Rio2 Limited (RIO) Earnings Call Transcript & Summary

[Audio Gap] important to us, and there's 2 aspects to that, that we'd like to reflect the first 1 is before Rio2 it was are 1 -- the 1 was Real Alto Mining, which operated in Peru from 2011 through 2015. We built and operated 2 heap leach gold mines, Larnacaindow, and that was subsequently purchase or taken out by resources at end of 2015. And effectively, 80% of the people who are now in the Rio2 experience come from that previous history. So there's an 11-year history of a lot of these people including the directors, most of them were there too. And the second point, I guess, we'd like to make is that we're a very land-based company. Our management technical offices located in Lima Peru and the management team was pretty much entirely Peruvian. So we're a little bit different from your average company. The corporate office effectively is in Lima. We have a small presence in Vancouver with team who worked from home. And recently, we've transitioned from being a developer into 2 asset producers. So Fenix Gold, which we've been developing in Chile for the last 8 years, is now in the ramp-up here. And in , which is an underground copper mine located south of Lima in Peru has a producing asset that was acquired in February this year, and we're now basically to asset producer with the ramp-up in progress. corporate snapshot last week before the gold price Craton Monday, we were basically a $3.65 share price, which was equivalent to almost USD 1.5 billion of value. Some of our biggest shareholders are on that list. You can see BlackRock probably the #1. And then a lot of other names that I'm sure most of you will probably understand or recognize 7% of the company is owned by insiders. So we have 2 assets, as I mentioned, and what we consider to be Tier 1 jurisdictions. Our first asset, which is the development asset now in ramp-up years old Fenix Gold is a high altitude open cast hepatic oxide gold mine in Atacama region of Chile. It's basically situated at an altitude of 4,600 meters for the process plant and the mining pits are located as high as 5,000 meters. So it's a difficult environment. And recently, with the weather events in Chile that we've experimented we've been impacted quite badly in Q3 by those events. You can see on that map that it's located approximately 160 kilometers from Copiapo, and that's basically that black line on the screen is an international highway, which goes across to Argentina. And the Fenix Gold is located very close to project and the Murray Konga Belt, which is a prolific gold zone has over 80,000 ounces have got identified several projects from Akero's or Kingsgate up in the north down through that sort of early-stage development assets, Siriosali, Caspiche to the South. We mentioned that this whole area is water challenged scenario where there's a lot of potential gold deposits put no water for mining. So the Fenix Gold project was standard by tracking water from Copiapo up to the third international Highway 31. We're doing about 1,400 cubic meters per day of truck water to allow the operation to work and part of our expansion plans to the Fenix Gold project or the implementation of a land pipeline in the next 5 years or so, which allows us to take that project from the 100,000 ounce level. at 80,000 tonnes a day in the future, being able to produce around 300,000 ounces, okay? So 20,000 tonnes a day is our nominal rate for the state project with the water transport by truck that's a bottleneck on our project currently. Some information to the reserves for the Stage 1 project, the 20,000 tonnes per day, 115 million tonnes at 0.48, roughly 0.5 grams per tonne. This is a bulk People Leach project, very low stripping ratio of 0.84 initially. And once we hit our mining rate of 20,000 tonnes a day during this ramp-up year next year, we would expect to use around 100,000 ounces. We have a big land package. We're exploring near mine at the moment at depth and around the perimeter of the project. We're not looking at original exploration. Our feasibility costs was $1,870 gold back in 2023, that has changed, obviously, diesel prices and labor costs have gone up, but then again. And we're looking to expand the project in about 5 years' time to 80,000 tonnes a day to 300,000 ounces. There's some photos recently from the aftermath from the weather events that we experienced. Top-left to leach pad. We've basically had 3 meters of snow during July and August. Fenix typically receives 15 centimeters of snow per year, so that the quantum of snowfall that we have has been extremely difficult, and this impacted operations quite badly. The photo to the bottom left, which is the operations area, after the snowstorm, you can see that the containers and the offices were practically buried in snow. And whilst the storm costs 5 days' worth of time, the cleanup and getting the core roads opened the gain was another 5 days. So you can see the excavators and opening up or roads again. So difficult times and the leach pad, very difficult to work with recovering of snow in the leach band. The top right front is Fenix South, where we're mining currently. And fortunately, the snowfall wasn't so bad there. So Fenix is a big bulk low-grade oxide deposit. -- it's effectively all volcanic Datrium. So those 3 peaks. You can see our 3 coins that were part of a volcanic complex. And within the middle of each cone, there's a vertical bridge structures rising up from below and the bridges are mineralized. Around the bridges and the endocytes and decide host rocks, there is sheet-entockwork system. And so there's 2 types of all this, the prices which contain class has broken up stock work thrown up in the bridges. And the Hostrock around them, there's the sheeted vein systems, which are about 30% of the mineral or 70% of the mineral contained within the bridges. The circles at the bottom of the long section are basically areas where we don't have enough drilling with the gold price now at over $4,000. The black line you can see on that cross section a long section is $1,800 gold shell and we're drilling constraints. So we've just been completing a drilling campaign at depth below the existing resource. The black holes were completed prior to the snow storms, the gold holes still to be done will restart them probably November, December once the weather improves. And with that information completed next year, we would expect to be publishing an updated resource estimate probably early Q3 once the mineral results of the lab results are back. The model has been worked and we have at an acceptable level to public. So there'll be a big increase in resources from low-grade material moving into ore and the new resources that deficit will be adding to the deposit. The second project is the Underground mine, you can see on the section, it's located 90 kilometers south of Lima, approximately 2 hours one of the dream projects in Peru because it's located on the coast at low altitude and very few projects or that lucky and -- it's a historic project that's been working for over 60 years. So 60 years of replacement of reserves today. They still have 34 -- 36 million tonnes, sorry, of almost 1% copper equivalent, that's effectively made up 40% copper, 20% precious metals, of which the bulk is gold accounting, producing annually around $25 to tonnes of copper equivalent, roughly 20,000 copper and the rest are precious metals. Very good low operational costs of $2.52 per pound produced. Again, a big land package concession package, which has not been explored in the last 15 years by the last previous owners. They've been focused on production. And also comes with an expansion potential approved permit that was received last month to take our plant production 8,400 and step it up to initially 10,000 tonnes per day processed and at 10,000 tonnes a day, we can then step to 12 with the permit for an additional 20%. So we're currently looking at the expansion plans for the CapEx that we require. We estimate roughly $50 million CapEx spend in for the expansion to 112. And we'll be basically, I guess, approving that with the Board next quarter and announcing that to the market that we're undertaking that expansion. So follows from the operation one of the mine portals to the top left, drilling underground top right, loading underground is bottom left and then mineral being delivered to the process plant in the bottom right-hand corner. So our H1 or Q2 highlights, basically, we continue with the ramp-up year. We had a slow start in Q1. If you remember, we didn't achieve our targets. Some of those issues almost those issues were resolved in Q2. The labor requirement for the truck drivers was resolved. The equipment issues was resolved with mining fleet purchased for the project deriving from an and we basically took our production from 13,000 to 16,000 over the quarter. We're looking to get to 20% as a steady state sort of nominal mining rate. At the same time, we also had some really freezing temperatures during the May period. So that the El Nino pattern has bought a colder-than-expected winter, we were minus 23 degrees during May, and we've had a very fast learning curve on the leach pad of using covers to printing the bad freezing, we did have some freezing issues as part of that experience. But by July, we had been able to employ double-layer plastic covers on the leach pad, which we're providing a 12-degree temperature difference from temperature. And as a result of that during the July and August storms to keep functioning and circulating solutions. So it was a positive as part of that experience. Condosat produced, as expected, very stable production. 725,000 tonnes of processed at 1% copper. And basically, the costs were maintained other than diesel, which we can't control. So at the end of the quarter of Q2, I know we're almost on Q3, but we had almost $50 million in the bank. So we have cash on hand. And then we have kicked off an exploratory program in Q3 coming up in Contestable around what we were previously historic open pits. Fenix Gold drilling that we talked about, the drilling around the perimeter of the project and to depth. And we published an updated technical report on the constable reserves updating that on report, which was over 4 years old. We also did work on ore sorting for Condestable. This is something that may work it may not. We are committing to purchasing a trial machine, a pilot operation that would process up to 1,500 tonnes per day and will trial that next year. It's been imported, it arrives end of October. If it works at all be an additional source of material from low-grade stockpiles from waste dumps at 0.4 copper that we have on the project 10 million tonnes, and that potentially as part of the expansion plan in Condestable from 4 to 10 to 12. But remains to be seen if that's really -- if the lab results can be replicated at an industrial scale. Okay. For Q3, we've published this on Monday morning, so we can talk about it. You can see during July, the impact of the first snow event that was effectively 1 meter of snow fall reminding everyone that 15 centimeters is the typical annual precipitation of snow and then recovering from that at the end of July and into August, and we got hope if the second event that brought 2 meters of snow and again shut the operation down for over 2 weeks. And then during September, we've had 2 or 3 smaller 24 out of 48-hour events with the same thing operations shutdown because of white-outs, blizzard, snow-driven conditions and disruption to mining. So the net result of that is the gold production. You can see that in August, September, we were basically achieving 4,000 ounces per month and then to July, June, July. And then we've dropped to 2,400. September looks like it's going to be closer to 2,900 when we finish the month. And then if we have the good weather conditions for the rest of the quarter -- the fourth quarter, we'll be able to ramp that up again to 4,000 initially 600,000 which will get us to approximately 40,000 versus the 60,000 that we guided at the start of the year. So it's a combination of the slow start in Q1 and the weather impact that we've experienced during the winter season. So basically, we have big growth plans within both assets. We've sort of talked about it. The Fenix expansion to the project requires a water pipeline. We've been working for over a year now with 2 desal providers that have existing infrastructure today. They have -- we're at the point now where we have term sheets presented by both of those providers, and we'll be making a decision into Q4 on which provider we go fourth with, and that information will then allow us to publish the long-awaited PFS study for the expansion. So we expect to see that in December. And that, I guess, will give on the of what the Fenix expansion looks like when we have a water pipeline, we moved to 20,000 to 80,000 tonnes per day and production of up to 300,000 ounces per year, which takes advantage of the resource. The resource for Fenix from 2023 is 5 million ounces at 0.3. So again, a big deposit, bulk low-grade mineralization. The near mine exploration that has been suspended. We were hoping to do that mineral resources in an update at the same time hasn't happened. So the drilling will restart November, and we would hope to be able to publish an updated statement 2027, let's say second half, okay? So once we decide on a provider for the project expansion, we then move into an engineering stage, initially engineering to support the EIA application. Then the engineering study continues in parallel with the EIA application moving through to detailed engineering, and we would hope to have a construction decision presented at the end of 2028. That pipeline CapEx could be anywhere between $150 million up to $450 million depending on the configuration of the pipeline and other offtakers. The on-site CapEx full expansion of Fenix to 80,000 tonnes as estimated to be around $200 million. So that's something we'll be looking at. We'll be turning that into a feasibility study at some point next year or early 2008. And the construction of the pipeline once and the project expansion at the same time once a decision is made is expected to be about 2 years. So basically, that would have us expand in Phoenix in 2031, late 2031 in the ramp-up during 2032 to maybe 2033, 80,000 tonnes per day placed on the leach pad. Condestable continues to operate at 8,000 tonnes a day. The ore sorting pilot plant that will start at the end of the year, and we'll run that for 1 year if the results are encouraging. And the near-term expansion based on the permit that was approved in the last month to take it to 10,000 tonnes a day, construction decisions imminent on that and procurement would start Q4. The updated -- sorry, the expanded plant work would start second half 2017 and carry through to 2028, and late '28 would be ramping the project to 10,000 tonnes per day. The ramp to 12,000 potentially involves ore sorting, but we also have 2 historic open pits. Condestable, there's information that we cannot publish because it hasn't got the quality controls QCA hasn't been done on those but there's indications that there's a good surface resource of millions of tonnes at 0.4 at Condestable open pit. So we'll be drilling that. We've started last week for 16,000 meters this year. next year and at the end of 2017, early out will be a surface resource for kind of sail copper deposit. So that's something that could potentially lead into a future open cast operation. Again, we don't know it could additionally be material that supplies the plant during the 12,000-tonne a day expansion. Lastly, just quickly to finish, we do have Tungsten projects. This is something that came with the shell company that was used to form Rio2. So prospective resources was the shale company. This project has been sitting on the shelf for 8 years almost now. And we've dusted it off, given that tungsten prices are favorable at the moment, critical metals. We completed a site visit, we published a 43-101 based on the existing drilling information, the historic drilling done in 2005, 2008. And you can see there's some intercepts that are okay that probably not well, but they're not bad either. So we're committing next year to do a summer drill campaign on this project. It's located approximately 70 kilometers southeast of and that 2,000-meter drill program will allow us to make a decision on what we do with. The idea is probably to spin it off to a different company or sell it. As it's not something, I think, that is Rio2 that we would expect or want to develop ourselves. So that's it. Thank you. Any questions, please? All right.

Well, I might jump people with 1 in the last couple of seconds, Andrew, if that's all right. contestable given the pre positive funding, I know Sorry SP1 I'm seeing it just you've given the positive outlook for common. Is there an opportunity to bring forward that open pit and maybe up to the.

Yes, the question is there an opportunity to bring forward in time with the open pit and upscale Difficult because it's a surface operation in Condestable currently approved for an underground mining operation. So we have to go through an EIA process. If we potentially -- that's coming back, we're very positive, and we could see a significant resource developing we could possibly fast track that permitting process. But I mean 5 years is probably reasonable fast track, maybe 4 years. We've probably got a year of that, maybe, but it's unfortunately not something I mean we really need to understand what the resources may even warrant a new plant. So instead of a 12,000-tonne existing plant, maybe it's 50 million, 60 million tonnes of 0.4 copper that would require a 20,000 tonnes day plan. So we sort of need to really understand what the resource is and what we're actually trying to permit through the EIA process. So we could possibly cut a year off that, maybe.

Okay. Brilliant. Look, thanks again, Andrew, for a really interesting presentation.

Okay. Thank you.