Morning, ladies and gentlemen, and welcome to the Mountain Province Diamonds Inc. second quarter 2022 earnings call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 10, 2022. I would now like to turn the conference over to Mark Wall, President and CEO. Please go ahead.
Thanks, Michelle, and good day to everyone who's dialed in to listen to our Q2 results call. My name is Mark Wall, and I'm the President and CEO of the company. Also present on the call is Steve Thomas, our CFO, Reid Mackie, our Vice President and Head of Sales and Marketing, Matt MacPhail, our Chief Technical Officer, Dr. April Hayward, our Chief Sustainability Officer, and Dr. Tom McCandless, our Vice President and Head of Exploration. The team will be available for any questions that you may have. Firstly, I would like to draw your attention to our cautionary and forward-looking statement. This presentation will be posted on our website for anyone who needs additional time to review this statement. Mountain Province is a Canadian diamond producer, mining Canadian diamonds to the high standards of corporate social responsibility, and that is something that we continue to be very proud of.
We own 49% of the Gahcho Kué mine in the Northwest Territories, with De Beers owning the remaining 51%. We operate with a joint venture agreement with a 4-person management committee, two from De Beers and two from Mountain Province. We've appointed De Beers as the operator of the asset, and that has resulted in the operating systems of De Beers and Anglo American being applied to the assets, including the high standards of corporate social responsibility, as I've already mentioned. In addition to the 5,025 hectares of joint venture ground containing the existing mining operations, Mountain Province is the 100% owner of more than 107,000 hectares of highly prospective ground that surrounds the Gahcho Kué assets.
We refer to these as the Kennedy North Project, and I'll speak more about that in a few moments. Q2 has been a successful financial quarter for the company, where we saw average sales value per carat sold generally consistent with the prices achieved during the first quarter of this year. We achieved a record quarterly adjusted EBITDA, surpassing the previous record attained in Q1. At the same time, there remains work to do on the operations side. The plans to correct the dilution issues seen early in the year have been rolled out by the operator, De Beers, as have the improvements around the primary crusher, Grizzly. There remain other areas of the operational performance that do not meet our expectations, and we continue to actively engage with De Beers as the operator around the plan to deliver these improvements.
In Q2, there was some improvement from Q1 evidenced in the increases in total tonnes mined, ore tonnes mined, ore tonnes treated. Myself and our Chief Technical Officer, Matt MacPhail, were at the site last week with a large De Beers team to review operational performance and improvement plans. On the exploration front, the company reported successful interim drilling results for the Hearne Northwest Extension at Gahcho Kué, which has intersections of kimberlite in 60% of the 14 holes drilled, with the longest intersection reaching 114.5 meters or around 375 feet. The Hearne kimberlite is one of four kimberlites being mined currently at Gahcho Kué.
The drilling results fully support the opportunity to consider the underground extraction of diamonds at Gahcho Kué in the future, and we look forward to further delineating the Hearne Northwest Extension with the goal of increasing the Gahcho Kué mine life. The company also reported a positive start to our 6,000-meter drilling program, with three of four target areas returning kimberlite intersections. More detail to follow, and work continues on this important exploration program. On bonds, the board of directors is very actively engaged in this process and working with our financial and our legal advisors. At the close of Q2, we repurchased for cancellation approximately $26.4 million aggregate principal amount of these bonds. This is a progressive step in our financial structure as we progress towards the term of the remaining bonds in mid-December.
I will now hand over to our CFO, Steve Thomas, to take you through the financial results. Steve.
Thank you, Mark, and good morning, everyone. Q2 sees similar strong financial performance to that experienced in Q1, driven by consistent selling price and increased carats sold. To confirm in advance that all numbers I discuss are in Canadian dollars unless stated otherwise. I will start with an overview of financial highlights for the 3 and 6 months ended 30 June 2022, a quarter which saw further financial records set. The financial results reflect significant revenue generated higher than all previous quarters, bar one, with U.S. dollar per carat similar to the record set in Q1, and carats sold up 16%. Ore tonnes treated were up 6% from Q1 and the ore stockpile grew 28%. Although Q2 did not see a resurgence of COVID cases as arose in Q1, as Mark mentioned, the operator continues to work on improving several areas of the operation through specific plans.
Q2 delivered a marginal improvement in operational output compared to the first quarter. The company held three sales during the quarter and sold its goods at $130 per carat, which allied with a comparatively stronger U.S. dollar than in Q1, saw the same CAD 167 per carat as per Q1 2022. This pegs the six-month sales per carat average for Q2 2022 at CAD 167 per carat compared to CAD 98 per carat for the first six months of 2021. During Q2, the company sold 587,000 carats, 80,000 above Q1 2022, but 132,000 below the comparable quarter in 2021.
For the first half of this year, total sales were 1.1 million carats, compared to 1.3 in the first half of 2021. The first six months of 2022 saw tonnes treated the same as the first half of 2021, an average plant throughput at 8,050 tonnes per day, just above last year's rate. However, average plant grade at 1.68 compares to 2.2 in H1 of 2021, and hence Mountain Province Diamonds' share of diamonds recovered at 1.2 million is 20% below last year's 1.5 million.
The increase in cash costs of production per tonne of ore produced, excluding deferred stripping from CAD 85 per tonne in Q2 2021 to CAD 103 per tonne in Q2 2022, reflects the costs incurred in the significant growth in the ore stockpile from 340,000 tonnes to 1,350,000 tonnes in Q2 2022. The impact of an 8% lower tonnes produced in a high fixed cost operation.
For the six months ended thirtieth of June 2022, the equivalent cash costs per tonne of ore produced is closer at $110 per tonne versus $100 per tonne for H1 of 2021, as the total ore tonnes produced are almost identical over that period, and the total ore in stockpile has the same tonnes as those for Q2 standalone. Turning to an overview of the balance sheet, there have been no significant changes in the major account balances compared to the year-end or at the end of Q1 2022.
For the senior secured second lien notes, although we bought back below par $10 million in Q2, the increase in the period end closing exchange rate from 1.25 at March 31 to 1.28 at June 30 masks this and leaves the secured note payable balance at CAD 372 million as per Q1 2021 and close to the CAD 376 million at the 2021 year end. Note that after the quarter end, we bought back a further $60 million of bonds below par, as Mark mentioned. Q2 results were impacted by interest rates increasing over the period, resulting in a reduction in the recorded warrant liability as the risk-free discount rate increased, and that gain positively impacted income before taxes.
Similarly, the increase in the five-year bond yield rate resulted in a reduction in the decommissioning and restoration liability by CAD 6.1 million in the quarter and by CAD 16.3 million for the first half of the year. These changes flow through the property, plant, and equipment carrying value in the balance sheet and only into the income statement via inventory, depending on the nature of the restoration activity. The last thing of note is that in the quarter, the company drew $10 million from the Dunebridge credit facility to meet the timing of working capital requirements in between sales events, and that balance now appears as a new liability in Q2 2022. After the quarter end, we drew a further $5 million for the same reason. Now diving into operating results.
As per Q1 2022, revenue in Q2 includes the sale of additional fancies and specials acquired from De Beers through the competitive bid process held in Q1 and April. The cost of these diamonds acquired from De Beers are accounted for through the acquired cost line, and for the six months ending June 2021 equals CAD 13.2 million compared to CAD 7.7 million for H1 2021. Revenue includes also proceeds from De Beers for our share of fancies and specials sold to them in June. As a result, Q2 produced CAD 98 million in revenue and CAD 182 million for the first six months of the year, compared to CAD 75 million and CAD 129 million for the same periods in 2021.
Driven by revenue performance in Q2, the company generated CAD 51.4 million earnings from operations, a new record surpassing the Q1 2022 record of CAD 42.8 million, and significantly above CAD 32.8 million for quarter one, 2021. This aggregates to earnings of CAD 94.2 million for the first half of the year, double that achieved in the first half of 2021. Moving to income before taxes, the quarter produced CAD 28.3 million, almost identical to Q1, and compares to CAD 22.5 million in Q2 2021. Q2 net income of CAD 22.6 million includes two large impacts mentioned in my introduction. Firstly, a CAD 7.3 million gain in other income as the warrant liability being mark-to-market reduced.
The equivalent reduction in Q1 2022 was CAD 5.9 million, but not applicable in Q1 2021. Conversely, Q2 net income suffered a loss of CAD 11.7 million as the Q2 ending exchange rate applied on the $290 million of bonds outstanding was 1.28, compared to a Q1 2022 closing rate of 1.255 applied to the $300 million outstanding at that quarter end. The comparative foreign exchange gains in Q1 2022 and Q2 2021 were CAD 4.3 million and CAD 5.3 million, respectively.
Both the foreign exchange and interest rates will continue to generate potentially material changes in net income from period to period, given the scale of the underlying liabilities on which they are calculated. Q2 also saw a derivative loss of CAD 1.4 million, compared to CAD 811 thousand in Q2 2021, and CAD 77 thousand in Q1 of 2022. That derivative calculation is in respect of CAD 78 million of costless collar currency hedge instruments in place and the right to repay against the senior secured notes early. The last material movement in Q2 impacting Q2 net income that I will highlight is the non-cash deferred tax charge of CAD 5.7 million, compared to a charge of CAD 4.2 million for Q1 of 2022 and CAD 0 in Q2 2021.
This arises given the significant production income earned in the quarter, but for which tax is not payable given the relief from current tax pools, and also reflects the impact of the impairment reversal that took place at the year-end. Q2 net income of CAD 22.6 million equates to CAD 0.11 per share on a basic and diluted basis, which is the same as that reported in Q1 2021 and the same as Q1 2022 on a basic basis. For the six months ended thirtieth of June 2022, the company has generated CAD 0.22 per share compared to CAD 0.14 per share for the same period in 2021. In conclusion, quarter two has seen strong financial results enabled by continued strong pricing achieved through our dynamic sales process.
These results position the company well to deliver our aim to improve the strength of the balance sheet with reduced debt needs and so attract financing alternatives which are being sought on the best possible terms. Thank you for your attention, and I will now pass the presentation back over to Reid Mackie, VP and Head of Diamond Sales and Marketing.
Thank you, Steve, and good morning. As after the previous record price performance of last year through to February, Russia's invasion of Ukraine had a disruptive impact on the rough market. Despite sporadic reports of Russian rough entering this market, the supply is still considered severely interrupted. Efforts to halt the supply of Russian diamonds to the U.S. widened during Q2, and most major retailers and industry bodies declared buying policies that prohibit the purchase of Russian diamonds. Our Q2 sales results reflect a solid demand environment, particularly in the U.S., the world's largest market for diamond jewelry, which continues to report good results at retail. Although current macroeconomic conditions are undoubtedly weighing on consumers and the market's confidence, industry consensus is that long-term fundamentals remain strong.
The company's rough market sales continue to be well attended, with competition levels higher than previous years. At our three most recent sales, we recorded consecutive price increases at each. With that, thank you for your attention, and I will now pass you back to Mark.
Thanks, Reid. To close, looking back to the strategy, there is no change to the strategy that we've previously discussed. Number one, optimize the business. Number two, drive sustainable development. Number three, optimize the capital structure. Number four, extend the mine life. Number five, find new mines through exploration. On focus area number one, we have some work to do. While the diamond market was very strong in H1, leading to record quarterly EBITDA in Q1 and then again in Q2, operational performance can still improve. We continue to engage with De Beers on operations performance to drive the bottom line, including conducting joint site reviews with De Beers senior management and technical staff.
On driving sustainable development, the team continues to work hard to further its community involvement following its national award for community engagement excellence received from the Mining Association of Canada, recognizing the collaborative relationship between the Gahcho Kue operation and the Indigenous communities. On the capital structure, we continue to review opportunities as we manage our debt position to achieve sustainable long-term debt. We have taken a step towards capital structure improvement, as mentioned, by the recent repurchase for cancellation of approximately $26.4 million aggregate principal amount of the 8% senior secured second lien notes. The company continues to be actively engaged in evaluating options to address the bonds with a focus on those that are friendly to equity holders. Importantly, I would like to thank our major bond holders for their continued support, including Mr. Dermot Desmond, our largest shareholder and significant bond holder.
With regard to extending the life of mine, we have reported successful drilling results for the Hearne Northwest Extension, supporting the consideration for future underground extraction of diamonds at the Gahcho Kué operation. In addition, our team is continuing its work on finding additional ore in the Hearne open pit. We are progressing well towards our plan to find new mines. We updated the market in Q2 with a successful interim result from 3,000 meters of drilling, part of a 6,000-meter 2022 drill program. Three of the four targeted areas returned kimberlite intersections with kimberlite intercepted in 16 of 20 holes drilled. Further results are pending from the remaining drill program and will be released in due course. Work on this continues. With that, the team will take any questions that you 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, and your questions will be polled in the order they are received. If you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset up before pressing any keys. One moment please for your first question. Once again, ladies and gentlemen, if you do have a question, please press star one at this time. There are no questions at this time. Please continue.
Hi, everyone. Matt MacPhail, Chief Technical Officer. I'm just taking questions from the webcast, and I'm gonna read this one out. The question that we have on the webcast is: how do you envision the relationship developing with De Beers on the Kennedy North property?
Thanks, Matt. I will take that one. I would say that on Kennedy North, we are reviewing the existing kimberlite deposits in the current price environment, and that work is ongoing. We continue to discuss with De Beers opportunities that may exist to integrate those deposits into the mine plan. Those discussions are ongoing, and there's no particular timeline for them.
Okay, great. That's the only question I have on the webcast.
Okay. With that, thanks, team. Thanks, everyone, for dialing in, and we will end this call.
Thank you. Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation and ask that you please.