Samphire, just south of Whyalla, has a resource of 12.4 million tonnes at 640 parts per million uranium oxide for 17.5 million pounds of contained uranium.

Importantly, 12.9Mlb, or 74%, sits in the higher confidence indicated category.

In December, Alligator published an exploration target of 14-75Mlb of contained uranium, which would be in addition to the current resource and covers only 42% of the project’s known paleochannels.

Alligator managing director and CEO Greg Hall said the target would “give the market an idea of the breadth of the potential here”.

Drilling has been underway since January and will shortly pause for 4-6 weeks for pastoral activities.

Alligator is aiming to update the Samphire resource by the end of the year.

Hall told the Resources Rising Stars Gather Round Conference in Adelaide last week that 10% of the project was well-explored, 32% had known mineralisation but was underexplored, and 58% was completely unexplored.

“We know 32% of these channels are mineralised,” he said.

“We really have a good opportunity to expand.”

Alligator is following the path of Heathgate Resources, which owns the long-running Beverley ISR mine in SA.

Hall said Heathgate initially had a resource of 20-25Mlb and started production in 1998 at 1.5Mlb per annum and is now producing at a rate of 4.5Mlbpa with a remaining resource of up to 80Mlb.

“It’s a wonderful technique where you can start with a good-sized economic starter project and grow from there,” he said.

Scoping study just the start

Alligator, which was added to the ASX’s All Ordinaries index last month, published an updated scoping study for Samphire in December, based on the upgraded resource.

The study looked at a 12-year ISR operation producing 1.2Mlbpa of uranium at C1 costs of A$22.94 per pound and all-in sustaining costs of A$47.58/lb, or US$33.31/lb.

Capital costs were forecast at A$131 million, while the ungeared, real post-tax net present value was A$257 million with an internal rate of return of 42% and payback period of 2.45 years.

“It’s a significant after-tax net present value at a reasonable capital cost,” Hall said.

Alligator is in the final stages of the approval process to conduct an ISR field recovery trial (FRT).

The FRT plant has been fabricated in Adelaide and will shortly be sent to Whyalla.

The company is aiming to begin the FRT by mid-year, which would mark a de-risking step for the project and would confirm the parameters to be used in a full feasibility study.

Alligator is still some years away from production but Hall said that wasn’t bothering potential customers, which were looking to lock in uranium supply 3-8 years out.

“As an early-stage development group, we are getting requests for proposals from major nuclear utilities to propose uranium supply going forward four to five to six years out,” he said.

Uranium market

The uranium spot price started the year strongly, peaking at US$107/lb in mid-January, before cooling to US$83/lb. It has since rebounded to just under US$89/lb.

Bell Potter Securities analyst Regan Burrows, which has a speculative buy rating and A10c price target for Alligator (currently 6.2c for a market cap of $235m), noted last week that the uranium term market was rising steadily from US$72/lb in January to US$77.50/lb at the end of March.

“The good news is that we don’t see any change in momentum from a fundamental standpoint, with ongoing reactor construction/grid connection and pro-nuclear rhetoric increasing,” he said.

“The bad news is that spot uranium prices should remain volatile as the market remains tight over the short term (Bell Potter estimates a circa 21Mlb deficit for 2024), impacting sentiment both positively and negatively for equities.”

Burrows said Bell Potter saw value in developers like Alligator as spot prices rose.

“We maintain our outlook for pricing, with term prices of US$77.50/lb still below our long-term price forecast of US$88/lb,” he said.

“With CY23 offtake contracting of 160Mlb below the replacement rate of circa 169Mlb (annual uranium consumption) providing support for ongoing contracting over 2024 and thus improved pricing.”

Hall has spent decades in the uranium sector.

“This is the third time I’ve been through a uranium boom, if you can call it that,” he said.

“It’s a very solid underlying demand this time, which is wonderful to see, and a change in global sentiment in terms of clean nuclear power.”