BY LACHLANN TIERNEY
POSTED MAY 26, 2021

Why is the Reedy Lagoon Shares Up Today? (ASX:RLC)

At time of writing, the shares of Reedy Lagoon Corp Ltd [ASX:RLC] is up more than 60%.

It’s a wild looking chart for RLC shares, with a mammoth spike in February followed by a hard retracement and a gentle downtrend until today:

Source: tradingview.com

We take a quick look at why the Reedy Lagoon share price is up today, as well as a quick look at the world of high-purity pig iron (HPPI).

Highlights from today’s RLC announcement

Here they are:

• As per a previous announcement from March, ‘Reedy Lagoon’s Burracoppin Iron project is progressing towards producing green High Purity Pig Iron’
• Working with CSIRO, Reedy ‘will investigate and trial new ways to determine resource estimates that can rely more on geophysics than information solely from drill holes’
• ‘The Burracoppin Iron project is seeking to establish an Indicated Mineral Resource of 20 – 30Mt iron concentrate product within the Burracoppin Magnetite deposit so that financial projections for the HPPI production can be determined’

You can see what the project looks like below:

Source: Reedy Lagoon Corporation Ltd

Here’s what that all means in simple terms.

Potentially less money needed for drilling costs due to a technological reliance on geophysics, could in theory allow RLC to progress to a strong idea of how big the project is, in turn allowing them quicker access to funds to develop the project.

What is High Purity Pig Iron (HPPI)?

HPPI is a strange one.

As the International Iron Metallics Association outlines:

‘High Purity Pig Iron (HPPI) is differentiated from other types of pig iron by its low manganese, phosphorus and sulphur contents. HPPI is manufactured from the smelting of ilmenite sand in electric furnaces to produce titanium dioxide slag and pig iron. Production facilities are located in South Africa, Canada, Norway and elsewhere. HPPI constitutes the principal ferrous feedstock material for production of ductile iron castings (also known as nodular or spheroidal graphite iron) used in high quality automotive, engineering and energy casting components.’

The fact that HPPI gets made into ductile iron castings is the key bit there.

Ductile iron has a diverse range of applications, which include:

‘Ductile iron has greater strength and ductility than gray iron. Those properties allow it to be used effectively in a wide variety of industrial applications, including pipe, automotive components, wheels, gear boxes, pump housings, machine frames for the wind-power industry, and many more. Because it does not fracture like gray iron, ductile iron is also safe to use in impact-protection applications, such as bollards.’

So HPPI is a sort of industrial metal, with some tech elements coming from wind-power and high-end car parts.

Outlook for RLC share price

From a technical perspective, the RLC share price has a fair bit of headroom before it scales the peak to the February high.

It’s also worth noting that RLC is not a one-resource company.

They are also looking at gold at Burracoppin and have a lithium project in Nevada.

So, in addition to the HPPI, they have exposure to the slowly awakening gold bull and potentially an EV resource in a country that is increasingly focused on shoring up its domestic EV supply chain.

Taking a look at their most recent quarterly, they went through $161,000 in operating costs and had $471,000 in cash.

For a current market cap of around $11–12 million, that would seem a little light.

But given the uniqueness of the project, you can also understand the enthusiasm today.

Small-cap resource companies like Reedy Lagoon carry significant risk while also holding out the promise of great rewards, should the project in question go ahead.

Daily Reckoning Australia Editor Callum Newman is really keen on a range of ‘strange’ small-cap resource companies at the moment.

You can get his market insights direct to your inbox by subscribing to The Daily Reckoning Australia.

Regards,

Lachlann Tierney

For The Daily Reckoning Australia