idle and fond bondage

The Rio2 Ltd (RIO.v) environmental report news

I just spent half an hour on a videocall with Alex Black regarding this NR, published this morning. It’s fair to say that the opinion and recommendation of the national Chile Environmental Authority, the SEA, came as a surprise to the company because they had addressed the previously raised observations on flora and fauna with the relevant regional authorities and received the green light at that level, but the national board took a different view. So, a few things to say:

  • The SEA does not decide whether the project moves forward, that’s the job of the 11 seat “Council of Ministers”. The council includes many ministries and brings differing opinions to the table, for example the Ministry of Mining is part of the Council. As is the Environment Ministry, of course, but there is a wide range of positions and opinions at the table.
  • The Council of Ministers does not have a fixed date on the vote and decision, but it was slated to happen on July 1st. Even if the vote doesn’t go ahead on that exact date, it will happen soon.
  • The decision taken at the Council of Ministers is by simple majority, e.g. if it’s 6 to 5, a motion is passed.
  • There is then a 30 day appeal period, in which any side may raise objections to the decision. That’s good for Rio2 if they don’t get their way, the SEA can also appeal if they don’t like the Council’s decision [EDIT: I have learned that this is not correct. In fact, the company does have the right of appeal, but if the permit is awarded SEA and other bodies that recommend against do not have the right of appeal].

Then once that period of potential appeal is done, we will know Chile’s position on the Fenix project. Clearly, the SEA environmental recommendation holds considerable weight at this type of committee and it’s not the first time that its new director has recommended against a mining project. Valentina Duran is the same head that recommended against the Anglo Los Bronces project (though for different reasons, with air quality and dust mitigation the issue that saw SEA give the thumbs down). However, the SEA is only one opinion and that of the Ministry of Mining (i.e. the Minister herself) will be equally as important and we know that body is in favour of Fenix going ahead. Long story short, Fenix may now become “news in Chile” and the subject of political debate in the period before the vote. While the Anglo Los Bronces decision may have been understood as an isolated case (it had question marks over it even during the previous Piñera government period), Fenix looks like becoming a test case for the country. If the Boric government is willing and able to delay and send back a EIA for revision on what is arguably a technicality, it will send a clear message to the mining industry that would reinforce their suspicions about the true motives behind the Los Bronces call. That sort of message affects the amount of hard investment dollars that would enter the country during the entire Boric administration. In this way, Rio2 at Fenix is the potential test case and while a small junior with a market cap that’s a rounding error for companies such as Rio, Anglo, BHP etc, you can be sure all the sector players will be watching attentively.

The news from Chile’s SEA is a clear negative for Rio2, there’s no denying that, but it’s not “The Project Is Dead” either. Even in a worst-case situation, the company would have to provide extra information on one very small part of its EIA application and we should note, the major issues regarding water, land, etc etc have been addressed to the satisfaction of all. We are sure to get more information from the company as soon as possible (Alex Black had a meeting lined up with his Chilean team and legal counsel after he got off the videoscreen with me) and depending on what they say and decide to do, that may even be a second NR in the next day or so to explain the permitting and decision procedure in more detail, along with the possible pathways for the company and the Fenix project. So a setback and bad news yes, but the company wanted to get in front of the news and give it in “straight shot” style before anything else (the SEA report is a public document and was published yesterday afternoon, it’s better to get these things from the company than the newswires). Finally, please note that in the event of the Council of Ministers voting the project up and then no appeal forthcoming, this bad news would become anecdotal and there wouldn’t be any meaningful delay to the project or its current timeline.

Final finally, disclosure: Long and staying long.


    It will be interesting to see the outcome of this decision. I am trying to think about the optics of the 11-seat panel. For the mining ministry, they certainly don’t want mining dollars to leave the country, but could it be they would be willing to lose a case over a gold mine vs. a copper mine? And on the other hand, a loss for the environmental ministry could be levered against the the new government a lot more than the loss of a mine? Domestically at least? We’ll see.


    Thanks for the nice summary… I see you are staying in, but are you a buyer here?


    So the opinion of the regional authorities does not matter much going forward? Do we know why the SEA came to a different conclusion?

    Mike Lovely West Vancouver 23/06/22 2:38 pm

    Zero comments on one of the biggest shzt kickings in this sector? Well here is mine:

    I think this will get resolved in RIO’s favour. It would not surprise me if this does not even push back RIO’s timeline.

    The worst can always happen but this is a real asset, with real economics run by real professionals.

    Very long (unfortunately) but added 80,000 today.


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