Up 30% in a month: Here’s why Lotus Resources shares were just halted

Lotus Resource Ltd. (ASX: LOT) Shares aren’t going anywhere on Tuesday.

Before the market opened, the uranium developer released its quarterly report and then called for a trading halt.

Quarterly update

Let’s first start with the company’s quarterly report.

Lotus Resources has had a busy period and has made big strides towards starting production at the Kayelekera uranium project in Malawi.

Management noted that Kayelekera’s front-end engineering design (FEED) program was completed after the end of the quarter, providing an opportunity to accelerate its relaunch.

It is estimated that the time to first uranium production has been reduced to 8-10 months due to the phased completion of construction of the site’s secondary infrastructure after the first uranium production. In addition, the initial capital cost of restarting first uranium production has been reduced to US$50 million.

During the quarter, Lotus Resources also entered into two conditional uranium supply agreements with Tier 1 counterparties.

One of these is a binding agreement with Curzon Uranium to purchase 700,000 pounds of uranium in 2026-2029 and provide an unsecured credit facility of US$15 million. He also has the potential to earn an extra £100,000 a year between 2030 and 2032. The other arrangement is a non-binding agreement with PSEG Nuclear to purchase 800,000 pounds of uranium between 2026 and 2029.

But the good news doesn’t end there. The quarter also saw the signing of a mine development agreement (MDA) with the Government of Malawi and the release of the Letlhakane scoping study.

Letlhakane is another uranium project in Botswana. In this scoping study, a 15-year LOM base case yields 3 million pounds per year with potential to rise to a 22-year LOM.

Combined with positive industry developments such as tech giants turning to nuclear power, this has sent Lotus Resources shares up more than 30% since last month.

Why has trading in Lotus Resources shares been suspended?

Lotus Resources had an unaudited cash balance of $25 million at the end of the quarter, excluding restricted cash of $14.4 million.

Management appears to have decided that this amount will not be enough to fund its future plans and this morning requested a trading freeze to begin raising capital.

The request states:

The trading stop request is pending a capital raising announcement. Lotus Resources expects that the trading suspension will be lifted no later than the market opening on October 24, 2024 by providing a capital raising announcement.

No details were provided about how much the company plans to raise and at what price.

It’s also worth noting that Lotus Resources was recently listed as one of the most shorted stocks. This capital raising may give short sellers the opportunity to close positions and move on. Although time will tell if this is true.