Lotus Resources (ASX:LOT) Drops 28% After $76M Raise- Is the Dip a Buy or a Dilution Warning?

Lotus Resources (ASX: LOT) shares fell sharply on Friday, dropping 28% from A$2.88 to A$2.08. The fall happened after the company announced it would raise A$76 million by selling new shares at A$2.15 each. That price was much lower than where the stock was trading the day before, about 25% cheaper. Because of this, existing shareholders were diluted, which usually makes investors unhappy.

What confused the market is that this comes at a time when uranium prices are very strong. Uranium recently climbed to US$101.50 per pound, the highest level in almost two years, and is still trading above US$90. In simple terms, the product Lotus Resources sells is doing really well.

So the big question investors are asking is: If uranium prices are high, why does Lotus need to raise money at such a low price?

This mismatch – strong uranium prices on one side but a heavily discounted share sale on the other, has made investors nervous. It suggests the company may need cash urgently or want to reduce risk, even though market conditions look good.

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Kayelekera’s Ramp-Up Hits a Key Moment

The money Lotus Resources is raising will be used for its main project, the Kayelekera Uranium Mine in Malawi.

This mine was shut for 11 years before Lotus restarted it in August 2025. Since restarting, things have gone mostly to plan. The company produced its first batch of uranium (yellowcake) on time and within budget. In November, it also carried out its first open-pit blast, which means it has now started mining fresh uranium ore.

Lotus Resources plans to reach regular production of about 200,000 pounds of uranium every month, or 2.4 million pounds per year, by early 2026.

On the sales side, Lotus has already signed fixed contracts to sell 3.5 to 3.8 million pounds of uranium to three power companies in North America. The first deliveries are expected in Q2 2026. After this capital raising, Lotus will have around A$145 million in cash. This money will be used to build an acid plant and connect the mine to grid power, which could reduce energy costs by about 35%.

So overall, the mine is progressing well, and the project itself looks on track.

However, investors are more concerned about how the money was raised. The shares were sold at a large 25% discount, and the placement was not guaranteed by underwriters. This usually signals that the company needs cash urgently, rather than raising money from a position of strength.

Because uranium sales are still months away, and it usually takes five to six months after shipments for cash to come back in, Lotus needed funding right now. The market didn’t like the terms of the raise, and that’s why the share price was hit so hard.

Why the 25% Discount Stings for Existing Holders

The placement will add roughly 35.4 million new shares to the register, diluting existing shareholders at well below the market price. For a company still reporting net losses of A$13.76 million on almost no revenue, this is not the first time Lotus Resources has gone to investors for cash, and that pattern is what concerns the market most.

Note for Retail Shareholders: To help offset this dilution, Lotus is also launching a Share Purchase Plan (SPP). This allows eligible existing shareholders to apply for up to A$30,000 worth of new shares at the same A$2.15 price. The SPP aims to raise an additional A$5 million and is expected to open on February 16, 2026.

Dilution is not always bad. If the funds help Kayelekera reach full production and start generating real cash flow, the short-term pain could be worth it. But when a company raises repeatedly before proving it can earn its own way, each new raise chips away at investor confidence. The key question now is whether this is the last raise Lotus Resources needs before becoming self-funding.

The Investor’s Takeaway for Lotus Resources

The bull case is simple. Uranium demand is the strongest in a decade, Kayelekera is one of the few mines globally that has actually restarted, and analyst price targets sit between A$2.85 and A$3.28, well above the current price. If Lotus delivers on production and starts shipping uranium this year, the stock could re-rate quickly.

The bear case is equally clear. Repeated equity raises, ongoing losses, execution risk in Malawi, and sovereign risk all weigh on the outlook. If ramp-up hits delays or uranium prices pull back, today’s buyers could face more pain.

We believe this setup suits risk-tolerant uranium bulls who are comfortable with near-term volatility in exchange for exposure to a producing mine in a strong commodity cycle. For more conservative investors, waiting for proof that shipments are converting into revenue may be the smarter move. The next two quarters will tell the story.