Grid Metals: Cashed up and moving forward   

Grid Metals (GRDM.V): Cashed up and moving forward   

Raising money in the current market has been difficult for many junior exploration and development companies. So the Grid Metals team’s achievement, raising $8.52 million for Grid Metals (GRDM.V), is particularly important.

“It went as planned,” said Robin  Dunbar President and CEO of Grid, in a phone interview. Which takes a lot of preparation, especially as much of the funding came from the centre of Australia’s mining industry, Perth.

“The Australians were introduced to us by Lithium Royalty Corp. which had invested in Grid early this year,”. Lithium Royalty was part of the most recent financing but additional investment came from three entities in Perth, Churchill Strategic Investments, the AMCI Group and the Primero Group  For Dunbar, while the cash was, of course, welcome, the investors brought much more to the table.

“The Primero Group is a highly specialized engineering and operations group which has done a lot of work in lithium,” said Dunbar. “They were able to conduct meaningful due diligence given their technical expertise ”.

Churchill is a group of Perth investors who have done well with investments in mining, “They were looking for opportunities in nickel and lithium,” said Dunbar. AMCI is a  group based of the US who have multiple investments globally in mining and metals.

“These are investors with knowledge and the right motivation,” said Dunbar. “They liked the deal and our business plan. They realize that the stock can go up over three or four years. They really liked the assets and said, “We think we can help.”

One of the advantages of dealing with experienced mining and engineering investors is that they actually know what they are looking at when they do due diligence. “We sent them our information which they looked at,” said Dunbar. “They sent two guys to look at the properties. One was a very experienced geo, the other was more a finance guy. Experienced people know what they are looking for. They looked at the core in our warehouse, our resource models and other technical reports and visited our properties.”

In the press release announcing the financing, Dunbar stated, “Grid Metals is looking to meet its capital needs by aligning with strategic investors that will assist in not only providing capital but industry expertise in the lithium and base metals sectors as well.” That is exactly what these strategic investors have brought to the table.

In exchange, they received shares representing a 27% ownership stake. “It’s a lot of shares,” said Dunbar. “But they are subject to a voluntary one-year hold and we wanted to fund the company. Now we can look at adding value.”

“We’ll be building out our team,” said Dunbar. “We’ll add a senior geo. Which is a lot easier when you are well funded.”

“We’re working on our Makwa/Mayfield Ni-Cu-PGM project,” said Dunbar. This project already has defined NI 43-101 resources and was the subject of a 2014 PEA. Grid has been drilling additional holes seeking to extend and enlarge the resource. “We have started on an updated PEA for the property.”

Lithium has been in the news recently with lithium prices hitting all-time highs. The demand for lithium is driven by the Li-ion batteries used in Electric Vehicles and Dunbar points out that, in China, EV sales are now ahead of IC engine cars.

For Grid, the hardrock lithium bearing pegmatite dykes at Donner Lake are a significant opportunity. The company updated its work on this project in a July press release. In that release Mr. Carey Galeschuk, Grid’s Vice President, of Lithium Exploration, stated, “The Phase 1 drilling program targeting the Northwest Dyke was very successful. The dyke shows good continuity, consistent mineralogy and grade variability, and a persistent spodumene-rich zone. Together with the Main Dyke we now have two clear targets for our initial near surface resource delineation drilling.”

Grid is pretty sure it has a lithium resource, the question is, how big? “We’re seeing two dykes 3-5 meters wide running along strike up to 900 meters,” said Dunbar. “You could potentially mine this with a small open pit and then go underground at a reasonable cost per ton. The lithium bearing dykes are very consistent and predictable”.

However, there is a lot of ground at Donner Lake which remains unexplored. “No one has really looked on a property-wide scale in recent years for lithium,” said Dunbar. So, as well as definition drilling on known pegmatite, Grid is undertaking a property scale exploration program to properly characterize the lithium potential of the numerous historically mapped pegmatites on the property. “We’re looking for pegmatite dykes that might be wider to feed a larger open pit operation,” said Dunbar.

Knowing the lithium is present at Donner Lake is one part of the puzzle, how to mine it is another, but a significant question is what to do with the lithium bearing rock once you have mined it. Dunbar points out that there is a potential solution just down the road at the Tanco lithium-cesium-tantalum mine and concentrator. “With spodumene prices very high, a toll milling arrangement might work out,” said Dunbar. After that in the future, there is a good chance that a lithium hydroxide plant will be built as part of a southern Manitoba lithium hub, admittedly at a steep capital cost of around $800 million.

Overall, with both nickel and lithium assets being advanced by Grid , there is pretty much certain to be a steady news flow over the next twelve months. Even in a deeply down market, that matters.

The American and Australian, sophisticated, investors took their shares at $0.12. The shares are currently trading at $0.16. Smart people have done their due diligence and a good price, the general investing public can get their shares for a couple of cents more. My order is in.

(Disclaimer: I liked the GRID story enough to buy shares which I may hold or sell at any time.)

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