Why the shares of lithium miner Avz Minerals Ltd are sinking lower today

The Avz Minerals Ltd (ASX:AVZ) share price has had a poor start to the week. Here's what you need to know…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Avz Minerals Ltd (ASX: AVZ) share price has been one of the worst performers on the market on Monday after emerging from a trading halt.

At the time of writing the lithium-focused mineral exploration company's shares are down 9% to 27.2 cents.

What happened?

Following its positive drilling update last week which revealed a thicker than anticipated pegmatite at its Manono Project in the Democratic Republic of the Congo, AVZ Minerals has raised $15 million to fund its planned phase 2 drilling and pre-feasibility programs.

The company has raised the money through a North American institutional investor via the placement of 60 million shares at 25 cents apiece.

As well as this initial placement, the institutional investor has 30 million attaching options exercisable within 24 months at 30.5 cents each. This will be worth up to an additional $9.15 million to the company should they all be exercised.

The current phase 1 drilling program is expected to be completed by the middle of the second quarter of 2018, along with the definition of a mineral resource estimate. After which, the funds raised will be used to move onto the phase 2 drilling program.

Executive Chairman Klaus Eckhof appears pleased with the capital raising and believes it will allow the company to work aggressively towards advancing the development of the project. Which is vitally important in my opinion, given that existing and potential Chinese partners are waiting for the project to advance before making further commitments.

Should you invest?

I have been very impressed with the early drilling results from Manono and look forward to the revealing of its mineral resource estimate in the near future. This should help investors better value the company and judge whether its shares are a buy or not.

But until that is available, I would suggest investors sit this one out and consider lithium miners that are already producing the metal. This includes Galaxy Resources Limited (ASX: GXY), Mineral Resources Limited (ASX: MIN) and Orocobre Limited (ASX: ORE). Though, it is worth remembering that these are all high risk investments.

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.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »