Alligator Energy (ASX:AGE) is earlier stage than many of its peers, but worth a close look

Nick Sundich Nick Sundich, October 31, 2023

This week’s domestic stock deep dive is on Alligator Energy (ASX:AGE), one of several ASX stocks in uranium. We think now is a good time to look at uranium stocks as prices return to levels that make most of the world’s projects profitable. And while Alligator Energy is at an earlier stage than certain other companies like Boss Energy, Alligator is not a company to be snuffed at.


Why investors may want to consider uranium stocks

Uranium is a non-renewable resource with low carbon emissions, making it an attractive alternative to traditional fossil fuels. It has a wide range of applications in nuclear power plants and can be used for medical research and other industrial processes.

The uranium market has never reached its pre-GFC highs (of over US$140 per pound), being hit by that crisis along with the Fukushima nuclear tragedy. But as the push for decarbonisation grows, uranium has become increasingly sought after as an effective fuel source with minimal environmental impact. And prices have rallied to levels that will enable several mothballed projects to restart and deposits with potential to grow into operating mines suddenly become appealing to explore at.


Be sure to check out the two uranium plays

As we’ve noted before, there is a handful of uranium stocks that might be able to capitalise as demand ticks up. In particular, companies like Boss Energy that are officially re-starting projects. Alligator is at an earlier stage, but still has potential to deliver some returns for investors.


All about Alligator Energy and its flagship project

Alligator Energy has four projects, 2 of which are in South Australia. Its Samphire project has a defined uranium JORC Resource and Scoping Study with compelling economics. The Big Lake Project is at an exploration stage. The company also has the Alligator Rivers Uranium Resource that has a JORC Resource. And finally, its Piedmont project in Italy that is a nickel and cobalt exploration asset.

The Samphire project is this company’s main focus right now. Samphire lies near Whyalla and has a JORC Resource of 18.1Mlbs of uranium and may be upgraded in the next few weeks. A scoping study for the project found a post-tax NPV of $152m, an IRR of 29% and a payback of 3.5 years. The AISC is US$30.2/lb which should mean healthy margins if uranium prices remain at their current levels.


A carbon free project

Samphire may ultimately be a carbon free project. The plan is to extract through the ISR method, meaning low power consumption. The project’s close distance to Whyalla may enable electric vehicles, light trucks and cranes to be used. And it could even potentially align with the state government’s proposed Hydrogen Hub for the region.

As indicated, Alligator Energy is planning to release an update in the coming weeks and is also considering optimisation opportunities for the project. Realistically, it won’t have Sapphire in production for at least 3-4 years, although shareholders can expect a Feasibility Study to be undertaken and complete before then. The company has indicated a Feasibility Study could be complete in the March quarter of 2025 and that it could sign initial conditional offtake contracts.


Other projects

We don’t have the space to delve into the company’s other projects as comprehensively. But it is conducting work on them as well.

The Alligator Rivers project lies right in the middle of a high-grade uranium province, one that includes Jabiluka. The Big Lake Project is in the Cooper Basin in South Australia, in the northern part of the state. Both are pre-drilling although the former project has had sampling and surveying work conducted.


Solid momentum expected

Alligator Energy’s share price has had more good than bad in a recent months, although momentum was halted when it raised $25m in September at a 20% discount to develop Samphire. So far as a Year to Date return, the company was relegated back to Square One.

However, we expect that as long as the company meets its forecasted milestones and uranium prices remain stable, there’s every reason to expect the company can create shareholder value in the coming months and years.


Alligator Energy (ASX:AGE) share price chart, log scale (Source: TradingView)


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