Good day. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Aya Gold & Silver second quarter 2023 results conference call. All lines are being placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Thank you. Ms. Ruth Hanna, you may begin your conference.
Thank you, operator. Good morning, everyone, and welcome to Aya's second quarter 2023 results conference call. My name is Ruth Hanna, and I'm the Investor Relations and Communications Manager, dialing in with some of the Aya team from Montreal and Morocco this morning. On the call today, we have Benoit La Salle, President and Chief Executive Officer, Ugo Landry-Tolszczuk, Chief Financial Officer, Raphaël Beaudoin, Vice President, Operations, and David Lalonde, Head of Exploration. We'll finish today's event with a Q&A session with the team. Please contact our IR team directly with any follow-up questions that are not addressed during the call. Before we begin, I'd like to remind listeners that today's event will contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.
Details of the forward-looking statements are contained in our August 11 news release, as well as on SEDAR+ and on our website. With that, I'd like to turn the conference over to Aya's President and CEO, Benoit La Salle. Benoit, please go ahead.
Thank you. Thank you, Ruth. Good morning, everyone. Welcome to the Aya Q2 conference call. We had an excellent quarter. Q2 was an excellent quarter. We have given you a presentation that summarizes the results which you have for this call. I would ask you to go to slide number 3. On slide number 3, we have highlights of operation. In Q2, 2023, we produced 526,703 ounces of silver, which is clearly for us above budget. It was a very good quarter. It's the second highest quarterly production after Q4 of 2022. Our cash cost was at $10.98 per ounce sold.
We generated $9.6 million in revenue and $3.7 million in cash flow. We also closed the quarter with $52 million US in cash and cash equivalents. Very good quarter, very good cash position, strong financial position. The growth pipeline, we have progressed the Zgounder expansion to 45% completion. As you see regularly on our, with our videos, the construction is going very well. We will keep updating you regularly. The extended Boumadine, open-end strike to 3.8 kilometers, that was also disclosed this quarter in a press release. We've also discovered a new at surface northwest mineralized zone, which we will review later. Also, for some of you who have questions, David Lalonde is on the call with us from Marrakech. You will be able to ask question to him directly.
The, we also had some Zgounder regional play. In the quarter, we've acquired 7 permits, the Tirzit copper, the historical Tirzit copper mine, and 67.7 sq km property. Just for this, for a bit of history, in 2020, when we started reviewing the assets of Aya and we had the Zgounder assets, we had identified those. These permits, when we've identified them, belong to a family. We were able to acquire them in Q2 of 2023, which, you know, came after 3 years of us looking at those, at those permits as being complementary to Zgounder and positioned in a very strong geological potential area. The, few things at the AGM in the quarter, we've increased the board diversity.
We have now more than a third female representation on the board, which is aligned with Glass Lewis. We've also disclosed a lot of our ESG program, and we've had our ESG report that was published. Going to slide number four on our presentation, that's quite telling. You have a summary of Q2 and year to date. It's quite interesting to see that with 526,000 ounces of silver production, we are now at a year to date of over 1 million ounces, compared to our guidance of 1.7 million ounces-1.9 million ounces. We maintain the guidance for the time being at 1.7 million ounces-1.9 million ounces, knowing that as of now, we're at 1 million ounces. The cash cost was excellent in Q2. It was good as well in Q1.
The average cash cost so far for the year is $12.87. Our guidance was $14.40. We're, we're, we're a bit ahead of our guidance, which is something that, you know, we, we understand quite well. It's all a function of definition drilling and being more efficient at site. The average grade is aligned with the reserve model. Q2 was at 265. For up to now, we're around 250. The guidance was at 264. You, you recall that, you know, the deposit has these very high-grade pockets that we hit in Q4 of last year. Right now it's more, the rate, the grade is, is, is steady. But the, the important thing is we've also been adding to the stockpile, which we did not have historically.
We're mining more than we're processing, and that's quite important. The two plants, you know, have good recoveries, so the average mill recovery is at 87%. The guidance was at 86%, so we're doing quite well. The availability, which you don't have on page four, but the availability is in the MD&A. For the two plants, it was at 95%, so that was really, really excellent. The quarterly production is expected to remain steady throughout the year. And we, based on our, you know, mine plan, we should even have better grade going forward. Cash costs are expected to remain stable, and the exploration budget, of course, is something that we'll, you, be coming back to you shortly, as we are getting very, very good results at Gouda and at Boumadi.
Just, slide number 5, it's interesting to see the bar charts. The top left one shows the production, and as you can see, except for Q4, which was, you recall, an excellent quarter due to very, very high grade, this is our second-best quarter at 526,000 ounces, so it's very good. The grade you see below, on the left-hand side, below the production, is steady, and it's, it is where it, it should be, around 250, 260. It's, it's really where it, it should be. The recoveries on the right-hand side at the top, again, except for Q4, which was, you know, a normal quarter. If you look at the recoveries at 87%, that's really aligned with where we want it to be.
The ore process, that's 72,000 ton, it's the second highest. Actually, we are right now around 800 ton a day with a design capacity of 700 ton a day. You know, in the industry, we always say you have about a 15% potential to go higher than the design capacity, while we are 15% above the design capacity right now of the two existing plants, and that's why we're building a third plant right now. Slide number six. On a cash flow basis, top left, you see at 3.7 is again aligned with where we need to be. Of course, it's affected by sale and, you know, currently, as you know, we have approximately half of our production is concentrate and half is ingot.
The concentrate is, it's a bit more difficult on the timing of the sale because the timing of the sale is when it reach destination, so based on transport. We don't always, you know, we, we don't, not always, we don't control the timing of the sale on the concentrate. We do on the ingots, but not on the concentrate. That has a direct effect, obviously, on our revenue, which has then a direct effect on, on, on, on the financial statements. The gross margin at $2.8 million during the quarter is good. It's aligned with where, you know, based on our cash costs, where it should be. Cost of sales at $6.9 million. Cost of sales at $6.9 million is a little high.
We have been acquiring a lot of equipment for the plant expansion. We've been hiring more people. As we indicated in the previous quarter, this is not, you know, a business as usual. This is business going into a very large expansion. You have amortization is more than what it should be because we have more trucks than we should have. We have more employees. Yes, it's a very, very good quarter. It's a very good cash cost, but also remember that we're getting ready to quadruple the production this time next year. You know, we don't hire all the people a week before we get going. It's we're a little bit, we know we're a little bit overstaffed, over equipped and all of that, but that, that, we're, we, we understand this.
The cash cost was excellent at $10.98. One of the reason why it's a little bit lower is there was less definition drilling. We had done quite a bit of definition drilling at the beginning, and we were ahead of the curve on that, so we have a good cash cost at $10.98. Moving to slide 7, on the sustainability, again, look, to me, that, that is pretty straightforward. We have a $100 million ESG loan with EBRD. We follow some very strict guidelines with them, which we're very happy to have. We had them on site in July. They came, and they, which is part of the process of the loan agreement that we have.
We, you know, we, we went through with, you know, with, we, we, we have obtained a pass, which is, you know, what we need to obtain, so everything is aligned correctly. You have, you know, a major effort that's been put in health and safety, major effort, which we now are pleased to say that, you know, we're, we're becoming international standard. We've also put in a mine rescue plan, which did not exist when we arrived. Now we have a mine rescue plan, which is very important, and that's coming along very well. The other important aspect is Scope 2 emissions. You recall that we have a power line that's being built at the moment, which will bring green energy to site for the new plant expansion and for all of the, of the equipment that we have.
That is going extremely well. Any question on that, you have Ugo and Raphaël with us today, but that power line is coming along very, very well. The Task Force on Climate-Related Financial Disclosure is about 70% completed. This is something that we're doing with EBRD as well, and the Environmental and Social Action Plan is 31% completed, but that's also something that, you know, we follow closely, which is part of our ESG financing. We are in a very good position, and locally, things are going very well. We have, you know, local cooperation, and this is a very important project in the country and in the region where we are.
We also have, you know, as you saw, you know, mobile clinic on different health topics, and we are, we have a great success with all of this. Slide number 8 is, is, of course, it's, it's just a picture. I know you've all seen the video that we circulate about once a month, and it's going very well. The construction that you're seeing here is, is, is where, you know, the, where we are as of the end of the quarter, but the construction is going quite well. On slide number 9, you see that we have the, the, the, the percentage of completion. For the process plant, we're at 40%. The underground and open pit mining at 47%.
We, you saw pictures in the video of the open pit mining, all the drilling that occurred there. Tailings, you also see that at 55%, water management at 74, electrical infrastructure, that's the new power line that's being built right now, at 27, and on-site infrastructure at 55. Look, globally, as Raphaël will tell you, on time and on budget, we are 90% committed on our cost, we are on budget and, you know, and then now we're getting into the erection part of the program, which is, you know, where something that we're gonna follow closely. A couple of pictures on page 10 of the leach tanks, the ore silos, and then a view of the water management system. As we all know, water is key to mining.
Water is key to Morocco. We're lucky that we have mountains around us that are up to 4,000 meters high, that bring in, you know, water from snow melting and from the rainfall. We will be capturing. We need to capture less than 1% of the water that runs by our territory, less than 1%, to have water for the full year. On page 11 is our portfolio of assets, the Atlas fault in Morocco. Morocco is becoming an extremely busy part of the world right now, in mining, in industrial construction, in automobile, in batteries. You'll see I'm sure you see a lot of news flow coming out of Morocco these days. We have a very good portfolio after Managem.
This is the second portfolio in the country, of course, not taking into account the phosphate. We have, you know, Zgounder, and we, we keep acquiring ground around Zgounder. We have Tijirit that we've just acquired. We have Boumadine, and we're also there, looking to acquire additional ground at Boumadine, and we have exploration going on at all of our projects. Zgounder, Boumadine, of course, not at Azegour and Amizmiz right now, but we will. You know, these are assets that we maintain in the portfolio. On slide 12, you just have something you've seen many, many times, is, is the, the, the mine, the Zgounder mine. We need to drill all the way down to the granite, and we need to extend it to the east.
We are accelerating this drilling as we speak, and the reason is because we needed to complete the development of the level 1950 and 1925, in order to start drilling, not from the top of the mountain, but from a gallery that has been developed, which is now in place, and we are drilling now extensively, trying to go all the way down to the granite. So this hasn't changed. It's continuing, and we keep drilling. So there will be lots of drill results from now till the end of the year coming from Zgounder, the main zone. On slide 13, it's the regional Zgounder, what we, you know, we call Zgounder Regional. There's ongoing drilling there. We've done 8,000 meters so far. There's more coming, and we have many targets.
David has, has seen some structures. He's seen some silver, gold, copper, grades and vein mineralization. This is an ongoing process. We are also working on Zgounder West. There's also potential on Zgounder East and south, it's, it's an ongoing process. It's something that we will, you know, spend a lot of time, because for us, the best discovery possible, is another Zgounder, we know that that's something that we're looking for, on top of increasing the Zgounder main zone. That's page 13. On page 14, that takes us to Boumadine. Now, as of the end of, of the quarter, we were at 20,000 meters, approximately, of drilling done, if I'm not mistaken, I say 20, but now we're, we're all done. Now, as of now, we're 36,000 meters done.
We're waiting for results. We should be getting most of them in the next few weeks. There will be a press release summarizing the drill program and the drill campaign before we all go to Beaver Creek, and that's something that, we know, we will be putting together. We've had very good results in the Q2, that we've put out 192 gram per ton over 129 meters, and many that I, you know, I won't repeat them. You have them on slide 14, you've seen them. All in all, Boumadine is now 3.8 kilometer long, very impressive. You see it on page 15 as well.
On the longitudinal section, is it has roots, so we've tested it down to 600 meters, but it's clearly, you know, a strong system, so on 3.8 kilometers. What's really important, as you see on page 16, is, and you see the structures that are in echelon, is to the north in pink, purple, you see that there is a new structure. That's what we call the Cross-section North 70, which is where we've seen a silver mineralization crossing the main structure. Obviously, the permits to the north of this becomes important, and we are in discussion with the state on that, the permit to the south. And all of what you're seeing here is, is, you know, requires additional drilling. We've drilled the whole program, 36,000 meters.
It's been, as you saw, very, very good. We'll have more results in a couple of weeks. That permit and that project is a, a key asset of Aief and will continue to be. On page 17, on page 17, you have the location of the new permits of Tirzit. You have the, you have our Zgounder permit at the top. You see them, we see the Zgounder mine. You see the boxes around or the permits around, and look, look, every time you see that, you know, pink color is the granite, and always close to the granite, touching the granite, is where we have the mine at Zgounder, and it's where we see the anomalies. To the north, that's where we also get results.
If you look to the west on those permits, you know, they're showing very good anomalies there to the west as well. That's why in 2020, we had identified the Tirzit permit as being extremely interesting because they were also touching the granite, but south of the granite, we're like north and east and west as well, because we cover so much ground, and we like those permits quite a lot. We've just obtained them. Elias and the team are completing the transfer of ownership. David is gathering the data. They did the geophysics, they did some work, they did the drilling. There's about 50 drill holes. They had intercept up to 3.5% copper. They and they also had, you know, silver anomalies.
It's, it's a, it's a very interesting group of permits. We just again, we're starting, we don't even have all the data yet, but it's, it's, it's a very interesting group of permits. That was acquired in Q2, and it's, it's part of our, you know, of, of our, results for the, for the period. On page 18, you just have a summary of what we've done. You know, good silver production, and, and, you know, and meeting cost guidance and meeting production guidance. You have the, the, the, the plant expansion, the 2,700 ton per day plant expansion. That's going very, very well. Actually, you know, the, the, the start of the construction of the TSF is starting Q1. You see the progress in the videos. It's going very well.
We've completed the detail engineering, and we're receiving the ball mill, the ball mill on in Q2. If some of you saw our Twitter account or our LinkedIn account, you saw a picture of the ball mill coming in on the deck of a ship being shipped over to Morocco. We're awaiting them at the port, and we'll bring them up to site. It's coming extremely well. As I said, the drilling at Zgounder, Zgounder Regional is ongoing. The drilling at Boumadine, as of now, is completed. We didn't talk much about Tichitt in Mauritania, but we are completing feasibility. It will be done by the end of August, and then we will see how to maximize value on this project.
In the second half then of the year, we will launch field work on Tirzit, of course, and we'll continue the exploration on all of our other assets. That completes the official, I would say, portion of the presentation. Again, you have Ugo, you have Elias, who's with us, you have David Lalonde and Raphaël. Any question specific to the operation, we will answer with great pleasure. Operator, back to you.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to remove yourself from the queue, please press star two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. The first question comes from Justin Chan of SCP Resource Finance. Please go ahead.
Benoit team, congrats on another great quarter. I guess my first question is just regarding the second half of the year and your overall CapEx plans. Is it right in doing the math from today that you have roughly $105 million left in your budget to spend? I'm just curious how much do you think is this year versus how much is next year?
Hi, Justin. You're talking more about our CapEx for, for construction, I'm assuming?
Yes.
Yeah. Listen, we of course, at the beginning of the project, it's a lot of a lot of deposits and civil work and that, and earthworks. I think today, right now in our budget, we'll have about half of that, that'll be done this year, and then about half that'll be done next year.
Okay, got you. That's... Okay, that, that makes sense. Thanks for that. Then just on, I, I guess, your expectations on grade for the rest of the year, do you expect something pretty similar to this quarter? Which I think would imply that you're going to beat guidance as you normally do, but I'm just maybe asking the question to confirm what you think.
Hi, this is Raphaël speaking. For the grade, we need to understand that we are mining right now about, you know, 50, 50% higher mining rate than we are milling rate. We are, we are stockpiling and we are processing. For commissioning next year, we need, we need ore, and we certainly won't pass the best ore, we need to for commissioning the plant. To answer your question, we're, we're mining at around 230 gram per ton right now, but we are milling around 250, and we are stockpiling a bit lower grade. We do expect to continue processing this slightly higher grade of the mill than we stockpile for the rest of the year. Guidance remains the same.
We need to do a bit of maintenance at the end of the year. We want to make sure that, that we do guidance, that we do our stockpile, that we are ready for next year. We, we don't expect much change, we don't expect any change in our, in our strategy, so head grade should, should remain, similar.
Got you. Thanks. Just on Tijirit in Mauritania, I guess, what, what are your current thoughts on, on, on that? I, I suppose we'll know more when the DFS comes out, but strategically, do you see it as a project within Aya or, or perhaps maybe a, a standalone opportunity? Just curious how, how you view that right now.
Well, we're finishing it, Justin, we're finishing the feasibility. That will be done for the end of August. You will see some drill results in the next few, few days, because we did 25,000 meters, so obviously, we, we had a lot of, we had a lot of results. The feasibility will be done at the end of August, then we'll, we'll make a decision. Look, it's a, it's a robust project. It's, it's, it's good grade. We know that it's, you know, it's a grade, around 3.5, 4 gram per ton. It's open pit, it's easy, it's, it's, it's close by to Tasiast, so it's, it's an easy project. It's a project that's easy to do. Is it part of our main strategy?
No, it's not, because, you know, we want to focus in Morocco, but we have it. We, we, we, you know, it's something that we've known for many years. We, we will decide in, in, in, in September, if we, how, how we approach this. That project is gonna get built. Is it by us, by somebody else? I mean, we don't have an answer yet, but we'll maximize the value for our shareholders. It's, it's, you know, it's, it's, it's a very nice asset, but it'd probably be best fit with a, a, a, a, a, a pure play gold play. Again, you know, this market is this market. We don't know where we're going to be with, we'll make a decision. It is a, a nice asset.
I mean, it's got a, you know, a good and a lot of a potential in geology. Again, it's part of, you know, it's a small asset for us. It's a little bit like, you know, Amizmiz and the other assets that we have, which we're not spending a lot of time on, but this one, it's baked. It's ready to go to construction, in three months, two months.
Gotcha. Well, that's, it sounds very good. We look forward to, to those results. Thanks, guys. I'll, I'll free up the line. Congratulations again on, on being where you normally are mid-year, which is, above your guidance rate and below your cost, looking, looking down at it. Cheers.
Thank you, Justin. Thank you.
Thank you.
Thank you. The next question comes from Eleanor Magdzinski from SCP Resource Finance. Please go ahead.
Hi, Benoit and team. Great work this past quarter. I have a bit more detailed questions, kind of, on the mining side of things. The first question I was just wondering is, how many jumbos do you currently have operating?
Okay. So we currently have 4 jumbos on site. That being said, we, we operate full-time, 2 of them. The 2 other are either on support, support work. One thing we need to understand here is that we are, we are on ramp-up, so, so there is a bit of a, there's a bit of a sequencing between the, the equipment we receive and how the mining rate follows. We, we want to make sure we have enough equipment on site to sustain that milling, that mining rate. Right now we have 2, 2 jumbos in operation and 2 on standby that will be, that will be put to work towards the end of the year and early next year.
Okay, great. Do you also have some jackleg headings as well for your development?
No. No, we use jackleg for definition drilling punctually, but we do not have any stopes that are operated with jackleg.
Okay, great. The second question is about raising, so just for vertical development. Just curious what was, I guess, what was developed in Q1 versus Q2, and if it's primarily to do with, you know, ore passes and waste passes, or ventilation or kind of a combination of both?
Sure. In this project, we have four raises. We have four raises on our plan. The first one we did, and we finished it in Q1, commissioned it in Q2, is the ventilation raise. We are installing our primary ventilation, so that was the first raise. We have two other raises that we are working on, one for waste and one for ore, or vice versa. We can interchange them. Finally, the fourth raise will be a ventilation raise also for the sub-levels, lower than level 2,000. We're about halfway through our vertical development, but the pace continue to improve, and now we are cruising.
We have, to answer your question, we have 4 raises in this project, 2 for ventilation, 2 for ore and waste.
Okay, great. Is it a combination of Alimak and drop raising?
Only Alimak.
Okay. Okay, great. Yeah, your, your rates are, are pretty great, especially considering it's Alimak, so it's, it's good to see. That's all the questions I had. Thank you very much.
Thank you.
Thank you. The next question comes from John Sclodnick of Desjardins. Please go ahead.
Yeah, thanks, guys. Yeah, I'm going to dial it back on the detail a little bit here, but very good quarter and impressive cash costs. Obviously tracking well below guidance. With you leaving guidance in place, do you think that in a back half of the year, cash costs are going to be above the guidance level or just above kind of year-to-date numbers so far?
Hi, John, this is Ugo. Listen, we try to do our best on cash costs every quarter. There, there is a little bit of stuff associated to mining that's gotten pushed to mining costs and some development and some and some ground support that's gotten pushed a little bit into the second half. For now, we're not changing guidance on cost, but obviously, it's the target we try to beat.
Fair enough, yeah, very diplomatic answer. On the exploration budget, I, I know you kinda touched on it and alluded to it, maybe going up back half of the year. Zgounder construction, still on budget and, and on my numbers, it looks like you'll have a bit of a cash buffer. Just kind of wonder if you can provide a bit of color on, on kind of what buffer you'd like to have there, as you're ramping up Zgounder, and kind of how you see that exploration budget tracking in, in that light.
Yeah. So far, I think Benoit mentioned, right, at Bouma-Unis, we've basically done the meters that we want to do, or that we had budgeted for the year. So, we're kind of waiting on some results and, and some feedback for David here, and then we'll see what we want to do with the budget associated to that. On Zgounder, we've done the majority of our surface drilling. Now, we're really focused on a lot of the drilling that had to be done from underground. We have two drills operating now and a few others coming in here towards the end of the month.
We're, we're on track, we're on track in terms of budget and in terms of meters we want to do and the cost associated to that. Same thing with regional. We're pretty much on track of where we want it to be. We're a little bit ahead of what we had budgeted with RC drilling to define the open pit. We, we finished that basically 6 months early of what we had budgeted. That's pretty much completed. For exploration, I'd say right now we're on budget, on what we want to do. We'll see what we do going forward here. We're just, that was always our plan, right?
Kind of do the first half year, go all out with what we could, kind of look at our results and make a decision from there, and so we're, we're there now. And on Zgounder, construction.
We're on budget. I think Justin had a question about that. We have about half, half the amount to spend, about the CAD 100 million that's left, or a little bit less than CAD 100 million. About half this year, about half next year. All that money is, is in, and we'll start to see it here. We'll, we're gonna do our first draw down of the debt, probably towards the end of this month. We'll start seeing a more restricted cash on our, on our, on our balance sheet as per our loan agreement. That's kind of put to the side, where Zgounder is self, self-contained in, in, in, in, in restricted cash. That's, that's following track.
In terms of, in general, what kind of cash buffer we want, you know, we obviously we monitor when we plan to finish and, and the ramp up of, and the ramp up of Zgounder expansion. You know, we do, we don't want to fall below probably something around $15 million of cash in the bank. If our geology team comes up with great results and, and we feel like that's something we should continue to invest in heavily, then, then we'll have to make decisions moving forward.
Okay. No, that makes sense to me. I appreciate that. Last one for me. Not sure if you can provide any details, just on that NPI, as I recall, you weren't paying it as it didn't seem legit. Just curious kind of what the resolution was, if, if you can provide any details. Then I guess specifically, if there was a, a cash or share component there?
Yeah, John, absolutely. The NPI, you remember when we came in, we immediately said that we didn't like it, we didn't think it made any sense at the time. We, we felt it was, you know, not, you know, not the right thing to have. We, we went and we started discussion with the former CEO. We, we were accounting for it, but we never paid it, but we were accounting for it. In Q2, after months of discussion, we finally came to an agreement with the former CEO, whereby we would pay him a portion of what was owed to him, which was even prior to our time, but then also for 2020 and 2021. There was a payment made of $1.6 million, which was accounted for.
It was in the payable, it was there. We, we, we made that payment to the former CEO, and for that, we, we, we, you know, just with him, agreed to kill the agreement, the NPI. It was, it was done with him, and, you know, it was, I won't say friendly, because it's, it's a big discussion, but, you know, at the end, it was. We, and he agreed that, you know, that thing was done at times that was different. So we paid $1.6 million, which was accounted for in the payables. The payables are, are, are down $1.6 million, and the NPI has been canceled.
Nice. Okay. Yeah, no, that seems like a, a win-win. I'm sure he prefers that money than nothing. Yeah, I know, seems like a, a good solution. That's it for me for questions. Yeah, again, congrats on a great quarter and thanks for taking my questions.
Thank you.
Thank you. The next question comes from Stephen Soock of Stifel. Please go ahead.
Hi, guys. Echo, echo John's sentiment. Great quarter. Great to see everything on track here. Most of my questions have been answered, but I was just wondering if you could provide a little more clarity on the costs here. You know, quite low for Q2, and that's great to see. And you mentioned some of the development and ground support work has been pushed in the second half of the year, so I guess we should expect a bit of an uptick. But is there any other, you know, you're starting to recognize efficiencies from the scale-up of the underground mining activities or any, any additional color on kind of why those costs were so low quarter over quarter? Thanks.
This is Raphaël again here. Like you, Gil said, we obviously try to do our best every quarter. Indeed, there is a bit of timing thing here. We did not have any mill maintenance shutdown this quarter. Very high availability, just 95%. That's one thing. Also, we have quite a bit of brand-new equipment. We did a lot of maintenance last year. We are on ramp-up. We have brand-new equipment. Things are going well. Because we mine at a higher rate, we do have the flexibility of putting good ore through the mill, we benefit from that. Not much more to say than this. This was a particularly good quarter.
We do have maintenance to do towards the end of the year and guidance, the number we, we wanna beat.
Perfect. Makes sense. No, I appreciate that. That's it for me. Thanks.
Thank you.
Thank you. The next question comes from Don DeMarco of National Bank Financial. Please go ahead.
Thank you, operator, and good morning, Benoit team. Just a couple questions here. First off, just focusing on Zgounder construction. I think previous caller mentioned maybe about remaining CapEx on the order of about $105 million. Would that be correct in your estimate?
Yeah, we're, we're a little bit. Yeah, about there. About there, Don.
Okay. If we split that between H2 and H1 next year, you know, I guess it works out to maybe all things equal, $26 million a quarter. Just wanted to confirm a few timelines then. Are you expecting first pour, maybe late Q1, and then can I assume commercial production sometime in Q2 next year?
Are, are you talking about budget or construction timeline, Don?
I'm talking about the Zgounder expansion milestones. With respect to Q1, would that be tracking late Q1 next year, and then commercial production in Q2 sometime? Just trying to think about how to assign the remaining development CapEx before a commercial production.
Yeah. Kind of our payment milestones and, and if you will, and if you will, the, the completion milestones or maybe, like, they're not exactly perfectly timed. Probably costs will come a little bit, a little bit like as, as things move forward, especially with the plant, a lot of it is, is paid, and then there's, there's kind of a retention until commercial production. If you look at the MD&A, we have a, a simplified Gantt chart that's there.
Yeah.
We have some... Right, we have somewhere like first quarter, kind of late Q1, early Q2 kind of thing, and then commercial production sometime between, you know, Q3 and Q4, is kind... And then ramp up and commissioning between that. Like, we're still, we're pretty much sticking to that. That's what we've had, that's what we've kind of had from the beginning. That's what we're kind of sticking to right now. There's nothing that really indicates that it'll be different, but payments will be earlier than that, because most of the work is gonna be done.
Got it. Okay, thank you for that. Okay, just shifting to the operations. I see in Q2, that open pit mining of ore commenced in July. Is, is that a contributor to the, the increase in mining rates that we saw in Q2? Looking ahead to Q3, Q4, are you going to expect to see those mining rates, really increase, as open pit accelerates?
Yeah, happy to comment on that. Obviously, we go from 700 ton per day to 2,700 ton per day. This is quite a bit of a step up, and the open pit will be instrumental to succeed that. In 2023, our plan, our objective, is to bring underground mining rate from 700 to 1,200 ton per day, which we achieved, so we're already there. Good news. For the rest of the year, we will focus on bringing up the open pit production to reach, to reach half the mining rate, so around 500 ton per day. Indeed, towards the end of, towards Q4, we will see a ramp up in the open pit. Right now, we take our time.
We finish definition drilling in Q1 and Q3, Q1 and Q2, sorry, we just started to open up to open up the open pit. We're taking our time. This is the first open pit at Gounda. We are making sure to get the dilution right, to get the workbench right. Q3 will be the start of the open pit. We had maybe 2,000-3,000 tons in July, we'll accelerate that mostly in Q4 to reach, to reach 500 tons per day towards the end of the year. Continue to ramp up next year between underground and open pit to reach our target cruising rate of 2,700.
Okay, excellent. Thanks so much for that great color. That's all for me. Good luck on Q3, guys. Thank you.
Thank you.
Thank you.
Thank you. Once again, ladies and gentlemen, if you do have a question, please press star one at this time. Our next question comes from Puneet Singh, Eight Capital. Please go ahead.
Great. Thanks. Just one on strategy. Quite an extensive land position you got there with the Zgounder Regional, and now you make that new acquisition. Just wanted to ask, do you see yourself locking up more land in that area over time, or would you first like to see what you have and then make a decision going forward? Thanks.
Yeah, Puneet, this is Benoit. Look, we always look for ground. Always, always, always, because sometimes things have to be renewed, and then we can get additional ground around it. It's a function of the results that we're getting. You know, we have permits also to the south, east, that are also very interesting there. David has been working there, and we may look, if we, you know, we see better things, we will get additional ground. We're always, always on the lookout because people have slowly started to come in. When we were at Boca Raton, 2 weeks ago at the Rick Rule conference, some people came to me, companies, and said, "Oh, we're looking into Morocco now.
Your numbers are so good that we got to see if we can get some ground." I mean, they will, they, they will, they may try, but I, I think Morocco is, is, is, is gonna get busier. We're maximizing the real estate of... It's got to make sense, obviously, but we're maximizing the real estate. Same at Boumadine. David's got his eyes on a few things, and it's normal, and same as Gounda and Tirzit, well, it came, it was an opportunity, and look, yeah, and but we do look at things in Morocco regularly. People do come to us, and you know, we take a look, we decide yes or no, David goes and he will visit it, and it's a function of what we see. We're absolutely open to take more ground. Absolutely.
Okay. Sounds good. Yeah, I think you definitely have an advantage being a first mover there, so great. Thanks very much.
Thank you.
Thank you. If there are no further questions, I will turn the call back to Benoit La Salle for closing remarks.
Thank you, operator. Thank you for the questions. Thank you very much to all of you present. Again, we had a very good H1, good Q1, good Q2. The team is, is, we're fully staffed. We have a fantastic team on site, here in, in, in Canada. We're, as you know, developing, two, three big projects, Gounda, main zones, Gounda, Regional, Boumadine, and now Tirzit. We, we have, you know, a lot of work for the rest of the year. We also have guidance to meet, which we're, you know, we're looking forward to, and we believe that we will maintain the guidance that we have, and we will be able to meet that. Currently, what we're seeing. Again, thank you very much.
It'll be, it'll be a busy H2, because we have drilling going on extensively at Gounda and Gounda Regional. We have Boumadine, that has just completed the 36,000 meters, and that will be coming out. Obviously, as Ugo indicated, and the team, we will sit down as soon as we have all the information and then make some decision on additional exploration going forward. Also, we will see most, many of you at Beaver Creek. We will see some of you in Denver as well, immediately after Beaver Creek. If any of you goes to the Denver Broncos game, just make sure to let us know, we will be there. Look, it's thank you for being there.
It's been a great beginning of 2023, we're looking forward to.