Rio2 Limited (RIO:TSXV) - Management Interview: CEO Andrew Cox

Concise executive summary — business focus

Rio2 completed construction and commissioning of the Phoenix gold heap‑leach plant on time and on budget in 2025; first gold pour occurred January 2026. 2026 is a transition year combining Phoenix ramp‑up and close‑out, multi‑year expansion studies/PFS work, an exploration drilling program, and integration/optimization of a newly acquired Peru copper–gold underground mine.

High‑level recap

• Phoenix construction: completed on schedule and within budget; plant commissioned late December 2025 and official gold pour in January 2026. Management presents this as confirmation of repeatable execution capability (third build/operate delivery).
• 2026 priorities:
  • finish construction close‑out and operational ramp at Phoenix,
  • advance Stage 2 expansion studies / PFS,
  • commence exploration drilling (deeper/perimeter infill),
  • integrate and optimize acquired Peru copper–gold mine.

Key operational metrics, KPIs and targets

Phoenix (Stage 1)

• Design throughput: 20,000 tpd.
• Ramp / timing:
  • Target to reach ~20,000 tpd around October 2026; steady state by Nov–Dec 2026.
  • Ramp year production: ~60–70k oz.
  • Steady state production: ~100k ozpa for roughly 4 years (Stage 1 assumptions).
• Strip ratio: ~0.85 (Stage 1).
• Water:
  • Current trucked supply ~1,200 m3/day.
  • On‑site ponds: ~30,000 m3 (site) + ~8,000 m3 (camp).
  • Need ~2,000 m3/day trucked to sustain 20,000 tpd.
• Exploration / MRE:
  • Deeper and perimeter drilling planned from Feb 2026 to convert inferred → indicated.
  • New Phoenix resource update targeted Q4 2026 (December possible).

Phoenix expansion (Stage 2)

• Target throughput: ~80,000 tpd (~4× Stage 1).
• Water requirement: ~100 L/s vs current ~23 L/s — requires pipeline from the coast/Copiapo area.
• Indicative pipeline/infrastructure capex (2022 study adjusted for inflation): previously US$250–300M; management noted potential for increases (wide possible range up to ~US$400M+).
• Production potential: ~300,000 ozpa for ~10+ years (expansion scenario).
• Timeline estimate: approximately 5 years from decision to production (studies/basic engineering ~2 years, EIA ~2 years, construction ~2 years — management used ~5‑year planning horizon to commissioning).

Peru acquisition (underground copper–gold mine)

• Current throughput: ~8,400 tpd (concentrator).
• Production: ~27,000 tonnes Cu/year (plus ~80k oz equivalent Au sales — manager estimates).
• Revenue mix estimate: ~80% copper, ~18% gold, ~2% silver (price‑dependent).
• Permitting / expansion path:
  • Application to increase to 10,000 tpd expected approval ~Aug 2026.
  • Administrative allowance could add ~20% to reach ~12,000 tpd.
• Tailings: conversion to dry‑stack filtration under construction (completion due end of quarter), designed to be upgradeable for 12k tpd.
• Near‑term integration: 6‑month “observe & consolidate” window; management expects formal consolidation and operational plan by June–July 2026. Updated MRE/resource report targeted Q1–Q2 2026.

Acquisition structure (deal mechanics)

• Management described the acquisition as opportunistic and “cheap” relative to upside.
• Financing mix (as discussed):
  • Cash raised,
  • Equity: ~US$35M in restricted shares to seller with a 9‑month hold,
  • Vendor financing: ~US$80M loan from seller,
  • Staged cash payments over the next three years (approx. US$10M, US$5M, US$15M referenced).
• Deal negotiations used a copper price assumption of ~US$4.40/lb.
• Seller alignment secured via equity rollover and vendor debt, limiting near‑term cash outlay.

Frameworks, processes and playbooks

• Project execution playbook: build → commission → ramp (repeatable team and preferred EPC contractors).
• Project development studies:
  • MRE updates (infill plus deeper drilling to convert inferred → indicated).
  • Prefeasibility study (PFS) for Phoenix expansion (target end Q1/early Q2 2026; timing may slip).
  • Environmental Impact Assessment (EIA) for pipeline & expansion (multi‑year).
• Integration playbook for acquisitions: 6‑month observe & consolidate window, then operational consolidation and expansion planning.
• Financing playbook: use vendor financing + equity rollover + staged payments to preserve cash and align seller incentives.

Concrete execution evidence (case studies)

• Phoenix: 14‑month construction from mobilization to commissioning (Nov 2024 → Dec 2025); successful gold pour; management cites prior project successes (Rio Alto / La Arena / Shahuindo) as experiential backbone.
• Peru mine: site visit found a tidy, efficient operation with ~10 years of drilled reserves ahead of existing workings and comparatively low immediate development capex to maintain production.
• Use of preferred contractors (HLC and Straon) who supported prior builds — lowers execution risk.

Operational constraints and risks (actionable)

• Water is the binding constraint at Phoenix:
  • Trucked water limits Stage 1 to ~20k tpd.
  • Stage 2 requires pipeline infrastructure (capex and permitting risk).
• Early mining challenges:
  • Initial benches will need more drill/blast/road work; operations will be “messy” before normalized full‑face mining.
• Expansion risks:
  • Pipeline capex and permitting timelines are long and capital‑intensive; sharing pipeline costs with other users could materially improve economics.
• Integration risk for Peru asset:
  • Need to consolidate two companies, retain/align staff, and understand local practices before implementing major changes.

Investor / execution catalysts to watch (milestones)

• Phoenix:
  1. Ramp to 20,000 tpd (Oct–Dec 2026).
  2. Phoenix MRE update (target Q4 2026).
  3. PFS for Phoenix expansion (target end Q1 / may slip to Q2 2026) and publication of water/pipeline capex/OPEX assumptions.
• Peru asset:
  1. Integration progress during the 6‑month consolidation window (formal plan by June–July 2026).
  2. Permit decision to expand to 10k tpd (~Aug 2026).
  3. Dry‑stack filter plant completion (end of quarter) — commissioning and upgradeability.
  4. Updated MRE/resource update (target Q1–Q2 2026).
• Financing / corporate:
  • Monitor staged payments, vendor debt terms and any additional capital raises if management pursues further M&A.

Management, organization and strategy

• Leadership:
  • CEO: Andrew Cox.
  • COO / Founder: Alex (surname not specified in source).
  • Core team has prior success building and operating La Arena and Shahuindo (Rio Alto lineage). Emphasis on experienced in‑country Peruvian technical staff and continuity.
• Strategy:
  • Primary focus: gold developer / operator (organic growth at Phoenix).
  • Opportunistic M&A: bolt‑ons that are strategic and accretive (Peru copper acquisition cited as opportunistic).
• Resource allocation:
  • With Phoenix moving to operations, management expects internal construction/technical capacity to pursue M&A or take on expansion projects.

Numbers / estimates (quick reference)

• Phoenix:
  • Target 20,000 tpd → ~100k ozpa steady state; ramp year ~60–70k oz.
  • Water: trucked supply ~1,200 m3/day → need ~2,000 m3/day for 20k tpd.
  • Water flow: Stage 2 needs ~100 L/s vs current ~23 L/s.
  • Strip ratio: Stage 1 ~0.85; Stage 2 ~1.3.
  • Expansion capex (prior studies): US$250–300M (management cautioned this may rise).
• Peru mine:
  • Current throughput ~8,400 tpd; production approx. 27,000 t Cu/year.
  • Revenue mix estimate: ~80% Cu / ~18% Au / ~2% Ag.
  • Expansion potential: permits to 10k (and administrative allowance to ~12k) tpd.
• Deal financing:
  • Restricted shares to seller ~US$35M, vendor financing ~US$80M, staged payments ~US$10M / US$5M / US$15M over 3 years.

Actionable investor takeaways

• Execution credibility: strengthened by Phoenix delivered on time and budget and by experienced management / contractor relationships — reduces execution risk relative to peers.
• Short‑term catalysts to monitor:
  • Phoenix ramp to 20k tpd (Oct–Dec 2026),
  • MRE updates (Phoenix Q4 2026; Peru Q1–Q2 2026),
  • PFS for expansion and permitting milestones for Peru (10k/12k).
• Key gating factor: water availability and the assumptions in PFS / water solution studies — single biggest driver of material upside at Phoenix.
• Integration watchlist: Peru asset consolidation (staff retention, production stability), completion and commissioning of dry‑stack tailings filter, and impacts of staged payments / vendor debt on cash flow.

Presenters / sources

• Andrew Cox — CEO, Rio2 (interviewee)
• Ben — interviewer, Atrium Research