Greetings, and welcome to the Endeavour Mining Second Quarter 2018 Webcast. And answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Sebastian De Monticello, CEO of Endeavour Mining Corporate.
Please go ahead, sir.
Good morning. Good afternoon, everyone. Thank you for joining Endeavour Mining's Q2 2018 Results Presentation. I'm Sebastian De Monteschi, CEO of Endeavour Mining, and it's a pleasure to be talking to you once again. Please note on the following slide, the usual legal statements and disclaimers here.
Here with me today, participating, Jeremy Langford, our Chief Operating Officer, Vincent Benoit, our Chief Financial Officer. And Patrick Wissay, our EVP Exploration And Gross. As usual, I will begin by taking you through the highlights from the quarter with the help of Jeremy and Patrick Vincent will then take you through our financials followed by Jeremy. We'll provide more color on each individual mine and project. We will then open the call for any questions.
As you can see here, and to recap on our activities from the first half of the year, we've made strong progress across each of our 4 strategic pillars. Ity CIL construction is progressing on time and on budget, and we are expecting an updated feasibility study on Kalana by Q1 next year. On the exploration front, we were also quite busy with more than 292,000 meters drilled across the group in the first half of the year. We believe that with the new discoveries made, most notably the carry area at Hounde, we will continue to build on our track record of unlocking exploration value. On the portfolio management front, following a strategic assessment of Tabakoto, the mine was deemed to be noncore and the sale process was launched.
This move is in line with our capital allocation strategy, which I will discuss in more detail in an upcoming slide. Lastly, we continue to manage our balance sheet carefully as reflected by our strong liquidity sources, which has us well positioned to fund our growth projects. As always, I want to reiterate that safety is an utmost priority for us. At Endeavour, no job is so important and cannot be done safely. We're delighted that our group level safety record remain better than the industry average.
During record. As you may be aware, we previously completed Hounde and Agbaou with no lost time injuries and that excellent track record continues at Ity. As a reminder, Hounde has now more than 10,300,000 hours without LTI. And even Agbaou had only one accident since it started its contraction back in 2012 about 6 years ago. On the next slide, as you can see here, we had a very strong first half of the year, beyond our safety tracker forward, which I just noted, we are pleased that our performance across the group is well on track to meet the full year guidance.
358,000 ounce produced in H1 at all in sustaining cost of $8.25 per ounce. It is important to highlight that both our group production and audience sustaining costs are on pace, both inclusive of and without Tabakoto. And you will note in particular that without Tabakoto, our all in sustaining, has been for H1 at $7.32 per ounce. We can go into more detail on these items in the following slides. Tabakoto, cipular of the strategy that was set back in early 2016 is to actively manage the portfolio to increase its quality over time.
As you know, we've been focused on divesting assets that do not fit our Magic Box criteria of low all in sustaining cost and long mine life. Based on this criteria, it is no surprise that both Euga and Zema were divested, viewed through this strategic land undertook a strategic assessment of Tabakoto, which was completed in Q2. This assessment demonstrated the potential to reduce Tabakoto all in sustaining mainly through capital investment to renew the underground operation. As some of you may recall, in 2015, the company transitioned from contractor mining to owner mining, but at the time did so with a second hand fleet, which suffers from poor availability and height maintenance cost. We are talking below 40% availability.
And despite this, the team has been doing a fantastic job on-site, about $40,000,000 of capital, is required to fix this. And our view was that these investments do not fit and Devon's capital allocation criteria. As such, Tabakoto was deemed noncore and the sales process has commenced. We believe the asset is better suited for the portfolio of another company with an alternative strategy, allowing us to continue to focus on lower cost and long life assets. We have already received non binding offers and are confident to close the transaction before year end.
As you will see in following slides, Tabakoto has been classified as held for sale and included as part of Endeavour's discontinued operation. Looking across the group, the benefit of Hounde ramp up has lifted production from continuing operation versus Q2 last year. In white, you can see the previous production from Enzema, which was sold last year. In gray, you can see that inclusive of Tabakoto Group production amounted to 173,000 ounce of gold in the 2nd quarter. The all in sustaining cost for the 2nd quarter amounted to $8.78 per ounce with Tabakoto and $7.80 without Tabakoto.
As expected, the all in sustaining cost increased over the previous quarter as Hounde benefited from stronger grade in the first quarter. I previously mentioned that our focus was to decrease our all in sustaining cost to below $800 per ounce. In order to maximize our cash flow generation. On this slide, we can see the impact of both the portfolio management and the project development activities. Between H1 last year and this year, we sold the high cost consumer mine and now intend to sell Tabakoto.
Combined these actions have decreased our all in sustaining cost by about $75 per ounce. The much larger impact has been the successful ramp up of production at Hounde, With its all in sustaining cost of $5.21 in the first half of the year, its impact on the group is noticeable. All in sustaining costs from continuing operation was $7.32 per ounce for H1. By this time next year, I would like to point out the Ity CIL project will be in production. Ity is all in sustaining cost is projected to be below $500 per ounce, further enhancing the overall quality of our portfolio and continuing to lower our group all in sustaining cost even further.
As such, I believe that we are very well positioned to meet our 2019 strategic objective of achieving an annual production of above 800,000 ounces at all in sustaining cost of below $800 per ounce and with the visibility of more than 10 years at each mine asset in early 2016. You can continued operation, which includes, sorry, the discontinued operations. In the first half of the year, we achieved the margin 116 dollars, which is almost double what was achieved during the equivalent period last year. On Ity CIL, as mentioned, the project is our next large growth catalyst, and we are very pleased with the progress being made. As it is on budget and on time for a first gold pour in mid-twenty 19.
On the CapEx front, we have already committed over 85% of the capital, Looking at the chart on the right, you will see that the remaining CapEx to be incurred now stands at $221,000,000, With 30,000,000 of equipment financing remaining to be drawn on, this brings our remaining cash outflow requirements to 190,000,000. With nearly EUR 340,000,000 of liquidity sources available, we are obviously very well funded. I have to say that I was on-site doing a project review last week, and I wish you could see the amazing job the team is doing there. But now I'll hand over to Jeremy to talk through the progress being made in more detail.
Thanks Sebastian, and good morning, good afternoon to everyone. As mentioned, the EDCOIL projects tracking on time and on budget, and is 50% complete to date. During Q2, we reached a major milestone with the ball and the signals arriving on-site, some 3 months earlier than initially planned. Just a major achievement during Q2 as for the list. 85% of total capital costs have been spent as Sebastian commented on.
All 8 of the COIL tanks have been constructed. Launders are going in now and 4 of the CLO tanks are currently in hydro tests. Pleasingly, there's over 2100 people on-site, and, 95% of the people, the local. Over the next slide and just some pictures looking, clockwise, obviously, the 4 CIL tanks with the fall behind and the 2 detox tanks in the foreground there. The slide on the right is the process plant Milling foundation still and the mill foundations, with one half of the ball wheel shells there.
Just below that is the whole bridge construction, which is going on really well. The moment. This whole bridge connects the DARFlu and Jiboutu pits to PE26 or the main processing facility. And lastly, but not least, the crushing facility or the crusher bolt, pretty common with Hounde, and Agbaou, very similar to the design. We're certainly benefiting from commonality in design.
On the next slide, we provided the upcoming milestones for reference In essence, time, I won't go through these in details, but we'll continue to track well against the schedule we've laid out. I'm going to hand over to Patrick now. For a review of the exploration activities. Over to you, Patrick.
Thanks, Jeremy, and good morning. Good afternoon, everybody. So, as far as exploration is concerned, you can see on the slide that This illustrates our continued strong focus on various exploration programs. As you can see, with the amount the amounts presented in the table, we have been very, very busy in H1 2018. And all in all, we spent something around the $35,000,000 spending exploration in the 1st semester.
Out of which $15,000,000 was spent in Q2 alone. This is, I would say, quite normal. Since we have intensified drilling ahead of the rainy season where we normally slow down a little bit. And, we'll start again later on, as soon as rainy season allows us to speed up. The main focus indeed, of our H1 was dedicated to, the Hounde area where we, announced recently confirmed Kari Pump discovery and announced 2 additional discovery over the board carry anomaly.
We have been also working on a very strongly especially in the first quarter but also in the second quarter at Kalana where we have undertaken a very intensive exploration program within the deposit. Our target is to publish and update the resource by sometime in Q3. Which will feed into our updated study for that project later on. At Ity, we have been continuing to work a lot on the Le Plaque discovery where we communicated earlier on this year. We continue to see a good result in the expansion of Le Plaque.
And, as said previously, we expect an updated resource to be delegated within, the end of the first quarter of next year. We are also very happy, because we are progressing significantly on our greenfield exploration package. 2016 2017 was mostly dedicated to work around our mind to increase the mine life. And starting last year, we started to accelerate our greenfield exploration effort, which we confirmed this year and we are quite active and we are busy on several target, to explore them. And, we expect to, publish something, some result later on this year once we have some more solid result.
And with that, I would say that's all for me for this part. And we will move on to financial, and I will hand over to Vincent to go through the extension of the presentation. Vincent,
Thank you.
Thank you, Patrick. Good morning, good afternoon, everyone. And so I will start this section by looking at the production bridge. Between H1 this year and last year. So when you look on Slide 16, at the chart and starting at the list, hand side and Zema and Tabakoto production has been removed to obtain H1 'seventeen production from continuing operations So overall, on a comparable basis, production has increased from 173,000 ounces to 299,000 ounces.
You then see that Hounde has more than compensated for the lower production at Agbaou, which is in line with its life of mine plan, which now integrates harder rock. And that Karma, which decreased due to the lower recovery rate associated with treating the Digi 2 transitional whore in the first half of twenty eighteen. And it is production increased and all in sustaining cost decreased there, mainly due to the increased tax Conage and higher grades from the back at 2 pit, which more than compensated for lower recovery rates. Jeremy will come back in a minute on technical explanations. Overall, this led to total production from continuing operations to 299,000 answers, which places very well and well on track to meet our full year guidance as Sebastian has remained earlier.
On Slide 17, I will walk through the main line items from revenue to oil and margin. The top line increase, as I just explained, and Gulf sold amounted 305,000 ounces. I want to note just a couple of other points. The gold price average is taking into account the streaming financing from Karma. And it has increased compared to a year ago.
As you have noted, as you see on Note 3, the all in sustaining margin significantly increased to $116,000,000 versus $64,000,000 last year due to the successful startup of Hounde higher realized gold price and an increase in gold sold at Ity, which more than offset for the all in sustaining cost increase at Agbaou. At point 4, the non sustaining capital spending increased versus late last year due to a $6,000,000 increase at Agbaou for its waste capitalization activities. On 0.5, the non sustaining exploration cost increase as we are well advanced in our drilling program as explained a moment ago by Patrick. In total, we spent $30,000,000 in exploration in the first half twenty eighteen, and we are well in advance compared to the full year budget as we are drilling more before the rainy season as Patrick was explaining. Finally, this resulted in an all in margin from all operation of $116,000,000 for H1, this year versus 60 for last year.
Page 18, here you will see a more detailed breakdown of the movement in cash over the period compared with a year ago. As shown on point 1, there was a significant movement in working capital variation during H1, 55,000,000 negative. This is due firstly to an increase in stockpile at Hounde and Karma. And secondly, due to the prepayments for reagents at Hounde and sale need due to the increased outflow from trade and other available, driven by gold sales received at Hounde. This working capital variation, it is expected that by the second half, it turns positive, with inventory and reagent consumption.
As shown in Point 2, interest and financing fees increased due to the increased in-depth outstanding related to the construction of Hounde and Ity CIL. As shown in point 3, we spent $153,000,000 on the Ity CIL, inclusive of these associated working capital. But we spent as well $5,000,000 for a new group IT system and $5,000,000 on the Canada construction. As shown in point 4, we'll receive $30,000,000 of proceeds following our convertible notes issuance in the first quarter. And as you see below, $218,000,000 has been repaid for the revolving credit facility in Q1.
And then in Q2, we have drawn down 17,000,000 for the construction of EP, bringing the net amount repaid this year to $210,000,000. On Slide 19, you can see here the strong increase in the cash flow per share, operating cash flow per share, due to the significant improvement in our portfolio asset quality, representing an uptick of $0.30 30 percent, sorry, $200 to $1.52 per share. On slide 20, so on this slide, you know, it's very well as it shows our capacity to fund our CapEx and our gross CapEx. So you see that it leaves us with a very well position to fund a good position to fund the reminder of the capital expenditure required to complete ity. We have $340,000,000 in available liquidity, comprising $79,000,000 of cash $260,000,000 of undrawn NC RCF.
On top of this, we have the remaining proceeds from the Nzema sale, the remaining equipment financing, ATIT and, of course, the cash being generated by the operation. So all those results are more than enough to fund the remaining ity CapEx, which amount to $200,000,000 going forward. On Slide 21, we quickly look at the cash variation from an IFRS standpoint which, of course, matched with the previous view. We started the year $123,000,000 in cash, net cash flow from operating activities amounts $108,000,000, which include a negative $55,000,000 working capital variation, as mentioned before, Investment activities amounted to $247,000,000, comprised of $163,000,000 of gross project, and $765,000,000 of sustaining and non sustaining operating capital expenditure, including exploration. Financing activity amounted to $98,000,000, which include, as previously mentioned, the issuance of the convertible notes and the repayment of the RCF.
That leaves us at the end of the period, at the end of June, with a current cash position of $79,000,000 at the end of the second quarter. Slide 22, of course, the strong operation performance during H1 led was strong adjusted EPS increase, which was stable, on the right, you can see the main item and adjustment which were being made. So it's always the same one, losses from discontinued operation that has been removed. Deferred income tax recovery, gain and financial instruments, stock based expenses. So that leads to this $0.31 per share S.
And with this, I will hand over to Jeremy in order he goes through the operational performance by mine.
Thanks, Vincent. So we've already talked about how pleased that was Hounde and, how it's performing compared to feasibility study. The expected production was lower than previous quarter. Mainly due to an expected decrease in the average head grade feed of the plant. So the operation continues to perform ahead of expectations and throughput has increased from 20% to 30% above nameplate.
Hounde now tracking at about 3,900,000 tonnes a year in annualized throughput compared to 3,000,000 tonnes of its nameplate. We do, however, remain cautious and conservative here, expecting this throughput to come down just to touch in the upcoming quarters. The wet season may be in effect AIC mainly increased mainly due to lower process grades as well as the high unit costs and the increased sustaining capital spend. As highlighted by the others, Hounde continues to make strong contributions to the group, its performance and it's well on track to meet full year guidance. Over to Agbaou, in 2018, as we've mentioned, quite a few times, continues to be a transitional year with a focus on waste capitalization, which gives us access to the high grade ores, over the longer term.
We did see production slight increase over the previous quarter due to the high grades of material milled, as lower grade stockpiles continue to supplement the mine feed. Good news is that the waste capitalization efforts are continuing to progress well. Overall Agbaou is on track to meet for your guidance as production is expected to increase in the latter portion of the year and costs are expected to trend towards the guided range as the hard oil blend and the stripping creases. Over ity, and we talked about this a number of times actually. When we talked about ity soil project, we tend to forget that we have a existing heap leach operation, and it continues to operate very well year to date and contract to meet its guidance.
Production increased Significantly over the previous quarter due to the high grade stacks as the mining activities of Bakatul have produced high grades as well as an increased recovery rate. As previously mentioned, 2018 is a transition year for Ithi as greater focus is given to the CIO build. Open pit mining activities for the heap leach operation are expected to continue until the end of Q3 2018. The aim is to create a stockpile sufficient to feed the stacking requirements for the later portion of this year. Short mining campaigns may then be conducted based on equipment availability and progression of the CIL ramp up or preproduction, if you like.
Over to Karma, as guided, production at Karma decreased over the previous quarter, due to a lower and stacked tonnage, despite increasing grades and recovery. Tonnes mined increase is expected, as mining activity ramped up in anticipation of the rainy season for this year, Q3. Mining and GGP pit was completed and the quarter and mining increased at a cow pit where mining began late in late Q1 2018. Interestingly, the front end at Karma since the new plant's been put in performing very well. Even looking at the H1 numbers, the plant's producing at nameplates, slightly better.
And we expect it to improve in the second half of the year. Looking at Tabakoto, production decreased over the previous quarter, mainly due to lower average head grades. This is due to the depletion in the high grade open pit deposits. Following our strategic assessment, it's clear the key to reducing the mine's all in sustaining cost is to upgrade the fleet, which would allow for increased tonnage to be extracted. This comes at lower mining costs, with significantly less maintenance costs as well.
These investments in our opinion require another company that can run 2 profitable underground mines. With obviously exploration potential. I would like to hand over to Patrick to have a chat about Kalana and give you an update. Patrick?
Thank you, Amy. As far as Karana is concerned, as I said, we have been working a lot on Kalana in the 1st part of the year with an intensive, I would say, exploration and resource program. That was finalized in Q2 on the Kalana and Kalana code deposit. Most of the work that was done was performed at Kelana deposit. The main goal was to confirm the overall geology called model, which was accomplished.
We found and we solidify a little bit as a journey called model with the following and the mapping of all the VENSET were deemed to occur and then they occurred. We also did, especially in Firdreani, which is expect to convert a portion of the previously classified into our resource in the north eastern part of the deposit. The remaining result from the last leach oil, god, I say, I expected, in the coming weeks, actually, very soon. Following bottleneck and confirmed in the lab because each well analysis take a much longer time than a classical fire assay. Our goal is to rebuild completely the geological model, which is being currently done now based on the drilling done by the previous owner and that which we completed this quarter while using a much more, I would say, conservative, top cut assumption and ordinary trading geostatic approach versus what was done previously.
In total, we are going to use more than 20 holds and more than, 221,000 assays would be used to build a journey called model. Which will form the basis and the basis of the updated feasibility study. Trust me, it's been a long and a lot of work which will give us, we are sure strong confidence in the new model that we are going to deliver. At the Tabakoto, at the Kalanako deposit, sorry, the ruling has confirmed the continuation of the mineralization, and we expect to convert a portion of the previously classified inferred resource and even increase the size of the deposit. As it was known early on, and this deposit was not included in the previous AFS.
That was made by Astell. We expect the updated ratio to be published sometime in Q3, probably late Q3 depending on the timing required to compile everything and to build the resource model. And then we'll transmit the updated feasibility to the updated feasibility that will be completed sometime in the first quarter or next year. That's it for me. Now, back to Sebastien.
Thanks, Patrick. So to conclude, this was a very strong second quarter for Endeavour and we expect to continue building on this, foundations for the remainder of the year. And over the long term, Throughout this presentation, you've heard that we remain on track to meet key production and all in sustaining cost metrics and guidance, with and without the inclusion of Tabakoto. Our near term growth prospects remain strong with Ity CIL construction tracking well and we're progressing at the Kalana project. Longer term, our focus on exploration and the recent success of our reinvigorated program continues to give us confidence of significant future upside.
Most importantly, this keeps us squarely on track to deliver upon our 5 year strategy and objective. Let me conclude by thanking my teams. Their commitment and focus, I was very well positioned to meet our objectives for 2019. Collectively, we have enhanced the quality of our portfolio and successfully improved its balance sheet by focusing on lower cost long life assets. I would probably point out that one number for the entire presentation, $7.32 all in sustaining costs for the continuing operation for the first half of the year.
And now that Tim and I would be happy to take any questions.
We will take our first question from Michael Stoner from Berenberg. Please go ahead. Your line is open.
Hi guys. Yes, so my first question is on Tabakoto. Could you clarify whether you consider spending any capital on Tabakoto ahead of a sale to kind of slightly improve performance or kind of kick off that optimization to optimize a better sales price?
Yes, Michael. Good question. I think it's fair to say that we continue to operate Tabakoto as if we were the owner of this asset till any completion of a transaction. And as mentioned, the in potential transaction is probably end of Q3 or Q4, which means that we will continue in the meantime to invest in the asset ensure that we can improve production and all in sustaining costs during the period.
Okay. Then having a look at the exploration spends that tracking kind of annualizing H1 quite high, are we still looking for the 40 to 45 total exploration spend? Guidance, implying a kind of much lower spend H2?
Yes, that you're talking about the full exploration budget for 2019, I guess. And I think the big driver that has pushed us to maintain that that path and target for 2018 is in particular the discovery at, carry area at Hounde? And as we mentioned, we want to publish a significant, hopefully, indicated resources in Q4 at the Kari area at Hounde. And therefore, we're putting all efforts required to come up with those numbers.
Okay. So it's kind of the success is driving kind of an acceleration of efforts there.
Yes, exactly.
Okay. And then just trying to get some of the nuance around the outlook you put in the release for Hounde. You've pointed to a softer H2 on grades, presumably throughput through the rainy season and in terms of cost strip ratio would you you're tracking well ahead on an annualized basis. Do you think you're still tracking for the upper end of guidance? Would that that be kind of fair to say?
Difficult to comment. I would just say that so far so good and this is performing well. Even July has been a good month. It all depends on how the rainy season is going to impact potentially the operations, but we're pretty confident that we should be well on track to meet the guidance and probably the high end of the guidance.
Has Jeremy's team taken the kind of learnings from Agbaou and your other operations on how to maximize kind of a strong Q3 through rainy season?
I think it's fair to comment that, Jeremy, you want to
Yes. Thanks, Ed. Thanks, Pavel. Look, we, we said about having digit plan as we move through the wet season. We have enough stockpiled material to get us through any event where we get stuck, I will talk about in particular, and I guess, we spent quite a bit of capital during the build with diversion trenches, hydrogeotech and pit dewatering.
So We're pretty much with Hounde and Agbaou, very well protected from any rainy event of note, but, god's power is god's power. So we'll believe that it is. But by and large, the assets of the reagents, they're pretty much an island during the wet season, if you like, and they're still sufficient. So yes, we're pretty happy with with how they're running through, at the moment.
We will now take our next question from Rahul Paul from Canaccord Genuity. Your line is open. Please go ahead.
Hi everyone. Congratulations on another strong quarter. Sir, that at Kari Pump, it looks like you indicated that you expect to have enough drill density to to have a meaningful portion of that resource in the MNI category. So that being the case, should we expect the next reserve update to incorporate some of the carry pump material as well. And so can we expect an updated mine plan as well?
Maybe at the with the year end results or sometime in the near future?
Yes. Well, you know how that we we published our updated reserve with the year end results in March. So if we have indicated resources on on the carry area by, let's say, November or December, we should be able to come up with updated numbers on the reserve side. For the year end results.
Okay. And I guess I'll ask because it looks like you've done quite a bit of drilling based on the exploration success that you're seeing right now, is your plan with the upcoming with the upcoming mine plan to to increase grade, to the plant and to maintain the higher grade profile for longer? Or are you at that point where you might start looking at a mill expansion as well?
I think it's, it's too early to say we want see first the, the level of indicated resources that Patrick will give us in November, but it's clear that we're all very excited. And we believe that this area could be somehow a bit of a game changer for Hounde going forward.
I agree. And just last question for me from a permitting standpoint, do you have some requirements? Or is it going to take really, how long do you think this could take to move through the permitting process?
Well, we have a number of items that we are launching already on that area, which is helping us also is that you know that we've got Bouere, which is just nearby and on which we are building up the infrastructure, so the road from where it to the plant, which goes through the carry area. So this will help a lot. In terms of permitting. I think that overall the mine plan since day 1 was to ensure that if you recall the Hounde visibility study had the first 4, four and a half years, pretty strong in terms of production and all in sustaining. And then Vindaloo pit with a drop of upgrade was going down in production and up in all in sustaining cost.
So since they won the objective with this exploration program was to be able to bring much earlier, so probably until year 3, some new high grade deposit. And it seems that the strategy seems to be working well with this upcoming Kari Pump resources.
Thanks, Sebastian. That's all that I had.
We will now take our next question from Justin Chan from Newman Securities. Your line is open. Please go ahead. Hi
guys. My first question is just just around tax for this quarter, the effective tax rate was quite high and a lot higher on the income statement then. Than cash tax was on the cash flow statement. I was just wondering if you could explain some of what's going on there and what your thoughts are on the effective tax rate for the full year?
Vincent, do you want to give an update on that?
Yes. The thing is that, you have to notice that, when you look at Tabakoto, a specific P and L, you have a tax, you have a tax, which is 4,000,000 which is mainly a tax assessment at Tabakoto. It's not an income tax and this is linked with the penalties on the withholding tax that after her on the withholding tax that Tabakoto has been adjusted for the year 14 to 16. So, it also include a minimum tax expense for 1% of the revenue. But overall, that's the main explanation is because of this provision on the accrual, let's say, on Tabakoto tax.
Yes. So it's a one off one off adjustment, Justin, linked to Tabakoto pasto did. In fact, that was even before we joined as the new management.
Right. Okay. Just to clarify, that's included in the current income tax or deferred income tax tax expense? In the next quarters of any similar impact or is that it for the year?
No, no, that should be as Sebastien is saying, it's a one off and we should come back to normal in Q3, Q4.
And I must say, Justin, that we have reinforced significantly also the way we are preparing the tax filing with the authorities. We have now a dedicated tax manager in country for that to avoid that we go into mistakes as the previous management had.
Okay. Excellent. That's very helpful. And then just on Kalana. What are your latest thoughts on, and I realize that the resource is being prepared in Q3, but In terms of the size of the plant there, did you give us a sense of what your latest thoughts are from the prior DFS at one point 7.
Is there any update or change there?
No, I think it's a bit early just into, to be able to state. We always said that our was to redo the DFS once we have comfort on the resource level. And I think the resource should come up in the next few weeks probably to 3, 4 weeks maximum, then the project team will look at it. We always said that our objective was to be able to increase that from one point 1,700,000 to 2,000,000 tonnes. So it will all depend on what's the best in terms of total return and cash flow.
Okay, excellent. And then just a last one, on Tabakoto, could you give us a sense of what you're looking for in terms of the sale there? Would you do you have a preference for cash or just total valuation or just trying to get a sense of what to expect there?
No, we're looking just for cash, not interested in shares. That's for sure. And we've been very clear with the different candidates that I have put non binding office on the table already. And then in terms of valuation or amount It's probably too early, but in any case, if you look at our accounts, you probably have at least the book value for Tabakoto, which is in.
Okay, great. Thanks very much.
We will now take Our next question from Tara Hassan from Raymond James. Your line is open. Please go ahead.
Just a couple of questions on the ops side. First on Hounde, obviously, an expectation for mining costs to go up as you move into a greater mix of harder rock. But there's also some commentary on higher fuel prices. So can you just provide some guidance on sort of what you're seeing on fuel prices in Burkina and what your expectations are for the rest of the year for mining costs, please?
Jeremy, you want to take this one?
Yes, sure. Thanks, Tara. Look, Taron, to answer your question, we are seeing a bit of a price hiking fuel. It's having a little bit of a a Q1, Q2 effect across the Burkina Faso assets in particular. And, I'm looking at all the the mining costs at all, all five assets at the moment.
We're still tracking to the, well within the full year guidance. Winday will smoothen out towards the latter part of this year likewise with, with Karma. Interestingly, the 2 highest cost smelting operations are of a heavy contracting And, the owner mining operations that we're mining at are still very low and below $2. So I'm very pleased in today.
Okay. And so if we're modeling in that range of $2 per ton for the remainder of the year, that's a good number. Okay. And then, just on, I guess, as well on the fuel price, are you seeing it regionally or just in Burkina in terms of increases?
No, we are seeing it regionally. Like I said, we came in a little bit more than others. All the different states have different subsidies and different taxes. So, you know, the unit costs are, what will cost per liter of fuel is different in Marley Burkina Faso and Co Diva slightly. And, yeah, we are seeing the, I guess, the crude oil price going up and the net result pulling it on to us.
Okay. And then just on Karma It's probably fair
to say Tara that we've been quite lucky up to know that given that we've been adding some operations and big operations, we've been centralizing more and more some of the buying. Being able to get some
That's great. Thanks. And just on Karma, there is commentary on sort of a change in stocking as your or characteristic change. Is that largely in line with what you expected on that change from CG2 to Cowal or is there variance from what you were expecting?
Yeah, Tara. It's something we've been working on for quite a while now. In the original feasibility study, I think we had 3 lifts per cell, thirty meters vertical. So we've done some test work the latter part of last year, first half of this year. And it looks as though we've got a significant kicker in terms of being able to go up another lift or 2.
So we're just looking at a, I guess, an optimized stacking plan with a minimal amount of conveyor shuts, etcetera. That impact the operation. So, we'll be working through that through H2 this year.
Okay. That's great. Thank you. And just to follow-up on the previous question on the Tabakoto sale, obviously Sebastian, you indicated cash is a preference are you willing to do a similar structure as what you saw in the Zima where you've got sort of stage payments or payments linked to production targets or resource targets?
Could be and some has offered that, but ultimately impressed for 100% of the cash on the closing. So we'll be fighting mainly for this.
We will now take our next question from Jordy Mack from Haywood Securities. Your line is open. Please go ahead.
Yes, great. Thanks. Yeah, good results coming out of Hounde. If we could just expand on some of Tara's questions, at Hounde there. Just looking at how your mining is going in terms of grade reconciliation And what's your assumed sort of mine dilution?
Jeremy, you want to come in?
Yes, sure. Thanks, Jordy. How are you going? Look, the reconciliation for the year had a bit of a spike when we started blasting the latter part of Q1. It's smooth right out now.
And, you know, we're getting a pretty good reconciliation between the DOM and the Great control model. And, what we are seeing is slightly more tons, and, slightly higher grade. So 8% I guess, lower than the great strong model in tonnes overall, but resulting in 9% more ounces. So it's kind of the net result is 0 at the moment. The main differences between VINblue and VINblue's central.
And, we're learning the ore body more now that we're operating at of course, from the feasibility study. And, yeah, we're pretty happy with the results today.
Okay, excellent. Thanks. And in terms of Stockpile strategy going into the wet, where do you stand at the moment in terms of the amount of stockpile and can that help you, offset obviously the higher throughput rates are you achieving at the moment to continue those through Q3?
We're in good shape with, with stockpiles Jordy, we've got, obviously, with Hounde with the mine plan, following the mine plan, we do need to stockpile more of the lower grade maturity and get access to the 2 point plus gram per tonne ore. So in terms of the fallback, we've got we've got well over, well over 45 days of stockpiled material that we could mill if we, if we couldn't get access to the pit for whatever reason. So we're pretty happy with that. We'll keep stockpiling. We strip a little bit more during Q3 as we're trying to get, hold of this high grade ore towards the back end of Q4.
To, to come home with a wet style. So, yeah, we're pretty confident that Hounde will roll 20 fourseven.
Okay. Thank you. And if I can extend one more question, move over to Karma, on the material characteristics of You're getting issues in terms of, funding or irrigation flow rate issues there in terms of lower snacking and obviously, I'm guessing you're getting lower flow rates through the ADA?
Yes. Look, I'll just clarify that. I guess, the characteristics of the pregnant solution going through the back end of the plant is the same for any all type, where we did get a little bit of a I guess, the speed bump was when we started processing just the cow material only. So it's got a little bit more clay in it, Jordy. And, when we didn't, we didn't have GG2 going through with it.
So it hit the throughput on the shoulder a little bit for for a short while, we get block shoots in certain different places. So we've, we're operating the plant, you know, slightly differently on this material now. And it does show, it does show, increased throughput with a blended, a slight blend with the stockpile material that we have a truckload of, as you know. So, certainly in terms of material characteristics, there's no problems in processing the material at all.
Right. Okay. And obviously expect to flow rates and recoveries not recoveries, recovered gold rates, I guess, to improve going through H2?
Yes, we do. We've had a pretty big start to the wet season up there actually and, 2 or 3 pretty big thunderstorms. So like any heap leach plant, as you know, you know, once you start getting a little bit of, I guess, dilution from the heavens, on the pad you see different solution, sorry, gold concentration coming through the ADR, but at the moment, yes, we're tracking in line with expectations and the assets will come home, if we proceed right, pretty much in terms of guidance.
Okay, thanks. I appreciate your time today. Thanks.
We'll take our next question from Dan Rollins from RBC Capital Markets. Your line is open. Please go ahead.
Yes, thanks very much. I don't want to focus on the financials too much here, but just back to that account, the question on tax, you didn't highlight that Tabakoto was part of the cause, but my understanding of the financial statements is that Tabakoto is no longer included. And continuing operations. And the continuing operation tax expense seems still to have been fairly high with fairly chunky moves at both Agbaou and Ity. I was wondering if you might be able to comment on that or if better take it offline?
No, I would if you could, I would, because there is a the reason for the day, the penalty at Tabakoto, but it's in the discontinued operation. And for the tax, when you look at the tax, for the continuing operations. That's true that there is an increase, but it's also due to the fact that we have increased withholding tax at Huiti as well. As you can see as well on the segments reporting, you see that the tax as ity are increasing which is not the income tax, but this is a tax related to, again, the provisioning tax because you have 9,000,000 you have $9,000,000 profit before tax at ity for the 6 months period. And you have, and you have $9,000,000 of deferred income tax.
So that explains the abnormal level of tax that it explained this increase at the group level. But again, it's a one off for the second quarter. So I agree with you.
Okay, perfect. And can you confirm just that Agbaou, you won't be paying cash taxes there until 2019. That's when the current agreement expires, correct?
It expires in, at the end of 'eighteen, yeah.
Yes, thanks.
Okay.
It appears there are no further questions at this time. Mr. Dumontis, I'd like to turn the conference back to you for any additional or closing remarks.
Thank you very much operator. Thank you all for joining us for this quarter 2 results. And again, thanks to my team and Have a nice and lovely day. Bye.
This concludes today's call. Thank you for your participation. You may now disconnect