Lotus Resources

ASX-listed Lotus Resources has reduced the care and maintenance operating cost guidance at its recently acquired Kayelekera uranium project in Malawi by 75%.

The care and maintenance costs have been reduced to an annualised cost of US$1.2 million (for the year ending 30 June 2021) from the original 2019 budget estimate of about $5 million as a result of advancements of certain recommencement activities for uranium production at the project.

Read more: Lotus Resources defines exploration targets at Kayelekera

Cost saving has been achieved through a comprehensive review of all activities and associated costs at the project site to ensure that the site care and maintenance programmes and costs are optimised.

The review has ensured that the primary focus for the ongoing activities are the core requirements of:

  1. Maintaining a high level of security and safety at site;
  2. Ensuring compliance with all regulatory requirements; and
  3. On-going maintenance of critical equipment.

A revised budget, which has been prepared from first principles to deliver these core functions, has now been developed. Key features of the revised budget and reduced costs include a reduction in the on-site labour force from 116 to 16 full-time local employees and two expatriate employees onsite; a 20% reduction in diesel price costs as negotiated with the supplier as well as a reduction in annual diesel consumption; and a reduction in the number of residents in the onsite camp, with only eight residents remaining.

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In order to achieve the care and maintenance operating cost guidance, certain capital projects will be undertaken to deliver the required modifications and include the following:

  • The large diesel gensets that currently power the site will be turned off with a small genset setup to power the camp and a combination of solar power and direct diesel power used to power pumps, communication towers and other infrastructure.
  • To support the reduced security contingent, drones and guard dogs will be employed to enable the majority of Project site security to be managed from the control room, with a smaller reactionary team available to respond if required.
  • An evaporative system to manage water in future wet seasons will be designed and implemented
  • Upgrades to surface water infrastructure including drains, ponds and pumping systems.

The work packages and associated infrastructure is planned to be completed before the end of calendar year 2020.

“Our operations and regional teams have done a great job in taking timely action to introduce cost-effective, safe and environment friendly and regulatory compliant measures at the project site. A key focus of this plan is on preserving cash and advancing our plans to build a new uranium supplier while coping with the restrictive conditions during COVID-19 pandemic,” says Lotus Resources MD Eduard Smirnov.

Restart study

Lotus Resources is well advanced with the scoping of a work programme that will be used to support a restart study.

Key scopes of work include:

  • Developing a cost estimate for refurbishment of the processing plant (crusher, mills, resin pulp tanks, dryers etc) to facilitate restart of the process.
  • Developing a cost estimate for refurbishment and upgrade of the acid plant.
  • Geotechnical studies of plant foundations.
  • Design work around an ore upgrading facility in the front-end of the processing route to allow lower grade ores to be economically treated.
  • Process improvements around acid recovery and process efficiency.
  • Power studies to reduce diesel consumption.
  • Updated mine design and scheduling based on the March 2020 mineral resource estimate.
  • Production scheduling optimisation to determine the optimal throughput and production rates.
  • Incorporation of all of the above into a feasibility level study to support financing and offtake arrangements.

The scope, timelines and costs associated with this work will be finalised in the September quarter of 2020. The restart of the Kayelekera operation is subject to a significant recovery in the uranium price to a level providing for sustainable and profitable production.