need to know:
• Rio2 owns the Fenix Gold Project which is the largest fully permitted and financed gold heap leach project in the Americas.
• The Company recently obtained a $174M construction financing package and has since moved forward with construction.
• Rio2’s management team comes from Rio Alto, which was highly successful prior to being merged with Tahoe Resources in a C$1.3B transaction.
• RIO trades at only $26/oz compared to its peers at $88/oz.

Rio2 Limited (RIO:TSXV, RIOFF:OTC) is focused on the construction and future production of its permitted and fully financed Fenix Gold Project in Chile. The Company recently obtained $174M in a construction financing package and is proceeding with construction and initial production is to be expected in early 2026. We are initiating coverage on Rio2 Limited with a BUY rating and target price of C$1.40/share.

Investment Thesis Summary
Largest Permitted & Fully Financed Gold Heap Leach Project in the Americas. The Fenix Gold Project is host to an M&I resource of 4.8Moz (at $1,800/oz Au), an NPV5% of $546M (at $2,250/oz Au), and is expected to generated $132M in EBITDA in year two of production.

Financed & Under Construction. In October 2024, RIO announced a financing package to fund the construction of the Fenix Gold Project, obtaining $174M across debt and equity. We estimate that RIO has a pro-forma cash balance of $187M, providing ample capital to fund the construction of the mine to completion. Management is targeting to spend $127M in construction capex and $47M in other costs including GST & working capital.

Low Construction Capex & Limited Dilution. The operation has many unique benefits like simplistic metallurgy, no tailings, low strip ratio in the first few years of the mine life, amongst other aspects that have allowed the initial capex to be minimized. The project financing was completed with only $68M raised in equity capital, minimizing shareholder dilution.

Large-Scale Asset with More Upside (Staged Development Approach). RIO is developing the Fenix Project in a staged approach, initially processing 20,000tpd (avg. 82Koz/yr) with plans to ramp to 80,000tpd (250-300Koz/yr+ avg.) after the mine is in production, a water solution is in place, and new permits are received.

Proven Management Team. RIO’s management team, including CEO Andrew Cox and Chairman Alex Black, have a track record of success from Rio Alto Mining. The team grew Rio Alto from a C$12M market cap to the merger with Tahoe Resources in a C$1.3B transaction in 2015. Rio2 also has a stellar cap table with 38% ownership from institutions, 8% from management/board, and 7% from Eric Sprott.

Discount to Peers. RIO trades at 0.4x NPV and $26/oz compared to mining companies in similar stages at 0.5x NPV and $88/oz. We will note that RIO’s NPV only includes Phase 1 of its production, and thus, would be much cheaper on P/NPV when factoring in Phase 2.