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Rio2 shares fall on EIA rejection of its Fenix Gold project in Chile  

The Fenix gold project, previously known as Cerro Maricunga, is located in Copiapo province, Chile. Image from Rio2.

Chile’s Environmental Assessment Service (SEA) has rejected the environmental impact assessment for Rio2’s (TSXV: RIO; US-OTC: RIOFF) Fenix gold project in the Atacama region. 

The SEA’s report notes that while Fenix meets the environmental regulations and requirements, it didn’t provide enough information on how it aims to eliminate the “adverse impacts” that the project will have on the area’s wildlife species, specifically the chinchilla, guanaco and vicuna. 

The report will now be presented to Chile’s Comision de Evaluacion Regional for a vote. This body includes 11 governmental institutions with environmental competencies, including the country’s mining and environment ministries.  

A decision on the project’s environmental impact assessment (EIA) is expected within the next two weeks, the company said. If it is rejected, Fenix Gold Limitada, Rio2’s Chilean subsidiary, can resubmit the EIA with extra information, analysts say. The project’s construction permit was originally supposed to be issued in the third quarter of 2022.  

“Fenix Gold has been working diligently throughout the environmental assessment process to provide all the required information,” Rio2 said in a press release. “Fenix Gold remains committed to continue working with the SEA and other governmental institutions to resolve and mitigate any potential impacts that need further consideration to secure approval for the project.”  

In December, Chile asked Gold Fields’ (NYSE: GFI; JSE: GFI) to come up with a new plan to relocate 20 endangered chinchillas from its Salares Norte gold project in the same region.  

Located about 20 km south of Kinross Gold’s (TSX: G; NYSE: KGC) La Coipa mine and about 680 km north of the capital of Santiago, the Fenix gold project covers 160.5 sq. km and has proven and probable reserves of 116 million tonnes grading 0.49 gram gold per tonne for 1.8 million contained oz. gold and 1.3 million recoverable oz. gold.  

Based on a pre-feasibility study in 2019, the project is expected to have a 16-year mine life and estimated to produce about 93,000 oz. gold on average for the first 13 years at an all-in sustaining cost of US$997 per ounce. The pre-production capex was pegged at $111 million. 

Using a gold price of $1,500 per oz. and at a 5% discount rate, the project would generate a post-tax net present value (NPV) of $241 million and a post-tax internal rate of return of 44%.  

“We assume Fenix is granted EIA approval in July but have delayed first gold production to 3Q23,” Craig Stanley, a Raymond James analyst, wrote in a research note to clients. “Given the uncertainty of approval… we lowered our rating to Market Perform.”  

Shares of Rio2 closed C23¢ lower, down from C54¢, following the announcement of the EIA rejection on June 23. At press time in Toronto on June 24, the company’s shares were trading at C28.5¢ within a 52-week trading range of C21.5¢ and C85¢.