Krakatoa Resources Ltd (ASX:KTA) has received a base case valuation of $0.04-$0.06 per share on peer comparisons as it advances its clay-hosted REE operations in New South Wales and Western Australia, according to Independent Investment Research.
The analyst claims that the company is trading broadly in line with a couple of recent entrants to the clay-hosted rare earth project development sector but at a substantial discount to companies that are further down the project development path.
With a qualifying resource and ongoing optimisation of its processing pathway, Krakatoa's share price is poised for appreciation as it provides the market with more project information.
Krakatoa's shares are currently trading at $0.02 with a market cap of $7.27 million.
Following are the excerpts from Independent Investment's research report:
Key points
Stage of project development matters – On resource-related metrics Krakatoa is trading broadly in line with a couple of recent entrants to the clay-hosted rare earth project development sector, but at a substantial discount to companies that are further down the project development path.
It already has a qualifying resource, so as Krakatoa provides the market with more information about its project, particularly as it optimises its processing pathway, its share price is likely to appreciate.
Krakatoa likely to grow its Tower resource base substantially – It has 101 million tonnes at 840ppm TREO and an exploration target of 87-519 million tonnes at 580-1120ppm TREO.
Even without a valuation multiple expansion, the Krakatoa share price should grow with increasing resources.
Rand clay-hosted rare earth prospect metallurgy results could add shareholder value – The market is unlikely to be placing any value in the current Krakatoa share price for the Rand prospect.
It has reported drilling results with a width-weighted average grade of 690ppm TREO.
Metallurgical results are expected shortly.
Cash on March 31, 2023, was A$1.0 million and it raised A$0.56 million in April 2023.
Valuation
Our base case valuation of Krakatoa is 4-8 cents per share on peer comparisons using the comparative metrics of Enterprise Value per tonne of Total Rare Earth Oxides (TREO), TREO Cerium Oxide and Magnet Rare Earth Oxides in reported resources.