Thank you for standing by. This is the conference operator. Welcome to the 2023 Q1 financial results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there'll 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, President. Please go ahead.
Thank you, operator, and thanks everyone for attending K92 Mining's Q1 2023 results 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 in 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 over to John to provide you with an overview.
Well, thank you, David, and welcome everyone. During the Q1 , the operation continued to progress on multiple fronts, performing strongly in all areas other than grade, and that was due to some unexpected short-term challenges, which we'll go into this presentation. I was in Papua New Guinea late last month. The operation is certainly on top of those challenges, and the mine has performed well since mid-April. There is a major focus on increasing our operational flexibility on multiple fronts, and this is obviously something that will continue. I think it's important to highlight that we've got a strong mining track record, having successfully mined Kora for five years and Judd for almost three years, while at the same time successfully expanding our whole operation during this time, increasing throughput by 250% in a pandemic environment.
There are multiple positives from Q1, and we'll continue to build off those. Process plant performance has been very strong, exceeding our expectations and continuing to set throughput records. Development, which has been a major focus, delivered another consecutive quarterly development advance record. Finally, K92 achieved multiple growth catalysts and milestones during the quarter, including strong exploration results on Kora South, Judd South, and also commencing exploration drilling for the first time ever on the A1 copper-gold porphyry target, which we see very much as our number one target. On the safety front, we recorded no lost time injuries during the Q1 . As the chart shows, since commercial production commenced in 2018, K92 has operated with a lost time injury frequency rate well below industry average.
As previously reported subsequent to the end of the quarter, with some profound sadness, we had to report that on May, two individuals were fatally injured during a vehicular accident. The accident occurred off-site, so it wasn't on the mining lease area. In fact, it was on a remote country road some distance from the mine, so mining operations were not impacted. I would like to say on behalf of K92 Mining to the family, the friends, the coworkers of our two colleagues, we offer our sincerest condolences and heartfelt prayers during this time. Safety has been, always will be a major focus for K92. On the ESG front, I'd like to begin with providing very positive progress update on our Tax Credit Scheme.
After multiple meetings last year, the committee has now been formed and the endorsement of the first round of projects is planned in the near term. For clarity, the Tax Credit Scheme allows for 2% of K92's assessable taxable income to be allocated to eligible projects, primarily focused on infrastructure, and then we get a commensurate tax credit granted. The program effectively partners with government to deliver even more projects and benefits to communities, and multiple priority targets have been identified. Importantly, the Tax Credit Scheme is in addition to our existing community programs.
While in Papua New Guinea in late April, we had the pleasure of hosting the board of directors of K92 for a site visit to our operations, plus meetings in Port Moresby with a wide range of stakeholders, including representatives of government, Papua New Guinea Chamber of Mines and Petroleum, suppliers, service providers, industry, academia, and, of course, the media. The picture here shows our Chair, Andy Jardine, with this year's recipients of our K92 Mining Tertiary Scholarship Program, plus two recipients from a scholarship from our JV partner, PNG. Each K92 scholarship recipient receives a medal which honors a senior Papua New Guinean leader within K92. The program itself is an annual program to third-year students in the study of mining, metallurgy, geology. This year, we added women in mining.
Scholar recipients also when they complete their fourth year, they then join the mine and go into our two-year graduate training program. I'd also like to announce that this coming year we will be adding a further scholarship, which will be a postgraduate scholarship, which will be the Tookie Angus Memorial Scholarship in honor of a late chairman. The board of directors also had the honor of having dinner with the Prime Minister of Papua New Guinea, the Honorable James Marape, the Governor of Eastern Highlands Province, the Honorable Simon Sia, and Member of Parliament for Kainantu District, the Honorable William Hagahuno. Of course, the support of government continues to be a major factor in our success. Moving to operational performance.
During the quarter, we produced 21,488 ounces of gold- equivalent with 117,903 tons processed at a head grade of 6.35 g per ton gold- equivalent. That compares with Q1 2022, ore processed increased 18%. Cash cost of $758 per ounce, and all-in sustaining costs $1,506 per ounce. Production during the quarter, as we've alluded to, was impacted by two short-term issues which gave us eight days of unplanned plant maintenance, and then the challenging ground conditions localized area at Kora, which I will discuss in some detail later in the presentation.
In terms of the key operational quarterly physicals, Kainantu delivered near record ore tons processed and mined, plus record development, which we see as particularly strong when you consider the short-term challenges it faced during the quarter. As noted, in previous conference calls, increasing our development rate continues to remain a major focus as we catch up on the development that was impacted due to COVID and of course, subsequent to COVID, supply chain issues. I'm really pleased with the development rates that we've achieved in the past two quarters with the arrival of another jumbo during the last quarter, and then we have a further jumbo to mid-year and then another one by the end of 2024. We'll be looking to build on these two quarters and continue to expand and increase our development rates.
In addition to the strong development advance rates, a major positive in the Q1 has been the performance of the plant. In March, we set a new monthly record, averaging 1,490 tons per day. That's 9% above the Stage 2A Expansion rate. The plant also set four new daily records during the quarter, as shown in the chart here, with the current record now standing at 1,815 tons processed in a single day. Stage 2A Expansion is currently undergoing its final commissioning, and we see the potential for a further throughput upside with this. As previously reported during the Q1 , unexpected operational challenges occurred in both the process plant and the mine.
At the mine, notably more challenging ground conditions than expected were encountered in a localized area in late February, that impacted on production stopping rates and access to a large high grade Avoca stoping area, which is circled here in the diagram. Generally in this situation, the mill feed will be supplemented by mining from additional higher grade mining fronts as we mine through the impacted area more slowly. In this case, as I think you can see from this diagram, our backup stops would have been located on the 1285 level at Kora, that top access for Avoca in the 1305 level was not yet completely developed, that really comes down to below budget development rates for several quarters during COVID, which we've shown previously and you saw in our operating results.
As a result, the mill feed was supplemented with lower grade material from underground, as well as some low-grade stockpile material that we maintain. I think it's important to highlight, firstly, that we do intend to mine this area in the future, so it will come back into our production. That when we introduce paste fill, which is part of that Stage 3 Expansion, that will provide a big boost to our geotech and mining sequence flexibility and better enable us to manage any future situations such as this. I think for our stoping sequence, it's also important to highlight that Judd has extremely good geotechnical conditions, and we've not experienced any areas with localized challenges there. You know, we're now developing the 1305 level in Judd, and so we'll have multiple large stoping areas going forward, as you can see in this diagram.
I think importantly, we are following our stoping sequence for 2023 plan, which does drive our guidance. Looking at the underground mine performance for Q1, moderately impacted first half of April due to the challenges noted in the previous slide. However, since then, the mine has been performing well. The stoping sequence has set ourselves up for a strong second half of the year. On the process plant front, as previously mentioned, there were a total of eight days of unexpected plant downtime. Now, that was due to a mill trunnion bearing failure and a limited electrical fire in a cable tray in the wet section of the plant. Pleased to report that post those, the plant has performed extremely well and in fact has set new records on the throughput front.
I think it's also important to highlight that we see the underground mine continuing to strengthen as the year progresses. There are multiple positive factors driving this. Firstly, our development rates have been very strong for each of those last two quarters, each one being a new record, and we see that very much as a leading indicator. Secondly, we've received key pieces of equipment already this year to date and more expected going forward, and that provides a boost to our capabilities underground. We'll show some photos later in the presentation on that. Lastly, after commencing underground development of the twin incline in 2020, we expect to mine the first ore tons from the lower mine in Q4. That is well ahead of schedule, and that's been driven by strong advance rates in the twin incline.
Ore tons from this area were not planned until 2024. Now, we will actually see our first tons come out in 2023. That establishes a major mining front at depth and supported by obviously the large and very efficient infrastructure. I'd also like to highlight that the localized area of challenging geotechnical conditions that we faced in Q1, there is also an opportunity there for us. As much as this sub-parallel structure is mineralized, it's not currently in any of the mine plans in the DFS or PEA. Potentially provides us with a significant upside in throughput. We're working with our own people and consultants to determine its resource potential and the best way to unlock it through the mining. Lastly, I'd like to reiterate that K92 has a significant plus five-year track record of mining and expanding operations.
Long hole stoping commenced in early 2020 and has been successfully executed and ramped up. We maintain our outlook for production to be within our guidance range, albeit in the lower half. I'll now turn over to our Chief Financial Officer, Justin Blanchet, to discuss our financial results for the Q1 .
Thank you, John, and hello, everyone. During the Q1 of 2023, we had revenue of $40.4 million, a 23% decrease from prior year. We sold 17,602 gold ounces at an average selling price of $1,807, compared to 26,471 ounces at an average selling price of $1,769 in the prior year. As at March 31st, 2023, there was 3,292 gold ounces in inventory, including both concentrate and doré. A decrease of 320 gold ounces when compared to December 31st due to timing of sales. Q1, 2023 cash flow from operating activities before changes in working capital was $16.5 million, compared to $22.5 million in the same period prior year.
As of March 31, 2023, we had $88.6 million in cash and cash equivalents. The decrease in cash and cash equivalents when compared to December 31 is primarily a result of spending $12.7 million on expansion capital, decreasing our accounts payable other than landowners' accrual by a net $7.3 million, and increasing our mine supplies, consumables, and fuel by a net $3 million during the quarter. As at March 31, K92 had one of its strongest reported working capital balances of $117.3 million, despite record expenditure of $23.5 million for property, plant, and equipment during the quarter. Further, as at March 31, receivables had increased to $35.1 million from $29.3 million at December 31.
Inventory had increased to $31.9 million from $28.5 million, and accounts payable had decreased to $29.8 million from $37 million. The company has no debt on the balance sheet. Q1 cost of sales was $23.7 million, compared to $22.5 million in the prior year, or $16.7 million compared to $17.7 million when you exclude non-cash items. Despite an overall increase in cost of sales, the company achieved better economies of scale and lower unit costs when measured for each ton of ore produced, attributable to the successful ramp up of the Stage 2 Expansion, with ore tons mined increasing from 100,124 in Q1 2022 to 117,865 in Q1 2023.
As John mentioned, during the Q1 , the Kainantu gold operations produced 17,593 ounces of gold, 1,651,297 pounds of copper, and 29,859 silver ounces, or 21,488 ounces of gold- equivalent. We sold 17,602 ounces of gold, 1,538,590 pounds of copper, and 29,164 ounces of silver. We incurred a cash cost of $758 and an all-in sustaining cost of $1,506 per ounce of gold, which was significantly below our selling price of $1,807 per ounce.
Our Q1 cash cost per ounce of gold increased to $758 from $536 in Q1, 2022. The increase in cash cost was primarily due to the lower head grade material compared to prior year, as John Lewins mentioned. Our Q1 all-in sustaining cost per ounce of gold increased to $1,506 from $788 in Q1, 2022. The increase in cost per ounce, in addition to the lower head grade material, can be attributed to the $11.2 million spent on sustaining capital as compared to $5 million in the same period prior year. The increase in sustaining capital is a result of increased capital development when compared to prior year, as well as replacing some equipment during the quarter.
It is important to note that after commissioning the Stage 2 Plant Expansion in late Q3 , 2021, we have seen a significant compression in our total unit cost per ton 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.
Thank you, Justin. For the exploration and growth section, we begin with the Kainantu Gold Mine strategy growth pipeline. On Stage 2A, we're pleased to be in the final commissioning stage with the last item being the rougher flotation currently being wet commissioned. Stage 3, we've made considerable progress on the tenders. We'll be awarding the various long lead items by the end of the month, and we're currently out on tender for the EPC for process plant and the paste fill, and we'll be looking to award these by mid-year. After completing that tender process, we plan to release a growth capital guidance update and schedule update. Next lift on the tailings dam has already commenced. That's well ahead of when it's required, and it's already 20% complete.
The video that you see here was taken last week, and that's the wet commissioning of the Stage 2A rougher flotation circuit expansion. That expansion, an additional two cells, but those additional two cells are far larger than the existing cells, and that more than doubles our rougher capacity. With these commissioned, we believe we'll see 1-2 percentage point at least improvement in our recovery, as well as providing us with potentially further ability to increase our throughput. Over the last few months, we are obviously pleased to have received quite a number of pieces of key equipment, underground equipment. This particular image shows our new jumbo in action. That arrived in the Q1 . We've got another jumbo due mid-year, and then a third new one is then due before the end of the year.
In Q1, we received a new longhole rig. That's our second longhole rig. That's an important addition because obviously it doubles the size of our fleet, provides us with greater flexibility and ability to steadily grow our drill stocks. During the quarter, other equipment arrivals included a new loader, as shown here, two integrated tool carriers, cement agitator, Normet charging machine. That equipment is designed, obviously, to expand our fleet, improve our productivity by replacing some additional equipment as well. More equipment is on the way. The two Cat trucks you see here, they are currently on the water between Brisbane and Lae, and we expect these to arrive in country by the end of the month. That significantly enhances our truck fleet.
Now on the twin incline, the furthest incline has now achieved 2,315 m as at the end of April, so that's a couple weeks already ago, and that's tracking well ahead of schedule. Incline development is now something like 80% complete. As you can see from the diagram, the twin incline advance is now getting very close, or in fact, it's within the Kora-Judd deposits. Q4, we actually plan to commence mining from the lower portions of the Kora resource from the twin incline, which is well ahead of schedule. That was only planned for next year, and it's a result of the twin incline being significantly ahead of schedule, as we've mentioned.
Importantly, it creates a significant boost to our operational flexibility as we're now establishing a new mining front at depth and obviously located in that new infrastructure area. In terms of the vein field exploration, drilling is underway at Kora South, Judd South, Northern Deeps, and shortly it'll be Kora Deeps. We're now looking at a long section here of Kora South. To date, we've defined a potential strike length of something like 2.65 km, with exploration from the surface focusing on Kora South. Underground exploration is targeting Kora South, and as I mentioned, imminently, Kora Deeps. With the twin incline significantly advanced, as shown by the arrow here in the diagram, we're in the process of moving a second diamond drill rig into the twin incline, and that drilling is to advance basically from north to south.
Obviously, this is one of our most highly prospective targets, and importantly, is within the mining lease, so it's adding ounces that are within the mining lease. Additionally, Kora South, Judd South drill drive has made significant progress advancing to the south. Drilling is underway from that drill drive, and we're certainly pretty excited to be testing that down dip extension of Kora South from underground, including importantly, that Dilatant Zone that we've reported previously, and you can see some of the numbers that we've had there. When we look at Judd South, again, shown in the long section. To date, we've defined something like 1.7 km of strike length. Judd South is open in multiple directions. Unlike the Kora South, we've intersected mineralization in almost every drill hole to date.
Again, like, the Kora South, the advancement of the underground infrastructure is opening up highly prospective drill platforms to explore at depth. We plan to provide the exploration update of our vein drilling later this month. On the porphyry exploration, after announcing that the maiden Blue Lake inferred resource of 10.8 million ounces gold- equivalent or 4.7 billion pounds copper equivalent, which is the fifth-largest known porphyry in Papua New Guinea, we have now got drilling underway at A-1. A-1 at this point in time is our number one porphyry target based on our airborne advanced mobile MT geophysics, which was flown in late 2021, and also from our surface mapping. As you can see from this image, A-1 is interpreted to be part of the same large lithocap complex that hosts Blue Lake and also the Arie target.
We're currently drilling our second hole at A-1 and look forward to providing an update on that in due course. With that, operator, we'd like to commence the 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. Our first question comes from Alex Terentiew of Stifel. Please go ahead.
Yeah. Good morning, everyone. Just two questions from me. First, I know that the mill capacity, pardon me, is the ultimate bottleneck, you know, when it comes to the mining the lower levels that you can lower levels of the mine that the incline is gonna connect to in Q4, you know, how should we think about the production potential from that incline, you know, as we look into 2024? I'm just wondering, you know, do you have the equipment and the people? I know we're still talking, you know, six-plus months away, I'm just trying to get a sense of, you know, what mining rates we could see from the mine as, on an overall basis once you guys get into that zone.
Okay. You said a couple of questions, Alex. Was there another one?
Oh, yeah, sorry. Yeah, the other one is just more on the Stage 3 Expansion. Just wondering if you can give us some color on timing of that spend over the next couple of years. I know a lot of the cost is development, and you guys are spending as you go along on that. Just trying to think of, you know, spending over the next two years as we, you know, something to kind of put into our model to better forecast cash flows.
Thanks. Thanks, Alex. In terms of the, first of all, the capacity from the lower levels, in the coming out of the twin incline. I guess there's a couple of things that are important there. One, as we reported, we do have now a second long-hole rig. We actually have an ability to operate in two different areas in the mine in terms of stoping, and that's only recently happened. That's only in the last quarter. As I said, right now, there is nothing in the schedule at all for tonnage from that from that lower level. Right now, we just don't have an actual schedule of what we would mine. Realistically, you're opening up a new area. You've got to do development along strike.
Of course, you've got to, you've got to develop multiple headings within the within the actual ore bodies themselves. I'm, you know, we're not looking for a lot of tons this year. Quite frankly, if we got 10,000 tons or thereabouts out of it in the Q4 , that would probably be a reasonable number. Next year, the vast majority of our tons come from the existing mining areas. That's both Kora and Judd. I certainly wouldn't see more than around 20% of our tons tops coming out of that lower area. That really would be the top end of our expectations. As you said, ultimately, the plant right now is our bottleneck. It seems to be an expanding bottleneck.
Quite frankly, the plant continues to surprise us with its capacity that we are getting from it. Certainly it's something that we're gonna be looking at in our budgeting process next year. In terms of the Stage 3 Expansion spend, as we've said, we will give guidance on that by around the end of this quarter. We've got the tenders due in, I think actually next week. I think we have a series of calls with the tenderers next week, going through their detail. We should be able to provide some detail to assist with the cash flow models by the end of this quarter. Obviously, there are two aspects to it. One aspect is ongoing sustaining capital.
I think we've given guidance, I think, or it certainly comes out of the studies that you've got around $60 million a year over the next four years for your sustaining capital. I think it's reasonable to be modeling that simply on a quarter-by-quarter basis, equally split. In terms of the expansion capital, we expect it to follow a classic S curve as you would for any of this sort of project. The detail of that we'll only really be able to provide end of the quarter.
Okay. Very good. Thanks, John.
Our next question comes from Ovais Habib of Scotiabank. Please go ahead.
Thanks, operator. Hi, John, and Kinross team. Just a couple of questions from me. John, starting off with my first question, just on underground development. You recently received a new equipment, jumbo, and you received an additional jumbo and loader. You're expecting to receive an additional jumbo and loader shortly. Two parts over here. Is there a specific underground development rate that you are targeting? And what do you need to get there? Do you need additional equipment? Do you need additional people? Second part of this question is, how many stopes are you currently mining from and preparing versus where you need to be to be comfortable sustaining a 500,000 ton run rate?
Okay. I guess first of all, in terms of the underground development target rate, the target by the end of this year is to be developing at approximately 1,000 m a month. We've scheduled our new equipment to be able to meet that schedule. Right now we're running at around 800 a month, and the current equipment obviously is sufficient for that. As was mentioned, we've got an additional twin boomer coming in, and that together with the second one I think we've got coming in the Q4 , will give us the ability to get up to our 1,000 m plus a month. I think in the original studies, that was about the level that we needed to get to.
We are looking at getting up to around 1,200 a month next year, simply to catch up on those meters that we dropped during COVID. We will have, I think, one or two additional twin boomers coming in next year as well, and other equipment. We've placed the order for our first larger scale equipment, which is a 21 ton loader versus the 17 ton that we're currently using. We've also, I think, ordered our first of our larger trucks, which are the 63 ton trucks as opposed to the current 45 ton that we're running. We are also looking at scaling up as the twin incline comes in comes into production.
In terms of a number of stopes, I mean, currently we have, I think four stopes that were mined in Judd during the quarter. I think we had three stopes that were mined for Kora. That actually is sufficient for 500,000 tons per annum. In fact, it's sufficient for a bit more than that when you bring in your development tons. We'll be running with the same sort of number. I think if you look at for the balance of the year, I think we've got about nine stopes of various sizes coming out of Judd.
Kora only has five or six, depending how you define them, coming out. They are significantly larger stopes than the stopes that we've got planned for Judd. We tend to have larger stopes.
John, just, and really thanks for that color. Just in terms of, you know, the dollars that you're looking to spend, let's say in terms of, you know, catching up on development this year. Would you think based on the equipment that you have and based on the people that you have, you will be able to spend that? Or do you think that's gonna be, you know, spilling over into 2024?
An interesting question actually, Ovais. Certainly some of the capital spend that we had planned for 2022 did spill over to 2023. In the main part, that was capital. Although there is obviously, because some of the development would mean sustaining capital, some of it did spill over. I think at this point in time, when we look at what we budgeted in terms of our sustaining capital, we certainly have the equipment to be able to achieve what we've set out to do. We have been recruiting some of those key areas, twin boomers, for instance, twin boom operators, and we have been successful at recruiting those.
At this point in time, our expectation is that we will spend the money that we've said we will this year. We will continue to spend at that rate over the next couple of years. I think importantly, there's a couple of things there that are perhaps important. One, the twin incline, which has obviously been going for a couple of years now, actually gets to the end of the mining lease, I think it's this year. Late in the Q4 . It may go over to the Q1 , depending on how we focus on our ramps going up and down. You know, we've been spending in excess of $1 million a month on those twin inclines. That's very much coming to an end.
There are other things that we're doing, obviously, including the internal ramps to connect the twinning incline up. That's been a, obviously a major expenditure for the last, the last two years, 2.5 years. You know, you'll see sort of expenditure in that area dropping off, but obviously that means that we're focusing on development in other areas.
Perfect. John, just my last question then, just, moving on to the twin incline then. You know, I think you answered part of my question in the previous, question that was asked. You know, twin incline seems to be ahead of schedule, and that continues to be ahead of schedule. You're looking to mine, the first ore at Kora, I believe, in, Q4. Will the processing of ore from this area get you back and up towards that midpoint of guidance? Or are you still kind of guiding towards the bottom end of guidance based on, you know, how things are progressing, in Q1 and Q2?
Look, I think from our perspective, we would say that our expectation is it will be in the lower half of guidance. We're certainly scheduling from our own perspective that we achieve our tonnages, which basically is for this year, we budgeted 500,000 tons per annum, and that is where we're guiding at this point in time. Is there potential to push more tons? Obviously, there is. At this point in time, we haven't built that into our budgets for the second half of the year.
Got it. Thanks for that, John, and great color. Appreciate it.
Thank you.
Our next question comes from Arun Lamba of TD Securities. Please go ahead.
Hey, John. I think you answered the first part of my question when Alex asked. Just, did I hear it right? You said you expect to release results of the tender process by the end of this quarter. The second part is just, is that around the time we also expect a potential credit facility announcement?
Thanks, Arun. Yeah. We'll, we expect to award tenders by the end of the quarter. As I said, I think, I think it's next week we're due to go through them with the tenders. In terms of credit facility, we're targeting the same sort of timeframe. Personally, I think it will probably push out to the Q3 in part because it'll probably be a consortium. We're actually looking to bring in PNG Bank into that consortium, which is something that has not been done before. The local banks, Kina Bank, have not historically been involved in the resource industry. We've actually been approached by them to be part of a revolver-type structure.
That's something that we're actually quite keen to do from a couple of reasons. One is that, you know, it involves then more of the PNG business community in our business, which I think is important in making it robust and inclusive. Secondly, from a political perspective, that would be, I think, extremely positive for the government, and it would be a good message that, you know, local business, local finance can be involved with multinational companies, which is, there's a capacity building aspect to that, which is really important, I think, for that local financial business and also for the government.
Thanks. That's it for me. Thanks, John.
Thank you.
Once again, if you have a question, please press star then one. Our next question comes from Andrew Mikitchook of BMO Capital Markets. Please go ahead.
Morning, John. Thank you very much, for going over that in great detail. Just two questions. I realize that part of the answer to the first one is this Q3 CapEx update. Generally, can you just reconfirm the concept that cash flows plus a debt facility is the targeted financing plan for phase three?
Yeah. Thanks, Andrew. In terms of covering our CapEx requirements, sorry, both in terms of sustaining capital and expansion capital, that fairly much comes from our cash flow. We have also, as we said, putting making arrangements to put in the revolver facility. That's more than anything else to ensure that we maintain, for instance, the sort of exploration expenditure that we've committed to this year, and we're able to continue to commit to it in 2024 and 2025. If anything, be able to look at expanding that spend. Yeah, very much, if the question is sort of more design of, you know, is there an equity component required for all the things that got planned?
The answer is, that there is no equity requirement, no.
Thank you. Just secondly, there was discussion of continuing unit cost improvement that you saw in Q1 extending into the year as throughput comes up. Can you characterize what you're seeing on the ground in terms of unit or consumables, maybe inflation? Are your unit cost savings outstripping any inflation you're seeing, or are you seeing some savings from kind of peaks that we saw previously on some of these consumables and costs that you guys are subjected to?
Yeah, that's a good question because it is a bit of a mixed bag, Andrew Mikitchook. We certainly are not seeing the pressures that we saw last year. You know, where it seemed that many of the areas, including, I think one of our highest was in explosives, where there was significant increases that came through in explosives. We're not seeing that sort of pressure coming through. I think our labor costs were up about unit labor costs that were in terms of what we pay our people were up about 5%. Overall, our labor cost per ton went down because we're simply doing more tons. We're not, as you know, you don't have to expand your workforce by a commensurate number to the amount of tons that you increase by.
Certainly when we look at the Q1 , you know, we saw spend in almost every area in unit terms of cost per ton come down. Important areas would have been processing, I think, was probably the lowest cost that we recorded. Finance and admin down significantly. Maintenance also down significantly. General administration was also down. We've seen significant downward pressure, which as you alluded to, a lot of that, of course, is simply that we are increasing our tons mined and our tons processed, and we obviously expect to see those economies of scales, and we are seeing them come through.
I would say that inflationary pressure in terms of the consumables that you are buying, has come down significantly from where it was last year.
Great. Thank you very much for those comments, John. I'll pass the microphone to the next speaker.
Thanks, Andrew.
Once again, if you have a question, please press star then one. Our next question comes from Chris Thompson of PI Financial. Please go ahead.
Hi, good morning, team. Thank you very much for taking my question, and thanks for all the details and your answers to all the other questions asked. Just a quick question, I guess, a lot of my questions have been answered, but just going back to the plant. Have you got any timelines for the, for the completion of the commissioning there?
Chris, when you're talking completion of the commissioning, you mean the new roughers?
The new roughers. That's right. Yeah.
Yeah, we, I mean, we expect to have them fully operational by the end of the quarter or before the end of the quarter. You know, it's not a big section really. I'll be on site later this week. I expect to see them, you know, while I'm there, I certainly would be expecting to see them start being integrated into the flow sheet on a pretty much full-time basis. Certainly by the end of the quarter.
That's great. Thank you very much. Thanks.
Once again, if you have a question, please press star then one. This concludes the question and answer session. I would like to turn the conference back over to John Lewins for any closing remarks.
Thank you very much, operator. Look, thanks everyone, for your participation this morning. I think, you know, when you look at this past quarter, and this start to the year, without doubt it has been one of the challenging ones for us. We've had a number of areas where obviously the performance hasn't been what we've been looking for. What I really think is important from our perspective is that we've had those. We've faced them, we've got over them, and we've shown ourselves able to handle those and move forward. I think operationally, we come out the other end, stronger and more focused on areas where we need to improve.
I think that's both from a corporate level and from an operational level. I would perhaps like to just reflect on also the fact that we saw the passing of our Chairman, who's been the chair of the company since we started, Tookie Angus, and I know that a number of people on the call were at his celebration of life just a short while ago. It was a rather exuberant almost celebration of life. I think it reflected very much the exuberance of our chair. I would like to reflect on that and reflect on the contribution that he made to this company.
maybe finally, while not directly linked to the quarter, as we mentioned during the presentation, we did have an accident, which was outside of the mining lease, but nevertheless was two of our people who, unfortunately, were fatally injured in an accident. again, reflect on that. certainly it's impacted us. I think we are a team and a family, and that's impacted a lot of people within the organization. It's also I think for us, it's made us, again, refocus our energies in that safety area and look at how we can do things better. to the family, friends, and the colleagues, condolences for those losses.
We certainly look forward to the balance of the year, with a positive mindset. We have actually achieved a lot during the quarter. We did hit quite a number of new records. It gives us good energy for the balance of the year going forward. As I mentioned, I'm heading out to site later this week, and looking forward to spending a bit of time there and seeing how things are progressing. With that, again, thank you all for participating in this call. Stay well. Thank you.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.