ASX-listed Lotus Resources has temporarily halted production at its Kayelekera uranium mine, in Malawi, owing to equipment damage and a supply disruption in a third-party acid supply chain linked to geopolitical conflict in the Middle East.

Lotus, with support from specialist engineers, have investigated the root cause of the failure and formulated a repair plan using additional refractory bricks available onsite with this work now underway.

The company says steady state production is now expected to resume in the third and fourth quarters, subject to acid supply and funding.

Lotus is progressing equity and quasi-equity funding options, which remain subject to acid plant commissioning, and this has been viewed as a clear pathway to sustainable steady-state production and the resolutions of its 2026 offtake commitments.

At present, Lotus maintains a cash balance of $26-million.

Lotus has used the supply of third-party acid in the Kayelekera processing plant since the restart began, while its acid plant is commissioned.

However, the ongoing political tensions in the Middle East have adversely impacted on the availability, reliability and cost of sulphur and sulphuric acid, and these disruptions are now culminating in several contracted and prepaid deliveries being delayed or not fulfilled.

Despite this, Lotus has continued to work with suppliers to monitor and manage the situation until geopolitical conditions stabilise.

Following the final stages of hot commissioning works at the Kayelekera acid plant and the first production of acid, several refractory bricks within the sulphur furnace showed signs of failure.

The company has accelerated planned maintenance, originally scheduled for early in the third quarter, to align with the production pause and acid plant remediation works.

Regarding its funding objectives, Lotus also highlights that trading in its securities prior to the completion of the funding process would risk the market trading on an uninformed basis, particularly having regard to the uncertainty around the outcome of the funding process, and could impede the company’s ability to finalise and complete this process.

Meanwhile, Lotus also notes that delays to production and export permitting have impacted on the company’s ability to meet its initial offtake obligations.

Lotus currently has obligations to deliver about one-million pounds, or about 453 metric tonnes, of triuranium octoxide in the second half of this calendar year. Triuranium octoxide is a common form of uranium concentrate.

Given its limited ability to meet these offtake commitments within that timeframe, the company is engaging with customers to defer a significant portion of deliveries into the 2027 calendar year.

Under its offtake agreements, Lotus’ financial exposure in the event of a delivery shortfall is limited to the difference between the price paid by the utility to procure replacement material and the contracted sales price, combined with any associated legal costs or procurement commissions.

Further, Lotus is advancing the permitting and logistics processes required to enable the first shipment of product from Kayelekera.

The company has already secured key regulatory and contractual authorisations, including approval from the Malawian Atomic Energy Regulatory Agency for its updated Transport Management Plan covering transit through Zambia and Namibia, and a Zambian transport licence obtained through logistics partner Alistair Group.

Additionally, the company notes that shipping and transport contracts from Walvis Bay in Namibia, to all converters have been finalised.

Further regulatory and operational approvals are now being progressed to support export from Namibia. These include a lodged application with the National Radiation Protection Authority and the Ministry of Environment, Forestry and Tourism (MEFT) for the transport of radioactive material within Namibia.

Lotus is also working with its warehouse contractor to obtain MEFT approval for the temporary storage of yellowcake drums prior to port delivery, as part of its broader transport management framework.

Contracting for customs clearance, freight forwarding and warehousing from Kayelekera to Walvis Bay is also at an advanced stage.

Permitting timelines remain subject to regulatory review and approval processes and are currently expected to take one to three months from the date of announcement.

Additional permits for export and transit will still be required for each shipment, some of which can run in parallel with existing approvals. Lotus anticipates first shipment from Walvis Bay as early as September, with initial credit to its converter account expected in October or November, paving the way for deliveries to offtake customers.

Based on a uranium spot price of $85/lb of triuranium octoxide, Lotus’ maximum liability for this year is about $10-million.

Lotus has requested an extension of its voluntary suspension from the ASX until a funding option has been finalised and the start of normal trading, set for July 16.

The company will provide further updates when acid supply to the processing plant is resolved.