Kaili Resources (ASX:KLR): From $0.04 to $1.08 in a single day…what caused the exponential rise?

Kaili Resources (ASX:KLR) made one of the biggest one-day gains in recent memory yesterday (August 18), closing at $1.08 after closing $0.04 the preceding Friday. And this was after reaching as high as $3.18 earlier in the day. Just what happened.

Overview of Kaili Resources (ASX:KLR)

Kaili Resources has been known by its current name since 2015 when it changed its name from Omnitech. It has been a battler for years, aspiring to stumble across the next big deposit (like Chalice) but without success (ast least of the magnitude that would ordinarily merit a 2900% re-rating). Its most recent target is finding rare earths in South Australia’s Limestone Coast 200km east of Adelaide, near where Australian Rare Earths (ASX:AR3) had recent exploration success. And it had only been the preceding Friday that Kaili announced it had received approval for a drilling program.

What rare earths you may ask? The company is searching for Rare Earth Oxides generally, but it was noted that Magnetic Rare Earth Oxides were 17% of the TREO – Tb + Dy and Pr + Nd. The first is terbium oxide and dysprosium oxide and are commonly used in ceramics, glass, phosphors, lasers and Faraday rotators. The latter is praeseodymium-neodymium oxide and the most famous rare earth. It’s a critical feedstock for green tech magnets and is what made Lynas (ASX:LYC) a fortune.

Why did it rise?

It is hard to say. Most resources companies that re-rate find a major deposit but Kaili just announced a campaign. Maybe investors are relieved that it is finally going somewhere. Perhaps it is the interest in rare earths. And in the first ‘speeding ticket’ the company copped, Company Secretary Patrick Yue said,’ This announcement may have drawn investors’ attention to KLR in the view of high interests in critical minerals investment’.

Many punters (i.e. on Hot Copper) would point to some pump and dump scheme, but that would be hard to prove. But it is certain that some made a lot of money, and perhaps others (i.e. those who bought at over $3) would have lost a lot of money.

Is this unprecedented?

Rare, but not unprecedented. Back in 2021, Mindax (ASX:MDX) re-entered the ASX after 2 years and rose 1000% in a single day. Normally when a company re-enters trading, investors just want out because there’s little other reason to stay behind – investors are just happy to have the chance to sell. But Mindax re-entered with $2m in fresh capital and FIRB approval for its 1.7bt Mt Forrest Iron Ore Project.

There were other spikes during the COVID era like Etherstack which climbed due to a deal with Samsung and Jupiter Energy (ASX:JPR) which rose off the back of no news. But such big spikes have been a lot less common since COVID – which is why what happened with Kaili yesterday was such big news.

Conclusion

Without knowing (yet) how and why the stock rose to the extent it did, we think the next big question investors have is where the company will go to next? It will likely continue its planned campaign, but don’t hold your hope up for such exponential one-day moves again, especially not amidst Kaili shares.

We know these would be hard words to hear because everyone wants to ‘get rich quick’ and this would be such an easy scenario. But while wealth like this can be made in the market, it is from buying the right stock and holding for the long term as many investors in Pro Medicus (ASX:PME) or CSL (ASX:CSL) have done – just to name a couple.

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