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Why the Avz Minerals Ltd share price jumped higher today

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Although the lithium miners are posting solid gains today, the Avz Minerals Ltd (ASX: AVZ) share price has pushed notably higher than its peers.

At the time of writing the lithium-focused mineral exploration company’s shares are up 6.5% to 24.5 cents.

Why are its shares jumping higher?

Investors have responded positively to an update on AVZ Minerals’ drilling activities at its Manono lithium project in the Democratic Republic of the Congo.

According to the release, the latest hole being drilled has intersected 282.95 metres of pegmatite, containing a similar proportion of spodumene reported from two previous drill holes.

This is great news for shareholders and appears to back up opinions that AVZ Minerals is sitting on top of a significant and lucrative mineral resource.

One negative, however, is that drilling is taking far longer than I expected. I would have hoped that the mineral resource would have been close to being defined by now, but there appears to have been delays in getting rigs to site.

Today’s release states that four rigs will be operational at site by mid-March, with a fifth rig recently being mobilised from South Africa. Previously management had stated that five rigs would be operational by mid-February.

This is disappointing because until the mineral resource has been defined, I think it is difficult to put a valuation on the company and its shares.

In light of this, I would suggest investors continue to keep AVZ Minerals on their watchlists and consider other lithium producers in the meantime.

My two favourites in the industry are Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE). Though it is worth remembering that like AVZ Minerals, these two shares are still very volatile and high-risk investments. This would make them unsuitable for investors with a low tolerance for risk.

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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 Scott Phillips.

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