Thank you for standing by. This is the conference operator. Welcome to the K92 Mining third quarter financial results conference call and webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to David Medilek, Vice President, Business Development and Investor Relations. Please go ahead.
Thank you, operator, and thanks everyone for attending K92 Mining's third quarter 2022 conference call. We hope you and your families are doing well. In addition to myself, we have on the line John Lewins, Chief Executive Officer and Director, and Justin Blanchet, Chief Financial Officer. I would also like to remind everyone that after the remarks from management, the call will be followed by a Q&A session. As we will be making forward-looking statements during the call, please refer to the cautionary notes and risk disclosure in our MD&A and slide two of the webcast presentation. Also, please bear in mind that all dollar amounts mentioned in the conference call are in United States dollars, unless otherwise noted. Now, I'll turn it over to John to provide you with an overview.
Well, thank you, David, and welcome everyone. In the third quarter, we took another step forward, delivering multiple operational milestones, including record ore processed, record ore mined, near record development advanced, strong all-in sustaining and cash costs, while also ending the quarter with the company's strongest financial position to date. Q3 marked the first quarter where we achieved the Stage 2A expansion run rate of 1,370 tonnes per day for an entire month, having achieved 1,373 tonnes per day during the month of August. Quarter-over-quarter, mill throughput increased 8% to 1,282 tonnes per day.
Strong mill throughput performance is particularly significant as it was achieved without the installation of the new flotation cells, which will roughly double a rougher flotation capacity, highlighting that there is further upside in terms of throughput and also obviously in terms of improving our recovery. Installation of these cells is planned for early 2023. Lastly, third quarter delivered two major growth milestones, the integrated development plan evaluating the Stage 3 DFS and the Stage 4 PEA. In addition to that, we also reported our maiden inferred resource at Blue Lake of 10.8 million oz gold equivalent. Subsequent to quarter end, we also delivered high-grade drilling results at Kora, Kora South , Judd, Judd South, as well as maiden results for our Northern Deeps target, representing a significant expansion to our strike length while also intersecting dilation zones in both Kora and Judd.
The integrated development plan demonstrates at Kainantu we have a tier one asset. The resource at Blue Lake highlights the significant potential within our copper- gold porphyry belt, and the high-grade vein field results show that we may have only just scratched the surface of our vein exploration to date. Now, if we look on the safety front, again for the quarter, we recorded no lost time injuries, and we are proud to operate with one of the best safety records in the Australasian region, and we continue to have a strong focus on our occupational health and safety and continually improving our safety systems. On the ESG front, I'm pleased to report that during the quarter we published our 2021 sustainability report.
The report features multiple highlights, including being the second largest payer of corporate tax in Papua New Guinea's mining industry, a carbon intensity which is well below global average, which we plan to continue to improve on, a focus on local employment and training, and significantly, contributions to a wide range of social programs, including but not limited to education, infrastructure, business development, female employment, and COVID-19 programs. K92 is very proud of the positive impacts that we have on our local community and on Papua New Guinea in general, and I encourage you to read the report, which is found on our website, k92mining.com, in the responsible mining section. Now in August, K92 participated in the Chamber of Mines and Petroleum full-day industry briefing, which was given to the parliament.
That included our VP of Government and Community Affairs, Philip Samar, who's also the vice president of the chamber, delivering the main presentation on the mining industry, and then myself delivering a presentation on Kainantu operations. Philip Samar's presentation provided an overview of the economic contributions to the mining industry of Papua New Guinea. The presentation which I delivered was focused solely on Kainantu, focusing on our growth plans, positive contributions to date, various community programs, and projections for the positive impact of the operation with our Stage 3 and Stage 4 mine expansion plans. All presentations I think were well received, and we had very good local media coverage, which included coverage of K92's presentation in the local TV station, EMTV, with a not particularly great still of me from that.
During the quarter, K92 was also recognized as a TSX30 company, which is the Toronto Stock Exchange's flagship program for top performing stocks over a three-year period on a dividend adjusted share price appreciation. K92 is proud to be part of that TSX30, ranking number 11, having delivered a three-year return 333%. Moving on to operational performance. During the quarter, we produced 32,995 oz gold equivalent with 117,938 tonnes processed at a head grade of 9.8 g per ton. Compared with third quarter 2021, ore processed, ore mined increased 35%, 37% respectively. A major positive continues to be the strong performance of the process plant.
In the third quarter, average mill throughput was 1,282 tonnes per day, and that's 17% over the Stage 2 run rate. In August, as I've mentioned, the plant achieved a record throughput of 1,373 tonnes per day, which is slightly above the Stage 2A expansion run rate, 1,370. In July, after the installation of our new TC- 1000 crusher, we had multiple daily records, including 1,638 tonnes milled on July the 6th and 1,642 tonnes on July the 14th. Performance, I think, is especially impressive when you consider that a key part of the plant upgrade being the installation of the flotation cells, which will double our rougher capacity, will only occur late this quarter, in fourth quarter or early in 2023.
The flotation cell upgrades is not only important to improve our recoveries, but also boosts our flexibility and potentially allows us to increase our throughput rates even further. In terms of our key operational physicals, K92 delivered record quarterly ore processed and record ore mined. Mining exceeded milling rates, ability. Development advance also recorded its second highest quarter advance to date. Increasing our development rates continues to remain a focus, and I am pleased to report that subsequent to the quarter end in October, that our guidance is based on the second half of the year being stronger than the first, and we certainly saw that in Q3. K92, we believe, is well positioned to achieve its guidance of 115,000 oz-140,000 oz gold equivalent for the year.
I'll now turn over to our Chief Financial Officer, Justin Blanchet, to discuss our financial results for the third quarter.
Thank you, John, and hello everyone. During the third quarter 2022, K92 had revenue of $36.4 million, a 3% increase from prior year. We sold 25,297 gold oz at an average selling price of $1,663, compared to 21,675 oz at an average selling price of $1,707 in the prior year. As of September 30th, 2022, K92 had 6,795 gold ounces in inventory, both concentrate and doré, an increase of 3,783 gold ounces when compared to June 30th due to timing of sales.
Cost of sales was $20.8 million compared to $20.1 million in the prior year, or $15.2 million compared to $15.3 million when you exclude non-cash items. Cost of sales is marginally higher due to increased costs associated with the operation of Stage 2 Expansion and inflationary cost pressures. The successful ramp up of Stage 2 Expansion has allowed the company to achieve a better economies of scale and lower unit costs with mining activity increasing from 88,857 tonnes in Q3 2021 to 122,035 tonnes in Q3 2022. During the third quarter 2022, cash flow from operating activities before changes in working capital was $12.8 million compared to $12.6 million in the prior year.
During the quarter, we spent $10 million on expansion capital and made a $4.8 million corporate tax installment payment in Papua New Guinea. It is worth noting that a significant portion of our cash and cash equivalents is held in Canadian dollars, and at our reporting date of September 30th, the Canadian dollar was relatively weaker against the U.S. dollar, and K92 recorded an unrealized loss due to foreign exchange. During the third quarter, K92 completed a bought deal financing for gross proceeds of CAD 50 million. As of September 30th, 2022, we had the U.S . Equivalent of $106.7 million in cash and cash equivalents and our strongest working capital balance to date of $120.1 million. K92 has no debt on our balance sheet.
As John mentioned, during the third quarter, the K92 gold operations produced 29,256 oz of gold, 1,666,076 lbs of copper, and 32,161 oz of silver, or 32,995 oz of gold equivalent. We sold 25,297 oz of gold, 1,551,981 lbs of copper, and 28,396 oz of silver. We incurred a cash cost of $503 and an all-in sustaining cost of $909 per ounce of gold, which was significantly below our realized selling price of $1,663 per ounce.
Our Q3 2022 cash cost per ounce decreased to $503 from $596 in the prior year. The decrease in cash costs was primarily due to the successful ramp-up of the 400K expansion, allowing the company to achieve better economies of scale and a 17% increase in gold ounces sold. It is important to note that after commissioning the Stage 2 plant expansion in late third quarter 2021, we have seen a significant compression in our total unit costs per tonne processed. We continue to see downward pressure on costs via economies of scale as operations ramp up. I will now turn the call back to John to continue with the rest of the presentation.
Well, thank you, Justin. Well, for the exploration and growth section of the call, we'll begin with highlighting that recently K92 hosted an analyst tour on October the 19th and 20th, which was a fairly comprehensive two-day visit featuring tours and presentations covering mining, processing, infrastructure, expansion, mine, regional geology, community, human resources, and a helicopter tour of our regional exploration. We take a lot of pride in providing a comprehensive tour, and this was the first tour since September 2019. I believe the analysts on the visit that had been to site previously would have been extremely impressed at how the operation has progressed since their last visit. Those analysts that were on their first visit, I think should also have been very impressed with what they saw on site and operation.
The photo here shows analysts and others at the twin incline portal, one of the twin incline portals. Of course, these portals did not exist when the last analyst tour took place. Our second photo here, you can see the analysts in front of the high-grade Judd vein system, J1 Vein on the 1305 level, which is the uppermost level of our Judd development to date. Again, first time that any of the analysts would have seen Judd underground as Judd existed, it existed when we had our last analyst visit with the current high-grade vein mineralization at Judd being made during the pandemic. At the end of the tour, the analysts attended a dinner organized by K92 with government officials in Port Moresby. This included the Honorable Sir Ano Pala, who is the new Mining Minister.
That's him on the right. See him there in a photo with myself, as well as Jerry Garry, who is the Managing Director of the Mineral Resources Authority or the Mines Department. In addition, we had several of our key business partners present as well. We understand it's the first time that a PNG Mining Minister has met with analysts in such an informal setting, and I think that reflects the standing that K92 has in the country. It's probably a first for many of the analysts as well. Looking at our production growth strategy. Stage 2 Expansion, as you're aware, the 400,000 tonnes per annum was achieved third quarter 2021. Stage 2A, well- advanced.
We actually achieved the run rate, the final remaining upgrade being the installation of the flotation cells, which will more than double our rougher capacity as planned late this quarter or early in 2023. In September, we were pleased to announce the integrated development plan for our next phase of growth, which is the Stage 3 definitive feasibility study to 1.2 million tonnes per annum throughput, and then Stage 4, which sees a further increase of that to 1.7 million tonnes per annum as a PEA. I think both cases outline tier one scale, low all-in sustaining cost, and we'll discuss that integrated development plan in more detail a little bit later in the presentation.
In terms of Stage 2A, filter press, additional TC-1000 installed and operational, and the mine has achieved its Stage 2A throughput in the third quarter. Flotation cells, as stated earlier, are the major upgrade that was still outstanding. Once those flotation cells are commissioned, we expect to see a notable boost to recoveries, as well as having considerable flexibility and potentially increase our throughput further. In Stage 2A, we expect to see a meaningful incremental boost to our free cash flow generation, and that in turn will see a potential increase throughputs beyond Stage 2A design. That again will strengthen our ability to self-fund our growth even further. We continue to progress the upgrading, expanding of our infrastructure in the long term. As shown here in this drone footage of the mine portal area, we recently completed construction of our new equipment workshop.
That facility is more than three times larger than the previous facility, in addition to being a more modern facility with overhead crane, et cetera, et cetera. The yellow arrows on the slide highlight some of the key infrastructure which has gone in place around the portal since that last analyst visit in 2019. The tailings dam storage facility has also seen a major upgrade, as you can see from this slide, with the latest lift almost completed, where we're adding about 1.6 million cubic meters of additional capacity. Tailings dam lift is a downstream design and also features some of the latest monitoring equipment, providing real-time information and remote monitoring. Earthworks have gone very well, and as a result, we plan to continue to build the next lift on an ongoing basis.
Now, as noted earlier, mid-September, we reported our integrated development plan for the Stage 3, alternate Stage 4 cases. In both cases, major expansion from 2A deliver tier one production and costs. Stage 3 DFS outlines a peak annual production of 309,000 oz gold equivalent per annum. Stage 4 PEA outlines peak production of 500,000 oz gold equivalent per annum. The Stage 3 case involves the construction of a new standalone process plant next to the existing plant with a capacity of 1.2 million tonnes per annum, and that being commissioned second half of 2024. The Stage 2A plant being idled at that point in time.
The Stage 4 PEA involves a new standalone 1.2 million tonne per annum plant again, and again, commissioned second half of 2024, with the Stage 2A plant then being reactivated second half of 2026, increasing our total capacity to 1.7 million tonnes per annum. As you can see, in both cases, we achieve the design run rate for about three years, and then we're dropping off. Exploration is a key focus to not only maintain that peak production, but potentially look to expand it. Later in the presentation, we'll discuss the latest exploration results. You can see that we've been successful in considerably expanding the deposit strike length since the latest resources were released last year, which underpinned the integrated development plan.
I'd also note the 1.2 million tonne per annum plant has been designed in both cases to be able to be cost effectively expanded. When we look at Stage 3, we achieve, as we mentioned, peak production 309,000 oz gold equivalent. Life of mine average co-product all-in sustaining cost is $732 an ounce or $545 an ounce net of by-product credits. Stage 4, peak production, 500,000 oz gold equivalent. Life of mine average co-product all-in sustaining cost of under $700 an ounce or under $450 an ounce net of by-product. Both cases, as you expect, generate considerable cash flow, self-funded from mine cash flow at $1,600 an ounce.
Run rate in both cases generate substantial annualized cashflow, highlighting the significant NPV growth potential through expanding peak production life beyond that exploration that I flagged. In terms of sensitivity to gold price, you can see a gold price of $2,000 an ounce. The DFS case NPV5 increases 46% to $855 million. In the PEA case, NPV5 increases 38% to $1.8 billion. On the twin incline, which is the key long lead item for these projects, the furthest incline has now advanced a bit over 1,701 m as at the end of October. The performance of development crew has been very strong year to date, with the twin incline advance exceeding budget by around 39%.
The twin incline, as we previously mentioned, has been significantly oversized, capable of 5 million tonne per annum and beyond with the installation of conveyors, enabling the infrastructure to meet our Stage 4 Expansion and potentially go beyond that to Stage 5 or maybe even Stage 6. I think the decision to oversize the twin inclines when we commenced development in 2020 continues to look like the correct decision as our exploration continues to show great potential. Drilling is underway at multiple high priority targets, Kora, Kora South, Judd, Judd South, and also Northern Deeps. Just a step back in time, perhaps. It's probably quite instructive to go back to this slide, which was actually something we presented at the previous analyst tour in September 2019.
There you can see the small additional resource that we put in at Kora North and our drilling targets on the long section. I think it's an interesting reference point to show how rapidly exploration is transforming Kainantu. Here's our latest resource long section, and it's showing both Kora and Judd. Remember that high-grade mineralization at Judd at depth was only discovered in the third quarter of 2020. The effective date of the Kora resource is October 31st, 2021, so that's just over a year ago, and the effective date for Judd is December 31, 2021. Now, here's a long section of Kora South going out to Northern Deeps as well from our latest drill results in October. Since the last resource update in late 2021, we've had a major pivot from infill drilling to resource growth drilling.
To date, almost every hole has intersected mineralization. The latest drill results have extended the drill deposit strike length by approximately 600 m to the south, and the second hole that we put in the Northern Deeps target, drilled from the twin incline as it advances towards Kora, intersected significant mineralization 700 m north of the Kora resource, much further north than we were actually expecting, and recorded just over 3 m at 7.18 g per tonne gold equivalent. When you consider, to date, we've defined a strike length along the Kora South vein system, 2.65 km. As we observed in Kora resource, tenor tends to increase with depth.
Targeting Kora South from underground has also delivered some very promising initial results from our southernmost drill cutting, with hole KMDD0495 intersecting a potential dilation zone projected to be over 400 m vertically from the previous dilation zone at KUDD0002. KMDD0495 recorded 30.55 m, 12.82 g per tonne gold equivalent. There, some 400 m above it, we recorded from KUDD0002, 35.9 m at 5.98 g per tonne. In terms of targeting over the next year, the rate of drilling is expected to increase as we advance underground infrastructure, particularly the twin incline and the Kora South drill drive. Currently, we're drilling Kora South, Kora, Northern Deeps, and we plan to commence drilling at Kora Deeps around mid-2023 as the twin incline progresses to the south.
We also plan to increase the number of underground rigs from six to seven with the purchase of an additional rig. All of the underground rigs are ours . In terms of Judd, the latest resource has also increased with strike length of around 130% from the drilling that we've done. The results to the south at Judd have delivered very strong hit rate. 61% of surface holes drilled have exceeded 5 g per tonne to date, with a very solid average thickness of 3.8 m. Judd South, similar to Kora South, also intersected a dilation zone, with the latest result, KUDD0017 recording 25 m at 20.89 g/t gold equivalent, and KUDD0023 recording 19.9 m at 3.89 g/t.
These holes are proximal to the first hole that we ever drilled in Kora South, KUDD0001, which recorded 66.55 meters at 5 grams per tonne gold equivalent, one of the thickest intersections we've ever recorded in the system. Again, in terms of targeting, we're currently drilling Judd South, Judd, Northern Deeps. We plan to drill Judd Deeps in that second half of 2023 as the twin incline comes along. Surface drilling at Judd also underway. Two rigs on the surface, and they're looking to extend the Judd resource up dip in the same way that we've seen at Kora. Surface-wise right now, we've got two rigs that are drilling Judd within the mining lease. We've got two rigs that are drilling Judd South and Kora South to the south.
We're obviously very encouraged with the latest results. Something of an understatement, perhaps, which continue to intersect our dilation zones. These zones represent a potential endowment multiplier with significantly greater tonnes per vertical meter or per square meter. Based on our emerging understanding of these systems, we believe that they have the potential for considerable vertical extent, as well as some limited strike extent. An increasing focus of our exploration programs is to target these zones and increase our understanding of their potential. Now, in Q3, we also announced the major milestone of our porphyry exploration being the maiden Blue Lake inferred resource, 10.8 million oz gold equivalent or 4.7 billion lbs copper equivalent. The resource is large, has a high-grade core that is open at depth.
It's actually the fifth largest known porphyry in Papua New Guinea and was defined with under 17 km of drilling, and the cost was less than $1 per ounce gold equivalent. Now, shown in the long section, the resource has defined a high-grade potassic core with increasing tenor at depth. The porphyry environment appears to be well-preserved, limited erosion, little evidence of faulting, as you can see from the relatively high degree of symmetry in this resource section. The porphyry is open at depth, and there is some evidence that we have not yet hit the high-grade core of the system at depth. We believe there's a strong expansion potential through step-out drilling. From our exploration at Blue Lake, we've gained a tremendous amount of knowledge and plan to apply it to other targets within that prospective porphyry belt.
In late 2021, we flew a MobileMT advanced geophysics over our entire land package, and the results from this confirmed several known porphyry targets in addition to highlighting the potential for additional targets. We know that in Papua New Guinea, porphyries tend to cluster, and there are five targets defined near Blue Lake. The work clearly shows A1 is our number one porphyry target. It has a very strong conductivity response while also being situated in a very prospective geological environment. Essentially, it's believed to be the heat source for the main high-grade Kora, Judd, and Maniape/Arakompa deposits. Additionally, from field mapping, Blue Lake, A1, Ayena are within the same large lithocap, indicating the potential for additional porphyries in between. Soil sampling at A1 is now well underway, and from these samples, we plan to establish an appropriate program of diamond drilling to be commenced early in 2023.
Now, lastly, and certainly not least, I'd like to highlight that our soil sampling program at Kora South/Judd South has recently encountered some really encouraging results towards A1 porphyry. A substantial 750 m by 100 m high-grade gold anomaly was recorded just outside of the target outline for the porphyry. Based on geophysics, this also corresponds to potentially a major structural convergence of the Kora, Kora South, Judd, Judd South vein system, with possibly the structure hosting Maniape/Arakompa vein systems. Follow-up work is underway with soil sampling, plus we'll then move to a drilling program. With that, operator, I'd like to commence our Q&A session. Thank you.
Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Alex Terentiew with Stifel. Please go ahead.
Hi, guys. I want to thank you again just for hosting us on that great site tour last month. It was a really great event. Just one question for me. Not really an operational one, but more on the financials. I know that you note here in your financials that you entered into some hedges to help offset short-term, you know, provisional pricing. Then in the revenue line, you've got a loss on receivables of fair value. This quarter, it was almost $9 million. Can you just help me, you know, better understand, you know, where that number is coming from?
Okay. Thanks. Thanks, Alex. Yeah, it was good to have all you guys on-site. In terms of that provisional pricing adjustment that you're referring to, obviously, we get a price adjustment which relates to the fact that we get paid 90% of our what we're going to get paid when we actually dispatch our concentrate. Sorry, before we dispatch our concentrate, when it actually arrives in Lae. Then we get a final pricing, which is the pricing that we actually get based on the outturn at the smelter. We do have some hedging to limit that, but obviously over the last quarter, we've had quite a big adjustment on that.
Then at the end of the month, we fair value our receivables using the October metal prices, and they were materially lower than July, August, and September. We do also have our final adjustments for assay outturns on copper, gold, and silver. They, in this particular quarter, that was a negative adjustment in terms of ounces, although a couple of those are actually, we're looking at going to umpire on them.
Okay. Okay, that's great. It is a provisional pricing and adjustment number. I just wanted to make sure I wasn't missing something there, but. Okay, no, that's it for me. Thank you very much.
Thanks, Alex.
Once again, if you have a question, please press star then one. The next question comes from Michael Gray with Agentis Capital. Please go ahead.
Yeah, good morning, John, and thank you very much again, as Alex mentioned, for the excellent site visit. Couple of questions from me. On the political front, clearly you have a strong push in terms of government relations. A couple things. Did the ESG report you guys published really resonate with the government? And what's the outlook for the mining license renewal process, and what's the status?
Thanks, Mike. So in terms of ESG, we printed multiple copies of our ESG report and at that parliamentary briefing that I mentioned, we actually distributed copies to all of the parliamentarians there. Certainly in the meeting that I've had with CEPA and also with MRA, there's been a reference made to it and positive reference. Importantly, I think CEPA is the environmental department and under the environmental minister. In a meeting I had with the environment minister and his first secretary, they were specifically talking about carbon footprint, carbon credits, et cetera, and where PNG wants to go on that.
That's a particularly important issue in PNG as it is in all of the Pacific region right there. Yes, there has been a good degree of resonance in terms of ESG. In terms of the renewal of the mining lease, we put our application in earlier this year. It's been going through process, which is warden's hearing. Warden's hearing are then followed up with our technical review. In our case, we have submitted to the MRA our 43-101 on the integrated development plan, the expansions.
In fact, I know that they're well down the track in their evaluation of that because we've had a number of queries come back in terms of what we're doing there, and we've provided answers to all of those queries. I've met with the managing director of the MRA specifically in relation to the renewal, and he's been very clear that it's getting a priority from the MRA. Process on an ML renewal is quite clear under the Act. You put your application in. First Stage is initial evaluation of your ML. That's followed by warden's hearing, and the warden's hearings are in areas around the mining lease, all of which have happened and have been positive. That then is followed up by a technical review by the technical team.
That then gets to a recommendation from the MRA, from the managing director. That is submitted to the MAC, the Mineral Advisory Council, which is actually chaired by the managing director of the MRA. They make a recommendation on renewal, and that is sent to the minister for his signature. The minister under the Act has no discretionary power in relation to the renewal of the mining lease on a recommendation from the MAC. He can certainly ask for additional information or raise any issues he may have, but he does not have discretion in terms of renewal. We're well down the track as I've been advised by the MD. Certainly our expectation is probably early in 2023 to get the renewal.
I think we could have got it quicker, but we've had a little thing with an election, so it's stuck in between, which does tend to hold up what various government departments are doing. Hope that
Very good.
Answers the question.
Yeah. No, no, very, very well. Appreciate that color. The other question is, just timing for further work at Blue Lake. You've had some international consultants, you know, there and, on quite a few occasions, and you're, you know, really highlighted on the site visit the, potential to depth and on this call at Blue Lake. Is that gonna be, something you prosecute, before A1? Or maybe you could just let us know, you know, are you really leveraging things you're learning at Blue Lake and at the, A1 first? Maybe also, I might have missed it, but the soil sampling that you mentioned, 700 m by 500 m soil sampling, did that actually cover part of A1?
First off, the next drilling program that we have planned is actually at A1.
Yep.
That will occur after we've completed our surface soil sampling. I think, you know, part of the mapping that we've done has highlighted that there is a large lithocap that covers Blue Lake, A1, and one or two other known porphyries as well, and potentially obviously some unknown porphyries. We see them all as effectively one porphyry swarm, for lack of a better word. We combine the mapping that we've done with the geophysics that we flew late last year and with the work, the results that we got out of Blue Lake, and A1 does come up pretty much as the number one target at this point in time. The focus certainly next year will be on A1.
In addition to that, it's initially a relatively shallow drilling program, the same as we did at Blue Lake, where we started off with sort of holes down to about 500 m as an initial program, and then a second program of deeper holes vectoring into where we believe that potassic core to be. We'll follow a similar program at A1. Blue Lake, there are plans and intent to do further work at Blue Lake, further drilling at Blue Lake. It will be deeper drilling because obviously from what we've seen to date, that high-grade core appears to increase at depth. We're looking at, you know, 1,000+ m holes, looking for increases in grade at depth, which is certainly we've seen a number of indications.
As you referred to, we've had some fairly well-known international consultants in, and they've expressed a similar view, although we're waiting for a couple of reports from people that there is great potential at depth for the grade to increase. Certainly there is significant work planned on the porphyries. In relation to that, surface sampling, soil sampling that we referred to in slide 36, I think it was, that is immediately outside of the porphyry target. If you look on the slide, you'll see there's a couple of yellow lines. Just to the south of that highlighted area, there's a yellow line, and that yellow line delineates the A1 porphyry target.
Okay.
It's just outside.
Okay. Very good. Thank you very much, John and team.
Thanks.
The next question comes from Andrew Mikitchook with BMO Capital Markets. Please go ahead.
Morning, John. Thanks for a very comprehensive review here on the conference call and hosting us on the site visit. Just a very quick question. Can you give us some sense whether we should be expecting any scheduled maintenance or scheduled downtime at the mill for bringing on the last few pieces of two A here between now and the beginning of next year? Or maybe potentially between now and when you provide guidance for next year so that we can make some interim adjustments before you give us more detailed adjustments.
Okay. Thanks, Andrew. Again, good to have you at site last month. In terms of the installation of the two flotation cells, there will be some small downtime where we do the final hookup of piping and what have you. It will be scheduled such that we do the hookup when we do one of our planned maintenance shutdowns. You know, as you'd expect, we pretty much have planned maintenance shutdowns every month. We run on basically an availability, I think, of 8,000 hours a year, which is a bit over 91% availability on the mill. We're probably tracking above that, I think, this year- to- date.
That's what we base our operational numbers on. Yes, there will be some stoppage to do the final hookup. It's been designed such that it'll be minimal. Obviously we've been through this with putting in the new cleaner, recleaners and also with the changes that we made to our rougher section, for instance. We've done quite a bit of it in the past. The guys are pretty used to it. In terms of timing, we expect to have the flotation cells on site this quarter with the final hookup in first quarter 2023. That will certainly be taken into account when we give our guidance. In all honesty, it won't be.
It will not be a material impact in terms of downtime. It is, however, important in terms of achieving the sort of recoveries that we want to achieve, the 92%, 93% recovery. It's important from that context and therefore, it gets a high focus from us as something that we wanna do very early in the first quarter next year.
Sure. Well, thank you very much for that, and we look forward to a big year next year. Thank you.
Yeah. You and us both. Thanks, Andrew.
The next question comes from Don DeMarco with National Bank Financial. Please go ahead.
Thank you. Good morning, John and team. I got three questions. I'll start with the first one. Regarding the Stage 2A Expansion, John, after the flotation cells are installed, you're expecting a notable boost to recoveries and higher throughput. Can you quantify this? I mean, that is like above the recoveries that have been in the low 90s and throughput above the target of 1,100 tonnes per day for the last three quarters.
Look, in terms of recovery, so first off, as part of the definitive feasibility study in PEA, we've actually done quite a lot of test work in Perth on flotation. One of the things it highlighted was that additional residence time in the roughers could add one or two percentage points to our recoveries. Hence, although Stage 2A is a 25% increase in throughput, I see pretty much doubling our rougher capacity. We're actually looking to give ourselves quite a bit of extra capacity on the roughers. Second thing is that the roughers are a bank of two cells or two banks. Each has four cells in parallel. From an operational perspective, roughers of four cells only and then basically you're going out to tails.
It's actually a very, very short rougher circuit. That's what we inherited. In my view, it's the circuit that was built there was probably one of the poorest I've ever seen, and I've seen a lot of flot circuits in my time. Adding the additional two flot cells, larger flot cells up front, increases your effective bank to six cells, which allows us also to convert probably the last cell in each of the two banks to a scavenger. Therefore, allow us to not only increase our residence time, but also improve the circuit in providing a scavenger, which currently we don't have. If you look over the last quarters, we've been in the low 90s, high 80s, low 90s. We're certainly looking for recoveries in the 92%-94%.
It's 1 or 2 percentage points, but that's significant for us.
Great.
In terms of throughput, we've got some pretty good metallurgists, I think, working for us. That's seen with taking a plant that when we when we took over the mine, it had a rated capacity of 170,000 tonnes per annum. We refurbished it to 200,000 tonnes per annum. Stage 2 obviously took it to 400, and Stage 2A has taken it to 500, which is pretty much where we're running right now. We've basically tripled the capacity, and we haven't added any additional mills. We've added flotation, we've obviously added crushing capacity, and we've done quite a number of other changes in the circuit.
We think that with some tweaking, we can probably add another 10% to the throughput and so potentially get it up to maybe 550,000 tonnes per annum. We'll certainly be looking for another 10% from it. Our mets are quite adamant that they can get it, and with a few bits and pieces of debottlenecking. Certainly we will be looking to do that debottlenecking and potentially get another 10% out of the plant.
Okay. That's great. Thank you for that. For my second question, this focuses on the exploration update in mid-October, where you showed an additional extension of mineralization at Kora and Judd to the south. When would you expect to reach and test what you're calling a potential feeder zone? Is it a matter of months or years? What might you expect to find there?
Wow, now those are big questions. That's one of the biggest questions I think you can ask, actually. In the context of getting towards that feeder zone, obviously, that area that we highlighted in slide 36 is right next to the interpreted A1 porphyry target, which we believe to be the main source. Drilling in that area, we anticipate doing this quarter. Right now we've completed some detailed mapping over A1 and associated areas, and we're busy right now with a detailed soil sampling program over that area that will be completed this quarter, and we'll start getting our results back this quarter. We anticipate getting the first rig in there early next year.
Right now we're going through our scheduling of rigs and what have you, but looking potentially at first quarter next year to actually start doing some drilling down there to the site I'm talking about. Now, I guess the other thing in terms of looking at feeder zones is also Kora Deeps. We've got those areas of Northern Deeps, Kora Deeps and Kora South Deeps. The twin incline as it comes in, we will continue to operate diamond rigs underground. Right now we've got one on that twin incline. We expect next year there'll be two that will actually be operating in the twin incline. One's gonna focus on Northern Deeps, one will focus on Kora Deeps.
Obviously those are answers that if we can identify answers there, we can bring them to account very quickly. It's also looking at, you know, the alternate feeder zones. You can still have A1 as a feeder zone, but it doesn't necessarily have to have come along strike as you know, it could have come at depth. It's really about covering all bases, if you like. Because of course, so far we don't know how deep it goes. We just know that wherever we've drilled to date, we hit it. Kora Deeps, Kora South Deeps have potential as that source as well. To put it into context, I mean, right now we've got 10 rigs operating. We've got 11 rigs at site.
We've got another surface rig that's come to site. Certainly going into the budget for next year, there's an additional underground diamond rig, which will take us up to seven diamond rigs underground. There's an additional surface rig, which will give us three of our own surface rigs. Right now we also have three contractor rigs on surface. Potentially would take it up to about 13 rigs total operating on the site, underground and on the surface.
Okay. That's great. Yeah, a number of potential catalysts there then. For my final question, also on exploration, you've been intersecting these dilation zones that have wide intervals of mineralization. Can you give us an indication when you might have some economics wrapped around these or the timing of potentially adding to a mine plan?
We're looking at an updated resource, I think the third quarter of 2023. That would be looking to then feed into additional work in looking at things like what is the impact of that on the mine. Those dilation zones, remember, are in the exploration area right now, not in our mining lease.
Yeah. Of course, yeah.
Certainly there's a pretty strong focus on those dilation zones and in fact that whole Kora South area to put it into a mine design study, because that's one of the areas that we're targeting for a new mining lease application.
Okay. Okay. Well, thank you very much. That's all for me. Good luck with the rest of the year.
Thanks, Don.
Once again, if you have a question, please press star, then one. The next question comes from Arun Lamba with TD Securities. Please go ahead.
Thanks, operator. Just quickly, John, can you just update the status on potentially getting a revolving credit facility? I know in my numbers I don't have you needing it for the expansion, but I believe there was some talks about potentially getting one. Any update you could provide would be great. Thanks.
Thanks, Arun. Yes, look, we've certainly progressed that. Obviously a key for putting that revolver in place has been to complete the Stage 3 DFS, generate something called reserves. You may not have noticed, but for the first time this quarter, we've been able to use some fairly strong language from a geological sense and a mining sense. We have actually been able to use that magical word ore. Because now we have reserves and having those reserves is an important aspect in terms of putting the revolver in place, as is having a financial model, both of which we now have and we're providing to a number of banks. We've set up a data room for the banks and we've got our financial model.
We would certainly anticipate going through that process in more detail in the first quarter next year and probably having the revolver in place by the second quarter of next year. As you said, you know, the numbers certainly don't say that you need it, but we wanna make sure we've got that flexibility. At the same time, you know, there's a strong commitment on the exploration front for obvious reasons. There's just so much potential. We wanna make sure that we're able not only to maintain our current exploration spend, but actually to look at increasing our exploration spend over the next couple of years while we're at the same time obviously doing the major expansion.
Sounds great. Thanks.
Thanks, Arun.
This concludes the question answer session. I would like to turn the conference back over to John Lewins for any closing remarks.
Oh, thanks, operator. Look, in many ways, this has been our most exciting quarter. Certainly, many people within the organization believe it's been an incredibly exciting quarter. We've brought out that resource on Blue Lake, almost 11 million ounces gold equivalent, which I think quite a number of people didn't see coming. We've also got our integrated development plan for Kora-Judd, which sees us move under the DFS up to 300,000 oz a year and under the PEA, going beyond that and up to 500,000 oz a year and really reinforces that this is very much a tier one asset.
We've also covered in this call put out over 90 holes of exploration from both surface and underground that have reinforced the consistency at Kora and Judd. It really we believe set us up for a good close to 2022. Then even more excitement we believe as we go forward into 2023, where we'll have more rigs than we've ever had operating. We'll be covering more targets than we ever have. It just seems, and of course, we'll be going forward with our major expansion to move this into Stage 3 and then potentially Stage 4 over the next few years.
As I say, this has been probably one of our most exciting quarters, but it's just leading into, we think, more of the same in the fourth quarter and all of next year. As they say, watch this space. Really appreciate your time and attention this morning. Since we're not gonna talk until after Christmas for our next quarter, wish you and your families all the very best for the festive season, balance of this year. Hopefully we all have a great 2023. Thank you very much.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.