Rio2 buys Peru’s Condestable copper mine in US$241 million deal

Rio2 is acquiring a 99.1% interest in the Condestable copper mine in Peru for US$241 million, boosting its Latin American footprint and diversifying beyond gold.

Rio2 (TSX: RIO) Rio2 (TSX: RIO) is expanding its Latin American presence and diversifying its metals portfolio with the acquisition of a 99.1% interest in the Condestable copper mine in Peru, in a transaction valued at US$241 million.

The asset is currently owned by Southern Peaks Mining, a company backed by UK private equity firm Global Natural Resource Investments. The deal marks a key step in Rio2’s transition from a pure gold developer to a diversified producer in the region.

Deal structure and financing

According to the company, total consideration for the acquisition is US$241 million, made up of an upfront payment, a deferred component and the assumption of existing debt.

The US$180 million upfront payment will be financed as follows:

• US$80 million in cash
• US$65 million in vendor debt financing
• Approximately US$35 million in Rio2 common shares

Southern Peaks will also receive a US$37 million deferred payment, payable between 2027 and 2030. In addition, Rio2 will assume US$24 million of Condestable’s debt, bringing the total transaction value to US$241 million.

To fund the acquisition, Rio2 has arranged a financing package that includes the US$65 million vendor debt and an equity financing of US$100 million, under which it plans to issue subscription receipts at C$2.22 each. Due to strong investor demand, the equity financing was later upsized to US$120 million.

Following the announcement, Rio2 shares fell as much as 5% to C$3.26, as the market digested the impact of potential dilution, leaving the company’s market capitalization just above C$1 billion.

“A major moment” in Rio2’s evolution

Rio2 executive chairman Alex Black described the Condestable acquisition as “a major moment” in the company’s evolution from a gold-focused developer to a Latin American diversified producer.

“With first gold production at Fenix Gold just weeks away, Condestable brings immediate and growing cash flow to support our future growth in gold,” Black said, adding that the mine also offers “meaningful exposure to copper at a time when copper trades at historic lows relative to gold.”

Rio2 president Andrew Cox highlighted the quality and potential of the asset:

“Condestable is a stable, well-run, cash-flowing operation that has meaningful expansion potential. We believe there is an excellent opportunity to add value at the mine and see it as a complementary component of Rio2’s growth strategy,” he stated.

Condestable: long-life underground operation with expansion upside

Located about 90 km south of Lima, Condestable is a long-life underground copper operation with over 60 years of continuous production. The mine currently feeds an 8,400 tonne-per-day (tpd) processing plant that produces a clean copper concentrate with no penalties.

According to Rio2, there is significant potential to grow the operation through:

• Expanding underground mining capacity from 8,400 tpd to 12,000 tpd
• Potential open pit development, which could extend mine life and increase output

The company forecasts copper-equivalent production of around 27,000 tonnes per year, which is expected to deliver:

• Approximately US$110 million in annual cash flow at consensus metal prices
• Around US$145 million in annual cash flow at current spot prices over the next five years

Rio2 plans to use this cash flow to support expansions at Condestable and to help fund the build-out of its Fenix Gold project in Chile, which is currently under construction.

Synergies with Fenix Gold and growth in gold-equivalent output

With Condestable in the portfolio, Rio2 expects that, combined with Fenix Gold, its operations could produce around 180,000 ounces of gold equivalent per year.

Looking ahead, the company sees a pathway to increase output to approximately 380,000 ounces of gold equivalent annually, assuming the successful development of a Phase 2 expansion at Fenix Gold.

By securing an established, cash-generating copper asset while Fenix Gold approaches first production, Rio2 positions itself as a multi-asset, multi-metal producer with exposure to both gold and copper across Chile and Peru.

Strategic copper exposure at a favourable point in the cycle

The transaction comes at a time when copper prices are trading at historically low levels relative to gold, a dynamic that Rio2 believes creates a strategic entry point into high-quality copper production.

With the acquisition of Condestable, the company strengthens its Latin American platform, combining:

• A producing copper mine with room to grow
• A near-term gold project at Fenix Gold
• A clear strategy to reinvest cash flow into expansion and value creation

Together, these elements support Rio2’s ambition to become a leading diversified metals producer in the region, well-positioned for the next upswing in the copper and gold price cycle.