Rio2 transforms into dual producer with Peru copper mine deal

Rio2 Limited is acquiring the Condestable copper-producing mine in Peru for a total of US$217 million (A$327M), instantly transforming the company from a single-asset Chilean gold developer into a diversified Latin American precious-and-base-metals producer, with immediate cash flow.

Under the deal signed with private owner Southern Peaks Mining, Rio2 will pay US$180 million (A$271M) at closing, expected in January 2026. The payment will be made through a combination of US$80 million (A$120M) in cash, US$65 million (A$98M) as a six-year vendor-take-back debt and 21.9 million Rio2 common shares valued at US$35 million (A$53M).

A further US$37 million (A$56M) in deferred installations, payable between 2027 and 2030 for cash or shares at Rio2’s election, brings the headline price to US$217 million (A$327M), valuing the total deal at US$241 million (A$363M) after assuming US$24 million (A$36M) in net debt.

To fund the cash component and provide working capital, Rio2 has arranged a C$140 million (A$150M) capital raising at C$2.22 (A$2.41) per share, led by Raymond James, Stifel Nicolaus Canada and BMO Capital Markets.

A separate best-efforts private placement of up to C$14 million (A$15M) in Peru, Colombia and Chile is also underway but is not required for the completion of the acquisition.

Sitting at sea level, 90km south of Lima, Condestable is a 60-plus-year underground mining operation currently producing 27,000 tonnes of copper equivalent per year from an 8,400 tonne per day plant.

The acquisition of Condestable marks a major moment in Rio2’s evolution – from gold developer to Latin American diversified producer. With first gold production at Fenix Gold just weeks away, Condestable brings immediate and growing cash flow to support our future growth in gold.

Management says it sees clear potential to expand throughput to 12,000 tonnes per day from the underground operation, coupled with possible open-pit additions. The mine operates on 100 per cent renewable hydroelectric power, holds Copper Mark accreditation and is rolling out the electrification of its mining fleet.

Across the next five years, the mine is forecast to generate average annual EBITDA of US$110 (A$166) million at consensus copper prices. However, at the current booming spot levels of US$5.35 per pound, the company says the mine could spit out as much as US$145 (A$218) million per year in EBITDA, which would be enough to easily fund the expansions at both its Fenix Gold project in Chile and Condestable.

Once the acquisition is completed and coupled with the company’s existing Fenix Gold mine, the combined operations are expected to deliver a total production of about 180,000 gold-equivalent ounces a year for Rio2, with a pathway to 380,000 ounces once the planned phase two expansion at Fenix is completed.

The acquisition adds a second top-tier jurisdiction alongside Rio2’s flagship Fenix Gold project in Chile, where construction is 80 per cent complete and first gold remains on schedule for January next year.

In one strike, Rio2 appears to have rewritten its corporate narrative. The Condestable acquisition brings immediate cash flow, exposure to a long-life copper asset and the financial firepower to self-fund growth, while Fenix transitions from developer to producer.

If management then also delivers on its expansion plans at Fenix, Rio2 will likely have the scale, cash generation and clean-energy credentials to punch well above its current market standing.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au