Krakatoa poised to erupt with Zopkhito’s 11% antimony potential

The eastern European country of Georgia might not be the first place that comes to mind when you think of thriving mining economies.

But the nation strategically located on the doorstep of central Asia has a long history of mineral production and offers favourable conditions for foreign investors including a low corporate tax rate, cheap and abundant hydro power and a skilled and affordable workforce. 

It is here that ASX-listed Krakatoa Resources Ltd has planted its flag as it looks to grow value for shareholders by cashing in on booming antimony and gold prices.

In December, Krakatoa announced it had secured an exclusive option to acquire an 80% interest in the Zopkhito antimony and gold project in the Upper Racha region of Georgia.

Location of the Zopkhito project, Georgia; and associated infrastructure (Roads=White, Rail= Black, Port=Red).

Brought to the company by a contact at investment bank Cannacord Genuity, Zopkhito represents a more advanced antimony opportunity than many of the projects currently being pored over by explorers on Australia’s eastern seaboard.

A globally significant resource

While it is not JORC-compliant, Zopkhito contains a foreign resource estimate of 225kt at 11.6% stibnite for 26,000t of antimony and 7.1Mt at 3.7 g/t for 815,119oz gold, compiled through the analysis of thousands of samples collected from the 27km of exploration adits developed at the project mainly during the Soviet era.

Photographs of 2019 channel sampling. Left: Sample 80-20-01-15 (Sample length is 0.98m with 10.4% Sb), Right: Sample 24-01-119 (Sample length 0.13m with 8.34% Sb).

The project also has established rail access to the Black Sea port of Poti, where copper concentrate is currently being exported from.

To put the size of the Zopkhito antimony resource into perspective, it is just under one-third of what Larvotto Resources is sitting on at its Hillgrove mine in New South Wales, the largest antimony resource in Australia and eighth largest globally. 

Yet Krakatoa is capitalised at just $5.6 million, a fraction of the ~$400 million value Larvotto has been ascribed in recent weeks.

Krakatoa notes that the Hillgrove antimony project has a reported head grade of 1.2% antimony (Sb), as referenced in Blue Ocean Equities research dated 16 December 2024. While comparisons are often made using gold-equivalent (AuEq) grades—which can give the appearance of higher values—the underlying antimony grade at Hillgrove is broadly consistent with other notable Australian deposits such as Southern Cross and Fosterville, each of which also report grades in the vicinity of 1% Sb.

In contrast, the Zopkhito Project in Georgia hosts significantly higher-grade antimony mineralisation, averaging close to 12% Sb, or approximately 45 grams per tonne gold-equivalent (g/t AuEq). This represents a grade that is nearly ten times higher than Hillgrove’s antimony content on a direct comparison basis, rather than the fourfold increase previously suggested—particularly when excluding additional gold credits.

Krakatoa executive chairman Colin Locke understands why investors might discount Zopkhito compared to Hillgrove: it contains a smaller foreign resource; no drilling has been undertaken to estimate that resource; and few Australians would be familiar with Georgia.

But he points to Adriatic Metals, which has built a $1.4 billion mining business in the Balkans (Bosnia and Serbia), as an example of the investor rewards that can come with being an early mover in a less recognised mining jurisdiction.

“We fancy we could be the same if we can prove up and increase the resource,” he says. 

Locke mentions that he and CEO and chief technical officer Mark Major have produced outstanding returns for investors on overseas projects over the last 20 years.

A treasure trove of geological data

Regardless of what happens in the future, Zopkhito as it stands is no early-stage greenfields opportunity.

The project sits on a granted mining licence and along with the extensive exploration tunnels and ~20,000 samples that have been collected, decades of mapping and metallurgical testing that produced positive initial results provide a wealth of information for Krakatoa to work with.

Locke says the capital previously sunk into Zopkhito makes the price that the company will pay if it ultimately elects to exercise its option look absolutely modest.

To date, Krakatoa has paid the vendor – JSC Caucasas Minerals (JSCCM), a private Georgian country with strong ties to the country’s business and government circles – US$100,000 as an initial fee, securing an exclusive option for 12 months.

It can pay an additional US$100,000 to extend the option period for a further 12 months.

At any stage during this 24-month period, Krakatoa can pay US$7 million to acquire 80% of the project.

Should the option be exercised, JSCCM would be free carried on its 20% interest until a decision to commence commercial mining is made.

Under the terms of the agreement, Krakatoa is also obliged to spend $2 million on exploration and development during the option period.

 With the changing seasons, the 2025 field season is underway. The focus will be on increasing confidence in the geological model and geochemical database to a JORC 2012 standard

This will take the form of additional surface mapping, geochemical sampling, adit sampling, drilling from adits or the surface and surface and airborne geophysical surveying.

Only 16 of more than 60 mineralised veins have been investigated to date to create the current resource, suggesting there is significant potential to grow the resource beyond its current size. 

Recently completed geophysical fieldwork indicates the mineralisation is open in all directions. 

“The surface has only been scratched to date,” Locke says.

Rapid move to production possible

While there will typically be a hiatus in activity at Zopkhito over the winter period, it is not hard to see Krakatoa moving the project rapidly into production once it has established a JORC-compliant resource.

Not only is the project sitting on a granted mining licence, in Georgia there is no requirement to complete costly and time-consuming heritage surveys. Nor are there the land access issues that have plagued explorers in certain Australian jurisdictions recently,

If you’re thinking why didn’t any of the previous owners move into mining at Zopkhito, the simple answer is the incentive has never been quite like it is today.

Since the end of 2023, the price of antimony has soared from US$10,000/t to record highs of around US$50,000/t recently due to what has been described as a perfect storm of factors.

These include declining production, particularly from large Chinese mines; dislocated supply due to sanctions on Russia and Chinese export restrictions, growing demand from the solar and defence sectors, and the depletion of strategic stockpiles.

In a recent webinar, Blue Ocean Equities analyst Carlos Crowley Vazquez said he expected antimony prices to remain high for the next 3-4 years because of the supply-demand imbalance.

Then there’s the gold price, which reached record highs above US$3,000/oz in March and has stayed around that mark amid ongoing global economic uncertainty.

Mt Clere adds another element

Zopkhito is absolutely the main focus for Krakatoa going forward, but the company does have another string to its bow in the Mt Clere project on the north-western margin of the famed Yilgarn Craton in Western Australia.

Location of Krakatoa Mt Clere exploration licences within the Yilgarn Craton, Western Australia. Insert is highlighting current prospects and the Tower REE Resource within the tenure; some of many opportunities at Mt Clere.

In April 2022, Krakatoa discovered the Tower clay-hosted rare earths deposit at Mt Clere and within seven months had defined a maiden JORC-compliant resource of 101 million tonnes at 840ppm total rare earth oxide.

Clay-hosted rare earths have since fallen out of favour with the market, but there remains significant exploration potential at Mt Clere including two large discrete and strong gravity anomalies identified at the Stone Tank prospect last year.

Krakatoa successfully applied for a grant of up to $220,000 through the WA Government’s Exploration Incentive Scheme to drill-test the two anomalies and is planning to undertake the program mid-year.

Krakatoa also has an outstanding credit with a leading drilling contractor so the Stone Tank opportunity will almost be a free swing for shareholders at something that could carry very significant scale.

And it just lends support to the argument that the company’s shares are seriously undervalued.

KRAKATOA RESOURCES INVESTOR SNAPSHOT

• ASX CODE: KTA
• MARKET CAPITALISATION: $5.6 million (at 0.9c share price)
• SHARES ON ISSUE: 590.1 million
• CASH (at 31 December 2024): $1.42 million
• ENTERPRISE VALUE: $4.08 million
• KEY ASSETS: Zopkhito antimony-gold project (foreign resource estimate of 26,000t at 11.6% stibnite and 815,119 ounces at 3.7 g/t gold), Mt Clere (Mineral Resource of 101Mt @ 840ppm total rare earth oxide)

THE PROACTIVE TAKE

“Krakatoa has arguably stolen a march on its peers in the antimony space by optioning Zopkhito. If it all comes together, it’s not hard seeing the project in production in a short space of time, taking advantage of high antimony prices. In that scenario, Krakatoa would warrant a much higher valuation. The Stone Tank anomalies could produce anything and that is exciting in itself.”