Good day, thank you for standing by. Welcome to the Gold Resource Corporation Q2 earnings conference. All lines have been placed on mute to prevent any background noise. Should you require any assistance, please press star zero on your telephone keypad and an operator will assist you. During today's conference call, there will be a question and answer session. If you would like to ask a question, simply press star one on your telephone keypad. I will now turn the conference over to Kim Perry, Gold Resource Chief Financial Officer. Please go ahead.
Thank you, Sarah, and good morning to everyone. On behalf of Gold Resource, of the Gold Resource team, I would like to welcome you to our conference call covering our Q2 2022 results. Before we begin the call, there are a couple housekeeping matters I'd like to address. Please note that certain statements to be made today are forward-looking in nature, and as such, are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings. Joining me on the call today is Allen Palmiere, our President and CEO, and Alberto Reyes, our Chief Operating Officer. Following Allen, Alberto, and my prepared remarks, we will be available to answer questions. This conference call is being webcast. For those of you joining us on the webcast, you can download a PDF copy of the conference call slides.
The event will also be available for replay on our website later today. Yesterday's news release issued following the close of the market and the accompanying financial statements and MD&A contained in our Form 10-Q have been filed with the SEC and EDGAR and are also available on our website at www.goldresourcecorp.com. Please note that all amounts mentioned in this call are in US dollars unless otherwise stated. I will now turn the call over to Allen.
Thank you, Kim, and good morning, everyone. I want to thank the listeners for taking the time to join us on this call. The first half of 2022 has proven to be a solid start to the year. While we are expecting production results to dip lower in the second half as a result of grade, I would like to reiterate our full-year guidance of 24,000-26,000 oz of gold and 900,000-1,000,000 oz of silver. This is approximately 40,000 gold equivalent ounces. While the base metal prices in the first half of the year helped our cash cost and all-in sustaining costs, we expect that we will achieve our cost guidance. Finally, capital exploration and G&A forecasts remain on track for guidance.
I'd like to point out a few achievements related to Q2 before handing the call over to Alberto to provide an update on our Don David Gold Mine operations. We will then proceed with remarks from Kim on our Q2 financial results. Lastly, we'll provide a few closing remarks, and then we will take questions from participants. We continue to heavily invest in Mexico, which will benefit us going forward from an operational, financial, and in many cases, an environmental standpoint. With the completion of the filter plant and dry stack facility in late 2021, we are processing 85% of the tailings through the new plant. The residual 15% is used for paste fill and goes underground. The facilities not only conserve water, they reduce the traditional risks associated with the tailings storage facility and accelerate the reclamation of the open pit.
We also processed over 200 tons of artisanal tailings from a local community. In addition to financially giving back to the community, we were able to ensure they were properly handled and stored. We are encouraged by the results of our investment in the infill drilling program, which is producing positive results. In Michigan, we continue to work on the feasibility study. The inflationary environment and capital cost pressures, combined with lower commodity prices, are creating challenges. We continue to work on alternatives and are working to optimize the value inherent in this world-class deposit. I'll now pass the presentation to Alberto to discuss Don David Gold Mine's operational results.
Thank you, Allen Palmiere, and also good morning to all. We experienced a positive quarter for Don David Gold Mine. Turning to the results of operations, I am pleased to report that we processed nearly 129,000 tons of ore and sold approximately 9,000 oz of gold, 230,000 oz of silver, equating to a combined 11,500 gold equivalent ounces. We further sold over 285 tons of copper, 1,800 tons of lead, and 3,600 tons of zinc. Turning to slide five. As for an update on investment, as Allen Palmiere mentioned earlier, I want to highlight that the zinc tailings regrind circuit has reached the target recoveries, which reflected towards the end of Q2. Also, in the underground, we have successfully completed phase I of the ventilation circuit.
The new circuit includes ventilation shafts, 273 m in length and 3 m in diameter that connect level 3 all the way down to level 22. The system allows for 450,000 CFM to be delivered to the lower levels while reducing resistance to airflow. Phase II is underway, and it will be completed in Q3. The secondary raise will connect level 22 to level 27. Our underground exploration program has resumed as the ventilation has improved. The amount of drilling will achieve 35,000 to 40,000 in the year. Drilling in the underground continues to deliver positive results, supporting potential expansion to the current working areas. I will now pass over the presentation to Kim to discuss Don David Gold's financial results.
Thank you, Alberto. We closed the quarter with a strong balance sheet consisting of just over $33 million in cash and working capital increase almost $5 million during the quarter. We reported net income of $2.7 million and operating cash flows of $8 million for the three months ended June 30. Net sales of over $37 million were 20% higher than the same period in 2021 due to higher gold sales and higher base metal prices. Total production costs of $21.7 million for the quarter is 11% higher than the production cost for the same period in 2021. The increase is largely related to half a million increase in consumable products driven by price increases, 500,000 increase in royalty expense due to higher sales, and almost $1 million in spare parts for heavy equipment repairs.
Finally, there was a 500,000 increase in transportation costs due to an agreed 9% rate increase. Don David Gold Mine's total cash cost was $247 per ounce, and total all-in sustaining costs per gold equivalent ounce were $799 per ounce. These costs are significantly lower than 2021 and directly related to the higher base metal prices realized. Allen, back to you.
Thanks, Kim. The economic climate has changed dramatically in the past few months. While we are comfortable with the guidance for the year, it is making new projects challenging. Across the industry, we are seeing projects suffer from cost escalation as well as increased cost of capital at a time when commodity prices are declining. It is unfortunately a perfect storm, the duration of which is unknown. However, as you've heard me say before, we remain focused on creating value through disciplined growth and capital allocation. As I noted in my opening comments, we've made tremendous strides to demonstrate our commitment to advanced initiatives around health, safety, community development, and really our overall ESG programs. We plan to continually expand our efforts in this area.
With our healthy balance sheet, strong management team, we look forward to advancing the Back Forty Project and to continue to focus on improvements at the Don David Gold Mine while maintaining our status as a low-cost producer with a focus on disciplined growth. With that, I'll turn the call over to the operator for questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad. One moment please for your first question. Your first question comes from the line of Jake Sekelsky of Alliance Global Partners. Please go ahead.
Hey, Alan and team. Thanks for taking my questions.
Morning, Jake.
Obviously, you know, we've seen industry-wide cost inflation that you just touched on a bit, but it seems like you've been somewhat insulated with outstanding costs coming in below $800 an ounce. Any color on the steps that you're taking proactively to mitigate these pressures? And are you concerned at all with any of them surfacing in a larger way in the second half of the year?
I'm not anticipating significant changes in the second half, Jake. We had anticipated cost escalation when we did the budget last year, and as it's turned out, we've been, unfortunately, fairly accurate. A lot of the cost increases that we've seen had already been anticipated. On a go-forward basis, we're beginning to see correction, albeit slight, in the cost of grinding media, and some of the other inputs seem to be stabilizing a little bit. We were fortunate in that we were able to negotiate a 6% increase in labor early in the year, and again, that was budgeted for. We are, of course, benefiting from the high base metal prices that we experienced in the first half of the year. That has corrected somewhat, obviously. That being said, the current rates are still significant.
We do have some hedging in place for our zinc production, which is going to ensure solid revenue for the balance of this year. What that will do is enable us to maintain our cash cost and AISC at least for the balance of this year.
Do you think even with you know obviously zinc prices have come down a bit off the highs but you know we're still sitting at $1.50 or so a pound which historically is a strong level. Are you comfortable with putting in longer-term hedges with zinc at current levels?
It's something that we consider actively on an ongoing basis, Jake. I will tell you that my personal view, and this is not one that we've necessarily adopted corporately yet, is that I would take $1.50 zinc all day long forever. I've been involved in zinc for, unfortunately, a few decades now, and I've never seen zinc prices at this level for an extended period of time. I think there is a strong possibility that zinc may, in fact, increase in the short- term because of smelter curtailments in Europe, and who knows what's happening in China right now with COVID and the resultant, reductions in capacity. Europe is being driven by the energy crisis over there, and the zinc smelters are not going to be operating at full capacity.
That may result in a supply squeeze within the short- term, and I don't know what short- term is. I think we're going to see a period of time of strong zinc prices persisting. Historically, you're right. $45, $50 zinc is very, very good, and it is something that we will consider to lock in prices on a go-forward basis.
Okay. That's fair. Just lastly on Back Forty, I mean, we're coming up to the feasibility study, you know, over the next couple quarters and then kicking off the permitting process after that. Can you just touch a bit on what that permitting process might look like going forward? You know, it's my understanding that the process rests solely with the state with no federal permitting needed. Is that right?
That is correct. Michigan is one of two states in the union that has complete control over the permitting process. They do have a little bit of input from the EPA and from a technical perspective, but only that. The state has total authority over granting permits. All of the permits that we deal with are under the control of the Department of Environment, Great Lakes, and Energy, EGLE for short. It's part of the Michigan Department of Natural Resources, and we deal with five sub-departments of that group. What it does is enable us to have a relatively focused approach to permitting. Process is, we will submit applications for the various permits to the appropriate departments. There will be a back and forth public hearings, commentary from the departments. We will respond.
We're forecasting at this time that that process will take 10-12 months. After that period, we would anticipate that we would receive the permits from EGLE. Permits in the state of Michigan are subject to a contested case process whereby opponents of the project can challenge the permits in an administrative court. It's a normal process. We fully anticipate that we will be going through that process. It will take, again, 6-12 months. The timelines are really fuzzy here because it's totally out of our control. We do know, or we've been led to believe, that the court would like to have a combined contested case process for all permits concurrently. That would shorten the timeline to conclusion. Once the court rules that we have valid permits, assuming they do so, then we'll begin construction.
Does that address it, Jake?
Yeah. No, that was very helpful. That's all on my end. Thanks again, and congrats on a strong quarter.
Thanks, Jake. Good hearing from you.
Thanks, Jake.
There are no further questions at this time. I will turn the call to Mr. Allen Palmiere for closing remarks.
Well, that was short and sweet. I would love to suggest our disclosure was so all-encompassing that there was no questions generated. Probably it's the economic times in which we live that is creating a lot of attention to be placed on other issues. That being said, I would very much like to thank everyone for joining us. I look forward to speaking to you all in Q3. Have a very good afternoon, and thank you again.
This concludes today's conference call. You may now disconnect your line.