Lotus Resources Ltd (ASX: LOT) shares were under pressure last week.
The ASX uranium stock tumbled into the red after completing a capital raising.
Is this a buying opportunity for investors looking for exposure to the chemical element? Let's see what analysts at Bell Potter are saying about the miner.
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What is the broker saying?
Bell Potter notes that Lotus Resources' capital raising was necessary to strengthen its balance sheet after a tough period. It believes the ASX uranium stock is now covered for the next nine months of operation. The broker explains:
LOT announced it had intended to raise A$76m via an institutional placement, and a further $5m via a SPP to support the ongoing ramp up of the Kayelekera uranium project. Production in 2Q of 70klbs U3O8 (drummed) was impacted by sulphuric acid availability (shortages) and logistical issues (transportation). LOT spent A$39m in capital over the quarter, finishing with A$56m in cash.
With the cash-flow conversion being further drawn out on delays to qualification testing from convertors (Orano, Cameco and Converdyn), cash was going to be tight heading into the end of CY26. The top up should see them through the next ~9 months of operations, barring any further disruptions.
While Bell Potter acknowledges that Lotus Resources is not quite out of the woods, it sees light at the end of the tunnel. It said:
Acid and power: The two key considerations targeted under the restart as being critical to lowering operating costs at Kayelekera. The acid plant should commence commissioning in the current quarter, which will reduce the overall dependence on imported sulphuric acid. The grid connection is scheduled for 4QCY26, which should also lower operating costs, which accounted for ~18% of Opex when Kayelekera previously operated.
Our current estimate of operating cash burn is ~A$16m pq going to A$37m pq at full capacity, meaning the business has ~$12m of operating expense runway. Capital projects remaining in the pipeline include the TSF lift and grid connection. With qualification for the three convertors coming to a protracted end, LOT will look for first shipments in June, with ~6 shipments commencing per quarter on a steady state basis. This should see cash receipts pick up in Sept-Dec, depending on the destination of the sale. LOT have contracted 1Mlbs for CY26, and we estimate production of 1.4Mlbs over the same period, as such, LOT has limited earnings leverage to the recent move in spot uranium prices.
Should you buy this ASX uranium stocks?
According to the note, the broker has retained its speculative buy rating with a trimmed price target of $3.70 (from $4.00).
Based on its current share price of $2.08, this implies potential upside of almost 80% over the next 12 months.
Though, given its speculative rating, this investment would only be suitable for investors with a high tolerance for risk.
Commenting on its recommendation, Bell Potter said:
We make adjustments to our valuation, which includes adjusting for the recent 11.5:1 consolidation, and the increase in shares on issue assuming completion of the capital raise. Adjustments to timing and volume of sales (and cash receipts) have also been made. LOT are going through the ramp-up of Kayelekera, as such, financial performance is likely to be volatile and difficult to predict.
