Bradda Head Lithium (BHL) - Advancing Projects with Cash Reserves

Bradda Head Lithium Limited (formerly Copper Development Corporation) is a lithium exploration group focused on developing its high-quality projects in the USA. Through its subsidiaries, the group holds a 100% stake in lithium brine, pegmatite, and clay projects located in strategic positions in a world-class lithium belt in the USA.

Matt Gordon caught up with Charles FitzRoy, CEO, Bradda Head Lithium. Mr. FitzRoy joined the company in May 2021 from the CMOCs Corporate Development and Strategy team, where he was recently part of two $550M deals. Charlie has a wide range of experience across the metals and mining sector, with most of his focus on M&A (Mergers and Acquisitions), equity research, and strategy. He holds degrees in Geology, and Metals and Energy Finance. He is a fellow of the Geological Society and a professional member of MIMMM (Member of the Institute of Materials, Minerals, and Mining). Charlie also brings considerable management experience from his five years with the British Army.

Company Overview

Bradda Head Lithium is a lithium explorer focused on developing its 100%-owned US lithium assets, which are strategically located in Arizona and Nevada. The company’s focus is on developing low carbon footprint lithium assets to supply the forecast shortfall in US domestic supply. The company was founded in 2009 and is headquartered in the Isle of Man. It has been listed on the London Stock Exchange (AIM: BHL) since 2010.

Bradda Head Lithium is an AIM-listed explorer with assets in North America, primarily in Arizona and Nevada. The company has 3 types of lithium assets that make it unique. These assets include brine, pegmatites, and clay-based projects. In Nevada, the company has brines, while the clays and pegmatites assets are based in Arizona. The company is well-funded. At the end of May 2022, it had $60.5M in current cash flow. It has the financial resources to operate the assets until mid-to-late 2023. The company is in a very strong position, and similar to a lot of companies, the shares are very cheap at the moment.

The company is conducting work on all 3 projects simultaneously. It was able to raise capital last year in a well-timed window. During this raise, the company’s stock was trading at 15p, which led to a USD$30M funding, placing it in a very strong position. At the end of May, the company had $60.5M in cash flow.

The company also has a royalty with Lithium Royalty Corporation, which is expected to bring in an additional $5.5M once Bradda Head Lithium increases its resources at the clay asset. It has one drill permit for a portion of the clay asset based in the north. The company also expects to acquire a permit at the Basin East Extension. Once the permit is in place, the company has plans to initiate drill operations at the Basin project, which would feed into an increased resource by the end of 2023. At the same time, the company is also conducting metallurgical test work on the project. The entirety of the work will feed into next year’s PEA (Preliminary Economic Assessment), combining the clay assets at both Basin West and the West Extension.

The company is in a strong market position and has the funds to carry out the test work and drill programs. It does not need to approach the market in order to raise additional capital. Through the deployment of existing capital, the company can drill the pegmatites, clays, and brines. It is looking to demonstrate the value of its assets without needing additional funds. These parameters make Bradda Head Lithium a fantastic buy at the current share price.

The company continues to work on all 3 assets at once, the clay assets will be drilled in the background along with the metallurgical work. The company has acquired permits for the pegmatite asset and is currently awaiting bond adjudication, which is expected very shortly. Once it is in place, the company will mobilise the rigs and commence drill operations.

Currently, the majority of the company’s value comes from its Basin project, and not from pegmatites or brines. If the company can demonstrate the pegmatite potential to the market, it will be a game changer and the company’s valuation will skyrocket. Pegmatites are much easier to get into operation as they are quicker and quite well understood.

Notably, 60% of the world’s lithium supply comes from pegmatites in Australia. It’s a well-proven route that has a lower cost of capital. An intermediate product is much easier to produce than the end product, which serves as an excellent opportunity for Bradda Head Lithium.

Drill Operations

Bradda Head Lithium has a drill program planned for the pegmatites. The company is looking to drill a total of 30 holes. It conducted a geophysics survey on the asset last year. It has also conducted extensive mapping, surface sampling, and channel sampling. The company also carried out a 3D modelling exercise with SRK, and the results are expected shortly. The surveys and test work have enabled the company to develop the drill targets. Overall, the company is targeting 2 positions, one in the central bit and the other one in the northern bit of San Domingo, the pegmatite district.

As part of the drill program, the company is looking to drill 15 holes at a 150m depth and 15 holes at a 300m depth. The company anticipates that the zone pegmatite system extends at depth, and it is looking to prove the thesis through the drill program. The company is equally focused on its clay assets. Since both the clays and the pegmatites assets are centrally located in Wickenburg, the company is looking at a singular central hub for both the projects that are being worked on simultaneously.

M&A Considerations

The brines in Nevada are located further away, however, a brine drilling project is much simpler than a clay or pegmatite project. A brine project is easier to manage as well. For the brine projects, the company is looking for a potential JV (Joint Venture). Brine projects have slight differences compared to the clay and pegmatite projects. A JV will help the company share the risks and costs.

Project Permitting

Acquiring permits isn’t a challenge for the company. It was able to attain the Nevada permits fairly quickly. In fact, the permit for a Nevada-based shadow drill program was acquired within 6 weeks. Similarly, the permits for the Wilson brine project were acquired in under 6 weeks. Acquiring permits in Arizona takes longer due to the ongoing covid issues and staffing problems.

The company has already acquired the Basin North and San Domingo permits. It hasn’t faced any issues with the Wikieup drill program. The results of the drill program are already available, however, the company is looking to carry out additional work in order to better understand the asset. Through the drill program, the company was able to identify several good intersections of mineralized clay. As per the company, there are no problems in acquiring the permits. Although the process isn’t as straightforward as one would hope, the resistance seems to be decreasing.

Operational Challenges

The drilling market in the US is excessively challenging due to the ongoing inflationary pressures that have caused an increase in drilling costs and made it harder to source skilled labour. The inflationary pressures have been consistent since 2021 and have continued this year. Bradda Head Lithium was able to get in drillers and lock them in slightly ahead of the project schedule. It has strong relationships with the drill operators which enables it to plan 6-12 months ahead of time.

The challenging market is also due to a delay in assay results. The assay labs are now taking around 6-8 weeks or longer for results. Although the process can be fast-tracked by paying additional cash. The company would need to pay double the price to get assays in 2-4 weeks’ time.

The assays are expected to provide a strong insight into the company’s drill program. Once the drill operations start, the company expects to put out any pegmatite intersections within a month, even before the assay results are back. The assays are expected to follow up over a 6-8 weeks time period. Bradda Head Lithium is looking to start drilling this month. The assay results will feed into August/September, while the September/October assays will feed into November, around the same time as the conclusion of the drill program. The drill program is expected to take between 4-5 months, and the assay results will take an additional 6-8 weeks. Overall, the company is looking at a 6-month timeline.

The clay-based Basin project is a smaller drill program compared to San Domingo. At San Domingo, the company has 7,000m of drilling planned. It is looking to drill 20 holes on the Basin East Extension and 10 holes on Basin North. These holes will be much shallower as the clay deposit at Basin has an expected depth of 300ft-400ft. The company is chasing the upper-grade zone which is again in the shallower portion of the deposit.

The San Domingo area was mined back in the 1940s and the 1950s. It has really good grades at surface. The company has identified a 9km strike length. The results have been highly promising so far. The company is excited to start drill operations and publish results from the core.

The pegmatites are being drilled to a 300m depth, which will feature holes up to a 1,000 feet depth. The program will be shallower and would require significantly less drilling. This will also result in shorter assay turnaround times. These aspects will make the program’s timeframe significantly shorter.

According to Bradda Head Lithium, the market is in a very good position to buy lithium stocks. The company experienced a share drop-off, where the value moved from 17p to 7p. The company has a mix of lithium assets which makes it unique. It is currently focused on drilling the pegmatites which can be done fairly quickly. This could potentially lead to an increase in the company’s valuation.

A lot of the North American clay projects are doing very well and are pushing towards development. This movement will have a positive impact on the company’s operations as well. As companies like American Lithium, Lithium Americas, and Cypress get closer to development, the confidence in Bradda Head Lithium’s assets will also increase.

Listing Considerations

Bradda Head Lithium is currently looking at a potential TSX-V (Toronto Stock Exchange) listing for the North American market. There is a lot of valuation potential for lithium companies in North America and Australia. The company analysed both possibilities and decided on a TSX-V listing. A press release in the near future might provide updates on the TSX-V listing.

To find out more, go to the Bradda Head website