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Rio Alto Mining to Deliver Gold Under Prepayment Facility

Rio Alto Mining Limited (TSX VENTURE:RIO)(OTCQX:RIOAF)(BVLAC:RIO)(DB Frankfurt:MS2) has announced that it has completed definitive documentation and drawn down an initial tranche of US$5 million under the previously announced US$25 million gold prepayment agreement with Red Kite Explorer Trust.

The remaining funds have been placed in escrow and will be released upon satisfaction of certain conditions precedent typical of such an agreement and including final approval of the agreements with RKE by the TSX Venture Exchange.

The Company will deliver up to 36,800 ounces of gold from July 2011 (if fully drawn) in settlement of its Prepayment Facility as follows: 575 ounces per month until October 2012, increasing to 1,150 ounces per month from November 2012 to October 2014. These ounces represent approximately 6% of expected output from the oxide project. The actual monthly delivery of gold ounces will vary by 5% from the amounts stated above for every $100 dollar change in the gold price (up or down) from a base price of $1,150, subject to limits at $1,450 or $950 per ounce.

Rio Alto may prepay gold ounces remaining to be delivered under the Prepayment Facility, in whole or in part, at any time without penalty in either ounces of gold or the equivalent in cash at the then prevailing gold price. As security, Rio Alto has granted RKE a charge over substantially all of the Company's assets.

In addition, RKE has provided Rio Alto with a US$3 million credit facility (the "Credit Facility") that may be accessed, at the Company's election, once all of the funds placed in escrow have been utilized. The Credit Facility may be drawn upon once and for no less than the full US$3 million amount. If drawn, the Credit Facility would bear interest at the 3-month LIBOR plus 6 per cent per annum compounded annually. The Credit Facility would mature in October 2014 and may be prepaid at anytime without penalty.

Net proceeds from the Prepayment Facility may be used to develop the La Arena gold oxide project in Peru. Management expects that the Prepayment Facility together with existing working capital should be sufficient to complete construction of the oxide project. Proceeds, if any, from the Credit Facility may be used for development of the La Arena gold oxide project or related working capital requirements.

The Company paid a cash arrangement fee of US$750,000 in connection with the Prepayment and Credit Facilities and entered into a gold marketing agreement with RKE covering the expected gold production from La Arena gold oxide mine.

Anthony Hawkshaw, CFO and Director stated that, "Funds from the Prepayment and Credit Facilities will help ensure that we stay on track to deliver ore to the pad in December and complete the gold recovery plant early in the New Year without diluting our shareholders' interest in the copper/gold deposit at La Arena. We have an aggressive development schedule, but thus far our team at La Arena has met every target. Rio Alto is confident that as long as there are no extreme weather conditions at site or a force majeure event our team will complete construction and development according to the plan."


Rio Alto Mining Limited

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