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  • Global Strategic Metals Debt Conversion To Equity At Premium Provides Impetus 0 comments
    Apr 14, 2014 12:21 AM

    Global Strategic Metals (ASX: GSZ) has received a vote of confidence from Kärtner Montanindustrie GmbH (NYSE:KMI), which converted a €1.5 million (A$2.2 million) loan into 18.75 million ordinary GSZ shares at a premium to its last traded price.

    The conversion price of $0.10 per share is a significant premium to GSZ's last traded price of $0.017.

    KMI is the former vendor of GSZ's 80% owned Wolfsberg Lithium Project in Austria, which hosts two types of Pegmatite ores - Amphibolite Hosted Pegmatite with grades up to 3.15% lithium oxide; and Mica Hosted Pegmatite with grades up to 1.95% lithium oxide - with veins up to 5.5 metres.

    "This conversion represents a significant improvement to the company's financial position by removing a significant amount of debt from its balance sheet," GSZ non-executive chairman Tony Sage said.

    "This debt conversion represents the final amount owing to KMI for the company's 80% acquisition of the Wolfsberg Lithium Project."

    Sage added he was pleased the conversion occurred at a premium to the current share trading price.

    The 18.75 million conversion shares represents a 6.98% dilution to its current issued capital and is believed to be the most efficient mechanism for eliminating debt, allowing the company to focus on progressing Wolfsberg.

    Wolfsberg Lithium Project

    Wolfsberg hosts an Inferred Resource of 16.9 million tonnes at 1.6% lithium oxide, with the advantage of substantial exploration upside with the ore body remaining open at depth and along strike.

    It is located in Carinthia, 270 kilometres south of Vienna and 20 kilometres east of the industrial town of Wolfsberg, which grants it the benefit of being well serviced by existing infrastructure including rail and road.

    The company plans to use ore it had mined from the project last year to update the metallurgical test work carried out by the North Carolina State Minerals Research Laboratory in the 1980's using modern technology.

    Recent advances in processing technology, particularly grinding techniques, may have a significant impact on both the recovery rate and the quality of the concentrates produced.

    This testwork will be used to secure product specifications and samples for spodumene (Lithium), quartz, feldspar and mica.

    GSZ also plans to start negotiations for off-take agreements; undertake limited drilling to increase the confidence of the resource into the Measured and Indicated categories; complete a Definitive Feasibility Study into operation of 0.5-1 million tonne per annum mining operation; and target zones of identified boulders of spodumene from either trenching or drilling.

    Analysis

    That the conversion of the €1.5 million convertible loan provided Kärtner Montanindustrie was carried out at a significant premium highlights the confidence that the Austrian company has in Global Strategic Metals and the Wolfsberg Lithium Project.

    The conversion price of about $0.10 compared to the currently traded price of $0.017 is also noteworthy given that the last time the company's traded at that price was in mid-November 2012.

    In addition, the conversion removes all debt, allowing it to focus on progressing the project.

    GSZ had recently secured European investment of $711,381 to progress further work on the project including metallurgical test work and other work.

    We expect the debt conversion to be valuation accretive for Global in the short term and believe that its news flow ahead will increase its valuation from the current circa $3.9 million, which is decidedly light.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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