Rio2 Ltd. (RIO:TSX; RIOFF:OTCQX; RIO:BVL) will gain the Condestable project and its 45,000-hectare property for total consideration of US$217 million, noted a Cantor Fitzgerald report. Find out why Cantor changed its rating on Rio2.
Rio2 Ltd. (RIO:TSX; RIOFF:OTCQX; RIO:BVL) entered a definitive agreement with Southern Peaks Mining L.P., a private company, to acquire its 99.1% interest in the Condestable copper mine in Peru, reported Cantor Fitzgerald Analyst Matthew O'Keefe in a Dec. 9 research note. Cantor changed its rating on the Canadian mining company to Hold "on price appreciation."
"We are not overly enamored with the deal given the sparse details provided on the asset, questionable timing (Fenix is not yet complete), and the reduced leverage to precious metals it brings (this may cap the multiple)," O'Keefe wrote. Fenix is Rio2's flagship asset.
Cantor Fitzgerald maintained its target price on the explorer-developer of CA$2.50 per share (CA$2.50/share) and will wait to revise it until after the deal closes, and more details become available, O'Keefe wrote. He expects the new target will "be largely neutral to net asset value."
Rio2 was trading at the target price at the time of the analyst's report. As such, the target implies zero upside.
The company has 429.9 million shares outstanding. Its market cap is CA$1.1 billion. Its 52-week range is CA$0.58-2.51/share.
The total consideration for Condestable is US$217 million (US$217M), of which US$180M is to be paid upfront and the remaining US$37M to be paid in tranches over four years between 2027 and 2030, noted O'Keefe. Additionally, Rio2 is to assume $24M of net debt. This arrangement implies a transaction enterprise value of US$241M.
To cover the cost of the acquisition, Rio2 arranged a US$185M financing package. It consists of US$65M in vendor debt and a bought-deal equity financing expected to close around Dec. 15. In the upsized equity issue, 74,865,000 subscription receipts of Rio2 will be sold at CA$2.22 apiece, generating total gross proceeds of CA$166M, net CA$120M.
Also, Rio2 entered an agreement with a Peruvian Investment Bank for a private placement for aggregate gross proceeds of up to CA$14M, net CA$10M, through the sale of up to 6,306,300 Rio2 common shares at the issue price.
Rio2's acquisition of Condestable is expected to close in January 2026.
Condestable is an underground copper mine about 90 kilometers south of Lima and has been operational since the 1960s, O'Keefe described. Currently, the mine feeds an 8,400 ton per day (8.4 Ktpd) processing plant. It yields a clean concentrate with minor silver and gold byproducts on which Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) appears to have a stream.
"While Condestable is a producing asset, it is an old mine that will likely require significant capital to maintain and extend/expand production as contemplated by Rio2," the analyst added.
According to Rio2, the mine is projected to produce 27,000 tons per annum (27 Ktpa) of copper equivalent, 80,000 ounces (80 Koz) on a gold equivalent basis, with a 10-year reserve life. No actual resource estimate was provided with the acquisition announcement, but Rio2 indicated it soon will post the April 2024 NI 43-101 technical report on Condestable.
Rio2 expects the project, at spot prices, to generate an average annual EBITDA of US$145M over the next five years. Further, there is potential to expand underground mining capacity to 12 Ktpd, potential for open-pit development, and potential for exploration upside at the 45,000-hectare property.
O'Keefe reported the status of and plans for Fenix. With construction about 80% done as of Nov. 30, the project is on track and on budget for first gold production in January 2026, noted Rio2. It expects to ramp up production fully to 100 Koz of gold per annum by year-end 2026.
The plan is still in the works to expand Fenix to 80 Ktpd from 20 Ktpd, taking production to 300 Koz of gold annually for about 10 years from 80 Koz. For the expansion, the company intends to complete a prefeasibility study in Q1/26, followed by an update of the Fenix mineral reserve and resource estimate in Q4/26, then completion of a feasibility study in H2/27.
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Disclosures for Cantor Fitzgerald, Rio2 Ltd., December 9, 2025
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Potential conflicts of interest The author of this report is compensated based in part on the overall revenues of Cantor, a portion of which are generated by investment banking activities. Cantor may have had, or seek to have, an investment banking relationship with companies mentioned in this report. Cantor and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. Although Cantor makes every effort possible to avoid conflicts of interest, readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies. Disclosures as of December 9, 2025 Cantor has not provided investment banking services or received investment banking related compensation from Rio2 Limited within the past 12 months. The analysts responsible for this research report do not have, either directly or indirectly, a long or short position in the shares or options of Rio2 Limited. The analyst responsible for this report has not visited the material operations of Rio2 Limited. No payment or reimbursement was received for related travel costs. Analyst certification The research analyst whose name appears on this report hereby certifies that the opinions and recommendations expressed herein accurately reflect his personal views about the securities, issuers or industries discussed herein. Definitions of recommendations BUY: The stock is attractively priced relative to the company's fundamentals and we expect it to appreciate significantly from the current price over the next 6 to 12 months. BUY (Speculative): The stock is attractively priced relative to the company's fundamentals, however investment in the security carries a higher degree of risk. HOLD: The stock is fairly valued, lacks a near term catalyst, or its execution risk is such that we expect it to trade within a narrow range of the current price in the next 6 to 12 months. The longer term fundamental value of the company may be materially higher, but certain milestones/catalysts have yet to be fully realized. SELL: The stock is overpriced relative to the company's fundamentals, and we expect it to decline from the current price over the next 6 to 12 months. TENDER: We believe the offer price by the acquirer is fair and thus recommend investors tender their shares to the offer. UNDER REVIEW: We are temporarily placing our recommendation under review until further information is disclosed. Member-Canadian Investor Protection Fund. Customers' accounts are protected by the Canadian Investor Protection Fund within specified limits. A brochure describing the nature and limits of coverage is available upon request.