RIO2 Limited Completes Updated Pre-Feasibility Study FOR the Fenix GOLD Project IN Chile
RIO2 LIMITED COMPLETES UPDATED PRE-FEASIBILITY STUDY
FOR THE FENIX GOLD PROJECT IN CHILE
For Immediate Release September 4, 2019
Rio2 Limited (“ Rio2” or the “Company ”) (TSXV: RIO; OTCQX: RIOFF; BVL: RIO) today announces the
results of the updated mineral resource estimate (“ MRE”) and P re-Feasibility Study (“PFS”) for its
100% owned Fenix Gold Project (“Fenix Gold” or the “Project”) located in the Maricunga Mineral Belt
of the Atacama Region, Chile. This updated PFS is the Company’s base case to accelerate development
and start production in the shortest possible time.
All amounts in this news release are in US dollars unless otherwise indicated. Base case economics for
this PFS were calculated using a $1,300 per oz gold price.
The updated MRE for the Project is 5.0 million oz of gold in the measured and indicated category and
1.4 million oz of gold in the inferred category constrained within a $1,500 gold price pit shell. The
mineral resource remains open at depth and along strike.
This PFS is strategically focused on an optimally configured mine plan which will facilitate the shortest
possible timeline to construction/production, a lower initial capex, higher grades initially being mined,
and a lower initial strip ratio as compared with the 2014 PFS. The PFS focuses on a low-cost heap leach
gold mine with 1.83 million ounces (“oz”) of gold reserves that will produce 1.37 million oz of gold.
The PFS contemplates mining ore at a rate of 20,000 tonnes per day (“tpd”) with water for the project
being trucked from Copiapo. This compares with the ore mining rate of the 2014 PFS which was a
constant 80,000 tpd with water for the project being piped from Copiapo. To maximize cash-flow,
high-grade ore will be placed on the leach pad during the initial 13 years of production and low-grade
ore will be stockpiled for leaching in the subsequent 3 years of production giving a total mine life of
16 years. Average annual gold production during the first 13 years will be 93,000 oz and 50,000 oz
during the final 3 years of production as stockpiled ore is being crushed and leached.
With a large mineralized resource and potential for resources to grow through further drilling, there
remains considerable opportunity to increase annual production and extend the mine life of the Fenix
Gold Project. Timing to increase production will depend on transporting a greater volume of water via
a pipeline, alternative water solutions closer to the project and changes to the gold price during the
initial years of production.
The previously completed Pre- Feasibility Study on the Project, titled “NI 43-101 Technical Report on the Cerro Maricunga Project Pre-
Feasibility Study Atacama Region, Chile” dated October 6, 2014 with an effective date of August 19, 2014 (the “2014 PFS”), is available on
SEDAR under Rio2’s SEDAR profile at www.sedar.com. The Cerro Maricunga Project was renamed the Fenix Gold Project by Rio2 in 2018.
PFS HIGHLIGHTS
• 1.83 million ounces (“oz”) of Proven & Probable Mineral Reserves grading 0.49 grams per tonne
("g/t") gold
High-grade to leach pad – 81.9 million tonnes grading 0.57 g/t gold
Low-grade to stockpile – 33.1 million tonnes grading 0.30 g/t gold
• $222 million after-tax life of mine ("LOM") cumulative cash flow (unlevered)
• $997 / oz average LOM all-in sustaining costs ("AISC")
• 1.37 million oz LOM gold production
• 93,000 oz average annual gold production during initial 13 years
• 50,000 oz average annual gold production during final 3 years
• $121 million after-tax net present value discounted at 5% (“NPV5”) or ($241 million at $1,500 per
oz gold)
• 27.4% internal rate of return ("IRR") (44.3% at $1,500 per oz gold)
• Capital costs of $111 million with LOM sustaining capital costs of $95 million
• Construction currently targeted for Q4 2021 and first gold production in Q4 2022
• 16 year mine life at initial 20,000 tpd mining rate with expansion potential subject to additional
water options and changes to the gold price
Alex Black, President & CEO of Rio2, stated, “Our highly skilled and experienced management team
has taken great stride s since the acquisition of the Fenix Gold Project just over 12 months ago. We
have completely re-imagined and re-engineered the project with a focus on shortening the timeline
to construction/production, simplifying the approval process and permitting of the project, lowering
initial capex, concentrating on higher grades during early years of production and optimally minimizing
the initial strip ratio. We also thought outside of the box to arrive at an innovative solution of trucking
water to the project with the sole purpose of fast-tracking and simplifying the approvals process and
permitting of the project. Together with our highly experienced environmental and permitting
consultants in Chile, Minería y Medio Ambiente Limitada (MyMA), we have now set an achievable
timetable to construction in Q4 2021. With a large mineralized resource base and a modest project
production rate, as indicated in this PFS, we are confident we can expand the mine quickly and
optimally after achieving initial production. Once the Fenix Gold Project achieves commercial
production it will be the only gold oxide heap leach gold mine in operation in Chile and achieving a
unique milestone.”
OVERVIEW
This PFS focuses on the development of the Fenix Gold Project on a throughput of 20,000 tpd. The
primary reason Rio2 has elected to start at this rate of production is to allow for the trucking of water
from Copiapo which will expedite and simplify the approval and permitting process of the mine. By
choosing the option of trucking water to the mine site, the Company has reduced the timeline to
construction from five years to two years. Once the project is in production, the Company will focus
on the logistics and timing of constructing the previously planned water pipel ine from Copiapo
(outlined in the 2014 PFS) which will sustain a mining rate of up to 80,000 tpd, four times of what is
contemplated in this PFS.
Under the PFS mine plan, the Project will be able to produce for sixteen years with average annual
production of 85,000 oz of gold for total LOM production of 1.37 million oz. LOM AISC is estimated at
$997/oz. The Project demonstrates strong returns with an after-tax NPV5 of $121 million and an after-
tax IRR of 27.4% using the base case gold price of $1,300/oz ($241 million and 44.3% at $1,500/oz gold
price). The Project is expected to generate average annual after-tax net operating cash flow of $15.1
million with cumulative LOM after -tax net cash flow of $222 million. At $1,500/oz gold, the Project
would average more than $25 million in after-tax net operating cash flow annually and generate more
than $422 in cumulative after-tax net cash flow over the 16-year mine life.
PFS HIGHLIGHTS
High-grade Low-grade Total 2014 PFS
Gold Price $1,300 / oz $1,300 / oz $1,300 / oz $1,350 / oz
Ore Tonnes 81.9M 33.1M 115M 294M
Grade (Au g/t) 0.57 0.30 0.49 0.40
Proven &Probable Reserve (Au ozs) 1,829,000 3,743,000
Average Annual Gold Production (Au ozs) 93,000 50,000 85,000 228,000
Recoverable Gold (Au ozs) 1,371,000 2,956,000
Throughput (tonnes per day) 20,000 20,000 20,000 80,000
Strip Ratio 0.81 1.76
Recovery (%) 75 75 75 79
Mine Life (years) 13 3 16 13
Initial Capex $111 $399
Sustaining Capex $95 $188
Cash Cost (US$ / oz) $918 $1,036 $927 $864
AISC (US$ / oz) $979 $1,082 $997 $928
Pre-tax NPV (0% - $M) $305
Pre-tax NPV (5% - $M) $168 $521
Pre-tax IRR (%) 31.9 29
Post-tax NPV (0% - $M) $222
Post-tax NPV (5% - $M) $121 $409
Post-tax IRR (%) 27.4 25
ECONOMIC SENSITIVITIES
Using the base case gold price of $1,300/oz and incorporating only Proven and Probable Mineral
Reserves of 1,829,000 oz of gold, the Project has an after- tax NPV (5%) of $121 million and an after-
tax IRR of 27.4%. The Project’s economics are most sensitive to fluctuations in the gold price and
operating costs, as summarized in the tables below.
Sensitivity to Gold Price
Gold Price ($/oz) $1,200 $1,300 $1,400
NPV (5% after tax) $60M $121M $181M
IRR (after tax) 17.5% 27.4% 36.1%
Sensitivity to Capital Costs
Capital Costs -10% $111M 10%
NPV (5% after tax) $128M $121M $113M
IRR (after tax) 31.2% 27.4% 24.3%
Sensitivity to Operating Costs
Operating Costs -10% $1,272M 10%
NPV (5% after tax) $176M $121M $65M
IRR (after tax) 34.9% 27.4% 18.8%
CAPITAL & OPERATING COSTS
Initial Capital for the Project is estimated at $111.2 million which includes $14.2 mill ion in
contingencies. Capital cost estimates are summarized in the table below.
Area Capex ($Millions) Sustaining
($Millions) Total ($Millions)
Mining 3.25 0.85 4.10
Process Plant 34.64 16.27 50.91
Support Facilities 19.48 19.48
Indirect Cost of process Plant and support facilities 16.77 16.77
Process Plant Contingency 10.63 10.63
Leach Pad, Waste dump, PLS Ponds 11.55 44.09 55.64
Leach Pad, Waste dump, PLS Ponds Contingency 3.60 13.81 17.41
Owner costs 11.30 4.570 15.87
Closure Costs 0.00 15.40 15.40
Sub Total 111.22 94.99 206.21
Operating cost estimates are summarized in the table below.
Cost Area $/oz $/tonne
Mining ($ mined) 1.8
Reclaimed ore from
stockpile 0.91
Haulage Crusher to Pad 0.65
Mining ($ processed) 368.8 4.4
Processing ($ processed) 340.6 4.1
G&A ($ processed) 166.7 1.99
Total On-site Costs 876.1
Refining, transport 50.27
Total Cash Costs 926.4
Royalties 0.97
Total Cash Costs 927.3
Sustaining Capex 69.26
AISC 996.6
The mining cost considers the mining of ore, the mining of waste, reclaiming low -grade ore from the
stockpile to the crusher, and from the crusher to the pad.
The processing cost considers crushing and leaching, recovery, and the water supply costs.
MINERAL RESOURCES & RESERVES
The Mineral Resource for the Fenix Gold Project has been updated with the results from a small infill
reverse circulation (RC) drill program of 7,066 m completed in 2018/19, and all relevant and approved
surface channel sampling ha ve been used in the resou rce estimate for the first time. This resource
update also marks the first time that a three dimensional (3-D) geological model has been constructed
for the deposit.
The additional data, new geological model and revised modelling parameters have had no ma terial
effect on the combined measured and indicated resources when compared to the 2014 PFS. This
suggests that the resource estimate is robust for bulk mining.
Inferred resources have increased markedly from the 2014 PFS due to confidence gained from th e
geological model and well-structured variograms. Inferred resources have been projected up to 150
m from the base of drilling, in line with ranges demonstrated in gold variograms.
The MRE presented in the following table are constrained within a $1,500/oz optimized open pit and
calculated using a 0.15 g/t cut-off grade.
Resource Classification Million Metric Tons Au Grade (g/t) Au Ounces (x1000)
Measured 122.4 0.41 1,630
Indicated 288.3 0.36 3,355
Total Measured + Indicated 410.7 0.38 4,985
Inferred 136.6 0.32 1,388
Notes:
1. Mineral Resources reported is inclusive of mineral reserves;
2. The table includes all Measured, Indicated, and Inferred Resources contained within the “Resource Pit”, which represents t he test for
eventual extraction applied;
3. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part
of the Mineral Resources estimated will be converted into Mineral Reserves;
4. Mineral Resources are reported in accordance with Canadian Securities Administrators (CSA) National Instrument 43 -101 (“Standards of
Disclosure for Mineral Projects” (NI 43-101) and have been estimated in conformity with generally accepted Canadian Institute of Mining,
Metallurgy and Petroleum (CIM) "Estimation of Mineral Resource and Mineral Reserves Best Practices" gu idelines;
5. Mineral resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due
to rounding;
6. The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient
exploration to define these Inferred resources as an Indicated or Measured mineral resource and it is uncertain if further ex ploration will
result in upgrading them to an Indicated or Measured mineral resource category.
The Mineral Reserves presented in the following table are constrained within a $1, 225/oz optimized
open pit and are reported as in-situ dry million tonnes and include 3% mining dilution and 97% mining
recovery using a cut-off grade of 0.24 g/t Au.
Reserve Category Million
Tonnes
Grade
(Au g/t)
Contained Gold
(Koz)
Recoverable Gold
(Koz)
Proven 53 0.52 866 650
Probable 63 0.47 962 722
Proven and Probable 116 0.49 1,828 1,372
Notes: The Mineral Reserve estimate with an effective date of August, 15 2019 is based on the Minera l Resource estimate with the same
effective date that was prepared by Mario Rossi, Principal Geostatistician of GeoSystems International Inc. The Mineral Reserve was
estimated by Mining Plus with supervision by Raul Espinoza, Senior Open Cut Engineer with Mining Plus Peru S.A.C. Mineral Reserves are
estimated within the final designed pit which is based on the $1,225 /oz pit shell. The minimum cut-off grade was 0.24 g/t gold. Average life
of mine costs are $2.42/tonne mining, $4.10/tonne processing, and $1.99/tonne processed G&A. The average process recovery was 75%
for single stage crushing. Tonnes and gold ounces are both re ported in millions. Small differences in total tonnage and grade may occur due
to rounding. The Mineral Resource estimate is inclusive of Mineral Reserves.
FENIX GOLD PROJECT - MINE PLAN
During Year 1 the mine production rate will be ramped up to 20,000 tpd of high-grade ore (> 0.40 g/t)
for estimated gold production of 80,000 oz. The life of mine strip ratio (waste : ore) is estimated to be
0.81 : 1.
Mining will then progress for an additional 12 years at an average annualized rate of 20,000 tpd of
high-grade ore, 7,000 tpd of low-grade ore and associated waste material. The high-grade ore will be
crushed via a single stage crusher to a P 80 size of 4 inches then re-handled and sent to the leach pad
whilst the low-grade ore is stockpiled for crushing and leaching in later years.
Metallurgical test work shows average life of mine recoveries of 75% after single stage crushing to 4
inches, with more than 50% of the gold recovered during the first 45 days of leaching.
Mine design and estimation of the mining reserves was completed using conventional open-pit design
methodology. The mine design is based on a $1,225 Lerchs -Grossmann pit optimisat ion computer
analysis. The pit design incorporates 20m benches made up of 2 x 10m mining benches utilizing a fleet
of 70 tonne and 90 tonne excavators and 43 tonne dump trucks. Mining operations will be performed
exclusively by a mining contractor under a mining alliance style framework for the entire life of mine.
Fenix Gold Project – Mine Site Layout
For a picture of the Fenix Gold Project Mine Site Layout click here.
PROCESSING
High-grade ore will be crushed to a P 80 size of 4 inches via a single stage Gyratory crusher wit h lime
dosing occurring before the crushed ore is fed to a stockpile. Crushed ore will be re -handled and
trucked from the crushed ore stockpile to the leach pad. Agglomeration of crushed ore is not required.
Low-grade ore will be mined and stockpiled for crushing and leaching in later years.
Processing operations will treat the solutions from the heap leach facility operating in a new ADR
(adsorption, desorption and refining) plant capable of treating 20,000 tpd of ore to pad or 1,058 cubic
meters per hou r of pregnant solution to produce doré bars. The plant layout is designed to be
upgradeable to 40,000 tpd and 80,000 tpd respectively.
Processing costs are estimated at $4.10 per tonne treated over the current life of mine which includes
water purchase and water transport costs.
HEAP LEACH PAD
The leach pad area will be prepared and covered with an impermeable liner. Corrugated, perforated
drainage piping will be laid on the liner for collection of the pregnant leach solution. A protective layer
of finely crushed, permeable ore will be placed on top of the liner to prevent damage from the mobile
equipment and during ore loading. The ore will be stacked on the pad in 10m lifts.
The heap leach pad is located 4 km from the pit, at an elevation of 4,376m abo ve sea level. The pad
will be developed in four stages with a stacking volume for Stage 1 of 10.3 Mt; 30. 6 Mt for Stage 2;
27.7 Mt for Stage 3 and 60.7 Mt for the final stage. The total pad capacity will be 129 Mt. The irrigation
system will uniformly apply cyanide solution directly onto the levelled surface of the leach pile through
a drip irrigation system, at an irrigation rate of 10 L/hm2 with an irrigation cycle of 90 days.
The percolation rate through the heap will depend on the viscosity and specific gravity of the solution,
the mineral void space, the percentage of fines, mineral affinity for the solution and air entrapment.
Once the heap is saturated, the gold rich solution will drain to the lowest part of the pad and then into
the pregnant leach solution (PLS) pond before being pumped to the ADR processing plant.
POWER
The power supply for the Project will be generated via diesel generators. T hree generators, two in
continuous operation and one on standby, will be installed in the power plant located in the ADR plant.
There will also be two generators installed at the crusher which will also supply power to the mine
workshops.
Grid power is located within 25 km of the mine site and connection to the grid will be considered as
the Fenix Gold Mine is expanded.
WATER
The 20,000 tpd project requires a water supply of up to 24 L/s. The Fenix Gold Project has access to
water via a contract signed with Aguas Chañar S.A. (“Aguas Chañar”), the major water supplier to the
town of Copiapo, to supply up to 80 L/s of treated town wastewater from its Piedra Colgada treatment
facility located to the north of C opiapo. The original plan , outlined in the 2014 PFS, was to build a
pipeline with associated power line from the Aguas Chañar facilities to Fenix Gold along the existing
main road, international road CH31, from Copiap o to Argentina which passes within 20 k m of the
Project. This plan is still being considered for the future expansion of the Project and discussions are
ongoing with infrastructure companies who are interested and able to finance and build the pipeline
and other mining companies who may wish to share in the benefit of the pipeline project. The capital
costs, operating costs and cost of water for the larger water solution are set out in the 2014 PFS.
The water for the 20,000 tpd project will be t ransported by 30 tonne capacity w ater tankers,
loading from the Aguas Chañar facility and discharging to the process plant located at the Project, a
distance of approximately 158 km. The water transport route will be via international road CH31 which
passes within 20 km of the mine site.
Water costs are estimated to be $1.56 per tonne of ore processed for the first four years of production
and decrease to $1.51 per tonne for the remaining life of the project. The water cost includes the
purchase price and transportation of the water to site.
The Company is currently reviewing a number of additional water options involving permitted, unused
water rights which are closer to the planned mining operations with the objective of improv ing the
economics of the water supply to the Project.
LABOR AND SUPPLIES
The Fenix Gold Project is located approx imately 140 km from Copiapo, a mining town with a
population of approximately 175,000 people that supports major mining o perations in the a rea.
Skilled labour, specialist services and materials for the mining operations will be sourced locally. An