Lotus Resources Ltd (ASX:LOT) says the results from its definitive feasibility study (DFS) are in and the numbers stack up to restart the Kayelekera Uranium Project in Malawi.
According to the DFS, Kayelekera ranks as one of the lowest capital cost uranium projects globally, with a low initial capital cost of US$88 million, an initial capital intensity of US $37 per pound and an average production of 2.4 million pounds U308 (ASX:UTO) per annum for the first seven years over a 10-year life-of-mine.
Short restart timeline
The mine is also able to quickly restart production over a timeline of about 15 months for construction and refurbishment once a final investment decision (FID) has been made.
The restart DFS is underpinned by an ore reserve estimate of 15.9 million tonnes at 660 parts per million (ppm) U3O8 for 23 million pounds U3O8.
The uranium produced in the mine plan is based on 96% ore reserves and 4% inferred mineral resources.
Despite the current high inflation environment, operating costs are lower compared to the historical operations and an earlier restart scoping study due to increased feed grades from ore sorting, lower power costs from grid power and improved acid utilisation from nanofiltration.
The DFS factored in US$35.8 million for new plant and infrastructure to improve the project economics and plant reliability, which were not considered in the scoping study.
Reduced emissions, good timing
The project has significantly reduced projected power-related CO2 emissions by around 72% or roughly 21,000 tonnes per annum compared to the historical operation through a number of new and innovative initiatives. This finding bolsters the company’s ESG goals of reducing carbon emissions from its operations while looking to be an ESG leader in the uranium industry.
The timing of the project restart is also aligned with uranium market conditions where significant demand is anticipated based on the global zero carbon and electrification goals.
Managing director Keith Bowes said: “Having an asset with low technical risk and low restart capital, which can quickly commence production, are key characteristics that investors look for in a mining project.
“The results of the Restart DFS clearly put Kayelekera in this category and this provides an opportunity for the company to leverage off the strongest fundamentals for the nuclear/uranium industry in many years.
“The standout features of the Restart DFS are the low capital costs and attractive operating costs, which consider the current high inflation environment, while also ensuring a positive legacy as we have significantly reduced our carbon footprint, in line with the company’s ESG strategy.
“The initial upfront capital costs remain one of the lowest in the industry, both from a headline (US$88 million) and an initial capital intensity perspective (US$37-per-pound annual production).
Early stages of market upcycle
“I am also very pleased with the success we have had in putting together a power supply strategy that not only provides electricity at a very low US$0.106 per kilowatt hour, but also reduces our power related CO2 emissions by over 70% compared to the previous operation. This is a key step in the company strategy towards our long-term goal of becoming a leader in ESG in the uranium sector.
“Additional details regarding our ESG commitment and the multiple initiatives we are undertaking will be outlined in our sustainably report, due to be released towards the end of 2022.
“We believe we are still in the early stages of the uranium market upcycle and are confident that the uranium price still has some way to go before it peaks. The company will look to lock in prices that ensure long term profitability and good returns for our investors.”
Lotus now plans to accelerate engagement with the various nuclear energy utilities to secure offtake agreements at the necessary volumes and pricing to support the restart of Kayelekera. It’s also considering its financing options.