Rio2 Defers Fenix Gold Guidance After El Niño Snow Halts Mining

Rio2 deferred its 2026 production guidance for the Fenix Gold mine after extreme El Niño weather forced the suspension of mining during heavy snowstorms in Chile's Atacama Region. The company also reported Q2 consolidated production of 13,539 ounces of gold, 75,437 ounces of silver, and 9.3 million pounds of copper.

Andrew Cox, Rio2's president and CEO, said Q2 was the second quarter of ramp-up at Fenix Gold, supported by steady cash flows from the Condestable copper mine in Peru. More work areas opened, more people were hired and the principal mining contractor's equipment arrived – all factors Cox said should improve productivity and costs in Q3. Still, grade came in below plan because tonnes delayed from Q1 limited the ability to selectively mine high-grade material.

Then the weather hit. Executive Chairman Alex Black said Peru and Chile are in the middle of one of the strongest El Niños on record. At Fenix Gold, localized snowstorms and extremely low temperatures began to affect operations late in Q2 and continued into July and August. Mining stopped when conditions were unsafe. The company estimates about 265,000 tonnes of ore mining was deferred because of heavy snow, which led to the deferral of roughly 5,000 ounces of gold production. That impact will show up in August, not Q2.

Rio2 had previously guided 2026 gold production at 60,000 to 65,000 ounces. Now it is deferring that number until it can assess the full effect of the weather and the ongoing ramp-up. The company still expects to reach commercial production at Fenix Gold in Q4 2026.

On the leach pad, freezing temperatures in May slowed leaching on parts of the pad. The team tested different drip line covers and settled on a double-layer black cover that keeps the pad about 12 degrees Celsius warmer than the ambient air. The entire pad will now use those covers during winter.

Water transport from Copiapó continued to ramp up, with trucking delivering over 1,000 cubic meters per day and a one-day record of 1,800 cubic meters during a three-shift trial. Trucking had to stop twice during the quarter because the plant's water storage was full. Water consumption per tonne of ore came in below design – about 75% of the original estimate – because ore from Fenix South has higher moisture content than expected. A one-day snow event in June pushed significant water into the pregnant leach solution pond, which Black called a welcome bonus.

Blasting fragmentation of volcanic breccias is working well, but harder andesitic and dacitic dome material – about 30% of current ore – is generating more oversize rock. STRACON and blasting contractor Orica are working on improving blast design.

Ore mining ramped from 13,600 tonnes per day in April to 16,100 tonnes per day in June. The mine is expected to hit 20,000 tonnes per day in Q3.

At Condestable, processing exceeded 700,000 tonnes of ore at average grades of 0.66% copper, 0.24 g/t gold and 3.88 g/t silver. Copper grades were below plan because of higher internal dilution in certain stopes, particularly in June. Gold and silver recoveries were materially better than budgeted. Unit production costs came in at $39.50 per tonne, 1% above budget, driven by high-volume haulage fleet constraints and higher fuel costs, partly offset by favorable exchange rates.

Condestable produced 9.3 million pounds of copper, 4,451 ounces of gold and 74,374 ounces of silver in Q2, all contained in concentrate. Production guidance for 2026 (February to December) stands at 21,500 to 23,500 tonnes of payable copper equivalent.

Rio2 also hedged against rising diesel costs tied to the Iran War. In early March, it secured nine commodity call options spanning April through December 2026, covering 1.575 million gallons at a premium of $622,000. The protected volume scales from 150,000 gallons per month in spring to 200,000 gallons per month by year-end. As of July 31, the open contracts had a combined market value of $759,000.

Exploration drilling resumed at Fenix Gold for the first time since 2014, with 23,190 meters planned on a $9.5 million budget. The program was 50% complete at the end of Q2, with completion expected by late August and a mineral resource update due by year-end.

At Condestable, a 46,480-meter underground diamond drilling program was 45% complete by end of Q2. The company also filed an updated NI 43-101 technical report on July 23, showing total measured and indicated resources of 82.1 million tonnes at 0.69% copper, 0.13 g/t gold and 4.12 g/t silver. Proven and probable reserves of 36.5 million tonnes at 0.73% copper underpin a post-tax NPV at an 8% discount rate of roughly $710 million over a 14-year mine life.

The dry stack filter plant for tailings has been in commissioning and is producing filtered tailings. The company expects to incorporate it into operations during Q3 as it transitions from traditional wet tailings.

Rio2 expects approval for the modification of the Condestable mine EIA during Q3, including environmental approval for increased processing capacity to 10,000 tonnes per day.