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Why AVZ Minerals Ltd (ASX:AVZ) shares stormed higher today

The AVZ Minerals Ltd (ASX: AVZ) share price has returned from its trading halt and pushed higher in morning trade.

Its shares were up as much as 6.5% at one stage before giving back some of these gains. At the time of writing the lithium-focused mineral exploration company’s shares are up 4.5% to 9.4 cents.

Why were AVZ Minerals shares in a trading halt?

Initially AVZ Minerals shares were halted whilst it prepared a response to an ASX query. That query related to an article where the company’s managing director spoke about potential offtake arrangements in addition to other questions around funding.

The company’s managing director, Nigel Ferguson, commented that AVZ Minerals could potentially raise funds at a premium to share price, and that a 20% offtake that would translate into a potential amount of funding into the company. Before adding that the other funding option would be to sell half of the asset.

In response to the ASX query, AVZ Minerals advised that it “would like to retract the references to potential offtake values and potential sale values as the statements are not consistent with the detailed disclosures required to form a reasonable basis for the comments made.”

This is not the first time that AVZ Minerals has had to retract comments. In April it retracted statements that featured in a paid article in the AFR. That article was approved by Mr Ferguson. It has also seen slapped on the wrist after paid advisors leaked project details out on Twitter.

This certainly is not a good look for the company and it appears to have overshadowed today’s drilling results release, which was the second reason for the halt.

According to the release, those results have increased the company’s knowledge of “the deposit along strike, both to the south-west and north-east of the central part of the main resource area.”

In light of this, management believes it is very likely that it will see an increase in resource tonnages and category at Roche Dure. As a result, it expects “this to lower the strip ratio over LOM and positively impact the project economics.“

Should you invest?

I’m yet to be convinced that its Manono project is viable, especially if lithium prices continue to soften. So, for now, I would suggest investors stay clear of AVZ Minerals and also industry peers Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE) until there are positive developments with lithium pricing.

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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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