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AVZ Minerals Ltd (ASX:AVZ) shares jump 8% higher on transport savings news

Although it has given back some of its early gains, the AVZ Minerals Ltd (ASX: AVZ) share price remains in positive territory this morning.

At the time of writing the mineral exploration company’s shares are almost 2.5% higher at 8.9 cents. At one stage they were as much as 8% higher at 9.4 cents.

The latter brought its five-day return to approximately 45%.

Why are AVZ Minerals’ shares zooming higher again?

This morning AVZ Minerals advised that it has conducted a further review of the methodology adopted for its recent scoping study.

This review has revealed significant savings which allow for a more cost-effective transport of the concentrate from its Manono Lithium project to port. This does not include applying any further discount that could be negotiated for volume carried with providers moving forward.

According to the release, management believes it can cut the costs of transporting concentrate from the Manono project in the Democratic Republic of the Congo to Dar es Salaam in Tanzania by utilising “bulka bags’ instead of half height 20’ containers. This will enable “maximisation of available transport methods to port with positive results.”

Why is this important?

This is important because one of the major issues that many investors, myself included, have with the Manono project is its distance from ports in a country with very poor infrastructure.

As you can see on the image below, Manono is a significant distance away from the nearest port.

Source: AVZ

However, while today’s news is undoubtedly a positive, management has yet to reveal what impact the change will have on its scoping study. An updated study is being re-run to include the savings and produce updated financials for the project.

Should you invest?

I’m still not convinced about the project and believe investors ought to stay clear of its shares until commissioning begins. That’s if it ever gets to that stage.

In the meantime, I’d stick with companies that are already pulling the white metal out of the ground such as Galaxy Resources Limited (ASX: GXY), Mineral Resources Limited (ASX: MIN), and Orocobre Limited (ASX: ORE). Though, they are also high-risk options don’t forget.

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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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