Rio2 Limited (“Rio2” or “the Company”) (TSXV: RIO; OTCQX: RIOFF; BVL: RIO) is providing an outline of its plans to complete the financing for the construction of the Fenix Gold Project (“the Project”) in Chile.
The plan includes appointing an independent financial advisor, completing a Feasibility Study on the development of the Fenix Gold Project, reviewing and restructuring the precious metals purchase agreement with Wheaton Precious Metals International Ltd and re-engaging with lenders for the senior project debt facility of the Project construction financing.
Rio2 has appointed Endeavour Financial (“Endeavour”) to provide financial advisory services with respect to the financing and construction of the Fenix Gold Mine.
Endeavour will work closely with Rio2 board and management in developing the optimum financing solution for the Fenix Gold Project given the Project’s current status. Endeavour will provide a full-service approach to the financial advisory, which includes the review and restructuring of the existing precious metals purchase agreement, technical guidance during the completion of the Feasibility Study and dealing with lenders on the debt component of the financing.
An updated Pre-Feasibility Study was prepared for the Fenix Gold Project in August 2019 and amended and restated on August 3, 2021.
Since that date, and over the course of H1 2022, the Company completed detailed engineering and updated cost estimates for the purpose of financing discussions with lenders for the construction of the Project. Discussions with lenders were halted on July 5, 2022, when the approval of the Project’s Environmental Impact Assessment (“EIA”) was formally declined by the Chilean Government. Given the Project’s current status, the Company has decided to incorporate the detailed engineering into a new study and update operating and capital costs to reflect today’s cost environment. The gold price will also be updated to a more appropriate level, given the August 2019 study was based on a gold price of $1,250. This new study will be completed to a Feasibility level and is expected to be completed and published by the end of Q2, 2023. The Feasibility Study will be a key document for consideration by the Project’s potential lenders.
On March 29, 2022, Rio2 announced that it had received a deposit payment of US$25,000,000 from Wheaton Precious Metals International Ltd. (“WPMI”) in connection with the previously announced precious metals purchase agreement on Rio2’s Fenix Gold Project in Chile (the “Gold Stream”).
Under the Gold Stream, WPMI will purchase 6.0% of the gold production until 90,000 ounces of gold have been delivered, thereafter dropping to 4.0% of the gold production until 140,000 ounces of gold have been delivered, after which the Gold Stream will reduce to 3.5% of the gold production for the life of mine from the Fenix Gold Project. In addition, WPMI will make ongoing production payments for gold ounces delivered equal to 18% of the spot gold price until the value of gold delivered to WPMI less the production payments is equal to the total upfront consideration payable by WPMI under the Gold Stream of US$50 million, at which point the production payment will increase to 22% of the spot gold price. As part of the agreement, a second deposit of US$25,000,000 was to be paid to Rio2 following the receipt of the EIA approval for the Fenix Gold Project, and subject to the satisfaction of certain other customary conditions.
As the approval of the EIA was declined by the Chilean Government on July 5, 2022, the timing and completion dates of the construction and eventual production of the Fenix Gold Project are currently unknown. Given this uncertainty, Rio2, in close consultation with Endeavour Financial, is planning to revise and restructure the agreement with WPMI as soon as practicable.
