The Australian mining company, Krakatoa Resources Limited (ASX: KTA) has released an announcement today regarding a new exploration licence application immediately next to the recently acquired Mt Clere Rare Earth Project. The recently acquired Rare Earth Project, located in Western Australia, holds various targets, including rare earth element (REE) and thorium in enriched monazite sands.
Following the release of this news, KTA’s shares climbed up by over 18% on ASX during today’s trading session.
This new tenement application (E52/3722) is expanding Krakatoa’s holdings over the prospective drainages in the Gascoyne Region of Western Australia by a further 153 km2, increasing the secured area to 556km2.
Mt Clere REE Project- Thorium Radiometric Imagery, Ion Absorption Laterite REE Targets, Pan Concentrate
Geochemistry (Source: Company Reports)
The new application is offering future opportunities to the company for the exploration of monazite, a rare earth phosphate [(REE)PO4] that accumulates in drainage systems because of its high density.
Before the grant of the new licence, the company needs to compile the legacy data and reprocess the existing geophysical datasets by using modern techniques. Krakatoa also needs to review the potential for other REE mineralisation styles, including ion-adsorption clay drill target generation and REE-carbonatite. The company is also going to undertake a ground search for, and sampling of alkaline ultramafic outcrops it will also perform non-ground disturbing activities, including the collection of monazite samples. As per the company’s release, all these tasks will commence immediately.
Historical Exploration Work at Mt Clere Rare Earth Project: From the year 1995, various companies including BHP, Astro Mining and All Star Minerals Plc have completed exploration programs on this Project. Between 1985 to 1987, BHP undertook a comprehensive programme of stream sediment sampling, which was targeted at Pb-Zn-Ag mineralisation. BHP completed a heavy mineral sampling at the approximate density of 500 samples per 1,000km2 and confirmed the presence of gahnite and monazite in the region.
Between the years 2005 and 2006, Astro Mining NL undertook an exploration programme on the western region of the Mt Clere Rare Earth Project for diamonds. During the search, 19 discrete, primitive, alkaline lamprophyres were located, however, no micro-diamonds were recovered. The grain counts of mineral species in selected samples of heavy mineral concentrates produced high monazite of up to 48%, high zircon of up to 60%, ilmenite of up to 29% and leucoxene of up to 20%. Astro’s work concluded that the project was fertile for rare earth elements, niobium and thorium mineralisation, but not for diamond exploration.
All Star Minerals Plc has also tried its hands on the exploration of this project. In 2006, it collected two large samples of alluvium, which respectively returned 3% and 2% monazite. Subsequently, in the next year, it collected 77 samples, the results of which confirmed the presence of monazite and other rare earths elements in the region.
Mt Clere Project Geology and Ion Absorption Laterite REE Targets (Source: Company reports)
Krakatoa Resources believes that the Project area shows considerable prospectivity for three REE target styles:
1) Monazite sands in vast alluvial terraces,
2) Carbonatite dyke swarms and
3) Chinese-type Ion Absorption clays in extensive laterite areas.
Financial Strength: Currently, Krakatoa has a very tight capital structure, which is providing an excellent platform for any potential exploration/acquisition in the near future. Recently on 4th June 2019, the company announced that it has received firm commitments from institutional and sophisticated investors for a capital raise of $275,000 before costs. It is expected that the funds from the placement will be utilised for exploration activities on the company’s existing projects, for evaluating acquisition opportunities, paying for the costs of the issue and for general working capital purposes. In 2019 March quarter, the company spent $27k of cash for exploration and evaluation. As at 31st March 2019, the company had cash and cash equivalents of $137k.
Other Project Updates: Along with Mt Clere Rare Earth Project, the company is also progressing with its several other projects, including Mac Well Project and Dalgaranga Project. At the Mac Well Project, the company recently (during March quarter) commenced planning for a surface geochemical sampling of the nine target zones. At its Dalgaranga Project, the company has completed a desktop review, which has identified several base metal occurrences in the Dalgaranga Greenstone Belt, including the Phoebe (Zn), Gum Well 1 and 2 (Zn–Cu–Ag), the Dalgaranga Hill (Zn) and the Lasoda (Pb–Zn–Cu–Ag) prospects.
REE Current Market Scenario: The rare earth elements are used in the electric motors of hybrid vehicles, wind turbines, hard disc drives, etc., and additionally, these elements are used in the production of fuel cells and Nickel-metal hydride batteries, among others. Due to its various uses and applications, the demand for rare earth elements is increasing rapidly, as a consequence of which, the prices of these elements are expected to rise in the future. Thus, the acquisition of Mt Clere Rare Earth Project holds strategic importance for the company.
Importantly, the leading exporter of rare earth elements, China, recently reduced its exports of rare earth elements in order to respond back to the trade policies of the US, a leading importer of rare earth elements. The current trade war between China and the US is providing a great opportunity for companies like Krakatoa Resources, who owns REE projects outside China to enjoy the benefits of rising REE prices.
Currently, the small-cap companies with REE projects are few, which are trading on the international exchanges. Hence, ASX-listed Krakatoa Resources Limited is offering investors an unprecedented leverage play. With its recently acquired Mt Clere Rare Earth Project, which appears to have all the hallmarks of a Chinese-type ion-adsorption REE conducive ore body, Krakatoa Resources holds great opportunity of establishing itself as a significant REE producer.
Stock Performance: On the stock performance front, Krakatoa Resources has provided significant returns in the past three months with stock prices rising by 35% as on 21st June 2019. At the time of writing, i.e. 24th June 2019, KTA’s stock was trading at $0.032, up by 18.52%, with a market capitalisation of $3.17 million.
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