Thank you for standing by. This is the conference operator. Welcome to the Torex Gold Resources Second Quarter 2020 Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.
I would now like to turn the conference over to Dan Rollins, Vice President, Corporate Development and Investor Relations. Please go ahead, sir.
Thank you, operator, and good morning, everyone. On behalf of the Torex team, welcome to our Q2 2020 conference call. Before we begin the presentation, please note that certain statements to be made today by the management team may contain forward looking information. So please refer to the detailed cautionary note in today's MD and A. On the call today, we have Jody Kuzenko, President and CEO and Stephen Thomas, CFO.
Following the presentation, there will be both will be available for a question and answer period. This conference call is being webcast and will be available for replay on our website. This morning's press release and the accompanying financial statements and MD and A are posted on our website and have been filed on SEDAR. Also, please note that all amounts mentioned in this call are U. S.
Dollars unless otherwise stated. I'll now turn the call over to Jody.
Thank you, Dan, and good morning to all on the line. Welcome to the Torex Gold Q2 results release. First time for me in role as President and CEO as Fred Stanford has moved on to the role of Executive Chair. The headline for the quarter undoubtedly reads that the operations are back on track. With more than 63,000 ounces of gold sold in Q2, a strong June and an even stronger July, we are feeling confident as we head into the second half of twenty twenty.
In terms of the agenda for the call, I will walk you through a COVID update, then the safety and operational performance for the quarter. Following that, Steve Thomas, our CFO, will step you through the financial results. Finally, I will update you with the progress made against 2 key catalysts in our near term future, building Medialuna and proving up Muckahi. Starting first with COVID. The impact of the pandemic was heavily felt during the early part of this quarter.
By decree of the Mexican government, our operations were suspended in April. We resumed partial production in May with the processing of lower grade stockpiles. And in June, we resumed full protection. In terms of the health of our employees, from the very outset, we have opted for a staged approach with multiple layers of protection. This is serving us well.
We have now had 4 confirmed cases of COVID. This was expected and continues to be expected. All cases have been managed as planned. These plans include maintaining our 3 stage COVID screening for anyone rotating into site, rapid response testing on contact tracing, isolation as required, ongoing and transparent communications with our workforce, our union and our communities. And we have now introduced COVID clearance testing prior to return to work for anyone who has had COVID or is showing any COVID symptoms.
While we don't believe that these measures will keep us COVID free for the duration, we do believe that we are very much COVID resistant. We have set up risk mitigation plans on all fronts that are squarely aimed at enabling us to continue to operate, come what may as Mexico continues to deal with the pandemic. Our disciplined approach to safety at all levels of the organization has made our COVID protocols possible and has made them receptive. It has also led to furthering our run of no lost time injuries. As of today, our lost time injury frequency sits at 0, and we have operated more than 7,000,000 hours without a lost time injury.
Truly an example of leaders and workers coming together using strong systems to deliver an exemplary and industry leading outcome. Turning now to production. While we were not producing in April, it was not a wasted month. With the care and maintenance team on-site, we undertook extensive maintenance and non destructive testing work at the process plant. During this period, we found a load speed coupling in the ball mill drivetrain that required replacement.
The part could only be manufactured overseas and as a result arrived in June and was changed out in June, which explains the lower milling rate for that month. In May, we resumed partial production. By processing from the lower grade stockpiles, we produced just over 20,000 ounces for that month. That decision generated sufficient revenue to enable us to stay current on accounts payable and to continue to pay our employees. It also provided us with some important operational insights for the period to come in late 2023 to early 2024, when we will use the stockpiled material as transitional feed between the conclusion of the ELG open pits and the ramp up of Medialuna.
June was marked by a full remobilization of all of our operating and maintenance crews in the open pits and underground. The pits had an excellent ramp up and delivered 16,600 tonnes per day in the month. Where we contract mine in the underground, we had some difficulty in mobilizing out of country workers. This explains the 8.30 tonnes per day achieved versus the 1,000 tonnes per day that we had been consistently hitting prior to the shutdown. These personnel issues have now been largely resolved and you can expect that we will return to the usual underground mining rates in Q3.
Mine grade for the quarter came in as expected at an average of 3.07 grams per tonne. Notably, with respect to the underground, we made some key decisions in the quarter to continue to optimize both subsill and El Limon Deep. We have started development at El Limon Deep to allow for conventional cut and fill mining below the area where Muckahi is being tested. We have started the development of a third portal, which will daylight near the process plant and is expected to cut our haul distances in half, which will have associated unit cost benefits. We've expanded exploration drilling in the underground at ELD North, ELD South and under Wajes as well.
The purpose of this additional drilling is to increase the grade in that pre Media Luna period in the back half of 'twenty three and early 'twenty four. In terms of the process plant, I've already touched on the coupling repair. It proceeded as planned in June, which impacted throughput in the month. In spite of the downtime, the team delivered 38,890 ounces for the month of June. Recoveries remained stable throughout the quarter at 89% versus a design of 87%.
If there was any question about whether we were truly back in stride, the team closed July with a healthy 42,630 ounces produced, which is an excellent signal that we have put the COVID shutdown behind us and have come back with a strong start to the Q3. This strong start also positions us nicely to deliver on the revised production guidance of between 390,000 and 420,000 ounces for the year. Our disciplined and systems based approach to safety and production has now been extended to operating costs. June was an OpEx budget beat and even with the suspension period, operating cash flow for the quarter came in at $28,000,000 prior to changes in non cash working capital. With that preview, I will turn it over to Steve Thomas for a detailed review of the financials.
Thank you, Jody, and good morning, everyone. Despite the interruption at the front end of Q2, the key message is that we responded effectively to the lockdown in April and positioned the operations well to reengage partially in May and fully in June and protect our balance sheet throughout. As such, Torex is well positioned to deliver strong operational and financial results in H2. We expect to carry this momentum into 2021 and beyond. With the price of gold trading around all time highs, we are well positioned to exit the year in a strong net cash position.
Given the strength of our operation, we will be able to fund our future growth commitments, meet our debt obligations and grow our treasury position by the year end. In April May, we took the precautionary measure of drawing $90,000,000 on the revolving credit facility to ensure the liquidity of the company was maintained. Given that the duration of constraints on production was uncertain at that time. With the operations able partially reengage during May and fully in June, during Q2, we produced 60 63,000 ounces at an average price of $17.12 per ounce. As Jody mentioned, this results in a $28,000,000 of cash generated from operating activities before non cash working capital.
The $90,000,000 increase in working capital can be attributed to the revolver draw for which the increase in cash matches with an increase in long term rather than current debt liability. The $41,000,000 growth in cash balance during the quarter reflects the $90,000,000 draw on the revolver facility, offset by $50,000,000 outflow across capital investment and scheduled debt repayment, indicating that net cash generated from operating activities was more or less flat at $2,000,000 Lastly, for earnings from the mine operations at $18,000,000 this includes $11,100,000 of costs associated with COVID-nineteen related impacts on operations, comprising $8,000,000 of cash production costs and $3,000,000 of depreciation, both of which are adjusted out of adjusted earnings. The $8,000,000 cash production costs are adjusted out of total cash costs AISC and adjusted EBITDA. So turning firstly to our liquidity position. Items of particular note for Q2 and where relevant in the first half of the year are as follows.
Notwithstanding the $90,000,000 revolver draw mentioned earlier, the movement in working capital reflects the continued progress we are making in collecting VAT balances as they fall due, which for the quarter was $13,000,000 a tax receivable balance of $20,000,000 representing the difference between tax installments made during year to date and our estimate of mid year tax liability The reduction in accounts payable and accrued liabilities of $32,000,000 during the quarter reflects primarily the settlement of the 2019 liability for the site based profit share plan, plus a reduction in trade payables. It also reflects a further debt reduction of our term loan by $22,000,000 and the aforementioned capital investment of $29,000,000 The extent of capital investment year to date has been constrained due to the site closure. As our revised guidance indicates, we expect the amount of deferred stripping to reduce compared to original guidance. However, our sustaining capital program is expected to remain in line with original guidance. For non sustaining capital, we have spent $30,000,000 year to date and have guided to spend $92,000,000 which Jody will expand upon shortly.
In summary for our cash flows, the first $50,000,000 of draw on the revolver paid for capital additions and repayment of debt and the second draw of $40,000,000 represents the growth in the cash balance over the period. Regarding the debt principal repayment of $22,000,000 this sees our outstanding term loan reduced to $87,000,000 and with $140,000,000 drawn on the revolver, results in a net debt position of $54,000,000 at the quarter end compared to $26,000,000 at Q1. The cash balance at Q2 end is $177,000,000 and with the production performance achieved during July and elevated sales price, the balance has grown meaningfully by the end of July. With this cash position and forecast production targets, this leaves us confident that the company has adequate liquidity to support its operations and meet its financial obligations over the next 12 months. But as Jody mentioned, management remains vigilant of the ongoing measures it will take to combat future impacts of COVID-nineteen should they arise.
We reported in Q1 on the significant impact of the 25% depreciation of the peso during March had on the peso currency hedges put in place in Q1. Q2 has seen a slight strengthening in the peso compared to Q1, resulting in a small unrealized gain across the currency hedges that were settled and the $85,000,000 of contracts outstanding at the quarter end. However, the precipitous rise in gold price has resulted in a $6,000,000 unrealized loss in the period as we mark to market the gold collars that are in place in our rolling 12 month program. Of course, increasing gold price will impact the future value of those gold contracts. Turning now to operating costs and total cash costs and AISC per ounce.
The significant reduction in production and sales during Q2 and the associated reduced costs incurred in April May heavily impacts the TCC and ASICs per ounce calculations for Q2. That said, we see that with TCC at $7.40 per ounce for the quarter and $7.44 for the 1st 6 months and AISC at $10.15 for the quarter $9.90 for the 1st 6 months, those metrics for the first half of the year fall within the range for the revised guidance for the full year. It's worth mentioning also that the company has not experienced any material elevation in costs of materials as a result of the COVID pandemic due to the preemptive measures taken by the operations and the supply chain team to ensure that we have access to critical consumables in adequate supply and through those regular channels. As forecast and reported in Q1, the impact in Q2 on the TCC and ASIC calculations in accounting for open pit and open underground stockpiles based on ounces rather than on a per ton basis used prior to 2020 has reduced significantly and is largely in line with our expectations. Lastly, having taken external soundings and reviewed treatment by others for COVID-nineteen related production costs and depreciation, we think it appropriate that the $8,000,000 of production cash costs are adjusted out of TCC and ASIC numbers, which is equivalent to $127 per ounce reduction.
As mentioned earlier, these COVID-nineteen related costs are fully accounted for within our earnings figure, however. Turning now to our tax position, which for the 2nd quarter is uncharacteristically straightforward. The current income tax expense is in respect of the 7.5% mining tax. And for the deferred tax liability, the slight strengthening of the peso over the quarter results in the deferred tax recovery. The above operational performance results in net earnings of 3 point $8,000,000 for the quarter or $0.04 per share.
Adjusted earnings are derived consistent with previous quarters, but Q2 sees the adjustment for the COVID-nineteen related costs, resulting in adjusted earnings of $3,600,000 and a similar $0.04 per share on a basic and diluted basis. In summary, in Q2, we have demonstrated the effectiveness of the measures taken to combat the impacts of COVID-nineteen whilst limiting the costs incurred during the care and maintenance period, positioned ourselves for H2 to produce into the current high price market and maintain the capital growth program to set us up for 2021 and beyond and lastly, bolstered our liquidity position to protect the company in the event of future volatility arising due to the pandemic. Thank you for listening. And with that, I will turn the mic back over to Jodi.
Thank you, Steve. Turning now to the future with an update on Medialuna and Muckahi. On Medialuna, the work has been focused in 4 key areas. First, the feasibility study. This continued throughout the COVID period without interruption and is scheduled to be concluded mid-twenty 21.
2nd, our infill drill program. For this year, it is aimed at upgrading an additional 7,000,000 to 9,000,000 tons from inferred to indicated. This program was suspended for the months of April May, but we remobilized in June and drilling resumed in July. The 3rd area of focus is the 7 kilometer tunnel needed to access the Medialuna ore body. This will be collared close to our new Portal 3 near the process plant.
The platform has been completed. We are starting into slope stabilization around the portal, finalizing the labor plan and ordering equipment. We are on pace to take the 1st blast in early Q4. The 4th area of focus is permitting. We are on track with 3 permits already approved, including the environmental impact resolution for the Morelos property, and 3 other permits are pending, all in accordance with our permit plan.
One additional point of note on the Medialuna build is our decision to further de risk schedule by adding a portal at the top of the ore body on the south side of the river. Suspense for this contributes to the increase you see in the non sustaining capital numbers as compared to original guidance. Permit applications have been submitted for the south portal and construction is set to begin later this year. All of that to say, our next mine is very much on track. The 7 kilometer tunnel to Medialuna will use monorail based trains to remove blasted rock from the tunnel, which brings me to the Muckahi update.
This month, we will start field testing the equipment for monorail based transport of blasted rock on the steep 30 degree ramps. We have demonstrated the effectiveness of drilling and bolting on the steep ramps. With that equipment performing as designed, we are moving to the next step, which is the testing for the efficient removal of the blasted rock. The steep ramp conveyor has been manufactured and delivered to site. We expect to start testing this later in the year.
Another long hole open stope has been drilled and blasted meeting the specifications of 95% passing 400 millimeters. And additional crews are being trained in the use of the Muckahi equipment and processes, so that we actually have people who are ready to go when we need them. All in, it has been a complex and unusual quarter for Torex and we believe that this was reflected in our valuation during the first half of the year. With a quick return to stable production and cash generation, a healthy balance sheet, the future well on track with Medialuna and Muckahi and a safety record that is industry leading, we have clearly weathered this storm and come out stronger the other side. Thank you for taking your time to listen in today.
Subject to any questions, this concludes our remarks and I will turn the call back over to Claudia, the operator.
Thank you. We will now begin the question and answer session. Our first question is from Michael Flix, Private Investor. Please go ahead.
Hi. I'm wondering what the milling rate is now since you restarted and how the alignment on the mill is holding?
Yes. Thanks for the question, Michael. The milling rate in the month of June was 11,870, which reflected the 74 hour downtime we took to change out that coupling. The milling rate for the month of July was excellent and above 13,000 tonnes a day. We have completely aligned both the SAG mill and the ball mill drivetrain, checked it again during the April downtime.
And I'm pleased to say we have no indications that either vibration or temperature are running out of tolerance. So we're in pretty good shape from a milling perspective.
Do you expect to get up to the 14,000 ton rate? I believe that's what you were after the last alignment.
Yes. No, we haven't been at the 14,000 tonne rate really ever in fact. We are limited by power as a result of some decisions made during the build. Our new and revised daily milling goal rate is 13,000 tonnes a day and we have every confidence that we will achieve this in the back half of 2020.
Okay. Thank you.
Thank you.
Our next question is from Ryan Thompson with BMO. Please go ahead.
Yes. Hi, Jody. Thanks for the update. Could you just give a little bit more color or just dig into the decision to add the portal on the south side of the river? And can you maybe just tie that into a discussion of what the latest thinking is on the scheduling?
Yes. Thanks for the question, Ryan. The South Portal came about as we were looking at the scheduling for the tunnel excavation for the 7 kilometer tunnel. We plan to use monorail based equipment for that tunnel. We have scheduled a very aggressive rate at 10 meters a day.
Even with the monorail based equipment, there is risk associated with that. On our plans that shows us arriving at the bottom of the Medialuna ore body underneath the Balsas River in about 2 years. What we wanted to do in order to mitigate that schedule of risk is place a portal at the top of the ore body on the south side of the river. We're now calling it the south portal, which will enable us to access the ore body from the top using conventional ramping to get in there. And so with that thinking, we have now 2 clear paths to access that ore body, so we can bring production online in 2024 as scheduled.
Okay, great. That's very helpful. I think that was the only question that I had. I think you guys answered everything else. So I'll turn it over to the next caller.
Thank you, Ryan.
There are no further questions registered at this time. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.