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Why AVZ Minerals Ltd (ASX:AVZ) shares rocketed 18% higher today

In morning trade the AVZ Minerals Ltd (ASX: AVZ) share price has been one of the best performers on the local market.

The lithium-focused mineral exploration company’s shares are up 11% to 9.1 cents at the time of writing. At one stage they were as much as 18% higher ay 9.7 cents.

Why are AVZ Minerals’ shares rocketing higher?

This morning AVZ Minerals advised that extensional drilling at the Roche Dure pegmatite in the Democratic Republic of the Congo has identified additional high-grade lithium and tin mineralisation which will be included in the company’s revised mineral resource calculation.

According to the release, the latest drilling has continued to confirm the initial drilling results and homogenous nature of the deposit. In light of this, management has advised that drilling is tailing off as planned and its focus is now on its definitive feasibility study.

AVZ’s managing director, Nigel Ferguson, appeared to be pleased with these latest drilling results.

He stated: “We are very happy that the scale of the Roche Dure mineralisation continues to grow and we look forward to releasing an updated Mineral Resource Estimate for Manono before the end of the year.”

Incidentally, Mr Ferguson has been busy buying the company’s shares this month, so he’ll be especially pleased with the positive share price reaction today.

According to a change of director’s interest notice released yesterday, the company’s managing director picked up 1 million shares through an on-market trade on November 1.

He paid a total of $65,236 for the shares, equating to an average price of approximately 6.5 cents per share. This brought Ferguson’s holding to a total of approximately 37.1 million shares and 12 million performance rights.

Should you invest?

While I believe that AVZ Minerals has a monster lithium asset on its hands, due to transportation issues I’m not overly convinced that it will ever live up to its potential.

In light of this, I would sooner invest in proven miners such as Galaxy Resources Limited (ASX: GXY), Mineral Resources Limited (ASX: MIN), and Orocobre Limited (ASX: ORE) if I wanted exposure to the high risk lithium industry.

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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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