Thank you for standing by. This is the conference operator. Welcome to the Artemis Gold Second Quarter 2025 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. 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, then zero. I would now like to turn the conference over to Meg Brown, Vice President, Investor Relations. Please go ahead.
Thank you, Operator. Good morning, everyone, and welcome. Thank you for joining our Inaugural Earnings Conference Call and Webcast. It's an exciting milestone and a transformational time for Artemis Gold. Before we begin, I would like to remind everyone that certain statements made on the call today may be forward-looking, and we encourage you to refer to our public filings and disclosures, including the cautionary language in yesterday's news release, for more detailed discussion of potential risks and uncertainties related to these statements. I will now hand the call over to Artemis Gold's Founder and Executive Chair, Steven Dean.
Thanks, Meg, and thank you all for taking the time to join the call today. It is our first earnings call now that we're in operations, and we're all excited to present and talk a little bit more about the, and give some color to the results. In addition to myself today on the call, we have our newly appointed CEO, Dale Andres, our President, Jeremy Langford, our CFO, Gerrie van der Westhuizen, our Chief ESG Officer, Candice Alderson, and our VP of Finance, Erik Marchand. I'd like now to take a moment to introduce Dale Andres, our recently appointed CEO. For those of you who have not had the pleasure yet of meeting Dale, I can tell you the company is very fortunate to have the benefit of his very capable leadership.
We know Dale well, not only as a non-executive director of Artemis Gold since 2023, but also for his very successful career with Teck Resources. In fact, he and I worked together there, rising to having a responsibility for its base metal business, as well as his exemplary job in creating shareholder value for Gatos Silver, where he was CEO and led the company through a turnaround process that ultimately led to the sale of the company at an attractive premium. Adding Dale in an executive leadership position provides broader and even greater management bench strength, which will allow Jeremy to focus on the concurrent optimization of Blackwater Phase 1 operations and the delivery of the Phase 2 expansion. Dale and Jeremy will take us through the highlights of the quarter. We will open the call to your questions. I would like now to turn the call over to Dale.
Thank you, Steven. It truly is an honor and a privilege to take on the CEO role at Artemis Gold at such an exciting and transformative time. I do want to jump straight into the details of the quarter now. First and foremost, safety has and will continue to be our top priority. Nothing is more important than ensuring every person at the mine and across the company goes home safe and healthy every day. We do maintain rigorous safety standards and foster a culture where everyone looks out for one another. It is great to be recognizing a milestone of 5.5 million hours LTI-free at the end of July. During the second quarter, we produced 50,623 oz of gold, which includes almost 35,000 oz in May and June. That was after declaring commercial production on May 1st.
Year to date, that production stands a little over 63,000 oz, and all of that is in line with our guidance. Throughout the second quarter, the ramp-up of the mill continued, and by June, we had achieved 102% of nameplate capacity. Gold recoveries in May and June averaged about 84%, which were impacted by both ore characteristics in the upper layers of the deposit as well as our push to drive higher throughput on an operating hour basis. The plant is currently running very well, and we continue to focus on both stability of operation and further optimization. In late July, we successfully completed a three-day plant maintenance shutdown to make various modifications and improvements to the dry and wet circuits, which is expected to enable the mill to further and more consistently outperform its nameplate capacity.
Various initiatives are also underway to further improve recoveries, including augmenting our understanding of the ore characteristics in the oxide zones and transitional zones, which is at the top of the deposit. That is in order to optimize the ore blend going forward. This sets us up very well to meet our annual guidance target of 190,000- 230,000 oz of gold produced. Turning to slide five, in the second quarter, we reported revenue of over $230 million, net income of $100 million, and adjusted EBITDA of $146 million. In this record gold price environment, our average realized gold price, and that is in Canadian dollar terms, was over CAD 4,500 per ounce, generating cash flow from operations in the second quarter of $185 million. Needless to say, we're very happy with this strong start.
We also achieved cash costs and all-in sustaining costs for the post-commercial production months of May and June. That was within our guidance range for the period and significantly lower than the majority of our peers. At today's gold price of about $3,300 U.S., and looking at our all-in sustaining costs of around $800 per ounce, that delivers a margin of around $2,500 per ounce. That's roughly $1,000 higher than the average of our peer group on that margin. That margin does have the potential to grow further in the current strong gold price environment. As we stated in our news release, we also expect slightly lower all-in sustaining costs in the second half of the year as operational efficiencies improve and production continues to increase.
The cash flow we generated in the second quarter allowed us to begin repayments on our long-term debt, with $67 million repaid to date, and that includes a $40 million payment in July. Ongoing strong free cash flow, combined with the $700 million new revolving credit facility that was announced yesterday, will give us financial flexibility that we need to support both our near-term expansion options as well as refinance our long-term debt. With that summary on the operating and financial performance, I'll now turn it back to Steven.
Thanks, Dale. I'd like to first highlight the building of Blackwater in an industry-leading 22 months, an exceptional achievement by our team, not commonly achieved in our sector, and a testament to the hard work and dedication of our workforce. With the build and startup led by Jeremy, our team has a track record of delivering against our commitments on a timely basis and in line with guidance. In an industry often challenged with risks and uncertainty, this is an accomplishment we can be very proud of. In January, we completed construction of Phase 1 and poured our first bar of gold and silver, and just three months later, we achieved commercial production. A great success. On achieving commercial production, we published our 2025 guidance. Pleased to say we're on track to meet that guidance.
In the first two months of commercial production, we have already demonstrated that Blackwater will deliver low-cost production, delivering strong cash flows that, in conjunction with the $700 million revolver announced yesterday, give the company the ability to refinance our Project Loan Facility on very attractive terms and provide financial flexibility to deliver on our near-term expansion opportunities. It's an exciting time for Artemis Gold. As you know, we declared commercial production in May, and we're now solidly established as Canada's newest gold and silver mine. Blackwater checks all the characteristics of a true Tier 1 asset in terms of size, scale, resource upside, large underexplored regional land package, infrastructure, community support, and a low carbon footprint through our connection to the provincial hydroelectric power grid.
It is truly an exceptional asset that will make meaningful development and economic contributions to the local communities, the province of British Columbia, and in fact, all of Canada for years to come. In May, we officially opened the Blackwater Mine, and we were honored to have in attendance not only the Premier of the province, David Eby, but also his Minister of Mining and Critical Minerals, Jagrup Brar, along with senior representatives from our First Nations partners and local communities. The Minister, in his comments, pointed to Blackwater as a great example of what we want to see more of in British Columbia, a project that creates good jobs, supports local and indigenous communities, and takes crucial steps to minimize the impact on the environment. It shows how responsible mining can move our economy forward in the right way.
I just want to add that in the picture that some of you may see in due course, the Premier of British Columbia is six foot seven, and his Minister is six foot five. I'm not that short. Turning to slide nine, Dale, would you like to make some comments?
Thanks, Steven. We're very pleased to announce the signing of a commitment letter with the National Bank of Canada for a fully underwritten $700 million revolving credit facility. The revolver will replace the existing long-term debt that is comprised of the Project Loan Facility and the Stand-by Facility that was put in place to build Phase One of Blackwater, with an estimated $450 million remaining to be refinanced at the expected closing date. The revolver does provide a lot of flexibility, it's on better terms, and we aim to have it in place by the end of this quarter. On slide ten, Steven did speak earlier about 2025 guidance, and I want to briefly touch on the details, as well as a quick overview of how we are achieving industry-leading all-in sustaining costs.
We are reiterating our full year 2025 production guidance range of 190,000- 230,000 oz of gold produced, and that includes 160,000- 200,000 oz during the post-commercial production period. We are also reiterating our post-commercial production all-in sustaining cost guidance of $670- $770 U.S. dollars per ounce of gold sold, which would put us in the lowest decile among gold producers globally. By comparison, this is, I think, roughly half of the all-in sustaining cost of the average of our peer group. I know that some of you have asked previously how that is possible, and the answer lies in a few strategic advantages that we do have over other producers. Beyond the fact that Blackwater is a new mine, and therefore maintenance and sustaining capital costs are low, we also benefit from a very low strip ratio compared to many other deposits.
The starter pit in particular, where we are mining now, and as you saw from our results, has a waste-to-ore ratio currently of just 0.5, and over the life of mine, it's around 2. If we compare that to other large open pits with life of mine strip ratios, sometimes double that or even more. We do also benefit from diesel savings in the mobile mining fleet due to the fact that we're hauling downhill, both from the pit to the plant, as well as to the stockpile areas and waste storage facilities. Perhaps more important, being in British Columbia and connected to the grid, we do benefit from inexpensive and renewable hydroelectric power. At this stage, I'd like to turn the call over to Jeremy to talk about some of our future and what I think is very exciting growth options. Over to you, Jeremy.
Thanks very much, Dale, and greetings, everyone. The core project team that developed Phase 1 at Blackwater has been working hard in tandem with the operations team, planning and scheduling structured improvements across the Blackwater processing facility and infrastructure, whilst we're also exploring what we call a step change in increasing the current Phase 1 nameplate capacity. Additionally, and in parallel, we are focused on finalizing the accelerated Phase 2 plant configuration. If you recall back to the Phase 2 expansion study back in H1 2024, that study produced an annual production of just over 500,000 Au equivalent oz a year.
We feel there are options and synergies that provide attractive upside and optionality to the expansion study of the Phase 2 asset, with our key objective of further increasing throughput capacity, whilst increasing and improving on the operational flexibility and reducing our overall risk profile of the processing operation in general. We're working on presenting the Phase 2 execution strategy to management during H2 2025, as previously mentioned. Dale, would you like to comment or touch on the exploration thoughts moving forward?
Thanks, Jeremy. Yeah, I mean, let's stay tuned on those growth options. I'm just, for one, recently joining as the CEO, very excited about that, and we're looking forward to updating the market on that as Jeremy and his team progress. We do have substantial upside through exploration, both at the Blackwater Mine and in the region. At Blackwater, we really haven't done any extension drilling, expansion drilling of the resource, or more broadly across the region since we acquired the asset in 2019, and since the previous owner had already defined roughly 12 million oz of gold in resources, and that includes 8 million oz of gold in proven and probable reserves. As a reminder, most of that, the vast majority, I think 97%, is in the proven category. However, the deposit does remain open to the north and northwest, as well as at depth.
With additional drilling, it certainly has the potential to be much, much larger and a longer life asset. We have a very large land package in the region, totaling about 1,500 sq. km , and that's largely untested. We have identified more than 30 targets, all within an economic trucking or conveying distance of Blackwater, with significant mineralization in numerous historic drill holes. We do expect to begin a regional drill program later, actually soon, which will be part of a broader and longer-term regional exploration strategy over the next five to ten years to fully test this large and what we believe is a very highly prospective land package. Regional exploration drilling, together with our continued optimization efforts and future expansion plans at the operation, aims to unveil the true potential at Blackwater and unlock further value for our shareholders.
Just turning to the last slide, and in summary, we do have an asset that is not only robust in size and scale, but it is located in what we believe to be one of the world's best mining regions. We have stable mining laws, supportive government policies, quality infrastructure, and that includes renewable low-cost hydroelectric power in BC. BC is politically and socially stable and is recognized as a center of excellence for mining. We have had a very solid start to operations, where the team has achieved nameplate capacity in a very short period of time, and we're in excellent shape to meet our published guidance. We are establishing a track record of capital discipline and cost control, and delivering one of the lowest all-in sustaining costs in the industry.
Our balance sheet is strong, with a growing cash balance expected as the year progresses, which is expected to support our numerous other near-term organic growth opportunities. I am very proud to lead this company going forward, where we value our people and the communities we operate in. We are committed as a team to high performance and continual improvement in absolutely everything we do, and that extends from safety to production to future growth and just overall leadership. We continue to focus on building long-term value for our shareholders. Thanks, and with that, over to you, Steven.
Thanks, Dale. I think it's now time to move to Q&A. I think that concludes the formal part of our presentation, so I'll turn it back to the operator to open up for the Q&A session.
Thank you. 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're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Harrison Reynolds with RBC Capital Markets. Please go ahead.
Hey, good morning, Artemis team, and congratulations on a great quarter and some very impressive early results out of Blackwater. A couple of questions from me. Wondering if you can provide any commentary on the operating metrics you're seeing at the mine so far in Q3, particularly around grades, recoveries, and costs. Are you seeing that progress you would hope for, or are you learning anything new about the deposit that's requiring incremental adjustments?
Thanks, Harrison. I'll direct that question to Dale. Before I do so, just congratulations for you being the first analyst to get a report out on our results yesterday afternoon, late last night. I guess there is an advantage of being West. Dale.
Thank you. Thanks for the question. Thanks for the question, Harrison. Yeah, as I said in the remarks on the presentation, the plant and the operation, the mine and the plant, and all the infrastructure continues to operate well. We look forward to updating on our Q3 results as we progress. We did have a three-day shutdown, as I mentioned. We did some major maintenance, but also some modifications, and that includes to the ball mill, which we're really focused on driving both stability and increased throughput on an operating hour basis. Those two combined are currently and continue to be our focus on recovery. We are, just as a reminder, obviously up in the upper layers of the deposit. We do see some weathering and oxide and transition zone materials. That's something that we're currently trying to get a better handle on just so we can blend that better.
The operation is performing well. We're driving both additional throughput and additional recovery. As I said, we look forward to updating on our Q3 results.
Great. No, that's good to hear. Maybe just one follow-up. It's good to see the revolver in place. I'm wondering if you could talk about your current thinking around the expansion scenarios. I know you touched on it briefly in the prepared remarks, but maybe specifically talking about what could an upsized Phase 2 look like. Could that go directly up to your permitted level of 20 million tons, or how are you thinking about that?
Harrison, it's too early to comment on that. Appreciate the question. Appreciate the level of interest and you're one of several people following us and supporting us who would like to know more. As Dale indicated in his presentation, it's something we are working on. I expect that we'll get an initial update in the next three to five weeks. As we've said in our formal press release, I think something on Phase 2, probably October-November sort of time. We've taken a little bit more time for a very deliberate reason, and that is that the original Phase Two study that we released in, I think it was February or March of 2024, by the way, which was only, what, a year and a half ago. It seemed like a long time ago, but it wasn't, had us going to 15 million tons.
The gold price in Canadian dollars was some $1,500 lower. We knew less about the ore body. Its characteristics, we anticipated it to be harder than it is certainly in the initial several benches of the deposit. There's a lot to reconsider and reprocess and update. We would rather take a little bit more time to do that and get an optimal result than rush out on the original plan.
Definitely. No, that makes sense. Appreciate you taking the questions and excited to see what's next. I'll pass the line on now.
Thanks, Harrison.
The next question comes from Wayne Lam with TD Securities. Please go ahead.
Good morning, guys. Congratulations to Harrison as well for being first in the question queue. Maybe one for Jeremy. You know, we've talked about this before, but if I look at the initial performance here, it kind of mirrors some of the mines that you've dealt with in the past that have well outperformed design capacity out of the gates. If I look at Hyundai or ED as recent examples, where those saw quite a bit of outperformance versus nameplate pretty quickly, can you speak to some of the optimizations still to come with Phase 1, and should we start to model some upside to the nameplate mill performance?
Thanks, Wayne, for your question. Jeremy, you're pretty close to that. As I said earlier, we're a little bit reluctant to be too specific on those initiatives right now, but I'll let Jeremy have a go at that question.
Yeah, thanks, Steven, and good morning, Wayne. I think Dale touched on it as well. We have got the time here to measure twice, cut once. You've heard me use this saying before. I don't really want to directly compare the past assets to Blackwater. They're very different in context and scale as well, with Blackwater being a three-stage expansion methodology from day one. That even you've seen, Wayne, during your site visits where we talk about we spoil for choice at Blackwater. We're pretty busy exploring, as the asset further improves, how to get the maximum we can get out of the processing facility and generally the infrastructure that supports it and do this while we are building Stage Two as well. There are a couple of moving parts to it. I'm pretty happy with where it sits right now.
I'm actually sitting in a design office looking at the designs as I speak to you all now. We're in good shape and look forward to sharing the news with you all when the time's right towards the end of the year.
Wayne, if I could just also add to Jeremy's response, there's a few things, other things that in addition to the process plant that we should touch on briefly. One, at some point, we probably should revisit the optimization of this deposit. As most of you will recall, it was optimized at $1,400 U.S. dollars. That's a fair bit lower now than today's price and certainly lower than the long-term consensus price. That's likely to result in more ounces reporting to the reserve category, but we need to do the work. That will change things like strip ratio, haulage of waste, et cetera, et cetera. That is a succinct project, which has an interesting relationship with the process and throughput capacity.
Also, we've flagged in the past the opportunities we have to change the energy source of our haulage methodology from the pit for both waste and ore to electric hydro source, energy source. It also occurs to us that that methodology doesn't necessarily have to be on wheels because we've got the benefit, as you know, from having visited the site, we've got the benefit of fixed centroids of infrastructure, whether that be the plant, the pit, one big pit, one TSF, one waste facility, and one low-grade stockpile. All of those things being relatively fixed in their location lends itself to other options on haulage. That's something else that we will report back to our shareholders and supporters over the next six months. We've got a lot on the go in terms of analysis and re-analysis. Stay tuned. It's going to be a newsworthy next six months.
Yeah, definitely a lot of levers to pull still to come. Okay, maybe that's a good segue into my next question. As we kind of think about the pit optimization, maybe just thinking about the grades, obviously very early stages, and there's been a lot of drilling done inclusive of the grade control program. Just wondering if you're still targeting the process grades closer to the 1.67 g outlined in the feasibility study, or do you anticipate moving towards a more run-of-mine strategy at some point in the near term, given that the mill has shown the capability of handling more material?
I'll quickly answer that, but if Jeremy or Dale want to jump in and add, feel free to do so. The quick answer to that is that we do expect the grade to trend higher in the second half. You're right. Once again, it's an iterative economic analysis because if we can squeeze more through the mill, then our unit cost per ton is going to be lower, which means our economic cutoff is lower. It would follow that we should be sending more ore to the mill than we originally planned, and therefore the average grade may be lower than the original plan at nameplate.
To add to that, it is not something that we advertise because anyone who's got some experience in statistics knows that we don't yet have a huge data population, but we've drilled a grade control about just over 20 million tons of ore to date, and we are seeing additional what we call medium-grade tons. In other words, conversion of waste, which we thought was waste, to medium-grade and low-grade material, which means that either we stockpile it or we put it through the mill at a faster rate. That's also making the analysis that we just talked about earlier more interesting. Let me say that. Dale.
Maybe I'll just add one comment and just reiterate. It is only two months into commercial production, so we do need to get some additional time under our belt. What Steven commented on, it just again shows why this deposit really lends itself to expansion and expansion sooner rather than later, especially with this waste-to-ore conversion that we're seeing.
Jeremy, any comment?
No, other than I think for all the people who've been following us, you know, the original study done back in 2013 had a 55,000- 60,000-ton a day plant. We know the peak can advance at that rate. We know that the ore and material is going to come out as fast as we can mine it. Certainly looking at the most efficient way of doing that long-term and levering off the BC Hydro to green energy for me is one avenue that we're working on pretty hard right now. I think it certainly lends itself to a less selective, more bulk mining operation, whichever we choose. That's the choices we've been lucky enough to have with this asset.
Thanks, Jeremy.
Okay, perfect. Thank you. Maybe this is the last one for Jerry. Just wondering on the accounting side, I wanted to ask on two items. The first is if you might be able to provide a bit more color on the inventory adjustment to the cash costs if that was more of a one-off this quarter. The second is just with commercial production having been declared in May, it seems as though the sustaining capital spend was pretty light. Just curious why some of that capital wouldn't have been characterized more as sustaining capital rather than all as growth.
Jeremy, sorry, Wayne, you're referring to the fact that we attribute cost to high-grade and medium-grade ore only?
Just on the reconciliation, there was a change in the inventory number to get to the net production cost.
Yeah, that's pretty standard in terms of the representation of production costs and reconciling that to all-in sustaining costs. That would always be on a net basis in terms of what's actually being sold. As you recall, this is all-in sustaining costs per gold ounce sold, and that inventory adjustment has to be accounted for separately. We are actually being somewhat conservative in not attributing any cost to a low-grade ore, and we certainly are not playing any games in terms of that inventory adjustment, in fact, being very conservative.
Sorry, just to jump in, Wayne, you appreciate what we're saying here is that the accounting convention, one approach would be to capitalize the low-grade stockpile on our balance sheet, which would have the result of lowering our operating costs. We're expensing it, so we carry no cost on that low grade, zero on our balance sheet. There is no more conservative approach to how we manage inventory than that.
Certainly far more conservative than a number of other peers. In terms of all-in sustaining costs, no, the all-in sustaining costs, we don't consider it to be surprisingly low. This is consistent with us being a new mine. No issues there with the classification or sustaining costs.
Okay, perfect. Quite a phenomenal result on the cost side for just the first couple of months. Congratulations and congrats on a great quarter. Thanks for taking my questions.
Thanks, Wayne.
The next question comes from Andrew Mikitchook with BMO Capital Markets. Please go ahead.
Oh, hi. Congratulations to Jeremy and your team for phenomenal success here. A lot of great questions been asked. Just a little bit of follow-up. Maybe Steven, you already talked about the re-optimizing the pit. Does the technical team think they have enough data and enough time to at least partially, or if not fully, re-optimize the pit for this Phase 2 plan that's coming in November?
I can pretty well tell you for certain that we will not be optimizing or re-optimizing the mine this year. That is a separate exercise. I think it's sufficient for us to know that there's, even without re-optimizing that, there's a massive amount of ore that could be mined and released in the next five years, even without re-optimizing the pit. I think that in terms of data, 97% or 98% of the resource, the reserve resource, is in measured category, which would mean that we can convert, if the economics allow and design allow, a significant portion of the resource into a proven category of reserve when we do optimize. No, there's no shortage of data. Where there may be data lacking is what Dale referred to as the extension to the northwest and at depth. At some stage, we need to drill some deeper holes to chase that.
We've got an abundance of resource category that's still not converted to reserve, even without it.
Okay, I think as paraphrased, I think, Steven, your words, or maybe Jeremy's, there's an abundance of choices and opportunities here. We all look forward to seeing that. Just a little financial question on this, a couple of financial questions on this revolving credit facility. Is it fair that what you guys press released today could be considered as an interim facility and that once the full Phase 2 plan is out, this could be then revisited and right-sized to advance that as, you know, on an optimized timeline and financing structure?
No, it's not our intent. This is a longer-term facility to accommodate and allow flexibility for our expansion plan.
Okay. Just in terms of exiting post the RCF, just to be clear, the cost overrun facility, I guess $40 million, does that stay in place or is that replaced as well?
It's all refinanced with this revolving credit facility.
That's great. Thank you very much, and I'll let others ask questions.
Thanks, Andrew.
Once again, if you have a question, please press star, then one. The next question comes from Jeremy Langford with Canaccord Genuity. Please go ahead.
Thanks, Steven and James. Thanks for taking my questions. Congrats on a big milestone, and it's a really good discussion here. I have left a couple of clarifications and one accounting question. On the clarification side, you did really good progress in terms of the trend of throughput and recovery of Phase 1. You guys have discussed the three-day shutdown and the improvements and optimizations you've done there. You've also talked about working on the blend of ore to get recoveries to where you're aiming to have them. Are there any additional improvements that you need to make to the plant, or was this three-day shutdown the last?
Dale, you want to answer that? As we've said, it's too early for us to comment on what optimizations there might be before us. As I said, we expect in the next three or five weeks or so to come out with an update on that. Dale, you want to?
I would say that three-day shutdown does really set us up for the second half of the year. What we're doing is continually debottlenecking, improving, and seeing what the true capacity of the asset is. As we progress that, we will do various tests at higher throughput rates. We'll see where different bottlenecks appear. There may be additional projects that we implement from a modification perspective. As Steven said, we're still working through that. We are running the mill above design capacity on a regular basis, on an operating hour basis, and we'll see where that takes us. Now that we have that three-day shut and we've set ourselves up for the back half of this year, stay tuned.
From an improvement perspective, what I will say is that when we look at so-called step change opportunities that Jeremy talked about, we are looking for very capital-efficient, quick wins, things that we can implement fast and ahead of the broader, bigger Phase 2 expansion, which we're also in the middle of optimizing.
Okay, great. I’m appreciating that it’s an iterative process. I do know you guys said potentially 10% above nameplate in the presentation, so that’s helpful to point to. The next question is also a clarification, kind of similar to what Andrew said. We’ve all been looking forward to this expansion, seeing where this next iteration of plant goes to and the capital and the throughput and everything associated with that. He touched on the re-optimization, and it’s clear that comes later. These other opportunities that you guys have talked about, and Steven, you touched on them with, you know, potentially alternative haulage solutions that take advantage of the electrification. Is that going to be part and parcel with the expansion plans we hear about later this year, or will that be a separate catalyst?
Sorry, just say the question again, please, Jeremy.
Yeah, so electrification of the haul, you've talked about that being a pretty big opportunity. Is that part of this, the expansion plans that you're going to talk to later this year, or is that a separate catalyst potentially coming later?
I think there's an opportunity for an update on it, but I don't think we're going to get any significant outputs on those options in terms of technical studies before year-end. We'll give it a shot. The focus is on optimizing the Phase 1 facilities and optimizing and putting a pin in what Phase 2 looks like in terms of the plan.
Okay, great. Great, thank you. That's clear. Finally, last question, accounting thing, on the non-cash changes and working capital in investing activities. There was $61 million. Could you just walk us through those? It was related to the counterclaim against the EPC contractor.
Yeah, I'll let Jerry comment on that, please.
No problem. Jeremy, hi. Even though it refers to non-cash changes, those are actually cash changes. The non-cash is, as Norman Tate showed, directly from the IFRS standard, which we complied with. Those are really payments of payables associated with our initial CapEx, so CapEx that we incurred in Q1 that wasn't paid until Q2. That's why that's being added back when we're looking at the Q2 numbers.
Okay, thank you.
To be clear, Jeremy, what you're looking at, I think, Jerry, is the paydown of accounts payable related to the CapEx incurred in early Q1.
Initial CapEx, yeah.
Initial CapEx. It's an accounts payable rather than a CapEx spend, which would be the CapEx spend had already been reported. A big chunk of that, as we've said, we will be claiming against the EPC contractor because a big chunk of that relates to rectification works as a result of them terminating the contract and leaving site.
Understood. I guess finally, the rectification works, what exactly is that?
Fixing stuff that was not done right. How about that?
Incremental expenditures.
Redoing works that were not done correctly or to specification by the EPC contractor.
Okay, that's really helpful. Thanks, guys, for taking all my questions. Really appreciate it.
You're welcome.
This concludes the question -and -answer session. I would like to turn the conference back over to Steven Dean, Chair, for any closing remarks. Please go ahead.
Thank you, Aisha. Thank you to everyone for joining the call. I hope we've been able to answer your questions. There's a lot of data in this release, and we appreciate if you do have any further follow-up questions, we'd be happy to chat to you directly on those. We also look forward to reporting to you, as we've said during this call, on our optimization and growth progress over the next one to six months and also our third quarter results in early November. Thanks again for joining us, and we look forward to seeing and chatting to you all soon.
This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.