Good morning and welcome to the status update by Andfjord Salmon. My name is Martin Rasmussen. I am the CEO of Andfjord Salmon. Our presentation was introduced with a video of Andøya, where we are located today. Our objection is not only to serve salmon, we want to serve it with a clear conscience. Our marketing efforts are therefore based on clear and ambitioned concepts that communicate that you can have a clear conscience when you eat our salmon, at the same time invest in a share with a clear conscience. Together with me here today, our CFO, Bjarne Martinsen, and he will cover the financial details later. Out of respect to new shareholders, I will start by giving a short introduction to Andfjord Salmon. Our concept is about capitalizing on the natural advantages we have here at Andøya.
Our ambition is to build the world's most fish-friendly and sustainable fish farming facility. Our facility has been developed on the salmon's terms because this will also generate shareholders value. That is why we utilize technology adapted to our natural advantages of being located next to the Gulf Stream, a flow through system. A laminar water flow in combination with oxygen-rich seawater from the nearby Andfjorden provide optimal and natural conditions for the fish. In other words, we don't have to invest in costly equipment or use energy to lift or regulate the temperature on the seawater. We avoid problems with salmon lice or poisonous algae in the pool because we source seawater below the levels where they live. The fish cannot escape, and biological waste will be used as a resource.
The combination of low energy cost, biological control, and strong growth conditions give Andfjord Salmon a low OpEx and as small as possible environmental footprint, fully in line with our ambition. Here you can see a cross-section of our solution, and we source seawater at approximately 40 meters water depth, below the area where salmon lice live. We push the seawater into the pool, and we use our own technology to create a laminar water flow. A laminar water flow is a parallel water current from one side of the pool to the other without creating turbulence in the water. The oxygen-rich seawater is distributed evenly throughout the pool. Organic waste sink to the bottom of the pool, which then can be cleaned by cleaning robots and other metabolic products such as CO2, will be returned to the ocean without harming the local environment.
The pool is more or less a traditional net pen on land, but we protect the fish against salmon lice, and we protect the local environment by, for example, gathering the organic waste. We are very proud of our concept, and we are very proud that it works as it should, effectively and biologically. It is not a coincidence that we are located at Andøya. In fact, Andøya is the land area in Norway that is located closest to the Gulf Stream. This allow us to source warmer water during the winter compared to the seawater available for traditional ocean-based fish farmers. Warmer water provides improved growth and better biological condition, including lower risk of winter ulcer. Today, we are developing our first facility at Andøya, where we have planned to build up a annually production of 19,000 tons of gutted salmon or HOG.
In addition, we have a expansion potential at our Fisknes, Breivik, and Kvalnes sites, which has the potential to bring total capacity to 90,000 tons of gutted salmon. Now, to a quick summary of the third quarter and subsequent months. All pool functions have been running for one year. On the 25th of June, we released the first smolt. The technical functions worked well, and the biological conditions in the pool have been and are very good for the fish. On the 31st of October this year, the average weight of our salmon reached 1 kg, almost two months ahead of our original schedule. A couple days ago, 30 of November, the average weight was 1,350 gs. In other words, the fish continues to grow well.
On November 30, the survival rate was 98.7%, five months after the release of the smolt. To put this number into perspective, for traditional ocean-based fish farming, in our region, you have had a highly successful smolt release if the mortality rate is below 3% after three months. In other words, our survival rate is industry leading. After close to one year of operation, we see that we are capable of producing 1 kg of salmon within 1 kWh of electricity. Our feed conversion ratio, or the FCR, is so far below 0.9 kg, which also reflect that we will achieve a low OpEx. We will start to include the FCR in the future reports. Let's provide you with operations update.
We will start the operational update by showing a video of the first tasting session of the Andfjord Salmon. At the end of the day, we want to provide a product that tastes amazing, and it's therefore reassuring to see that one of the world's best chef can serve salmon on a fantastic way.
Shall I take the salmon up first?
Yes. Here you go.
Here we have a beautiful salmon from 69 degrees North, Andøya. The first thing I do to find out that the salmon has a good quality, is that I check the gills. I check the fish flesh. I check that it hasn't got any bruises, and most importantly, it smells of fish. With that technique and what Andfjord has done with this salmon, it's completely new.
Yes, Øyvind.
This is what I've been looking forward to.
This is probably the farmed fish I've seen that looks most like a wild salmon. I am a passionate wild salmon fisherman.
I noticed as soon as I opened the box and looked at it, "Is this farmed fish?" Yes.
It has very good, solid fins, and that means that it has a good place in the pool. The fish is one and a half kilos, but for being one and a half kilos, it has a fantastic fine color.
Yes.
I look forward to tasting it, because the consistency is. The color is one thing, but the consistency is also very important.
Important, yes. Having a land-based facility, and perhaps the world's most sustainable facility, it's quite incredible what that enables, which means that you get an incredibly good raw material. Shall we taste it?
I'm really looking forward to doing that. What do you think of the structure of the flesh itself?
Very fine, for sashimi.
Yes. Mm-hmm.
You can use it for anything. A few slices with a thin piece of salmon. You don't need anything more.
I become so happy when I feel that it has that texture it has.
I hope you enjoyed witnessing the first tasting of the Andfjord Salmon. Now we will address the period prior to this. As mentioned, our fish thrives in the pool. This means that the biological conditions are very good because we have been able to recreate the salmon's natural habitat on land. Our laminar water flow, which the salmon knows from the ocean, functions as it should, and feces sink to the bottom, where the cleaning robots collects it in an efficient manner. We are continuously trying to improve things, by having a team with plenty of expertise from traditional salmon farming and smolt production, combined with young, talent people, we constantly find new and more efficient ways of operating the pool. Examples of this are improvements to collection of biological waste, optimized feeding, and a number of other operational process improvements.
Our concept is based on a unique technology in combination with a location with natural advantage. It is also important to remember that we are surrounded by seafood production, and this affects everyone who lives up here. What I'm trying to say is that my colleagues' expertise and passions are important success factors for our fish farming concept. When I spend time with my colleagues, I notice that fish farming is not only a job, it's a way of life. The fish continues to grow well, which means that it has very good and stable conditions in the pool. The average weight of our smolt was 120 g when it was released. A couple of days ago, the average weight was 1,350 g.
The growth is healthy and strong, and the fish is demonstrating a natural behavior in the pool, which means that it thrives in the laminar water current. Our specially designed feed, Calanus Plus by Andfjord Salmon, has proven to be a success. Our feed contains Calanus, which is nature's own starter feed for fish that lives in the ocean. Calanus also function as a flavor enhancer in the feed, and this means that the feed tastes well in addition to providing the fish with a healthy and nutritious feed. The one thing that we probably are most proud of is the survival rate of our fish. As of 3rd of November, the survival rate was 98.7% after just above five months in the pool.
There will always be some fish mortality as the weakest individuals shall be removed from the pool, and we also regularly extract fish to conduct fish health examinations. In comparison, mortality rate for ocean-based farmed salmon was 15.5% in 2021, according to the Norwegian Veterinary Institute Fish Health Report 2021. A highly critical phase for the fish is now behind us, but we are not celebrating until the fish has been harvested. We have a high quality and diverse team in Andfjord Salmon, which means that we are equipped to handle unforeseen events. Electricity supply and energy prices has been a hot topic throughout Europe this year. Low energy consumption equal lower electricity costs, which in turn means improved profitability.
Our flow-through system is based on the use of natural seawater from Andfjorden. Not all land-based facilities have the access to the same natural advantages that we do. The RAS system can be an alternative. I'm glad that we can borrow the Gulf Stream, protect the fish against salmon lice, and return the water to the ocean without causing harm to the local environment. Simple yet genius. My mantra is strong biological conditions in combination with low energy consumption. We have proven both of these profitability factors by successfully operating the pool with fish during the first five months. We have a run rate of utilizing approximately 1 kWh to produce 1 kg of salmon. This is in line with our ambition. Phase II at Kvalnes are the next pool that will be built there.
We have already conducted a lot of the work required to secure good process and progress to the next pools. Today, we are in the closing stage of discussion with many suppliers about finalizing the plan for the next construction phase. It is important that we harvest the synergy from our experience with the first pool and utilize this knowledge for the next pool. We will soon finalize this process, and at that point, we will organize a capital market day where continued expansion and timeline is the key topics. We'll let you know at a later date exactly when this will happen. Regarding our other sites at Andøya, you probably remember that the zoning plan application for our Breivik site was approved in June.
Earlier this autumn, we received indication from the Andøy Municipality that they would decide on the Fisknes zoning plan application in their council meeting in December. Earlier this week, we received feedback that the council, for capacity reason, probably will push the case to the first municipality council meeting in the new year. We continue to experience strong political support for our plans because the positive value creation and employment effect is great here at Andøya. Now, I would like to hand over to our CFO, Bjarne Martinsen.
Thank you, Martin. As usual, we will provide you with a top-level information about our financial position. We strengthened our balance sheet during the first half of the year. Our financial position is therefore solid for the current phase, with the first pool in operation and planning for further development. We will take a closer look now, and we are, as always, answering further questions after the presentation. The third quarter result is affected by the fact that we now build up value of biomass in the balance sheet. Costs that were previous expensed on an ongoing basis are now a part of direct and indirect biomass production costs, and therefore included as inventory in the balance sheet. This is included in change of biomass and inventory in the income statement.
The value of the biomass has been adjusted to market value, which is also included in the adjustment on the same line in the income statement. When Andfjord Salmon generates its first revenues in 2023, the cost linked to biomass production will be recognized in the income statement. Operating costs otherwise remain stable. Direct variable production costs, such as feed costs, will be affected by and develop in line with the production schedule. Other operating costs are at the same level as at the first half of 2022 when we operated the first pool as if we had fish in it. Starting in the third quarter, we see now full effect of depreciation of the facility. Our assets primarily consist of investments in facilities, inventory including biomass, as well as bank deposits and receivables. Current investments are primarily linked to the next development phase at Kvalnes.
As Martin mentioned, we are in the final planning stages for the next build-out phase. We do not incur large investments in this phase. The balance sheet also shows a healthy cash position with NOK 117 million. In addition to what you can see on the balance sheet, we have additional credit facilities and grants totaling to NOK 30 million, meaning that the company's financial position is very comfortable for the phase we are currently in. We have a long-term debt of NOK 143 million, and there are no material changes to this since the second quarter. The liabilities include bank loans from SpareBank 1 Nord-Norge and Innovation Norway, as well as the NOK 50 million shareholder loan that was issued last year. Short-term debt consists primarily of current liabilities linked to the business, and these are at a relatively low level.
Our equity was strengthened during the first half of the year and is therefore significantly higher than at both year-end and the same time last year. The cash flow statement shows a relatively modest investment level compared to earlier quarters, which is explained by the phase we are currently in. Cash flow in connection with operations are influenced by several things and must be seen in connection with the second quarter when net disbursements were low. These levels will be affected by the timing of inflows and outflows. In total, cash flow throughout the year will reflect operating costs and the buildup of inventory. The NOK 117 million cash position at the end of third quarter, plus current receivables and unused credit facilities, provide sufficient financing for the company's current phase.
As we've said several times, we will first prove that our concept works before we initiate financing of further build-out at Kvalnes. The phase II financing at Kvalnes will be a combination of equity and debt. Back to you, Martin.
Thank you, Bjarne. A quick summary. The fish is doing well and is growing well, our philosophy is that happy salmons equal happy shareholders. This requires strong biological conditions, which up till now has been great. Our business has very low energy consumption, which will be positive for our long-term profitability. We expect a decision on our Fisknes zoning plan application very soon. Our target of conducting first harvest in the middle of next year remains firm. The salmon has grown faster than expected, which may result in earlier harvests, we need to monitor the situation over the next few months before we can provide more precise guidance on the exact harvest date. In summary, things could not be much better, we are very satisfied with things are progressing. We are main...
We maintain our 24/7 focus to effort and efforts to make sure that we avoid any negative surprises. Our ambition is to build the world's most fish-friendly and sustainable fish facility for Atlantic salmon. As we explained today, we are on our way to achieving this objective. Please feel free to contact us if you have any question related to the presentation or if you're more curious about how we build the world's most fish-friendly and environmental-friendly facility for Atlantic salmon. Thank you for your attention.