Lotus upbeat on Kayelekera Mine Development Agreement

Socially responsible: Lotus completed construction of Kayelekera Clinic which is now operating

By Marcel Chimwala

ASX-listed Lotus Resources says it is progressing with negotiations with the Malawi Government to sign a Mine Development Agreement (MDA) for the Kayelekera Uranium Mine in Karonga.

MD for Lotus Keith Bowes says that the MDA will set the fiscal regime in which the Project will operate and is one of the inputs the Company is seeking prior to making its Final Investment Decision (FID) for the restart of Kayelekera. 

Bowes explains in the Company’s quarterly report for the quarter ended September 30, 2023 that he and Non‐Executive Director for Lotus Grant Davey travelled to Malawi to meet with the new Minister of Mining and the Minister of Finance to progress the MDA.

He says: “The Government of Malawi is motivated to finalise the MDA as soon as possible, recognising the importance of mining to the future growth of the Malawian economy. This is as also evidenced by the Mining Minister’s address to the Africa Down Under Conference in Perth, Australia where she made positive statements about Kayelekera’s previous contribution to Malawi’s economy and stated her support for mining projects in Malawi, including Kayelekera, being put into production soon.”

“Lotus has also progressed the work with Tier 1 law firm Herbert Smith Freehills (HSF) to support the Company in developing the documentation and strategy around the execution of the proposed MDA.”

Kayelekera power supply agreement

Bowes also says in the quarter under review, Lotus continued with discussions with Malawi’s power utility Electricity Supply Corporation of Malawi (ESCOM) for a Power Implementation Agreement along with the Power Supply Agreement which will facilitate the connection of the Kayelekera site to the Malawi national grid and allow the Company access to lower cost power, a critical component of the reduced operating costs reported in the Definitive Feasibility Study.

“The Malawian grid power, sourced predominantly from hydro, is considered green in nature and ensuring this source as a major component of its power mix fits with Lotus’s low carbon strategies,” he says.

Bowes says during the quarter, Lotus, along with its technical consultants, worked with ESCOM through a technical working group to define the optimal grid connection solutions and the associated power reliability and upgrade costs.

“A preferred option has been selected and a commercial working group has now been formed to consider the business case for the upgrades and new installations required, including negotiating the reduced electricity tariffs that will be applicable for Kayelekera,” says Bowes.

He explains that a memorandum of understanding (MOU) is being prepared that will outline the pathway and responsibilities associated with the formal agreements proposed.

The Company has also initiated an assessment of what will be required for the installation of the new transmission line from an environmental impact assessment perspective depending on the selected route, and this will feed into the execution strategy.

Site activities

Bowes explains that general site activities associated with care and maintenance during the quarter remained focused on four main areas namely:

 • Compliance with all regulatory requirements;

• Maintenance of the equipment on site so as to minimise restart costs;

• Ensuring security of the assets on site; and

• Management of water onsite to control the discharge of water to the environment, during the wet season in accordance with licence conditions.

“The key site activity during the quarter was the execution of geotechnical works associated at the plant terrace and the return water dam (RWP2). In addition to installing a gabion basket system, significant work was also carried out on the water drainage/diversion systems around the plant and RWP so as to minimise the ingress of rainwater into the ground water system. The works were completed in October,” he says.

Offtake discussions

Meanwhile, Lotus continues with its discussions with multiple electricity utilities regarding potential offtake agreements, including participating in formal Request for Proposals (RFPs) and off-market discussions with a number of these utilities and other off-takers.

Bowes reports that Lotus attended the WNA Uranium Symposium in London, meeting with numerous utilities, industry participants and investors.

He says that this year’s conference had the largest attendance (~700) on record and it was clear the sentiment around the future of the nuclear industry from all participants was the most positive seen for many years.

Bowes says; “The number of utility engagements compared to last year was much higher and the opportunities around term contracting also improved. As a result of these efforts, Lotus has participated in four RFPs during the quarter.”

“Lotus is also finding utilities are increasingly receptive to Lotus’s proposed offtake terms, with the market effectively rising to the pricing level Lotus has been prescribing in its submissions for the last 12 months.”

He says utilities’ strong focus on potential suppliers’ ESG credentials continued, and Lotus received detailed ESG questionnaires from a further two European utilities during the quarter. These utilities not only look towards net-zero carbon emissions in their supply chains, but also social licence to operate, International Labour Organisation compliance, modern slavery mitigation measures along with the Company’s diversity and equality criteria in addition to geopolitical diversity in their supply, all of which Lotus is well positioned to offer.

The uranium spot price has increased during the September quarter from a low of US$55.40/lb to finish the quarter at US$73.50/lb, a 33% increase and a multi-year high. The UXC Long-Term price increased by US$5.00/lb to US$61.00/lb over the quarter.

One thought on “Lotus upbeat on Kayelekera Mine Development Agreement

Leave a Reply