AVZ Minerals Ltd (ASX:AVZ) shares sink despite confirming monster lithium resource

The AVZ Minerals Ltd (ASX:AVZ) share price has tumbled lower despite confirming its Manono project as the biggest lithium deposit in the world…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the worst performers on the local market today has been the AVZ Minerals Ltd (ASX: AVZ) share price.

In early afternoon trade the lithium-focused mineral exploration company's shares are down 7% to 13 cents.

What happened?

This morning AVZ Minerals released its long-awaited mineral resource estimate for the 60%-owned Manono Lithium-Tin-Tantalum Project in the Democratic Republic of the Congo.

According to the release, the mineral resource estimate is a massive 259.9Mt at 1.63% lithium oxide (Li2O) contained within approximately 50% of the total strike of the Roche Dure pegmatite.

In total the resource is estimated to contain 4.25 million tonnes of Li2O, 219Kt of tin, and 11.2Kt of Tantalum.

Is this good?

It is an outstanding result and confirms Manono to be the world's largest lithium deposit with the second highest grade globally.

As a comparison, Pilbara Minerals Ltd (ASX: PLS) and Kidman Resources Ltd (ASX: KDR) operations in Western Australia have an estimated 213.3Mt and 189Mt at 1.32% and 1.5% grades respectively.

Another positive according to management is its significant tin component. It believes this will help reduce operating costs by providing a valuable by-product credit.

So why is the AVZ Minerals share price sinking lower?

This could simply be a case of buy the rumour and sell the fact. However, it is worth noting that there are concerns that no matter how good Manono appears to be, its location may ultimately make it uneconomical.

Manono is situated a significant distance from any ports in a country with incredibly poor infrastructure and unforgiving terrain. As a result, many believe that the costs to get the product to the end customer could prove to be too high.

Clearly management has a few concerns as well and has yet to confirm whether it will progress Manono to production.

Should you buy the dip?

I would suggest investors stay clear of AVZ Minerals until there is a clear understanding around the costs involved in operating Manono. Management is now focused on fast-tracking a feasibility study, which the market will no doubt be eagerly anticipating.

Motley Fool contributor James Mickleboro has no position in any of the 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 Scott Phillips.

More on Share Fallers

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Bapcor, Boss Energy, Macquarie, and Novonix shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

Stock market crash concept of young man screaming at laptop on the sofa.
Share Fallers

Guess which ASX 200 stock just crashed 31% on slumping sales

The $1.3 billion ASX 200 stock is getting hammered today.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why CBA, Inghams, Praemium, and Strike Energy shares are tumbling today

These shares are having a tough time on Tuesday. But why?

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Share Fallers

Why Brightstar, Eagers Automotive, Regis Resources, and Westpac shares are sinking

These shares are starting the week in the red. But why?

Read more »

Disappointed man with his head on his hand looking at a falling share price his a laptop.
Share Fallers

Why 29Metals, Atlas Arteria, DroneShield, and Yancoal shares are falling today

Let's see why these shares are ending the week in the red.

Read more »

Shot of a young businesswoman looking stressed out while working in an office.
Share Fallers

Why 29Metals, CAR Group, DroneShield, and Santana Minerals shares are falling today

These shares are missing out on the good times on Thursday. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Imricor, Imugene, Newmont, and Pepper Money shares are falling today

These shares are having a tough time on hump day. But why?

Read more »