Resource Development Group Limited (ASX: RDG)

RDG provides construction and mining services to the resource, infrastructure, energy, government, utilities, and defense sectors. It primarily conducts its operations through its subsidiaries, Central Systems Pty Ltd. and Australian Garnet Pty Ltd. RDG was listed in ASX on May 19, 2011. It holds a market capitalisation of $182.65 million as of February 11, 2022.

Financial and Operational Highlights: As per the announcement on September 20, 2021, the reserve estimate at its 100% owned Lucky Bay Garnet Project in the Midwest of Western Australia is reached at 202Mt @5.4%HM with an average garnet grade of 86% in HM. Project NPV works out to be $483 million with an IRR of 48%. RDG is expecting to put the project into production by the end of Q1FY22.

In FY21, RDG clocked revenue growth of 220.6% to $67.12 million. The company is focused on developing the Ant/Sunday Hill manganese project as well as the advancement of the Lucky Bay Garnet project during the year. It also progressed the discontinuation of Mineral Solutions Australia Pty Ltd. It had realized profits of $1.4 million from the sale of the asset. It had reported a net profit of $1.18 million in FY21 as compared to a net profit of $1.76 million in FY20. It had closed the period with a cash balance of $23.89 million.

Technical Analysis: On a daily chart, RDG stock prices are trading above the rising trend line support level at AUD 0.057. Moreover, the momentum oscillator RSI (14-period) is trading at a 45.72 level, indicating negative momentum. Further, prices are trading below the trend-following indicator 21-period SMA, which may act as a resistance zone. An important support level for the stock is placed at AUD 0.057 while the key resistance level is placed at AUD 0.070.

Considering the drop in net profit in FY21 and current trading levels, investing in this stock at such uncertain levels should be taken with a calculated approach, hence a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 0.063 per share, down by ~3.08%, as of 11^th February 2022.

Daily Technical Chart – RDG

Source: REFINITIV

Elmore Ltd (ASX: ELE)

ELE provides mineral processing services to the mining industry. Its flagship Peko Iron Ore and Gold project is located in the Tennant Creek region in the Northern Territory. In addition, it owns Hodgkinson Basin Gold and Antimony projects in Queensland. ELE was listed in ASX on February 25, 1998. It holds a market capitalization of $24.54 million as of February 11, 2022.

Financial and Operational Highlights: As per the update on February 9, 2022, its Peko Magnetite project has reached a significant milestone with the completion of test work and pilot-scale production. The plant is expected to produce high-grade magnetite products. It also announced the appointment of Mr Andy Haslam as Non-Executive Director.

As per the quarterly activities report, ELE continues to progress on the Territory Minerals Far North Queensland project with metallurgy activities. It had completed placement totalling $3 million through an issue of 150 million new shares at a price of $0.02 new shares to institutional investors. The company accepted the resignation of Mr Peter Richards as Chairman and Non-Executive Director. Due to nil cash receipts, ELE incurred operating cash outflows of $1.43 million in Q2FY22. It had closed the period with a cash balance of $1.27 million as of December 31, 2021.

Technical Analysis: On a daily chart, ELE stock prices are facing the resistance of rising trend lines and sustaining below the trendline resistance zone. The momentum oscillator RSI (14-period) is trading at ~56.28 level, indicating a lack of strength in the momentum. However, prices are trading above the trend-following indicator 21-period SMA, which may act as a support zone. Now the next important support level for the stock is at AUD 0.0245, while resistance is at AUD 0.033 level.

Considering the negative cash flows, change in the management, nil revenue generation, and current trading levels, investing in this stock at such uncertain levels should be taken with a calculated approach, hence a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 0.028 per share, down by ~6.67%, as of 11^th February 2022.

Daily Technical Chart – ELE

Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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