Rio2 Limited (TSX: RIO) is looking to be more than a single asset producer. The company last night indicated that it has entered into a definitive agreement to acquire a 99.1% interest in the Condestable Mine in Peru.
The asset is set to be acquired for a combination of cash, shares, and vendor debt financing from Southern Peaks Mining. Under the terms of the arrangement, total upfront consideration is set to consist of US$180 million, of which US$80 million is to be paid in cash, US$35 million is to be paid in the form of shares, and US$65 million in the form of vendor debt financing. US$37 million in deferred consideration is also on the table, which is to be paid from 2027 through to 2030.
The purchase also includes $24 million in debt, bringing the total value of the transaction to US$241 million.
Condestable is an established underground copper mine, which is expected to produce an estimated 27,000 tonnes per year of copper equivalent, or about 80,000 ounces per year of gold equivalent. The current reserve life is said to be over ten years, with the mine also containing expansion potential to move the operation from 8,400 tpd to 12,000 tpd.
“The acquisition of Condestable marks a major moment in Rio2’s evolution – from gold developer to 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. Condestable also provides meaningful exposure to copper at a time when copper trades at historic lows relative to gold,” commented Rio2 Executive Chairman Alex Black.
In terms of the financials, the mine is expected to generate average annual EBITDA of US$110 million at consensus prices, which grows to US$145 million at current spot pricing. Cash flow from the operation is expected to fund expansion at both Condestable as well as the Fenix Gold mine that Rio2 is currently in the process of placing into production.
Pro forma, Rio2 is expected to produce 180,000 ounces of gold equivalent annually following the transaction, with a pathway to growing that to 380,000 ounces of gold equivalent annually should potential expansions at both mines be pursued.
The acquisition is currently expected to close in January 2026. Funding is set to come from a US$165 million financing package, which has since expanded from the initial announcement. The company originally expected to raise US$100 million under a bought deal financing led by Raymond James, Stifel Nicolaus, and BMO Capital Markets, but that funding round has now been expanded to US$120 million.
Rio2 last traded at $2.50 on the TSX.
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