Lotus Resources Ltd (ASX:LOT) is on the verge of restarting operations at Kayelekera Uranium Project in Malawi, with multiple work programs underway to revitalise the mine that has laid dormant for seven years.

Kayelekera, which as of late March is five-sixths owned by Lotus and one-sixth by the Malawi government, is a proven uranium operation, having produced 11 million pounds over five years. However, it ceased operating in 2014, following sustained low uranium prices.

Lotus has three main work programs being undertaken – a development study, a drilling program and environmental consultation.

Uranium is back

Lotus managing director Keith Bowes said renewed optimism in the uranium sector was driving further excitement with regards to Kayelekera.

“Brownfield uranium projects with proven production history, such as Kayelekera, are well placed to be the first to respond and meet the ever-increasing supply-demand gap,” he said.

“Given these factors, as well as our strong existing cash position of more than $17 million, the company is accelerating a number of work programs aimed at positioning Kayelekera to quickly and economically restart operations.”

Uranium’s revitalisation has been driven by a few factors, including a bill signed by the US Senate last year to create a national US uranium reserve.

The spot price for uranium has reached above US$30 per pound this year, following spikes in May last year when it rose to four-year highs.

There is also a growing groundswell of support for uranium to be designated as a legitimate source of renewable energy.

The company has a market cap of approximately A$161.5 million and since November 10, 2020, shares have traded in the range of $A0.083 to A$0.18 on the back of newsflow along with improved uranium fundamentals and are currently trading around A$0.15.

Test-work the first focus

Bowes said test-work developed to assess the cost reduction strategies identified in the 2020 scoping study was the main priority for Lotus.

“The scoping study cost assumptions were largely based on actual operational data achieved over the project’s five-year period of production,” he said.

“Since its closure in 2014, there has been a number of proven technological advancements not available at the time, as well as a number of other relevant initiatives we are considering.

“We believe that if all of the initiatives prove to be successful, there is potential for savings in the order of 10-20% from the previous estimate.”

The cost reduction strategies are focused on ore sorting technology, power generation, acid recovery and examination of the tailings storage facility.

Drilling and environmental studies

Also imminent is a 5,000-metre reverse circulation drilling program to test near-mine uranium targets, as well as a maiden drill program at the high-grade Milenje Hills Rare Earth’s prospect.

There are six radiometric anomalies to the south of the existing pit that cover areas of outcrop and have similar signatures to the Kayelekera anomaly, which are between two and four kilometres from the plant and have received no historical drilling.

Lotus has also appointed a highly regarded environmental, social and governance (ESG) consultant to assist in performance measurement, reporting methods and a communication strategy related to ESG considerations for the project.

It is also seeking a potential OTC markets listing.

– Daniel Paproth