Morning. Thank you to everyone for joining our Island Gold Phase Three Expansion Study webcast. My name is Scott Parsons, and I'm the VP of Investor Relations. Before we get started, I'm going to provide a brief overview of our schedule this morning. As we will be making forward-looking statements in today's presentation, I would like to remind everyone to review our cautionary notes. Also, all figures in the presentation are in US dollars unless otherwise noted. I'll now introduce our presenters today. From our Toronto office, we have John McCluskey, President and CEO, Jamie Porter, CFO, Peter MacPhail, COO, Chris Bostwick, VP Technical Services, and from our Island Gold operation, we have Austin Hemphill, General Manager, Raynald Vincent, our Chief Geologist, and Nathan Bourgeault, Chief Mine Engineer. In terms of our schedule, John will be providing an introduction.
Jamie and Peter will provide an overview of the current operation. Raynald's going to give us an update on exploration before we move into a detailed review of the Phase Three expansion study. This will be led by Chris, Austin, and Nathan. Last, Jamie will close out the formal portion of the presentation with our capital allocation outlook, after which we'll open up the webcast to questions. With that, I'll now turn the call over to John McCluskey, our President and Chief Executive Officer.
Thank you very much, Scott. Welcome to the call, everyone. Alamos has grown significantly over the past five years. In 2014, we were producing 140,000 ounces of gold per year from our Mulatos mine. In 2015, we acquired Young-Davidson, and in 2017, we acquired Island Gold. Both assets have been the key components of our evolution into a diversified North American gold producer. Both assets are continuing to drive a transformation of this company with the best yet to come. In the case of Young-Davidson, we just completed a tie-in of the lower mine this past week, the final step of a multi-year expansion, which will be a step change for this operation. In the case of Island Gold, the asset has grown in every sense since we acquired it.
Today, we'll be outlining a Phase Three expansion of the operation, which will transform the asset into an even bigger, longer life, and more profitable operation. We have now delivered on three significant catalysts this year, and we're well-positioned to deliver on the fourth, being strong free cash flow growth starting in the second half. As outlined in our press release last night, our team has done a thorough evaluation of a range of scenarios to take Island Gold forward, capitalizing on our exploration success. The installation of a shaft and expansion of the operation to 2,000 tons per day is the best option in every respect. The shaft expansion has the strongest economics, it's the most productive with the lower cost, more than offsetting higher capital in the initial stages, and it best positions us to capitalize on future reserve and resource growth, which we're confident will continue.
Island is a great operation. This next step will create a better operation, with production increasing to average 236,000 ounces of gold per year at industry low all-in sustaining costs of $534 per ounce. As Jamie will speak to later in the presentation, this expansion will not take away from our strong free cash flow outlook. In fact, it greatly enhances it over the medium term and over the long term. At $1,450 per ounce gold, Island will generate average free cash flow of $170 million per year. At spot prices, this increases to $250 million per year. I'll now turn the presentation over to Peter MacPhail to provide an overview of the Island Gold project. Peter?
Thanks, John. Good morning, everyone. Jamie and I just have a few slides here, and then we'll pass it on to the team that has pulled this all together. Slide nine, please. Here we go. Just a quick refresher on the asset. It's located just outside of Dubreuilville in Northern Ontario and about 80 km from Wawa. It's quite easy access right off the Trans-Canada Highway. Alamos acquired it in 2017 through a combination with Richmont Mines. It's a high-grade underground mine with a reserve grade of 10.4 grams per ton. We currently have about 1.2 million ounces in reserve, another two and a half million ounces in resource, and that's growing. The exploration success hasn't slowed down. Next slides, please. This is one of my favorite slides in the deck. It really details the exploration success over the past several years.
In terms of ounces in all categories, Alamos has doubled the inventory in the past three years since acquisition to 3.7 million ounces. The reserve grade, which is the solid black line, has also significantly increased to 10.4 grams per ton. This success has basically been accomplished by doubling the exploration spend from where it was under Richmont to $20 million a year. We wanted to really find out how big this could be before committing to a shaft, and we feel we've now crossed that threshold. We fully expect the deposit will continue to grow, the economics being presented today are really just a point in time. Next slide, please. This slide illustrates the chronology of the mine moving up the ranks in terms of where it sits in relation to the grade profile of other Canadian operations.
From 2014 to current, it has evolved into one of the highest grade gold mines in the country. Next slide. This is another good slide which illustrates the quite significant growth in production over the past four years, from a run rate of 40,000-50,000 ounces per year to as high as 150,000 ounces last year. What you're seeing here is the effect of both increasing grades and increasing mining rates, from historically 500-600 tons per day through 900, 1,100, and more recently, 1,200 tons per day, our new permitted run rate. In conjunction with the increased production, all-in sustaining costs have come down nicely into the $600-$700 per ounce range. I think with that, I'll turn this slide over to Jamie to talk more to the financials.
Thank you, Peter. As Peter mentioned, we've been very successful in increasing production at Island Gold. We've effectively doubled the ounce production from pre-acquisition levels. With that, we've managed to drive costs lower. Those lower costs have combined with a $500 per ounce increase in the price of gold since we acquired the mine two and a half years ago, leading to tremendous margin expansion. As Peter indicated, Island Gold is already a very low-cost mine, with all-in sustaining costs at around $700 an ounce. Post-expansion to 2,000 tons per day, our all-in sustaining costs will average $534 per ounce, making this one of the lowest cost and most profitable mines anywhere in the sector. If we go on to the next slide.
The margin expansion that I just referred to is combined with production growth to result in growing free cash flow. In the two and a half years since we've owned Island Gold, we've generated in excess of $100 million US of free cash flow, with $65 million of that in 2019 alone. That $65 million of free cash flow in 2019 was net of $20 million of exploration spending. Fast-forward to when we're operating the shaft at 2,000 tons per day, and our cash flow effectively triples at current gold prices to in excess of $210 million US per year. If we move on to the next slide. This really showcases the value that we've created through the acquisition of Island Gold.
The gray boxes on the left-hand side represent our acquisition cost, as well as the consideration paid to repurchase the 3% NSR $55 million earlier this year. We compare that to the value of the mine today at both a 1,450 and a 1,750 gold price. You can see that using a 1,450 gold price, Island Gold is worth over $1 billion. Add to that, the cash that we've generated to date represents an 80% increase in the value of the asset. If we update that for 1,750 gold price, that's almost a 150% increase in the value of the asset from our initial acquisition cost. We've done that, as Peter indicated, through growing production, by expanding mineral reserves and resources. This is based on what we know now.
This deposit has gone from 1.8 million to 3.7 million ounces, showing no signs of slowing. At this point in the presentation, I'd like to turn it over to the gentleman who's been responsible for that reserve and resource growth, our chief geologist at Island Gold, Raynald Vincent.
Thank you, Jamie. First, I will present you a slide of the mineralization at Island Gold, then the exploration results and the exploration program that are currently ongoing at the Island Gold mine. Next slide, please. Here you have two photos. On the left, you have the face from the 820 west sill where we are doing a tons of mining. That's a high-grade face with a grade of 237 gram per tonne uncut over 2.5 meters. Cut, it is 76 gram per tonne. The photo on the right is a photo of the gold mineralization. It is a quartz veining within a altered metavolcanic rocks. The gold is located in the quartz vein associated to the tourmaline and other tertiary minerals.
For this specific gold, the grade is 152 gram per tonne over five meters or true width . Next slide, please. I will present the evolution of the exploration work at Island during the past 10 years. The first deep drilling , we were calling it deep drilling program, started in 2010. At that time, the overall reserve resources of the mine were a bit below half million ounces. We did an exploration program, it was Richmont mine at that time. The overall result within the first 11 holes were almost all big hole, five and 10 gram per tonne. Next one, please. At the end of 2016 when Alamos acquired Richmont, the majority of the reserve resources were located between 500 meters level and 1,000-meter level. From surface to 500 meters level, there was almost nothing left.
All the resources, or most of the resources were located below a 1,000-meter level. The resources are in blue on this slide. The overall gold content was a bit over 1.8 million ounces. Next slide, please. At the end of 2019, here's the situation. Overall resources are over 2.7 million ounces. Again, the majority of the resources, they are below 1,000-meter level, and the reserve they are located between the 500-meter level and 1,100-meter level. Next slide, please. This is the exploration result that we released last Monday. The highlight, we are in the eastern part of the deposit between the two resource block, we intersect 44.3 gram per ton gold over 2.3 meters. In hole MH 2104, in hole 620, MH 201, we intersected 29 gram per ton, uncut 26.7, cut over 4.9 meters.
Near the reserve resources in the extension area, we all there from the 840 level intersected 21 gram over 4.3 meters, as well as 52 gram over 10.3 meter in hole 840, 56601. We just received also a result from the MH 2204 below the deepest resource block in the western part of the deposit. We've gotten 25.4 gram per ton over 5.6 meters. The cut grade was 23.1. In the red star, they represent the drill rates that are currently in progress at the underground mine. Next slide, please. On this slide it is to show you where we are doing our exploration program. The green areas represent potential areas where we believe we can increase the resources from now to the end of the year. The green star represent the hole in progress from the underground drilling program.
The red star represent the drilling that is currently ongoing from surface, using the directional drilling . Maybe just to end this my part of the presentation, I just want to remember people that within 10 years with all the programs that we did, the deposit goes from half million ounces to over 3.5 million ounces. For this type of deposit, orogenic gold deposit, it is well-known that generally the lateral extent is, in terms of dimension, is less than the vertical extent. You can see at the bottom of the slide and the black arrow represent two kilometers wide. We are finding mineralization at Island over two-kilometer length, strike length. Drilling at depth, we hope that the mineralization will still be there according to the fact that originally gold deposit generally are extending more vertically than laterally.
Now I will pass over to Chris Bostwick who will present the Phase 3 study. Thank you.
Thank you, Raynald. Good morning, everybody. Next slide, please. To start, I'd like to outline our focus since we acquired Island Gold in 2017. After a very successful integration of Island into Alamos, we immediately expanded the exploration effort, and we continue to drill at an accelerated rate. The results have been obvious with the significant increases in our reserve and resource base in each of the last three years. In 2018, we completed the Phase 1 expansion to 1,100 tons per day. Last year, we received our permit for the Phase 2 expansion to 1,200 tons per day. In 2020, we are now mining and milling at that rate. Last year, we started on the process of evaluating a Phase 3 expansion, the results of which we are presenting to you today.
Throughout this period, we've continued to expand our CI initiatives, leading to increased productivity all through the operation. Next slide, please. Here we are looking at our quarterly mining and milling rates for the last five years. Our Phase One expansion completed in September 2018, saw tonnage rates go from 900 tons per day to 1,100 tons per day. With amended permits in hand and no additional capital, we are now at 1,200 tons per day. In Q1 of this year, we mined at a record of 1,240 tons per day, despite having a shortened quarter with Island temporarily shutting down in late March, due to COVID-19. Next slide, please. I'll reiterate here what John said earlier in that the shaft expansion of 2,000 tons per day is the best option under all scenarios.
It results in superior economics with $1 billion in after-tax NPV and a 17% IRR at $1,450 gold, and at closure to spot $1.45 billion in NPV and a 22% IRR at $1,750 gold. The shaft gives the strongest operating performance of 236,000 ounces of average annual production at an all-in sustaining costs of $534 an ounce. These are 72% higher and 30% lower than 2020's previous issued guidance. The shaft gives us the best exposure to both higher gold prices and continued exploration success at depth. The shaft offers less operational risk and more protection against lower gold prices with less of an impact on future cutoff grades. Next slide, please. Assumptions used in the study include a mineable resource that includes all of Island Gold's year-end 2019 reserves and 80% of its resources. I'll discuss how we got there in some later slides.
We used a base case gold price of $1,450 and a 0.75 exchange rate. The life of mine plan and cash flows all began at the start of 2020, and all scenarios evaluated include a detailed mine design, significant ventilation upgrades in the capital, and the addition of a paste backfill plant. Next slide, please. On the mine planning side, we've gone through a very detailed process. five scenarios were generated with each scenario undergoing multiple optimizations. The mine design was catered to each scenario, with unique material handling systems and ventilation circuits fully designed. The mining sequence was resource-driven and generated the annual physicals and equipment requirements, and mine costing was from first principles guided by site costing and productivities experience. Next slide, please.
We have a high degree of confidence in the capital estimate, as the design engineering was completed to a pre-feasibility level by a very reputable group of engineering consultants using labor rates and productivities from recent projects. Next slide, please. Notable among these consultants is Hatch, who did the infrastructure engineering, including the headframe and hoisting plant. Cementation with the shaft sinking, who incidentally undertook our recently completed Young-Davidson lower mine expansion. Halyard with the mill expansion, and Golder with the paste plant, tails dam, and permitting support. Golder also designed the Young-Davidson paste plant and tails dam. Next slide, please. The following three slides discuss how we got to our 80% resource conversion. Here on the left side, we see Island's 2019 year-end reserves and resources that total 3.7 million ounces.
In the middle is the undiluted resource that made it into stope shapes and were deemed economically accessible to mine. We then applied our standard dilution factors and recoveries by zone, and if they still met our cutoff grades, they appear on the right side of the table and were used in the study. Note that the overall Phase Three mine plan grade of 10.45 is close to Island's 10.37 gram per ton year-end reserve grade. Next slide, please. This depicts a waterfall chart of what we just discussed. Blue bars represent Island's reserves and resources. The first orange bar represents the 375,000 ounces that are not included due to being not mineable, not economically accessible, or a diluted grade falling below the cutoff. The second orange bar represents the loss of 105,000 ounces from mining recovery, netting the 3.2 million ounces used in the mine plans.
Next slide, please. To put the 80% conversion rate into a historical context, we've charted the last six years' conversions. On the far left of the graph in the blue bar, in 2013, Island had one million ounces of inferred. By 2017, in the stacked bars beside it, Island added one million ounces of new reserves. Moving forward to 2016, there were again a million ounces in resources, and we have converted 83% of them to reserves since we acquired the property. Most of the proven and probable reserves at Island were at one time inferred resources, are inferred as generally added via surface directional drilling on a 100-meter dice-5 pattern or an approximately 70 by 70 meter drill spacing. Conversion to M&I and proven probable was mostly undertaken with underground delineation drilling from exploration drives in the footwall.
Generally, we need to get three to four new holes between each pair of inferred holes with underground drilling to upgrade to indicated. Next slide, please. As mentioned, we began working on Phase Three last year at a scoping study level. We identified three potential material handling methods, ramp, haulage, conveying, and a shaft, and three likely tonnage rates, 1,200, 1,500, and 2,000 tons per day. At a scoping level, we saw, moving to the right on the table, increasing capital costs and decreasing operating costs, as well as increasing NPV. Some other important observations from the scoping study were that a 1,500 ton per day ramp option required an additional ramp to surface. With the ramp and conveyor options, personnel transportation times became excessive at depth, impacting productivity.
There will be a limit as to how far a ramp can go, and significant lateral development is required to get the conveyor to surface, and the conveyor option comes with much higher operating risk. However, the shaft can be expanded to depth, significantly reduces personnel travel time, and helps reduce ventilation capital and operating costs. Next slide, please. Five options were taken to a PFS level evaluation. We looked at a ramp, 1,200 tons per day option with and without paste backfill. We looked at a ramp at 1,600 tons per day and a shaft at 1,600 and 2,000 tons per day, all with paste backfill. 16,000 tons per day was chosen for two of the options because through early mill optimization work, we determined that we currently have 16,000 tons per day of milling capacity.
Like the scoping level work, the PFS work has shown the shaft 2,000 ton per day option confirms the strongest economics. With that, I'll hand it over to Austin and Nathan to go into the details of the shaft expansion.
Great. Thank you, Chris. Good morning, everybody. I'm Austin Hemphill. I'm the mine General Manager here at Island Gold. I've been at Island for the last two years. Prior to this, I was six and a half years at our Young-Davidson operation, where I oversaw the Northgate Mid Shaft project, as well as the sinking of the MCM shaft. Can we go to the next slide, please? Okay, a couple of common options to all the scenarios we considered here are paste plant, which improves mining recovery, improves the mining sequence. We also have a power upgrade common to all options. With the ramp options, the majority of the power upgrade being used for ventilation, and for the shaft option predominantly towards the hoisting plant.
A number of surface infrastructure improvements to support the long-lived asset, as well as the tailings expansion for future production, all options extend the life of mine from between eight to 14 years, with $104 million of capital being spent in the next four years. Next slide, please. A couple of infrastructure unique to each of the situations is the ramp option is obviously requiring a significant increase in our mobile fleet. A significant amount of ventilation upgrades being required to support the fleet. The 1,600 ton and 2,000 ton options requiring mill expansions, the shaft option requiring the sinking of a shaft as well as construction of a hoisting plant. Can we go to the next slide, please?
With the paste plant, we're able to realize approximately 100,000 additional gold ounces through mining recovery by mining existing pillars or pillars that would have been left behind in future mining. Additionally, this gold will carry a value of approximately $145 million. This also allows us for faster stope cycling time and allowing us to realize the higher mining rates. We estimate approximately 56% of the tailings go underground, and we'll realize about a $13 million life of mine savings for our tailings raises. Can we go to the next slide, please? With the paste plant investment, we're able to support the 2,000 ton a day mining rate. The plant itself requires approximately $34 million investment, which will be spent over the 2021 through 2023 years, with commissioning of the plant in the fourth quarter of 2023.
We're estimating approximately $13 per paste ton placed, and we're requiring approximately one and a half years of engineering construction, realizing a 32% after-tax IRR that just makes sense in all options. Can we go to the next slide, please? Now, power investments required for all options is shown here, about 500,000 CFM through to nearly 1 million. The next option we look at under the shaft option is, again, we'll have approximately 25.5 MW peak demand in 2017, the majority of that going towards the hoisting plant, 7.5 MW, as well as an additional 1.8 MW required for the upsize mill. This more than offsets the cost required for the ventilation. As you can see in here, it was only about a 700,000 CFM ventilation requirement, with a $14 million capital investment common to all options for this power upgrade in 2021 through 2022.
Can we go to the next slide, please? Common infrastructure investments required for all options, again, are related to basically supporting our long-lived assets. First of all, we'll complete the kitchen facility here, which is a major modernization and expansion in capacity, as well as construction of a new administration building, expansion of our existing warehouse capacity. With all these projects totaling approximately CAD 29 million spent through the 2020 through 2024 period. Can we go to the next slide, please? Tailings facility. We're presently in the midst of a tailings raise. We began it in 2019, and we're continuing to finish it in the later part of this year. CAD 22 million is the total spend for this project here. Provides a significant and sufficient capacity to support our near-term expansion in mineral resources and reserves, with CAD 13 million of the CAD 22 million being spent this year.
With that, I'll hand off to Nathan Bourgeault, our Chief Engineer.
Thank you, Austin. I joined Island Gold in December of 2017. I've been the Chief Mine Engineer here for the past two years. Prior to joining Alamos, I was a member of the construction operations team on a number of different projects, both on the contractor and the owner's team side of the fence. Next slide, please. As previously discussed, the shaft provides a significantly higher production rate with an average of 236,000 ounces per year and an all-in sustaining cost of $534. Shaft option does require a higher capital spend up front. As you can see over the life of mine, it's only incrementally higher, and this is more than offset by a lower operating cost, resulting in a lower combined capital and operating cost overall. The shaft was the lowest cost for all the scenarios studied and contributes to stronger economics with the highest NPV. Next slide.
Looking at the ramp 1200 option, showed an increasing operating cost at depth and does require additional capital to bring the mineral resource below our existing infrastructure into the mine plan. These capital costs are tied directly to increase in ventilation infrastructure and mobile equipment. As you can see from the long section, for the ramp 1200 option, we would require one additional fresh air raise and an additional exhaust raise. Next slide. Looking at the mobile fleet for the ramp 1200 option, we'd be transitioning from our existing fleet of eight haul trucks at our existing mining depths to a requirement of 18 haul trucks at a peak as we mine deeper in the mine. This is directly tied to a longer travel time to get deeper into the mine. Next slide, please.
The ramp 1,600 tons a day option, we also saw the increase in operating costs associated with mining deeper, also tied to an increase in power, propane, and labor costs. There's also additional capital costs required to achieve or to access the resources at depth similar to the ramp 1,600 option, and also to increase our mining throughput. You can see from the long section that in the ramp 1,600 option, we required two additional fresh air raises and a second ramp system that both supports material movement and ventilation in this option. Next slide, please. Looking at the ramp 1,600 mobile fleet, we'd be transitioning from our current fleet of eight haul trucks to a peak requirement of 25 haul trucks at depth. This is both due to the travel time required to get deeper in the mine and also the increased throughput. Next slide.
Looking at the shaft 2,000 ton per day scenario, provides the lowest operating cost of all the scenarios that we studied. As mentioned, it does have a higher upfront capital cost. This is more than offset by lower OpEx. It's expected the mining rate will increase in 2025 after the shaft is commissioned. Compared to the ramp scenarios, the shaft option would only require five haul trucks to maintain the 2,000 ton per day mining rate after the shaft is commissioned. As you can see, the only additional infrastructure that would be required in this scenario is the shaft, which would also serve as a fresh air raise. Next slide, please. The proposed shaft location is located just south of the existing mine site. The site itself is a flat plateau with many rocky outcrops and offers the opportunity for minimal rock excavation during the construction period.
You can see on the plan view where the mill and the existing portal are located just northeast or northwest of the mine site of the proposed shaft location. Next slide, please. The hoisting plant is a conventional improvement design capacity of 4,500 tons per day at the initial depth of 1,373 meters, with an ultimate design depth of 2,000 meters. Next slide, please. This long section is showing the proposed location of the shaft, with respect to the mineral resources that were included in the study. Note the shaft location's on the eastern side of the deposit, and it does allow early access to some of the highest grade material in the resource base. Important to note that we're not stuck at the 1,373 elevation, and we have the flexibility to go deeper as this deposit continues to evolve.
The ultimate shaft depth would not need to be finalized until sometime in early 2024. Next slide, please. Shaft also includes surface hoisting plant with an ultimate design depth of 2,000 meters as well, and it'll allow us to move roughly 280 people per hour into the mine, greatly reducing the amount of time it takes to travel and get all of our personnel to the face. Next slide. The headframe is a 59-meter steel headframe with both hoists located in a common hoist house. Next slide, please. The shaft arrangement is a 5-meter diameter shaft with a concrete liner. There's two 12-ton skips and a service cage, both in dedicated compartments, which will allow us to both concurrently travel and move material while we're skipping load. Next slide, please. A conventional blind sink was selected as it improves the schedule, reliability, and flexibility.
A raise bore shaft was studied. It was found that it would displace ore haulage and reduce throughput below the 1,200 ton per day rate throughout the life of the project period. Next slide, please. The underground ore and waste handling and loading pocket is a conventional proven design, very similar to the system that was just commissioned at our Young-Davidson in operation in Matachewan. Next slide, please. The shaft ventilation system offers a reduction in ventilation requirement, especially compared to the ramp options that were studied, with the shaft acting as a fresh air source. Combined with the reduced mobile fleet, this will result in greatly improved air quality underground in the mine. Next slide, please. In the mill expansion, there's a couple of key component changes that would be required.
We'd require an upgraded crushing circuit, a second parallel ball mill, a new CIP circuit, and carbon screen, and a new elution circuit. Expected cost for the upgrade of the mill is $40 million to expand to the 2,000 ton per day rate. Next slide. It's important to note that the mill expansion is a conventional design and build and represents an expansion of the existing facility and not the construction of a whole new facility. Next slide. Looking at the total material moved by year, you can see our peak material movement is 3,300 tons in the current study. With a 4,500 ton per day capacity at the 1,373 depth, this will give us more than enough capacity to continue to expand the mine as the deposit evolves at depth.
The ultimate design capacity at the 2,000-meter cap was noted in the previous slide of 3,500 tons per day total material movement. Next slide. As mentioned, the shaft does have a higher life of mine total capital as compared to the ramp option. Roughly CAD 118 million of additional capital compared to the ramp, but does offer a CAD 338 million savings in operating cost compared to the ramp scenarios. This will result in a CAD 220 million lower total operating cost and capital cost being realized with the shaft expansion. This is driven primarily by improved efficiencies and more effective time at the face on the operating cost side. Next slide. Looking at the sustaining capital, the increase in growth capital is partially offset by a lower sustaining capital on the shaft option.
This is a function of a decrease in mobile fleet and capital development in the shaft option as compared to the ramp options, with an average annual sustaining capital cost of $37 million in the shaft expansion option. Next slide. Looking at growth capital, there's a higher growth capital driven specifically by the mill expansion, the shaft construction, and the underground ore and waste handling system. It's expected the total cost for the mill expansion and the shaft installation to be $272 million and results in a $319 million higher growth capital with the shaft expansion as compared to the ramp. Next slide, please. The overall capital cost for the shaft is expected to be $232 million. This compares very well when benchmarked against other recent shaft projects in our region.
The expected timing of the shaft with early work starting in Q3 of 2021, shaft sinking starting in Q1 of 2023, and the shaft being commissioned in Q2 of 2025. Next slide, please. Looking at the shaft unit cost summary, there's a 21% decrease in total unit operating costs over the life of mine with the shaft expansion option. This is driven by improved travel time, as mentioned, more effective materials handling system, so cheaper and quicker and easier material moving through the mine and a higher throughput. With that, next slide, please. With that, I'll hand it back over to Austin Hemphill , our mine General Manager.
Okay, thank you, Nathan. I'll go ahead to slide 68, please. Okay, on this slide, you'll see the shaft's location there highlighted on the eastern side of the deposit. If you look down towards the deeper part, down to the east as well, you'll see the ore body color-coded by grade, with red being the highest grade of 20 grams per tonne or higher, with the grade being identified by the different cooler colors. The shaft location positions us almost ideally to access this higher grade deposit significantly earlier than we would be able to do with the ramp. Can we go to the next slide? Okay, on this slide, you can see that we're able to pull this high grade forward by a significant number of years, versus the ramp options.
This allows us to increase the revenue stream significantly, as well as start to recover some of the higher capital investments required for the shaft project. Can we go to the next slide, please? As we can see here, the annual gold production post-project delivers us approximately 236,000 ounces there, which again is a 66% increase versus 140,000 presently realized into the ramp 1,200 tonne per day option. Can we go on to the next slide, please? The shaft mining costs, we're able to maintain both a lower but also a more stable mining cost.
You can see that the mining costs here for the shaft 2,000 stay approximately $100 or less per tonne, whereas the ramp options increase as time goes on, with the ramps 1,200 tonne per day being $127, average over the life of mine, or $131 per tonne immediately post-project, and $127 a tonne for the ramp 1,600, which allows us to realize a 27% reduction in unit mining costs versus the ramp 1,200 tonne per day option. Can we go to the next slide, please? Again, this continues into the total operating cost as well. As you can see, the shaft options stay below $200 per tonne, both life of mine, as well as immediately post-project, with post-project being $178, whereas the ramp 1,200 being $235 and 1,600 being $220. This again is about a 24% reduction versus the present ramp 1,200 tonne per day option.
Can we go to the next slide, please? Again, this carries on to the cash costs. As you can see, the average life of mine for the shaft option is $422, or immediate post-project is $403, whereas the ramp options are both significantly higher, with the 1,600 being $100 higher post-project, with the ramp 1,200 being almost $140. This allows us to realize, again, a 25% lower cash cost relative to the ramp options. Can we go on to the next slide, please? This is where, again, we're able to realize a significant difference on the all-in sustaining cost. As we mentioned before, here approximately $534 average mine site all-in sustaining cost for the shaft options versus over $700 for each of the ramp options, realizing a 30% reduction versus the ramp 1,200 tonne per day option for the shaft.
Can we turn on to the next slide, please? This is where obviously the shaft really demonstrates its strengths versus any of the ramp options, is we can show here in the shaft 2,000 tonne per day column. You can see that at 750 meters depth, it's costing us approximately $96 per tonne to mine, whereas down at 1,500 tonne, 1,500 meters, I'm sorry, it's only $102. We only realize an increase in mining costs of approximately $6 per tonne. Whereas compared to the ramp 1,200 tonne per day option, at 750 meters, we're very similar to $106. However, at depth, we increase significantly to $159 or $57 a tonne. As we can see, this is over a 50% increase in mining cost versus the shaft option.
The numbers are very similar for the ramp 1,600 tonne per day option, with the shaft obviously providing us a significantly more stable mining cost. Can we go on to the next slide, please? As we look at the tonnes and grades per vertical meter, you see that from 1,000 meters and deeper, we're able to realize a significant increase in both tonnes and grade at depth. Well, the shaft best positions us to realize the benefits of these higher tons and grades as we continue to go deeper. Can we go to the next slide, please? This is where, again, we get to the serious benefit of the shaft. It minimizes the amount of travel time, as Nathan mentioned previously.
We can show on the slide here, the time at face to the completion of the shaft brings our effective time at the face to over 120% of what we're able to realize presently, with the ramp options continuing to deteriorate over time as the mine gets deeper and deeper and the travel time increasing. Similarly, with an additional time at the face, we're able to increase our productivity on the development case. On the meters per employee shift, you can see we're able to significantly increase ourselves by almost 20%. Can we go on to the next slide, please? This increase in productivity is more obviously realized on the production side. We're able to increase our tons per employee hour from five and a half to over seven at peak post-shaft completion, while also minimizing the additional staff required.
As you can see, the shaft option, we stay well below 400 personnel being required, where the ramp 1,600 peaks out at almost 500. Can we go on to the next slide, please? Similarly, we see the same with our primary production equipment. As you can see that we peak out both earlier and at a lower level with the shaft option, requiring just over 30 units of primary production fleet, whereas the ramp options increase over time with the increasing haulage distances, peaking out at almost 45 units with the ramp 1,600-ton option. Underground trucking hours, similarly, you can see the precipitous drop in trucking hours required upon completion of the shaft versus, again, the increasing numbers required for each of the ramp options over time. Can we continue on to the next slide, please? With the economic review, sorry.
We're able to see the shaft 2,000 ton per day option generating a significantly higher net present value. While the revenues from both options are very similar at $4.5 billion, the operating costs are $300 million less for the shaft. The total capital cost, again, while slightly higher for the shaft option, results in a total operating cost and capital of $2.6 billion for the ramp option, versus only just below $2.4 billion for the shaft option. Cumulatively free cash flow, again, after-tax we're able to realize from the options, the shaft being only $1.5 billion, whereas the shaft being $1.6 billion. As you can see, the after-tax net present value for the ramp being about $870 million, over $1 billion for the shaft option.
Now, if we increase the gold price near spot, we can see that the actual after-tax NPV for the ramp option increases to about $1.3 billion, while the shaft continues to distance itself, increasing to $1.45 billion. You can see the after-tax IRR of the shaft versus the ramp increasing from 17% to 22%. Again, quite simply, the shaft 2,000 generates the highest NPV. It accelerates revenue and it lowers our operating costs, more than offsetting the higher CapEx. Can we go to the next slide, please? You can see here, with the shaft being completed in the 2025 period, it only takes us approximately two years to offset the higher capital cost. From every year thereafter, we're able to realize the benefits of the significantly lower operating cost, significantly increasing our free cash flow. Can we continue on to the next slide, please?
The shaft option, quite simply, is the strongest alternative. It provides us superior economics, a significant increase in production, at over 72% versus our present 1,200 ton per day option. Provides us the lowest costs, positioning us in the lowest quartile for both cash costs as well as all-in sustaining costs, as well as to de-risk the mine by minimizing our exposure to gold price fluctuations and also any kind of labor or other commodity issues that might develop. It also positions us ideally for any future expansions to the resource below the 1,500-meter depth. If we can continue on to the next slide, please. You can see with some various scenarios we ran at different gold prices, at the present $1,450, again, we touch on the NPV of the ramp 1,200 being $874 million versus the shaft at $1.0.
You can see this significantly increases with an increase in gold price. If we were able to realize that $1,850 gold price, it would be $1.4 billion for the ramp, but $1.6 billion, again, for the shaft, resulting in an IRR even higher at 24%. Continue on to the next slide, please. Okay. We also have to consider the upsides. When we look at the life of mine averages, we can see they're over $233 difference on the all-in-sustaining cost per ounce. One of the things we got to look at is for every million ounces we get in at a depth, how much can we realize?
Again, with the project being set at 1,500 meters, at that depth, for every million ounces we're able to realize, we're able to realize an additional basic revenue of $315 million, which is a significant gain versus the present ramp option. Obviously, with the successes we've seen so far at Island, if this were to continue at depth, the differences would be even greater. Continuing on to the next slide, please. One of the other benefits here is we're actually substituting diesel horsepower for electrical horsepower, resulting in a significant offset in our greenhouse gas emissions. This is a net reduction of 35% versus our 1,200 ton per day ramp option, and significantly more from the 1,600 ton per day ramp option. It provides us, obviously, the lowest carbon emissions, as well as improvement of air quality underground. We can continue on to the next slide, please.
Now, shaft expansion requires a bit of permitting, but it's nothing we haven't done before. We've had significant successes both at Island Gold as well as our Young-Davidson mine. As we're presently configuring this process, we're able to avoid triggering a federal permitting process and stay within the provincial architecture. Continue on to the next slide, please. Again, as we can see in the project schedule here, as I've been touching on in previous slides here, Quarter two commencement of 2020, the commencement of engineering has already begun, and we believe the shaft approach should be completed in the second quarter of 2025. Again, that's where we start to realize all the benefits here, both the increased productivity, significant reductions in operating costs, and the tremendous increases in cash flow. With that, I'll hand back over to Jamie Porter. Thank you.
Thanks very much, Austin. That's a great overview of the project. I'm going to briefly walk through the free cash flow profile under various gold price scenarios, after which I'll make some comments with respect to capital allocation. If we can move on to this next slide. This really showcases the free cash flow of the Shaft 2000 expansion at a $1,450 gold price and shows that even at gold prices $350 per ounce, lower than where we are today, Island continues to generate free cash flow for the next year and a half. After which, we require about $150 million, modest investment, in order to get the operation fully ramped up to that 2,000 tonne per day level. Once we're there, 2025 and beyond, we're generating in excess of $170 million on average for the remaining 10-year life of the mine.
If we go to the next slide, we are showing effectively the same free cash flow profile, but at a $1,750 gold price. At $1,750, closer to current spot, Island effectively self-finances the capital required to expand the operation 67% from 1,200 tonnes per day to 2,000 tonnes per day, and results in average annual after-tax free cash flow of $210 million US per year after 2025. Moving on to the next slide, we show effectively the same thing, but on a cumulative basis. What I like about this slide is on the far right-hand side, if you look at the orange bar, that represents cumulative after-tax free cash flow from this Phase 3 expansion at a $1,750 gold price of $2.3 billion. That is almost four times our acquisition cost of $624 million. It just demonstrates, again, the value that we have added through this acquisition.
With that, I'll make some comments with respect to capital allocation, then turn the presentation back to Scott to walk through the mechanics around the Q&A. We have just in the second half of this year, we've just now really transitioned to a period of strong free cash flow growth. If you walk through each of our assets at Young-Davidson, we just announced the completion of the lower mine expansion. What that means is higher production, lower unit costs, and less capital, which will translate into free cash flow of well in excess of $100 million per year. At Island Gold, as I've just indicated, we have another year and a half of free cash flow before we need to start investing significant capital in the Phase Three expansion. At Mulatos, we anticipate being able to self-finance construction of La Yaqui Grande.
Mulatos will generate sufficient operating cash flow to be able to pay for La Yaqui Grande. What that translates into is significant free cash flow going forward of in excess of $150 million per year pre-dividend that will be available to continue to return to shareholders in the form of higher dividends. To strengthen our balance sheet, we anticipate repaying the $100 million that we drew on our credit facility, and bolstering our cash balance further, and it will also be available to continue to advance our other organic projects within the company. If we move on to the next slide, this really demonstrates that we have a long history of returning capital to shareholders.
If you look at the period from 2010 to 2014, we generated in excess of $400 million US in free cash flow from Mulatos in that 4 to 5-year period, of which we returned 25% or $100 billion to shareholders in the form of dividends. From 2015 to 2019, we entered a period of growth. We were very active in counter-cyclical M&A, merging with AuRico in 2015 when the gold price was in around $1,100 per ounce. We followed that up with the acquisition of Richmont when the gold price was $1,250 per ounce. We've diversified, we've transitioned from a single asset company with one mine in Mexico to a mid-tier diversified gold producer with two-thirds of our production in Canada. We've completed that diversification, that reinvestment phase, and we're entering that harvesting phase, again, where we'll start generating tremendous free cash flow.
We have the ability to continue to increase our dividend. We've increased it 200% since 2018, and I'd anticipate significant growth in the dividend in 2021 and beyond. With that, I'll turn the presentation over to Scott to commence the Q&A part.
Thank you, Jamie. We will now open up the webcast and call for questions. If you wish to ask a question, you can do so through either the webcast or the phone line. To ask a question through the webcast, click the raise hand button at the bottom of your screen. Once your hand has been raised, you will be placed into a queue. When it is your turn to ask a question, you will receive an on-screen prompt to unmute your microphone, after which you can go ahead and ask your question. If you wish to withdraw your question, you can simply click the same lower hand button in the same location. To ask a question through the phone line, dial either one of the numbers on the screen and press star one.
I'll now turn the webcast back to our panel of speakers, and we'll wait a few moments for questions to queue up. Great. Our first question comes from Cosmos Chiu at CIBC. Cosmos, please unmute your line and go ahead.
Thanks. John, Jamie, Peter and Scott, and the team here. Can you hear me?
We can hear you.
Great. I guess my first question is, first off, congratulations. At least to me, the numbers look good. I'm sure a lot of work was put into this study here. My question is on the sequence of events or upcoming sequence of events. Austin sort of touched on it, but I just want to get a fuller understanding of some of the critical path items coming up. I see that the shaft sinking isn't going to happen until Q1 2023. What needs to happen before you start sinking that shaft? Could you start sinking that shaft earlier, and would that help?
It's Chris here. One of our constraints is permitting. We need to get the permits in hand, and as has been mentioned, we expect those in hand at 18-24 months timeframe. We're actively working on that. Other things that have to happen upfront are detailed engineering for the shaft infrastructure and, as well, ordering of some long lead time items for the shaft, which would be the hoist construction of the Galloway, ordering the grinding mill, and a few other items. There's not that much opportunity to get the shaft underway any earlier than we've described.
Great. Chris, while I have you here, I guess, again, this is further out, but in terms of when you tie it in, are we going to see any kind of potential downtime or lower capacity, lower production, as we experienced at YD?
No, none at all. We have the capability, while we're commissioning the shaft, of continuing to haul to surface at the current rates that we're seeing right now.
Mm-hmm. I guess you just completed the shaft sinking at YD. I know it's not a perfect comparison. It was raise boring at YD versus more conventional shaft sinking here at Island Gold. Could you maybe touch on the cost or compare the cost and advancement rates at YD versus Island Gold? I know you also consider raise boring at Island Gold, but that turned out not to be the best alternative.
Right. Yeah, we are doing a conventional sink at Island. The advance rate will be about 9-10 feet per day, which is obviously slower than raise boring. In order to raise bore a shaft, you need access to the bottom of the shaft, and we're not there yet, so we'll be able to concurrently sink the shaft and get our ramps deeper at the same time, and there's no requirement to tie those into each other.
On the shaft capacity, I see that at least at the initial depth, you're looking at 4,500 tons per day in terms of the shaft capacity. Looks like the maximum that you need is about 3,300 tons per day, and looks like you're hoisting most of the waste back up to surface, and that is included in the 3,300 tons per day. Could you talk about some of that latent capacity? Is it just to prepare you just in case there's another expansion, or is it just to make sure that even if you go deeper, further shaft sinking here, you will still have that capacity for the maximum tonnage that you need?
Yeah. We sized the hoisting plant to allow us at a greater depth, say, 2,000 meters, to still maintain a full production rate of 2,000 tons a day or plus waste.
Mm-hmm. One last question here, if I may. Thanks for all the analysis. It was great to look at the details behind the different alternatives. Clearly, the 2,000 tons per day was the winner. Was there a close number two in terms of alternative, or was the 2,000 tons per day shaft the runaway clear winner here?
The other two options that we looked at on an expansion basis were Well, we didn't present the economics for it, but the ramp 1,600 and a shaft at 1,600. Both of those came in on an NPV basis, roughly halfway between the ramp 1,200 and the shaft 2,000. There was nothing else from an economics perspective that was close to the shaft 2,000 option.
Great. Thanks a lot for your conference call today. Those are all the questions I have.
Thanks, Cosmos. Our next question comes from Chris Beer at RBC. Chris, please go ahead. Chris, you may just need to unmute your line.
Scott, can you hear me?
We can hear you now.
Okay, thanks. Congratulations. A great, very detailed thorough review, much like the Young-Davidson presentation two years ago. My question is, you had one or two slides there on the exploration and the depth. Is there a way, after Q2 maybe, to look at sort of the grade reconciliation? The grade continues to look better at depth. Clearly there's some shoots that way. There's a lot of mineralization laterally extensive as well. Has there been some success, I guess hard during COVID, but to drill further east rather than at depth?
Maybe I can ask this question. Our drilling program are focused on increasing the resources at the underground mine. It's why we are drilling near the actual resource work. To the east, we did some holes along the Goudreau deformation zone. We're going to Edward and Cline . We did intersect a few interesting gold values, such as 9 gram per tonne over two meters in holes that are a kilometer away. We are not focusing on these right now. The focus is really on increasing the resources, it is why we are in the slide, you saw the three red stars. That's the hole that are currently in focus, we are focusing really in extending the deposit down deep. Hopefully to the 2,000 meter level.
Chris, the trickiest thing to do when you're already operating a mine that's quite profitable under the current scenario is to get enough data together to drive a decision to try to make it better. Since we acquired it, we knew that the emphasis had to be on growing reserves and resources, and we've been trying to do that as aggressively as possible. We felt by the end of 2019 that we had sufficient ounces in place. It happened faster than we expected, and we were very happy for that. We had enough to drive the Phase 3 study, in order to continue to bolster it and to demonstrate really sound economics going forward, the emphasis is going to remain on expanding those reserves and resources that we can quickly access.
Okay, thanks. Congratulations. The grade continues to look great. Thank you.
Thank you, Chris. We're now going to turn the call over to the conference line. We do have a few questions queued up. Operator, can you please open up the line for our first question? Operator, can you please open up the line for our first question, please?
Certainly. The first question is from Kerry Smith from Haywood Securities. Please go ahead.
Thanks, operator. Congratulations, everybody. I think in 10 years' time, you're going to be very happy that you put that shaft in for sure. Mike, I have a couple of questions. One is, in that 2,000 tons a day mill expansion, what sort of excess capacity do you think might be in that circuit? Do you think it would be capable of an extra 10%, or is it pretty much designed for 2,000 tons a day and that's all you think you could squeeze out of it? I know you've had pretty good success at pushing the plant harder than what notionally was designed for currently. Just wondering if there might be a little bit of extra capacity that could be utilized.
Kerry, well, I'll take it, Chris. It's Peter here, Kerry. Yeah, every mill I've ever been involved in, particularly, versus design throughput, there's always a bit more. We just don't leave ourselves on the line there. The mine at 2,000 tons a day is a solid mine. Great. If we can get more out of it, I imagine we'll figure out a way to put it through the mill.
Okay. Just on the permitting, you'd said in the deck that you wouldn't require an EA either at the provincial or the federal level. Has that been sort of certified or signed off on by the province, or that's your understanding just through discussions with them?
Yeah, no, that's our understanding. We'll need to put in our project description here fairly soon. This is a brownfields. We're not increasing the tailings footprint. The only impact disturbance would be around the new shaft site, and it's pretty clearly a provincial jurisdiction sort of thing. There are a few minor federal permits, but nothing that's going to require a full-blown environmental impact statement or something like that. It's kind of modification of existing permits and a few new disturbance areas.
Okay. Peter, when do you think you would file that project description then?
We've been working on all the baseline data for about a year now. That'll be this year at some point. I don't know exactly when.
Okay, got you. Maybe just one last question for Jamie. At, say, $1,700 gold, which was the other scenario you ran, when would the mine be taxable?
Hi, Kerry. We use the $1,750 gold price scenario in our proxy for spot. I believe we start paying taxes in 2026. The way it works is we have about CAD 1 billion of available tax pools to split between YD and Island Gold. For purposes of the study, we've allocated about 60% of those to Island. On a go-forward basis, after factoring in the use of those tax pools, our effective rate is 16%.
Those pools can be shared between either operation, obviously.
Correct. Based on profitability, yeah. Our estimate, though, is that 60% will be used by Island.
Got you. Okay. Okay, that's great. Thanks very much, guys.
Thanks, Kerry.
Thank you. The next question is from Lawson Winder from BofA Securities. Please go ahead.
Hi guys. Thanks for the very well organized and detailed presentation. That was a pleasure to follow along with. I wanted to ask about the tailings raises. First of all, are they included in sustaining or growth capital? Approximately, what's the sequence of additional tailings raises after this one? I think previously they planned to be about every five years. Are you still looking at something similar with the paste backfill plant? Thanks.
Lawson, I'll answer that. The current tailings raise that we're doing now, a portion of it is in growth and a portion's in sustaining. Two future tailings raises that we'll do, just looking at it here now, one in 2024 and one in something like 2030 are both in sustaining.
Okay. That's great. Then, I was just looking further down the road to a potential additional sinking of the shaft to a lower level. I think it's reasonable to do so given where the exploration has gone. Can we think of it as sort of being a similar level of cost per meter? The current shaft down to 1,373 is about $170,000 per meter. Would that be similar, going from, say, 1,373 down to 1,500 or 2,000?
No, it would be somewhat less because we already have a large chunk of the infrastructure in place, being the head frame and the hoisting. It'd be more like CAD 50,000 a meter plus indirects.
The other thing to mention along those lines is, and I think Austin alluded to it in one of his slides, was that, as we start sinking this shaft, and that'll only start in, I think, 2023 or thereabouts. If the deposit has continued to grow at depth, we would just sink it deeper on the first go to maybe 1,500 meters, 1,750 meters, something like that, depending on what we've been able to find in the ensuing two or three years. That would be even cheaper because you wouldn't have to do a winze, or not a winze, but get underneath it and leave head cover and whatnot. If we see that, we will take advantage of that during the initial project.
Yeah, that makes a lot of sense. Just one final question from me. You assumed a dilution rate of 15% on average for the inferred M&I resources not already in reserves. You mentioned that you took a zonal dilution approach. I was just curious, what's the degree of variability from one zone to another? How does that dilution change as you go deeper? Thanks.
It's not so much that it changes as you go deeper. It changes with the orientation of the ore body, the depth of the ore body, and by zone. You could see anywhere from 25% to a 50% dilution by zone. I don't believe we used 15% dilution for the inferred. We used something higher. If you're doing the calculation from the table, it may appear to be 15%, but you have to remember that a lot of the lower grade material gold cutoff falls out of those tables, so the effective dilution rate is higher.
The other thing we're expecting with the inclusion of the paste plant is improved recovery, but also a reduction in dilution.
Okay. Thanks so much. I appreciate you taking the questions. Good luck.
Thank you. The next question is from Trevor Turnbull from Scotiabank. Please go ahead.
Thanks, guys. Just a quick silly follow-up on the tax pool question. Is that US dollars you were talking about or Canadian?
Trevor, when I referenced the CAD 1 billion in tax pools, that's Canadian.
Okay. Thank you. The other question I had was just with respect to permitting. It seems to me that when you increased mill capacity in the past, one of the things you had to discuss with the province was, I think, an air quality permit. Is that the type of thing that you would have to do again? Considering this is a fairly large step change relative to the 1,200 tons a day you're at now, do you envision that being any more difficult or taking more time than normal to get it up to what you need for the new capacity?
Hey, Trevor, it's Peter. Yeah, air quality would probably be one of the permits that we have to amend. I don't see it being a huge issue. They haven't been in the past. It is a step change. Having said that, with respect to air quality, the overall project is going to be significantly better air quality given the lower diesel emissions coming from the operation. I think on a net-net basis, it'll be a reduction in greenhouse gases and air disturbance.
Okay. Understood. Great. Thanks, guys.
Thank you. The next question is from Mike Parkin from National Bank. Please go ahead. Mr. Parkin, your line is now open.
Sorry, I was on mute talking to myself. Thanks for taking my question. Just with respect to engineering, given that a fair bit of the work won't start for a bit of time, where do you expect to be on % of engineering complete when the heavier capital spending kicks in in 2022?
Nathan, why don't you talk to that?
Sorry, Chris, I was having trouble getting unmuted there. As mentioned during the presentation, we're starting the basic engineering phase of the project this year. It's already underway starting right now. We're expecting to be kind of completed the basic engineering phase by the end of the year, with IFC level engineering coming early 2021, mid-2021. When the bulk of the construction phase on the shaft hits us in 2022, we're expecting, for the most part, all of the detailed engineering on the shaft to be completed. To support permitting, there's a fair amount of engineering that's required on the mill. We'll be probably doing a lot of that engineering up front as well just to support the permitting process.
I guess the answer is, the majority of the engineering will be completed before we start construction on the large capital spend on the shaft, just to support both permitting and the procurement of the long.
Okay, great. In terms of the location of the shaft, have you placed it based off the geological center of mass to date, or with a bit of an interpretation as it seems everything's plunging further to the east? As your diagram shows, tons per vertical meter seems to be growing as you're going deeper. Has there been a bit of a thought there that you're maybe a little further east than what your total resources currently would indicate?
The primary factors into the shaft location were that obviously we didn't want it to, as you were saying, go into the ore body anywhere, and secondly, or maybe even more importantly, is finding a good spot on surface. If you look back to that layout and the location where it is, there's quite a few areas in that area that are bogs and not great spots to situate a shaft. As Nathan mentioned, the area that we ended up picking has got some good outcrop there, and it's going to minimize our amount of earthworks required. Anything you can add there, Nathan?
We looked at a number of different locations. You'll notice that the lake is just to the north of where the shaft location is, and that was a huge geographical constraint for the shaft. Also, I mean, Raynald's done a pretty incredible job of finding a lot of material underneath our feet, and it seemed that every time we picked a shaft location, Raynald would find some nice material there. The location that we've got has been delineated, has been drilled, and has been condemned. We're pretty confident that where we've got the shaft, we've got a decent shaft pillar around it. As Chris mentioned, the surface location couldn't be better. A nice high plateau, minimal amount of rock excavation, and fairly close access to existing infrastructure.
Okay, super. That's it from me, guys. Thanks so much, and congrats on the great study.
Thank you. Once again, please press star one on your telephone keypad if you have a question or comment. In the meantime, I will turn the meeting back over to Mr. Parsons.
Thank you, operator. Similarly on the webcast, if you do have questions, please click the Raise Hand button at the bottom of your screen. We do have another question. James Holman from Invesco. Jamie, please go ahead.
Hey, thanks, guys, for taking my question. I was wondering about the paste plant. You talked about how that would allow you to exploit more of the ore body. I was wondering what you guys have currently been doing for backfill and whether it will allow you to attack more remnant stopes higher up in the mine that you're currently mining, and if it will add reserves in that area.
Nathan or Austin?
Yeah. Currently we're utilizing a combination of unconsolidated rockfill and cemented rockfill for our backfill. The increase in recovery is directly tied to us being able to recover the rib pillars that we leave between the upper level and our mining horizons. It also will allow us to improve recovery in the areas that we're mining in between, just in allowing us a more aggressive mining shape. As far as the upper mining horizons go, there's probably some opportunity there to look at recovering some of the zones that are closer together. Our primary mining zone is the C zone. There are a number of areas where we have lenses very close that we haven't necessarily attacked just because of their proximity. That may open the door to some of those. As far as remnant pillar mining, a lot of our remnant pillars are safe.
Regaining access into those areas would be difficult given the fill that was placed in those areas originally.
Thank you.
Thank you. We have no further questions on the webcast or conference call at this time. I would like to thank everybody for joining us this morning. Please do reach out to us if you have any follow-up questions, and we look forward to speaking with all of you soon. Thank you.
Stay safe, everyone.
Thanks. That ends the call. Thanks for attending.
Thank you. Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.