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Rio2 Ltd (2)
Symbol RIO
Shares Issued 257,510,649
Close 2022-09-06 C$ 0.13
Recent Sedar Documents

Rio2 files administrative appeal over Fenix

2022-09-07 16:00 ET - News Release

Mr. Alex Black reports

RIO2 PROVIDES FENIX GOLD EIA PLAN UPDATE

Rio2 Ltd. is providing an update of its activities following the announcement made on July 5, 2022, with respect to the Atacama Regional Evaluation Commission's decision not to approve the environmental impact assessment (EIA) for its Fenix gold project in Chile.

The Environmental Qualification Resolution ("RCA") which is the administrative document with which the Environmental Assessment Service ("SEA"), outlines the rationale for their decision, was issued on July 19, 2022. Since the receipt of this document, the Company, along with its Chilean environmental and legal advisors, have been evaluating options to continue to advance the Project.

On review of the RCA, Rio2 has identified numerous discrepancies with factual and procedural matters in the RCA, which it believes provides grounds for a strong case for the decision to be reviewed in a non-judicial administrative appeal before a Committee of Ministries. The Committee of Ministries is composed of the Ministries of Environment (Chairman), Health, Economy, Agriculture, Energy and Mining. The national director of SEA is the secretary of the Committee.

After a thorough review of the RCA, in collaboration with the Company's external legal counsel and environmental consultants, Rio2 maintains its conviction that during the environmental assessment process of the Fenix Gold Project's EIA, the Company provided all the information requested by the different agencies and addressed, with the highest technical standards, the observations raised during the process. It should be noted that on completion of the rigorous EIA process, 18 agencies issued their technical conformity to the Project. Furthermore, Rio2 is particularly proud of its social engagement strategy over the past four years that paved the way for the successful completion of the Participacion Ciudadana (Public Consultation) and Consulta Indigena (Indigenous Consultation) processes resulting in favorable agreements with the indigenous communities directly impacted by the Project.

Based on the findings of the RCA review, Rio2's local subsidiary Fenix Gold Limitada ("Fenix Gold") decided to exercise its right to file an administrative appeal before the Ministries Committee and filed the appeal on August 31, 2022.

The basis of the administrative appeal was based on the following key findings:

(a)The Fenix Gold Project was presented for environmental assessment through an EIA, which is the most stringent instrument contemplated by Chilean Environmental Law. The EIA also included a successful public consultation process and successful special consultation process for indigenous communities, under the rules of the OIT No. 169 International Convention;

(b)The rejection of the EIA is not based on legal incompatibilities that cannot be overcome, but on the need, according to the authorities view, to provide additional information to discard potential risks to Chinchilla chinchilla, Lama guanicoe and Vicugna vicugna;

(c)Fenix Gold provided quality information in the EIA to demonstrate there were no significant risks to the aforementioned fauna species. This finding was incrementally strengthened and supported during the process through additional observation campaigns and data compilation, in direct response to the authorities' requests;

(d)The observation campaigns and technical information produced by Fenix Gold and its external advisors were prepared using the methodologies and guidelines approved by the authorities and consistent with similar precedents in the area;

(e)Certain requests or observations from the authorities, incorrectly referred to by the RCA as "not addressed" by Fenix Gold, were made after the assessment process was closed, in which it is not legally possible for the company to present additional answers. Making requests or observations after the EIA process is closed is not consistent with the nature and rules of the environmental impact assessment process.

As a result of these key findings, Rio2 is of the view that the rejection of the Project is not consistent with the environmental assessment process that took place over the past two years, and, therefore, the Company believes there are strong legal and technical grounds for seeking the review of the RCA before the Ministries Committee, which has the faculties to reverse the decision made at the regional level.

In parallel with the administrative appeal process Rio2 will work closely with regional authorities to conduct additional observations of fauna in the Project area and to agree on new voluntary commitments, if required, to address any remaining concerns that the authorities may require to guarantee the sustainable execution of the Project. This additional work will not only provide a positive contribution during the administrative appeal process but can also be used for a resubmission of a new EIA, should Fenix Gold's appeal not be successful.

TIMING

Based on feedback from its external legal counsel and advisors, the estimated timing for obtaining EIA approval for the Fenix Gold project is approximately one and half to two years. The estimated timing for the administrative appeal process is approximately one year, based on the experience of the Company's external legal counsel. The estimated timing for the preparation and resubmission of a new EIA (only required if the administrative appeal is unsuccessful) is approximately two years. As previously mentioned, these two activities will occur in parallel.

FUNDING

As of June 30, 2022, the Company had cash of approximately US$13.5M and working capital of approximately US$11M, which had been allocated to pre-development activities for the Project and the Company remains debt free. To date, a significant amount of money has been invested in the pre-development of the Project, including the construction of the camp facilities at its infrastructure subsidiary, Lince S.A., pre-fabrication of elements of the processing plant, and water loading facilities in Copiapo.

All contracts with third-party contractors/suppliers have either been suspended or terminated and staff numbers in Chile, Peru, and Canada have been reduced from 82, prior to the rejection of the EIA, to 22 at the current time.

Additional funding will be required during the next two years and the Company is currently investigating the merits of launching a strategic review process to assess potential sources of future funding.

CHILE'S CONSTITUTIONAL REFORM PROCESS

Chilean voters resoundingly rejected a new, progressive constitution in a referendum held on Sunday September 4, 2022 following a nearly two-year process that aimed to reflect a broad array of voices in the nation's proposed new constitution.

With the ballots counted, 62% of voters rejected the proposal with 38% voting in favor, according to the Chile Electoral Service. The proposed constitution was rejected in all of Chile's provinces, with 60% of voters rejecting the proposal and 40% voting in favor in the Atacama Region, where the Fenix Gold Project is located.

As a result of the vote, all political parties have vowed to work with the current government to develop a new constitution that better reflects the wishes of the Chilean people. There is currently no publicly announced timeframe for the preparation of a new constitution.

FENIX GOLD PROJECT

The Fenix Gold project is one of the largest undeveloped gold oxide, heap leach projects in the Americas, hosting a Measured and Indicated mineral resource (as such term is defined in National Instrument 43-101 -Standards of Disclosure for Mineral Projects, "NI 43-101") of 5 Million ounces of gold which the Company believes will make a positive contribution to the Atacama Region and Chile. The Project is an example of modern gold mining where a full complement of technical, environmental, and social considerations have been consulted on and designed in from the outset. The Project represents a significant investment in the gold mining business in Chile by a junior mining company of approximately US$210M of initial and sustaining capital and will generate employment for at least 1,200 people during the construction phase and 550 people during the 17 years operations phase. The mine being contemplated at the Project will be a run-of-mine heap leach operation, no crushing or tailings storage facilities are required thereby minimizing the overall impact and footprint of the Project.

TECHNICAL INFORMATION

The scientific and technical content of this news release has been reviewed, approved and verified by Enrique Garay, MSc. P. Geo (AIG Member), a consultant to Rio2 Limited, who is a QP under NI 43-101 has also reviewed, approved and verified the scientific and technical content of this news release. For additional information regarding the Project, including key parameters, 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 August 3, 2021, with an effective date of August 15, 2019, a copy of which document is available under Rio2's SEDAR profile at www.sedar.com

ABOUT RIO2 LIMITED

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 markets track record. Rio2 is focused on taking its Fenix Gold Project in Chile to production in the shortest possible timeframe based on a staged development strategy. Rio2 and its wholly owned subsidiary, Fenix Gold Limitada, are companies with the highest environmental standards and responsibility with the firm conviction that it is possible to develop mining projects that respect the three axes (Social, Environment, Economics) of sustainable development. As related companies, we reaffirm our commitment to apply environmental standards beyond those that are mandated by regulators, seeking to protect and preserve the environment of the territories that we operate in.

We seek Safe Harbor.

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