Good morning, and thank you to everyone for joining our Island Gold Phase III expansion study webcast. My name is Scott Parsons, I'm the VP of Investor Relations. Before we get started, I'm going 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 U.
S. Dollars unless otherwise noted. I'll now introduce our presenters today. From our Toronto office, we have John McCuskey, President and CEO Jamie Porter, CFO Peter McPhail, COO Chris Boswick, VP, Technical Services And from our Island Gold operation, have Austin Hemphill, general manager Renald Vincent, our chief geologist and Nathan Bourgeaux, 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. Renaud is going to give us an update on exploration before we move into a detailed review of the Phase III 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 open up the webcast to questions. With that, I'll now turn the call over to John McCluskey, our President and CEO.
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. And 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 multiyear 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 tonnes 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. And 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 $14.50 dollars per ounce gold, Island will generate average free cash flow of $170,000,000 per year. At spot prices, this increases to $250,000,000 per year. I'll now turn the presentation over to Peter McPhail to provide an overview of the Amgold 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 Duberville in Northern Ontario and about 80 kilometers 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 1,200,000 ounces in reserve, another 2,500,000 ounces in resource and that's growing.
The exploration success hasn't slowed down. Next slide, please. 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 3,700,000 ounces.
The reserve grade, which is a solid black line, has also significantly increased to 10.4 grams per tonne. This success has basically been accomplished by doubling the exploration spend from where it was under Richmond to $20,000,000 a year. We wanted to really find out how big this could be before we're committing to a shaft, and we feel we've now crossed that threshold. We fully expect the deposit will continue to grow, so 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 to 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 to 600 tonnes per day through 900, 1,100 and most recently 1,200 tonnes per day, our new permitted run rate.
And in conjunction with the increased production, all in sustaining costs have come down nicely into the 600 to $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. And with that, we've managed to drive costs lower. Those lower costs have combined with $500 per ounce increase in the price of gold since we acquired the mine 2.5 ago, leading to tremendous margin expansion.
As Peter indicated, Island Gold is already a very low cost mine with all in sustaining costs in around $700 an ounce. Post expansion to 2,000 tonnes per day, our all in sustaining costs will average $534 per ounce, making this one of the lowest cost, the most profitable mines anywhere in the sector. If we go on to the next slide, the margin expansion I just referred to is combined with production growth to result in growing free cash flow. In the 2.5 since we've owned Island Gold, we've generated in excess of US100 million of free cash flow, with US65 million dollars of that in 2019 alone. And that US65 million dollars of free cash flow in 2019 was net of US20 million dollars of exploration spending.
Fast forward to when we're operating the shaft at 2,000 tonnes per day and our cash flow effectively triples at current gold prices to in excess of US210 million dollars 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 $55,000,000 earlier this year. We compare that to the value of the mine today at both a $14.50 dollars and a $17.50 dollars gold price. And you can see that using a $14.50 dollars gold price, Island Gold is worth over $1,000,000,000 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 $17.50 gold price, it's almost 150% increase in the value of the asset from what we've from our initial acquisition costs. And we've done that, as Peter indicated, through growing production by expanding mineral reserves and resources. And that this is based on what we know now. This deposit has gone from $1,800,000 to 3,700,000.0 ounces, showing no signs slowing. So 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 Arlingold and then the exploration results and the exploration program that are currently ongoing at the Arlingold mine. Next slide, please. So here you have two photos. On the left, have the phase from the 820 West Sill, where we are doing tons of mining.
So that's a high grade phase with a grade of two seventy seven gram per tonne uncut over 3.5 meters. Cut it is 76 gram per tonne. On the photo on the right is a photo of the mineralization. It is quadraining within a ultra meta volcanic rocks, and the gold is located in the quadravine associated to the tomarine and other terrestrial minerals. For this specific hole, the grade is 152 gram per tonne over five meters or two widths.
Next slide, please. Will present the evolution of the exploration work at Aynens during the past ten years. So the first deep drilling we were calling it deep drilling program started in 2010. And at that time, the overall reserve resources of the mine were a bit below 500,000 ounces. And we did an exploration program, it was H1 minutee at that time.
And the overall result within the first 11 holes were almost all below five and ten year end per ton. Next one, please. So at the end of twenty sixteen, when Alamos acquired Richmond, the majority of the reserve resources were located between 500 meters level and 1,000 meter level. From so fast to 500 meters level, there was almost nothing left and the all the resources or most of the resources were located below 1,000 meter level. The resources are in blue on this slide.
And the overall gold content was a bit over 1,800,000 ounces. Next slide please. At the end of twenty nineteen, here's the situation, overall resources over 2,700,000 ounces. Again, the majority of the resources, 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. So the highlight, are in the eastern part of the deposit between the two resource block, intersect 14 to 4.3 ampere tonne gold over 2.3 meters in Old MH 2104. And In Old 620 MH 201, we intersected at 29 gram per tonne uncut, 26.7 gram per over 4.99 meters. And near the reserve resources in the extension area, all there from the 840 level intersected 21 gram over 4.3 meters as well as 52 grams over 10.3 meter in 845,601. And we just received also a result from the MH2204 below the deepest resource block in in the western part of the deposit, we've gotten 25.4 gram per ton over 5.6 meters.
The cut rate was 23.1. In the red star, represent the day rates that are drill drill that are currently in progress at the Armen Gulf 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.
So the green star represents the all in progress from the underground drilling program. The red star represents the drilling that is currently ongoing from surface using directional drilling. Maybe just to end this my part of the presentation, I just want to remember people that within ten years with all the programs that we did, we the deposit goes from 5,000,000 ounces to over 3,500,000 ounces. And for this type of the deposit of a lineage gold deposit, it is well known that generally the lateral extent is in terms of dimension is less than the vertical extent. So you can see at the bottom of the slide that the black arrow represents two kilometers wide.
So we are finding mineralization at island over two kilometer length strike length. So drilling at depth, we hope that the mineralization will still be there according to the fact that the originator deposit generally are extending more vertically than laterally. So now I will pass over to Chris Paswick, who will present the Phase III study. Thank you.
Thank you, Ronald, and good morning, everybody. Next slide, please. To start, I'd like to focus 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 one expansion to 1,100 tonnes per day. And last year, we received our permit for the Phase two expansion to 1,200 tonnes per day. And in 2020, we are now mining and milling at that rate. Last year, we started on the process of evaluating a Phase three 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 tonnes per day. In Q1 of this year, we mined at a record of twelve forty tonnes per day despite having a shortened quarter with Island temporarily shutting down in late March due to COVID-nineteen.
Next slide, please. I'll reiterate here what John said earlier in that the shaft expansion at 2,000 tons per day is the best option under all scenarios. It results in superior economics with $1,000,000,000 in after tax NPV and a 17% IRR at fourteen fifty gold and at closer to spot, 1,450,000,000.00 in NPV and a 22% IRR at seventeen fifty 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 twenty twenty's previous issued guidance.
The shaft gives us the best exposure to both higher gold prices and continued exploration success and depth. And 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 minable 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 $14.50 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, and the addition of a base backfill plant. Next slide, please. On the mine planning side, we've gone through a very detailed process. Five scenarios are 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 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 head frame 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 twenty nineteen year end reserves and resources that totaled 3,700,000 ounces.
In the middle is the undiluted resource that made it into stoping 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 III 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.
The 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 minable, 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 3,200,000 ounces used in the mine plans. Next slide, please. To put the 80% conversion rate into a historical context, we charted the last year six years conversions.
On the far left of the graph, in the blue bar, in 2019 sorry, 2013, Island had 1,000,000 ounces of inferred. By 2017, in the stacked bars beside it, Island added 1,000,000 ounces of new reserves. Moving forward to 2016, there were again 1,000,000 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. Our inferred is generally added via surface directional drilling on a 100 meter dice five pattern or approximately 70 by 70 meter drill spacing.
Conversion to M and I and proven probable is mostly undertaken with underground delineation drilling from exploration drives in the footwall. Generally, need to get three to four new holes between each pair of inferred holes with underground drilling top grade to indicated. 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, 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.
So, five options were taken to a PFS level evaluation. We looked at a ramp, 1,200 tons per day option, with and without paste fill. We looked at a ramp at 1,600 tons per day, and a shaft at 1,602,000 tons per day, all with base 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 installed grinding capacity. And 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.
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 point five years at our Young Davidson operation, where I oversaw the Northgate mid shaft project as well as the sinking of the MTM shaft. Doug, can we go to the next slide, please? Okay. A couple of common options to all the scenarios we considered here are pace plant, which improves mining recovery, improves the mining sequence. We also have a power upgrade common to all options.
With the ramp options, majority of the power upgrade being used for ventilation and for the shaft option predominantly towards the hoisting plant. Number of surface infrastructure improvements to support the long lived asset as well as the tailings expansions for future production, and all options extend the life of mine from between eight to fourteen years, with $104,000,000 of capital being spent in the next four years. Next slide, please. Couple of infrastructure unique to each of the situations is the ramp options 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 and the shaft option requiring the sinking of a shaft as well as construction of a hoisting plant. Go to the next slide, please.
With the Pace 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 goal will carry a value of approximately $145,000,000 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 $13,000,000 life of mine savings for tailings raises. We go to the next slide, please. With the paced plant investment, we're able to support the 2,000 ton a day mining rate.
The plant itself requires approximately $34,000,000 investment, which should be spent over the 2021 through twenty twenty three years, commissioning of the plant in the fourth quarter of twenty twenty three. We're estimating approximately 13 per paste ton placed, and we're requiring approximately one point five 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 kcfm through to nearly 1,000,000. Next option we look at under the shaft option is again, we'll have approximately 25.5 megawatt peak demand in 2017, the majority of that going towards the hoisting plant, 7.5 megawatts as well as an additional 1.8 megawatts required for the upsized mill.
This more than offsets the costs required for the ventilation. As you can see in here, was only about a 700,000 CFM ventilation requirement, with a $14,000,000 capital investment common to all options for this power upgrade in 2021 through 2020 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 capacity as well as construction of a new administration building, expansion of our existing warehouse capacity, with all these projects totaling approximately $29,000,000 spends through the 2020 through 2024 period. We'll 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. Dollars 22,000,000 of total spend for this project here provides a significant and sufficient capacity to support our near term expansion in mineral resources and reserves, with 13,000,000 of the $22,000,000 being spent this year. With that, I'll hand off to Nathan Borgia, our Chief Engineer.
Thank you,
Austin. I joined Island Gold in December of twenty seventeen. I've been the Chief Line Engineer here for the past two years. Prior to joining Alamos, was a member of the construction and operation team on a number of different projects, both on the contractor and the owners' team side of the fence. Next slide, please.
As previously discussed, the shaft provides a significant skids significantly higher production rate than average of 236,000 ounces per year in an all in sustaining cost of $534 Shaft option does require a higher capital spend upfront. And as you can see over the life of mine, it's only incrementally higher. 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 1,200 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 1,200 option, we would require one additional fresh air raise and an additional exhaust raise. Next slide. Looking at the mobile fleet for the Ramp 1,200 option, our 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 Ram 1,600 tonne a day option, we also saw that 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 Ram 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 to the travel time required to get deeper in the mine and also increased throughput. Next slide. Looking at the Shaft 2,000 tonne 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, but 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, this the shaft option would only require five haul trucks to maintain the 2,000 tonne 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 has also served as a fresh air raise. Next slide, please.
The shaft 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 planned view where the existing portal are located just northeast or northwest of the mine site, with the proposed application. Next slide, please. The hoisting plant is a conventional and proven design, capacity of 4,500 tonnes per day at the initial depth of thirteen seventy three 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 locations 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 1373 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 twenty twenty four.
Next slide, please. Shaft also includes a surface hoisting plant that will with an ultimate design depth of 2,000 meters as well and will allow us to move roughly two eighty 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 head frame is a 59 meter steel head frame with both hoists located in a common hoist house. Next slide, please.
The shaft arrangement is a five meter diameter shaft with concrete liner. There's two twelve ton skips in the service gauge, both in dedicated compartments, which will allow us both concurrently travel and move material while we're skipping loading waste. Next slide, please. Conventional blind sink was selected as it improves the schedule reliability and flexibility. A raised board shaft was studied.
It was found that it would displace ore haulage and reduce throughput below the 1,200 tonne per day rate throughout the life of the project period. Next slide, please. The underground ore and waste handling loading pocket is a conventional and proven design, very similar to the system that was just commissioned at our Yonge Davis in operation in Tatuan. Next slide, please. 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. 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 the new elution circuit. Expected cost for the upgrade at the mill is $40,000,000 to expand to the 2,000 tonne 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 move by year, you can see our peak material movement is 3,300 tonnes in the current study. With the 4,500 tonne per day capacity at the thirteen seventy three 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 liter depth was noted in the previous slide at 3,500 tonnes 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 118,000,000 of additional capital compared to the ramp, but does have a does offer a $338,000,000 savings in operating costs compared to the bank scenarios. This will result in a $220,000,000 lower total operating costs and capital costs being realized with the shaft expansion. This is driven primarily by improved efficiencies and more effective time interface 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 $37,000,000 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 $272,000,000 and results in the $319,000,000 higher growth capital with the shaft expansion as compared to the ramp. Next slide, please. Overall capital cost for the shaft is expected to be USD $232,000,000. 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 twenty twenty one, shaft sinking starting in Q1 of twenty twenty three and the shaft being commissioned in Q2 of twenty twenty five. 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 systems, cheaper and quicker and easier material moving through the mine and a higher throughput. And with that, next slide, please.
With that, I'll hand it back over to Austin, and Bill Heard, my General Manager.
Okay. Thank you, Nathan. I'll go ahead to Slide 68, please. On this slide, you'll see the shafts location that are highlighted on the eastern side of the deposit, as well as 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 ton 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 would be 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 realizing the ramp 1,200 ton per day option. Can we go on to the next slide, please? Now the shaft mining costs were 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 ton, whereas the ramp options increase as time goes on with the ramp 1,200 per day being 127 average real life of mine or $131 per ton immediately post project and $127 a ton for the ramp 1,600, which allows us to realize a 27% reduction in unit mining costs versus around 1,200 ton per day option. Go to the next slide, please.
And again, this continues into the total operating costs as well. As you can see, the shaft options stay below $200 per ton, 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 is again, is about a 24% reduction versus the present ramp 1,200 ton per day option. Go to the next slide, please. And again, this carries on to the cash costs. As you can see, the average life of mine for the shaft option is $422 Remediate post projects is $4.00 $3 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 So 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? And this is where, again, we were able to realize a significant difference on the all in sustaining costs. As we mentioned before here, approximately $534 average mine site all in sustaining costs for the shaft options versus over $700 for each of the ramp options, realizing a 30% reduction versus the ramp 1,200 ton per day option for the shaft. You can 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 ton per day column, you can see that at 07:50 meters depth, it's costing us approximately $96 per ton to mine, whereas it's down to 1,500 ton 1,500 meters, I'm sorry, it's only $102 So we only realized an increase in mining cost approximately $6 per ton.
Whereas compared to the ramp 1,200 ton per day option, it's seven fifty meters, we're very similar to $106 However, at depth, we increased significantly to $159 or $57 a ton. As you can see, this is over a 50% increase in mining costs versus the shaft option. And these numbers are very similar for the Ram 1,600 ton per day option, with the shaft obviously providing us a significantly more stable mining costs. And go on to the next slide, please. So as we look at the tons and grades per vertical meter, you see that from 1,000 meters and deeper, we're able to realize a significant increase in both tons and graded depth.
The shaft best positions us to realize the benefits of these higher tons of grades as we continue to go deeper. Can we go to the next slide, please? Now this is where, again, we get to act the serious benefit of the shaft. It minimizes the amount of travel time, as Nathan mentioned previously. So we can show on the slide here, the time and face the completion of the shaft brings our effective time at the phase to over 120% of what we're able to realize presently with this ramp options continuing to deteriorate over time as the mine gets deeper and deeper and the travel time increasing.
And similarly, with an additional time at the phase, 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? And this increase in productivity is more obviously realized on the production side. We're able to increase our tons per employee hour from 5.5 to over seven at peak post shaft completion and whilst also minimizing the additional staff required.
As you can see the shaft option, we stay well below 400 personnel being required where the Ram 1,600 peaks at almost 500. Can we go to the next slide, please? Again, similarly, we see the same with our primary production equipment. As you can see that we peak out both earlier in the lower level with the shaft option requiring just over 30 units of primary production fleet, whereas ramp options increase over time with increasing haulage distances peaking out at almost 45 units with a 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.
Continue on to the next slide, please. Now 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. Whilst the revenues from both options are very similar at $4,500,000,000 the operating costs are $300,000,000 less for the shaft. And the total capital cost, again, was slightly higher for the shaft option, results in a total operating cost and capital of 2,600,000,000.0 for the ramp option, which is only just below $2.4 for the shaft option. Cumulative free cash flow, again, after tax, we're able to realize from the options, the shaft being only $1,500,000,000 whereas the shaft being 1,600,000,000.0 And as you can see, the after tax net present value for the ramping about $870,000,000 over $1,000,000,000 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 $1,300,000,000 while the shaft continues to distance itself, increasing to 1.45. You can see the after tax IRR of the shaft versus the ramp increasing from 17% to 22%. And 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? And 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.
And from every year thereafter, we're able to realize the benefits of the significantly lower operating costs, significantly increasing our free cash flow. Can we continue on to the next slide, please? Now the Shawnakh option, quite simply, is the strongest alternative. Obviously, it provides us superior economics, a significant increase in production, over 72% versus our present 1,200 ton per day provides us the lowest cost, positioning us in the lowest quartile for both cash costs as well as all in sustaining costs, as well as the de risk of mine by minimizing our exposure to gold price fluctuations and also any kind of labor or other commodity issues might develop. And it also positions us ideally for any future expansions of the resource below the 1,500 meter depth.
We can continue on to the next slide, please. Again, you can see with some various scenarios we ran at different gold prices at the present $14.50 dollars again, we touch on the NPV of the ramp of $1,200 being $874,000,000 versus the shaft of $1 You can see it significantly increases with an increase in gold price. If we were able to realize that $18.50 dollars gold price be $1,400,000,000 for the ramp, but $1,600,000,000 gain for the shaft, resulting in an IRR even higher 24%. If you move on to the next slide, please. Okay.
And then we also have to consider the upsides. When we look at the life of mine averages, we can see there are 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 it at a depth, how much can we realize? And 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 basically revenue of $315,000,000 which is a significant gain versus the present ramp option. And obviously, with the successes we've seen so far at Island, if this were to continue with that, 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 improved of air quality underground. You 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. And 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 the next slide, please. And again, as we can see in the project schedule here, as we've touched on in previous slides, quarter two commencement of twenty twenty, the commencement of engineering has already begun, and we believe the shaft work should be completed in the second quarter of twenty twenty five.
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. And 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. So if we can move on to this next slide, this really showcases the free cash flow of the Shaft 2000 expansion at a $14.50 dollars 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 US150 million dollars 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 US170 million on average for the remaining ten year life of the mine.
If we go to the next slide, we're showing effectively the same free cash flow profile, but at a $17.50 gold price. And at $17.50 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 US210 million per year after 2025. Moving on to the next slide, we show effectively the same thing, but on a cumulative basis. So 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 three expansion at a $17.50 gold price of 2,300,000,000.0 That's almost four times our acquisition cost of CAD624 million. Just demonstrates again the value that we've added through this acquisition.
So with that, I'll make some comments with respect to capital allocation and turn the presentation back to Scott to walk through the mechanics around the Q and 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 US100 million dollars per year. At Island Gold, as I've just indicated, we have another one years point of free cash flow before we need to start investing significant capital in the Phase III expansion.
And at Mulatos, we anticipate being able to self finance construction of La Yaqui Grande. So 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 $150,000,000 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 $100,000,000 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 shows the 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 US400 million in free cash flow from Mulatos in that four to five year period, of which we returned 25% or US100 billion dollars to shareholders in the form of dividends. From 2015 to 2019, we entered a period of growth. We were very active in countercyclical M and A merging with Elrico in 2015 when the gold price was in around $1,100 per ounce. We followed that up with the acquisition of Richemont when the gold price was $12.50 dollars per ounce.
So we've diversified, we've transitioned from a single asset company with one mine in Mexico to 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. So with that, I'll turn the presentation over to Scott to commence the Q and 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, 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, 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. You hear me?
We can hear you.
Great. I guess my first question is, again, I guess first off, congratulations. At least to me the numbers look good. Am sure a lot of work was put into this study here. But 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 twenty twenty three. What needs to happen before you start sinking that shaft? And could you start sinking that shaft earlier? And would that help?
It's Chris here. So 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 eighteen to twenty four 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 us some long lead time items for the shaft, which would be the hoist construction of the Galloway, ordering the mill or sorry, the the grinding mill and and and a few other items.
So there's not that much opportunity to get the shaft underway any earlier than we've described.
Great. And Chris, while I have you here, I guess, again, this is kind of further out. But in terms of the when you tie it in, are we going to see any kind of potential downtime or lower capacity, lower production as we kind of experienced at YD?
No, none at all. So 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.
And you know, I guess you just completed the shaft sinking at YD. I know it's not a perfect comparison. It was raised boring at YD versus more conventional shaft sinking here at Island Gold. But could you maybe touched on kind of like the cost or compare the cost and advancement rates at YD versus Island Gold? And I know you also consider raise borrowing at Island Gold, that turned out not to be the best alternative.
Right. So yes, we are doing a conventional sink at Island. The advance rate will be about nine to 10 feet per day, which is obviously slower than raised boring, but order to raise bore 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.
And then 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. It looks like the maximum that you need is about 3,300 tons per day. It looks like you're hoisting most of the waste up 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 shafts sinking here, you will still have that capacity for the maximum tonnage that you need.
Yeah. Yeah. So we size the hoisting plant to allow us at a at a greater depth, say 2,000 meters, to still maintain a full production rate of 2,000 tonnes a day or less waste.
Then 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. But was there like a close number two in terms of alternative?
Or was the 2,000 tons per day shaft the runaway clear winner here?
So the other the other two options that we looked at on an expansion basis were but but we didn't present the economics for the ramp 1,600 and a and a shaft of 1,600. And both of those came in on an NPV basis roughly halfway between the Ramp 1,200 and the shaft 2,000. So there was nothing else that was close to the from from a 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, I guess, after Q2 maybe or to look at sort of the grade reconciliation, the grade continues to look better at depth. And clearly, there's some shoots that way, but 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 Aligner Mine. It's why we are drilling near the actual resource work. Today, we did some holes along the Gludo deformation zone, we're going to Edwards and Feinen. We did intersect a few interesting values such as nine gram per ton over two meters in all that are a kilometer away.
But we are not focusing on these right now. The focus is really on increasing the resources. And it is why we are in the slide, saw the three red stars, right? That's the old that are currently in progress. And we are focusing really in extending the deposit down dip, so hopefully, the 2,000 million dollars level.
Chris, the trickiest thing to do when you're already operating a mine that's quite profitable under the current scenario is to drive enough get enough data together to drive a decision to try to make it better. And 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. And we felt by the end of twenty nineteen that we had sufficient ounces in place. It happened faster than we expected, and we were very happy for that. But we had enough to drive this Phase III study.
But 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. You have a grade. It 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 questions queued up. Operator, can you please open up the line 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 ten 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 tonne a day mill expansion, what sort of excess capacity do you think might be in that circuit? Like do you think it would be capable of an extra 10%?
Or is it pretty much designed for 2,000 tonnes a day and that's all you think 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, I mean, every mill I've ever been involved in, particularly versus design throughput, there's always a bit more. We just don't leave ourselves at on the line there. But I mean, the mine at 2,000 tons a day is is a solid mine.
Great. If we can get more out of it, we'll I imagine we'll figure out a way to put it through the mill.
Okay. And just on the permitting, you'd said in the deck that there 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?
Yes. No, that's our understanding. We'll need to put in a our you know, project description here fairly soon fairly soon. And but but we don't you know, we're we're so this is Brent Brownfields. We're not increasing the tailings footprint.
We're not you know, the only the only impact disturbance would be around the the new the new shaft site. And, you know, it's pretty clearly a a provincial jurisdiction sort of thing. There there are a few minor federal permits, but nothing that's gonna require a full full blown environmental impact statement or something like that. It's it's kind of modification of existing permits and a few new disturbance areas.
When, 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. And so that'll be this year at some point. I don't know exactly when.
Okay. Got you. And 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?
Carey. Yes. So we use the $17.50 dollars gold price scenario our proxy for spot. I believe we start paying taxes in 2026. The way it works is we have about CAD 1,000,000,000 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. So on a go forward basis, after factoring in the use of those tax pools, our effective rate is 16%.
And those pools can be shared between either operation obviously?
Correct. Based profitability, our estimate though is that 60% will be used by Island.
Got you. Okay. Okay, that's great. Thanks very much guys.
Thanks, Gary.
Thank you. The next question is from Lawson Winder from BOA 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?
And then approximately, what's the sequence of additional tailings raises after this one? So I mean, I think previously, they're planned to be about every five years. Are you still looking at something similar with the pace backfill plant?
I'll answer that. So the current tailings raised, what we're doing now, a portion of it is in growth and a portion is in sustaining. And the future two future tailing tailings raises that we'll do, just looking at it here now, one in 2024 and one in something like 2,000 30 are both in sustaining.
Okay. That's great. And then the just kind of looking further down the road to potential additional sinking of the shaft to a lower level. I mean, 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?
So the current shaft down to $13.73 is about $170,000 per meter. Would that be similar going from, say, $13.73 down to like $1,500 or $2,000
No, it would be somewhat less because we already have the large chunk of we already have a large chunk of the infrastructure in place being the head frame and the hoisting. So it'd be more like $50,000 a meter plus indirects.
The other thing to mention maybe 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 the shaft, and that'll only start in, I think, 2023 or thereabouts, We and if the deposit has continued to grow in it grow at depth, we would just sink it deeper on the first go to, you know, to maybe 1,500 meters, 1,750 meters, something like that, depending on what we've been able to find in the, you know, ensuing two or three years. So that would be even cheaper because you wouldn't have to, you know, do a winds or not a winds, but get underneath it and and, you know, leave that leave leave head cover and whatnot. So, you know, if if we see that, we will we will take advantage of that during the the initial project.
Yes. That makes a lot of sense. And then just one final question for me. You assumed a dilution rate of 15% on average for the inferred M and I resources not already in reserves. And you mentioned that you took a zonal dilution approach.
I was just curious, like what's the degree of variability from one zone to another? And then 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, by zone. So you can see anywhere from 25 to a 50% dilution by zone. I did not 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 blow cut off falls out of those tables.
The effective dilution rate is higher.
The other thing we're expecting with the inclusion of the PACE plan 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.
Yes. Thanks, guys. Just a quick silly follow-up on the tax pool question. Is that U. S.
Dollars you were talking about or Canadian?
Trevor, when I referenced the $1,000,000,000 in tax pools, that's Canadian.
Okay. Thank you. And then 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. Do you see is that the type of thing that you would have to do again?
And considering this is a fairly large step change relative to the 1,200 tonnes 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?
Trevor, it's Peter.
Yes, air quality 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.
So I think on a net net basis, it will 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.
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 percent of engineering complete when the heavier capital spending kicks in, in 2022?
Nathan, why don't you talk to that?
Yes. Sorry, Chris. I was having trouble getting unmuted there. So as mentioned during the presentation, we're starting our the basic engineering phase of the project this year. It's already underway starting right now.
We're expecting to be at kind of completed the basic engineering phase by the end of the year, with IFC level engineering, coming early twenty twenty one, mid-twenty twenty one. So 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. And to support permitting, there's a fair amount of engineering that's required on the mill. So we'll be probably doing a lot of that engineering upfront 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 procurement of the long haul.
Okay, great. And then 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 interpretation as it seems everything's plunging further to the east, as your diagram shows tonnes 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?
Well, so the primary factors into the shaft location were that obviously, we didn't want it to as we were sinking, 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 in the location where it is, it was 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's a that was a huge geographical constraint for the shaft. Also, I mean, Renal has done a pretty incredible job of finding a lot of material underneath our feet. And it seemed that every time we picked the shaft location, Renal would find some nice material there. So, the location that we've got has delineated has been drilled and has been condemned.
And so we're pretty confident that where we've got the shaft, we've got a decent shaft pillar around it. And 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 for me guys. Thanks so much and congrats on a great study.
Thank you. In the meantime, I will turn the meeting back over to Mr. Parsons.
Thank you, operator. And 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, Jamie Holman from Invesco. Jamie, please go ahead.
Hey, thanks guys for taking my question. I was wondering about the PACE plant. And you talked about how that would allow you to exploit more of the orebody. And I was wondering if 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 if it will add reserves in that area?
Nathan or Austin?
Yes. So currently, we're utilizing a combination of unconsolidated rock fill and cemented rock fill for our backfill. The increase in recovery is directly tied to us being able to recover the rig pillars that we leave between our last 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.
So 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. But as far as remnant pillar mining, a lot of our remnant pillars are, say, getting 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. So I'd 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. You. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.