Lotus Resources (ASX:LOT) is moving into detailed engineering and onsite works to restart operations at the Kayelekera Uranium Project in Malawi, with an aim to achieve first uranium production during Q3 2025.
This news comes after the $476.72 million market capitalised company completed a front-end engineering and design (FEED) program, which has positioned Lotus to undertake a low-capital intensity, accelerated restart program for Kayelekera.
The accelerated restart program will allow Lotus to determine long-lead items and a critical path to production schedule. It also allows Lotus to confirm or update capital cost estimates for aspects of the plant refurbishment and new equipment installations, and update the operating costs from the 2022 Definitive Feasibility Study (DFS).
Based on the FEED program’s results, the company formulated the accelerated restart plan which reduces the initial restart plan by focusing on capital items essential to the restart. The company notes the remaining capex continues off the critical path to optimise operations and cost structure.
Lotus reports the plan reduces initial restart capital from US$88 million ($130.68 million) to US$50 million, while also having an initial restart capex of US$50 million — ranking Kayelekera as one of the lowest capital cost uranium projects globally — with an initial capital intensity of US$21 per pound.
A pre-production cost of US$10.6 million is required, compared to US$11.5 million based on the DFS, and the build-up will be staged.
CEO Greg Bittar says by decoupling the restart timetable from the long lead items, the company is able to start the plant well ahead of the original DFS schedule of 15 months.
“Those capital items remain in the plan and will be brought on as soon as possible in order to optimise the cost structure,” Bittar says.
“However, we don’t need to wait for those, or have the timetable to restart dependent on those items. The plan was always to have full backup diesel power generation, as the site was originally operated by, and we can use this power while the grid connection is completed.”
Bittar adds that following the signing of the mine development agreement and completing the FEED program, Lotus is positioned to take advantage of the continuing strength in the uranium price and the “strong uranium demand outlook”.
“Our thorough FEED process has provided the foundation for us to optimise and accelerate our restart plans for Kayelekera, taking advantage of the existing plant and infrastructure,” Bittar says.
“By sequencing the capital spend and targeting the critical restart items we reduce the amount of initial restart capital, which allows us to turn the plant on much earlier than previously contemplated.
“This not only provides us with increased funding flexibility but critically allows us to be a producer next year and take advantage of the strong customer demand we are seeing by moving into production as soon as possible.”
Lotus says personnel have arrived onsite and a program of refurbishment work at the camp and plant areas has begun. The refurbishment includes removing material that has accumulated along the western boundary of the processing plant and encroached on plant infrastructure during the care and maintenance period.
The work also includes refurbishment of the potable water and sewer system in the camp, phase one refurbishment of rooms in the camp, as well as an inspection of key plant equipment and initiation of refurbishing the plant equipment at the crushing and grinding areas.
The plant and equipment in care and maintenance for the restart of operations represents more than US$200 million in invested capital expenditure.
Lotus reports Kayelekera has a 10-year mine life with a production target of 19.3 million pounds of triuranium octoxide, alongside competitive cost estimates; steady state C1 cash cost of US$34.5 per pound and an all-in sustaining cost of US$44.8 per pound.
The project also has a pre-tax and post-tax net present value of US$439 million and US$301 million, with a pre-tax internal rate of return of 80%.
Over the mine’s life, it is expected to generate a pre-tax free cash flow of US$698 million.
As of 30 June 2024, Lotus had $34 million cash at hand, which the company says allows it to proceed with the restart plan.
Concurrently, the company is assessing the optimal funding mix including debt, prepayment sources, strategic, and cornerstone funding sources, and expects restart capital, post-production capital, and working capital to come from a mix of these sources.
The Kayelekera Project has produced 11 million pounds of triuranium octoxide over five years between 2009 and 2014. The project was shut down to preserve its longevity due to a sustained low uranium price.
Lotus Resources is a uranium developer headquartered in Perth, Western Australia. The company is currently focused on its Kayelekera and Letlhakane projects, which both lie in Africa.
Write to Aaliyah Rogan at Mining.com.au
Images: Lotus Resources
