Krakatoa shares surge on Indonesia deal

Shares in Perth-based explorer Krakatoa Resources have soared on the back of the company signing a strategic alliance with Indonesian iron ore miner Sitasa Group.

Krakatoa will issue 5 million fully paid shares to Sitasa Group in exchange for exclusive access to Sitasa's pipeline of five iron ore exploration projects.

It will also acquire 99.8 per cent of PT. Bina Citra Sawita, which holds an iron ore exploration licence in West Sumatra.

The company described the deal as a highly significant breakthrough for shareholders.

Separately, Krakatoa has secured a funding facility worth up to $5 million from Melbourne-based investment company Gurney Capital Nominees.

The facility can be drawn down at any time over the next five years, at which point Krakatoa will issue shares to Gurney at 80 per cent of the company's five day volume-weighted average price.

Krakatoa currently holds an 80 per cent stake in the Donggala project, a prospective gold and iron ore tenement on the Indonesian island of Sulawesi.

Its shares closed the day's trade 32 per cent higher at 16.5 cents.