Why the Avz Minerals Ltd share price rocketed 16% higher

Credit: iStock

One of the biggest movers on the market this morning has been the Avz Minerals Ltd (ASX: AVZ) share price.

In morning trade the lithium hopeful was up as much as 16% at one stage before dropping back a touch. At the time of writing AVZ Minerals’ shares are up 12% to 32 cents.

What happened?

This morning the company advised that the first drill hole of its 20,000 metre phase 1 drilling program has intersected 295 metres of pegmatite from 62 metres down-hole depth.

According to the release, the results suggest that the Roche Dure Pegmatite is thicker than anticipated in this particular area, reaffirming management’s view that the Manono Lithium Project in southern Democratic Republic of Congo is a world-class lithium asset.

Should you invest?

Whilst this is definitely a very promising development for the company, I still wouldn’t be in a rush to invest in its shares just yet.

The Manono Project undoubtedly appears to have a lot of potential, but until the full extent of the mineral resource underground is known I would suggest investors keep their powder.

Especially given how one lithium expert has previously been very sceptical on the project’s future. According to an interviews with News Limited earlier this month, Global Lithium’s Joe Lowry believes that there’s a strong possibility that the Manono lithium project may never be built.

Lowry appears to believe that the project is too far from the coast in a high risk nation. This could potentially make transporting raw materials difficult for the company.

So for now, I think investors would be better off considering other lithium miners that are already producing the metal such as Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE).

Both of these producers are currently benefitting from high lithium prices and are likely to deliver significant free cash flow this year. But like AVZ Minerals, let’s not forget that they are still high risk investments themselves.

So if the lithium miners are too high risk for your liking then these exciting tech stars could be far better options for you.

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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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