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Why AVZ Minerals Ltd (ASX:AVZ) shares have plunged lower again

It has been another disappointing day of trade for the AVZ Minerals Ltd (ASX: AVZ) share price.

Despite the release of positive drilling results this morning, the lithium-focused mineral exploration company’s shares have tumbled almost 6% lower to 9.9 cents.

This latest decline means that the AVZ Minerals share price is now down a massive 73% from its 52-week high of 37 cents.

Why did its shares sink lower today?

This morning AVZ Minerals provided an update on its mineral resource drilling at the Manono Lithium Project in the Democratic Republic of Congo.

Management has advised that it recently received new drilling results from a further 7 drill-holes. These new drilling results were not included in the maiden JORC Mineral Resource estimate reported in early August. That estimate confirmed that the company is sitting atop a monster lithium asset.

According to managing director Mr Nigel Ferguson, the latest assay results continue to “confirm lithium and tin mineralisation in the modelled zone, demonstrating the homogenous nature of the pegmatite. Additionally, new results from unmodeled areas have also intersected mineralisation, adding to the scale of the Roche Dure mineralisation.”

While this is no doubt a positive, it is meaningless if the company isn’t able to commence production at Manono.

Investors have been waiting patiently for an update on its scoping study, but management advised this morning that this has now been delayed due to the fact that an extension to the original scope of works has now been included.

This study is all the more important for AVZ Minerals as there are significant doubts around whether Manono will ever be a viable operation due to its distance from ports in a country with poor (or non-existent) infrastructure.

Should you buy the dip?

I’m not convinced that Manono will be brought on line, so I would suggest investors stay clear of the company until a scoping study proves otherwise.

And while I do see value in fellow lithium miners Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE), investors may want to hold off an investment until there are improvements in the prices of the battery making ingredient.

Instead of lithium, these hot stocks could be the ones to buy this month.

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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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