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On Friday, JPMorgan initiated coverage on Lotus Resources Ltd (ASX:LOT) (OTC:LTSRF) with an Underweight rating and set a price target of AUD 0.13 per share. The firm’s analysis indicates that while Lotus is on track to become a new uranium producer with its Kayelekera mine in Malawi expected to commence production in the third quarter of 2025, there are concerns about operational risks and economic viability.
According to JPMorgan, Lotus is anticipated to produce 0.8 million pounds of uranium in the fiscal year 2026, increasing to the mine’s full capacity of approximately 2.45 million pounds by the fiscal year 2027. Additionally, the company’s Letlhakane project in Botswana could potentially yield 3 million pounds of uranium per annum over a decade, based on a scoping study from March 2025. However, the projected all-in sustaining cost (AISC) of $79 per pound is higher than JPMorgan’s long-term uranium price forecast of $75 per pound, leading the firm to consider the project uneconomical at present.
Despite a potential medium-term support for uranium prices due to a restocking cycle, as reactor inventories are currently below historical averages, JPMorgan remains cautious. The firm acknowledges that Lotus could offer an attractive free cash flow yield once its operations are fully ramped up, but it also points out the significant operational risks associated with bringing Kayelekera to production and the subsequent ramp-up phase.
JPMorgan’s valuation suggests that Lotus Resources shares are trading at a 27% premium to their net present value (NPV) based estimation. As a result, the firm has positioned Lotus Resources with an Underweight rating, indicating a less favorable outlook compared to other industry players like BOE and PDN, which JPMorgan prefers in that order.
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