Quote Originally Posted by Nutz View Post
You'll usually want to convert things you've used into materia when you're done with them. You'll gain that ability through the main scenario quest line, so until then just hang on to any 100% spiritbonded gear.
The quest that unlocks it is actually a sidequest, but the main scenario takes you to the right area at the right level with a quest that explains materia. Once you get to that quest (which has an NPC goblin meld a dagger Minfilia gave you while explaining the whole materia business), be sure to take the sidequest right next to him which actually unlocks converting spiritbonded gear into materia. (If you craft as well, that's the same area you'll go to for the quests unlocking melding materia onto items, but those ones can only be done on DoH classes, unlike that converting one that can be done by any class.)