The operator of the Northern Territory's Ranger uranium mine has begun construction on a two-kilometre underground exploration tunnel.

Energy Resources of Australia is spending $120 million on the project, which it hopes will unlock 34,000 tonnes of uranium oxide.

General manager of major projects David Stark says ERA will use the exploration reuslts to decide whether an underground mine is viable.

"There is a requirement for 35,000 metres of exploration drilling into that ore body to firm up exactly what is there," he said.

"That can really only be achieved by close proximity.

"The only way we can do that is by putting in an exploration decline down there and do the drilling from that point."

The tunnel is expected to be completed by mid-2013 and the company will then spend a further $50 million on a feasibility study.

At this stage, the local Mirarr people at Jabiru have not agreed to the development of an underground mine by ERA.