Good day. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lucara Diamond Q2 2023 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then one on your telephone keypad. If you would like to withdraw your question, please press star two. Thank you. Zara Boldt, CFO and Corporate Secretary, you may begin your conference.
Thank you, Michelle. Good morning and good afternoon, everyone, and welcome to Lucara's Q2 2023 conference call. I'm Zara Boldt, Lucara's CFO. Joining me on the call today is Dr. John Armstrong, our Vice President of Technical Services. I'll take you through a review of our second quarter results before turning the call over to John. We should have time for some questions at the end. On the second slide here is our cautionary statement. Just a reminder that we will be making some forward-looking statements today. Please do refer to this slide. Certain financial measures that I will refer to during today's call and which appear in the presentation are non-IFRS financial performance measures. These include Adjusted EBITDA, Adjusted operating earnings, Operating cash flow per share, and Operating costs per ton of ore processed.
Please refer to our interim MD&A for details on how these measures are calculated. As a reminder, all references are to U.S. dollars unless otherwise stated. Let's begin with some highlights from the second quarter ending 06/30/2023. We recognized revenue of $41.1 million during the 3 months ended 06/30/2023, and we generated Adjusted EBITDA of $15.7 million. This was done safely and in accordance with our plan for the year, and as a result, we are maintaining our annual guidance for 2023. Specials recovered were 6.6% weight of production and included 13 stones greater than 100 ct.
We generated cash flow from operating activities of $9.2 million. Despite continued inflationary pressures, particularly for labor, a strong US dollar offset an increase in cost over the comparable period, resulting in an operating cost per ton processed of $27.97. The longer-term outlook for natural diamond prices remain positive, anchored on improving fundamentals around supply and demand, as many of the world's largest mines reach their natural end of life over the next decade. Following on the record-high diamond prices achieved in early 2022, a softer diamond market emerged in the latter half of 2022. This has persisted into the second quarter of 2023. The result of global economic concerns, combined with geopolitical uncertainty, including the ongoing conflict in Ukraine. Prices continue to show signs of stabilization, however, as China continues to open up post-COVID.
Sales of lab-grown diamonds increased during the period. Intense competition, combined with improvements in technology, continued to drive prices of lab-grown diamonds down. This further differentiates this market segment from the natural diamond market and highlights the unique nature and inherent rarity of natural diamonds. The longer-term market fundamentals remain unchanged and positive, pointing to strong price growth over the next few years as demand is expected to outstrip future supply, which is now declining globally. About three weeks ago, we provided an update to the schedule and budget for the Karowe Underground Project. John will go through that update in more detail shortly.
The duration of the construction period increased, extending the anticipated commencement of production from the underground from the second half of 2026 to the first half of 2028. The revised forecast of costs at completion is now $683 million. The long-term outlook for diamond prices, combined with the potential for exceptional stone recoveries and the continued strong performance of the open pit, could mitigate the modeled impact on project cash flows due to scheduled slippage. We have notified our lenders of these changes. Our debt package consists of a project finance facility of $170 million, which is to fund the development of the underground expansion at Karowe. A $50 million senior secured working capital facility. The working cap facility matures on September 1st of this year.
We have requested an extension to the maturity date in accordance with the terms of the facility. There's no guarantee that this facility will be renewed on the same terms as maturing. Historically, we've used the working capital facility to manage our short-term working capital requirements. If we are not able to extend, amend, or replace that facility, we will be required to repay all amounts drawn as of the maturity date. Prior to 09 /05/ 2023, we will be required to place $52.9 million in a cost overrun facility. The loan agreement includes specific provisions for how and when these funds may be released. The balance for that facility was $18 million as of June 30.
Concurrently to the requested extension of the working capital facility, the company has also asked for a deferral of the September 5th deadline to fund the cost overrun requirement. The company's largest shareholder, Nemesia, has agreed to provide a liquidity backstop guarantee of $10 million, while discussions with the lenders are ongoing. Due to these near-term commitments, there is doubt regarding our ability to meet our commitments and discharge our obligations in the normal course of business. We do believe that we will be able to resolve the noted items through ongoing engagements with our lenders and with the support of our largest shareholder. There can be no assurance that these efforts will be successful.
Please refer to the Liquidity and Capital Resources section in our interim MD&A, and to note one of the condensed interim consolidated financial statements for the 3 and 6 months ended 06/30/2023. Let's move now to review the operational highlights from the second quarter. During the second quarter, we mined about 683,000 tn of ore and 900,000 tn of waste, and we processed 723,000 tn of ore, all in line with expectations. We recovered 90,497 ct at an average grade of 12.6 ct per 100 tn. We recovered 162 Specials this quarter, including 13 diamonds in excess of 100 ct, which equates to 6.6% weight Specials from production.
88% of the ore processed during the second quarter was from the South Lobe, with the balance from Centre Lobe. We sold 72,717 ct in the second quarter through our three sales channels, and I'll speak to those results in more detail in a moment. The operating cost per ton of ore process was $27.97 for the quarter. Despite continued inflationary pressures, a strong US dollar offset an increase in cost over the comparable period. Looking now at our financial highlights for the second quarter. Total revenue was $41.1 million, included $5.5 million in sales through Clara. This result is reflective of an expected change in product mix for the first half of 2023, and it is consistent with the mine plan.
A softer diamond market in the first half of 2023 resulted in lower achieved prices when compared to Q2 2022, when prices reached a multi-year high. We anticipate that the second half of 2023 will be stronger as a greater proportion of ct recovered from the South Lobe are sold. Adjusted EBITDA was $16 .7 million, with a decrease from the comparative quarter directly attributable to the decrease in revenue. Net income of $ 5 million for the quarter, with the change from the comparable quarter predominantly related to $ 9.2 million decrease in net revenue and lower deferred income tax expense, also due to the change in revenue. We generated operating cash flow before working capital adjustments of $ 16.3 million and an operating cash flow of $ 0.04 per share.
Looking at the first half of the year for our operational highlights, all operating metrics were achieved in line with plan. We are tracking well to our full year guidance. For the six months ended 06/30/2023, we mined 1.2 million tn of ore, 1.7 million tn of waste. We processed 1.4 million tn of ore. We recovered 180,000 ct from direct milling. We sold 156,000 ct. The operating cost per ton of ore processed for the half year was $27.23. Looking at our financial highlights, also for the six-month period, total revenue was $83.9 million. Adjusted EBITDA was $31.1 million. Net income of $6 million resulted in earnings per share of $0.01.
Operating cash flow before working capital adjustments was $30.4 million. Operating cash flow was $0.07 per share. This slide sets out our three sales channels and the results for each of those sales channels. During the second quarter, we recognized revenue of $38.6 million from the sale of 72,717 ct from Karowe, including top-up payments of $5.1 million. The change in quarterly revenue was predominantly driven by three factors: A softening of the market during the first six months of 2023 when compared to the multi-year highs in the first half of 2022. The planned shift in product mix, with 64% of the ct produced in the first quarter this year recovered from Centre and North Lobes.
This would compare to 100% of the ct recovered from the South Lobe in the same period last year. This has an impact on revenue and top-up payments in subsequent periods. Also, a lower Mine Call Factor in the second quarter impacted carat recoveries. Looking at the HB sales agreement for the 3 months ended June 30th, we recorded revenue of $25.8 million, inclusive of top-up payments of $5.1 million from the sale of 2,818 ct to HB. Lower revenue in Q2 2023 is reflective of an ore mix, which included Centre Lobe material. The decrease in revenue in the second quarter this year versus the comparative quarter can be attributed primarily to the number of high-value diamonds delivered to HB in preceding quarters, which were sold in the comparative quarter.
This is observed in the difference in top-up revenue in this table. We recognize top-ups of $13.1 million in the comparative quarter, as compared to top-up payments of $5.1 million in the current quarter. Top-up values will typically increase as the more valuable stones move through production and are sold. The lower top-ups recognized in Q2 2023 reflect the value of the stones delivered and is consistent with the change in product mix during the first six months of this year. For Clara, we sold 2,226 ct of Karowe diamonds, generating revenue of $3 million. The decrease in revenue from the comparative quarter is attributable to the shift in product mix from Karowe earlier this year. Generally, the market was soft, with little change in prices between the first and second quarters of 2023.
Price strength was observed in stones between 5 and 10.8 ct in size. For the quarterly tender, a total of 67,673 ct were sold in the May 2023 tender, generating revenues of $9.8 million. Rough diamond prices remained near a multi-year high point at the time of the comparative quarters tender last year. This quarter's tender results decreased 17% from the comparative quarter. As I mentioned earlier, with both key operational and financial metrics tracking well to plan, we made no changes to our guidance for the current year. I will now turn the call over to Dr. John Armstrong, our Vice President, Technical Services, to discuss some recent diamond recoveries and progress on the underground expansion at Karowe. John?
Great. Thanks, Zara, and good afternoon, good morning to everyone on the call. Going on the slide now, earlier this week, Lucara was pleased to announce the recovery of this 1,080 ct Type IIa white diamond from milling of South Lobe, MPKS ore. This represents the 4th plus 1,000 ct diamond recovered since 2015, and the 3rd plus 1,000 ct diamond since 2019. By all appearances, this 1,080 ct stone has all the qualities of an exceptional diamond. All these large diamonds have been recovered from the South Lobe. I just want to remind everybody that the underground expansion is focused entirely on accessing ore of the South Lobe, which has a demonstrable track record of strong resource performance. You can see the image there.
It's a, it is a, a very nice stone, indications of color. It will be a high-color stone. Clarity-wise, we, we haven't done any scanning on the diamond yet, but that will happen shortly, so we get an idea of the, the internal characteristics of the stone. By all accounts, from those who've held it, it's again, one of the, one of the nicest stones to come out of Karowe, and is really a testament to the strong operational team that we have in place at the mine. One of the, one of the hallmarks, I guess next slide, please, Zara. One of the hallmarks of Karowe is the consistent recovery of plus 10.8 ct diamonds or Specials.
The trends that we've observed in 2023 are consistent with the expectations of the resource and the blend of ore processed. We can see this shown on this chart, which many of you are familiar with, that we can show the consistent recovery of Specials on an annual basis, in particular, when we're feeding material from the South Lobe. Since 2012, we have now 32 diamonds in excess of 300 ct, and as I mentioned previously, 4/ 1,000 ct. Next slide, please. In the second quarter of 2023, as Zara indicated in her remarks, the mill feed was dominated by South Lobe, with approximately 88% of the material going through the plant from the South Lobe.
We produced 162 Specials, 13 diamonds greater than 100 ct, representing 6.6% weight of production, which is in line with our expectations, given the blend of EMPKS and MPKS that went through the plant. What we're showing here is some of the larger stones that were recovered during the second quarter, including a really nice 296 ct stone there, 268 ct, and some other ones. Many of these stones were recovered in the latter portion of the quarter, and revenues are expected to be realized in coming quarters as the stones move through the manufacturing process with HB. Next slide, please. Consistent with previous quarters, as Zara mentioned, we continue to sell our diamonds through a multipronged approach of tendering the goods through the Clara platform and HB.
Obviously, the value components, as we've discussed, previously, is driven by the plus 10.8 ct portion of the productions, generating, you know, in excess of 60% of the revenue coming out of that stream. There's always the opportunity through HB and others to partner with large brands in terms of getting polished goods out into the market. Next slide, please. The HB agreement does allow for a much better and regular cash flow from the large diamonds. In the second quarter of 2023, a total of $20.7 million of revenue came through the HB agreement, excluding top ups of $5.1 million. At the end of the quarter, we had received a total of $20 million in prepayments on the Sethunya from HB.
The image shown here on the, the, the right is the 549 ct Sethunya, which was recovered in the, the first quarter of 2020. Again, is one of the, one of the highest value stones and one of the nicest looking stones to, to come out of, Karowe to date. Next slide, please. Now we'll touch a little bit on, on, on Clara. Zara ran through some of the financial highlights. It continues to be a strong source of revenue for, for Lucara, with over $5 million transacted in the reporting quarter. Third-party goods are becoming a very important source of, of stones, with 48% of the goods transacted coming from third parties. At the end of the second quarter, we have over 100 buyers on the platform.
Those buyers are very active on the platform, and efforts continuing through the remainder of the year to increase that third-party supply. This obviously remains a very key focus area for the Clara team to build out that, that additional supply. Next slide, please. Earlier in July, we announced an updated capital budget and schedule for the Underground Project. The updated schedule incorporates a 20% increase in the duration of construction, extending the anticipated commencement of production from the underground, from the second half of 2026 to the first half of 2028. The revised forecast of cost of completion is $683 million, including contingency, which represents a 25% increase to the May 2022 estimated capital cost of $547 million.
This increase in estimated capital to reach the project completion is predominantly related to the increased schedule duration and related labor costs. Next slide, please. I, I guess I should note also, there are sufficient surface stockpiles to maintain the mill throughput, approximately 2.7 million tn per annum for the duration of the underground schedule. The underground project remains technically and economically feasible. Given favorable outlooks for long-term rough and polished diamond pricing, combined with our conservative diamond price assumptions and the potential for recovery of exceptional diamonds, such as the recent recovery of the 1,080 ct, a high value, Type IIa white, we expect that these can mitigate the modeled impact on project cash flows when stockpiled material becomes the primary feed source for several quarters, and we'll touch on that in a little bit.
Highlights for the second quarter, in terms of the project, we saw each of the shaft sink for approximately 30 m of advance, and the remainder of the quarter was spent in grouting activities within the sandstone units, being the Ntane and the MOSFET Ntane sandstones, which form, you know, the major or the major aquifer in that portion of Botswana runs through these particular sandstone units. We expect to be out of these water-bearing sandstones in the third and fourth quarter of this year for the ventilation and the production shaft, respectively. Looking ahead for Q3 activities, we have resumed sinking in the ventilation shaft. That will progress for about approximately another 10 days, and then we'll transition into an additional grout cover, which will take us out of the sandstones.
The current shaft bottom as of yesterday, was approximately 230 m below collar, or 785 m above sea level in the ventilation shaft. In the production shaft, where grouting activities are ongoing at the moment, is approximately 213 m below collar, and we'll transition out of grouting and get back into sinking in late August for another 30 m advance in the production shaft before we transition back to grouting. I mean, as I noted earlier, expect to be out of the sandstone in the production shaft at the beginning of the, the fourth quarter. Other activities will be focused on construction and early civil works for a bulk air cooler and commissioning a temporary cooling plant in, in the middle part of the third quarter here. Next slide, please.
The next set of slides that we'll walk through here display some of the key aspects of the rebase schedule in terms of some of the major metrics that people like to focus on in terms of tn mined, tn milled, carat recovered, and kind of a dollar per ton profile. I think it's prudent at this point to refer the participants and users of this material back to the forward-looking statements on slide two. As I walk through these and as you consider the numbers on this particular image, what we're showing, again, these are against the rebase, showing the total blended mill feed from underground and from the open pit.
Basically, looking at mine tn from 2023 out to the end of the life of mine now projected into the early 2040s. We can see that through the period of 2026 and 2027, this is where we end up milling some of our existing stockpiles that are on surface, which are a blend of different material from the North, the Centre Lobe, and the South Lobe, and maintaining that 2.7 million tn of mill feed throughout. Next slide, please. This particular graphic provides a little more granularity on the source of mill feed and also provides a kind of a line graph that shows the rock value in terms of dollars per ton. This is dollar per ton is obviously a function of the grade of the material and the average price per carat model attached to that particular rock type that goes through the plant, and people can find that information in our other sets of disclosure. What we can see here through 2025, we still have material coming from the open pit. In 2026 and 2027, we can see that we will have stockpile material going through, including life of mine stockpiles.
The ramp up to production in 2027 through 2028, you can see here this is, you know, ultimately the prize of the underground, where over 90% of the, of the feed in the early years of the underground come from the EMPKS unit, which is our highest grade, highest value, has the coarsest size-frequency distribution, and is a source of three of our plus 1,000 ct diamonds, is, is the predominant ore feed from the underground in the early years of production there. Obviously, looking at the, the dollar per ton figure takes a dip as we go through and are milling those stockpiles, not because of the quality of the goods, but this just is lower grade material.
I think it's important to note that that life of mine stockpile has a significant contribution from the South Lobe, in that in the early years of mining at Karowe in 2012, 2013, and 2014, a lot of the material from the upper benches of the South Lobe went to the life of mine stockpile. This was sort of prior to our understanding of the value contribution from the South Lobe being fully realized. Next slide, please. In terms of now, this particular slide here provides, again, more detail in terms of the, the, the production profile with respect to, to carats, split by the 3 major ore sources, North, Centre, South, EMPKS, and MPKS, and life of mine stockpile. Again, just kind of reiterating this point, in 2026 and 2027, a life of mine stockpile becomes an important contributor.
Obviously, in the early years, as I just noted, of production from the underground, it's predominantly out of the EMPKS, and you can see recovered ct approaching up to 500,000 ct per annum in the early years of the underground. I think I already pointed out in the previous slide that the importance of that EMPKS in the early years of the underground, having a size-frequency distribution profile approaching 88% specials. The next slide here is a high-level overview of the updated capital costs. I won't spend a lot of time on this particular slide.
The users can, can spend time on this one, just noting the $260 million of costs incurred to date on the project and an estimated cost at completion of $683 million . The other numbers are broken out by, by major packages that we're undertaking as part of the project. In the next 2 slides, so if you can advance them, please, Zara. The next 2 slides just speak to the strong pre- and post-tax flow, pre- and post-tax cash flows that come out of the underground and the overall life of mine project. That again, is just sort of reiterating the strong economics of Karowe itself and the underground project. Next slide, please.
The next, this next slide, is basically a high-level demonstration of the metrics or a resume, if you want to call it that, of the remaining life of mine, from 2023 onward out to the early 2040s. We have over 52 million tn of ore left to process through this period, producing about 6.8 million ct, generating approximately $4 billion in additional revenue, using our conservative diamond price assumptions, with no provision of revenue from exceptional diamonds. We know that Karowe has a demonstrable track record of producing these high-value stones on a regular basis. If you work it out over time, approximately every 5 quarters, the mine produces some of these, what we consider to be exceptional diamonds. Next slide, please.
This next slide provides a high-level summary of the rebased schedule, showing shaft sinking, equipping, and underground construction through to the middle of 2024, followed by a ramp-up of mine development and achieving full underground production in the first half of 2028. You can see that the, you know, the focus now over the next 2.5 years is, or 2 years, is basically on sinking of the shafts, the ventilation shaft being the critical path to the project, because the lateral development will take place out of the ventilation shaft in terms of the mine plan, while the production shaft is being equipped. Next slide, please.
Lucara is extremely proud of our safety record, and the, and the people at Lucara Botswana and the operational team and the project teams are also equally proud of our safety record, which remains a strong focus of the operation and the project to deliver on all aspects in a safe and environmentally sound manner. Lucara is aligned with GISTM. We've conducted our self-assessment, are in the process of having an Independent Technical Review Board go through our challenge management system, so that, that process is ongoing. Through the Botswana Chamber of Mines, Lucara has also adopted Towards Sustainable Mining, which has come out of The Mining Association of Canada, and we're leading in Botswana by achieving external TSM verification at the mine site. That was done last year. ISO 45001 certification was granted in 2021.
We are targeting ISO 14001 certification in the next 12-18 months. Lucara contributes 10 of 17 U.N. Sustainable Development Goals, we're very proud to be introducing this concept at the community project level. Our, our community teams, when they go out and we have discussions with respect to upcoming projects, we are planting the concept of these as sustainable, sustainable development goals. The project sponsors and those running the projects get to select which goals they want to work toward. I think this has been a really powerful thing that we've brought to these community projects. This slide shows some of the, some of the initiatives that are ongoing with respect to our community projects.
We're active, in, in many different projects, spanning everything from hardware stores through to small stock and farming and cooperative farming initiatives that are all being quite successful. we can- we participate and are fully supportive of countrywide initiatives, such as the anti-gender-based violence programs, and are obviously are an active participant in those in the local community and communities outside of the Boteti region. Next slide, please. We're just getting ready to, to, to, to wrap up here. I think the investment rationale is stronger than ever for, for Lucara and, and the Karowe mine. We have a positive outlook for the long-term diamond market fundamentals. The underground expansion project is, is underway. it will capitalize on the high-margin Karowe mine asset underground in the South Lobe. We have Clara, which is an innovative, sustainable, and transparent way to transact, transact rough diamonds.
We do feel that the, the investment opportunity and the long-term potential of, of Karowe is, is, is quite significant. With that, that will conclude the, the formal portion of the call today. I'll hand it back to the operator and to Zara, and we can answer any questions that the participants may have.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to remove yourself from the queue, please press star two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. First question comes from Raj Ray of BMO. Please go ahead.
Thank you, operator, and good afternoon, Zara Boldt and John Armstrong. I have a few questions, but I'll first start with your 2023 production. I mean, Zara Boldt, you did mention that you have a second half-weighted production profile, but are you still confident that you should be able to meet the midpoint of the guidance? Are you expecting the lower end of the guidance? If you can, if you or John Armstrong can touch upon, what was the reasons behind the lower Mine Call Factor in Q2, and if there's gonna be an impact in the second half, as well. That's my first question, the second question is on Lesedi La Rona and the comparison with the current stone. John, I don't want you to put in a spot, but if you, if your first blush, if you look at the current stone, how does it compare with Lesedi La Rona in terms of the overall quality? So those two, and then I have 2 more, I'll follow it up later.
Thank you very much, Raj. With respect to your question on the achievement of guidance, I mean, I think we've demonstrated strong operating, results for the quarter and for the half year. It's very consistent with our performance over previous years. So I think we're, we are quite comfortable with, the guidance rating, ranges that we have provided. I think I'll ask John to take the technical question on the Mine Call Factor, please.
Sure. Thanks, Raj. Yeah, we did encounter some lower-than-expected Mine Call Factors in the first part of the year. We really haven't experienced that over the last couple of years, so it was, it came as a bit of a surprise. The team has done a bunch of work on it. There's no, you know, easily or readily identifiable conclusion. There's nothing on the processing side. You know, the resource performance historically has been quite good. Some of the material was Centre Lobe material. We are mining down into, you know, basically the bottom of the available ore in the Centre Lobe. I don't know if that's a contributing factor.
I mean, there's not as much information from the resource model as you get down into the, the kind of the bottom part of some of these, some of these, lobes, in particular, the Centre Lobe. I don't think it's a cause for concern going forward. I mean, we do have to look at the Mine Call Factor in a, kind of a, a long-term view. This is sort of a short term, short-term blip in, in, in, in my view. I, I'm not overly concerned about the low Mine Call Factor in the, the first part of the, part of the year. I, again, don't expect it to be an issue going forward. The question about the comparison of, of the 1080 to, to the Lesedi.
I haven't held the stone, so that's the, you know, everything I say has to be qualified with, I have not actually held on to the, to the, to the recent recovery. In, in discussing the quality of the stone with the team who's seen it in, in Gaborone after it came out from cleaning, I mean, they were very effusive about the color. I mean, I think the expectation is that this will be a top color stone, similar to the Lesedi. Lesedi, as we will recall, when Graff finished polishing, that it came out as a D color. I think the expectation is that this particular stone will, will, will follow on those same footsteps. You know, morphologically, ...
It's a bit of a different shape than the other large stones that we've, we've recovered. You can see in the measurements and see in the photo that it's quite elongate, so there's been a lot of resorption on the stone. There's a couple of nice windows into the, into the stone. Like, as I indicated, we'll be getting ready to do some scans just to understand what's happening on the inside of the stone. You'll see there's a few PKs. We've seen that in other diamonds. I mean, if people go back and, I think, look at some of the images, if we go back and look at the 341 ct stone that was recovered in 2015, which became the, The Queen of the Kalahari, it, it has shared similar features to, to that particular diamond.
I can't really, like, like I said, I haven't held the stone, so my, I can't wait to hold the stone. And I'll be able to get a little more insight into what it looks like. We're extremely pleased, obviously, with the recovery of it. It, it is a testament to, to the operational team. I mean, I, I don't want people to think that, that these are easy stones to recover. They're not easy stones to recover. They are exceedingly rare in nature, and all systems have to be running at, at top form, to have the opportunity to recover these. It's a really, a, a great testament to the operational team. Kind of wandered around.
That's right.
in the answer to that question, but I think it, it's really-
No, that's great.
It is a spectacular diamond.
Okay. Okay, thanks for that, that, that's great. John, oh, while you're on, for the second half of Q2, it was 80% from the South Lobe, 20% for the Centre Lobe. Do you expect the same for the second half, or you have a much greater weighting of, of South Lobe?
It'll, it'll skew to a greater weighting of, of South Lobe. I think there'll be still be some component of Centre Lobe, but the, the, the plan has been to transition back to what we've seen over the previous years of a, of a 100% feed from, from the South Lobe. It may shake out that just on terms of availability and things like that, and our access to ore, that, that some Centre Lobe comes in there, but it's, it's not gonna be greater than the 20% contribution we saw in the, in the latter part of the second quarter.
Okay. Then going over to the underground, shaft sinking. You, you mentioned that the, the average sinking rate has been around, has been around 30 m a quarter. As you get out of the sandstone and the, and the, and get to the normal sinking rate, what sinking rate are you now modeling, to be able to meet, meet your, timeline for the vent and the production shaft? The second thing is, with respect to your underground development, has there been any change, regarding the timeline for the underground development with the, with the recent update, or are you still sticking with the same timeline you had for the underground development as before?
Okay, with respect to the, the advance rate, I would say it was more a coincidence that both shafts sunk about 30 m. We encountered some, some issues in the ventilation shaft, which required some additional grouting and the same as in the production shaft. It, you know, the focus in the, in the second quarter ended up being more about grouting than about sinking. I, I, I wouldn't, I wouldn't want to say that the, the, the 30 m a quarter is, is any type of, of measuring stick. When we get back into the, the main sinking and, and sort of, not sort of, but when we get out of the, when we get out of the sandstones, we'll be into a, a mudstone unit.
We don't expect to be going through this, this sinking and then grouting and then sinking type thing. We should be into a straight-ahead, sinking component. Our advance rates are based on, on the rock types, and are, we're, you know, basically looking at, sort of an instantaneous sink rate in, in, in and around the, the 2 m a day. There are a number of things that, that, that factor into that, in terms of services, the, the concrete liner that gets brought down, the ground support, and, and things of that nature. There has been a lot of work that has been ongoing, with respect to optimizing, those sinking, cycle times to improve our overall advance rate, which are being implemented, as, as we speak.
We're, we're confident that, that what we have in the rebase schedule is achievable with respect to the sinking rate assumptions that, that lie within that. It's, you know, the grouting has been something that has taken longer, and we're being very prudent about it. I think this is an important point to make, is that, you know, what we do with respect to the grouting now to prevent water from flowing into the shaft, into the shafts, benefits the whole duration of the shaft sinking process and the duration and the reliability of those shafts over the life of mine. The time invested now is critical to the success of the overall project and, and getting the grouting right.
That's why we are, are, are being prudent in, in the application of the grouting and making sure that we're, that we're sealing off that aquifer as, as, as best we, as best we can. The second part of your question with respect to the rebase and the underground development, we haven't changed in terms of the overall quantities or things of that nature, m of development. There's been a little bit of, of tweaking to the mine plan, but, you know, basically the assumptions around total m of development and the duration for that underground development, we haven't changed those assumptions in terms of the duration or or the quantities of of development required.
Okay, that's great, John. Thanks a lot for that. One last question for Zara, maybe on the finance side of things. Zara, I mean, you, it looks like, and based on my, my assumptions at least, that there's no near-term concern with respect to the funding, and obviously this 1,000 ct will, will, will help a lot. If I look at the options available, with respect to, can you first touch upon the Nemesia funding shortfall, the $25 million, and if that's still available, if you need it? Secondly, with respect to your working capital facility that matures on September 2nd, are you looking at replacing that with another working capital facility, or would you look at a, let's say, a revolving trade facility?
The third question is, with respect to your discussions, regarding your project loan, how's that progressing? The final part of that question, the, the interest rate swap that you currently have, now that's great, I mean, in this current environment. If there were to be a change in the project loan structure, does that impact your swap, interest rate swap at all? I know it's a lot of questions, but.
All right, I hope you wrote them down. You might have to repeat them, Raj. Thank you.
Yeah, yeah, no worries.
Okay.
Yeah.
With respect to sort of the, the, the near term, I would point out that, as I stated during the call, that the working capital facility presently matures on September 1st, and we do have a commitment under the project facility to fill a cost overrun account to the tune of $52.9 million. We have delivered an extension request to the lenders, they are considering that request. In conjunction with the extension request, our largest shareholder, Nemesia, have agreed to provide a liquidity backstop guarantee to the tune of $10 million. You know, we're pretty comfortable with what the next few months will bring as we work through the rebase here.
But with those two near-term commitments, still outstanding, there, there is some risk around going concern, and I would direct the listeners on this call back to note one of the interim financial statements to have a look at that. With respect to the Nemesia shareholder, $25 million shareholder standby undertaking, yes, it is still in place. It was put in place for a 3-year period, and that the intent of that was in the event of a funding shortfall, that there would be an opportunity there, to draw on that instrument, rather than having to raise equity. That, that's still in place. Okay, sorry. Now I've forgotten the rest of the questions.
Yeah, yeah, no worries. I mean, before I ask other questions, with Nemesia, how does it work? Because when I looked at it, it said $25 million, and there's around 600,000 shares that they get. At current valuation, that 600,000 shares doesn't equate to $25 million. I was wondering if there's any other aspects to it.
Yes, Raj. If you, there, when, when it was set up, there was a share issuance. I, I, it was probably 600,000. I'm sorry, I can't remember off the top of my head.
Okay.
If it is utilized, there is a share issuance. To the extent that it continues to be outstanding, shares are issued for each, it's probably $500,000 or $1 million drawn on the loan. It's... There's a formula for that.
Okay.
Nemesia has provided to a number of the lending group companies over the years.
Okay.
The $10 million liquidity guarantee would follow a similar format. The expectation is that it would follow a similar format.
Okay. Yeah, my other question was with respect to the project loan and how, how are your discussions progressing? I mean, you still have the $170 million, but the repayment structure might need to change. The interest rate swap, does it get impacted if there's a change in your project loan structure?
Thank you. Okay. Yep. It, it's a little bit early to say. We are in discussions with our lenders. We, we delivered them a lot of information at the same time we made the announcement to the market, and so they're working through that and their own processes. As we've said before, the, the project remains technically feasible and economically robust. We are, are quite confident that there remains a lot of value here, and you know, we, we think the lenders see that too. They've, they've been very supportive of the project, and we're, we're working through it with them. As there are updates to report, those will be reported. Thank you.
Okay. Okay, thanks, Zara. That's all the questions I had.
Thank you. Once again, ladies and gentlemen, if you do have a question, please press star 1 at this time. If there are no further questions, I will turn the call back to Zara Boldt for closing remarks.
Great. Thank you very much, Michelle. Thank you everyone for listening in today. We hope you have found it useful. If there are any follow-up questions, please contact us and we'd be happy to take those. We hope you have a good rest of your summer. Thanks again. Bye.
Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.