When it comes to bringing a project into production, there are few bigger competitive advantages than starting with an operation already proven to deliver the goods.
In the Kayelekera uranium project in Malawi – which lived its first production life under the ownership of Paladin between 2009 and 2014 – Lotus Resources (ASX:LOT) is sitting on just that.
One of just five brownfield uranium projects in the world on care and maintenance to have historically achieved commercial production of more than 2 million pounds, Kayelekera produced 10.9Mlb of uranium up to 2014, when it was placed on care and maintenance due to sustained low spot prices and to maintain Paladin shareholder value.
Critically, over its life the project’s output was accepted by all Western conversion facilities – ConverDyn in the US, Camico in Canada and Orano in France.
It’s an extremely interesting time to own a recently producing uranium asset. Momentum around the commodity has certainly shifted, as countries work towards a green future which looks increasingly likely to depend on nuclear power as part of its mix.
The popular view is that a supply shortage is on its way.
With this on the horizon, Lotus is exploring its options to get Kayelekera back into production. A restart study completed in October 2020 assessed the prospect of launching the project back into production in keeping with the operating metrics of its previous owners. The results were substantial.
The study highlighted a low total initial capital cost of US$50 million on the back of Kayelekera’s existing infrastructure, and predicted C1 cash costs based on an eight-year mine life of US$33 per pound of uranium oxide from years two to six with average production of 2.4 million pounds per annum.
“You’ve got all the infrastructure there already, so the time which would be required to start up the asset is quite short,” managing director Keith Bowes told Stockhead.
“Once you’ve made a decision to start mining, within 12 to 15 months you’re probably producing product – that’s very nice to have versus a greenfields project, which might take a couple of years to respond.”
But Lotus hasn’t pulled the trigger on Kayelekera just yet. The company is carrying out a series of studies designed to optimise and improve the project’s numbers across four key areas identified in last year’s restart study.
Four pillars of potential
Further strengthening the numbers around the Kayelekera restart has been a focus for Bowes since coming on as managing director in February, having previously led the technical work on the project after being part of the team which carried out acquisition due diligence.
Bowes said there were four main areas of focus for improvement at Lotus’ flagship asset, with the company exploring each at present.
The scoping study looked at two scenarios – the first with an eight-year mine life producing 16.4Mlb of uranium oxide with an average head grade of around 900ppm uranium oxide.
The second assessed the prospect of a 14-year life of mine, producing 23.8Mlb of uranium oxide with production after year eight coming from the treatment of existing low-grade stockpiles sitting at surface.
It is these low-grade stockpiles which form the basis of the first potential pillar of improvement.
“We are looking at whether we can convert the stockpiles into a more economic material by upgrading it using ore sorting,” Bowes said.
“Paladin actually did some work looking at ore sorting themselves a few years ago and demonstrated that the ore at Kayelekera is amenable to ore sorting.
“You may incur a small loss of uranium, but the upgrading benefits way outperform any losses you would have.”
The technology replicates those used with other commodities and involves crushing material and running it beneath a series of sensors, which pick out the ore from the waste and sorts it into a separate chute.
The second improvement involves the use of acid in processing materials. The project’s acid plant produces 235 tonnes of acid per day – a figure which potentially limits overall daily output.
Lotus is looking at ways to reduce the acid consumption of its ore – a move which could improve costs or allow it to increase uranium output.
“You can only feed as much ore into the plant as is consumed by the acid in any given day,” Bowes said.
“We’re looking at ore sorting again for that – exploring whether we can use the technology to sort high acid consuming materials from lower acid consuming material.
“If you can reject the high acid consuming material, assuming it doesn’t have uranium in it, you reduce the overall acid consumption. You can then either push more ore through, or your operating costs are lower because you’re not using as much acid.
“You’d have to make a decision on which is the optimal way to go.”
A Paladin-patented technology for acid recovery using nanofiltration is also applied at Kayelekera, and is royalty free under the terms of its sale to Lotus. The recovering acid is recycled in the process and either increases the total acid available or reduces the fresh acid requirements. Lotus is also exploring opportunities for optimisation here.
The third of the four pillars is in power generation. At present, Kayelekera’s plant is run by diesel gensets which cost US28-32c per kilowatt hour.
Bowes said the company was already engaged in negotiations with Malawi’s utility service provider ESCOM over accessing the power grid at nearby Karonga.
“We’d have to install transmission lines and transformers etc, but they are relatively low cost,” he said.
“By doing that we think we can get our power costs down to less than 10c per kilowatt hour – that’s a big change.”
Solar power and battery options are also being assessed at Kayelekera, while the prospect of retrofitting a steam turbine to create power from the project’s acid plant has the potential to cover around 25% of the project’s total energy demand, according to initial calculations by the vendors.
The final pillar is the tailings dam. The current project schedule assumes the need to build a second dam in around year five – an expensive exercise for which Lotus is exploring alternatives.
“The first question is whether or not we can optimise the existing tailings dam to make room for more material,” Bowes said.
“The second is whether we can start placing tailings back into the pit once mining has been completed in year 6 based on the current schedule (remembering we treat stockpiles from then on) – we’ll be looking at whether that’s an option for us as well.”
Bowes said the results of these four studies would guide a feasibility study which will ultimately guide a decision to mine.
“We think our timing and the way we’ve planned things will mean we’re able to hit the peak at the right time, and we can respond very quickly to a change in the uranium market,” he said.
“Being able to make a decision to mine and get the plant up and running relatively quickly – that’s a huge advantage.”
With so much on the cards in terms of project optimisation, Lotus is a uranium play to watch with interest in the months to come.
This article was developed in collaboration with Lotus Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.