Alligator Energy is an advanced uranium explorer with a focus on the Alligators River Uranium Province in the Northern Territory. The company is now targeting world-class +100M lb uranium deposits as part of a revamped strategy.
|Status: Advanced Explorer|
|Size: Small Cap|
|Commodity Exposure: Uranium|
|Share Price: $0.05|
|12-month Range: $0.028 – $0.085|
|Shares: 206m, Options: 13.2m|
|Top 20: 41%|
|Net Cash: $2.4m|
|Market Value: $10m|
|Key Parameters||Rating (✓out of 5)||Quarterly Statistics|
|Management Quality||✓✓✓✓✓||Q1 2014 Exploration Spend: $0.201m|
|Financial Security||✓✓✓✓||Q1 2014 Admin Spend: $0.204m|
|Project Quality||✓✓✓✓✓||Exploration Spend 49%, Admin Spend 51%|
|Exploration / Resource Potential||✓✓✓✓✓||Q2 2014 Forecast Exploration Spend: $0.641m|
|Project Risk||✓✓✓✓✓||Q2 2014 Forecast Admin Spend: $0.201m|
Alligator Energy represents one of the most prospective emerging uranium plays available to Australian investors, due to the quality of its acreage in a known uranium province. We introduced the stock to our Portfolio during October 2013 and it has managed to maintain focused exploration activity designed to advance its resource position within its Alligators River Uranium Project (ARUP) in the Northern Territory. This has taken place despite poor underlying market sentiment with respect to uranium over recent years.
During late 2013 the company announced a strategic investment partnership with the Macallum Group (MGL), a private company incorporating key members of the previously hugely-successful ASX-listed uranium company, Extract Resources. The group, which holds a 19.9% stake in AGE, boasts an outstanding track record of exploration and operational success. Not surprisingly, their involvement with AGE coincided with an immediate firming in AGE’s share price, as reflected in the price chart above.
AGE’s strategic investment partnership with MGL formed part of a $1.8 million capital raising during late 2013 that is now assisting in funding the current phase of AGE’s exploration program at its Tin Camp Creek project within the Northern Territory. The program kicked off recently and will involve high-priority drilling targets, as the company raises its sights to identifying opportunities that could prove up a minimum 100M lb U3O8 resource base, which would tick the boxes in terms of a commercial development opportunity.
AGE’s share price has recovered from a recent low during early July just above $0.03 to a current price of $0.055, a gain of more than 80%. AGE is recapturing the share price momentum generated during late 2013, due to the recommencement of field work as part of the 2014 exploration campaign, along with the prospect of Japan recommencing nuclear power generation, albeit initially on a modest scale.
Japanese Preliminary Approval for Nuclear Restart
Japan’s nuclear watchdog has recently announced preliminary safety approval for the restarting of two nuclear reactors at the Sendai plant. The Nuclear Regulation Authority (NRA) said the reactors at the Sendai plant had met new standards introduced following the Fukushima disaster. These are the first two nuclear reactors to pass this hurdle.
A month has been given for opposition groups to make their case against the move, before a final decision is taken. The reactors at Sendai power plant in Kagoshima Prefecture are two of 19 which Japanese electric utilities are seeking to restart and have applied for permission from the Nuclear Regulation Authority (NRA).
Japan shut down all of its nuclear reactors in the wake of the March 2011 quake and tsunami, which led to the Fukushima Daiichi plant disaster. The NRA issued a 400-page report detailing safety measures in place at the Sendai plant on Wednesday last week. The evaluation took about a year, twice what the regulator initially expected.
It is hoped that a potential renaissance of Japan’s nuclear industry could provide the impetus for a turnaround in uranium prices, which have been in the doldrums since the GFC. Japan’s idling of its nuclear reactors has weakened the demand side, impacting sentiment along with prices. The market is anticipating an eventual strong turnaround in prices, but many have grown weary waiting.
"This is a step forward. After we get the safety decision we would like to move towards restarts with understanding from local [townships]," said Prime Minister Shinzo Abe, whose cabinet is advocating the reemergence of Japanese nuclear sector after a significant hiatus. Before the accident, which was caused by a massive earthquake and tsunami, nuclear plants supplied about 30% of Japan’s power.
But since then the plants have been closed, either for scheduled maintenance or because of safety fears, and have not been restarted. Japan’s last reactor, at Ohi in western Japan, went offline in September 2013. This was partial cause of a 23-month-long deficit of trade balance the country is still undergoing.
Despite the hit that the uranium sector has taken in the wake of the Fukushima earthquake back in 2011, the conundrum remains the same: the world has few alternatives in terms of substantial, reliable base-load power generation. Realistically, in a world with burgeoning populations in emerging countries and an escalating need for clean energy, there will be greater demands placed on nuclear energy.
There are very real supply challenges being faced by the nuclear industry. Over the past 20 years, the effective supply gap was alleviated by uranium from decommissioned Soviet-era nuclear weapons. The final shipment from this program was delivered during December 2013, meaning the nuclear energy must start thinking seriously about sourcing new in-ground uranium supplies and developing new deposits.
2014 Field Season
The company recently kicked off its much anticipated (and much delayed) 2014 field season at its Tin Camp Creek Uranium Project, within the ARUP. The company plans to drill-test five priority target areas during the remainder of 2014, each of which is considered to have favorable geological, geochemical and spatial characteristics for hosting large uranium deposits (>100Mlb U3O8 ).
AGE is also carrying out an airborne Sub-Audio Magnetics/MMR geophysical survey at its Tin Creek Camp uranium project. The survey covers a significant part of the sandstone covered areas of the project area, including the primary target areas of Mintaka, Orion North, Orion East, Northeast Myra and South Orion. It will apply a configuration designed to maximise signal response from basement rocks underlying the Kombolgie Sandstone, which has been a key challenge for previous explorers in the ARUP.
I followed Extract Resources very closely during my Fat Prophets days and it was one of my best Portfolio performers, rising from a low of around $0.60 when we first recommended the stock to a high of around $12, before an eventual takeover at $8.65 a share. Given our already strong confidence in Alligator Energy based on its uranium potential in a world-class uranium province, MGL‘s corporate involvement reinforces our positive view. The Alligators River region has received significantly less exploration attention than the geologically similar Athabasca Basin in Canada, which continues to generate new discoveries. Accordingly we maintain our Speculative Buy recommendation around $0.05 for those without existing exposure, as the company continues with its 2014 exploration campaign.