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Rio2 Ltd (2)
Symbol RIO
Shares Issued 199,668,604
Close 2021-07-20 C$ 0.74
Recent Sedar Documents

Rio2 arranges $125M (U.S.) in financing for Fenix

2021-07-20 17:06 ET - News Release

Mr. Alex Black reports

RIO2 ARRANGES PROJECT FINANCING OF US$125 TO US$135 MILLION TO FULLY FUND ITS FENIX GOLD MINE TO PRODUCTION

Rio2 Ltd. has arranged mine construction financing totalling approximately $125-million (U.S.) to $135-million (U.S.) to finance the construction of a mine at its 100-per-cent-owned Fenix gold project in Chile.

The mine financing package is composed of the following components:

  • Non-binding term sheet with Wheaton Precious Metals International Ltd. for a $50-million (U.S.) gold purchase agreement;
  • BNP Paribas appointed as mandated lead arranger for a senior project debt facility of $50-million (U.S.) to $60-million (U.S.);
  • Marketed public offering of common shares of the company for gross proceeds of approximately $25-million (approximately $19.6-million (U.S.)), at a price per share to be determined in the context of the market with a syndicate of underwriters co-led by Scotiabank, CIBC Capital Markets and Raymond James;
  • Non-brokered private placement of common shares of the company to WPMI or an affiliate for proceeds of $5-million (U.S.) at a price per share equal to, and concurrent with, the offering.

Alex Black, president, chief executive officer and a director of Rio2, stated, "Securing this mine financing package is a significant milestone event for Rio2 and a testament to our management team and the strong, long-life project fundamentals offered by the Fenix gold project."

The mine financing package will allow for Rio2 to commence preconstruction activities at the Fenix gold project prior to receiving environmental impact assessment (EIA) approval and permits for its planned 20,000-tonne-per-day, run-of-mine, dump leach operations. Since the outset, the primary focus of Rio2 has been to accelerate the Fenix gold project to production, and the mine financing package will allow the company to maintain its current schedule for first gold production in fourth quarter 2022.

"We welcome WPMI and BNP as our partners in the construction and development of the Fenix gold mine, in an environmentally and socially responsible manner, to the benefit of all stakeholders. The Fenix gold project hosts the largest undeveloped gold heap leach project in the Americas with a large measured and indicated gold resource of five million ounces with exciting exploration potential, and is open to further mine optimization opportunities," said Mr. Black.

"Wheaton is excited to partner with Rio2 in developing the Fenix gold project. The strength of the Fenix gold project and its long-term potential has been readily evident during our due diligence," said Randy Smallwood, president and chief executive officer of Wheaton.

WPMI gold stream

Rio2 has signed a non-binding term sheet to receive total cash consideration of $50-million (U.S.) pursuant to a gold purchase agreement to be entered into with WPMI, a wholly owned subsidiary of Wheaton Precious Metals. The proceeds from the gold stream will be used to partially finance the mine construction.

Upon entering into the gold stream, WPMI will purchase refined gold equal to 6.0 per cent of the gold production until 90,000 ounces of gold have been delivered and 4.0 per cent of the gold production until 140,000 ounces of gold have been delivered, after which the stream will reduce to 3.5 per cent of the gold production for the life of mine. Under the proposed gold stream, WPMI will pay total cash consideration of $50-million (U.S.), $25-million (U.S.) of which is payable upon closing, subject to conditions including the completion of the offering (as described below), with the remaining $25-million (U.S.) payable subject to certain conditions, including the receipt of the EIA approval for the mine. In addition, WPMI will make continuing payments for gold ounces delivered equal to 18 per cent of the spot gold price until the value of gold delivered less the production payment is equal to the upfront consideration of $50-million (U.S.), at which point the production payment will increase to 22 per cent of the spot gold price.

Entering into the gold stream remains subject to, among other matters, the final negotiation and completion of definitive documentation, including the gold purchase agreement.

As part of the non-binding term sheet, Wheaton has committed to subscribe for $5-million (U.S.) of common shares pursuant to a non-brokered private placement subscription agreement at the same price per share as the offering (as described below).

BNP senior project debt facility

On July 20, 2021, the company engaged BNP to act as the sole and exclusive bookrunner, sole and exclusive lead arranger, and sole and exclusive administrative agent for the senior project debt facility in the amount of $50-million (U.S.) to $60-million (U.S.). Proceeds of the senior project debt facility will be used to finance the construction and commissioning of the mine and available by way of cash advances in U.S. dollars and for potential cost overruns. The senior project debt facility is expected to have a principal grace period in line with construction and ramp-up period and a tailored amortization profile designed to match projected cash flows from the mine. The closing of the senior project debt facility remains subject to a number of customary conditions, including the completion of satisfactory due diligence, the receipt of credit approvals and the negotiation of definitive documentation.

Financing process

"We have completed a comprehensive review of numerous financing options, and we are very pleased with the outcome of our process. We have arranged financing with two leading financial partners to fully finance the construction costs at Fenix gold. The mine financing package is transformational for Rio2 as it will provide the resources to execute on our plans for the development of the mine," stated Jose Luis Martinez, Rio2's executive vice-president and chief strategy officer.

Rio2 equity offering

The company has filed a preliminary short form prospectus in connection with a marketed public offering of common shares of the company for aggregate gross proceeds of approximately $25-million (approximately $19.6-million (U.S.)), at a price per common share determined in the context of the market. The offering will be conducted through a syndicate of underwriters co-led by Scotiabank, CIBC Capital Markets and Raymond James.

The pricing of the offering will be determined in the context of the market at the time of entering into a definitive underwriting agreement between the company and the underwriters. The company has granted the underwriters an overallotment option to purchase up to an additional 15 per cent of the common shares issued pursuant to the offering on the same terms exercisable in whole or in part, at any time and from time to time, up to 30 days from and including the closing date of the offering.

Not less than $20-million (U.S.) of the net proceeds of the offering plus the proceeds of the private placement will be used to finance development of the corporation's Fenix gold project and associated mine and camp infrastructure (which, for greater certainty includes development of related infrastructure by Lince SA, a wholly owned subsidiary of the corporation). The remaining combined proceeds are expected to be used for general working capital purposes. Any proceeds from the exercise of the overallotment option will be added to the corporation's working capital.

The common shares are being offered: (i) to the public in each of the provinces and territories of Canada, except for Quebec; and (ii) in the United States, only to qualified institutional buyers (as defined in Rule 144A under the U.S. Securities Act of 1933, as amended, in a private placement exempt from the registration requirements of the 1933 act.

The offering is scheduled to close on or about Aug. 6, 2021, and is subject to customary closing conditions, including, but not limited to, the receipt of all necessary regulatory approvals, including the approval of the securities regulatory authorities and the TSX Venture Exchange. The completion of the offering is also subject to the completion of the private placement (as described herein).

The company has applied to list the common shares on the TSX-V. A preliminary short form prospectus containing important information related to the common shares has been filed with securities regulatory authorities in each of the provinces and territories of Canada, except for Quebec. The preliminary short form prospectus is subject to completion. Copies of the preliminary short form prospectus may be obtained from the underwriters by e-mail at equityprospectus@scotiabank.com or by request to the company. A copy of the preliminary short form prospectus can also be obtained under the corporate profile of the company on SEDAR.

Rio2 private placement

As contemplated by the non-binding term sheet with WPMI, WPMI or an affiliate would purchase on a non-brokered private placement basis common shares from treasury for proceeds of the Canadian-dollar equivalent of $5-million (U.S.) (approximately $6.4-million) at a price per share equal to the price of the common shares issued pursuant to the offering, provided the gross proceeds of the offering and private placement exceed $20-million (U.S.). The company intends to use the proceeds from the private placement to finance development of the company's Fenix gold project.

The private placement is scheduled to close on or about Aug. 6, 2021, and is subject to customary closing conditions, including, but not limited to, the receipt of all necessary regulatory and other approvals, including the approval of the TSX-V. The completion of the private placement is also subject to the concurrent completion of the offering.

Advisers

Rio2's financial adviser is Scotiabank, and its legal advisers are McMillan LLP in Canada and Guerrero Olivos in Chile in connection with the gold stream and the senior project debt facility.

Technical information

The scientific and technical content of this news release has been reviewed, approved and verified by Enrique Garay, MSc, PGeo (AIG fellow), senior vice-president, geology, of Rio2, who is a qualified person under National Instrument 43-101. For additional information regarding the Fenix gold project, including key assumptions and risks associated with its development, see the independent technical report entitled "Updated Pre-Feasibility Study for the Fenix Gold Project, Atacama, III Region, Chile," dated Oct. 15, 2019, with an effective date of Aug. 15, 2019, a copy of which document is available under Rio2's SEDAR profile.

About Rio2 Ltd.

Rio2 is a mining company with a focus on development and mining operations with a team that has proven technical skills, as well as a successful capital market record. Rio2 is focused on taking its Fenix gold project in Chile to production in the shortest possible time frame based on a staged development strategy. In addition to the Fenix gold project in development in Chile, Rio2 continues to pursue additional strategic acquisitions where it can deploy its operational excellence and responsible mining practices to build a multiasset, multijurisdiction precious metal company.

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