Why the Resource Development (ASX:RDG) share price is one to watch

The Resource Development share price dropped 1.9% in the closing moments today in the wake of an acquisition announcement.

Bernd Struben

Author bio Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel. Areas of expertise Australian and global share markets Macroeconomic and geopolitical trends Real estate Education Economics, University of Michigan Favorite investment quote "The four most dangerous words in investing are: 'This time it's different." — Sir John Templeton

Published December 10, 2020 4:27 pm AEDT

Shares of Resource Development Group Ltd (ASX: RDG) weren't trading until moments before close today. But the share price slipped 1.96% in that small timeframe in the wake of this afternoon's acquisition announcement.

Despite falling 50% during the February to March coronavirus-fuelled fire sale earlier this year, the Resource Development share price is up 150% year-to-date, and up 400% from its 25 March lows.

By comparison, the broader All Ordinaries Index (ASX: XAO) is up 2% so far in 2020.

ASX share price on watch represented by surprised man with binoculars — Image source: Getty Images

What does the group do?

Resource Development provides contracting, remedial and construction services to the mining and oil and gas sectors within Australia as well as residential building and development. Its construction segment generates a majority of the firm's revenue.

Resource Development Group's shares first began trading on the Australian exchange on May 2011.

What's driving the Resource Development share price?

Resource Development announced it has entered into a binding agreement to acquire 100% of the Balline Garnet Project. The agreement was reached with shareholders of Australian Garnet Pty Ltd.

The company said the tenements in Balline, Western Australia, are contiguous with the world's largest supplier of alluvial garnet. Alluvial garnet products are used in the blasting and waterjet cutting markets.

Commenting on the acquisition, Resource Development managing director Andrew Ellison said:

Balline is a high-quality shovel ready project that is expected to produce a suite of highly sought after alluvial garnet products. We believe these products are undersupplied in global markets and are in high demand.

This is supported by our initial engagement with potential customers. Balline is one of only a handful of garnet projects globally capable of supplying high-quality garnet products.

The acquisition remains subject to the usual conditions precedent, which includes completing legal and commercial due diligence and AGPL agreeing to settlement terms with its creditors that are satisfactory to Resource Development.

Following on settlement, Resource Development plans to finalise its plans for the project infrastructure. That includes a wet concentration plan, mineral separation plant, and non-process infrastructure. The company reports this work will be funded with its existing cash reserves.

The Resource Development share price is up more than 150% in 2020, and was trading at 51 cents at close of trade yesterday.

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