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Why the Avz Minerals Ltd share price stormed higher today

Although lithium miners such as Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE) are pushing higher on Monday morning, one industry peer is climbing more than most.

At the time of writing the Avz Minerals Ltd (ASX: AVZ) share price is up 6% to 25 cents.

Why is the AVZ Minerals share price storming higher?

This morning the lithium-focused mineral exploration company announced that it has signed a memorandum of understating (MOU) with Beijing National Battery Technology Co. for potential investment and off-take opportunities with the company.

This closely follows last week’s announcement of a MOU with Guangzhou Tinci Materials Technology Co. also for potential investment and off-take opportunities.

According to today’s release, Beijing National Battery Technology Co. holds the dominant market position for the supply of batteries to China’s bus industry and has annual production capacity in-excess of 3 billion AH.

AVZ Minerals has now extended an invitation to visit its operations in the Democratic Republic of Congo to help facilitate a proper appreciation of the potential of the Manono lithium project.

Should you invest?

I’m not a fan of announcements relating to MOUs, so seeing two in the space of a week is a little bit of a warning sign for me.

Whilst these understandings may ultimately end up with fully fledged agreements, until such a time occurs I wouldn’t be buying shares based on the them.

Especially when the full mineral resource at the Manono project is yet to be defined. Until that is known, as well, I find it hard to place a value on its shares.

So for now, I would suggest that investors keep their powder dry or consider investing in lithium miners pulling the metal out of the ground already. My first pick remains Galaxy, though it is a high risk investment, let’s not forget.

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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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