Lotus tops up stake in Malawi uranium project
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Lotus Resources (ASX:LOT) has exercised its right to increase its interest in the previously producing Kayelekera uranium project by 20 per cent to 85 per cent.
Kayelekera produced 11 million pounds of uranium between 2009 and 2014 with proven quality given that all of this production was accepted by conversion facilities in the US, Canada and France.
With a low initial capital cost of about $US50m ($65.7m) to restart production thanks to the presence of existing infrastructure, including the processing plant and a quick ramp-up of production expected, it is not hard to see why the company has moved to acquire Kayelekera Resources’ interest in the project.
The remaining 15 per cent in the project is held by the Malawi Government.
Lotus chairman Michael Bowen notes that Kayelekera is one of only a small number of uranium projects with a demonstrated track record of operations.
This makes the consolidation of ownership an important milestone as the company positions to restart operations in an improving uranium price environment.
Uranium prices are trading close to $US30, almost 25 per cent higher than its market low of $US24 per pound a year ago.
“With work on the Re-Start Feasibility Study progressing, the increase in ownership comes at a time when the uranium price and sentiment in the industry is improving due to an impending supply deficit. As a proven uranium producer, Lotus is well placed,” Bowen added.
The Kayelekera uranium project in Malawi hosts a current resource of 37.5Mlb of uranium and is the subject of a scoping study indicating that it can be brought back into production quickly and at a very palatable capital cost.
This is thanks to the presence of existing infrastructure such as the 1.4 million tonne per annum processing facility, tailings facility, acid plant and accommodation camp, which results in a capital intensity of $US21/lb – one of the lowest in the industry.
Lotus’ study also considered two production scenarios, the first of which envisages the production of 16.4Mlb of uranium over eight years and the second the production of 23.8Mln over 14 years including the processing of stockpiles from the eighth year.
Cash costs have been estimated at about $US33/lb on average production of about 2.4Mlb per annum.
The company expects to carry out a feasibility study in the second half of this year that will incorporate outputs from targeted studies, an updated resource with mining schedule, and revised project economics to support financing and offtake.
It recently raised $12.5m through a share placement, leaving it fully funded through to early 2023.
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.