RCS - Bradda Head Lithium - Open Letter to Shareholders

Bradda Head LithiumAnnouncement

08/08/2023 10:00

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RNS Number : 6412I  Bradda Head Lithium Ltd  08 August 2023

 

 

 

 

8 August 2023

 

Bradda Head Lithium Ltd

("Bradda Head", "Bradda", "BHL" or the "Company")

Open Letter to Shareholders

 

Bradda Head Limited (AIM:BHL, TSXV:BHLI, OTCQB:BHLIF), the North
America-focused lithium development group, this morning published an Open
Letter to Shareholders from the Company's Board of Directors outlining the
ongoing positive indicators from the Company's operational drilling,
fieldwork, permitting efforts and strategic discussions in the US and Canada
associated with all our US-based Projects.

 

The full text of the letter is included below and is also available on the
Company's website at https://www.braddaheadltd.com/media
(https://www.braddaheadltd.com/media)

 

 

 

For further information, please contact:

 

 Bradda Head Lithium Limited        +44 (0) 1624 639 396
 Charlie FitzRoy, CEO

 Denham Eke, Finance Director

 Beaumont Cornish (Nomad)           +44 20 7628 3396

 James Biddle/Roland Cornish

 Panmure Gordon (Joint Broker)      +44 20 7886 2500
 John Prior

 Hugh Rich

 Shard Capital (Joint Broker)       +44 207 186 9927
 Damon Heath

 Isabella Pierre

 Red Cloud (North American Broker)  +1 416 803 3562
 Joe Fars

 Tavistock (PR)                     + 44 20 7920 3150
 Nick Elwes                         braddahead@tavistock.co.uk

 Adam Baynes

 

Open Letter to Shareholders from Board of Directors of Bradda Head Lithium

It has been a productive few months for Bradda Head, with ongoing positive
indicators from our operational drilling, fieldwork, permitting efforts and
strategic discussions in the US and Canada associated with all our US-based
Projects. This is not reflected in the valuation of our Company in the opinion
of the Board.

In this letter, the Board wants to address the recent decline in our share
price and provide an update on the status of our highly prospective Projects
and emphasise why we believe our current share price level, which is
significantly below our actual listing price, is undervalued and offers an
extremely attractive entry level into Bradda Head.

First, let us consider the underlying fundamentals of our value for investors:

 

 

Investment Recap

 

Positive forecast for healthy lithium demand

·    Electric vehicles and energy storage systems drive demand as supply
growth remains challenged.

 

Continued and growing economic support

·    The US, through the Inflation Reduction Act (IRA), is investing
US$369 billion into its electric vehicle future, aiming to increase investment
in critical minerals and develop the supply chains for these minerals in the
US.

 

 LRC Royalty

·    The Company aims to receive the second royalty payment (US$2.5
million) after the next resource upgrade at Basin, which is forecast to be
announced in H2 of this year.

 

 

Quality projects in top jurisdictions

·    Reduced investment risk as a consequence of having all main
recognised lithium mineralisation styles identified in our Projects, each with
the potential to be a Company-maker.

·    Our Projects, in Arizona, Nevada and Pennsylvania, are within the top
mining jurisdictions globally. Arizona is the US state with the highest annual
revenue from mining.

·    There is strong National and State Government support for a range of
Strategic Minerals to be supplied from within the USA itself. Lithium is
identified as one of these strategically important minerals. Bradda Head is
well placed, not only to attract attention from end users in the USA but to
capitalise on this funding at the right time.

·    Bradda Head has a strategic land package of 23kms(2) for hard rock
lithium exploration and development in Arizona. There is the potential scale
to deliver a sizeable potential resource opportunity. Panmure Gordon's
initiation note (9th May 2023) independently indicates the potential for
nearly 8Mt of LCE, as well as highlighting the proximity to genuinely world
class infrastructure (roads and inexpensive, 100% renewable energy) found in
very few other areas worldwide.

·    Bradda Head has a large strategic land package of lithium-in-clay,
(46kms(2)) also in Arizona. Drilling currently underway is expected to expand
this resource. SRK has identified a JORC-compliant exploration target of 1Mt
to 6Mt LCE.

·    Our Lithium Brine projects in Nevada, namely Eureka and Wilson, are
prospective opportunities. Both projects have clear geophysical anomalies,
showing the presence of reservoirs with conductive fluids, indicating the
potential presence of brine at both. We also see potential for a clay
signature at Wilson.

·    Bradda Head also has strategic land packages that have the potential
to contain lithium-bearing brines associated with oilfield brines in
Pennsylvania.

·    The extraction of lithium from old oil brines has seen significant
investment recently with the acquisition of lithium rights in the Arkansas
portion of the Smackover formation for US$100M in May this year by Exxon Mobil
which is now entering this space.

 

Bradda Head is funded for 2023.

·    All projects are 100%-owned. Experienced Board and Management with a
wide array of knowledge across the metals & mining space. Strategic
positioning in the US for lithium end-users Our lithium projects are
strategically located to supply the rapidly growing US domestic

market, with the benefit of:

a.            US-produced low carbon footprint lithium

b.            Strategic positioning in the US for lithium end-user

 

·    All projects are 100%-owned.

 

 

News to look out for

 

San Domingo: proving up the district scale potential

Follow-up drill programme planned to start this quarter:

·    This next drilling campaign is building on the successful initial
maiden drilling programme from earlier in the year

·    Our primary aim of this programme is delineating a Resource

 

Basin: resource growth on the way in H2

·    Drilling underway at Basin East Extension and Basin North

·    2023 drilling targeting resource of over 1Mt, an expansion which
would trigger the contractually agreed payment by LRC of a further $2.5
million.

·    JORC Exploration target of up to 6Mt LCE at 17km(2) Basin Project

 

Brine assets

Wilson and Eureka

·    Bradda Head intends to demonstrate the potential value in our Nevada
brine assets. The Company is interested in developing these projects itself or
via JV investments, whilst naturally focussed on our most progressed projects
(Basin and San Domingo) which we believe are most likely to increase value for
shareholders in the short-term.

 

 

Share price performance (January to June)

 

Bradda Head's share price was 8.8p on January 3, 2023. Since then, the share
price has closed to a low of +/- 3.7p, a fall of close to 60%.

What are the market headwinds that have stalled the Company's share price
growth? Which are the factors that are external to the Company (i.e., things
we cannot change) versus factors that are internal and under the control of
the Company? Key factors highlighted to us by investors include:

·    Spot lithium pricing weakness until mid-May 2023

·    Mixed analyst outlook for lithium price

·    Hard Rock Spodumene vs Li-bearing Brines

·    Cash position

·    Communication on the recently announced change of auditor.

Each of these is covered in more detail below.

 

 

Lithium pricing

 

Spot lithium pricing weakness until mid-May

Spot Lithium prices in China declined from a high of around US$85,000/t in
November 2022 to a low of near US$21,000t in May this year. Since then, the
price has rebounded and is around the US$39,000/t mark. The price seems to
have defined a new floor of US$22,000/t, the level below which a significant
amount of lithium supply from non-integrated Chinese operations becomes
uneconomic.

Lithium price outlook remains strong and recently, at the Fastmarkets
conference, the chart to the left was presented by William Adams, Head of Base
Metals & Battery Research at Fastmarkets, showing that the low in 2023 is
considerably higher than the low in 2020 after the first lithium wave of high
spot prices in 2018 (See Figure 1).

 

During the 2018 lithium price rise, the projects that rose to fill the supply
gap were hard rock projects in Australia, while the brine producers in South
America struggled to scale up production.

This is why Bradda Head has its targeted approach of all 3 main recognised
types of lithium, with the focus now on resource delineation at its pegmatite
district in Arizona where we see huge potential for value creation and
resource expansion over 1Mt LCE at its Basin clay project demonstrating the
scale potential.

 

Figure 1: Lithium Hydroxide high/low price 2018 to 2023

Analyst outlook for lithium price

Bradda Head uses the long-term mean consensus price for its view on the
market, which has increased from c.US$8,000/t back when forecast in early 2021
to now c.US$18,000/t as of consensus forecast May 2023, see Figure 4. What is
clear to all lithium market watchers is the level of demand in lithium and
also the supply needed, which historically has taken longer to get on stream
(brines in South America) and been harder to scale up than other forms of
lithium mining (hard rock projects in Australia)

Bradda's projects are strategically positioned to fill the near, medium and
long-term demand for lithium. Allowing the Company to move quickly in
comparative valuation growth terms in the near-term as a consequence of it's
hard-rock project, which would use industry standard equipment and production
flow sheets.

 

 

Figure 2: Lithium price consensus forecasts from May 2021 to April 2023

 

 

 

 

 

 

 

 

Hardrock spodumene vs. Li-bearing brines

DLE technology is developing but it is not yet proven on a wide commercial
scale, but hard-rock mining is! Bradda Head is focussed on its second drill
programme at its 23km(2) pegmatite district in Arizona, due to start this
month. This will, we believe allow us to report our first 43-101 compliant
resource and push this Project forward towards production with pace. Bradda
Head has already reported some significant Li20 interceptions at its San
Domingo Project as highlighted in Figures 3 1  (#_ftn1) and 4 2  (#_ftn2)
below from Q1 of this year:

Figure 3: Miner Deck analysis of Q1 lithium drilling intercepts with market
caps added

 

Note: Red Dirt Metals name changed to Delta Lithium in April 2023

Figure 4: Bubble chart comparing Q1 assay intercept, grade and market caps.
Bubble size is related to market cap.

 

The recent approval of Thacker Pass has added positive sentiment in the US and
confidence is growing. Bradda Head is confident in the long-term market in
clays, and we see Basin as a major part of the Company's mid-term strategy
whilst we develop San Domingo, the simpler and more cost effective hard-rock
project.

 

Cash position

Bradda Head has sufficient cash reserves to carry out its planned 2023 drill
programmes and we also expect that Bradda Head this year will receive its
second royalty payment from LRC of US$2.5 million once we release our updated
resource at Basin following the initial results from the current drill
programme there.

 

Communication on change of auditor

Bradda Head released a premature RNS on June 28 relating to the delay in
filing of its accounts, which in turn led to confusion in the market. Steps
have been taken to ensure this does not happen again and Bradda Head released
a clearing RNS on the 30 June adding detail to why the auditor change was
required (due to the requirement for a CPAB registered firm, as we are now at
TSX-V listed Company) and the request by Bradda Head for permission to file
its TSX-V accounts late.  These announcements are no reflection of the
Company's financial position and Bradda Head will be announcing its results in
accordance with the AIM rules.

 

 

Summary

 

Bradda Head has strategically located critical mineral projects in the US,
located in the middle of the burgeoning US battery supply chain that the
government is funding growth of with nearly US$370bn of grants and low-cost
loans.

Bradda's asset mix gives the Company and its shareholders exposure to three
different types of lithium projects, as all types have their advantages. The
Company has near, medium and long-term exposure, and most importantly has work
underway on its two flagship projects (hard rock and clay).

2023 will be a big year for Bradda as we aim to push our resources at Basin
over the 1Mt LCE mark, which should trigger the next royalty payment and also
kick-off the PEA. We are also shortly starting our second drill programme at
San Domingo with the main aim to delineate a resource, which would
dramatically change the Company's valuation overnight.

This is the time to invest in Bradda before the 3rd wave of lithium investing
hits the market.

 

 

 

 Contact for enquiries.

Charles FitzRoy, CEO

info@braddaheadltd.com (mailto:info@braddaheadltd.com)

 

 

 

About Bradda Head Lithium Ltd.

Bradda Head Lithium Ltd. is a North America-focused lithium development group.
The Company currently has interests in a variety of projects, the most
advanced of which are in Central and Western Arizona: The Basin Project (Basin
East Project, and the Basin West Project) and the Wikieup Project.

The Basin East Project has an Indicated Mineral Resource of 21.2 Mt at an
average grade of 891 ppm Li and 3.5% K for a total of 100 kt LCE and an
Inferred Mineral Resource of 73.3 Mt at an average grade of 694 ppm Li and
3.2% K for a total of 271 kt LCE. In the rest of the Basin Project SRK has
estimated an Exploration Target of between 300 to 1,300 Mt of material
grading between 600 to 850 ppm Li which is equivalent to a range of between
1 to 6 Mt LCE. The Group intends to continue to develop its three phase one
projects in Arizona, whilst endeavouring to unlock value at its other
prospective pegmatite and brine assets in Arizona, Nevada, and Pennsylvania.
All of Bradda Head's licences are held on a 100% equity basis and are in close
proximity to the required infrastructure.

 

Bradda Head is quoted on the AIM of the London Stock Exchange with the ticker
of BHL, on the TSX Ventures exchange with a ticker of BHLI, and on the US
OTCQB market with a ticker of BHLIF.

 

Forward-Looking Statements

Neither TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release. This News Release
includes certain "forward-looking statements" which are not comprised of
historical facts.  Forward-looking statements include estimates and
statements that describe the Company's future plans, objectives or goals,
including words to the effect that the Company or management expects a stated
condition or result to occur. Forward-looking statements may be identified by
such terms as "believes", "anticipates", "intends to", "expects", "estimates",
"may", "could", "would", "will", or "plan". Since forward-looking statements
are based on assumptions and address future events and conditions, by their
very nature they involve inherent risks and uncertainties. Although these
statements are based on information currently available to the Company, the
Company provides no assurance that actual results will meet management's
expectations.  Risks, uncertainties and other factors involved with
forward-looking information could cause actual events, results, performance,
prospects and opportunities to differ materially from those expressed or
implied by such forward-looking information. Forward looking information in
this news release includes, but is not limited to, following:  The Company's
objectives, goals or future plans. Factors that could cause actual results to
differ materially from such forward-looking information include, but are not
limited to: failure to identify mineral resources; failure to convert
estimated mineral resources to reserves; delays in obtaining or failures to
obtain required regulatory, governmental, environmental or other project
approvals; political risks; future operating and capital costs, timelines,
permit timelines, the market and future price of and demand for lithium, and
the ongoing ability to work cooperatively with stakeholders, including the
local levels of government; uncertainties relating to the availability and
costs of financing needed in the future; changes in equity markets, inflation,
changes in exchange rates, fluctuations in commodity prices; delays in the
development of projects, capital and operating costs varying significantly
from estimates; an inability to predict and counteract the effects of COVID-19
on the business of the Company, including but not limited to the effects of
COVID-19 on the price of commodities, capital market conditions, restriction
on labour and international travel and supply chains; and the other risks
involved in the mineral exploration and development industry, and those risks
set out in the Company's public documents filed on SEDAR. Although the Company
believes that the assumptions and factors used in preparing the
forward-looking information in this news release are reasonable, undue
reliance should not be placed on such information, which only applies as of
the date of this news release, and no assurance can be given that such events
will occur in the disclosed time frames or at all. The Company disclaims any
intention or obligation to update or revise any forward-looking information,
whether as a result of new information, future events or otherwise, other than
as required by law.

 1  (#_ftnref1) Source: Miner Deck and Bloomberg. Market Caps as of 04 August
2023

 2  (#_ftnref2) Source: Miner Deck and Bloomberg. Market Caps as of 04 August
2023

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