By Wahard Betha
A Definitive Feasibility Study (DFS) conducted by ASX-listed firm, Lotus Resources, has confirmed Kayelekera Uranium Mine project as one of the lowest capital cost uranium projects globally whilst also having the ability to quickly recommence production once a Final Investment Decision (FID) has been made.
In a press release, the Company stresses that following the development Lotus is now focusing on accelerating engagement with the various nuclear energy utilities and securing offtake agreements with the necessary volumes and pricing mechanisms to support the restart of Kayelekera whilst also considering various financing options to fund the restart.
Commenting in the statement,Managing Director for Lotus Keith Bowes commended the findings saying having an asset with low technical risk and low restart capital, which can quickly commence production, is one of the key characteristics that investors look for in a mining project.
Bowes said: “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, whilst 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 of US$88 million and an initial capital intensity perspective of US$37/lb annual production.”
“This is an excellent achievement given current inflationary pressures. The number is higher than that originally announced in the Scoping Study, but includes three new items which are critical for lowering our operating costs.”
He said the operating costs during steady state in the initial mining phase now sit at US$29.1/lb U3O8, well within the second quartile costs for current and planned uranium producers.
Bowes also said he is impressed with the success they have had in putting together a power supply strategy that not only provides electricity at a very low US$0.106/kWh, but also reduces the company’s power related CO2 emissions by over 70% compared to the previous operation.
He said the power supply strategy is a key step in the Company strategy towards its long-term goal of becoming a leader in ESG in the uranium sector.
Bowes said: “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.
“With the Restart DFS now complete the Company looks forward to continuing its work with the Malawian government to secure a Mine Development Agreement that will support the Project financing and shareholder returns appropriate for the scale of investment.”
“At the same time the Company plans to increase engagement with the various nuclear energy utilities to secure offtake agreements at the necessary volumes and pricing to support the restart of Kayelekera.
“This work will be undertaken in parallel with our work on securing funding for the restart. 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.”
The key highlights from the Restart DFS are:
- Quick re-start to production following a Final investment Decision
- 15 months development prior to first production
- Proven processing facility reduces start-up risks
- Debottlenecked flowsheet consisting of traditional milling, acid leach and resin-in-pulp circuits with high metallurgical recoveries of 86.7%
- Simple mining technique lowers operating costs
- Shallow open pit mining with low strip ratio of 1.8
- High degree of confidence
- 96% of uranium produced from the mine plan is from Ore Reserves with the remaining 4% coming from Inferred Resources contained in existing stockpiles.
- Low initial capital cost
- US$88M ranks the Project as one of the lowest capital cost uranium projects globally with an initial capital intensity of US$37/lb
- Includes US$35.8 million for new plant and infrastructure to improve the project economics and plant reliability including a new acid plant and steam turbine (US$15.3M), a connection to the national grid (US$13.0M) and upgrade to the front-end processing circuit to incorporate ore sorting (US$6.0M)
- Improved margins due to low operating cost
- Cash costs are US$29.1/lb and AISC of US$36.2/lb during the first 7 years of production (after ramp-up).
- Robust Mine life with exploration upside
- 10-year Life of Mine (LOM), with production of 19.3Mlbs U3O8 at an average annual production rate of 2.0Mlbs (2.4Mlbs for the first 7 years before production is sourced from stockpiles)
- Exploration success at Livingstonia and potential further opportunities at Chilumba and around the current Kayelekera resource, demonstrate potential to extend the LOM past the 10 years
- Significantly improved ESG results
- Power related CO2 emissions reduced by over 72% or ~21,000tpa compared to the historical operation
- Over 600 jobs will be created for the local community
- Community Development Agreement in progress to support development of our qualified communities
The Company’s next areas of focus relate to undertaking the work necessary to position Kayelekera for a successful restart when a final investment decision is made. Key activities expected to be completed within the next 6 to 12 months include:
· Complete negotiations with the Malawian Government concerning the Kayelekera Mine Development Agreement;
· Continue dialogue with nuclear energy utilities and other parties in connection with uranium offtake agreements;
· Finalisation of an agreement with the Electricity Supply Commission of Malawi (ESCOM) for the connection of the mine site to the national grid;
· Preparation of an Operational Readiness Plan for restart;
· Completion of financing plan for the initial and working capital requirements for the restart of the mine; and
· Development of the scope and costs for undertaking a Front-end Engineering and Design (FEED) program of work in conjunction with a site based early works program that could allow an accelerated restart if deemed viable. This work will be undertaken while the Company continues to maintain Project asset integrity through its care and maintenance program.
The Kayelekera project, currently on care and maintenance, is a past producing asset having delivered approximately 11 million pounds (Mlbs) uranium between 2009 and 2014, before its closure due to a sustained low uranium price.
Following the Company’s acquisition of the Project in 2020, a Re-Start Scoping Study was completed in October 2020 which identified the key drivers for the project economics all of which have been incorporated into this DFS.