Six Sigma Metals has negotiated a more favourable deal for the planned acquisition of lithium and vanadium projects in Zimbabwe that will further de-risk the investment decision and speed up drilling.

The company (ASX:SI6) previously executed an option agreement with Zimbabwe-based miner Mirrorplex to acquire up to an 80 per cent interest in the Shamva lithium and Chuatsa vanadium and titanium projects.

Instead of having to wait until due diligence is completed to start drilling, Six Sigma can begin drilling this month and have the results in hand before it needs to make a final decision on the acquisition.

The company also has more time to carry out drilling, with due diligence extended to 116 days from 60 days previously.

On top of that, shareholders will likely be happy with revisions to the consideration payout for the projects, with less shares to be issued under the revised deal.

To earn an initial 30 per cent, Six Sigma now only has to issue 25 million shares instead of 50 million.

Six Sigma will instead issue 25 million “out of the money” options, exercisable at 2.5c each – more than double the company’s current share price – within three years.

Out of the money is a term used to describe a call option with a strike price that is higher than the market price of the underlying asset.

“The variation of the agreement really enables the company to be able to significantly de-risk the decision of whether to proceed with the acquisition,” non-executive director Steve Groves told Stockhead.

“We are pleased with the outcome as it means less dilution for shareholders for SI6 to earn-in to phase one whilst maintaining the same exposure.”

Creating value

“The senior personnel were on a site visit to the Zimbabwean assets last week and unanimously came away with a very positive view as to the potential of the assets to create significant value for the company in the near term,” Mr Groves said.

“We were very impressed with the quality of infrastructure and services, stability and evident appetite for foreign investment in Zimbabwe.

“We spoke to numerous local residents, including key stakeholders for the Shamva lithium project, and all were very enthusiastic about SI6’s presence in Zimbabwe and were confident that foreign investment in quality resource projects was key for the economic development of Zimbabwe.”

Zimbabwe is becoming a much more attractive investment proposition for miners following the fall of long-time leader Robert Mugabe last year.

The new president, Emmerson Mnangagwa, has declared that Zimbabwe is finally “open for business”.

“Zimbabwe is open for business and whoever stands in the way, hurting business in this country, will fall. It is not business as usual anymore, things have to change,” President Mnangagwa said at the signing ceremony.

Under Mugabe’s reign, foreign investment stalled – leaving a country rich in resources largely underexplored.

Full steam ahead

Six Sigma is well funded to complete an aggressive exploration program, including an initial drilling program to target high-grade areas.

The company has completed an environmental impact assessment report for the Bonnyvale target, which means it can now start drilling.

Bonnyvale is considered a high priority lithium target at the Shamva project.

Lithium grades of between 1 per cent and 3.13 per cent were evident in 240 rock chip samples taken from the Bonnyvale target.

Over 60 of the samples returned grades of over 2 per cent. Anything over 1 per cent can be considered high-grade in lithium mining.

Lithium mineralisation has been defined over 160m thickness and 550m of strike at surface at Bonnyvale.

But it could actually be much longer and wider, with mapped pegmatite outcrops evident over a strike of up to 3km and widths ranging up to 250m.

Pegmatites are rocks formed from lava or magma and are the primary source of lithium.

The initial three-hole drilling program will be conducted as a first pass to identify if lithium mineralisation continues at depth.

Drilling is slated to begin by the end of July.


This special report is brought to you by Six Sigma Metals.

This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice.

If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.