Shares of Rio2 (TSXV: RIO; US-OTC: RIOFF) on Tuesday reached their lowest value since March 2020 as Chile’s regional evaluation commission, which includes 12 government bodies, again rejected the company’s environmental impact assessment (EIA) for its Fenix Gold project in the Atacama region.
The news comes days after the project’s EIA was denied by the environmental assessment service (SEA), a national monitoring body, as the plan didn’t provide enough information on how it aims to protect the area’s wildlife species such as the chinchilla, guanaco and vicuna.
Shares of Rio2 closed 23¢ lower, down from 54¢, following the announcement of the EIA rejection by the country’s (SEA) on June 23.
“The company will work on evaluating its options and decide on an action plan,” Rio2 said in a press release. “Once the action plan is completed, the company will announce how it intends to execute it and provide the revised timeline.”
The company said that it has already completed its consultations with the region’s Indigenous groups and citizens regarding the project.
The Fenix gold project, previously known as the Cerro Maricunga project, is located in Copiapo province, Chile. Credit: Rio2
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 prefeasibility 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 preproduction capex was pegged at US$111 million.
Using a gold price of US$1,500 per oz. and a 5% discount rate, the project would generate a post-tax net present value (NPV) of US$241 million and an internal rate of return of 44%.
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.
Cantor Fitzgerald analyst Matthew O’Keefe described the latest rejection as a “setback” but says that the project is “far from dead.”
“The project has fulfilled all the applicable regulations and environmental requirements for the granting of applicable sectorial permits… further, the species mentioned lie outside the mine’s area of influence and the rejection appears to be due to a lack of information, not a clear negative impact,” O’Keefe wrote in a note to clients.
At noon, Rio2’s shares were trading at 17¢, down 13¢ or 43%, beating its previous 52-week low of 21.5¢.
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