We are initiating coverage on Lotus Resources (LOT AU) with a SPEC BUY rating and set a price target of A$0.40. LOT is progressing a strategy of restarting Kayelekera and using its cashflows to develop the large resource at Letlhakane, ensuring a long production profile of ~2.5-3.0mlb pa. Near-term catalysts include additional contracts/offtakes for Kayelekera, restart funding and the restart FID. We believe the timing of the Kayelekera restart and ramp-up coincides with tightness in the uranium market, driving economic upside from our near-term bullish price outlook. Longer-term upside from optimising the Letlhakane flow sheet, including potential ISR, could lower capex and opex and potentially allow upside flexibility on production levels.
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