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Australia’s Lotus Resources (ASX: LOT) has received a major boost in its quest to restart the Kayelekera uranium mine in Malawi with the signing of a mine development agreement (MDA) with the African nation.
The MDA with the Malawian government ensures that the mine will operate under a stable fiscal regime over a 10-year period and provides the necessary confidence to investors, the company stated in a July 31 announcement.
Commenting on this milestone, Lotus managing director Keith Bowes said “the relevant ministries including mining, finance and justice have all been very supportive in our negotiations as we have gone through multiple iterations of the MDA.”
The MDA comes with internationally recognized principles relating to legal protection on security of tenure, dispute resolution and expropriation. Key terms include a royalty rate of 5% and corporate tax rate of 30%, both of which align with the project’s definitive feasibility study (DFS) published in August of 2022.
Lotus will have exemptions for import and export duties, excise and VAT on capital goods and specified consumables directly related to mine production. There will also be withholding tax relief on dividends to the company for the majority of the mine life.
The former-producing Kayelekera represents the most significant mining operation in Malawi. During its operational years (2009-2014), it produced about 11 million lb. of uranium oxide, until low uranium prices forced its closure.
With the recent revival of the uranium market, the mine is getting a second chance at production from its reserve base that is estimated at 15.9 million tonnes grading 660 parts per million uranium oxide for 23 million lb. of yellowcake.
The 2022 DFS estimated a total production of 2.4 million lb. uranium over 10 years at cash costs of $29.1 per lb. and an all-in-sustaining cost of $36.2 per lb. for the first seven (uranium is trading at $85/lb. at press time). The mine restart is expected to cost $88 million.
Lotus currently holds an 85% interest in the project, with the Malawian government owning the remaining 15%. The mine’s majority ownership was previously held by Paladin Energy (ASX: PDN).
Following the MDA signing, Lotus’ management lauded the commitment by Malawi to develop its mining industry, pointing to Rio Tinto’s increased shareholding in Sovereign Metals (ASX: SVM), which holds a graphite project in the country, as another indication.
The company’s next steps are to complete offtake negotiations for the first phase of contracting and finalize the project’s financing. It previously targeted a mine restart by late 2025.
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