Rio2 (TSE:RIO) executives said operations at its Phoenix Gold project have been disrupted by two severe winter storms, delaying the company’s expected progress toward steady-state throughput of more than 20,000 tonnes per day. Management said the project lost about two weeks of production during a July storm and expected to lose roughly another two weeks in August as crews worked to restore access and clear snow from operating areas.
During an investor discussion, an unidentified operator said the company’s second-quarter results improved from the first quarter, supported by contributions from Compañía Minera Condestable, which was acquired in January. Phoenix Gold, meanwhile, remains in ramp-up and has faced recruitment, mine-access and material-fragmentation challenges in addition to the weather disruptions.
Phoenix Gold weather disruption
“We had almost three times as much snow” in the August event as in July, Cox said, adding that the company was still restoring access to the project at the time of the discussion. He described the storms as two 10-year events occurring within three weeks.
The weather affected mine access, the leach pad, plant areas and the CH-31 international highway connecting Copiapó and Argentina. Cox said the road damage had been repaired sufficiently to reopen access, although more permanent repairs would be completed later.
Management said there was no damage to the operation and no safety issues from the weather events. About 30 people remained on site to keep the plant running during the August storm, and access was reestablished to relieve personnel and deliver fuel and other supplies.
Before the July weather disruption, Cox said Phoenix Gold had reached throughput of 20,000 tonnes per day and was on track to declare steady-state production during the third quarter. He said the company expects to return to that level once mining resumes normally, though the storms have postponed the assessment of operating costs at sustained production rates.
Ramp-up progress and operating variables
Cox said the project’s full mining fleet, including 42-tonne Scania trucks and two 90-tonne Caterpillar excavators, arrived during the second quarter and was on site by the beginning of the third quarter. Management said this resolved a prior equipment-availability constraint, while recruitment issues reported in the first quarter had also been addressed.
The company continues to work with its blasting contractor to improve fragmentation in harder andesite and dacite material. Cox said this material has produced an elevated amount of oversize rock compared with volcanic breccia, and the company is adjusting blast patterns, loading, power factors and detonation methods.
Management also said it had found that ore from Phoenix South contained about 4% humidity, compared with initial expectations of 1% to 1.5%. Cox said this reduced the water required to saturate material on the leach pad by about 25% versus expectations. Snowfall also added water to the project’s system, with the July event estimated to have generated about 13,000 cubic meters of inflow from the leach pad to the pregnant leach solution pond.
The company said water has not been a constraint at Phoenix Gold. If ore humidity remains elevated as mining advances, management said the lower water requirement could potentially support throughput of 20,000 to 25,000 tonnes per day late this year or next year, subject to operating conditions.
Black plastic covers installed on portions of the leach pad have helped retain heat and reduce evaporation, according to Cox. He said the covers created an approximately 12-degree temperature difference between conditions outside and inside the pad and enabled leaching operations to continue during freezing temperatures and snowfall.
Costs and recoveries remain under review
In response to an investor question about Phoenix Gold’s future all-in sustaining costs, management said it was too early to provide a reliable full-year estimate because the project has not yet reached consistent steady-state operations. The operator cited diesel and labor inflation in Chile as factors that need to be incorporated into future projections.
Cox said the lower ownership cost of the newly arrived mining equipment should benefit costs, noting that the equipment’s cost was approximately half the ownership cost of rental equipment previously used at the project. He said the company hopes to have a clearer view of operating costs by September or October if normal operations resume.
Addressing gold recovery, Cox said the Phoenix Gold feasibility study assumed recoveries of 70% to 75%. He said second-quarter production relative to ounces stacked reflected the project’s 90-day leach cycle, solution percolation time through multiple lifts, timing differences in placing material under leach, and freezing issues affecting some early uncovered cells. Management expects to have a better understanding of recovery performance later this year.
Condestable initiatives
At Compañía Minera Condestable, Cox said a tailings filtration plant was commissioning and expected to move into full-time production by the end of the month. The facility is intended to process tailings through a filtering system for dry stacking.
The company has also completed surface mapping and geophysics across the Condestable concession package. Cox said the work will guide an open-pit drilling campaign of approximately 5,000 to 10,000 meters intended to help define resources and assess a potential future open-pit project over the medium to long term.
Separately, Condestable expects an ore-sorting pilot plant to arrive in October and be installed during the fourth quarter. The planned six- to nine-month trial would process roughly 1,500 to 1,600 tonnes per day from waste and low-grade stockpiles, with management seeking to assess whether material grading about 0.4 could be upgraded to roughly 0.65 to 0.7. If successful, the company said it could consider expanding the technology to support a ramp-up toward 12,000 tonnes per day.
About Rio2 (TSE:RIO)
Rio2 is a diversified precious metals and copper producer focused on building and operating mines with a management team that has proven technical skills as well as a successful capital markets track record. The Company is currently producing gold at its Fenix Gold heap leach mine in Chile and copper/gold/silver at its recently acquired Condestable underground mine in Peru. Rio2 and its wholly owned subsidiaries, Fenix Gold Limitada and Compañía Minera Condestable SA, are companies that operate with the highest environmental standards and responsibility with the firm conviction that it is possible to develop mining projects that respect the three pillars (Social, Environment, Economics) of responsible development.
