Why Avz Minerals Ltd shares are sinking into the red

The Avz Minerals Ltd (ASX: AVZ) share price has returned to trade on Friday following its voluntary suspension and fallen into the red.

At the time of writing the lithium-focused mineral exploration company’s shares are down 2% to 25 cents.

Why are its shares sinking lower?

This morning AVZ Minerals made two announcements to the market. One was related to its drill intercepts and the other was a further response to an ASX price query.

The drill intercepts have once again been very positive and appear to support management’s belief that the Manono project in the Democratic Republic of the Congo is a world-class asset with a significant mineral resource.

With its drilling program going to plan, management expects to be able to confirm its initial mineral resource estimate by the end of June.

The positive nature of these drill intercept results will come as no surprise to many shareholders given that images of drill core were recently circulated on social media by Michael Langford of Airguide International Pte Limited, AVZ’s strategic advisor regarding Chinese relationships, without the company’s authorisation.

However, according to its ASX price query response, the company does not consider the images from these Twitter posts to have contained material information.

While this may be the case with the images, I would suggest that the post’s accompanying statement made them material. Mr Langford talked up the core holes and said that their “Spodumeme size is clearly obvious.”

At the very least the reaction to the posts was material, with its shares rocketing higher upon their release.

Should you invest?

While AVZ Minerals itself may not be to blame for this mishap, unless the company were to end its relationship with Airguide International, I would suggest investors stay well clear of the company and focus elsewhere in the industry. Until then, I think the company lacks the credibility to be considered investment grade.

Instead of AVZ Minerals, I would be snapping up these top shares with enormous growth potential.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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