The Argosy Minerals Limited (ASX: AGY) share price has been one of the strongest performers in morning trade on Monday.
At one stage the lithium-focused mineral exploration company’s shares were up as much as 10.5% to 26 cents. They have since given back some of these early gains but are still 6.5% higher to 25 cents at the time of writing.
Why are Argosy Minerals’ shares surging higher?
This morning Argosy Minerals released an announcement advising that the gas supply at its Rincon lithium project has finally been switched on.
While this might seem like an odd thing for the market to get excited about, it is a necessary step in establishing the grade of the lithium carbonate that the company is sitting atop at the Rincon project in Argentina.
Earlier this month Argosy Minerals’ shares came under pressure after drilling results at Rincon revealed that the grade of its lithium was industrial grade and not the sought-after battery grade that battery makers are wanting.
However, management suggested that the washing process could potentially have raised the grade of its lithium. This process was not able to be conducted as, to the surprise of everyone, the Rincon project had not yet had its gas connection switched on.
But with the Rincon project now connected to the local gas supply, management can look to use the washing process to establish the true grade of its lithium. Judging by its share price reaction today, some investors are betting that improvements will be made to its grade.
Should you invest?
I would suggest investors continue to stay clear of Argosy Minerals until the grade of its lithium and the true value of its mineral resource is known.
Until then I would suggest investors either look elsewhere in the resources sector or consider miners that are already pulling lithium out of the ground and benefiting from high prices such as Galaxy Resources Limited (ASX: GXY) or Orocobre Limited (ASX: ORE). Though, both are still high risk investments, 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.