Why is the AVZ Minerals share price sliding 7% on Friday?

Commodity players are incurring losses today, and AVZ is no exception.

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Key points

  • The AVZ Minerals share price is extending losses today and heading south at pace
  • Broad sector moves, company updates, and equity market money flows appear to have weighed in on the picture
  • In the last 12 months the AVZ share price has soared by 427%

The AVZ Minerals Ltd (ASX: AVZ) share price is tracing lower today and is currently down 7.5% at 78 cents.

While there have been no market-sensitive updates from the company today, ASX miners and metals producers are trading down in Friday’s session.

In wider market moves, the benchmark S&P/ASX 200 Index (ASX: XJO) is lower on Friday as well, currently down 2.3% at 7,193 points.

What’s up with the AVZ Minerals share price today?

Market data from Bloomberg reveals the commodity ‘factor’ that’s been driving returns in recent months has begun to slow.

That trend is matched in the level of outflows seen in investment vehicles that track various indices tied to commodities such as metals and energy.

“Precious metals and commodity ETFs are experiencing outflows,” portfolio manager Ingo Kurick wrote, citing The Daily Shot.

“Are investors realising peak inflation? Are [there] already fears of a recession coming? Or [are they] just taking profits after the rapid development?”

Extrapolating this data onto the Australian markets sees an uncanny resemblance, with indices tracking Australian materials, metals, and mining companies faltering this past month.

The S&P/ASX 300 Metals & Mining Index (ASX: XMM) has fallen 12% since 19 April, while the S&P/ASX 200 Materials Index (ASX: XMJ) has slipped by a similar amount.

Both are leading sectors this year to date, although have caved from 52-week highs since then and remain heavily compressed in May.

What else is weighing in?

The AVZ share price has suffered a similar fate since 19 April and is trading in line with the wider sector moves.

Earlier this week, AVZ provided an update on its operations in the Democratic Republic of Congo (DRC). The company revealed a mining licence has been awarded to its 75%-owned Dathcom Mining SA business for the flagship Manono Lithium and Tin Project. 

As reported by The Motley Fool Australia, comments in the release relating to Manono Project ownership claims might have had a negative effect on the AVZ share price.

Apparently, AVZ wants to acquire the remaining interest in Dathcom Mining SA. AVZ is in a joint venture with La Congolaise D’Exploitation Miniere SA.

Under the original terms of the JV, La Congolaise agreed to cede 10% of its interest to the DRC Government. However, La Congolaise has reportedly transferred its stake to Jin Chen Mining Company, with no apparent reasoning.

This could result in AVZ seeing its ownership in Dathcom reduced to 51%, whereas it had previously sought to sell its stake for US$240 million.

In the last 12 months, the AVZ share price has shot up by 427%. It is up just 2% this year to date after a 35% downfall over the past month of trade.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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