Good day, ladies and gentlemen, and welcome to the Dundee Precious Metals Second Quarter 2018 Analyst Conference Call. At this time As a reminder, today's conference is being recorded. I would now like to turn the call over to Janet Reed. You may begin.
Good morning, everyone. And welcome to Dundee Precious Metals 2nd quarter conference call. With me today are Rick House, President and CEO and Hume Kyle, Chief Financial Officer, who will each comment on the quarter, as well as David Ray, Chief Operating Officer Nikolay Visov, Senior Vice President, Sustainable Development and John Lindsay, Senior Vice President, Projects, who are here today to assist with answering questions following our formal remarks. After close of business yesterday, we released our 2nd quarter results and hope you had an opportunity to review our material. All forward looking information provided during this call is subject to the forward and qualification, which is detailed in our news release and incorporated in full for purposes of today's call.
Certain financial measures were to during this call are not measures recognized under IFRS and are referred to as non GAAP measures. These measures have no standardized meanings under IFRS and may not be comparable to similar measures presented by other companies. The definitions established and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Please refer to the non GAAP financial measures section of our most recent MD and A for reconciliations of these non GAAP measures.
Please note that unless otherwise stated, operational and financial information communicated during this call have generally been rounded and any references to 2017 pertain to the comparable period in 2017. On this morning's call, Rick will comment on our second quarter year to date operating results as well as the progress being made on our capital project and exploration programs for the quarter. Hume will then provide an overview of our second quarter year to date financial results as well as our guidance for 2018. With that, I'll turn the call over to Rick.
Thanks, Janet, and hello, everyone, and thanks for joining us today for our second quarter 2018 conference call. I'm pleased to provide you with an update on second quarter results and progress on our key projects and initiatives. We have seen some recent weakness in the gold price with 4th straight monthly decline, primarily due to rising interest rates, strengthen the U. S. Dollar and global economic uncertainty as a result of protectionist trade policies of the U.
S. Year to date gold prices are down 6.3%. The realized price per gold in the second quarter was $13.07. Copper and other base metals have seen more dramatic price weakness with copper off more than 14% since the middle of June. Year to date copper prices are down 13.6 percent.
The realized price for copper in Q2 was $3.12. In the near term, prices are likely to remain volatile, however longer term fundamentals for both metals remain good. Global gold and base metal equities are down 7% 5%, respectively, year to date. And the GDX J is down 6%, reflecting this recent metal price weakness. We continue to execute our strategy to create value by optimizing operating performance line of future growth opportunities while we maintain our balance sheet strength.
We had continuing strong performance from Chelopech improved performance for our Tsumeb smelter, which achieved record quarterly gold sales at Chelopech of 54,660 ounces. Gold production was 48,272 ounces and copper production was 8,500,000 pounds. Our all in sustaining cost per ounce of gold was $5.40, 22% lower than the first quarter. At our Tsumeb smelter, we smelted 46,409 tons of complex concentrate reflecting a lower quarter due to the 24 day annual maintenance shutdown. We are on track to achieve all guidance measures, however, due to the strong first half gold performance, gold production guidance was adjusted upward and our all in sustaining cost guidance was adjusted downward.
Overall, financial results in the 2nd quarter were strong with earnings per share of $0.09, reflecting strong metal sales and metal prices, offset somewhat by the effect of the annual maintenance shutdown at Tsumeb and a weaker U. S. Dollar relative to both the euro and South African rand. Total capital expenditures are in line with guidance with the forecast capital spending related to the completion of the Premier Grant Gold Project coming in 7% below budget. With Krumovgrad project construction 71 percent complete, our balance sheet remains strong with $41,000,000 in debt.
Total liquidity of $250,000,000, made up of $14,000,000 in cash and $236,000,000 in the undrawn revolving credit facility as well as investments at fair value of $35,000,000. At Chelopech we've achieved record 1st half gold of 105,603 ounces, following our record full year gold production last year of 197,000 ounces. This was a result of higher gold grades than expected in several mining blocks in the sequence as well as higher recoveries due to focus on improving mill performance. We expect copper grades to remain about the same for the rest of the year. However, we expect gold grades to decline somewhat in the third and 4th quarters compared to the first half of the year.
Cash cost return of ore processed was $35, which was 12% higher than the Q1 2017 due primarily to much stronger euro. Number of improvement projects are underway and should help offset some of the impact of the stronger euro. We have several project further increased mining intensity and lower mining costs, and we continue our process plant optimization work designed to reduce energy and consumables and improve metal recoveries. Shelopach is on track to achieve production and cost guidance for the year. We are completing construction on our new Smart Center pilot project, which will begin operating September will ultimately support our 2 operations in Bulgaria and provide real time monitoring and control as well as advanced analytics capability using a fully integrated data enterprise platform.
In our in mind exploration program, we drilled 80977 Meters and continue to identify extensions to existing ore bodies and new zones. We are focused on reserve conversion of some of these recently discovered resources particularly in the inactive upper levels of the old sublevel cave mining area. Positive results were recorded for extensions of Block 8 18, 19, and 150 in the upper levels. 6 underground diamond drill holes, totaling 19 18 meters were completed in the Southeast Brecha pipe zone. Several new 20 to 50 meter wide zones of bolts or breeches were identified, which include a four meter interval with 3.3 grams gold equipment from 4 sixty nine meters downhole.
Diamond drilling of the Crafts to target, approximately 1 Kilometers Northwest of the main Chelopech ore bodies has outlined a new zone of shallow copper gold mineralization over a strength lake of about three hundred meters. Six holes drilled in the second quarter and additional two holes completed in July of all intersected copper gold mineralization. The true width is estimated to be about 70 meters. The mineralization at Craftsde is open to the Northeast And Southwest as well as up dip and down dip of the current drilling between the 130 and the 280 metered levels from surface. Fruit future drilling will focus on defining the lateral and up dip and down dip extent.
The smelter performance in Q2 continued to trend to more reliable and consistent operating performance. We smelted 46,409 tons, copper concentrate. This was lower than planned in the quarter, primarily due to the annual maintenance shutdown being deferred drug planned Q1 timing into Q2. As a result of the furnace integrity improvement initiative. This initiative has already extended life of the furnace scripts to 15 months.
We expect further improvements with this next campaign, and we are targeting to reach 18 months before the next major maintenance shutdown, with the goal of ultimately reaching 24 month shutdown cycle. This represents a significant cost savings opportunity and a potential increase in throughput. The Offgas system refurbishment completed during the maintenance shutdown is expected to provide more operating continuity in the second half of twenty eighteen. And as such, the full year 2018 concentrate throughput is expected to be within guidance. Past previous production records demonstrating the continuing improvements being achieved in smelting operations.
The cash cost per tonne of concentrate processed in the first half of the year has been negatively affected by the lower throughput, stronger electricity and labor costs. A number of cost reduction efforts are underway that will help us to bring these costs in line with guidance for the year. Reductions have been targeted in the areas of labor productivity, maintenance, contractors, consultants, and outside services and utilities. We continue to make progress reducing the secondary copper inventories that accumulated during the construction and commissioning of the asset planning copper comparatives. This reduction will continue through 2018 2019 and will result in a reduction in stockpile interest and allow higher throughput capacity for fresh concentrates.
We continue to advance the smelter expansion project to increase throughput of complex concentrate to as much as 370,000 tons per annum. The feasibility study was completed in the fourth quarter of 2016 and confirmed the robust project economics. With an estimated implementation capital cost of approximately $52,000,000. Scope of the project includes the rotary holding furnish additional cooling and other upgrades to the Ausmelt furnace as well as upgrades to the slag mill area. Work is progressing on securing the necessary permits support this planned increase and discussions are underway to secure sufficient complex concentrate feed to fill the expanded capacity.
A decision on this project is not expected to occur until 2019. Project construction is approximately 71% complete and slightly behind schedule at the end of June. However, the project is still expected to reach 1st concentrate production late in fourth quarter of 2018. Spending of $111,600,000 has been incurred to date. With an additional $52,000,000 to $56,000,000 forecasted to complete is expected to be between $164,000,000 $168,000,000 compared to the original estimate of $178,000,000.
A number of key milestones were achieved in Q2. The construction permit for the new access growth was issued in June and construction for the main power lines that the site has commenced. The open pit fleet of equipment has arrived and hiring and training of the open pit crews is underway. Planned grade control drilling for the initial grave control model of the pit was completed and the first open pit blasting and stop buying ore began in early July. Major mill structural mechanical and piping installations are progressing well as is the electrical and instrumentation work.
The only remaining permit required for the construction is the discharge water pipeline, which is expected in August. Pre commissioning activities have begun and hot commissioning will start later in third quarter. 1st concentrate is expected in Q4 and commercial production in Q1 twenty team. The operating team is on track with all elements of the operational readiness plan as well as deploying the shared services model to maximize synergies with Chelopech. Exploration has identified a number of satellite deposits within a few kilometers of Krumovgrad.
Phase 1 drilling of Surnac satellite deposit located approximately 4 kilometers to the east of the Krumovgrad open pit, which began in Q1 was completed in Q2. The aim of the 1st phase drilling was to explore the Eastern and Southern sides of the Cernet deposit. Results show that mineralization continues down dip and is open to the east, while no extension was down to the south of the deposit. We're waiting for phase 2 drill sizes in progress and is expected to be completed in the third quarter of 2018. Which will be followed by a new resource estimate for this deposit.
Drilling also continued on Kupol Nord satellite with no significant results to report and early stage exploration work progressed on several other regional targets as well. Following this discovery of the Cork and West deposit in 2017, we have continued to advance expiration of our Greenfields, PMAC gold project in Serbia with the goal of adding more ounces to second quarter of 2018. In addition, 7 24 meters of trenching and 35 line kilometers of ground magnetic surveys and infill soil sampling were carried out. Drill plans for the third quarter of 2018, including testing near resource targets and further drilling on Cork and West, and shallow drilling of gold anomalies and soil. We expect to release an updated resource estimate for TMAC in the third quarter of 2018, which factory and updated drilling at Cork And West and reporting of oxide transitional and sulfide zone within the mineralization.
Of Cork And West Bigger Hill And Corken. We conducted preliminary metallurgical test work on comp as a sample, representing the oxide material from Bigger Hill Corkin and Corkan West as well as transitional material from Corkan. The metallurgical test work concluded in June 2018, including course ore bottle roll test, well as column leach tests. The 9 week column leach tests indicated gold extractions of 94% for both the corkin and bigger hill oxide samples. 76% for the cork and West oxide sample and 68% for the cork and transitional sample.
We are planning to do a more comprehensive or characterization test work programs to support a potential scoping study at the Malartic joint venture project in Quebec. All assays were received for the 19 42 Meters Stout drilling program that was completed in early April. Signeca significant results in addition to those reported in the first quarter of 2018 include 7.2 grams per ton gold over three point three meters. Exploration plans for the remainder of 2018, including soil and sediment sampling program over large areas, with detailed mapping and high resolution error maintenance survey, along with the Marbonite and Northernite shear zones within the Malartic group, along with further drilling of known targets. So in summary, our 3 key near term focuses are to successfully execute our Krumovgrad project, specifically the successful Construction, completion, commissioning and ramp up of this long anticipated high grade, low cost open pit gold project in Bulgaria, which will generate significant growth in gold production and free cash flow starting in 2019.
Secondly, to continue to optimize the performance and reduce the costs at our Tsumeb complex copper smelters so that we generate growing free cash flow from this business and third, to invest in exploration to discover additional resources to extend the life of both Chelopech and Krumovgrad mines as well as to advance our Timok Gold project in Serbia. Thank you. I'll now turn the call over to Hume, who will review the financial results and 2018 guidance, following which we will open the floor to questions.
Thanks, Rick. For the second quarter of 2018, we reported adjusted earnings of $0.08 per share compared to $0.07 in the quarter of 2017 and adjusted EBITDA of $32,000,000 compared to $31,000,000 in 2017. These increases were primarily driven by higher volumes of copper concentrate deliveries as a result of timing of deliveries may recall in Q1 time of deliveries hurt Q1 and that timing positively impacted the 2nd quarter. It was also impacted by higher realized gold and copper prices, partially offset by lower volume smelted and asset deliveries as a result of the 24 day plasma maintenance shutdown during the quarter. Higher stockpile interest and lower metal recoveries at Zoomo and a weaker U.
S. Dollar. For the 1st 6 months of 2018, we reported net earnings Adjusted net earnings of $0.08 per share compared to $0.03 in the prior year and adjusted EBITDA of $51,000,000 compared to $45,000,000 in 'seventeen. The increases were primarily driven by higher realized gold prices and copper prices, higher volumes of copper concentrate deliveries and higher production, increased estimated recoveries, metal recoveries at Tsumeb, partially offset by a weaker U. S.
Dollar and lower third party toll rates and higher stock cost of Tsumeb. Similarly, from a cash flow perspective, funds from operations during the second quarter 1st 6 months were $29,000,000 $47,000,000, respectively, compared to $26,000,000 $43,000,000 in 20 17. Free cash flow, which we define as funds from operation less cash outlays versus sustaining capital and mandatory debt service obligations was $22,000,000 $33,000,000 in the 2nd quarter and for the 1st 6 months. Compared to $2,014,000,000 in 20 17. These increases reflect $16,000,000 of term loan repayments that occurred in the second quarter of 2017 and higher funds from operations.
Turning to our key cost measures. Cash cost per ton of ore processed was $36 for the second quarter 1st 6 months of 2018, up approximately 13% from 2017, the vast majority of which was due to a weaker U. S. Dollar. All in sustaining cost per ounce was $5.40 $601 for the second quarter 1st 6 months of 2018, down $161 $106 from 2017 due primarily to higher byproduct credits and lower cash outlays versus Canadian capital expenditures, partially offset by a weaker U.
S. Dollar. At Tsumeb, cash cost per ton in the second quarter and 1st 6 months was $5.48 $5.22 up $130.50 in 20.17. 2nd quarter increase was due largely due to the impact of a maintenance shutdown the year to date increase was primarily attributable to a U. S.
Weaker dollar and higher labor and electricity rates that were part partially offset by reductions in contractor and consulting expenses. From a capital expenditure standpoint, our sustaining growth capital expenditures for the second quarter of 2018 were $6,000,000 $21,000,000 respectively for an aggregate spend of $27,000,000, up from $21,000,000 in 20 17. Spained growth capital expenditures for the 1st 6 months of 2018 were $11,46,000,000, respectively, or an aggregate spend of $57,000,000, up from $43,000,000 in 20 17. These increases relate principally to krumovgrad construction activities, and the June 30th, we've incurred approximately $120,000,000 or roughly 70% of the estimated final cost of roughly $164,000,000 to $168,000,000. At June 30, our financial and liquidity positions remain strong with minimal debt and approximately $250,000,000 of cash resources, including $236,000,000 under our revolving credit facility, $14,000,000 of cash, as well as a 10 to complete our ConAgra Gold project and to advance our other growth capital initiatives.
During the quarter, we also hedged the balance of our $28,000,000 operating cost Tsumeb locking in a weighted average rate of approximately 13.16 over the balance of the year. Turning to guidance. Based on our year to date operating results and our outlook over the balance of the year, we updated our guidance to reflect higher than anticipated grades and recoveries at Chelopech. As a result, gold production sales guidance has been increased approximately 5% based on the midpoint of the guidance provided, such that gold produced is now expected to be between 100 and 82,001,001,000 ounces with gold sold now expected to be between 155,272,000 ounces. Our mine cash cost and all in sustaining cost guidance was similarly adjusted and is now expected to range between $35.38 per tonne $6.40 $7.55 per ounce, down approximately 5% to 7% from our previous guidance.
At Tsumeb cost guidance was lower to reflect the additional currency hedges and is now expected to be between $430,000,000 $400,000 per ton net of byproducts. Sustaining Cabo's expenditure guidance was reduced to reflect certain expenditures in respect of the TMF rate at Chelopech being shipped to 2019. And as a result, it is now expected to be between $28,000,000 $33,000,000, down approximately $4,000,000. While we've not provided any guidance in with MineRP. And did not see it really having any significant effect on our 2018 results.
What I will say is that we are very pleased with the progress that the team is making in executing the business plan and remain confident in its future growth potential and value proposition that it offers the mining industry and DPM. In closing, with 1st gold from our global cost from a Brent gold project expected later this year, we are nearing a period of significantly higher gold production in cash flow generation, which we firmly believe should support further increases in our share price. It will also provide us the opportunity to further grow our gold mining business a return portion of this cash to our shareholders, the execution of which was based on a disciplined capital allocation process directed at increasing the value of our shares. With that, I will turn the call back to the operator. Thank
questions. And our first question comes from the line of Cosmos Chiu of CIBC. Your line is now open.
Hi, Rick, human team and Thanks for the conference call. Maybe just a few questions from me here. Maybe first off on the Krumovgrad. You mentioned in the MD and A that you're slightly behind right now 71% completion versus 78% completion. Could you maybe give us a bit more color on that?
And then in terms of looking ahead, what are some of the critical path items that you need to target to ensure that you have concentrate by the end of late Q4?
Yes. Good morning. It's, John Lindsay here. Yes, Jay, are you As you are, just say, we are a little bit behind. That's mainly a result of our concrete contract.
It didn't perform quite as we expected in the fourth quarter of last year and 1st quarter of better this year, we've subsequently replaced and brought additional resources to the site Unfortunately, the second quarter, the weather didn't quite cooperate with us, it was particularly wet and rainy. And we didn't, we weren't able to accelerate to the extent that we had anticipated. But having said that, the major foundations are now in with the structural steel mechanical installation suggestions well. All the mills are in. We're starting with cold commissioning in some of the areas.
So it's pretty much going according to plan, from here on in. And yes, it's, as you say, it slipped out a little, but we're still anticipating making 1st gold in the fourth quarter.
Great. Maybe as a follow-up, you also mentioned that you started pre stripping here at Krumovgrad in Q2. Have you hit any ore yet? Have you started stockpiling any ore yet?
Yes, we have. Absolutely. We've had a a couple of glass already and, we've started soft filing both high grade and low grade ore at the site and readiness for the start up.
And the grade's been okay compared to the mine plan compared to the block model?
Yeah, they're in line with our expectation.
Okay, great. Maybe switching gears a little bit here in terms of Chelopech congrats on getting higher grades in the first half of twenty eighteen. I think, Rick, you have mentioned it a bit in your comment here. But how has it reconciled in terms of to your block model here? And on a higher grade sort of higher than expected grades kind of confined to a certain area, I'm just trying to figure out if the potential higher grades could come through into second half again.
So, this is David, David. The grades are tending to run at around 5% higher than what we had anticipated in the block model. The reason why we're guiding lower is to caution you that the first quarter in particular had high grades relative to expectation. And we didn't want the anticipation that was going to continue through to the end of the year, the Q3 is much closer to what we expect in Q3 and Q4. So we're just a couple of percentage points higher than we would expect So within 3% to 5% where gold is higher than anticipated from the block model.
Okay. Okay. And then maybe going to, SueMed here, you know, clearly with a full year guidance of 220,000 250,000 tons of complex concentrate for 2018 at cost of $4.30 to $4.80 per ton Looking at what you've done so far in the first half in terms of production or in terms of throughput, in terms of cost, second half will have to improve. Is just is it just simply a function of now that you've got your maintenance behind you in Q2, the just the ramp up will get you to full year guidance?
That's correct. Yes. So we obviously in the you look at the profile of the shutdown, what tends to happen coming close to the shutdown is your ability to produce consistently and steadily is affected by continuity in the maintenance of the equipment. What we've seen post shutdown is that the smelter is now for the first time as a complete unit operating extremely well. So we've had issues with odd items before.
So 1st month's production has actually been in excess of requirements in order to meet that target for year end. So that's why we're confident that we can be within guidance.
Great. And then I guess that's why it's going to help as well. When you target, I guess the last one was 15 months since the last shutdown, you're now targeting hopefully 18 months for the next shutdown here. Would that change the number of days? You did 20 days in terms of the maintenance shutdown this time around, even when you make it longer with a period of 18 months, would it still stay at about 24 days?
Yes, the days are unaffected because the primary driver is around the repairs to the offs now. That's the critical path and the breakout and replacement of refractory. So that's what dictates the timeline. So we would expect to see the cam for the interval between campaigns increase This one, we did 15 months. I saw the vessel when it came offline.
It was in fantastic condition. We could definitely have done more time already. But keeping now as we're looking at what other vessels do we need to be increasing their life in order to have us achieve 15 months 18 months and then beyond that, consistently and reliably going forward.
Okay. And then maybe one last question on Tsumeb here. Certainly, when I go through the financials for just Tsumeb as a business unit, it was it reported a net loss of $1,000,000 for the quarter. On top of that, you spend about $4,500,000 in CapEx. Looking at the accounting for Tsumeb, it's always difficult, just given the integration you process or coming from Chelopech, But could you maybe remind me again when what kind of mix in terms of complex concentrate could actually propel Tsumeb as a stand alone business unit to start reporting a positive earnings or positive cash flow, all things considered.
Would you need the expansion to take place first as you know, Rick sort of mentioned the potential expansion here, Tsumeb, would that be necessary for you to report as a stand alone unit, a positive earnings for Tsumeb?
Yes, we don't need the expansion to report positive earnings. But, Sumit, what we've seen in the first half of the year is that dominated in 1 quarter by the shutdown. Our variable costs remain around 25 percent of the total. So you're talking about $100 to $125 per ton. So when you consider that, in the performance premium over what's happened at the 100,000 tons or so in Q1.
As you can see, we should be generating positive cash flow
Yes, I think that's right. I, I think based on the levels that our current infrastructure that we have in place, And what we're targeting for this year and what we're targeting to achieve next year, which is really getting up to, closer to the 265,000 tons per year. We're looking at generating, I'll say, EBITDA somewhere in the $20,000,000 to $30,000,000 range. And then staining capital in the business, which could range anywhere between, let's say, $10,000,000 $18,000,000 as a range with a positive free cash outcome. So that's what we think we can do in the near term based on existing capital that we've invested in the facility.
And yeah, like on a stand alone basis, it doesn't look like it and certainly doesn't generate a return on investment that you would expect on a standalone basis. But as you know, it's very, integral to Chelopech and, processing and concentrate to actually get Tsumeb to achieve a return on capital that would make sense on a standalone basis the expansion comes into play, and that's the $50,000,000 capital project with incremental cash flow of somewhere north of $30,000,000 per year. So when you do that together, we would expect certainly, improved metrics on a stand alone basis. But again, from our standpoint, we look at the smelter both as a standalone because that's how we reported that on an integrated basis with Chelopech and provide a secure, let for its complex concentrate.
And to confirm the $20,000,000 to about $30,000,000 and a $10,000,000 to $18,000,000, that's on an annualized base
That's on an annual basis, correct. So even for this year, as David said, we had the first half of the year that had the the impact associated with the 24 day shut, we do expect substantially higher volumes in the second half. And we do expect generate positive free cash flow for the smelter for the year. Thank
and
answer session. Next question comes from the line of Don MacLean of Paradigm Capital. Your line is now open.
Good morning, guys. And just few follow-up questions. On the Krumovgrad, have you actually done a review of the unit costs, the inputs since the feasibility study so that you can get a sense of where these operating costs will start out.
Yeah. We had updated the operating costs. I guess it was over a year or so ago when we updated the capital. We haven't looked at them since then. So what we've reported then is still what we're anticipating.
Was there any area in particular that you were maybe looking for more color on?
Well, I guess we've seen through the startup of the Rainy River project that there can be a whole host of different cost changes that, we're not forecast, obviously, in the feasibility study that take place. And so guess, questions like exchange rate and, labor costs, as you're seeing, let's say at Tsumeb, these can move around a fair amount.
Well, I think as John said, we haven't actually done an update since then, but the reality is that those operating costs are denominated lower level currency. I think they were based on to the 114 exchange rate, the exchange rate today, I think is around 116. So it's different, but not materially different, and labor rates have increased since then as well. But again, given that there's very low inflation domestically, in Bulgaria, that wouldn't have a material impact either.
Yes. And then in terms of sort of unexpected costs that you say. We got Chelopech running in Bulgaria. So we know what the salaries are. We know what sort of operating costs are in the countries.
We're confident that those are your mine fleet is leased. So those costs are fixed. So there's I think we have a fairly high degree of confidence in the numbers that we have to date.
Okay. That's the I guess that's the key. Second question, maybe second and third would be related to Tsumeb, maybe a little more color on what's happening with their energy and labor costs. And maybe, David, you talked about how the sort of predictability of the project was had really picked up in the last month. Is your sense that you're now onto a better level altogether for the Tsumeb
smelter?
So in terms of costs, if you look back the last few years, we seen 15% to 19% increase in our energy costs. The uplifts and projections from NAND Power and the regulators in the country have indicated something much So we're now less than 10% and between 5% 10%. We have some mitigating activity that we've got going on to have a look at alternative power supplies. In terms of labor, that continues to be something in Southern Africa where there are high expectations and we have to manage that as a combination of we'll be giving our negotiations and also looking at productivity improvements. So that's clearly a driver for us.
In terms of predictability, we've seen a mark improvement. So really all of the work over the last few years, the capital spend, the optimization. Making sure that we understand exactly how do we get the best out of the integrated asset, all of our kinds of fruition. And we saw with a newly started facility, a significant difference in performance, both in terms of continuity of the process reductions in rework, increased treatment rates, gas masks, everything in group. So I think we have now seen a change to a different environment in terms of the operations.
So, record online times, record concentrates, we've foot record list of production, copper inventory reductions. So all around, it was a well, you know, it was a good month. And on top of that, we had a 1,000,000 man out we achieved at the end of June. So performance is broad based.
Excellent. That's
good. And that's Those are the things that you can control. Maybe a little color on what's happening, what's the concentrate market, the complex concentrate market would help too.
I think the complex concentrate market, as you know, it's a relatively small marketing comparison to the green concentrate market, the clean concentrate market, What's happening though is we've seen, with pressure on capital projects and capital discipline that some of the projects that were previously on the books they're either later. And in some cases, they come off completely. In other cases, we have seen projects that are now more urgent to bring in, which would increase the amount of tonnage to market. So we're seeing this balance. So overall, I think the sentiment on TCs and availability of materials in improving.
But like Rick said, we're not planning to make any decisions on this investment soon in terms of the expansion. We're rather looking at how can we optimize the asset we have first to get performance. I don't know if that helps, Tom.
Yes, no, that's helpful, David. And maybe just on the expansion. Operations that would prompt you to do it sooner or later? Or can that just sit as an inventory item to do whenever you feel that the market is suitable to, to give you a high rate of return on the project?
Yes. So there are some elements of the project that actually have a fairly high return we would deal with that differently. And mostly those around things like the slight mode where we can get improved performance and recoveries by making early modest capital changes. And the other thing I think that we haven't really spelled out is that what we're finding are some of the things that we thought were imperatives and in fact going to accelerate such as water cooling. Which have a fairly big price tag.
You're looking at more than 20% of the overall capital cost of the project just for water cooling. We've now been able to defer that by the performance improvement that we've had in refractory. So we've now got to a point where we're achieving close to 300,000 tons on a single one. And, we could afford to bring that down to an annual rig per. So in other words, half that performance without water cooling is a worse case and we suspect that's not going to happen.
We'll continue to get good performances on refractory. There may be some modest reductions, but not a dramatic reduction as we previously anticipated. So that means that there are capital elements within the $52,000,000 that Rick mentioned that actually are being deferred rather than brought forth.
Interesting. Excellent. I'll pass it back to the operator.
Thank
I'm showing no further questions at this time. I would now like to turn the call back to Rick House for closing remarks.
All right. Thanks everyone. Have a great long weekend. Enjoy the summer, festivities. Thank you.
Bye.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.