One of the worst performers on the local market today has been the AVZ Minerals Ltd (ASX: AVZ) share price.
In early afternoon trade the lithium-focused mineral exploration company’s shares are down 7% to 13 cents.
This morning AVZ Minerals released its long-awaited mineral resource estimate for the 60%-owned Manono Lithium-Tin-Tantalum Project in the Democratic Republic of the Congo.
According to the release, the mineral resource estimate is a massive 259.9Mt at 1.63% lithium oxide (Li2O) contained within approximately 50% of the total strike of the Roche Dure pegmatite.
In total the resource is estimated to contain 4.25 million tonnes of Li2O, 219Kt of tin, and 11.2Kt of Tantalum.
Is this good?
It is an outstanding result and confirms Manono to be the world’s largest lithium deposit with the second highest grade globally.
Another positive according to management is its significant tin component. It believes this will help reduce operating costs by providing a valuable by-product credit.
So why is the AVZ Minerals share price sinking lower?
This could simply be a case of buy the rumour and sell the fact. However, it is worth noting that there are concerns that no matter how good Manono appears to be, its location may ultimately make it uneconomical.
Manono is situated a significant distance from any ports in a country with incredibly poor infrastructure and unforgiving terrain. As a result, many believe that the costs to get the product to the end customer could prove to be too high.
Clearly management has a few concerns as well and has yet to confirm whether it will progress Manono to production.
Should you buy the dip?
I would suggest investors stay clear of AVZ Minerals until there is a clear understanding around the costs involved in operating Manono. Management is now focused on fast-tracking a feasibility study, which the market will no doubt be eagerly anticipating.
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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.