Lotus Resources Ltd (ASX:LOT) recently acquired the 6 million pound U3O8 Livingstonia Uranium Project located 90 kilometres from the company’s Kayelekera Uranium Project in Malawi.
Red Cloud Securities believes this is a positive update for the company, as the resource area shows potential for increasing both size and grades.
Lotus paid just US$25,000 or US$0.004 per U3O8 resource pound for Livingstonia, compared to African developers which are currently trading at an EV/pound of US$2.57 or global peers at US$3.48.
The asset provides a great opportunity to add to the company’s resource base, potentially by as much as 16%, according to Red Cloud.
The following is an extract from Red Cloud’s corporate update on Lotus:
Impact: Positive
Lotus Resources announced it has acquired the 6M lb U3O8 Livingstonia Uranium project, located 90km from its 85%-owned Kayelekara uranium project in Malawi. The acquisition is expected to increase the company’s resource base, in addition to providing potential to become a satellite operation for Lotus. Several exploration targets around the boundaries of the resource area have already been identified by drill holes that ended in mineralization (Figures 1 – 3). Airborne radiometrics also show an anomaly that extends into the existing Lotus tenement at the Livingstonia North. We believe this is a positive update for the company, as the resource area shows potential for increasing both size and grades. Although the resource isn’t very high grade (325 ppm U3O8), ore sorting testwork is currently underway and could help increase head grade at time of processing. Eventually, adding this material to the mine plan could extend the life of mine for Kayelekera.
- Another 6M lb U3O8 acquired on the cheap. Lotus paid just US$25,000 or US$0.004 per U3O8 resource lb for Livingstonia, compared to African developers which are currently trading at an EV/lb of US$2.57 or global peers at US$3.48. The asset provides great opportunity to add to its resource base, potentially by as much as 16%. This emerging satellite area could have a positive impact on project economics should the lbs be added to mine plan and extend LOM. Landholdings have risen to 187km2 within this underexplored region.
- Broader zones of mineralization are evident within Livingstonia, but have been sparsely drilled, and could also potentially add highergrade zones extending beyond existing resource areas. Historical drill results include 1) 1,180 ppm eU3O8 over 8.0m from 77.4m (CBRC034) and 2) 1,800ppm eU3O8 over 3.6m from 72.5m (CBPRE007).
- An initial exploration program will begin shortly, where RC drilling will test several high-priority targets including the strike extensions into the adjoining Livingstonia North and Chilumba. Given that LOT has exploration success with the project, it can undertake ore sorting test work on the Livingstonia material in 2022 as part of the process in order to determine if Livingstonia becomes a future satellite.
- Exploration potential exists in four main areas including 1) east of the northern end of the mineral resource outline, 2) along strike of the NW trending zone of the higher-grade mineralization, 3) within the mineral resource outline where earlier drilling did not drill through the full thickness of the host sequence, and 4) in the southern area of the lower grade zone, with potential for higher grade mineralization.
We maintain a BUY rating and recently upgraded target price of A$0.40/sh (primarily due to our new uranium price assumption). Lotus continues to trade at discount to its peer group at a P/NAV of 0.86x vs. peers at 1.17x P/NAV. Upcoming Catalysts: 1) Technical studies at Kayelekera (ongoing), 2) Exploration drilling at Kayelekera (Q2/21), 3) Field work at Milenje Hills (H2/21), 4) FS for Kayelekera (H1/22).