Good morning and welcome to Nordic Mining's first quarter presentation. My name is Finn Marum and I'm the new CEO of Nordic Mining. I'm joined here today by Tord Meling, who's our CFO, and Kenneth Nakken Angedal, who's the Managing Director at Engebø. Following my introduction, Kenneth will cover operational status at Engebø, and then Tord will go through the financial status, and then we'll end off with a Q&A session. We keep a strong focus on health and environment and safety at Nordic Mining, building on the solid track record that was created during the construction phase. During the first quarter, we had one minor lost-time injury. However small, it's one too many. The first quarter marked the transition from construction to production ramp-up. Our progress was hampered by issues related to plant design. Consequently, volumes have been lower than what we would have wanted.
As Kenneth pointed out in the fourth quarter presentation, production ramp-up is the riskiest phase, riskier than construction. We have a new process plant in a unique combination with our mineral ore. In addition, we have a new organization. In the first quarter, our focus was on building experience and debugging the process plant while focusing on producing garnet only. During March, we made a $33 million tap issue of our high-yield bond in response to bondholders' offer. This allowed us to create more runway, as well as to make more optimal long-term decisions during the ramp-up. Later in March, we found that the fix for the slurry pumps that we reported on, provided by the EPC Contractor, was not working. We decided to carry out a third-party review of the pumping circuit.
The review revealed that the pumps had insufficient capacity, which was consistent with what we observed during running the plant. The pump capacity is being upgraded as we speak, and early indications are that the new design is working well. Given the nature of the issue that we experienced, we decided to mandate a third-party review of the other parts of the plant as well to proactively uncover any other issues that could hamper our production ramp-up, with a view to using the planned downtime in July to fix any outstanding issues. In May, we did make the first shipment of garnet to the Barton Group's Rotterdam facility, and this allowed us to test the value and logistics chain from the mine on the mountain through the process plant to our end customer in continental Europe. Although the cargo was small, it marks a significant milestone for Nordic Mining.
Looking ahead, we will commence production of rutile later this month, with a plan to make the first shipment in the third quarter of this year. Coming in as the new CEO of Nordic Mining, my primary focus is first and foremost to get the Engebø plant up and running safely and quickly. In my view, we're making good progress in that regard. However, we are behind what we signaled to you at the beginning of the year. Nevertheless, we remain committed to reaching design capacity for the plant at year-end. My second area of focus is to take our board through a strategy process, answering the question of where we want to be with Nordic Mining in a 5- 10 year perspective. We will become cash flow positive in 2026, which will create a foundation for future opportunities.
As part of the strategy process, I will engage with various stakeholders, including our investors, customers, as well as environmental groups, to solicit their input on the process. The strategy will be concluded and communicated sometime this fall. Finally, we have hired a new Chief Commercial Officer to assist in the strategy process, as well as to allow us to be more proactive in our new business development. He starts in July. With that, I would like to hand over to Kenneth to take us through the operational status at Engebø.
Thank you, Finn. At Engebø, we are now including our Mining Alliance partner, 110 employees. Looking over Engebø, looking into the plant, and seeing what we experienced the last months shows that since we get into our operating shifts in October 2024, we have experienced a significant growth in the organization. We have been building our team from October until now and are still continuing to build. We have new hires coming in in the summer and also in the autumn. We are happy to say that some of our trainees that have been with us in the past months and years have committed also to stay on board in the future. We have been building our experience through the construction and the ramp-up phase. This unique experience has been gained as we have been in the front seat through both commissioning and now the ramp-up.
In many ways, you can say that what we are doing right now, starting, stopping the plant, adjusting within the frames we have, is the most difficult part of what we do. To conclude, you can also say that our experience is outpacing our production. Going a bit into details on the mining side, we are well advanced and progressing in the pit. We have, through the last months, gained significant access to high-grade ore that we will use in the future. We are ahead of schedule in the mining. The mining operations have in the first quarter moved 570,000 tons of rock, and to date, we have moved close to 1 million tons of rock and deposited in our area behind the pit.
What we are focusing on now, coming into the end of the second quarter and into the second half of 2025, is to focus on utilization of our machinery, making sure that we have efficient operations in a pit until we are going into full production in the process plant. As Finn, mentioned, we are happy to announce that our first commercial shipment of 569 tons of garnet has been dispatched to Rotterdam. It shows that we are capable of producing high quality according to strict regulations from our customers. It's also very important to be able to test the equipment from our product silos onboard a boat, send it and ship it to Rotterdam, and to unload it into the packing system at Barton's facilities.
We made steady production in the first quarter and have seen a growth and increase in production also in the second quarter, which allows us to send out the ship of 569 tons. Most outstanding items in and outside of the process plant have been finalized and closed out together with our EPCs. As mentioned by Finn Marum, we have not achieved our internal ramp-up plan for the first quarter. We have installed a remedial solution for the pump circuits in March, which did not have the expected effect. Together with the external party, we have now remodeled and recalculated all slurry pumps in our process plant, and the prioritized pump has been modified together with our EPC contractor, which has shown good effort in supporting us in making this happen. The initial data shows that the performance of the prioritized pumps is according to our expectations.
The performance indications from the initial and prioritized pumps let us now start to continue our ramp-up. The production of rutile will restart and commence at the end of this month. We will look into further modifications of the pumps in the planned maintenance modification stop in July. We remain steady on our target for full production at the end of the year. We have, as mentioned, focused always on maintaining the quality of our products, and it shows that focusing on quality gives benefits down the line in terms of volumes. The first shipment of garnet has been sent, and the first shipment of rutile is planned in the third quarter. Long-term production levels remain unchanged, with around 35,000 tons of rutile a year and 200,000 tons of garnet a year after a slow ramp-up in the initial five to six years.
We are proud of the work we do within sustainability and environment. We now have a seven-member team focusing on meeting all regulatory requirements and monitoring our environmental performance. When we are producing, we are depositing our tailings and have continuous monitoring of this 24 hours a day. We have not had any deviations or breach of permits as long as we have been operating for the last six months. As mentioned earlier, we have done a significant update to the baseline studies of our environment around us, both on land and in the fjord. These results have been communicated with the regulatory bodies and our local community. For full transparency, these reports have also been put into our Norwegian project website for everybody to understand and read through.
Now that we are finished with construction, our environmental monitoring goes into a new phase with the annual reporting of findings and reporting to the Norwegian Environmental Agency every year. We have also done a significant effort to lift the reporting towards sustainable mining from the Norwegian Mining Association. I leave the word to Tord.
Thank you, Kenneth. I want to start off with the cash position. Cash flow in the period was a net increase of NOK 169 million, which was, of course, impacted by the tap issue in early March, with a net proceed of NOK 349 million. As announced in our fourth quarter presentation, we saw that we were not going to be able to obtain the liquidity buffer that we had earlier planned for, and by that, having limited resources available to handle any unforeseen events in the ramp-up. That was the background for why we wanted to increase the existing bond. Today, we see that this was fortunate because of the pump issues that have evolved into the second quarter. The tap issue allows us to plan the ramp-up in the most optimal manner, taking into account the issues that we are facing.
The delays are hitting the cash flow negatively, as we had planned for revenues in the end of the first quarter and increasing into the second quarter. This is now being postponed. The cash flow from investment was NOK 110 million, which includes capitalized costs up until January. The CapEx from the construction project is coming to an end, but it remains some end discussions and holdbacks from the EPC Contractor to conclude the investments in the plant. The strengthening of the NOK is affecting the cash held in US dollar and had a negative impact of NOK 16 million in this first quarter. We are exiting the quarter with NOK 636 million in cash, including restricted cash, which will be sufficient to take us to a positive cash flow operation. Moving over to the P&L, there are some changes here to focus on.
We have done a reclassification of the mine and the construction in February, meaning that the operating cost and payroll at Engebø has been capitalized in January. After that, the main part of the total operating costs of NOK 56 million, excluding the depreciation, relates to February and March. As you will see, the depreciation has also increased, and this is because we have started to depreciate the mine and the process plant. The production expenses are impacted by high activity in the pit throughout the quarter. More than 570,000 tons of rock have been blasted and hauled in the period, and the main part of this is waste rock that we need to move in order to get access to the high-grade ore.
This work, as Kenneth said, is ahead of the schedule and something we have to do, we have done now that we would have had to do later if not done now. Furthermore, we have a full setup in the operation, and the plant has been running while we are testing and ramping up the production, lots of starting and stopping, unfortunately without producing end products of high volumes. Not running the plant in an optimal way is costly, but also an important step on the way to steady production. Direct costs related to the issue that we are facing with the pumps are mainly overtime payment to key resources and hired consultants to help us with the finding of the best solutions. Going forward, the main focus is to get the production up and running with a target of reaching steady design capacity by the end of this year. With that, we can go over to the Q&A.
Yes, thank you, Tord. I think we'll start with Kenneth here. There are just a few questions here to you, Kenneth. We'll start with, can you clarify who is bearing the cost of the additional work related to the redesign of the production line and the replacement of the slurry pumps? Are the contracts with the subcontractors structured in a way that they cover cost up to the delivery of a finished product, or will Nordic Mining need to absorb those expenses?
I think the main point now is that we are collaborating together with the EPC Contractor to finalize and fix this issue we have with the pumps. That said, it is, of course, built around our NS 8407 contracts, where we are paying for a certain capacity and solution finalized in our plant.
A question about the garnet. What were the customers' feedback from the quality of first-shipped garnet product? Are you in Nordic Mining happy with the quality of the product you made, and is it the same as planned in the DFS?
The quality of the product is in accordance with or in exceedance of the expectations in the DFS. We have had our customers visiting us several times during the last months to just oversee and look into the quality of the products, and we have not received any remarks on quality at this point.
Is the facility reliable now after those challenges that you have experienced?
We have found a steady-state solution to have a reliable plant at this point in time. When we are now upgrading the pumps, we are also needing to find new steady states, and we are continuing our ramp-up, meaning we are adding more volumes and increasing the density of our wet processing plants. They are still in a ramp-up phase, and we must assume that we will meet challenges going forward, but we are ready and prepared to solve this as they might come up.
Have you started to deposit mining waste?
We have started our tailing solution in November. In correlation with our first mineral concentrate and first ore to mill in November, we started depositing the tailings and have, as we have been running the plant, doing tests, continuously been depositing according to our permit.
When will you deliver rutile products, and is the rutile quality as good as planned?
As mentioned, we plan to ship the first rutile shipment in the third quarter, and there is not seen any reason not to have a full good quality in a lot of volumes, also in rutile. We have done small batches of production, but now that we restart up the rutile production, we will see and learn more. As said before, our focus is always to maintain quality and then increase the volume.
What do you think the biggest challenges for the operation in the next two years will be?
I think, as mentioned also in the previous quarterly report presentation and also mentioned by Tord, the phase we are in now has and will always be the most risky phase in terms of uncertainty. It means that we might meet challenges, but we have been good at meeting and solving most of them along the way. In terms of our one- to two-year prospect, we need to first and foremost deliver as promised on design capacity by the end of the year, and then is to maintain and focus on both quality and volume for the next coming years.
Perhaps a question for Tord. Could you comment on the observed rutile garnet prices on the market?
Yeah, we have seen it's a quite slow market on the rutile, with not much to update about since last quarter. For the garnet price, it's not a big market where we can observe market prices. The drivers here are the construction market, which is in somewhat a slow period. For the garnet, we have a fixed price for the next five years, so we are covered there.
Thank you. Kenneth, what are realistic garnet sales volumes for the second quarter in 2025?
It's a little bit early to start predicting volumes at this point, but we are now ramping up as planned and following the plan until the end of the year.
Finn, could you tell us, is there any news about the Quartz project?
We are advancing two projects that were started earlier. One is to look at downstream processing of our rutile in Norway. The other project is the one that you're asking about, is a Quartz project. I think we reported earlier that we've taken out 10 tons of minerals from the mountain, and we've shipped that to Germany for processing, and we're still waiting for the results. Early indications are quite positive, but the final results will be available to us this fall.
Thank you. We have one last question to Finn Marum. Is there any change to the strategic direction?
Not yet. We maintain the strategy that was communicated by Ivar, my predecessor. As I just mentioned, the two projects are being advanced under the current strategy. As I mentioned earlier, we are in this new strategy process, which will conclude this fall and communicate to the market. For seeing any changes to that, I think it's too early. We need to take our board through it yet, but that will yield some answers that I know our investors are eager to ask, such as what will our dividend policy be, etc. These are things that will revert to this fall.
I would thank everybody for participating in this webcast, and we'll see you back in three months.
Thank you.