Which will increase operating throughput by 33% for next year, and a much bigger transformational expansion called Expanded Phase 2, which will see us operate at 21 million tons per annum by mid-2027, and driving to be a 500,000+ oz producer as we ramp that EP2 up in the second half of 2028. We do have a robust capital return policy. We paid our initial dividend in September of this year, and we are fully funded for the growth as well. That is the strategic rationale for investing in Artemis. Last week, we announced a transaction to acquire all the outstanding shares of Vista Gold, which has the Mount Todd project in Northern Territory. This is a bolt-on acquisition for Artemis. It is a $427 million all-share transaction that we expect to close in the first quarter of 2027, so next year.
We feel we are uniquely positioned as Artemis to advance Mount Todd with our experienced project team that has just done this and proven this capacity to take new gold mines through the development and operating phase with Blackwater, and a wealth of experience in other gold mines with the project delivery team, including Australian experience. We are looking forward to that as we move into 2027. Vista shareholders would own 5% of the combined company after closing. Our main focus continues to be on the stage development of Blackwater. Again, just a reminder, our board and management own 36% of Artemis on a fully diluted basis, so fully aligned with the rest of our shareholders. Just taking a quick closer look at Mount Todd.
It is a feasibility stage project that is and has been fully permitted at the development scenario that we are looking at, which is a 50,000 ton per day scenario. We will outline our development plans more after closing. I would say that there are very few jurisdictions that have the geological potential, combined with good infrastructure, good regulatory framework, and good mining expertise to support their development, and Australia is one of those places. It is a tier one jurisdiction. Again, great exploration upside, timed very well with what we have underway with Blackwater, where we are able to put our engineering, design, and construction expertise towards Mount Todd at the right time. Our focus is clearly Blackwater now, but this fits very well with our team and our development plans at Blackwater.
When we look at the pathway that we outlined to 1 million ounces, and we think this can be done as early as 2032, it is both the stage development at Blackwater. As I said, we are on track for guidance. We are going to be processing 33% more material with our Phase 1A project, which is coming online next quarter. The full benefit of that in 2027. As we ramp up our EP2 project, which is a CAD 1.44 billion spend that just kicked off major works at the beginning of August. We are on track for that project on time, on budget, and being a + 500,000 oz producer by the second half of 2028. We are already optimizing post EP2. Our goal is to drive our production rate up to 25 million ton per annum, and we are currently doing engineering on that.
It's de-bottlenecking both the Phase 1A project and EP2. We will be coming out with a new resource reserve mine plan, and hopefully, an expanded de-bottlenecked EP2 rate of up to 25 million tons per annum. Our target is to do that in the first quarter of next year. We are driving that growth internally at Blackwater. That remains our key focus. Mount Todd, at the previous feasibility studies, you would have to go back to the 2024 feasibility study to look at what a potential 50,000 ton per day operation would look like, and that gives us this pathway to a million ounces. There's nothing magic about being a million ounce producer. We think that it is a unique and rare opportunity. It happens to take us there, and this shows a pathway to achieving that.
It's more about the value we think we can add, both at Blackwater and Mount Todd, that drove us to make this transaction. Just briefly, I mentioned we paid an inaugural dividend, CAD 0.05 a share, earlier this month. Our capital allocation framework and shareholder return framework that we outlined earlier this year envisions that going to CAD 0.08 a quarter, so CAD 0.32 a share, starting in 2027, aligned with the timing of delivery of our expanded 1A production. That will be our base dividend rate, and then going to a variable rate as EP2 comes online in 2028 with a 40% of free cash flow return.
When we look at what makes Blackwater special and just taking a deeper dive into Blackwater, we are blessed with a low strip ratio, cheap hydroelectric power in British Columbia, and a downhill haul, which helps us be less exposed to higher fuel prices as well and lower diesel consumption as a result of the downhill haul. We have a current mine life out to 2043 at EP2 rates, and as I mentioned, we are looking at coming out with a new resource and reserve, looking at extending that life at EP2 rates out towards 2050, by the first quarter of next year. On our mine operations, we are ramping up our mine to support EP2 rates. We are bringing in additional both shovel capacity and haulage fleet capacity. We recently commissioned a new tranche of delivery of that equipment. The pit looks great. It's operating really well.
We are seeing more low and medium grade ore in the deposit than originally envisioned in the resource model. We are stockpiling that material. We currently have 24 million tons of low and medium grade ore stockpiled next to the pit. Again, very well prepared both for 1A ramp-up and to support mine feed for EP2. As we look to the current performance of our mill, recoveries have obviously improved very much since the initial startup. Just a reminder, we declared commercial production in May of 2025, so we have been operating for about 17 months now. Recoveries through the process, around 92% in the second quarter. The operation continues to perform well, and I would say we are continuing to drive and optimize performance in the mill. We are on track for our guidance for 2026. I mentioned that previously.
I would say from a capital perspective, our current guidance has us spending growth capital of between CAD 685 million and CAD 755 million. As you can see, we're back end weighted, so the second half of this year, and that's primarily associated with the EP2 spend. We just declared major works in August and are ramping up construction workforce and progress on that. We should see a fairly large increase in the capital spending as we ramp up activities aligned with guidance. When we look at Phase 1A, again, I mentioned this is on track for completion in the fourth quarter of this year. We'll be ramping up to an 8 million ton per annum processed rate. This is a CAD 120 million project. We were 57% complete at the end of Q2. We're much more than that today. The new tanks have been erected.
They're fully hydro-tested, ready to go into service. We do have to tie in a new cyclone cluster in the fourth quarter, and that will split the feeds between our current ball mill and a new Vertimill, which will get tied in the fourth quarter as well. That's to the wet side of the circuit where the majority of the upgrades are happening. We've already de-bottlenecked our dry side, which is a three-stage crushing circuit, and that's already been proven and ramped up to the 8 million ton per annum rate. We're in good shape to deliver this for 2027. When we look a little bit closer at the much more transformational EP2 project, CAD 1.44 billion spend for a 13 million ton per annum plant expansion. It's a whole new processing train. Will not interfere during the construction progress with our current operation.
Again, very competitive and at what I think is a low capital intensity per annual ton of throughput. Like I mentioned earlier, a 500,000 oz- 525,000 oz production profile for the first full 10 years, and we'll be looking to extend that beyond with our additional resources and reserves that we're updating. This will secure us as one of the top three gold mines in Canada. We took a very, I think, prudent approach with an early works phase over the last seven or eight months. Early works really accomplishing four things. One, engineering procurement, so all the long lead items for the EP2 project have been ordered. Third was earthworks, bulk earthworks, and those are nearing completion and went very well. Just eliminating all the geotechnical risk with the new plant.
Fourth was putting in all the camps required for the full construction workforce at peak, and those are in. We just recently installed and commissioned a 714-bed construction camp. Beyond early works, we did declare the start of major works at the start of August. We have already poured the main raft pours for the SAG and ball mill. Pieces of the ball mill shell have already arrived on site. The SAG mill should be showing up on site towards the end of the first quarter, early second quarter of next year. Those are really taken off the critical path through our early works and early procurement approach. We've already started pouring the concrete for the ring beams for the CIL circuit. We've fully excavated for the primary crusher and should be pouring concrete for the vault there very shortly.
Our internal goal is to pour 10,000 cubes of concrete before the end of this year, and by the end of the first quarter next year, we will have the mill building up and fully enclosed. When we look at beyond EP2, as I mentioned, we are looking at optimizing to 25 million tons per annum. We will be updating our, and that is really through debottlenecking. There will be some capital, but we think that will be very capital efficient, and we will basically be taking out the design contingencies in the EP2 build and looking at further optimizing the 1A build. We will incorporate both grade control drilling, which we do 12 months in advance of mining, and that is with an RC rig and a very good QA/QC program.
Our reconciliation work to date, additional drilling that we have done, and mine plan optimization and stockpile optimization into the new resource and reserve update at the end of the year. That should come out in Q1. We are looking at a bunch of other optimizations as well. We are drilling the deposit at depth. I will just go to the next slide here. This is a cross-section through the Blackwater deposit. You see the upper shell, which is our current reserve pit, which is done at a CAD 1,400 gold price. The lower shell is our resource pit, a resource shell done at a CAD 2,000 gold price. We have 156 million tons in that additional resource gold price without doing any additional drilling. Then we are drilling at depth. We have just mobilized our third diamond drill rig. We are drilling 1,000-m holes.
We have released the first initial results from the first two drill holes, and we are finding very significant mineralization, both through the resource shell as we anticipated, but below that as well. Our current resource shell bottoms out in drilling. We are doing a lot of regional exploration work and just ramping that up. Again, regional exploration has not been done on the property since 2012 or 2013. Stay tuned on upside for that. Just from an ability to pay and fund EP2, we do have plans to fund that out of operating cash flow, including the ramp-up with 1A, which comes online at the end of this year. We do have CAD 179 million in cash at the end of the second quarter, a CAD 700 million Revolving Credit Facility that remains undrawn and available, although we do not plan to use it.
We did put in a put option protection insurance plan, you would call it, or at least I like to call it. Puts a floor on the gold price just to make sure in a black swan event, if the price drops out, that we can afford and keep going on the EP2 build. We are well positioned to finance EP2, no matter what happens. Just a really quick look at our capital structure. Again, 36% owned by board and management and a very supportive registry that has been with us for many years. Just to wrap up, and I will try and leave a couple of minutes for questions. We are executing well on our 2026 catalysts. We look forward, including with the Vista Gold transaction closing in the first quarter and progress on EP2 on further catalysts in 2027 and beyond.
Things are going well and look forward to updating you and the market as we progress. With that, I'll leave it for questions.
I think we have time for maybe one question if there's one in the room. If not, I'll just ask a quick one. As you think about Phase 1A expansion and the EP2 expansion, what milestones should investors be looking for over the next 12 months?
Yeah, I would say I mentioned a few of them, but Phase 1A will both commission and fully ramp up for January and getting the full benefit of Phase 1A throughout 2027. We'll look to further optimize as soon as that's up and running at 8 million ton per annum rate. On EP2, it's starting really well, but we'll progress concrete, steel erection, and equipment installation throughout 2027. Our goal is to pour first gold by mid-2028 with EP2 and fully ramp up EP2 before the end of 2028.
Great. I think we'll stop there. Dale, thank you very much. That was excellent.
Thank you.