Good morning, and welcome everybody to our Phase Three Plus expansion study presentation and webcast. My name is Scott Parsons, I'm the Vice President of Investor Relations, and I'm gonna be providing a brief overview of our schedule this morning. We are gonna be making some forward-looking statements throughout this presentation, so please review our cautionary notes. We have our full team here, many of which will be presenting today, and all will be available for questions during the Q&A segment. Starting from the top, John McCluskey, our President and CEO, Jamie Porter, our CFO, Peter MacPhail, our COO, Chris Bostwick, our Senior Vice President of Technical Services, Luc Guimond, our VP of Operations, Scott R.G. Parsons, our VP of Exploration. From Island Gold, we have Austin Hemphill, General Manager, and Nathan Bourgeault, Chief Mine Engineer.
In terms of our schedule this morning, John will be providing an introduction momentarily. Jamie's gonna be providing an overview of the Island Gold Mine, and then Chris and Nathan are gonna go into more detail on the Phase 3+ expansion study. Jamie's gonna close out that segment of the presentation with a review of the Phase 3+ economics, as well as our capital allocation outlook. Then we'll turn it over to Scott Parsons to close out the presentation and review the significant exploration potential that Island Gold possesses. At that point, we're gonna open the meeting up to Q&A. For those of you on the webcast, to ask a question, you will need to dial the phone numbers on the screen and enter the passcode. We will be showing these numbers again during the start of the Q&A segment.
With that, I'll turn it over to John McCluskey, our President and CEO, to provide an introduction.
Thank you very much, Scott and good morning, everybody. It is a real pleasure to be with you this morning to talk to you about this next phase of development of Island Gold. It has been an incredible journey to have acquired this asset and to have brought it to the point where we are today. When we initially purchased it was a relatively small operation, it was a relatively small resource, but we saw tremendous potential, which is why we wanted to acquire it in the first place. We'd been looking at it for several years. We'd done a fair amount of work on it. Then when we came to an agreement with Island Gold, we had an opportunity to do even more detailed due diligence. We saw even more potential. We went for it.
We did the acquisition, and that was in the face of a lot of questioning from the market. We pursued it quite aggressively. We pursued exploration quite aggressively. We were very successful. In fact, we were successful beyond our own expectations because the rate at which the reserves and resources have grown at Island Gold have far exceeded our expectations. It's also worth noting that one of the key catalysts in terms of our initial review of the project, and what made us very excited about it right out of the gate, was the very high rate of resource to reserve conversion. This is absolutely key in this particular project.
We had never seen a project with such a high resource to reserve conversion, and I think that's gonna be quite important to keep in mind as we go through the presentation today. 2022 has been a year with some, you know, really amazing catalysts. We grew our resources and reserves to an excess of 10 million ounces this year. Island Gold itself breached the 5 million ounce mark, which, as most of you will appreciate, is a very key mark that very few projects ever reach, let alone high-grade underground mines. Second big delivery was our La Yaqui Grande project. We've been working on this one throughout COVID. We had the positive permitting breakthrough for construction of that project right at the beginning of COVID.
It meant that we had to more or less start construction with that as a significant hurdle to overcome as we built it. I'm very proud of that construction group because they just pursued it, they pursued that challenge in a very impressive way and ultimately delivered the project right on time. We were saying a year and a half ago we wanted to be pouring gold by the beginning of the third quarter and we actually started pouring gold in June. We were able to actually build that production into our second quarter forecast. We were so confident we would do that.
La Yaqui Grande has been a very exciting development for us, about $168 million, but it's gonna be low cost production for the company for the next six years. Of course, most of you who've been following the company know that Mulatos has maintained a six-year mine life practically since we started production back in 2005, and that hasn't changed. We're quite confident we're gonna continue to see exploration success there. For the second half of the year, obviously the biggest catalyst for the company was this Island Gold Phase 3 update. We've been working on this, as you could probably appreciate, with quite some intensity over the last year.
There's a big team of management and engineers that have been involved in the project. I think if you reviewed the release that we published after the close yesterday, you'll see that we've come to a very positive conclusion on this update. We're quite excited to present the details of it to you this morning. Given the fact that we're going to be committing quite a bit of capital to Island Gold over the next few years, it seemed to be a logical step to make to essentially push back the development of our Lynn Lake project. It's almost a natural thing in any case because we're still going through permitting at Lynn Lake.
There's an awful lot involved in that, especially where the federal side of things are concerned. It involves completing our IBAs with first nations in the region. That is just gonna take a little more time in any case. We're intending to get the bulk of the funds spent developing Island Gold before we start on Lynn Lake. In that way, we're going to be able to maintain a decent level of free cash flow and support the dividend and so forth. That was the rationale behind that decision. Just focusing on a few highlights on the expansion study itself.
After you know very careful consideration, we looked at the fact that we added another 1.4 million ounces of gold since the last Phase 3 update. It's also not the last ounce of gold we're gonna find. Island Gold we're quite sure is going to get considerably bigger than what the numbers that we're presenting today are. In that case, you know, where do you go with it? Well, in our case, we decided that a 2,400-ton per day mine was the way to go. So essentially 400 tons a day higher than what the original Phase 3 study contemplated. It shows a 20% growth in production over a much longer mine life, essentially an 18-year mine life.
That's staggering when I say those numbers because, you know, I've been in the mining industry for a long time. It's very rare where you have a high grade, low cost mine like Island Gold with an 18-year mine life. That's staggering. That's just rarely something that we come across. To think that, you know, this has fallen into, you know, our hands and we have the opportunity to build it to a point where, you know, it can be the key asset for Alamos in the years to come.
The fact that costs have come in at an industry low $576 per ounce, that's all-in sustaining costs, that is again, you know, a very good outcome given that, you know, we're well aware we're in an inflationary period right now. We factored in the costs, the additional costs that inflation has brought to bear on the project over the last 18 months, and we've still come in with this very attractive cash cost base. It's gonna generate $223 million in free cash flow. That's at a $1,650 gold price assumption. $260 million in free cash flow if you assume an $1,850 gold price.
This is going to be an absolute juggernaut of an asset for Alamos in the years to come. I think those numbers just speak for themselves. Effectively, this study, which really goes against what has been mostly happening in the industry, especially with the inflationary pressures that we're all facing. The fact that we've come up with a project that's larger in scale, it's a more valuable operation, it contemplates a much larger rate of production over a much longer period of time at a very low cost, it has driven the net present value of this project to close to $2 billion of value.
When you consider we acquired it for $620 million, you know, we've made over $200 million in free cash flow from operations up till now. We've obviously invested very heavily in exploration, but we've driven the value of this project higher year by year since we've owned it. We think that this development is just the next logical step. Another benefit, not the least of the benefits by any means, but another key benefit of going from shifting from a ramp operation to a shaft operation is the fact we're gonna need far less diesel power to produce gold from this mine.
We're effectively gonna be able to reduce our need for diesel trucks from about 18, which is where we were going as the mine deepened. We're gonna be able to reduce that down to five diesel trucks, which is a 35% reduction in our carbon footprint at this operation. That is a very key component to helping us achieve our target of a 30% overall reduction in our carbon footprint by 2030.
You know, our benefits from this Phase 3 plan are really you know right across the board and in my opinion you know more than justify the capital outlay that we're about to spend in order to get us to where we need to go by 2026. What are we building here? Island Gold, as everybody knows, is a gem of a project. It's by no means the biggest project right now. It's a very good grade, one of the highest grade gold mines in Canada at just over 10g . But it's a 1,250 ton per day operation.
It's been producing between 140,000 and 150,000 ounces a year since we've increased that throughput from 900 tons a day when we acquired it. This step we're taking is pretty substantial, effectively doubling the capacity of the operation. Where it takes us, it basically will create the seventh-largest gold mine in Canada. It'll be the lowest cost gold mine in Canada. In terms of profitability, it'll be in the top five. This is the only asset of this caliber, of this scale that isn't in the hands of a major mining company in Canada. It's also interesting to note that our Young-Davidson mine makes the list as well. You know, these are incredibly valuable assets for us.
They're great assets for Canada. When you consider that, back in 2014, when we only had a single mine at that point, that was the Mulatos mine in Canada, but pardon me, the Mulatos mine in Mexico, but we wanted to get into Canada. You know, we knew that the political risk in the world was increasing, and one of the best places to operate was right in our own backyard. You know, our head office is right here in Toronto. We saw that there was a real opportunity with the downturn in the market to look at Canadian assets and set about on a strategy to acquire Canadian assets. From a standing start in 2015, essentially by 2017, we had both Young-Davidson and Island Gold.
By 2020, we'd finished the scale-up of the Young-Davidson mine, building out all the lower mine infrastructure. Now it's producing roughly 200,000 ounces a year and generating over $100 million in free cash flow. We took on Island Gold at the end of 2017, and here it is today, over 5 million ounces and now about to undergo a doubling in size with the Phase 3+ update. I would say that we've more than achieved our goals in terms of getting into Canadian operations. You know, this slide, which is one of the last slides I'm gonna talk to, it really illustrates visually just how significant Island Gold is on the Canadian landscape.
As we make this investment, we move it from, you know, it's a relatively low-cost mine. It's one of the smaller mines that you'd see on this chart. Look where it goes with this investment. In terms of profitability, it moves right to the top and effectively right to the middle of the pack in terms of scale. You know, this is obviously a huge undertaking for Alamos. It's the single largest capital investment that we've ever made in a single project. We're very confident in our ability to do it. We've done already a tremendous amount of work to de-risk this project. Effectively, most of the earthworks are finished.
We started by having the permits in place in order to already address the tailings facility two years ago. We've basically finished that. This is where most of the projects that we've seen budget blow-ups on in Canada have typically gone wrong on the earthworks front, and we've really de-risked the project from that perspective. Going forward, you know, we see just a tremendous future for the company. We've got three great assets now, you know, long life, low cost. We've got some investment to do now. That's what hopefully we should be doing as a mid-tier growth company.
We are very gratified to just have one of the best assets in the world in which to make this investment, because the payoff for our investors, our employees, it's just going to be tremendous. You can see that, you know, our objective to get up over 600,000 ounces a year will clearly be met with this phase of development of Island Gold. We still have Lynn Lake in the pipeline, and we're very impressed with that project. We see a lot of growth potential there. It's already grown substantially since we acquired it.
I think it just bodes well when you consider that with the development of Lynn Lake, which is next in line, it can take our production upwards of 800,000 ounces a year. With that, with those opening remarks, thank you very much for tuning in and for your time and attention. I'm gonna turn over the presentation to Jamie Porter, who's going to discuss some of the financial metrics of the project. Jamie.
Thanks, John, and good morning, everyone. Before I give an overview of Island, we are gonna watch a video that we put together that really summarizes the evolution of Island over the past few years and where we're going in terms of the Phase 3+ expansion. I'll play that now.
The Island Gold mine is located within the Michipicoten Greenstone Belt in northwestern Ontario, Canada, near Dubreuilville and about 83 km northeast of Wawa. Island Gold hosts one of the highest grade and fastest growing ore bodies in the world. Island Gold began producing in 2007, averaging less than 50,000 ounces of gold per year. As exploration drilling moved deeper, grades increased and resources and reserves grew from 400,000 ounces in 2011 to 1.8 million ounces by 2016. Following its acquisition by Alamos Gold in 2017, reserves and resources doubled to 3.7 million ounces by 2019. This rapid growth allowed for a Phase 3 expansion plan to be announced in 2020, which adds infrastructure to accommodate increased mining and processing rates of 2,000 tons per day.
Rather than expanding the ramp, the Phase 3 plan identified the addition of a shaft as the best scenario from every standpoint, including providing the strongest economics. It will improve productivity and significantly reduce costs. The shaft also best positions the operation to capitalize on future exploration success. Since the start of 2020, ongoing exploration success has driven a 37% increase in combined mineral reserves and resources to 5.1 million ounces of gold. This rapid growth has allowed for a Phase 3+ expansion, increasing production rates to 2,400 tons per day, supporting a bigger, more profitable and valuable operation. This will include a larger mill expansion, paste plant and accelerated underground development to support the higher mining rates.
Longitudinal retreat long hole open stoping will continue to be the primary mining method with ore and waste hauled to the shaft and skip to the surface. On surface, ore will be trucked to the expanded mill, which will include a new crushing circuit to support higher processing rates. The new paste plant will allow for improvements in the mining process with faster stope cycling and increased mining recovery. It will also reduce tailings capacity requirements with more than 50% of tailings used to create paste and go back underground. Completing the expansion in 2026 is expected to increase average production to 287,000 ounces per year. With productivity improvements and economies of scale, all-in sustaining costs are expected to decrease more than 30% to average approximately $580 per ounce, among the lowest in the industry.
The addition of the shaft also greatly reduces the number of haul trucks required, in turn, reducing greenhouse gas emissions by an expected 35% over the life of the mine. There is great potential for future growth with the deposit open laterally and down plunge, and some of the best exploration holes coming in the past two years as the deposit has expanded deeper. The shaft infrastructure has been designed to accommodate that growth with the capacity to extend the shaft up to 2 km. Island Gold also hosts significant regional potential. In 2020, Alamos acquired Trillium Mining, adding over 5,000 hectares adjacent to and along strike from the Island Gold deposit. This increased the land package by more than 50% to 15,000 hectares, which includes two past producing mines with several historic high-grade gold showings.
With a 17-year mine life and significant exploration potential, Island Gold is expected to be one of the most profitable operations in the world for decades to come.
Could hardly have said it better myself. That's a good overview of Island. I'll make some additional comments with respect to the development of the asset over the past several years, and I'll turn it over to Chris, who's gonna walk us through the details of the Phase 3+ expansion and what the future holds for Island. This mine started operation in 2007. Island has produced 1.1 million ounces to date, but we have seen very significant reserve and resource growth as well as production growth in the last four and a half years since we've owned it. From a corporate perspective, we've been very focused on really optimizing this asset.
We've invested almost $100 million in the last several years in repurchasing a 3% NSR, a 15% NPI, and as was referenced in the video, acquiring additional concessions from Trillium Mining. What we've done is we've really set up Island for long-term profitability. We've reduced the royalty and economic burden associated with past agreements significantly and set Island up to be profitable for the long term. We referenced in the video the tremendous exploration success that we've had. This deposit has grown in leaps and bounds. When we acquired it in November 2017, we had 1.8 million ounces across all categories.
That grew to 3.7 million ounces as of the end of 2019, which formed the basis for our July 2020 Phase 3 shaft expansion to 2,000 tons per day. Here we are now, as of the end of 2021, 5.1 million ounces across all categories. That's what forms the basis for the mine plan that we're putting forward as part of the Phase 3+ expansion to 2,400 tons per day. We've increased reserves and resources, but importantly, we've also increased grades. Our reserve grade has gone from 8.7 g per ton we initially acquired Island to north of 10 g now. We've seen a 33% increase in ore grades. That just means every ounce that we've found has become more profitable, given those higher grades.
Another important point to note is the cost of adding those ounces. Our discovery cost is only $12 per ounce over the course of the past four and a half years. That's really how you add value in the mining industry, by finding high grade and therefore highly profitable ounces at only $12 an ounce discovery cost. We've added tremendous value to this asset. Our reserves and resources have grown, we've tried to keep pace by expanding production. We've gone from a rate of 900 tons of underground mining and processing per day when Richmont owned Island to. We quickly moved that up to 1,100 tons per day, and then a couple of years back to 1,200 tons per day, which is where we're operating now.
We've seen obviously a corresponding increase in our ounce production. We've gone to a range of between 130 and 150 thousand ounces of production over the last several years. As production has increased, we've benefited from economies of scale, which have driven the cost on a per ounce basis down. Growing production at lower costs has led to a significant increase in free cash flow. You can see in 2017 and 2018, we generated marginal free cash flow, but a significant increase starting in 2019. In 2020, we did over $100 million in free cash flow net of $81 million of capital spending.
We increased our capital spending in 2021 as part of the phase three expansion, but still generated $53 million free cash flow. Since we've owned this asset, we bought it for $600 million. Since we've owned it, we've recovered $200 million in free cash flow to date. It's done a you know fabulous job of financing its capital expansion and returning free cash flow to the corporate coffers. This is my favorite slide in this part of the presentation because it really highlights the amount of value that we've added through the Island acquisition. Again, we acquired this mine for $620 million back in 2017.
With the Phase 3 expansion we published in July 2020, we were able to demonstrate that Island had a value of $1.3 billion. With the Phase 3+ study and expansion to 2,400 tons per day that we're putting out today, we can demonstrate that Island's worth north of $2 billion at current gold prices. We've created tremendous value, and this is gonna continue to be a growing and exciting asset for Alamos in the years ahead. With that, I'll turn the presentation over to Chris, who's gonna get into the details of the Phase 3+ expansion.
Thanks, Jamie, and good morning, everyone. Why have we done another expansion study? Well, the reserve and resource base has increased by 37% since 2020. We saw some opportunities to accelerate access to higher grade additions and to optimize the production rate to reflect the larger ore body. As well, we wanted to incorporate some scope changes and the industry-wide inflation impacts that we've been seeing. Here we see the resource base used for the 2020 study. The colored blocks represent individual stopes included within that mine plan, with the red stopes being over 20 g per ton, and the red vertical line representing the shaft. Here outlined, we see the main areas of the resource base increase since 2020.
The larger box, the white outline, we see the expansion at depth to the east with higher grades. In the smaller upper outline, a filling in of Island East with higher grade material that allows for early access or earlier in the mine plan. Here's a summary of the key changes with the Phase 3+ expansion. The largest, of course, is the addition of the 1.4 million ounces to reserves and resources. We've increased our production rate to 2,400 tons per day from 2,000 tons per day. There's 28 km of additional development life of mine, and that's attributable to the resource increase that we've seen. There's $100 million of development capital that has moved forward from sustaining capital into growth to support the increase in the production rates.
We're expanding the mill from 1,200 tons per day to 2,400 tons per day. This expansion is gonna produce a larger and more valuable operation. 44% more ore allows for a 20% increase in throughput and an increase in the mine life. Given the large resource base, scope changes, and inflation, life of mine capital is going up to $1.5 billion. Growth capital has increased to $756 million, and includes $100 million in accelerated development to get to 2,400 tons per day. However, this is being done with a lower capital intensity than the previous study. We're spending 4% less capital per ounce, and our all-in cost per ounce, including total capital, is reducing by 3%.
This provides for a 25% increase in NPV from the previous study at $1,650 gold, and a $2 billion of NPV at spot gold. Some of the assumptions that we're using for the study. First off, we're assuming that the reserve at 87% of the December 31st, 2021 resources are mined. Base case gold price is $1,650 gold with a U.S. dollar exchange rate of 0.78% to 1%. All subsequent numbers presented in the presentation from here will be from January 1st, 2022. This slide here, I'll just focus on the last two boxes, which is what we've achieved since the 2020 study. We've upgraded service infrastructure to prepare for a larger, longer life project. We've completed phase one of the tailings expansion. We've increased the resource base to over 5 million ounces. We've completed permitting to begin shaft sinking.
We're about to start the pre-sink in this coming quarter. The planning process for this study follows the same methodology as we used in the phase 3 study. Stoping shapes developed with a stope optimizer and development and underground infrastructure laid out in detail. Sequencing is resource driven and operating costs and productivities are derived from first principles and from the mine's operating experience. Whereas the phase three 2020 study was done to a PFS level, the majority of the phase three plus study has been done to a feasibility study level with detailed engineering being completed on the shaft and the hoisting facilities. Most areas we've attained pricing following a competitive RFP process and awarded contracts to the best overall proponent. We've also updated cost estimates for equipment supply and construction services during this period of rapid inflation and high demand.
We feel this introduces robustness to those estimates. Contingency on the various infrastructure project elements ranges from 10%-30% with higher levels in those areas not completed to feasibility study levels. It's important to note that 90% of the earthworks have been completed. This is an area, as John mentioned earlier, where a lot of greenfield projects run into trouble. The tailings dam footprint has been expanded with no additional earthworks required going forward. The shaft site has been cleared and grubbed. The mill expansion area is on bedrock. With the level of earthwork completed and with over 50% of shaft infrastructure already contracted, the expansion is significantly de-risked. To give some examples of the progress to date, the tailings dams, the earthworks for the life of mine have been completed with the next lift to be added in 2024.
Again, initial tailings dam construction is where a lot of projects have underestimated capital. We're done here. With paste backfill, we have sufficient capacity within the existing footprint for existing reserves and resources. The shaft site has been cleared with pre-sink to start in August. Shaft sinking itself starts in Q3 of 2023. Initial production from the shaft is expected in Q1 of 2026. The new camp was completed last year and is able to accommodate our peak production workforce. A temporary leased construction camp will be installed later this year. A new admin building and dry were added last year. A new warehouse has just recently been completed. Finally, a fully equipped underground shop on the 620 level has been completed.
This will allow us to increase efficiency by having mechanics closer to the face and negating the need or the requirement to bring equipment to surface for servicing. 32% of the Phase 3+ capital has been committed with the focus right now on the shaft and the associated infrastructure. The bulk of the capital in the shaft area has been committed, including shaft sinking, the head frame, and the hoisting plant. Contracts have been signed. Equipment is on order. The impact of inflation will be limited within this area. Doing all this work has been a group of highly experienced firms combined with our dedicated project team. On the mineable resource side, we took all of the reserve and a portion of the resources with dilution applied to come up with a mineable resource.
One can see that on the inferred resource line, the in-situ grade of 13.6 has been reduced to 11.3 g per ton after the application of dilution. This has resulted in an 87% net conversion of resources with a resulting 4.6 million ounces included within the mine plan. Island has had a great history of converting resources to reserves and replacing mine depletion. In fact, mine depletion has been replaced each year since 2013. Over 100% of the inferred resources at Island when Alamos acquired it in 2017 have been converted to reserves. This is a high quality, high grade resource with proven continuity and it's only conservative classification relative to the dual density that calls it inferred. I'll now turn it over to Nathan Bourgeault, our Chief Mine Engineer at Island, to discuss mining.
We'll get started with a quick overview of the mine plan from the 2020 Phase 3 study. We can see on the eastern side of the deposit in red the shaft installation also included a paste backfill plant and a continuation of the longitudinal retreat long hole mining method, which is currently in use at Island. Transitioning to the current mine design, with the new mine design, we see a 43% increase in mineable resource, with the bulk of that increase in the eastern extents of the deposit in very close proximity to the shaft infrastructure. This increase in mineable resource does require an additional 28 km of development within $100 million of capital development and underground infrastructure being advanced to the project period to support the ramp up to 2,400 tons per day.
It's important to note that this development would be required in all scenarios of mining, including the current 1,200 ton a day ramp operation. Looking at our production schedule, we reach our full 2,400 ton per day throughput by the end of 2026, with the ramp up supported by the increased availability of mining horizons in proximity to the shaft development. Lower mining rates in 2025 are partially offset by higher mining grades earlier in the mine life. As mentioned previously, we see a 30% increase in development meters in the current mine design, and this is directly related to the increase in mineable resource. We see peak development in the years of 2024 and 2025 to support the ramp up to 2,400 tons a day and to further develop exploration platforms deeper in the mine.
The current mine design includes $162 million of accelerated development capital that's as compared to the 1,200 ton a day operation. It's important again to note that this capital development would be spent in all mine plans and is required earlier to support the higher throughput. Looking at the grade distribution from the 2020 study against the current mine plan, we see the growth in the deposit, specifically the number of high-quality stope blocks near the shaft, in close proximity to the shaft. The focus of the lateral development program during the project period is in accessing these high-grade stopes in the lower eastern extents of the deposit to support the ramp up to 2,400 tons per day and to provide access to higher mining grades in 2023 and 2024.
Looking at the grade profile as compared to the 2020 study, we see improved grades earlier in the mine life, specifically in 2023 and 2024, with a much more consistent grade profile throughout the mine life, supported by the increased tons and grade at depth. Looking at annual gold production, the accelerated access to higher grades supports increased output in 2023 and 2024, which offsets some of the tonnage-related decreases in 2025. Post-project average annual production grows to 287,000 ounces per year, with a four-year window where we're above 300,000 ounces between 2029 and 2032. It's important to note that the current production profile assumes only current mineable resources and assumes no additional discoveries beyond that. Moving on to operating costs.
Island Gold continues to be a low-cost producer, with recent cost increases related to inflation being offset by improved grades and economies of scale offered by the higher throughput. We see our life of mine all-in sustaining costs drop from $627 an ounce to $610 an ounce. Island Gold continues to have a very consistent cost structure, with labor continuing to be the biggest component of the overall operating cost structure. Power and diesel are a relatively small component of our operating costs, with diesel making up approximately 3% of that total, and our exposure to diesel decreasing post-project with the commissioning of the shaft. We see a very consistent cost structure compared to the 2020 study with respect to unit operating costs.
A stable operating cost as mining moves deeper post project completion. The mine site all-in sustaining cost is consistent with the Phase 3 study, with some variations from grade variability throughout the life of mine, and provides an industry-low all-in sustaining cost of $576 an ounce post-project. Now what really excites me about Island Gold is the growth of the deposit at depth. We are seeing a further increase in tons, grade, and ounces per vertical meter below the 1,000-meter elevation, with the bulk of this growth since the 2020 Phase 3 study being in very close proximity to the shaft infrastructure. It's this growth that supports the increase to 2,400 tons per day. It increases available mining horizons, which improves our operational flexibility and helps keep costs low as we mine deeper.
Looking at this graphically, you can see the trend of increase in grade and ounces per meter at depth. At the moment, the only reason we see the chart trail off below the 1,500-meter elevation is due to limited drilling. With that, I'll hand it back to Chris to discuss capital.
We'll now talk about the infrastructure and the capital required to build it. We'll start out with a surface plan of the mine and planned infrastructure. The mill is located at the north end of the map, near the top of the slide. The portal entrance to the existing ramp is in the center of the map. The shaft site is on the south end of the map, or in the lower right corner of the slide. The planned paste plant is close to the portal. On this general arrangement of the shaft area, we can see the head frame at the top or north of the drawing. With the hoist house to the south and the main substation to the south of that.
Since the phase 3 study, we've added a bin house to the headframe to allow for more efficient transfer of ore to the surface haulage fleet. The water treatment plant is located to the west of the headframe. Ancillary facilities are located to the east of the headframe. Other than the addition of the bin house, the hoisting facility design hasn't changed since the phase 3 study. The facility is designed to be able to hoist from a 2,000-meter depth to allow for the opportunity to exploit future deeper exploration success. The current plan is to sink to 1,373 m in depth. At that depth, the combined ore and waste hoisting capacity is 4,500 tons per day, well above our planned rates. Here we see the long section with the planned depth to 1,373 m and the potential depth to 2,000 m.
The shaft is centrally located within the center of gravity of the resource increases that we've seen over the last few years. Here in the bottom graph, we can see the annual combined ore and waste mining rates showing a maximum of 3,600 tons per day, well within the 4,500 ton per day capacity. Should we deepen the shaft to 2,000 m, we'd be able to mine at a combined rate of about 3,500 tons per day. The shaft facility will also be equipped with a service hoist for transporting personnel and materials. The double deck cage will be capable of transporting the entire operating crew underground in well under an hour. This is key to our increasing productivity and time at the face.
Currently, the ramp access, we're taking up to an hour on each side of the shift to transport our people to and from the face. This time would increase significantly with depth with a ramp on the access. The hoist house has co-located production and service hoists. Here on the right side, we can also see the bin house used to directly load ore and waste to the surface haul trucks. This is added scope and is economically justified with the increase in production rates and the increased resource base. Also new in scope to the Phase 3+ study is a hoist drive cooling building to the left of the hoist. With the Phase 3+ plan, we are expanding the paste plant to 2,400 tons per day.
Paste will allow us to increase our mining recovery by reducing the requirement for sill pillars. With paste fill, we expect to be able to recover about 140,000 additional ounces over the life of the mine. It also allows for faster stope cycling times and increased geotechnical stability. The paste plan is expected to cost $52 million. This includes the initial underground distribution system. Ongoing paste distribution is in sustaining capital. On the mill side, we're expanding the existing mill from 1,200 to 2,400 tons per day. On the flow sheet, the green boxes depict new equipment added and the orange boxes indicate modifications to existing equipment. We're adding a new two-stage crushing plant. An additional ball mill will allow us to convert the existing circuit to two trains.
We will convert five leach tanks to CIL and add three new larger tanks. We are adding a new ADR plant to handle the extra gold produced, and we are adding a cyanide destruction circuit to the plant. The cost is expected to be $76 million with most of the components to be new or refurbished. The P3, 2020 study at 2,000 tons per day had an expanded mill as well. What's changed here is that we are adding a new crushing circuit and covered stockpile. We're converting to CIL and adding additional tanks. We've upsized the ADR from 5 tons to 5 tons from 3 tons. Given the scope changes, the scope of all these changes, we also took the construction of an entirely new plant to a feasibility level.
However, given the current cost environment, the capital cost for a brand new plant was not offset by the reduction in operating costs that it would offer. Additionally, the two trains with the expanded plant will give us greater operational flexibility. Capital has increased with the Phase 3+ plan and has been driven by a 43% larger resource, the expansion of 2,400 tons per day with additional scope changes and industry-wide inflation. However, the Phase 3 plan expansion comes with a lower capital intensity, $344 per ounce versus $359 per ounce in the 2020 study. This results at $1,650 gold in a 25% increase in NPV to $1.6 billion with the expansion and larger resource more than offsetting inflation.
Looking to grow, looking at growth capital changes since the phase 3 2020 study, we had a $146 million increase from scope changes and the larger resource. We have $100 million in accelerated development to get to the 2,400 ton per day mining rate. Again, note that this originally would have been in sustaining capital, and we have $75 million in inflation, which equates to about a 14% inflation rate. And in the last two years, we've spent $103 million, giving us $756 million going forward from the beginning of this year. On the sustaining side, the larger resource has added $211 million in capital, primarily in additional development meters to access the expanded resource.
Inflation accounts for $63 million, which equates to about an 11% inflation rate. We spent $73 million in the last two years, giving us $777 million in sustaining capital going forward. This slide provides a little more granularity on the growth capital. We can see the increase in mill and paste plant costs due to their upsizing and inflation. The effluent treatment plant is new scope to the project. Again, $100 million of the increase is what would have been sustaining capital brought forward in the plan. We're showing growth capital intensity at $160 per ounce, which is lower than the previous plan.
On the sustaining side, the bulk of the increases are attributable to the 43% increase in resources and the associated development requirements. With sustaining capital increasing by only 35%, we become in with a 6% lower capital intensity than the previous plan. This is a high-level overview of the project schedule. We have earthworks being completed in September, the pre-sink starting in this next quarter, shaft sinking starting in Q3 2023, and the shaft and paste plant construction starting in Q3 2024. Initial production from the expansion occurs in Q1 2026. The shaft operation is gonna give us a 35% reduction in total carbon emission versus us continuing with ramp access mining at 1,200 tons per day.
This is primarily because we require only five underground haul trucks with the shaft as opposed to 18 required to support, ramp mining at 1,200 tons per day. On an intensity basis, this results in a 31% reduction in emissions. Island Gold is already an industry leader in terms of emission intensity. From the graph, you can see that the industry average for underground mines is 0.47, and we are currently at 0.16. With the shaft in at 2,400 tons per day, we will see a further intensity reduction of 31%. This is a key component of the 30% reduction by 2030 commitment that Alamos most recently announced.
On the permitting side, we are in receipt of the closure plan amendment that allows for shaft sinking and construction of the associated infrastructure. We will be doing a second CPA and two ECAs. ECA, these ECAs aren't required until closer to the mill and paste plant work. We've received a number of closure plan amendments and ECAs at both Island and Young-Davidson, and we understand the process and the timelines well. I'd like to hand it back to Jamie, and he's gonna go over the overall project economics.
Thank you, Chris. I'm gonna briefly summarize the economics of the Phase 3+ expansion. I think Chris did a really good job of outlining how the capital intensity is better under the Phase 3+ expansion. You know, by building a bigger project, we make this a more valuable operation in virtually every way. Our gold production's increasing significantly from 3.1 million ounces over the life of the mine to 4.5 million ounces, which is gonna drive revenue to over $7.2 billion. If you look at cash flow, because of the low-cost nature of Island Gold, this is a very profitable operation.
If you look at free cash flow over the life of the mine on an undiscounted basis at a $1,650 gold price, this operation will generate $2.8 billion of undiscounted free cash flow. Again, at a $1,650 gold price and discounting that at 5%, you get to a net present value of $1.6 billion, and at current gold prices, that increases to north of $2 billion. At 25% IRR, a fabulous project. This slide showcases the free cash flow profile under the Phase 3+ expansion at a $1,650 gold price. You can see that we hit about breakeven in 2026, and after that, generate tremendous free cash flow over the life of the mine.
This represents a 35% increase in total free cash flow under the Phase 3+ study relative to the Phase 3 study that we published two years ago. From an economic perspective, this is a no-brainer. It's the highest IRR, free cash flow, and NPV. It increases our production quite dramatically while maintaining what are gonna be some of the lowest reported all-in sustaining costs anywhere in the industry. It's better from a capital intensity perspective. When we talk about capital intensity, I mean, we're comparing to the Phase 3 study that was done two years ago without adjusting for inflation. It's actually better were you to do that. Every additional ounce that we find and incorporate into the mine plan reduces the capital intensity on a per ounce basis as well.
A far superior expansion under the Phase 3 plan. By making this a bigger and lower cost operation, but we're also making it more efficient, more productive, which positions it well to be profitable for the long term. Having that low cost structure makes Island far more resilient from a gold price perspective. If the gold price were to be cut in half tomorrow, Island Gold is still generating tremendous free cash flow and it's still highly profitable. There's very few mines anywhere in the world that could say that at a gold price half of where current spot is.
Conversely, at higher gold prices, with the higher production, we've got more exposure and leverage to an increase in gold prices. You can see in this sensitivity chart at a $1,950 gold price, the value of Island under the Phase 3+ scenario increases to $2.2 billion, and the IRR increases to 26%. From a capital allocation perspective, we've got two charts here very similar to what we presented back two years ago with our Phase 3 2,000 ton per day expansion. At a $1,650 gold price, we showed that we require a modest investment of about $200 million from our other operations to finance this expansion. The majority, the vast majority of that $750 million of growth capital is financed out of operating cash flow at Island Gold.
Once that expansion is complete, we average $223 million of annual after-tax free cash flow, again, at a $1,650 gold price. If we look at that same analysis at $1,850, we cut the requirement of funding from our other operations down to about $140 million, and we increase the average annual after-tax cash flow to $260 million starting in 2026. This project requires zero external financing. We've got lots of cash flow coming from each of Young-Davidson and our Mulatos operations to help subsidize this expansion. I think John mentioned it in his opening remarks. We have made the decision to defer Lynn Lake and really focus our capital and attention on the Phase 3+ expansion.
What that does is it provides us with free cash flow through this growth period. We're gonna be about break even this year in terms of our cash balance. Through 2023 and 2024, we're generating about $150 million a year of free cash flow. We talked about our multi-year expansion of the lower mine at Young-Davidson. We completed that in 2020. Now, Young-Davidson's generating $100 million a year in free cash flow. We just a few weeks back completed construction of our La Yaqui Grande project in Mexico. That's been a two-and-a-half year build where we've been investing pretty significantly in that. Now that's up and running, that'll generate about $100 million a year in free cash flow.
We've got lots of cash flow from both Young-Davidson and coming out of Mexico to support the investment in Island Gold. Given its low cost nature, it's generating sufficient cash flow from operations to finance the majority of the expansion itself. We're in great shape from a balance sheet perspective over the next several years. Again, in 2025 and beyond, we're gonna see dramatic increases in our free cash flow. With that, I'll turn the presentation over to Scott R.G. Parsons to walk through the exploration side of the story.
Thank you very much, Jamie. Everything we've talked about today is based on the existing 5.1 million ounce reserve and resource. What I wanna highlight is the tremendous exploration potential that we have at Island Gold, including past production of over 1 million ounces. The total endowment of Island Gold is 6.2 million ounces. Just to reiterate, it's a significant orogenic gold deposit. We see tremendous potential for continued growth. Before I dive into it, we've seen these slides a few times, but just to recap on the growth of the deposit. When we almost acquired Island Gold in 2017, total resource and reserve base was 1.8 million ounces. Two years later, the deposit evolved, doubling in size, adding 2 million ounces to 3.7 million ounces net of depletion.
Two years later, at year-end 2021, again, a 37% increase of 1.4 million ounces to 5.1 million ounces. I'll touch on the lower portion of Island East that you can see at the bottom right of the resource block, which is a phenomenal portion of the deposit, but significantly wider and higher grade intersections. Over this period of time, one notable point and Jamie touched on it, was including past production since 2017, we've added 4 million ounces of high-grade gold and all of that at a discovery cost, which is industry-leading at $12 an ounce. The 2021 drilling highlights, we were successful in 2021 at intersecting and expanding mineralization across Island Gold, the two-kilometer strike length.
Really the highlight of the year was this Island East, which is driving the Phase 3 expansion. Not only on the upper portion of this image did we add new reserves from basically what was previously nothing. We drilled from underground exploration drifts we just put in place. We also targeted the lower portion of Island East and you can see some of the best drill holes from Island highlighted there. The best ever in fact LDR-25-08, which is 71 g per ton or 39 cut over 21 m true width. That's the best hole out of over 1.3 million meters of drilling and 7,000 drill holes at Island.
The other notable intersection I'll point out here is MH27-02 in the bottom, very bottom right of the image at 11.9 g per ton over 4.6 m. This was a 300-meter step out that we did down plunge of the Island East ore shoot. We intersected the structure. This is outside of the current Phase 3+ mine plan. It just really points to that ongoing exploration upside at Island Gold. The last point I'll make on this is all the drilling we're doing with what you're seeing in the reserves and resources, it's along a structure we call the E1E structure, which hosts the majority of the reserves and resources at Island Gold. Even at these depths we're drilling from surface, you know, predicted dice five patterns.
We're intersecting that structure within 5 to 10 m of where we expect to intersect it, so it just shows how predictable it is, and with the grade continuity within it, we understand now in terms of the geologic controls from everything we've been mining and seeing underground, and tying that into the drill core depth. It's a high quality inferred resource that at a good drill spacing that some would even call indicated in other deposits. In 2022, our exploration budget's $22 million for mine exploration at Island. This includes 27,000 m of underground exploration drilling from the drill platform shown in the blue boxes.
This is working on expanding the resource laterally on key levels where we're already mining or near mining, so near term ounces. Then also the surface directional program at depth, where you can see 30,000 m plan targeting the down plunge extension of Island Gold. You know, a lot of that drilling, we have five drills turning now, three out of the five are focused in that high-grade Island East area. The other two are working on stepping out a mineralization on Island Main and West. This is a great longitudinal, you've probably seen it before, but I think it highlights the potential of Island longer term.
Just looking at something like a Campbell Red Lake, you know, 70 years of production, 20 million ounces produced, significant reserves and resources ahead of it. LaRonde is another good example. You know, in production for 35 years, 6 million ounces produced in the significant reserve and resource base. One commonality that you'll see in Archean orogenic gold deposits is the significant vertical component or the down plunge component relative to the surface expression or the on strike component. That's a common theme with deposits that are controlled by ore shoots. At Island Gold, you can see where really the potential to extend this deposit at depth is significant. We're really just scratching the surface down to 1,500 m.
We've, you know, Island's been in production 15 years, just a million ounces produced with a 5 million ounce reserve and resource ahead of it. With the underground exploration or with the Phase 3 underground infrastructure that will be in place, it really opens up opportunities for us at shaft bottom, you know, lateral underground development at the base of the shaft to continue expanding the deposit at depth. We're also contemplating a hanging wall exploration drift, which would get us right out in front of the deposit and allow us to do both infill drill and expand the deposit at depth. The last point I'll touch on is our property position in the Michipicoten Belt. This is a significant opportunity for our team to have 15,000 hectares.
We expanded the land package by acquiring Trillium in 2020 by about 5,000 hectares or 50%. This was key for us, not only for the down plunge extension of Island, but also the regional potential. It hosts two historic high-grade mines, number of high-grade showings. What this allows us to do now is take a district scale or belt scale approach to building out the geology and targeting based on what we know now is the controls and mineralization. Whereas historically, the challenge in this belt, it's always been, you know, people holding smaller portions of land, and you're only working within that land that you own. The key, you know, for this type of orogenic gold exploration is understanding structures, understanding controls and mineralization, and we can do that now and target accordingly.
The white stars indicate some of our mine exploration targets outside of Island Gold reserve and resource, and then also some of the regional targets that we're working on in 2022. With that, I'll turn the presentation back over to John for some closing remarks.
Well, I know that's an awful lot of information to digest. Virtually every presenter had some very key points to make that you know clearly illustrate the tremendous potential of this project as well as you know the ongoing value proposition as we continue to produce from the mine. The whole aspect of risk is one that you know is clearly in certainly every member of this management team's mind when we go to present a project like this.
The fact that we have gone to tremendous lengths to de-risk the project prior to completing this Phase 3+ study and presenting it to the market, I think that bodes very well for our ability to execute on this next phase of development. We are now going to open the presentation to questions and answers. Scott Parsons is going to be coordinating that. We have some participants here in the room, but we also have a number of people that will be participating online. Scott will effectively ask for anyone online that has questions to start queuing those questions up.
It's a good opportunity given the breadth of information that we've just presented to you, a good opportunity for you to question us on that information now. Scott?
Thank you, John. As a reminder for those of you on the webcast, to ask a question, please dial the numbers on the screen to join our conference line, and you'll need the participant passcode. Valerie, please, if you could provide the polling instructions to those on the webcast and conference line, please.
Certainly. Thank you, Mr. Parsons. We will now take questions on the telephone line. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star one on your device's keypad. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. There will be brief pause while the participants re-register for questions. Thank you for your patience.
Thank you, and just a reminder to those on the webcast, please mute your audio on the webcast before you ask your question. As we wait for callers to queue up on the conference line, let's open up the floor to questions, and we'll come back to you shortly, Valerie.
Thanks very much. First question. Lucky me. Thank you everybody for the presentation. Lots of great information. There was a few things I wanted to touch on, if I might, and maybe just start with Lynn Lake to sort of understand what then will be happening with that asset between now and when you presumably will make a decision in 2025 to proceed. Are we still gonna get a study on Lynn Lake, an updated study in the coming year?
I'll pick up here. Yeah, we're working on that, and we would expect to update the market with a study once we have permitting in place. You know, if that happens this year, that's great. If that happens next year, that's when that will be.
Great. Very helpful.
I think, you know, our primary focus right now is on exploration and permitting and of course we're heavily engaged in discussions and consultations with the First Nations as well. We're just more or less carrying out the work that we would have normally done because there was no imminent construction decision expected in any case. You know, in other words, effectively, there's a fair amount of work to be done between now and the end of the first quarter of next year in order to put all this in place and I think at that time we should be ready to present our study.
Yeah, we continue to work on all of the feasibility aspects, bringing up the level of engineering. That effort is a fairly significant one that's ongoing. It just doesn't make sense to probably put that out until we've got permits in place because, you know, the permitting process can change some of the aspects of what you're building.
Well, the other reason I was asking the question too is, you know, by the time we get to 2025 when you'll be looking at making a decision, I mean, a lot can change by then too, so.
Yeah, we'd probably put out another updated study before we build.
Yeah. You know, it's a pipeline project, right? It's awfully good to have it, I'll tell you. We bought it at the very bottom of the market for just over $20 million. Since then we've added over 1 million ounces of reserves and resources to it. You know, it's a great project to have in our development pipeline, but it is in our development pipeline. You know, when you've got a variety of assets within the company and you've got to manage capital allocation, there's some give and take that goes into that.
If we could have anticipated the rate at which Island Gold was going to expand, I mean, it's just grown dramatically over a very brief period of time. As that's happened and as the, you know, the quality of those ounces, the grade of those ounces have been added, it just made nothing but good sense for us to allocate more capital in that direction and get that production moving forward ahead of a Lynn Lake project decision. You know, one way or the other, Lynn Lake's gonna be a good project. It's good grade. It's got, you know, very interesting economics, and I think, regardless of what happens over the next three to five years, it's gonna be a project that we can develop.
Okay. Thanks very much for that, guys. I also wanted to ask about the assumptions you made in getting to the mine-able resource from the undiluted and pre-recovery assumption resource. It looks like you grossed up the tonnage by 14%, so that would be the implied dilution. Then you assumed a 5% recovery loss and then converted 92%. Is that roughly how that all kind of adds up?
Yeah.
I guess that's for you, Nathan. It was 87. Go ahead.
Yeah. The combined recovery or conversion is 87. That includes the 5% mining loss and that conversion on the inferred and measured and indicated, and then using the diluted reserve numbers just straight as mined.
What was sort of the global dilution rate that you used?
It's done by zone, what you're back-calculating is would be a kind of null grade dilution. Depending on the zone, the way it's calculated in the model, it's using a stope optimizer. It's interrogating against the block model. Not all dilution is considered a null grade in that scenario.
You know, the average dilution really dependent on both mining zone and type of stope. Downhole stopes typically have a lower dilution, mining dilution than what we see in uphole stopes and different zones. Typically 20%-30% dilution.
Yeah. As Nathan implied, the dilution incorporates grade within that, so it's not grade at zero. Sorry, it's not dilution at 0% grade.
Okay. Gotcha. Maybe just one final question on power rates. Obviously you have the benefit of being able to rely on, you know, electricity for a lot of this operation, it reduces your diesel. You know, how long are your power contracts and kind of what are the current rates in that, and then how do those rates get determined going forward to the length of the contract?
Yeah. Our, you know. What have we got here? $0.067. That's what we're currently using. That's what we currently pay. That includes a rebate that we get from what's called a NEAP program, which is an Ontario northern industry rebate. That's been confirmed that that will remain in existence well into the future by at least the current government. I suppose anything's subject to change. Those are the rates we pay, and that's how it works.
I still think I'd rather be building a mine in Ontario right now than just about anywhere else in the world. If you're concerned about energy and power costs and water and, you know, every other thing that we face as an industry, you know, absolutely we're concerned about them. I'd rather be in Ontario than anywhere else.
Thanks, John and team. Maybe my first question is on the mill. As you talked about, you also looked into the, you know, potential for building a new mill, that turned out to be not as cost effective. I guess my question is, you know, is the 2,400 now limited by the, you know, mill, the size, the existing mill? Or if that's not the case, how much higher can you take it, given all the, you know, Scott R.G. Parsons, the geologist, talked about, exploration upside. Is there upside here at the mill?
Whether a new mill or an expanded mill, we would design that to average 2,400 tons a day, which means it'll, you know, instantaneously do probably 2,700-2,800 tons a day. All mills are expandable, so if Scott finds more, we'll add a third circuit. You know, mills generally I mean, this mill has gone from 600 tons a day to 900 tons a day to 1,200 tons a day. Now we're gonna take it to 2,400 tons a day. It actually currently has enough grinding capacity for about 1,600 tons a day. It's the rest of the mill that's that limits it. By adding one primary ball mill, we can adjust the three mills that exist there now to have two-train ball mills for 1,200 tons a day each.
Yeah, you can continue to expand mills. We did look at a new mill because we thought, well, with this new ore body and the significant growth we've seen in it, maybe this site deserves a brand-new spanking mill. You know, in today's, you know, environment, you know, going out for quotations on all the bits and pieces right now puts that mill very expensive. Frankly, we don't really see the need. We can continue to expand the existing mill. There's plenty of mills operating in Northern Ontario and Northern Quebec that have been expanded from mills that are much older than this one. This one's kind of a 1985 vintage. It was built for Kremzar, not even Island. You know, there's no problem to expand it.
It's been a while since I've been up there, so I just wanna make sure, as you said, Peter, there's room for a third line if you need it. Maybe my other question is on CapEx. You know, CapEx has increased. However, you know, I can see that you've done a good job in terms of limiting inflation. I think it was Nathan or Chris who mentioned that it was only 11% increase after backing out the scoping changes. You know, clearly looking ahead, you've done all the earthworks and some of the higher sort of risk items. But beyond that, you know, clearly everything's getting more expensive these days. What can you do to further limit risk?
Because we're still looking ahead into 2026. There's still a lot of runway until production starts. What are some of the key, you know, risk areas in terms of inflation? How do you make sure that there's no, you know, CapEx increases?
Yeah, I'll start that and maybe someone else might wanna take over. You know, one of you know big part of what we're doing is the shaft and the related infrastructure associated with that shaft, the building, the hoist house, the hoists themselves. You know, that we've signed the contract for the shaft. We know what that is. We've bought the hoist. We know what that is. We've bought the steel for the headframe and the truckload facility. We know what that is. We've contracted for the steel that supports, that goes inside the shaft. Certainly there's still opportunities for inflation, but we've de-risked a lot of that through that process.
Another big part of the CapEx is all that underground development that we're bringing forward. You know, we're our own master in that regard in that it's you know that underground development is manpower and equipment. We have the equipment. We're gonna buy more. We have the manpower. We might have to pay them more. It's not. You're not gonna see stupid crazy blowouts and stuff like that. You might see general cost of living inflation in that sort of stuff. Where these things blow up often, and you can look around, and I won't have to name them, it's in you know tailings dam construction. It's in earthworks. It's in foundations.
You know, as Chris pointed out in his slides, we're, you know, somewhere around 90% complete when you look at the fact that we've already done all the foundation work for the main tailings stands and all of the, you know, down to bedrock grouting, putting in grout curtains. All of that's done, right? We're in great shape compared to many projects when it comes to capital because we're an existing mine that's already had to go through all of that. We're not a greenfield starting from scratch.
Maybe one last question. There might be a simple answer to this. Your timeline today is Q1 2026. Previously, it was mid-2025. Could you maybe talk a bit more about the timeline?
Yeah, it's a combination of a few things. One would be, you know, a bit later start than what we had anticipated in the 2020 plan. Part of that is took a bit longer to get our closure plan amendment through. The other thing is just taking into account this expanded reserve and resource and making sure we, you know, got it right from the start, slowed us down a little bit. That's the main reason.
I have a quick question for you here. Just to confirm, all these numbers are based on the 1,373 shaft depth? Okay, and that.
Yeah, that's correct, yeah.
That takes you out to 2039.
That's right.
Okay, you've obviously done some work on an expansion down to 2,000 m, which would have enough capacity to continue on. Do you have approximations on how much that would cost to deepen the shaft?
Yeah, you're probably looking at $50,000-$60,000 a meter. The work that we've done is primarily to, you know, in the sizing of the hoisting plant. That's where those numbers come from, that we're able to hoist at 3,500 tons per day from 2,000 m.
Okay, great. Would it be possible to go even deeper than that with that existing shaft, or we'd have to go to an internal shaft or something else?
More likely have to go to a winze or truck up to the loading pocket of that shaft. Possibly deeper, but at a lower tons per day.
Just to add to that, I you know depths below 2,000 m, the toe of the shaft actually starts getting quite far from the deposit because it's dipping to the south. You know, as the deposit grows and kind of, you know, gets deeper, it may not make sense to go deeper than that just given the distance from the shaft to the deposit at that depth.
Not go deeper with the existing shaft.
Yeah.
Put a winze or internal-
Yeah.
Internal shaft in.
Yeah.
Great. Thank you.
That'd be a great problem to have though, Steve.
That's right. That would be the shaft excavation itself. There'd be additional development and whatnot to get down to the bottom of the shaft.
Yeah, that's just shaft deepening and equipping.
We, we do have a question from the conference line. Valerie, if you could please, provide the polling instructions again and, announce our first question.
Certainly. Once again, please press star one at this time if you have a question. Our question is from Mike Parkin with National Bank Financial. Please go ahead.
Thanks, guys, for the update. Just a few questions. The tailings capacity, you were mentioning in the report's already got, you know, oodles in terms of what you plan to mine. Does it have any potential to be expanded beyond that, or would you have to be looking at a second facility if you continue on your exploration success you've been having?
Yeah, we've done the engineering to get it to what we see we need. We haven't gone beyond that. That's an open question.
I guess you're already showing a dramatic improvement in GHG emissions and moving to a very small diesel fleet. I guess because of the scale of the diesel fleet, once the shaft is online, it wouldn't make sense to try to support an electric fleet on such a small unit of diesel switching to electric.
We've considered it. It's still very much on the table. The diesel fleet is something that we currently operate and we know quite well, and so that's what we've run with in this model. You know, as battery and electric vehicle technology improves, it's definitely something that we're actively investigating.
Yeah, we'd also look at electric scoops and jumbos as well.
It may have been in the report, I may have just missed it, but you've adjusted the cost for the inflationary environment we're in today. Are you maintaining that level of cost through the life of mining, or are you seeing? Are you modeling kind of an elevated cost pressure for a shorter period of time and then returning to more normalized costs for, say, cyanide or diesel?
No, we're incorporating the current, inflated prices, through the life of the mine. We're not reverting to lower costs later.
Okay. Thanks very much.
Thank you, Mike. We don't have any other questions on the webcast or conference line. If there's any other questions in the room, we're happy to address those.
Thanks. Just on the amendment to the closure plan, is that something relatively easy, or is that more involved? I guess, what's the timeline on that?
Yeah. It's a relatively minor amendment. We changed the location of the paste plant from one location to another. We don't see it as being that significant.
Okay. I think I saw in the presentation 33% of CapEx committed. Any idea what that would be near, around year-end?
Well, it's gonna grow a bit, but you know, maybe it gets up to 40% or something by year-end.
Yeah, the next big chunks of capital after the shaft are the mill and the paste plant, and we're not starting construction on those until 2024, so we probably won't have any commitments on that until late 2023 when we start ordering equipment.
Perfect, thanks. Just a quick one on grade reconciliation. I think when you first acquired Island, it was pretty overwhelmingly high and then kind of corrected over time. Where is that sitting kind of right now?
Yeah. It continues to be generally positive, but not the 20% positive that we saw under Richmont. That's frankly one of the things that drew us to the asset was that conservatism in the grade that we saw. It's, you know, kind of within 5% typically now.
Yeah. Over time, we've adjusted our capping factors and integrated the reserve estimate to try and reel those high deltas back into something more industry norm, you know, 5%, and we've accomplished that.
It's interesting to remark that, you know, since 2013, that project has converted everything that was in resource to reserve. It's just gone very steadily, and it's pretty much been at a one-to-one rate. You know, it's clearly like nothing else I've ever been associated with in the more than 30 years I've been involved in the mining industry, and I don't think anybody else at this table has seen anything quite that good either. Island Gold is clearly, you know, it's an amazing ore body. When you've got a good ore body, it makes you look good. It makes the miners look good. It makes management look good.
We can pretty much, you know, forecast what our production's gonna be on a quarterly, annual basis, and the mine delivers. If anything, you know, we tend to still have that positive reconciliation. Even now there's still conservatism built into the block model, and that's why we have so much confidence in incorporating portions of the resource into the mine plan.
Yeah. The other thing to note there is in that E1E zone where we've seen the bulk of the resource increases over the last year, we're still using a relatively low capping factor, which we won't adjust until we get some operating experience in there.
Thank you. We have a few more questions on the conference line. Valerie, if you could please, announce the next question.
Certainly. Our next question is from Kerry Smith with Haywood Securities. Please go ahead.
Thanks, operator. Peter or maybe Nathan, was there any thought to moving the shaft east? Obviously, it looks like the bulk of the resources are going to be developing obviously significantly east of that. I know you've spent the money to kind of get the shaft very ready, but was that looked at?
No, it wasn't. The current shaft location is actually on a really nice plot of land. It's at a nice solid bedrock. You know, on a ridge. You know, looking kind of further north of the shaft is Goudreau Lake, and then kind of to the south of us is a lot of kind of swampy, marshy land. The spot that was selected for the shaft is really an ideal location from that perspective. You know, the hoist plant and headframe are all founded right on bedrock, and you know, it's a nice dry ridge. I could sit out there all day and just stare at it, to be honest.
The second question I had, the contingency in the CapEx was $55 million, excuse me, in the old study, and it's $55 million in the new study, and you've got, of course, you know, slightly over $200 million as incremental capital. Can you just walk me through how that number was determined?
Again, maybe I'll start and someone else will rescue me along the way here. But you know, as we've continued to engineer and de-risk the thing, and things have gone from, you know, early stage engineering to, in fact, kind of feasibility and detailed engineering, certainly around the shaft area, we decrease the contingency on those components as they get locked in. But frankly, increase the contingency on some others, like the mill expansion, where we haven't done quite as much work. So net-net, it ends up the same place, but that's purely coincidence the way it's worked. We've de-risked it. You would think just by de-risking it should have gone down, but you know, it's other areas we've added some contingency. So that's.
I guess we could go offline, and we could walk you through one by one what they are if you'd like later, Kerry.
Yeah, and in some of the areas where we've got commitments that are not going to be subject to inflation or scope change, we've got much less contingency there.
Okay. I think my reaction was with the $200 million more CapEx that I just thought the dollar amount of the contingency would have been a bit higher. That was my only observation. Okay. The other question I had was, I thought you talked about this hanging wall drift for better drill access. When would that be completed? When would you have that available for drilling?
It's something we're considering, well, we are starting later this year at the 925 level. Part of that will be initially used for infill drilling purposes in starting in 2023. As that development happens into the hanging wall, we are looking at allocating, and it is incorporated into the life of mine development plans, meters for further exploration development at 925 into the hanging wall, which will get us out right on top of the ore body to allow us to continue testing at the depth. You know, eventually looking at being more effective and efficient in terms of cost and time by drilling that from underground rather than and to transition away from the surface directional.
Okay. Yeah, got it. The last question I had was the new crushing circuit, Chris, that you're installing in the mill, what is the notional or nominal throughput of that crushing circuit on its own?
That's merely. Yeah. You know, it'll be well sized for 2,400 tons a day, and normally crushing circuits can do quite a bit more. It's. We haven't entered into any sort of detailed engineering on that aspect yet, Kerry. We'll give ourselves some time, though.
Okay.
Yeah, Kerry, sorry, just it's Jamie. Just one quick question. Your question with respect to contingency, you noted that you suspected the number would have been a bit higher. A big part of that capital increase is the accelerated development, right? There's $100 million of what was sustaining capital that was moved forward into growth capital, and you don't apply a contingency to that because it's based on our ongoing development costs.
Right. Gotcha. Okay. That's a good point. Thank you. Okay. What would be the bottleneck in the new plant then, do you think, Peter? Would it be the tanks, I suppose?
Sorry, what would be the bottleneck?
Yeah, the tanks. I'm just thinking about, you know, as you push ahead here.
There'll be, you know, incremental things. You know, I think ultimately it boils down to the grinding circuit. You we'll size this for, you know, comfortably to do, you know, 2,400 tons a day. Could you push it a bit? You know, you can usually push those things 10% more. Beyond that, you you're looking at more grinding horsepower.
Okay. I gotcha. Okay, great. Thanks, guys.
Thank you. My next question is from John Bair with Ascend Wealth Advisors . Please go ahead.
Thank you. Good morning, everyone, and very good presentation. John Bair with Ascend Wealth Advisors. Not to be a Debbie Downer here, but just kind of a general broad question that I think all of you might be able to address, and that is, what's your greatest concern that your projections and profitability numbers and so forth don't play out as expected? You've got some time here between now and when you hope to, you know, first get into production and so forth. What keeps you up at night? Let's put it that way.
Yeah, it's Jamie here. I'd say the biggest variable is, of course, the gold price. That's a significant factor. One of the points that I made in the slides I presented was that, you know, Island is such a high quality ore deposit with, you know, 10 g and industry low cost that that doesn't really. Gold could drop by $400 tomorrow, it doesn't really impact our decision to move forward with this. You know, we'd still generate a lot of positive free cash flow even at substantially lower prices. I'd say that's the biggest risk, both, you know, to the downside and potential to the upside.
Anything operational? I mean, obviously, gold price swings is probably your biggest variable there because it sounds like you've got pretty much everything else locked up as far as procurement and so forth. Anything else that you can think of?
On the operational side, I mean.
Regulatory-wise? Yeah.
Maybe I'll start, you can.
Yeah, sure.
On the operational side, I mean, it is an operating gold mine. That's, you know, this is not, you know, many projects are greenfields, and there's so much startup difficulty with things like that. This is an operation that, you know, we've been operating now for.
For five years, and has been in operation for, you know, 15 years, altogether or thereabout. It's, you know, the workforce is there. We're in a supportive community. You know, it doesn't get much better in the world of gold mining than where we're located, right there. Yeah, you're gonna have hiccups with operations all the time, but you're not gonna have showstoppers.
Exactly. More or less what I was going to say. You know, we're operating that mine now. We have a very clear understanding of the ore body. You know, everybody's trying to figure out when something looks this good, well, where's what am I missing? Where's the blind spot? Really what it comes down to is our schedule. I mean, anybody who's gonna build a project of this scale that you're planning to build out over the course of a number of years, everybody sitting at this table is focused on that schedule. Why I feel very confident in our ability to do this is just look at our track record.
You know, when we were just starting out, building Mulatos, we were one of the few companies that built a project at that time, on time and within budget. When it came to taking on Young-Davidson, which was a massive task, we took that from 3,400 tons a day to 8,000 tons a day, built out all the lower mine infrastructure, and we built it right within the schedule that we'd set. We built multiple mines down at Mulatos, including, you know, San Carlos, Cerro Pelon, La Yaqui, now La Yaqui Grande. Those are all standalone mines. We call that Mulatos. Everybody talks about Mulatos, but if you go down there, you'll see we've been operating from a whole variety of pits and, in San Carlos' case, from underground.
The company has a tremendous amount of experience in terms of construction. There practically hasn't been a time when we haven't been building something over the last six or seven years. It's the key reason why I believe you know we can take on a project of this scale now and you know plan it, organize it, and execute on it and get it built on time. That's where the risk.
Great.
That's where the risk lies.
Yeah.
It's all a question of time.
It's exciting. Now I've got one last follow-up, kind of a different direction here. Given your additional acreage acquisition along trend from the Trillium acquisition, how much exploratory activity do you anticipate doing on some of these old mines that had, you know, existing production or good indication of ore bodies?
I mean, they do remain advanced targets, and they are advanced targets that, you know, the first step we need to do, those are historic mines, compile the data, and make sure we have a good handle on what's controlling the mineralization there, what was mined and, you know, identify the exploration upside. There definitely is exploration upside at both those historic mines that we did acquire. The other exciting part of it is, you know, looking outside of those mines, those were two patents that a company's held for, you know, decades and operated out of. Now we have the surrounding ground and it's looking at, how do you target effectively to find more of that mineralization that hasn't been tested yet.
You know, it is a high priority in terms of our exploration pipeline, and it's something that we will start tackling, you know, with on-the-ground exploration in 2023. This year we're working on really understanding those deposits and making sure we're approaching them correctly.
Not that much CapEx in that area? Is that? Am I hearing that right? Probably maybe 2-3 years out would be a little more advanced, aggressive.
Yeah.
In that plan?
In terms of the regional exploration, including those targets, we're probably looking at, you know, $3 million-$4 million a year in terms of, in terms of dollars allocated to exploring that larger land package, and it's just doing it systematically and being effective about it. When we make a discovery on that property, then we'll look at spending some more money on it. In the meantime, probably $3 million-$4 million a year.
Very good. Thank you very much. Appreciate your taking my questions, and best of luck.
Thank you.
Thank you, John. If there's no further questions on the floor here, we'll, you know, thank everybody for joining us in person and on the webcast. Please do follow up and reach out to any one of us if you do have any questions, and we look forward to speaking with all of you soon.
Bye.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation