Advancing Kayelekera Restart, Lotus Resources Eyes Long-Term Uranium Growth

Lotus Resources Limited (ASX: LOT) is an Australian-based mining company focused on developing its flagship Kayelekera Uranium Project in Malawi and recently acquired Letlhakane Project in Botswana into major producers of uranium oxide.

‍

Robust Uranium Market Supporting Development Plans

The uranium market is experiencing very positive sentiment currently, according to Lotus MD Keith Bowes after attending the recent World Nuclear Association's annual symposium in London. With uranium prices sustaining above US$60 per pound and global demand forecast to grow, Kayelekera is well-positioned to meet rising uranium requirements when production commences in 2025.

Several factors are contributing to strengthening demand for uranium:

• More reactors under construction globally, especially in China
• Existing reactors in the US and Europe extending operating lives
• Growing interest in smaller modular reactors (SMRs) in Canada, China and Europe 
• Latest WNA demand forecast revised up to 3.6% growth
  

This increasingly positive landscape provides confidence for Lotus to progress Kayelekera to production. Targeting average contracted pricing above US$65 per pound will deliver strong project economics.

Advancing Towards Final Investment Decision

Lotus has laid out a clear pathway to reach Final Investment Decision (FID) for Kayelekera by end of 2023. The key prerequisites are:

• Sufficient uranium price – now achieved with prices above US$60/lb
• Concluding Mine Development Agreement (MDA) with Malawi government – good progress being made
  

The MDA establishes the fiscal regime and incentives for foreign investment. Similar agreements are common for African mining projects.

Lotus is collaborating with other uranium companies looking to develop Malawian mines to propose an attractive investment environment. With Kayelekera first in line to commence production, its MDA may become a template for others.

According to Bowes, the government recognizes the nation-building potential of establishing a sustainable and profitable mining industry. If the 5-6 uranium projects under consideration can attract funding and proceed, Malawi’s economic prospects would be significantly uplifted over the next decade.

Refurbishment Plans

Upon formalizing the MDA and confirming FID, Lotus will embark on refurbishing the Kayelekera processing plant in preparation for production. 

The US$88 million capital expenditure estimate from the 2021 feasibility study included provisions for ground stabilization and removing stockpiles from areas prone to minor subsidence. These preventative measures will be implemented early during plant refurbishment. 

While some cost escalation is likely, Bowes believes the capex figure remains appropriate. A Front End Engineering and Design (FEED) study following FID will provide greater cost certainty.

At the same time, Lotus is progressing negotiations with the Malawian electricity utility ESCOM for connecting Kayelekera to the national grid.

Expanding Lotus’ Footprint

The impending acquisition of the Letlhakane Project in Botswana via a Scheme of Arrangement with A-Cap will significantly boost Lotus' uranium resource base. The 190 million lb deposit complements the 52.8 million pounds already defined at Kayelekera. 

Letlhakane provides the potential to extend Lotus’ production profile out to 20-25 years. Another key aspect is both projects are amenable to the low-cost alkali leach processing method. Optimizations developed at Kayelekera can be leveraged at Letlhakane. 

Shareholder approval for the merger should occur in late October, with completion targeted for November. Lotus will then undertake resource infill drilling to expand the quantity of Letlhakane mineralization in the higher confidence Measured and Indicated categories.

Conclusion for Investors 

With exciting progress towards re-establishing production at Kayelekera, the Lotus investment case is increasingly compelling. Successful conclusion of the MDA and FID will be important milestones to propel Lotus firmly into the next uranium bull market.

The merger with A-Cap will provide further growth potential and longevity for the company. Lotus is positioning itself to meet rising uranium demand over the long term. 

Investors seeking leverage to higher uranium prices should keep a close eye on developments at Lotus.