Rio2 Limited (TSX-V:RIO, OTCQX:RIOFF) has updated on its activities following the Atacama Regional Evaluation Commission's decision, announced on July 5, 2022, not to approve the Environmental Impact Assessment (EIA) for its Fenix gold project in Chile.
Rio2 said it has identified numerous discrepancies with factual and procedural matters in the Environmental Qualification Resolution (RCA), the administrative document issued on July 19 which outlines the Environmental Assessment Service's rationale for their decision.
The company believes the discrepancies provide grounds for a strong case for a review of the decision in a non-judicial administrative appeal before a committee of ministries, composed of the ministries of environment (chair), health, economy, agriculture, energy and mining. The national director of SEA is the secretary of the committee.
READ: Rio2 says it is evaluating various options to advance the Fenix gold project following environmental permit decision
After a thorough review of the RCA, in collaboration with the company's external legal counsel and environmental consultants, Rio2 said it maintains its conviction that during the environmental assessment process of the Fenix Gold project's EIA, the company provided all the information requested by the different agencies and addressed, with the highest technical standards, the observations raised during the process.
Vancouver-based Rio2 noted that on completion of the rigorous EIA process, 18 agencies issued their technical conformity to the project. Rio2 also said it is particularly proud of its social engagement strategy over the past four years that paved the way for the successful completion of the participacion ciudadana (public consultation) and consulta indigena (indigenous consultation) processes resulting in favorable agreements with the indigenous communities directly affected by the project.
Grounds for appeal
Based on the findings of the RCA review, Rio2's local subsidiary Fenix Gold Limitada exercised its right to file an administrative appeal before the ministries committee, filing on August 31.
The basis of the administrative appeal centered on the following key findings:
- The Fenix Gold Project was presented for environmental assessment through an EIA, which is the most stringent instrument contemplated by Chilean Environmental Law. The EIA also included a successful public consultation process and successful special consultation process for indigenous communities, under the rules of the OIT No. 169 International Convention;
- The rejection of the EIA is not based on legal incompatibilities that cannot be overcome, but on the need, according to the authorities view, to provide additional information to discard potential risks to Chinchilla chinchilla, Lama guanicoe and Vicugna vicugna;
- Fenix Gold provided quality information in the EIA to demonstrate there were no significant risks to the aforementioned fauna species. This finding was incrementally strengthened and supported during the process through additional observation campaigns and data compilation, in direct response to the authorities' requests;
- The observation campaigns and technical information produced by Fenix Gold and its external advisors were prepared using the methodologies and guidelines approved by the authorities and consistent with similar precedents in the area;
- Certain requests or observations from the authorities, incorrectly referred to by the RCA as "not addressed" by Fenix Gold, were made after the assessment process was closed, in which it is not legally possible for the company to present additional answers. Making requests or observations after the EIA process is closed is not consistent with the nature and rules of the environmental impact assessment process.
Rio2 also said it would work closely with regional authorities to conduct additional observations of fauna in the project area and to agree on new voluntary commitments if required. This additional work will not only provide a positive contribution during the administrative appeal process but can also be used for a resubmission of a new EIA, should Fenix Gold's appeal not be successful.
Time scales
Based on feedback from its external legal counsel and advisors, the estimated timing for obtaining EIA approval for the Fenix Gold project is approximately one-and-a-half to two years. The estimated time scale for the administrative appeal process is approximately one year, based on the experience of the company's external legal counsel. The estimated timing for the preparation and resubmission of a new EIA (only required if the administrative appeal is unsuccessful) is approximately two years. These two activities will occur in parallel.
As of June 30, Rio2 said it had cash of approximately US$13.5 million and working capital of approximately US$11 million, which had been allocated to pre-development activities for the project and the company remains debt free.
Rio2 said all contracts with third-party contractors and suppliers have either been suspended or terminated and staff numbers in Chile, Peru, and Canada have been reduced from 82, prior to the rejection of the EIA, to 22 at the current time.
Additional funding will be required during the next two years and Rio2 said it is investigating the merits of launching a strategic review process to assess potential sources of future funding.
The Fenix gold project is one of the largest undeveloped gold oxide, heap leach projects in the Americas, hosting a Measured and Indicated mineral resource of five million ounces of gold which Rio2 believes will make a positive contribution to the Atacama Region and Chile.
According to Rio2, the project is an example of modern gold mining where a full complement of technical, environmental, and social considerations has been consulted on and designed from the outset.
The project represents a significant investment in the gold mining business in Chile by a junior mining company of approximately US$210 million of initial and sustaining capital and will generate employment for at least 1,200 people during construction and 550 people during the 17 years of operations.
Contact the author at susie@proactiveinvestors.com