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Why lithium miner Altura Mining Ltd is rocketing higher

The market may be heading lower for a third day in a row, but that hasn’t stopped the Altura Mining Ltd (ASX: AJM) share price from rocketing higher.

In morning trade the lithium-focused mineral exploration company’s shares are up 13% to 44.5 cents.

Why are Altura Mining’s shares storming higher?

This morning the company advised that it has become aware of speculation concerning a proposed control transaction involving Altura.

According to the release, management has confirmed that this speculation is accurate and that China’s Shaanxi J&R Optimum Energy Co. has been casting its eye over the company.

Management has been in discussions with the vehicle battery developer regarding a potential control transaction but warned that these talks are still at an early stage.

As a result, there is no certainty that any transaction will proceed, nor is there any indication over what price a deal would be done at if a transaction were to go ahead.

Furthermore, any proposal would be subject to a number of conditions including regulatory approvals in China and Australia.

What now?

I think that Altura Mining’s lithium project at Pilgangoora, Western Australia, is a high-quality asset with significant potential. So I can’t say I’m surprised to see Shaanxi J&R Optimum Energy Co. looking into making a move to acquire a controlling stake in the company.

However, with there being no certainty that a deal will be made, I would suggest investors resist buying shares on this news. After all, if a deal does not go ahead then its share price could take a bit of a tumble.

In the meantime, I would sooner invest in either Galaxy Resources Limited (ASX: GXY) or Orocobre Limited (ASX: ORE). Both these lithium miners are already pulling lithium out of the ground and profiting greatly from the high prices the metal is commanding. Though it is worth remembering that both shares are highly volatile and therefore high risk investments.

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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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