How quickly can management build a mine? – Alex Black on long investment horizons

How quickly can management build a mine? – Alex Black on long investment horizons

[Music] Ryu is up nearly threefold in the past year this month the company closed an eye popping $23 million financing and the first gold Pour at its Phoenix Gold operation could come as early as 2025 executive chairman is Alex black Alex welcome to kcko thanks Michael thanks for having me here uh Alex your Flagship is the Phoenix Gold project what is it and what’s the work done today well Phoenix Gold currently is the largest undeveloped gold oxide heat bleach project in the Americas uh it’s a project that’s located in the atakama region of Chile about 160 kilm uh east of Copo and uh it was discovered back in uh 2010 by a company called atakama Pacific um atakama Pacific drilled some pretty spectacular holes back then uh went for a big ride um but then after two or three years going into 134 as the um you know the metal price started to come down they they they lost momentum and uh at the end of the day we approached them back in 17 and did a deal with them in 18 to acquire their company and because we’re we’ve got a track record of Mind building we saw lots of characteristics in that project that suit what our experience is and uh we did a deal and and since then we’ve put together in eia and we’re in the permitting process now and and in the financing process now uh no Alex in 2022 uh the company’s Environ prits were rejected yeah they were and that was a big shock to us and a big shot to the mining industry in general in in Chile because we’re in the wrong place at the wrong time we were going through our um adjudication of our eia when the new government in Chile came into Power uh in in about April of 2022 and you know their mandate was not very friendly towards mining at that point um and it it was interference bottom line is and there’s a big story here but I’m not going to go into the detail but the bottom line line is that uh it was interference from the federal government in a regional uh case um all EAS in in Chile happened regionally and they’re adjudicated regionally not not federally um so anyway um when that happened we went into a appeal process uh which was a committee of ministers um unfortunately that Committee of ministers doesn’t have a Time mandate so when we entered that Pro process we just didn’t know how long it was going to take and as as it was it took 18 months and that for a company like us Junior company one asset company it killed us I mean the share price went from 60 cents before the U before the announcement to 10 cents and then we flatlined across we pushed really hard uh we had lots of help from a couple of Lobby groups in Chile um we validated our case that in fact we did nothing wrong um we didn’t have to do extra work um the issue that the government brought up with respect to Chin sheers was incorrect and that’s what the committee of ministers found uh and we were allowed to go forward they made a decision in December and uh since December we had the official decree received about three weeks ago when we announced the financing that we we just did and uh and now we’re in the permitting process and permitting is is very much a bureaucratic process um so we we from our experience think it’s going to take three or four months to complete and uh and that coincides with the financing we’re doing as well bring us up to date then on uh this support uh for uh the government as well as the community Alex yeah well it was interesting uh during that whole process of being in front of the committee of ministers um we had community on our side our communities were lobbying the government to get this project approved we had business on our side in Copo the ataka region in Chile has one of the highest unemployment rates of the whole of the country so there was a lot of pressure put on by external parties um and you know I always say that social is the key to any mining project you better have everything buttoned down from a social perspective we did we started that back in 2018 when we acquired the project and uh it paid paid off for us because the community uh actually were a big part of the lobby for this project to go ahead and funnily enough we’re now a priority project in Chile we are PR priority mining project to be developed and and there’s a lot of emphasis to push our project forward through the permanent process and get this get this project up and running uh there’s some more water infrastructure that is being built near you well what is it and why is it important to Phoenix yeah there’s a project um and it’s a joint venture it’s called enac and it’s a joint venture between a Chilean uh sorry an Israeli company called Solair uh and also a Spanish company uh Soler specializes in diesel uh plant construction and distribution of diesel water the Spanish company I don’t have their name at the moment but they specialize in solar energy and they’re teaming up um to build a third-party um uh diesel project which will provide water to third parties like ourselves um uh on a um you know on a unit cost basis right there’s a there’s a cubic meter of water it’s going to cost X and that project right now is is in the fin stages of eia approval we don’t imagine there’s going to be any issues there because this follows the Mandate of the government and also the environmental Lobby in Chile is to stop companies from pulling water from the ground um and uh using diesel or uh uh sea water in in the process rather than uh water from the uh from the ground so uh it’s a project that probably in our guess and we’re going to know more of this because we’re going to do a um a uh expansion study later on this year but um you know what it’s going to do for us is is give us access to water to be able to expand our project from what it is today which is um a 20,000 ton a day order pad scenario producing about 100,000 ounces of gold per anom to something of the size of about 880,000 tons a day so four times bigger and producing somewhere between 250 and 300,000 hous perom for at least 10 years so that leap puts us in in in a worldclass league from the point of view of the uh production that we’ll be outputting from Phoenix Gold that depends upon uh working out arrangements with the water provider correct Alex yeah and that that’s going to fall in place um we’re estimating they probably will have all of that infrastructure available in 3 to four years time and uh so we dovet tile our operations with that at the moment we’re Trucking water to the project we’ve told everybody that’s not optimal but it’s built into our uh cost analysis our feasibility study that we finished in September of last year it works it’s not something you want to do forever we could do it for 17 years because that’s the Mind life of the 20,000 ton a day case at uh 1650 gold but but we don’t want to do that so so obviously tying into a a a longer term water solution is the way to go uh now Alex uh you’re based in Lima last week you were in uh Toronto uh talking about the company uh to investors and uh stakeholders uh you uh told uh Paul Harris um our other anchor here at kcko that your $23 million raise was a delightful surprise um can resource companies raise funds more easily this environment just with gold hitting alltime highs well you know I I think you have to have the Stars aligned it’s got to be management project um you know shareholders the thing that blew me away and and I I’ve been on this side of the fence I’ve been in the mining industry for more than 40 years but on the the corporate side or on the minor side for the last 25 years and I’ve never done a financing like this we we started off with a target of $8 million Canadian to raise that would see us through from now till September we’re estimating that September is when we um will do our next financing in respect to the uh construction financing for the project so $8 million was the target I went back to 8 Capital who led the deal said look you know I think I can do three and three to four from existing shareholders and Insiders I said fine go ahead and see if you can get that in the book so I started ringing up existing shareholders and uh within a couple of days I I I my order book was nearly $17 million from existing shareholders so that blew me away uh particularly because those existing shareholders had been through the the the crappy times that we just been through with regards to the um uh um negative response to our eia um but they were there in droves and and there was you know that much demand for it and so we tacked on a bit more money uh for new shareholders and and we ended up with what 22 $23 million so it was quite amazing I don’t know you know once again I think you have to have you know the right management team doing the right thing with the right project and obviously during that week too the gold price started to to accelerate uh and and rise and and maybe we’re in the right place at the right time for a change now um You said that there’s interest in the company there’s been a number of transactions I don’t have to tell you uh Alex uh in the resource space um what’s been notable uh to you regarding this current Spate of m& um yeah I think it’s interesting I think it’s light um because you know m&a should have I I’ve been a proponent of m& because I just believe there’s too many companies out there in in in the resource space and particularly in the in the gold space but um anyway yeah it’s starting to happen probably later than I would have thought it should have happened and and you know the philosophy of buying low and selling high is is something that uh obviously fits into the equation um yeah look I mean and even us once we got our eia approval in December we’ve had in you know inbounds from corporates that we we never spoke to before who are obviously looking and and curious about you know this 5 million ounce deposit in Chile doable um run of mine gold oxide Heap Leach so um yeah it’s going to be interesting to see how things play out we’re not for sale I mean we built two of these mines before in a previous iteration which was Rio Alto from 2009 to 2015 we built Brio Alto up from a company that was worth $12 million in 2009 to a company that was taken out by Taco resources in 25 for $1.2 billion so you know what I keep telling people is we’re mind Builders but we also know how to exit and now’s not the time for us to exit and I mean we wouldn’t do that because we’ve got a lot of value we can create here we got to get that second stage project up and running um and then who knows what’s what’s going to happen and who knows what the gold price environment or the appetite from from bigger guys will be at that time but uh yeah we we’ve done it before um we’ve seen uh Cobra Panama that first quantums of M come offline which is having a global impacts upon copper prices Alex um you spent a long time in South America at the beginning of the interview we were talking about your own challenges with Phoenix uh in terms of uh getting your r ation right um can you talk a little bit more about uh social license and kind of getting that right to where you operate because it’s really something that has come to the for in um I guess globally yeah social license I can’t iterate that more than I normally do in respect to laam I mean Latin America you know social social social is the key to everything and in the case of Cobra to Panama or or first quantum I I would be surprised if they didn’t have the social side of their business sorted and and and have the Buy in at the local level but what you find in latam is you have local support and then you have rings of other uh in you know interested parties and the further you go away from the project most of those interested parties are are anti- mining and so in the case of cor of Panama what I happen there was that there seemed to be buying at the local level but then there was this this big push outside of that area of influence um against mining which then went up to the government and um and and and that started the whole the whole uh issue there for for first Quantum typically what I in my experience particularly here in Peru is you know government can you know be positive or negative towards mining in a general sense but it’s really what you do on the ground at the community level in the case of Chile we had a very similar case to cob to Panama except um it was an environmental groups that that went up against us and and supported by the government it was actually the government that interfered in the process and decided there wasn’t going to be a new mind build at that time so um yeah it’s it’s a fine Bal bed but you you know you need to have that down pat and one of the things we pride ourselves in is we’ve got a great Latino uh team at Rio 2 it’s in fact the same team that did Rio Alto they all came with me once once I left Rio Alto back in 215 216 and we’ve done it twice before at L rer and sha window here in Peru and and we’ve successfully done it at Phoenix Gold in Chile so it’s it’s it’s all about being focused and and and spending a lot of time to make sure you get that R Alex how bad is the water situation generally for miners you talked about uh having um uh having a water uh potential water solution to you through a desalination plant um seem we seem to see more reports about solar and that being actually able to uh use for using desalination um how big a threat is uh water issues to Mining and also is Tech going to rescue us well yeah look I mean water is an issue in a lot of places around the world and particularly where we are in the atakama desert which is one of the driest places in the planet um yeah look obviously you just got to move with the times and in Chile the mining industry has moved itself away from sourcing groundwater for their mining operations and have built Dale projects but they’re mainly the big companies you know the chuki kadas the the escondidas etc etc um Candelaria for example which is a just to the south of uh Copo which is regional town near to our project um they have their own Dale project as well um and and Dell Supply so yeah Dell is a solution there are you know there are copper mines also looking at uh uh direct seawater I mean and that works for some projects um so that’s nice because you don’t have to uh treat it or or or spend any money on uh all you have to do is Pump It Up to the project um uh is there technology I don’t know I mean I don’t know of any technology that can fabricate water out of I don’t know air or something like that if there is it’s probably really expensive right now so I think D cell all around the world is is a solution and also for drinking water for for many countries around the world that are they facing um you know water issues so yeah look you got to move with the times for us it’s going to be Dell and it will come hopefully through this third party n a pack that I mentioned before uh obviously that we’re seeing copper as well as a gold start to move uh investor interest seems be growing and then we also see uh some uh Equity prices starting to move um any general advice that you would give or any Northstar or any um that you would look at in terms of this upswing in the commodity sector Allen no you know it’s really hard putting yourself like us a developer in the right place at the right time with with all these positive upswings in in commodity prices and precious metal prices so you know it it it’s tough because you could you know we could we could be developing and we could be on a a downswing of of the gold price and and that would work against us so you know what I see um and I don’t know where the gold price is going I mean I’m I’m I’m a CEO of a mining company I’m not a a predictor of of of gold or and the price of gold but um if you look at where Gold’s been um you know from 213 to two 19 it was sort of around 1250 on average it then jumped up uh from about 20 to you know 20 23 it was in that order of 1850 uh and now are we finding a new base plus 2000 I think so but where um I don’t know and and we’re living in interesting times as you know from the point of view of of of of the fiscal sit situation all around the world um you know debt situation you know supply of money etc etc so you know we’re I think we’re in the right place at the right time at the moment um and uh we just got to make hay as the sun shine and run as fast as we can and and get ourselves to production get our project built financed and built and um and the rest will will fall into place I was meeting more Alex kind of um sorry for the way I phrase it I was meaning kind of more of a framework um I was just interested because uh you know you’ve been in the guts of it right now but uh if you’re using your hat you’re using your analytical hat but then you’re looking at other resource names or other companies do you start with the resource itself that the company has do you look at management have they done this before uh are you looking at what their finances have all of the above is the there what’s your checklist right now when you’re uh going down and then you’re looking at particular Resource company well well obviously what’s in the ground yeah who are the guys who who are going to execute and deliver on what they’re saying they’re going to do and thirdly like I said before social what’s the social environment around where they are and how quick can they develop a project I mean even when you see projects in Nevada and Arizona and places like that they take 5 to seven years to get off the ground uh because of the permitting processes and Etc that’s not a social issue but you need to take that into consideration uh if you look at what we we’ve been through I mean we started 218 and here we are you know six years later you know we should be in Gold production by the end of next year so that’s seven years so all those sorts of things when you when you’re buy into a company like us um that’s not a producer you’ve got to say to yourself well you know I’m not buying it for now I’m buying for what what it’s going to look like in six or seven years or a potential takeout takeouts you know depends on the asset as to what what happens from a takeout perspective so I I I I really believe you know the three things I mentioned before the deposit the people and the social uh aspect of the project is key uh lastly Alex uh you say you’re going to be in uh production soon what’s going to be the Milestones over the next 12 months yeah so we’re working with Endeavor Finance right now we’ve been with them for the last uh 12 months or so and um we’ve received um expressions of interest for a number of funds and banks in the order of you know most the offers are in the order of1 to $120 million us for this project our current uh requirement is for about 110 million us so it’s more than we need but what will happen is that these funds and banks will want cost over facilities so that I want to lend you more than what you actually need to to make sure that you do get there at the end of the day so we’re in that process now um we we we plan to have our financing solution in place in August at the same time we’ve got the permitting happen happening that I mentioned before that’ll be finished in about August and so if there is any Equity uh that needs to be raised and and I’m sure it’s not going to be a lot of equity uh given the numbers I’ve just mentioned to you um we’re looking at September for an equity raise and and fully financed ready to go and when that happens because we already were in preconstruction here back in 2022 and I I asked people to go and have a look at our um presentation on our website which shows all that um we are we are anticipating we’ll be in first gold production late Q3 early Q4 next year so it’s very quick it’s a very quick quick project and um and and and we will be cash flowing towards the end of next year so that’s the that’s the key timelines Alex thanks for your time appreciate it my name’s Michael McCrae you’re watching kcko mining [Music]

Management, deposit and social license are all key when considering a resource investment, said Alex Black, executive chairman of Rio2, but time to production plays an important role, too.

Black spoke to Kitco Mining on Monday.

Rio2 (TSXV: RIO) is advancing its Fenix gold project in Chile. In April, the company announced a $23 million financing. The company also advanced some of its environmental permits. The company says that its Fenix is the largest undeveloped gold heap leach project in the Americas. The company anticipates production by 2025.

When assessing a resource company, Black said that the resource, management and social license are all fundamental. Time to develop also has to be weighed.

“How quickly can [management] develop a project? When you see projects in Nevada and Arizona, it takes five to seven years to get off the ground because of the permitting process. It’s not a social issue, but you need to take that into consideration.

“When you buy into a company…that’s not a producer, you’ve got to say to yourself ‘Well, I’m not buying it for now. I’m buying it for what it’s going to look like in six or seven years.’ [There are] potential takeout takeouts. It depends on the asset.”

0:00 – What’s the Fenix gold project?
1:40 – Environmental permits were initially rejected in 2022
4:17 – Community support for the Fenix gold project
5:34 – Water infrastructure near Fenix
8:39 – Raising funds as a resource company
11:05 – M&A heats up in the resource sector
13:09 – Ensuring that you have social license—lessons from First Quantum’s Cobre Panama
16:07 – Is the water situation deteriorating for miners globally?
20:27 – Checklist for resource investors
22:18 – Milestones over next 12 months at Rio2

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