Rio2 (TSX:RIO) - Fenix Gold Ramp-Up Persists as Condestable Expansion Takes Shape

Rio2: Fenix Ramp-Up and Condestable Expansion

Rio2 has moved from developer to producer, with Fenix Gold in Chile and the acquired Condestable copper-gold mine in Peru. CEO Andrew Cox described a year focused on ramp-up, weather disruption, operating improvements, and planning growth across both assets.

Fenix Gold: Ramp-Up, Weather Impact, and Operating Lessons

• Ramp-up progress: Fenix produced about 4,500 ounces in Q1 and 9,000 ounces in Q2. It averaged 20,000 tonnes per day (tpd) on the leach pad for the first 10 days of July.
• Weather-related disruption: Two severe snowstorms interrupted operations:
  • The July storm brought about 1 metre of snow over five days, halting work and requiring roughly four to five days to restore access.
  • A second storm on August 10 brought about 2 metres of snow. Clearing the leach area and affected access roads required about seven days of equipment work.
  • The company estimated the first event alone caused roughly 2.5 weeks of lost stacking. Management characterized the storms as exceptionally rare compared with the site’s roughly 15 cm average annual snowfall, based on 14 years of weather records.
• 2026 production outlook: Rio2 expects about 40,000 ounces for the year, below its roughly 60,000-ounce success case. Management said the lost production cannot be recovered within the remaining three months. The company plans to produce as much as possible; it reported a recent daily stacking record of 30,000 tonnes and expected to return to 20,000 tpd in October. It is considering whether a higher rate, potentially 25,000 tpd, can be maintained into next year.
• Next-year target: The mine was designed around 20,000 tpd and approximately 100,000 ounces of annual production. Management said additional water availability could allow more medium- and lower-grade ore to be processed, but it is still evaluating the mining plan and permitting implications.
• Water and ore moisture: Ore from Phoenix South has been arriving at about 4% moisture, versus an assumed 1%. That means less added water is needed to reach the roughly 10% moisture level required for leaching—about 60 litres per tonne rather than 90, a potential 30% water saving. Rio2 is assessing how to use that capacity.
• Leach-pad freeze protection: Cold weather caused cells to freeze in May. The original single-layer plastic covers provided about a 7°C temperature difference from ambient conditions; a double layer of black plastic increased that to about 12°C. Management said the change resolved the freezing issue.
• Operational preparedness: The storms showed where snow drifts accumulate and where equipment, generators, and protective measures should be positioned. The site’s generators are elevated on 2-metre pedestals to reduce the risk of snow blocking radiators. Management framed the disrupted ramp-up year as an opportunity to learn before full production.
• High-altitude workforce safety: At approximately 14,000 feet, the company uses truck video monitoring and Bluetooth-linked worker bracelets to help detect fatigue. It also limits outdoor exposure in winter, with workers taking indoor breaks after short shifts in severe cold.

Condestable: Expansion and Exploration

• Existing operation: Rio2 acquired the mature underground mine in February. Management described the on-site team and operating practices as strong and said it does not intend to interfere unnecessarily in day-to-day operations.
• Production expansion: The near-term plan is to expand the existing operation from about 8,400 tpd to 10,000 tpd, then potentially to 12,000 tpd over the medium term. Rio2 said it was finalizing technical design and capital requirements for the expansion; the transcript cites an estimated $50 million for the plant and associated underground infrastructure.
• Expansion timeline: The company expected to start procurement in Q4. Construction was planned for the second half of 2027 through the first half of 2028, with the goal of building in parallel without stopping the existing plant. Management targeted reaching 10,000 tpd in the second half of 2028. The 12,000-tpd step remains a subsequent expansion objective.
• Exploration-led value creation: Rio2’s stated role is primarily to support the operating team and add value through exploration. The company began a 16,000-metre surface drilling campaign around two historic open pits and plans a further 17,000 metres next year. It aims to publish a surface copper-gold resource by the end of 2027.
• Potential project scale: Management said a surface deposit grading around 0.4–0.5% copper could support a larger project. Results will help determine whether the operation needs a second plant or another expansion approach. These are longer-term scenarios, not committed plans.

Other Portfolio Priorities

• Tungsten project in Yukon: Rio2 revived a dormant project and secured an exploration permit for 2,000 metres of drilling next year, following discussions with local Indigenous representatives and the Yukon government. The work is intended to assess the historical data and inform whether to advance the project or pursue a standalone route.
• Fenix expansion study: The feasibility study has been delayed while the company finalizes water-supply terms. Management said it had narrowed the terms to specific numbers and hoped to select a supplier within about a month, after which those figures could be incorporated into the study.

Operating Playbooks and Management Takeaways

• Build operational resilience from disruption: Map where snow accumulates, stage clearing equipment accordingly, and protect vulnerable infrastructure.
• Use operating data to revise plans: Actual ore moisture and water use may support higher throughput or more lower-grade processing, subject to mine planning and permits.
• Preserve effective site teams: At Condestable, Rio2 plans to support an experienced operating team while concentrating its contribution on exploration and expansion.
• Stage investment against evidence: Drilling results and a resource estimate will guide decisions about Condestable’s longer-term plant configuration and scale.

Key Metrics and Timelines

Area Metric or target Fenix Q1 / Q2 production ~4,500 oz / ~9,000 oz Fenix 2026 outlook ~40,000 oz; ~60,000 oz was the stated success case Fenix design throughput / annual production 20,000 tpd / ~100,000 oz Recent Fenix stacking record 30,000 tonnes in a day Potential Fenix water saving ~30%; ~60 vs. 90 litres per tonne Condestable current throughput ~8,400 tpd Condestable planned throughput 10,000 tpd, then potentially 12,000 tpd Condestable expansion estimate ~US$50 million, as cited in the interview Condestable exploration 16,000 m this year; 17,000 m next year Condestable resource target End of 2027 Tungsten exploration 2,000 m planned next year Fenix expansion feasibility study Pending water-supply terms

Presenters and source: Andrew Cox, President and CEO of Rio2 Limited; interviewer for Crux Investor (addressed as “Annie” in the subtitles, though the name is not fully clear).