Australian uranium producer Toro Energy has pulled out of a project in Central Australia.

The company says a drop in uranium prices has made it unviable to go ahead with the Napperby uranium project, 160 kilometres north-west of Alice Springs.

In February last year, the head of the company said he planned to have an operational uranium mine at the Napperby site within four years.

The company has spent more than $5 million exploring the area.

But in an announcement to the stock exchange, Toro Energy formally advised Deep Yellow Limited it would not be going ahead with the $57 million purchase.

The two companies reached an agreement three years ago.

Toro says scoping studies and the long-term uranium price do not warrant the takeover, and it has found no other significant uranium deposits in the area.