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Why Argosy Minerals Limited (ASX:AGY) shares rocketed higher today

The Argosy Minerals Limited (ASX: AGY) share price looks set to make it two consecutive days of strong gains following the release of another announcement this morning.

At the time of writing the lithium-focused mineral exploration company’s shares are up almost 8% to 28 cents. This means that its shares have now risen by almost 17% this week.

Why are Argosy Minerals’ shares on the rise?

Yesterday the company’s shares raced higher after it finally had the gas supply switched on at its Rincon lithium project in Argentina.

The lack of gas supply had meant the company had been unable to use the washing process at Rincon. Without this process, which heats mined lithium carbonate to remove impurities, Argosy was only able to confirm the quality of its produce was industrial grade and not the highly sought-after battery grade.

While we still do not know what grade its lithium carbonate is, we do now know the size of the resource that the company is sitting on.

According to today’s release, results of initial eight drill-holes reveal that the inferred mineral resource is 207,957 tonnes of contained lithium carbonate equivalent (LCE) product.

Argosy managing director, Jerko Zuvela, appeared to be very pleased with this. He stated that: “We are very confident the resource estimate will support our project production targets that we expect to report within our preliminary economic assessment, and together with additional drilling works will also enable future upgrades to the maiden JORC mineral resource.”

Before adding that the: “resource estimate further validates the company’s fast-track development strategy to fully develop the Rincon lithium project toward commercial production. We are committed to building a sustainable lithium production company.”

Is it a buy?

While I do think that this announcement de-risks things somewhat, there are still a few unknowns that make it a little too soon for me to invest. The main one is of course the grade of its lithium carbonate, which is still unknown.

In addition to this, it isn’t the biggest resource you’ll see in comparison to miners such as Galaxy Resources Limited (ASX: GXY), Orocobre Limited (ASX: ORE), and Pilbara Minerals Ltd (ASX: PLS).

This doesn’t give it the longest mine life, though, admittedly, management has hinted that it could be expanded through the acquisition of neighbouring tenements.

In my opinion, Argosy Minerals is one for the watchlist.

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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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