National Bank of Canada initiated coverage on the shares of Rio2 (RIO.TO) with an outperform rating and a C$5.50 target price, with a focus on the company's Fenix and Condestable mines.
The company's flagship asset is the Fenix Gold mine in Chile's Atacama Region, which achieved first gold pour on Jan. 23. Rio2 also acquired a 99.1% interest in the producing Condestable underground copper mine in Peru on Jan. 30, the bank said.
The analysts said Fenix is the company's "principal driver for production upside from a proposed expansion prefeasibility study targeted for Q3, while Condestable provides immediate operating cash flow from stabilized operations, copper diversification and additional growth from throughput expansion and reserve conversion."
The analysts said they see consolidated production growing to about 350,000 to 400,000 gold-equivalent ounces annually by 2031, compared with about 113,000 ounces expected in 2026. Production at the Fenix Gold Mine is expected to increase as the mine reaches steady-state operations and later expands capacity following improvements to water access. At the Condestable Mine, there is also potential to increase output through higher underground mining rates and possible future open pit development.
The analysts said they expect free cash flow inflection on deck in Q2 after a transition quarter in Q1. For 2026, FCF is estimated at about $45 million, rising to around $463 million in 2027, with further upside potential by 2031 if the expansion plan proceeds.
"In our view, RIO is positioned to re-rate to a junior producer multiple as it completes transition to diversified Latin American producer with a newly commissioned gold mine, a producing copper-gold-silver operation, and transformational internal growth," they added.