An obscure rare earth miner’s share price has skyrocketed from just four cents to $2.82 in a matter of hours.
The 70-fold increase in the Kaili Resources share price occurred on Monday turning a modest $14,000 investment into a $1million windfall.
The increase occurred in a span of only five-and-a-half hours after the market opened, with the stock price reaching its highest point at 3:30pm Sydney time, merely 30 minutes before trading ended.
But the Australian Securities and Investments Commission imposed a trading halt on Monday, that will continue until Wednesday, following a request from the company.
‘Trading in securities in the entity will be temporarily paused pending a further announcement,’ the ASX said.
By then, profit takers had already sold, causing the price to more than halve back to $1.08 by the late afternoon.
This was still the highest closing price since June 2002.
Those who held on without profit selling still made a significant profit, with an initial $1,000 investment still worth $27,000.
An obscure rare earth miner’s share price has skyrocketed from just four cents to $2.82 in a matter of hours
The surge from Friday’s close at 3.6c started after Kaili Resources announced that afternoon that South Australia‘s Department of Energy and Mining had given it approval to drill at three tenements in Lameroo, Karte and Coodalya in the Murray Basin.
Moomoo market strategist Michael McCarthy said this surge was unhealthy and based on nothing more than crowd speculation, with the company not actually announcing any new production of rare earth minerals – used to make mobile phones.
‘It’s a disturbing development, I’ve got to say,’ he told Daily Mail Australia.
‘Some people made a lot of money today, some people had the living daylights beaten out of them and there’s no economic rationale for what’s going on – they’re nowhere near production yet.
‘Nonetheless, it appears to have captured the imagination of the market.
‘This is a product of crowd behaviour. This doesn’t make any sense.
‘The big problem with rare earths is not the drilling for them or the finding of them, or the mining of them, it’s the processing.
‘The fact they’ve been give a licence to drill is frankly neither here nor there.’
Kaili Resources, established in 1997, has languished under 80c for the last two decades, with Moomoo market strategist Michael McCarthy likening the surge in its share price to what happened in 1999 during the internet boom
Kaili Resources, established in 1997, has languished under 80c for the last two decades, with Mr McCarthy likening the surge in its share price to what happened in 1999 during the internet boom.
‘Those sorts of moves, to be frank, are ridiculous,’ he said.
‘It does suggest the crowd has got a hold of the share price and given it’s a very low market cap, not a great deal of money to move this stock around, the fact that it captured imaginations and had become a meme is probably the key driver here.
‘As a long-term market participant, I hate to see this sort of stuff.
‘Frankly, I’ll be investigating in the morning what it takes to short this stock.’
Kaili chairman Donghai Zhang and director Chunlin Liu are connected with the Chinese Yitai Group, which controls Inner Mongolia Yitai Coal Co.
