Thank you for standing by, and welcome to the Perseus Mining September 2017 Quarterly Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to your speaker today, Mr. Jeff Quartermaine, Managing Director and CEO. Please go ahead.
Thank you very much, and welcome to this conference call to discuss Perseus Mining September 2017 Quarterly Report. For those of you who are listening to the call on the other side of the world, I do thank you for joining us today and apologize for the timing of the call, but as you'd appreciate, it's impossible to schedule a call that suits all of the people who are interested in Perseus. A recording of this teleconference will, of course, be posted on our website later today, so should anyone need to tune in before we're finished, you can catch up on anything later on. I'm also joined today by Elissa Brown, our CFO, who will assist with any of your more tricky financial questions. Now, as you all know, the March and June quarters of this year saw a strong resurgence in Perseus operating performance on all fronts.
The improved operating performance at Edikan, the advances that we made in developing our second mine at Sissingué, and delivering a technically sound and commercially credible DFS for our third mine, Yaouré, have all been acknowledged as positive steps forward by the market and have led to a relatively strong share price performance during the period compared to some of our more fancy West African-focused peers. However, not unreasonably, some observers indicated that more evidence was needed to make the case that Perseus had, in fact, turned the corner in this coming of age as an investable gold mining company. We believe that our September quarter report released today provides further evidence that we have indeed turned the corner and that our transformation is now well and truly advanced, that the third successive quarter Perseus has delivered as promised.
We're now well on track to deliver on both our December half-year guidance and also the full calendar year production and cost guidance, and to complete the transformation of the company from a single mine business into an investable, multi-mine, geographically diversified mid-tier company, so let's take a closer look at this quarter's evidence and also discuss some of the near-term milestones that we expect to achieve in coming months. Firstly, gold production at our Edikan operation was once again strong, with 51,309 ounces being produced during the quarter at an All-In Site Cost of 1,116 grams. And this was almost identical to the June quarter when we produced 51,563 at 1,112 an ounce, and as you'll recall, that June quarter result was our best since June 2015.
The other important point to note is that during the quarter we generated a positive cash margin averaging about $174 per ounce USD compared to $164 in the previous period. Given that we sold about 50,000 ounces of 50,105 ounces this quarter, that generated about $8 million and a little bit of million of free cash flow in volume. There were several notable features associated with the performance. Firstly, improved grade reconciliation. Now, in July, we undertook an important business improvement initiative aimed at rectifying previous reconciliation inconsistencies in contained gold. We did this by processing a tightly controlled and measured 165,000-ton parcel of ore, lower grade fresh ore, from the Esuajah North Pit, over a 12-day period. Now, the exercise resulted in improved control and measurement of milled tonnages, but it did briefly reduce throughput head grade and therefore gold production in July 2017.
Nevertheless, based on the results of the initiative, a series of remedial measures were implemented, and I'm pleased to say that for the six months to 30th of September 2017, the reconciliation of contained ounces of gold between the resource model and the grade control model was 100%. And reconciliation of contained ounces between grade control and mill is now well within accepted industry standards. So this was a very pleasing outcome for fairly obvious reasons. Now, somewhat related to that, we also saw significantly improved head grade of ore processed during the period. The average head grade of ore milled during the quarter was up 13% to 1.16 grams a ton relative to the 1.03 in the previous quarter. It should be noted that that 1.16 grams a ton was the average for the quarter. And over the three months, we saw a marked improvement of grade.
In the month of September, for example, the average grade was actually 1.3 grams a ton, which is well above our projected average for the financial year. Now, the improvement in grade was expected. It did take slightly longer than we intended for it to materialize. The important thing is, though, that it has come through and should continue to come through in future quarters as higher grade ore is accessed, particularly from Fobinso and the Esuajah North Pits. The other feature during the period was improved plant performance. Now, during the course of the quarter, we did incur some unscheduled maintenance downtime resulting from processing the harder ore from Esuajah North. Now, I should note that this does not signal an ongoing problem with the Esuajah North ore. The hardness of the ore was well within our expected limits.
The issue was that we got a concentrated period of hard ore, which meant that our mill liners need to be replaced a little sooner than expected, as did some pumps and chutes, and we do expect that over time things will work themselves through and that we will have periods where the ore is not as hard as we've experienced and runtime will be improved. In any event, by the end of the quarter, things were certainly improving, and in September we were back to 92% runtime, which is close to target. We did initiate a few changes and will be carrying out some further work in the December quarter aimed at improving runtime and throughput rates further, and I should note that in October to date, our runtime is actually 97%.
So the trend of improvement that we saw in the latter part of the quarter has certainly continued. Our throughput rate has also continued to lift this month, and we're now approaching our average for the last six months. The other thing that improved during the quarter was recovery, which increased by 1%, notwithstanding the fact that we increased the proportion of oxide and transitional ore in the mill feed, but from 5%-13% in order to make up for some of the downtime that I mentioned earlier. One of the interesting things was that when we did conduct that business improvement initiative that I've also mentioned earlier, involving the treatment of a discrete block of fresh ore from Esuajah North, the recoveries achieved were very high. Actually, they were about 91% or so, which is exactly in line with the theoretical recovery for fresh ore.
Now, this is an important point because it is very encouraging as we look to the future when supplies of oxide and transitional ore start to peter out and we're processing fresh ore only. We know that the plant actually does what it's supposed to do. The other feature, I think, of production from Edikan during the quarter was the continued good performance of our operating team in Ghana. I should mention that it is a predominantly Ghanaian operating team that we have over there driving the improvements in mechanical efficiencies, and their work is making a significant contribution to the steady improvement that we're seeing continuously at Edikan. So well done, guys. You're doing a great job. Turning to costs with respect to our all-in site costs, these were reasonably flat during the quarter.
In terms of our unit costs, unit mining costs were fairly steady, actually decreasing from $291 a ton to $283 a ton as a result of more tons of material being mined during the period. Unit processing costs incurred during the quarter increased slightly from $1,031 to $1,061 per ton milled and increased 3%. Now, the actual tons of ore processed was down by 13%, so a 3% increase is actually a pretty good outcome and indicates a decrease in the overall total processing costs. This in itself is notable because we did see a higher cost of maintenance consumables, mill liners in fact, relating to the timing of the scheduled maintenance shutdowns. Site G&A was reasonably flat during the quarter. We averaged $1.53 million a month compared to $1.54 in the previous quarter, so that was pretty flat.
Combined, this meant that on a per-ounce basis, production costs for the quarter, including all mining, waste stripping, processing G&A, excluding royalty, came in at about a little over $1,000 per ounce compared to $974 in the preceding quarter. A slight decrease in royalty payments and a bigger decrease in sustaining capital resulted in an all-in site cost, as I said earlier, of $1,116 per ounce, which was nearly identical to the all-in site cost of $1,112 per ounce that we've recorded in both the June and March quarters of this year. So consequently, the all-in site cost at Edikan for the September quarter was within our all-in site cost guidance range for the December half-year, and that is encouraging going forward. So in terms of Edikan, we have turned the corner some time ago, in fact, and this quarter, combined with the last two quarters, is proof positive of that.
As I said, this improvement in performance is not a fluke, but it is part of a long-term trend of strong performance brought about by some fairly material changes in the way that we're doing our business. So our confidence in the future of Edikan is strong. We're comfortable that the forecast that we've made about future performance will be realized, and that's very important when it comes to looking at the funding of our future development activities. Speaking of which, let's talk first up about the development of our second mine, Sissingué. Now, construction of the Sissingué mine moved ahead steadily and according to plan during the quarter, and by the end of the quarter, we were about 77% complete. The procurement is about 100% complete, and at the end of the period, about 91% of construction materials, plant and equipment were all on site awaiting installation.
All concrete works are complete. The concrete contractors have been demobilized. All plant buildings have been completed, as has the installation of underground services, conduits, and piping and the like. The primary crusher is in place. Installation of the SAG mill is nearing completion, and the SAG mill motor was put in the other day. The CIL tanks are all done, including the top of the tank steelwork. The diesel power station cooling system and switch rooms have arrived on site for installation. The seven diesel generator sets that we'll have have arrived in Abidjan and are awaiting customs clearance ahead of being transported to site, so they're not far away. Tanks for the fuel farm needed to provide fuel for the mining fleet and the power station are on site and placed in position, so as far as construction is concerned, everything is tracking extremely well.
As far as commissioning is concerned, commissioning of the front end of the plant is expected to begin in early November, with all crushing to begin in early December. So we'll have ore on the crushed ore stockpile in December. Production of first gold is expected in the March quarter 2018, as we've been saying for some time, and commercial production will, we do believe, start as of April next year. I've said in previous teleconferences that a picture's worth a thousand words, and of course, what we have done in Appendix A of the quarterly report has included a selection of photos that record development of progress on the ground, and I would encourage you to take a look at those photos. It's hard not to be impressed by the work that's been done, both by our own team and also by our various contractors, particularly the Lycopodium team.
The target that we've given of first gold in March 2018 quarter is well and truly within our reach. To put progress at Sissingué further into context, we spent about $16 million during the quarter on development activities, and that brings our total expenditure on the project to date, including early works, of about $10 million to about $84 million. The forecast cost to complete development is $32 million, and that will be funded by an undrawn balance of $30 million under our project debt facility with Macquarie Bank and the balance of $2 million coming from our cash reserve. So notwithstanding the hopes of a few hedge funds who persist in selling our stock short the completion of development at Sissingué is fully funded, and we are definitely not coming to market for funds. Full stop on that particular subject.
Speaking of the Sissingué operations, which we expect to commence early next year, one of the very important lessons that we learned from Edikan is the critical importance of being fully tuned up to start operations when commissioning is complete, so to this end, we've implemented a comprehensive operational readiness plan for the Sissingué operation with the objective of absolutely ensuring the following commissioning of the mine and plant, the ramp-up to full-scale production occurs as efficiently as possible. Implementation of that plan is well underway, and we're in very good shape for start-up, and even if Lycopodium are able to earn a bonus by finishing the commissioning earlier than expected, we'll certainly be ready to go. Grade control drilling for instance has been performed by SFTP as part of the mining contract that started in early September 2017 and is going very well.
We'll have about three months of grade control data to hand before full-scale mining starts early in November. So the development and operational readiness of Sissingué is carrying on on all fronts and is looking very solid. We're excited about the project. We're looking forward to it starting to contribute gold and cash flow to the group in March next year, in the March quarter next year. And the other thing, I guess, is that while Sissingué's got a relatively short life, as it stands today, the opportunities for extension are extremely good, and we'll be certainly working towards that when cash flow comes available early next year. In the meantime, it's a relatively high-grade, relatively low-cost operation that will provide us an all-important second income stream starting in the June quarter of next year, the June half of next year, I should say.
Turning to our second development project and our third potential mine, Yaouré, the status of this project is exciting. The DFS has advanced strongly on all fronts during the quarter and is on schedule for completion this quarter, in the December quarter, as we've been promising for some time. In fact, our technical committee of the board met on Saturday to go through the preliminary results of the study. We have a little bit of fine-tuning to do over the next week or so, finish off a couple of things before circling back to the board at the end of the month to sign off, and we'll be going public with the results of that study in early November. Not exactly sure of the date, second or third, first or second or third, maybe. We haven't quite pinned that one down yet, but suffice to say it's very soon.
Also suffice to say yet another milestone will be delivered as promised, which is important. Given the JORC and ASX disclosure requirements, I'm not able to be too specific about the shape of the project until we fully disclose, but it is looking good, and I can say that it is coming up very much in line with our expectations based on the due diligence study that we undertook before purchasing the mine in April last year. It's a good project, I think, as you'll find out in a couple of weeks. What I can say is that the DFS has been based on a very comprehensive body of work by our in-house engineers and consultants alike, and this is important because it's not always the case, as many of us know from bitter experience.
The study is realistic, and we are comfortable for it to be used as a benchmark for judging our performance in years to come. It's worth noting that the DFS drilling was completed during the quarter. The program was aimed at confirming the resource that we had purchased, as well as getting additional information for the DFS. A total of 72,307 meters of RC, diamond, and Aircore drilling was completed. About half of that was in resource definition drilling. There was also a portion of grade control drilling done as well to help us define some structures.
The CMA deposit's been drilled on a 25 by 50 meter spacing in the zone where the pit is likely to be developed, and the Yaouré deposit's been similarly drilled to a spacing of 25 by 25, except in some areas where it was drilled to grade control spacing of 6 by 8 meters. The drill hole spacing in all of these areas, we think, is adequate for classification as indicated resources. All assays have been returned to date. The results confirm the tenor of previous intercepts and continuity of mineralization in both the CMA and Yaouré pits. We think that it's going to be a relatively straightforward structural architecture of the CMA mineralization, which will allow a very robust mineral resource estimate to be prepared, which is important because most of the ore and mechanical mineralization underpinning the DFS will be coming from that CMA pit.
Geological logging and assaying of the drilling in Yaouré has provided us a much clearer view of the structural controls of mineralization in that pit. The 25 by 25 meter spacing has allowed the application of pretty tight controls on the mineralization in the resource estimation, and particularly when we combine that knowledge with what we got from the very closely spaced grade control, I think we have a pretty good handle on what that set of structures can deliver us, so I guess all things considered, Yaouré's looking pretty good, and we'll have a lot more to say about this project when we release the results in the near future. I think it is definitely a case of watch this space as far as that's concerned.
Turning to corporate matters, applying a gold price of $1,283 as it was at the end of the month and an exchange rate of $0.78 , the total value of cash and bullion on hand at the end of the quarter was about $48 million, AUD 48 million. This sum includes $25 million of cash and 14,179 ounces of bullion that was valued at $23 million. The balance of $48 million is about $5 million more than the cash balance at the end of June, and the increase in cash and bullion during the quarter takes into account a number of inflows, for instance, $11 million coming from AUD 11 million from Edikan, positive working capital move of about 16. We did draw down $10 million on the Sissingué facility, but we also paid $5 million off on the company's short-term corporate debt facility as well.
We spent $22 million at Sissingué and about another further $6 million on exploration and evaluation expenditures. So all in all, those things balance out, so the cash balance is up about $5 million on the quarter. At the end of the quarter, we had gold forward sales contracts in place for about 165,000 ounces at $1,272. In terms of ounces, that was slightly up on where we were in the previous quarter as we took advantage of high gold prices during the quarter to supplement the book. Now, I should say that the hedging that we have in place includes all mandatory hedging required under the terms of our debt facility, so there's no more mandatory hedging. If we do hedge further in the future, it'll be solely at our discretion and as part of our overall risk management plan, which has stood us in pretty good stead today.
In terms of debt obligations, as I said, we did pay off $5 million of our corporate debt facility in September, so $10 million is the outstanding balance under that facility, and that'll be fully repaid by March next year, March 2018. We've also drawn $10 million under the $40 million Sissingué project debt facility, and we do expect to draw the remaining $30 million over the next couple of months as we finalize construction of the project. Now, by the time that Sissingué goes into commercial production on 1st of April next year, our corporate facility will have been fully repaid, and the total outstanding debt for the company will be $40 million under the project facility, and that'll be progressively repaid according to the schedule if it isn't repaid sooner by September 2020.
So what all this means is that not only are we generating cash from Edikan, but we've also got cash in the bank, and we've got an undrawn line of credit available to us. So suffice to say we are in fairly good shape financially. So in conclusion, I think that our results from this September quarter have added to a strong body of evidence supporting our investment case, and hopefully this teleconference has helped to highlight some of these achievements. Just in case you haven't missed the key points from our quarterly report that we released today, let me repeat them for you. So firstly, Perseus is producing gold in accordance with our plans at a cost that generates a positive cash margin for each ounce of gold we sell. We've been doing this consistently now for three quarters, and we expect this to continue.
Secondly, our development projects Sissingué and Yaouré are both running on time and on budget. The development of Sissingué is fully funded, and between internally generated cash and some bank debt, we're very confident that we'll be able to fund the Yaouré development, which we hope will kick off sometime in the second half of 2018. Thirdly, each of our projects, but particularly Sissingué and Yaouré, have excellent exploration potential. Now, we have been a bit quiet on the exploration front in recent times as we've deployed cash to development projects. However, that doesn't mean that our exploration teams have been idle. In fact, they've used the time very wisely to identify an exciting array of targets, and when cash is available for exploration starting next year, we are expecting to produce some impressive organic growth delivered from what are already a reasonably good set of assets that we hold.
Fourthly, we're in good shape financially. Our financing plan, including our current gold price hedging program, is serving us very well, and our financial management team is doing an excellent job. So I guess all things considered, we are making excellent progress towards delivering our short to medium-term growth objectives. We don't need to find new reserves. We don't need to buy new projects. We're in a position to deliver material growth on production and earnings from the assets that we currently own and on which we're currently working. As we've been demonstrating for the three successive quarters, we are accumulating a solid track record of delivering on our promises and presenting a credible case for investment that I think that the market is going to find increasingly difficult to ignore.
Thanks very much for your attention, and if you'd like to ask any questions now, I'd be happy to answer them.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you are using a speakerphone, please pick up the handset to ask your question. Once again, to ask a question, please press star one on your phone. We'll pause for a moment for parties to enter the queue. Once again, to ask a question, please press star one on your phone. Mr. Quartermaine, at this time, we're showing no questions.
Okay. Well, thank you very much. I hope that's a result of having comprehensively addressed all of the issues around the quarter rather than anything else. But once again, thanks very much for attending the call. We are on track. We are comfortable with the way we're going and look forward very much to continuing to have these good reports to release each quarter. The next time we have a teleconference will be in early November when we release the results of the Yaouré DFS, something else we're quite looking forward to. So once again, thank you very much, and I wish you all a good day.
Thank you. That does conclude the conference for today. Thank you for your participation. You may now disconnect your line.