Good morning, everyone. It's a pleasure to welcome you to this second quarter interim presentation here with Nordic Mining. We are standing at the construction sites here at Engebø Rutile and Garnet projects at the west coast of Norway. My name is Ivar Fossum. I'm the CEO of Nordic, together with Managing Director of Engebø Rutile and Garnet, Kenneth Angedal, and CFO Christian Gjerde. We'll give you the presentation this morning. As usual, the webcast will be posted on our website. Also, the complete presentation is included in the press release published this morning. Let's, let's start. We have a fairly standard agenda this morning. After my brief introduction, Kenneth will tell you more about the status of the project before Christian gives an update on financials.
Please also note that you can post your questions during our presentation, and we will have a Q&A session after we have finalized our presentation. There will also be some videos towards the end of the session, so don't hang up after the Q&A session, and you will see more of the Engebø surroundings after we have finalized. Let's move into the highlights for the second quarter. Around me, there are several construction activities. There are heavy dumpers, excavators, mechanical installation, tunneling work, a lot of heavy craning operations, so naturally, we are concerned with safety. We're pleased to see that our focus has also resulted in no lost time injuries for the second quarter. We hope, and our target is, that that will last throughout the project. That focus remains on top on our priority.
There are other issues related to ESG and ESG and safety also in the second quarter. We published our Transparency Act Report by the end of June, a complete document, which you should look at at our webpage. We also got our waste management plan for Engebø approved by Norwegian authorities towards the end of June. Kenneth will come back and give you a broad and proper introduction to where we are at the project later on, I'm pleased to see that construction are according to plan, and that we have carried out several heavy groundwork operations, which reduces risk for the construction of the project as a whole. We'll be back to, to that in a second. The world is in a uncertain stage in, in many way.
Fortunately, we, we have a niche and a luxury commodity, producing Rutile and Garnet combined. Although the markets in total are a little bit hesitant, we see that Rutile demand is well supported by the TR- the TiO2 metal segment, as well as the welding segment. Regarding pigment, which is a GDP-driven product, it's a softer market we see both in Europe and North America. We'll come back with more comments on that one later on. During second quarter, we stepped up activity at Engebø, so we spent almost NOK 370 million during the quarter, and that trend will certainly continue throughout the third quarter as well. There are plenty of new activities to engage, to be engaged on, during the third quarter.
Also, we listed our $100 million US dollar bond on the Nordic ABM Exchange during second quarter, and we completed a repair issue towards existing shareholders. Finally, that has been a long waiting period, I should say, the Norwegian government launched their new mineral strategy during June, just before vacation period this year. It's a mineral strategy which follows, to a large degree, the pillars of the EU's Critical Raw Materials Act. The Norwegian government are focusing on five distinctive points. Firstly, that the process of permitting shall go faster than now, and we can certainly subscribe to that in Nordic.
They want to secure that the mineral industry is also a, an integral part of the circular economy, improving sustainability in the value chain as a whole, but also to mobilize and inspire private capital to engage in Norwegian mineral assets. As well, they have responded positively to the inquiry from EU and other nations with regard to increased international partnership and cooperation. Our expectation is, of course, that this strategy will evolve and result in more specific action plans, as well as maybe also budget allocations from the Norwegian government. We think it's a good step forward in bringing more awareness to Norwegian citizens and politicians with regard to the importance of minerals, and we think it will be a good base to increase the sector here in Norway, both for players, but certainly also for investors.
Finally, we are pleased to confirm that Norwegian State will support Nordic in the appeal case. After two losses, there is still an appeal case from AMR that will be heard in the Supreme Court later on this year. The Norwegian State will take a full supporting part role in those hearings. A few words about future. As you know, Nordic has been an early initiator of seabed mineral exploration, curious and forward-leaning to what that could hold in terms of mineral resources. We have reviewed seabed minerals along with land-based opportunities during the last year. Our consideration is that the lead time to establish viable and commercial and sustainable production from seabed mineral resources is excessive compared to what we consider being promising opportunities onshore.
We have decided in the company to look for future and closer opportunities onshore and pause our engagement on seabed minerals. That does not mean that we put it aside. We might step into it later on. There are certainly interesting resources at the seabed, but again, the lead time to bring value to our shareholders, we think that is excessive compared to land-based opportunities. With those words, I will leave the word to continue to Kenneth Angedal, who will tell you more specifically about Engebø, where we are today. Please, Kenneth.
Thank you, Ivar. A little more in-depth on health and safety. We have in total project to date, 94 low potential incident registered in our system. This means potential incidents that has not led into further accidents, but we believe that we are doing a great job in awareness and non-conformance reporting to minimize and to keep our LTIs at zero. We have had reported in the previous quarter, working heights, but that investigation is now concluded with several actions for us to follow up towards ourself and our contractors. We did have a minor accident during the summer in a construction pit with no and minor material damage, where the some rocks flew out of the construction pit down at the sea level and hit our workshop at our process plant.
This debris was all within our bound safety boundaries, no risk for damages or health was at present. This is considered our low potential incident in our statistics. We have maintained roughly 70 workers at site during the quarter, with some reduction during summer holiday, we see now a transition where our EPCs are reduction in EPC1 and increase in EPC2. Over the next coming months in Q3, we'll also see an increase on-site presence by our EPC3 and EPC4. The numbers will rise slightly in the next quarter in our expectations. We are at a large change in our project. During the summer and in July, we released a press release that we finalized large part of our infrastructure.
This means our crusher chamber has been finalized, our vertical drilling is finalized, and our major road going up to the mountain has been opened up for use. Our process area is ready for construction of the factory, the process plant, which means that we are changing our focus in the project. We are also doing a significant update of our environmental baseline. We have started this spring and see no changes on the basis of our EIA done previously in the project. We believe that it's important for us to be able to document the status, both on land and in sea, before we start our operations. A little bit more in details. Our in- underground infrastructure is completed, and the civil foundation inside the underground infrastructure is to start within short time.
We have built a large underground crushing chamber for our primary crushing, crushers, and our vertical shaft up to the top of the mountain, which enables us very low energy usage in the first step of our process. Our owner site, owner site team will also increase drastically in the coming months because we are ramping up to meet the changes in our production at site, where we now will start building three main process plant buildings, which is our key to deliver high-quality products to the market. Another thing we just finalized is that we have fully enclosed our admin building and workshop at our process plant site, which is a major achievement within this quarter. As a preparation for starting up the mechanical installation and building our process plant, we are now currently ongoing significant construction of civils, which means concrete foundations for our buildings.
We are building a high and high. Our process plant buildings are high, up to 30 meters, and require significant and good foundations for this to be safe and sound in all environmental aspects. As part of what we do, we also communicate with our local stakeholders, and we have recently, during May, had a larger conference in the region. with large audiences, up to 250 people join, where we focused on meeting the questions from our stakeholders, and actually also opening up for questions from the audience, answered on the stage. We also had people from the local and the Norwegian NTNU and regional government in the Vestland County to participate and present, talking about the importance of the minerals in Norway.
A little more details on our progress. As mentioned, our main highlights is that we are now going from construction of infrastructure to focus on production and construction of our process plant. We have a significant increase in engineering progress and construction of EPC1 and 2, and are expecting to start up preparation work and mechanical installations in end of the third quarter. We still remain being on budget and production of startup in Q4 next year. One of the most important thing for us is to be ready for operation, and we have managed now to almost complete our management team for the operation of Engebø Rutile and Garnet. We are missing the mining manager, which are estimated to onboard during Q3. Our final manager started 1st of August, and we have HR coming in 1st of September.
We are maintaining our plan of ramping up, as you can see in the lower left trend there. We are roughly 20 people in our operational team by September this year. We have also bringing in some technical experts now to join and onboard to support with building up our systematic approach to our operation. In the coming months, we'll also open up 5-10 new positions that are estimated to onboard during January 2024. In regards to our main technology packages, all and or most of them are actually in fabrication with the mill planned to come to site here in November this year already. The main and big technology packages are on the way, and as previously announced, signed up for the crushing and comminution with Metso and with mineral separation with Mineral Technologies. I will leave the word back to Ivar.
Thank you, Kenneth. A few, a few comments and words about the, the market for Rutile titanium feedstock. The, the high level view is that the, the building and metal segments are strong. Metal segments, particularly driven by geopolitics and, and the Western world focus on aerospace and also defense, I should say. While the pigment market are more subdued due to the GDP dampening. In China, we see a split in the pigment market between sort of the, the new technology plants, which are chloride-based, and the old technology plants, which are sulfate-based. Where you see that there is a stronger, stronger demand for the modern technology plants in, in China. In Europe and North America, the pigment market is somewhat softened.
However, Rutile being a smaller portion of the market, prices remain stable for Rutile so far, and even exceeds what we have assumed previously in our models. On the Garnet market, the overall view is that the market is steady. We saw a weaker start in North America, but again, it has picked up during the second quarter, while in Europe is slightly softer, following the reduction in outlook for industry. Although we see somewhat shift from the water jet cutting segment towards the blasting segment being slightly stronger. We don't see any big movements on the pricing, but it remains to be seen where the world is moving towards the rest of the year. With that, I'll leave the word to Christian Gjerde, who will give an update on the finance.
Thank you, Ivar, and good morning to everyone. I will then give you a brief status on the financials before we move to Q&A. As Ivar mentioned, the second quarter has been a quarter with a lot of activities. It's the first full quarter after our financing of the Engebø project in March this year, and, and later related to that, the financial investment decision. In the quarter, we have capitalized close to NOK 370 million in mine under construction, which is a significant ramp up from around NOK 140 million in the first quarter of this year, reflecting the increased activities since fully funded. Mine under construction, the consolidated carrying amount as of this quarter or the second quarter, is close to NOK 800 million.
That is what has been invested since the start of construction work at Engebø in April of last year. At Port Rent, we had NOK 687 million in cash and cash equivalents, of which NOK 566 million sitting at Engebø Rutile and Garnet. That, together with the NOK 50 million that we are expecting to draw down quite soon under the royalty facility, and the NOK 1.1 billion corresponding to $100 million sitting on the bond escrow, will fully fund the Engebø project up to start of production. And as per our projections today, including an untouched project reserve of $30 million. Borrowing costs has been fully capitalized after satisfaction of the financing conditions in March of last year.
The, the interest rates on the bond, capitalized in mine under construction, with the residual financial items going into PNL, summing up to NOK 2.7 million gain for the quarter, with the main impacts being net foreign exchange gain on the bond, interest income cash at hand, and a slight, or a smaller cost on transactions of NOK 1.2 million. For the full financials for the quarter, both for Nordic Mining Consolidated and for Engebø Rutile and Garnet, you can find those in our press releases. With that, I will invite Ivar and Kenneth back to the stage for Q&A.
Thank you for this presentation. We so far have only a few questions, and, the first one is on the construction. Quite specific question: Will you be on track to finish the construction of the mine on time? Ivar or Kenneth?
Short answer is yes.
Question about the finance. When do you expect to draw on the royalty financing and bond, et cetera?
The royalty financing is expected to be drawn down late this quarter, early next quarter, and the bond later this year, early next year.
There is one question about the Rutile price. What was that per ton in second quarter this year?
We see pricing slightly above $1,400, around $1,450 per ton of Rutile in the second quarter. Depending on contracts, we have seen also contracts with, consistently higher prices, up to $1,700 per ton. There has been some changes, and it's depending on the contracts for the bigger suppliers.
Those were the last questions. It, it must have been a crystal clear. There, there is coming one there: Which risks does management consider as the most likely to affect the construction going forward?
Would you like to start, or?
I can start. I think there's, there are several risks that we are managing as part of the project today. A sizable project like this, there are, there are many risks that we follow on a continuous basis and mitigate when we close into activation of those risks in terms of what we construct. I think in, in many ways, our main consideration now are to finalize the detail engineering and embarking on starting the construction of the process plant and the factory, and to maintain good progress and productivity of those, construction and installation of our mechanical packages.
How long will Christian Gjerde remain in the position as Chief Financial Officer, and when can investors expect news on new hire?
I can comment on that. Christian will continue for another month or so, and we are moving forward on the process to get the replacement on CFO.
Are you expecting any cost increases compared to the budget for the construction?
Well, that's for me, I guess. We, we don't see any significant change in the, in the cost for the project compared to what we have estimated in the budget with our contingencies. We are well within our expected cost to completion of the project.
Could you please elaborate on whether you or your suppliers have the inflation risk in the construction contracts?
In the EPC contracts that we have with the big, roughly 70% of our budget, the inflation is within the EPC contracts.
Is it normal to capitalize interest expenses on the bond? Will you continue to do so once the first drawdown is made? Christian.
Yes. For accounting purposes, you are obligated to capitalize, borrowing costs related to construction projects. We started that from satisfying the financing conditions on the 8th of March, and it will continue to be capitalized throughout the project execution.
Ivar, from 1 to 10, what is the political risk for this project at this time?
We don't see any major political risk, at all, rather the opposite. We see a positive momentum from the political situation, a broad alignment among the bigger parties in Norway that, the mineral sector in Norway should be expanded, and, and grow in the years to come.
The mine is a large project where you would expect change orders. What have the size amount of change orders been so far? Please compare it to the expenditure so far.
In relation to changes, we are doing a finalization of detail engineering at the moment, and we see some changes, but are all accounted for in our expectation and still well within our cost to completion within our budgets.
... if the project reserves remain untouched, how will this money be allocated, used? Immediate reduction of debt? Question mark.
The project reserve is structured so that if unused, as we expect today, the funds can be released to Engebø Rutile and Garnet as additional working capital or as additional funds to fast track a refinancing of the bond, or it can be repatriated back to Nordic Mining as a parent, but then we have an obligation to offer to bond investors to buy back the bond.
There's a question regarding the royalty agreement with Orion. Given its initial size of $50 million and royalties of 11% of gross revenues, the cost of capital is exceedingly high. Aside from the opportunity to have the royalty payments through repurchasing half of the initial investment, is there any way for Nordic Mining to cancel the royalty agreement?
The cost of capital of the royalty post-tax is very competitive compared to other alternative capital sources. We are paying 11% gross pre-tax to Orion. The total cost of capital is around 9%, which is competitive long term for a mining project. We do have the opportunity to buy back half of the royalty, but there is no mechanism allowing us to terminate that contract.
Do you have customers and contracts for the products in early stages? When do you think of being profitable?
I can, I can start with the first part of the question. We are covered on sales for the first five years for the total production on both Rutile and Garnets, to international and high-class customers, I should say.
They want some more answers to the inflation issue. Do the suppliers have the risk or not?
The main EPC contractors has inflation embedded into their contract, which means that the risk is on their side.
Just to confirm, do you expect to have to raise any additional capital?
As stated, with the capital that we have available, the cash on Engebø Rutile and Garnet account, the $50 million from the royalty and the $100 million equivalent sitting on the bond escrow, we are fully funded up to production, including a $30 million reserve as per our current estimates.
Some questions about AMR. What are the judicial and economic risk related to the appeal hearing in the Supreme Court?
We consider that to be close to zero, following two losses in the foregoing cases from AMR. Again, we're happy to see that the Norwegian state are fully aligned with our view and will join us in the hearings.