Good morning, everyone. Welcome to Akobo Minerals' Q1 presentation of 2023. Together with me today, as always, I have with me Dr. Matt Jackson, our very enthusiastic and positive technical expert. We will take you through all the latest developments, everything that's happening with regards to mining, gold, exploration, and all the other exciting stuff that we are working on these days. First, a short introduction to the company for those not too familiar with us. Akobo Minerals, we're a Scandinavian-based company with assets in Ethiopia. We do focus on gold exploration and boutique mining these days. We do have an ambition to become the leading gold mining and exploration company in Ethiopia. The way we're going to do that is to follow a few general principles.
We do have a strong corporate foundation built that will support our continued growth in the area and to ramp up the resources for future production, and also discover new gold discoveries, not necessarily only in the Akobo area, but also within the Ethiopian general mining industry. We also have a strong local foothold. That's important. We've been there for 12 years, and based upon that foothold and also good ethics, transparency, and communication, we're able to work in a very good and smart way on the ground and with local communities, and also all the way up to federal governments. The last part is also a very important thing for us. We do strive to have a low cost and flexible operation that will now, going forward, be supported by cash flow from our boutique mining at Segele.
Again, we have the ambition to become a major player in the future development of the very interesting and highly unexplored mining sector industry in Ethiopia. What do we have? Well, we have a significant exploration and high-margin gold production potential. I would say the potential we see today is huge. We already have the Segele mine. It's a first-class deposit with some of the highest grades in the world, and you can see here we have the first mineral resource here by SRK. It gives us a, you know, fairly small number on the tonnage, 68,000 ounces of gold. The average grade here of 22.7 gram per ton is really high. You can see part also of that mineral resource estimate, the indicated part is, well, 41,000 ounces out of the 68.
We get up to an average grade of 40.6 gram per ton. This is almost never seen before around in the world, maybe Fosterville in Australia. You can see also from this small table here that this is way above normal mining grades in the industry. This gives us actually a very compelling economics for that specific project. We're expecting a very low all-in cost, closer to $250 per ounce. If you do the maths, it's obvious that this will generate some high-margin cash flow. Just for reference, the industry average here is around $1,000 per ounce. That's only a small part of what we're working on these days. We're still an exploration company.
The value going forward of this company will be dependent also on our ability to continue to develop new areas, new targets, and from where we are standing right now, it has never looked that promising. We believe that we're definitely on the way to be able to establish a million-ounce deposit just within our existing mining license area, and it's getting tangible. Matt will talk more about that later in the presentation. Without ESG, we wouldn't have been here today. It's a vital, and it's an integral part of the company. We do now have a world-class ESG program. It's an award-winning program. We have a great ESG team working on this every day, making sure that we're doing it right.
You can see here from this overview, we're focusing on 8 main areas. We're ensuring regulatory compliance. We are managing stakeholder relationships. We are building organizational capabilities. We are doing scouting and experimenting, and ESG monitoring and reporting, and we're developing a portfolio of sustainability projects. Also important is fostering the cultural change and embedding sustainability into all our processes. What do we actually do? Right now, after a long period of planning, we're starting to put and get our projects up and running. We focus on projects that are sustainable and not dependent on Akobo Minerals in the future. Current ESG program is based upon a lot of what we call, well, sustainable projects like you can see here, building a community hub room out of plastic bottles filled with sand, what we call ecobricks and a eco hub.
This is a great way of combining, cleanup of waste, as you can see, to putting sand into bottles, and then at the end, building houses out of it. Extremely important. We also do a lot of baseline studies, as you can see from the pictures. That's an important thing, to manage the biodiversity in the area, and make sure that we can follow and monitor all activities in the area, and not only our own. Just as you can see also on the top right picture here, there's a lot of traffic going in and out of our area, containers being shipped in and out. We've also made quite an effort to make people aware of the dangers of driving, to drive safe, keep the speed limit, or keep the speed down.
A lot of all of these alternatives are just starting now to be rolled out. A lot more to come. What about the key events? Q1, it's, well, it's history, it's in the past. We did a lot of activity in Q1, but I'll focus mainly now on the highlights of the Q1. We've had a lot of activity ongoing, a very busy quarter and after the quarter, and it's all starting to come together. We're working on many parallel projects or work streams at the same time. Building a mine and a processing plant, it's not straightforward. Just to take you through the highlights, at least after Q1. We produced the first small amount of gold from the Gingerbil quartz vein. We did that by way of bulk sampling into the small, ultra-small processing plant that we have now.
We have started construction of the main processing plant. We do have the ultra-small plant up and running, and it's fully operational. The largest underground mine or mine entrance, the incline shaft, we've advanced some 37 meters underground. Also for the two smaller winzes or entries into the main ore body at the top, they've also advanced quite significantly, 26 meters each, and we're getting really close to hitting the mineralized zone. We do also have had some very challenging weather conditions, probably the worst ever seen in the area. Historically, heavy rain and flooding. This has, of course, impacted progress somewhat, but on the other side, we managed to get through it. No casualties, no damage to our equipment or to our mine site or anything.
Of course, this heavy rain has created some trouble for us in the logistics, in the roads, and just getting things done. We are now very close to signing an agreement with an approved LBMA refinery. That would be a huge achievement for us, and it's one step closer to actually now getting the gold also monetized. There are no changes to our long-term plans. Even though we have not had any meaningful gold production so far, we've had really good experience from testing out the ultra-small plant. It's a testing ground for what's to come with the main plant. We've learned a lot, and that is really valuable to the overall project. Again, a steep learning curve. We recently started the bulk sampling from Gingerbil.
I think last time we estimated maybe a one and a half-hour drive from Gingerbil to Segele Main Plant. We worked on the road, we constructed a new road and built infrastructure, now we're closer to a 10-15-minute drive, which makes this Gingerbil area even more exciting for us. We're only a few meters away underground for hitting some of the richest gold grade in the world. We're getting really, really close. We do still have some NOK 30 million at bank. We're getting better every day. We're getting closer every day. We still have an estimated free cash flow from Segele of around $50 million, the world-class potential that we now see from the new targets, it's never been that good.
Of course, operating and working in a remote area like Akobo has its challenges. Working in Ethiopia has its challenges. That's just a fact. This is not a small project. We call it a small-scale mining, boutique mining, but in reality, we're talking about the football field of construction for a plant. We're talking about huge amount of masses that's been taken out from the surface just to prepare for the 3 mining entrances. A lot of engineering, a lot of, a lot of, a lot of work. This is not something that is done easily. It's a huge project. That said, we're working to move forward every day, to learn every day, but we've had some external challenges, impossible for us to do anything with, like the cement, like lack of rebars.
The inflation in Ethiopia now is very high. That makes supply of goods difficult. That's something we're working on every day. With inflation, well, if you have things in stock, you'd rather sell it in a week or in a month because you'll get a better price. Those things are with us every day. Also, we do have had extreme weather in Akobo, never seen before. We've been through that, we've been tested, and we came through, and we managed it, and we learned from it. Of course, on the internal side, we're breaking new ground. This has never been done the way we're doing it right now in Ethiopia. We're hiring and we're training a lot of people. We're changing people because they don't, you know, they don't cope with the work, the conditions, the area, and everything.
We, of course, have machinery breakdown. That's part of business. Getting spare parts, well, that's also part of our business. Planning, preparing. All of these things, of course, affect progress, but we're managing it. To give you an idea, at peak, we're managing some 300 people on a daily basis in this project. It's actually a quite a big project. For me, there's also no compromising on safety. If there is a safety issue, we stop, we solve it, and we restart. There is no other way to do this.
With that, you know, we're at the stage now where, from where I'm standing, it has never been better, it has never looked that promising, and we're really, really looking forward now to the next month, the next week, see the progress every day, getting closer every day. This is close to being materialized. Yeah, I'll now hand over to Matt, who will take you through some interesting slides, give you some good information on the project, both above ground and underground, and I think he might also have a few interesting videos to share with you.
Thank you.
Matt?
Great. Thank you, Jørgen. It's a real pleasure again, to be back here talking to you and updating our shareholders and anyone that's interested in the progress that we've made. I'll give a three-dimensional orientation of our project, and I'll talk a little bit about the operational teams that we have involved. Towards the end of my section here, I'll talk about some of the really exciting news that we've got with regard to exploration and the growth of the company as a whole. I realize that at many of these presentations, it can be a little bit difficult to understand the three-dimensional geometry of what we're doing here.
Maybe some people aren't familiar with mining, maybe some people are, but they don't quite understand with the two-dimensional imagery that we use. We have a video, which we're showing now, that shows a little bit about the Segele Mine itself. As we zoom down here, you can see there are places where it says inclined shaft, Western Winze, and Eastern Winze. These three terms refer to the tunnels that we use to take out the ore. Just at the bottom here, where the red area is, this is where the process plant is being constructed. If we carry on with this, we're gonna crash through the ground in a second, moving towards the inclined shaft. I'll pause the video there.
What we can see here is 2 green lines that show the Western Winze and the Eastern Winze. These are some areas that we're very much focusing on at the moment. The lengths of these tunnels, they're about 1.5 m wide by 1.5 m high, sorry, about 2 m high each. They're relatively small tunnels, and they're heading directly into the inferred resource and into the indicated resource here. These 2 winzes is, that we call they're tunnels, essentially. If I scroll backwards and forwards, you can see the geometry of these things underground.
They're heading directly for the indicated resource, but also very, very soon, there is gold in the rocks, much, much higher up from where we can see the colorful areas here. What's exciting about these is that the this colorful area that I've called the indicated resource, has an average grade over the whole area of about 40 grams per ton. You'll remember from the slide that Jørgen showed you earlier, that that is, you know, on world terms, an extremely high grade. We are just for ease of seeing this particular image, we've left out the three-dimensional modeled areas which are higher up from this that also can contain gold, which are categorized as inferred resources.
We, this Western Winze will be hitting into the mineralization, into the rocks that contains the gold very, very soon. We're expecting some good news from our team imminently. The Eastern Winze will also go down into the same area. At the moment, there's a big operational focus on getting this Western Winze down to the mineralization, with these fantastic grades that we've spoken about before. It's also worth noting that this black hole here is a really important one to think about. We actually have many, many drill holes that have come down into this indicated resource here, that have been used to make the model and make the assessment of how much gold is here.
Hole three has been emphasized because hole three was the discovery hole for the Segele Project. This is the point at which our geologists, a number of years ago, were jumping up and down with excitement because of the fantastic imagery of the fantastic gold that was pulled out at that point. There was in fact, gold grades in areas of those cores that was vastly exceeded 40 grams per tonne even. The Western Winze is heading straight for that particular hole, as we can see here. I hope this gives you a way of understanding the geometry of what's happening and the progress that we've made so far.
I can also show you, if we scroll on a little bit further, this blue hole here, this is the incline shaft. Once the incline shaft has developed, for, you know, considerably further, we will be able to operate this mine at around about 5,600 tons per month, with some more investment. At the moment, we are focusing very much on the winzes, the these two green tunnels. They will give us, you know, immediate access to ore. I hope that helps people to understand what we're looking at here.
We can move on through the presentation, and unlike previous presentations, where we focused very much on the plans and how it's gonna work, we now very, very much we very much now have an operational focus. What I'd like to do is to talk a little bit about, obviously, what we expect from the mining, but also I want to talk about the people that we have involved, and why we're so happy with the progress and why we have managed to succeed so far. I haven't spoken about him very much, but Professor Stephen Rupprecht has been working with the company as a consultant for quite a number of years now.
Since the discovery was made, in fact, when we got those really, really high grades, we got Steven Rupprecht involved to start designing and creating the operational philosophy for how the mining would actually happen. Professor Steven has a lot of experience of very large-scale mining, but he also is considered to be an expert in smaller methods of mining. It was Steven that designed the concept of using scraper winches and the operational philosophy, essentially. Steven has you know, he's the kind of mining engineer who is used in many due diligence assessments, for example, for huge investments, hundreds of millions of dollars of investments.
He's worked for Gold Fields as the corporate mining engineer, advising on many, many gold mines and the operational philosophy for them, and obviously, operational management. You know, modifying operational systems and ensuring that the mining teams are actually performing as they should do. Professor Stephen. He's currently very, very much involved in problem-solving and operational changes and adjusting the team, the mining team that we have, to push for operational efficiency, and to move as fast as we possibly can, and to use the investment in the most efficient way that we can. Stephen was heavily involved in the selection of IW Mining Services as the mining contractor.
Many of you will know that, in order to manage our risk with regards to mining, we decided we would contract out the actual mining activity. IW Mining are heavily involved at the moment and ramping up all the time with their work. IW Mining have experience of contract mining in South Africa, in various different environments, and it's run by Ian and Willem, who together have around about 70 years of combined experience in mining. They've hired a lot of local people and brought in expatriate miners from South Africa as well. The overall size of the resource is written on the slide, as you can see there.
As I mentioned before, we should have a very, very low operating cost, and the grades are very, very, very, very high. In terms of the progress that we've made, in this quarter, we've advanced the incline shaft to 37 meters, and both of the winzes are now at 26 meters each. It's a little bit hard to show, to take pictures of these, of these, underground mining activities, because obviously, it's dark and underground. We can see here that the systems that we've used, that we've designed for taking out the rocks from underground are these scraper winches, which is a very, very easily maintained system in a remote area. These have been installed now. We have them working on all three tunnels....
In particular, there's been a lot of work done to make all our systems resilient against these challenges that we've had with rainfall. The incline shaft has a very large above ground excavation that's taken some considerable time to establish. You can see on the right-hand side, there's a small wall that you can see that's been established in order to manage water. There's been a lot of work going on to manage the water situation and to ensure safety.
And with safety in mind, IW Mining have a real talent there when it comes to implementing safety measures, and that's been very much at the front of all of our minds in this process. Like I said, the Western Winze, that's the image in the middle that you can see there. Within days, we expect to hit the mineralization at that point. And when we hit that ore, it'll be able to be processed through the ultra-small plant, very, very soon, immediately, as soon as the ore is dug out from underground.
With the equipment and the team we have now, once we hit the mineralization, we will be able to gradually ramp up to producing 2,000 tonnes per month. With the fantastic skills that we have with from IW Mining and with the leadership from Steven Rupprecht, you know, we'll be able to put that in place and push forward in a really efficient and timely manner. In addition to Steven Rupprecht being involved with as the mining engineer, the consultant mining engineer, we've also for the same amount of time, we've had John Derbyshire involved, and both Steve and John worked together initially for the scoping study that many of you will have seen. John Derbyshire is a very high-level chemical engineer.
He has designed flowsheets, for example, and processing systems for projects that are extremely complicated, for example, rare earth element projects, and for large-scale smelters and so on. John Derbyshire, also, just like Steven, performs due diligence assessments for the banking sector and for, you know, in investments. He has been heavily involved in the planning and design of our process plant system, and also now he's heavily involved in ensuring that we're working, you know, as best we possibly can to be efficient and use our funding in the best possible way, and to drive towards production at the soonest possible time. John, in fact, was heavily involved with starting off our process plant team.
Our process plant team at the beginning of this year was 1 person, Manie Nienaber, who is the process plant head of department, and now he has 27 people working for him, and even more people working with him in the construction process of the main plant. We've come a very long way in this last quarter with the hiring of the team, and they're now working very well, running the ultra-small plant. The ultra-small plant, for anyone that's not aware of this, it was shipped in the Q1, and now it's fully operational and it's working and it can extract gold. It's not as efficient as the main plant will be.
The ultra-small plant can extract 40% of the gold that's in a rock, around about that. It's an estimate, but it's fully installed and it's working. It can also be expanded with a very, very small investment. What's great about this is we have a way of generating some revenue from the mineralization when we hit it in the Western Winzes, like I said in the last few slides, but also it gives us an opportunity to push through all the small challenges and teething problems that development of new engineering projects always have. It gives our team a chance to get to know each other and to know what their strengths and weaknesses are.
As Jørgen mentioned before, you know, sometimes, you know, when you build a team, it's necessary to. You end up finding out that some people aren't suitable, and then you go through a period of change. We have been through that process now, and I'm delighted to say that the process plant team is working very well indeed. With John Derbyshire's help and we with resolving any challenges that we come across, you know, we're now working extremely efficiently. John Derbyshire is also, and our team are also very, very much involved with talking with Solo Resources, the principal plant contractor who has designed the main plant, and they are also helping with the construction now.
I'd also like to say a little word about our Akobo Minerals Women in Mining. Next week is International Day of Women in Mining, and we're very, very keen to promote and develop our female talent as much as we possibly can. This is a photograph of the team there. If we move on to the actual progress that's happened recently. We have, we now have 3 crews working day and night on putting in place the process plant foundations. The foundations are divided into sections, and we have now completed the most complicated section, which is the one that will hold the mill.
The mill is the most difficult to install and operate part of any process plant because of the high level of movement and the weight of the item. The foundations for that are now completely complete, and the second most complex area, which is the area where the cyanidation happens, the CIL area, is now also very, very close to being completed. There's very fast progress on the other sections of the foundations. I'm pleased with the performance of this, and it's going very, very, very well indeed. Of course, once the foundations are completed, we have to start mounting the parts of the process plant onto it.
You can see from the left-hand side of this slide, that we have, that we have started installing the various parts of the process plant onto the completed parts of the foundations, which is the mill area, like I said. Lots of the other plant parts are being screwed together and bolted together and constructed off the foundations. As soon as the foundations are ready, they can be lifted on to the foundations and installed at that point. We have a really fantastic team from both Etno and Akobo Minerals, and also from Solo Resources. As I said before, the Solo Resources team designed and selected all the equipment, so we have a really talented team from that company working at site to perform all this work. It's going very well indeed.
We're very, very happy about that. Now, I've spoken a lot about the progress that we've made with the Segele mine. There's obviously a lot of operational focus with that, and a lot of effort is going into pushing us towards that, or, you know, very exciting first gold production. It's often a little bit difficult for people to understand the fact that, you know, with so much focus on Segele and these fantastic grades that we have, but geographically speaking, the Segele mine is a tiny area of a tiny part of the exploration area that we're working in, and even a tiny part of the mining license.
We've had for a long time now, and the reason why I was excited about this project when I first found out about it, we've had these fantastic exploration targets, and we have, you know, we have world-class grades in a resource estimate at Segele that we're going to be producing gold from, you know, very soon. Also, we have other similar grades that we see in other targets in our license area, and the license area is 182 square kilometers in size. You can see, you know, in many targets, like Joru South, we have grab samples, which is just one small sample that has 60 grams per tonne in it, and we have other areas around Waletta, for example, that have even 146 grams per tonne.
These are grab samples, so it's not as high confidence as the Segele mineral resource estimate, but, we have reason to be very excited, and we have been this excited for some time now. We've even said that our goal as a company, our long-term goal is to define multi-million-ounce deposits in the license area. I'm really pleased to say that we are now in the, you know, we're now making tangible progress towards that goal, in fact. We've got some results from the Segele Hilltop deposit that I'll talk about first, but a really exciting, more important thing to talk about is what we've seen at Gingerbil.
The Hilltop target, we've received the first assays from just a few of the holes here. We've only got assays from two of the holes that you can see in the cross-section on the left-hand side. They're not bonanza grades, they're not high grades, but they are significant grades that indicate that we have gold in this system. For anyone that's not familiar with the Hilltop target, it's around about 150 meters away from the Segele mine itself, so it's very, very close. This is an encouraging, exciting target that is very, very close to the mine. If we're successful in doing resource definition here, then it will be able to be exploited very, very quickly and very easily.
We found visible gold from samples that were in an artisanal pit, which is the green vertical line that you can see on the left-hand side of the slide. We have now successfully hit this in drilling, there are 2 areas where we found 1, just over 1 gram per ton. Anyone that understands mineral resources will understand that if there is a large volume of gold resource in the area, you don't necessarily hit, you know, bonanza and high grades in every single hole. There would be lower grades, like 1 gram per ton in various other places. What's exciting about this is that, you know, we, you know, this target is becoming more and more tangible all the time.
We're getting to the point now where we understand the geometry, and we can start drilling it out and developing this. That's very exciting for the expansion of the Segele mine in the immediate area. More exciting than this, in fact, is the Gingerbil deposit itself. Now, in order to help you understand the geometry and the geography of the area, we've got another video to show you. If I just pause here, we can see this is a map where it says Segele Gold Mine here. This is the tiny area that we were zooming through in the previous video. The plant area, where the plant is being built as we speak.
We can zoom out here, and we'll show you where the Gingerbil deposit is. Sorry, the Gingerbil target is. We're just flying up into the air. If I scroll back very slightly. This is where the mine is here, and this is where the Gingerbil target is, here. We've, we've expanded the infrastructure, we've developed the infrastructure, and the roads. Now it's only a 10-minute drive between the Segele Gold Mine and the Gingerbil target. So it's, you know, it's very easily supported and very easily worked on by our team. We're gonna zoom down to the Gingerbil target here. As you can see, it's around about 1,200 meters in length.
The actual strike length, what geologists refer to as strike length, which is the length of the target itself, is much, much larger than the Segele mineralization, which only has a strike length of, you know, 15, 20 meters, in fact. We see several targets, several areas where, these red areas here, where there is quartz veins that come up to surface, and we see visible gold in those, in those veins. This is very, very exciting indeed. Before I focus too much on Gingerbil, I will actually say that there are other very exciting areas even outside the Gingerbil target.
For the sake of simplicity, I'm only gonna talk about the Gingerbil target at this, on this particular presentation. Sorry, I had a slight technical problem there, but I'll just zoom back to Gingerbil here, and we're gonna fly down inside, and then you'll be able to get a better idea of why we're so excited about this. In the previous quarterly report, we announced that we'd found this target, and, you know, we were extremely excited about it, and we announced that we, that we were going to be drilling this project. We've now. The drilling is now well underway, and as you can see here, this line there is a hole that has successfully intersected the gold-bearing zone, the gold-bearing quartz zone, at depth here.
This is often a big milestone for the development of any target to go into resource definition, because you need to have a, the first idea of what the geometry is, to plan the later drilling and to develop a mineral resource. We've hit it at depth, but not only that, we've actually, we've actually been testing some of this material up here, which we call quartz float, and it contains gold. We're looking at gold-bearing rocks, gold-rich rocks even, that go right up to surface, not only at this particular location, but we also see the gold going right up to surface in these other areas that are red here. We're very, very excited about this for a number of reasons.
I'll go back to the presentation now to talk you through why this is exciting. We have the ultra-small plant up and running, which principally is a method for generating revenue. Also what's fantastic about the ultra-small plant is it's a method of establishing what the grade or the concentration of gold is in the rocks. A very reliable way of doing that is by bulk sampling. With a normal gold assay, you might analyze a rock that's about the size of my hand. In bulk sampling, you would process and extract the gold from many tons.
We've actually been doing this already from the quartz float that exists at the Gingerbil target. We have extracted gold. We haven't got to the point where we can calculate a grade yet. We have extracted gold. We're very excited about this and very interested. What is interesting as well about this particular target is that we have seen visible gold in many hand specimens. Also, this looks geologically to have the right kind of observations that you would see from a big gold deposit. Segele is unusual. It's unusual because it has very high grade. Geologically, it looks like something very strange, very unusual. Here, what we're looking at is visible gold in many hand specimens.
We also see base metal sulphides, and we see what we call alteration assemblages, that are a way that exploration geologists understand if something is exciting or it's not exciting. We're seeing a lot of very exciting observations here. As I said, we've, you know, we've hit it in the drilling, and we've upgraded the infrastructure, and we believe that this looks like a big gold deposit. We've been excited for many years now about defining large gold deposits in addition to Segele, and part of our value proposition, essentially, is that we will be producing cash flow from the Segele mine. In addition to that, some of the cash flow can be used to develop the company to build something which is much bigger and much more exciting.
We think now we are on to something that justifies that excitement, the Gingerbil target in this quarter has become something that is a lot more tangible, in fact. We're really looking at something that I'm excited about. Why are we excited about Gingerbil? It's two ways. We have near-term production potential from it, and we have long-term growth from it. We have the Segele process plant, which is being constructed as we speak, and the bulk sampling has shown that we can extract some gold from these areas. Once the plant is up and running, it's technically possible that we can extract gold from the Gingerbil target.
There's more studies to be done. There's a lot of reason to be very, very, very positive about the outcome of those studies. Because the mineralization comes right up to surface, as you saw in the video, we're not talking about having to put in place long tunnels and complicated underground mining. We're talking about very, very simple surface mining. With very, very simple surface mining, we can extract quite large tonnages of gold-rich rocks and process it through the Segele processing plant. That's one reason why we're excited. Even if we…
you know, even if we start producing from the very surface areas, we think this deposit is so big that we have a great potential to develop this and to really grow the company on the basis of doing resource definition. We're talking about doing the normal work that mineral resource development companies perform. We can do lots of drilling at this project and drill it out to depth, and develop large resources, and open the possibility for developing a large-scale mine at this particular project.
Obviously, we're at a very early stage with all of this, but what we're seeing on the ground now and the observations we've made support our excitement for, you know, producing, doing additional near-term production, expanding the production from the Segele gold processing plant, and also increasing the value of the company by developing this. The first stage that we have to get to make what we're looking at here a reality, is to extend the mining license. We have the right to extend our mining license under certain conditions. The preparation for this work is already underway.
What this means is that once we get the mining license extension established, once that's been done, it means that once our studies are successful, if the results of the resource definition work, and the mining studies, and the processing studies are successful, then rather than waiting, you know, a number of months or a number of years even to actually do the production, we could actually start producing gold from the shallow areas immediately. Yeah, we are really excited about this project, and it's really given a lot of us a big smile on our faces in the last few weeks. Yeah, I'm very excited about, you know, putting more news out there about this project.
Now I'll hand back over to Jørgen to take you through the financial update. Thanks.
Thank you, Matt. As you can all understand, from his great presentation, we're all excited these days. Will it happen tomorrow? No. Will it happen in a month? No. We need to plan for the next stage of the company, the growth of the company that will take this to the next level. Not forgetting, of course, the great cash flow that we expect from the Segele mine. Financial performance, not very exciting. We still do not have any revenue this quarter, Q1. Probably one of the last quarters that will happen. You can see it from the operational expenses, it's increasing with the activity level that we are having. Q4, we're down a bit, but that was due to one-off transaction fees with regards to the funding we did.
You can see it's steadily increasing with the activity level. Once we have completed the foundation and the processing plant, we expect these numbers to go down again. We will then only focus on processing and getting the ore out of the mine. You can see here also the equity and the debt development. Looks like we're having a very high debt-equity ratio. What will happen now in beginning of July, is that SEK 53 million of that SEK 178 million will be converted to equity. Just to go through some of the corporate structure overviews here also. We're listed now in Oslo, on the Euronext Growth, and also on the Frankfurt Stock Exchange.
Again, the company is still backed by our great shareholders, mostly Norwegian, but in number, a huge amount of Swedish retail shareholders also that we would like to, yeah, get more involved in the company and in trading in the share. We do have a 5,000 gold loan from Monetary Metals, and also two convertible loans of approximately 70-75 million Swedish krona, of which then the 53 million Swedish krona will be converted to equity in the beginning of July. We have a transparent corporate structure, no tax savings. We have a Swedish company, holding company. We have a Norwegian operational company where we all work, and Etno Mining, where all the local activity and all the licenses are being held. You can see here from the top shareholder list, it does not change. We have very committed and long-term shareholders.
I'll leave it up to you to look at the key metrics. I'll just give you an idea of the development of what we're doing. Also, the income statement for the group, I think it's, yeah, easier for you just to read, and if you have any questions, please reach out to me, and I'll go through that with you. Same with the balance sheet and also the cash flow. It's not very complicated, and I'm sure you'll be able to go through it. But again, please reach out if you want more explanations. That's it for today. Before we do some Q&A, of course, I just wanna finish off with a couple of words.
We are, as you can see in here, very, very excited about the company and the position and what we're doing right now. I would like to thank the team at site here in Oslo, in Wales, in Sweden. We have some of the best people in, I would say, in the mining industry working on this project, because it is an interesting project, and it is... We have the possibility to open up so much in Ethiopia, open up a mining industry that is not there. It's, it's great to see the team at site getting better every day, being trained by our expats, being trained by corporate management. We're developing ourselves every day. The foundation is strong, never been stronger.
We have the right people, we have the right systems in place, we're just really looking forward to deliver on this project going forward. With that, Matt, a few Q&A questions for us?
Plenty of questions here.
Plenty. Ooh, great!
Great. Okay. When can we expect positive cash flow, and when can we expect positive EBITDA?
Yeah, of course, it's interesting and obvious question for all of us to ask. To me, the answer is, well, first we have to get to the mineralized zone. There's no gold being produced without having gold in the material that we produce. So far, we've been testing and trying. It's not really a huge amount of gold in it, but it gives us a lot of experience, and it's setting us up for the main plant. Again, first we have to hit the mineralized zone and get that high-grade gold up and run it through. We'll see what comes out, how much, how efficient that production is, and we'll have to take it from there.
Okay, great. Next question. How is the political situation in the near?
There is no ongoing fighting. It's been a great disarmament of local militia. The federal government is, again, well, I would say, in control of the whole area. There are issues with, still with getting humanitarian aid into different parts of that region. From what we're seeing, that is now solved, and it's a good place, and it will only get better. In the Oromia region, we recently saw that there are ongoing peace talks with the Oromo Liberation Army and the government. This is being supported by Norway and also Kenya. Hopefully, that will lead to more sustainable, also.
Peace
... and/or at least reduction in the conflict. Those are probably the two most.
Mm
... call it, internal conflicts in the country.
I should say that both of those areas are very distant.
Very distant from our area.
... our operation. In Gambella, it's very, very straightforward, simple, no difficulties politically or in security senses.
No.
Yeah.
That's, that's it, and how do we, you know, how do we look at this for the next 12 months? Well, the country is at a place where they need to start performing on their monetary and financial reforms. I think that will only benefit us and benefit the industry. You know, they're working on restructuring their international debt. They're back to at least the situation they were before the Tigray conflict, even though a lot of money was spent on that. Yeah, we're hopeful and we're positive on behalf of Ethiopia for the development over the next few years.
In the very short term, there are challenges to be solved. That does not take away the potential and the, what I would say, the investment opportunities that will arise in Ethiopia over the next few years, decades.
We shouldn't forget the company is led by a Nobel Peace Prize winner who has successfully resolved two conflicts already.
Mm.
Yeah, that's something to talk about, certainly, in my opinion.
Yep.
Maybe this is one for me.
Yep.
For how long will the ultra-small processing plant be used? In my opinion, you know, it could go on for quite a number of years, in fact.
Mm.
Obviously, the sort of volume of production from the main plant will be considerably bigger. It's 1 ton per hour, initially expandable to 20 tons per hour. That's for the main processing plant, the ultra-small plant is only capable of 2 tons per hour. We can continue to use it for production from various areas. For example, if we have additional targets in the mining license, we can get production for that for many years to come. Also, we can use it for exploration work and for more bulk sampling and helping us to, you know, cheaply and quickly define more resources. I hope that answers the question. Next one. What alternatives are being considered besides continuing a standalone company? Are you looking at any acquisition opportunities to expand new assets?
Yeah. We're always opportunistic, but we're focused on what we're doing right now. I can say that we're not going to expand outside of Ethiopia. We're a pure play Ethiopian company. We're still mainly an exploration company, and that's where we want to grow the value of the company over time. There are a lot of assets in Ethiopia these days that, could possibly be taken over. There is also the risk of getting into a new project, depending on the stage. Is it a greenfield or what's the stage they're in? There are other international companies in Ethiopia with, I would call it dormant assets that might be interesting at some point. We also have a very good dialogue with a lot of the international players. They're interested to follow what we're doing.
We're open to... We would like competition, we would like new colleagues, we would like to develop this industry. I believe some of the strength we have is, for anyone looking to enter Ethiopia, is the fact that we have a well-functioning organization. We've been through everything from A to Z. We've been here for 12 years. That's unique. We can easily take up on new projects. Are we willing or interested to start any kind of dialogue right now? Well, it's up to the board and the shareholders, but my view is, we need to really get Segele and Gingerbil and other areas up and running. Hopefully with that, also a good ramp-up in the share price before anything is up on the table. Yeah.
A question here: When does a boutique mining operation become a large one? Will Gingerbil and other prospects tip you towards the latter? That's a great question.
Yeah.
Yeah. The Gingerbil project, you know, if the studies turn out as well as we think they will, then, yeah, it tips us more towards a large-scale mining company. Where the boundary is between a boutique mining company and a large-scale mining company is, you know, I can't really say. You know, arguably, it's around about, you know, 40, 50 tons per hour processing capacity. but yeah, you know, the excitement about Gingerbil is because it has the potential to change-
Yeah
change us in a fundamental way, actually.
Mm.
I mean, does that answer the question, do you think?
Yeah, I think so. We're You can look at some other companies trying to build large-scale mining in Ethiopia. Well, they're not there yet, but it's a difference in size, of course, and investment.
Mm.
I think looking at other companies like TRX in Tanzania and the way they're doing it, they're doing a great job of making a lot of money out of an open pit with a very low grade.
Mm
... and almost the same setup we have from Solo.
In fact-
possible to do this without-
In fact,
it was designed by Solo.
It was actually designed by Solo. We have the opportunity to really ramp up from a large mining scale perspective, without putting $200 million on the table to build something that will take 10 years.
How are you ensuring that adverse environmental impact of an expansion of your operations does not happen? For example, pollution of water, dust, and noise.
I can answer that, I guess.
Yeah.
We're already underway with, you know, understanding the baseline environmental situation in the area. Our ESG team are very, very involved and into the routine now of monitoring our water, and dust, and noise. They do it, you know, continuously all day. You know, we've managed to do it very successfully with the Segele mining operation so far, so I have no doubt that we'll be able to do the same with any operations that happen at Gingerbil, any expansion that happens there. Thank you for the question. Where should we go next? When will the production plant be ready? We're expecting, you know, we're expecting. As I said, the construction is happening on the foundations now.
It's a matter of a, you know, a matter of a few months, really. You know, it's a very short period from now. Okay, next question: Will you aim to get proof of inferred resources at Gingerbil as you did at Segele? Yes. The same process essentially will happen at Gingerbil as it happened at Segele. Most importantly, for the production that we are aiming to do from the shallow areas at Gingerbil, it might not be necessary to go through the same process as we did with Segele.
If we get successful, if we, for example, if we manage to process gold from the ultra-small plant, from the bulk samples, from the shallow areas, there isn't really any reason why we shouldn't. As long as we have the mining license and it's legal, then there isn't any reason why we shouldn't.
... put that mineralization straight through the Segele processing plant.
Mm. Just to say also that we have good support, very good support, and relationship with the new Minister of Mines and the government. They're encouraging us also to expand and move forward. They also see the potential and the possibility here.
There's actually a few more questions left.
Yep
I don't know whether we should keep going or.
Yeah, I'll take, I can do a few. When you get the gold, how easy will it be to convert it to dollars? Well, that's why we're working with one of the few, you know, there are only 11 LBMA-approved refineries in the world. We're working with two of them to now close an agreement. That means that we will get, well, a company like Brink's to arrive at site, take over the gold from us, transport it to Addis, and there to the refinery. At the refinery, they will refine it. That takes a week. Once it's refined, we'll get the cash back, and we will be paid in dollars. That dollar amount will eventually hit probably the Norwegian account first, then down to Ethiopia.
There is still restrictions on some of the capital in Ethiopia. We have a good relationship with both the Ministry of Mines and the National Bank, and the Ministry of Finance. I'm quite confident that we will solve all of these issues. Engaging in those discussions on a high level before we actually have the gold and actually have the dollars, is a bit premature. This is something we're working on and preparing for, and it's the first time for us. It's the first time for any company now, I think, since 2018, when MIDROC stopped sending out to international refineries. Yeah, it will be interesting.
It'll be a good process. We have a strong backing then from an internationally recognized refinery. The products that they do produce, such as an LBMA-approved bar, gold bar, will also have a huge benefit to the National Bank of Ethiopia, because an LBMA-approved bar, gold bar, has more value than just the value of the gold. You can actually borrow money on it. Very interesting discussions to have, and looking forward to that.
Okay, great.
I'm just thinking, what's the timeline being, leading to first gold production? Well, again, as we said, first, we need gold in the material.
Yeah.
... only, maybe a few meters away in the incline shaft, maybe 10 meters away. Right now, impossible to say, but we are close.
Mm-hmm.
And that-
Yeah, that's right. Yeah.
That grade and that material can go straight to the small, ultra-small plant. Again, what will come out of it depends on Matt, the...
Yeah, that's right.
Yeah.
Yeah. I mean, it depends on the grade of the material that we hit, but obviously, we're very optimistic. I mean, we have a resource estimate that shows that we have fantastic grades, in those areas. you know, the rocks come out of the ground, they go straight into the ultra-small plant, and then that's the first production that we have.
Mm.
So...
I'll just do the last one here. Is 30 million SEK enough in cash to get us to profitable production? That's what we're working hard on. Of course, the company cannot continue forever without getting some sort of cash injection or revenues. We are in no process of raising any kind of money. Should that be the case down the road, I'm very confident that we'll be able to source that money in one way or the other. Right now, we're focused on just getting that first gold up and send it through.
Yeah.
A lot of good questions this time.
Yeah, fantastic.
Maybe the message is reaching out now. I don't think we have anything more to say. Thanks for everyone who listened in and who are engaged, and positive, and supporting us every day in what we're doing. We might be able to release more frequent updates going forward. The last quarter has been just a mix of a lot of different activities, small activities-
Mm
... in different areas: the incline, the winzes, the winzes foundation, processing plant. It, there was no meaningful information to give out, so I hope this presentation gave you a good view on the progress and everything we've been doing. We'll look at getting maybe some more information out on a regular basis going forward on how the processing plant is moving forward, and also, of course, we'll let you know as soon as we hit some gold underground. Thank you.
Great. Thank you.