Why the Avz Minerals Ltd share price plunged 28% today

The Avz Minerals Ltd (ASX:AVZ) share price came crashing down to Earth with a bang today. Is this why?

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In the last few months the Avz Minerals Ltd (ASX: AVZ) share price has been one of the biggest movers on the local share market.

But unfortunately for its shareholders, today it is amongst the worst performers with a whopping 28% decline to 11.5 cents.

What happened?

This morning the company revealed that it has received the assays for five holes of its initial seven-hole drill program at its promising Manono Project in the Democratic Republic of the Congo.

These assays have confirmed high-grade lithium mineralisation over a strike length of 4km within three pegmatites at the Kitotolo Sector.

Which according to management confirms its understanding of the immense size of the Manono Lithium project and support the exploration target of between 400Mt and 800Mt of 1% to 1.5% Li2O at the Kitotolo Sector alone.

So why have its fallen?

With such strong results backing up the world class potential of the project, a 28% drop in its share price today will no doubt have caught many investors by surprise.

Whilst some investors may have hoped for even better results, I would put this down to being a case of buy the rumour and sell the news.

After all, despite today's decline, Avz Minerals' shares are still up a remarkable 270% over the last three months. With the drilling almost complete now, it appears as though day traders have been taking profit.

Which unfortunately highlights why investing in companies at this stage can be extremely high risk.

As I have said previously, I think Avz Minerals could have a world-class asset on its hands. But as production at the site is still some way off, I would suggest investors hold off an investment and merely keep the company on their watchlist.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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 Bruce Jackson.

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