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Why the Avz Minerals Ltd share price rocketed higher today

The Avz Minerals Ltd (ASX: AVZ) share price has been a huge mover on Thursday, climbing an impressive 11% to 30 cents.

This means the lithium-focused mineral exploration company’s shares have now risen 30% since the turn of the year.

Why are they higher today?

This morning AVZ Minerals announced the commencement of a 20,000 metre drilling program at its Manono Lithium Project in the Democratic Republic of Congo.

According to the release, the proposed drill hole location will allow drilling beneath the MO17DD001 drill hole in order to test depth extensions and thickness of the Roche Dure pegmatite which is expected to be in the order of 230 metre thick.

The MO17DD001 drill hole has previously revealed the presence of significant mineralisation which management believes indicates that it is sitting on top of a world class asset in both size and grade.

A total of five drill rigs will be operating on site by the middle of the month, with management confident that it will be able to provide an accurate mineral resource estimate early in the second-quarter.

Should you invest?

Whilst I do think that AVZ Minerals is likely to be a real star of the future in the lithium industry, I think the prudent thing to do is to wait for the results of its drilling program.

Until then it is difficult to know for sure whether the market is undervaluing or overvaluing AVZ Minerals. And with a market capitalisation nearing $500 million, its shares could come under significant pressure if the mineral resource is not as great as expected.

In light of this, I think investors would be better off with established lithium miners such as Galaxy Resources Limited (ASX: GXY) or Orocobre Limited (ASX: ORE) for now. Though it is worth noting that they too are higher risk investments also.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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