Lotus Resources kicks off first drilling in 15 years at Kayelekera uranium project

Lotus Resources (ASX: LOT) will this week begin a 5,000m drilling program at its Kayelekera uranium mine in Malawi, the first uranium exploration drilling program at the project in more than 15 years.

This is the next stage in the company’s plan to re-open the mine’s after more than six years in mothballs.

Kayelekera has a current resource of 376.5 million pounds of uranium oxide.

Reverse circulation drilling will test airborne radiometric anomalies located close to the existing processing plant and will aim to increasing the project’s 14-year mine life forecast.

Lotus says a regional uranium exploration assessment is also under way.

Mining can proceed on existing resource

This includes a more detailed review of the historical data available on the four most prospective exploration licences, together with mapping, radiometric prospecting and sampling.

However, managing director Keith Bowes noted that the existing scoping study confirms that Kayelekera already has a 14-year mine life.

“While exploration success is seen as beneficial in increasing mine life, it is not required for a recommencement of operations,” he added.

Drilling will take place at the four anomalies located south of the existing pit, an area which covers areas of outcrop with similar signatures to the Kayelekera anomaly.

“These targets are between 2km and 4km from the plant and have received no historical drilling,” the company says.

Following completion of the new drill program, the rig will be moved to the company’s uranium targets at Milenje.

This work will follow up the “positive” results that were returned from the reconnaissance trench sampling program completed last year at Milenje.

Kayelekera was reliable producer for nuclear power utilities

Kayelekera was formerly owned by Paladin Energy (ASX: PDN) and it produced 10.19Mlbs of uranium between 2009 and 2014 when continuing low uranium prices forced Paladin to place the mine on care and maintenance.

During that time, 4.5Mlbs was sold to utility customers and the remainder to nuclear fuel market intermediaries. In all, 63% of Kayelekera output was sold under multi-year contracts.

Lotus’ move comes at a time when nuclear energy generating companies in the US face a tailing off of existing contracts for uranium supply and will need to sign new ones over the next few years.

Global utility contract deals reached their peak in 2005 with 250Mlb of uranium bought that year under long-term arrangements.

In 2013, by contrast, new contracts covering only about 25Mlb were signed, and new long-term contracts failed to reach 100Mlb in the years between 2014 and 2019.

Mine to produce 3Mlbs when back in operation

The existing infrastructure at Kayelekera will allow for a, quick low-capital re-start.

Lotus is expecting annual production of 3Mlb.

Kayelekera was discovered in 1982 by the Central Electricity Generating Board of Great Britain, but the project was abandoned in 1992 due to the then poor uranium output.

In 1998 Paladin acquired control of Kayelekera and open pit development began in June 2008.