REG - Bradda Head Lithium - Audited Final Results for Year Ending 28 Feb 2023
25/08/2023 07:00
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RNS Number : 4524K Bradda Head Lithium Ltd 25 August 2023
25 August 2023
Bradda Head Lithium Ltd
("Bradda Head", "Bradda", or the "Company")
Audited Final Results for the financial year ending 28 February 2023
Bradda Head Lithium Ltd (AIM: BHL), the North America-focused lithium
development group, is pleased to announce its audited financial results for
the year ending 28 February 2023, and the Management's Discussion and
Analysis for the same period.
Financial and operational highlights
· Raised total gross proceeds of just under US$ 13 million, issuing
73,195,560 new ordinary shares to institutional and other investors;
· Following the successful completion of a follow-up drill
programme during October 2022, the Company updated its Basin East MRE,
resulting in a 22% increase in LCE tonnes, for a total of 371kt of LCE;
· Completed a maiden drill programme at our San Domingo pegmatite
asset, with a total of 47 holes drilled. This was the first 'modern' drilling
campaign at these historical targets since the 1950/60s;
· Strengthened our on the ground team with the key appointment of
Joey Wilkins as COO, who is a highly regarded geologist in the US arena with
extensive experience and knowledge of US geology, specifically
in Arizona and Nevada;
· Completed a dual listing, with the Company's shares admitted to
trading on the Canadian TSX-V Exchange under the ticker BHLI.TSXV.
Ian Stalker, Chairman of Bradda Head, commented:
"The financial year has been both busy and exciting, with the Company raising
gross funds of just under US$ 13 million as part of a successful UK and North
American placement in April 2022. The funds were strategically deployed to
successfully fast-track our first drill programme at our San Domingo pegmatite
resource in Arizona and complete our second Basin East drilling programme
since listing in 2021. We now have 371kt of lithium carbonate equivalent, and
an exploration target of between 1Mt to 6Mt of LCE over the Company's Basin
projects. We also significantly increased our hard-rock lithium bearing
landholding position in Arizona, and strengthened our team members with key
senior appointments, including adding Joey Wilkins as COO.
Several catalysts are on the way for Bradda in H2 2023 and H1 2024, as we
continue to develop our assets. Drilling is wrapping up at Basin with an
updated MRE being worked on currently. We have an internal target of a +1Mt
LCE resource, which would trigger the second royalty payment of US$ 2.5
million from Lithium Royalty Corporation. We have also mobilised a drill rig
to kick-off the second drill programme in 12 months at San Domingo, with the
primary aim to delineate a resource. Funding is in place for these programmes
and we look forward to updating the market with the results of these and other
initiatives."
Copies of the 2023 Audited Report and Financial Statements are being posted
to shareholders and will shortly be available from the Company's
website www.braddaheadltd.com (http://www.braddaheadltd.com) .
The Company will post its Notice of Annual General Meeting ("AGM") to
Shareholders at the same time. The AGM will be held at the Sanderson
Suite, Claremont Hotel, Loch Promenade, Douglas, Isle of Man IM1 2LX, with
the date to be confirmed.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET
ABUSE REGULATION (EU No.596/2014) AS IT FORMS PART OF UK DOMESTIC LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPONTHE PUBLICATION OF
THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INSIDE
INFORMATION IS NOWCONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL
THEREFORE CEASE TO BE IN POSSESSION OF INSIDEINFORMATION.
For further information please visit the Company's website:
www.braddaheadltd.com (http://www.braddaheadltd.com) .
Contact:
Bradda Head Lithium Limited +44 (0) 1624 639 396
Charles 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
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.
The Mineral Resource statement for the Basin Project was authored by Martin
Pittuck, CEng, MIMMM, FGS who works for SRK Consulting (UK) Ltd, an
independent mining consultancy. Mr. Pittuck has over 25 years' experience
undertaking and reviewing Mineral Resource estimates and has worked on lithium
clay estimates for over 5 years. Mr. Pittuck consents to the inclusion of the
technical information in this press release and context in which they appear.
Reference is made to the report entitled "Independent technical report on the
Basin and Wikieup Lithium clay projects, Arizona, USA" dated October 18, 2022
with an effective date of June 10, 2022 was prepared by Martin Pittuck, CEng,
MIMMM, FGS, and Kirsty Reynolds MSci, PhD, FGS and reviewed by Nick Fox MSc,
ACA, MIMMM. The Report is available for review on SEDARplus
(www.sedarplus.ca/landingpage (https://www.sedarplus.ca/landingpage/) ) and
the Company's website www.braddaheadltd.com (http://www.braddaheadltd.com) .
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.
Chairman's statement
It is my pleasure to present the Annual Report and the Audited Financial
Statements for Bradda Head Lithium Limited (the "Company" or "Bradda Head")
for the year ended 28 February 2023. The 2022/2023 year has been one of
significant and steady progress in our USA based Projects.
We completed a step-out programme at our Basin East clay project during
October 2022. The results were fed into an updated Mineral Resource Estimate
("MRE"), that was released during March 2023, resulting in a 22% increase in
contained Lithium Carbonate Equivalent ("LCE") tonnes compared to our previous
updated MRE. The March 2023 MRE comprises an Indicated Mineral Resource of
21.2 Mt at an average grade of 891 ppm Li, and an Inferred Mineral Resource of
73.3 Mt at an average grade of 694 ppm Li for a total of 371kt of LCE. The
Company followed up on this second drilling programme, during March 2023 and
commenced a further drilling programme Basin East, Basin East Extension and
Basin North. The results of this campaign will feed into a further updated MRE
later this year.
More significantly, we also completed a maiden drill programme at our San
Domingo pegmatite asset. A total of 7,300m with 47 holes were drilled. This
was the first 'modern' drilling campaign at these historical targets since the
1950/60s. Lithium bearing minerals (spodumene and minor lepidolite) were
identified in c.60% of the total holes completed, and it is extremely
interesting to note that the drilling undertaken covered just over 1% of the
23km(2) that Bradda Head holds in this Pegmatite District in Arizona. The
final assay results were highly encouraging and set the scene for what we
believe to be the potential to define a world class lithium pegmatite district
in Arizona. We draw encouragement from the fact that our best intersection
reported at 31.85m @ 1.60% Li2O (including 3.90m @ 2.88% Li2O, and 20.03m @
1.97% Li2O (including 7.06m @ 1.92% Li2O), was indicated to be the 7th best
lithium bearing intersection in Q1 2023 reported with-in our Canadian, UK, and
Australian listed Peer Group in an article published at the time by Miner
Deck.
Importantly this potential Lithium Resource is located near vital
infrastructure in Arizona and proximate to battery end-users within the US and
the wider developing North American battery hub. A follow-up drill programme
is being developed for the second half of 2023, aimed at delineating a
resource and testing additional ground within the much wider 23km(2) of our
lithium pegmatite claims.
Our on-the-ground team was also strengthened with the key appointment of Joey
Wilkins as COO during November 2022. Joey is a highly regarded geologist in
the US arena with extensive experience and knowledge of US geology,
specifically in Arizona and Nevada.
The Company remains financially robust having completed a fund raise during
April 2022 and raised just under US$ 13 million in a combined North American
and UK placement, broadening our investment base.
Our Projects in the USA are clearly very strategically placed to benefit from
highly supportive USA political landscape. Considering this, it is worth
noting that currently the US has only one active lithium mine in the state of
Nevada, which manufactures around 1% of the world's lithium production.
Under the current administration, steps are being taken to reduce the
reliance on foreign lithium sources and move towards an increasing percentage
of locally sourced lithium. This includes invoking the Defence Production Act,
and in support of this initiative, the Inflation Reduction Act was passed.
This includes US$ 369 billion in incentives for EV and mining industries to
reduce imports and increase US based battery and EV production.
Our Company is confident in the near and medium term lithium demand, as the
world transitions more and more into the clean energy future.A report from
Benchmark Mineral Intelligence estimates that annual demand will reach 2.4
million tons of lithium by 2030, being a 4-fold increase compared to current
levels.We use a long-term lithium price of c.US$22,000/t for our models, which
is where we expect long-term prices to gravitate towards.
Top of the Company's agenda is our drive for outstanding performance in our
Environmental, Social, and Corporate Governance ("ESG ") matters. For example,
at each step of the process, both prior to and during drilling, the Company is
in regular discussions with all related stakeholders in our claims, including
local councils, tribal representatives, and government officials. With water
scarcity being a key consideration in Arizona, the Company utilised sonic
drilling at our Basin East drill programme, which minimised water consumption.
A number of community-based programmes have been rolled out during 2022 and
into 2023, including sponsorship of local rodeo events, water conservation
studies, and other engagement events within our local communities.
The key focus for the Company for the rest of 2023 will be to maintain
momentum at our priority assets, namely Basin and San Domingo. With drill
programmes and other related activities planned at both locations for the
remainder of the year, we are one step closer to unlocking the significant
potential of these assets, creating value for our shareholders.
Thank you for your support and we all look forward to a successful year ahead
for Bradda Head.
Ian John Stalker
Chairman
24 August 2023
Chief Executive Officer's operational review
As the Chairman reports, this period under review has been both very busy and
exciting, with notable milestones achieved, including the first drill
programme at our pegmatite district San Domingo, two Basin East MRE upgrades
in less than a year, successful completion of a secondary fundraise, and
listing the Company's shares on the Canadian TSX-V Exchange.
Operational Review
Arizona Sedimentary Hosted Lithium Projects
Basin Project
During March 2022, the Company released an updated Basin East Mineral Resource
Estimate and Exploration Target ("MRE") for our Basin project, compiled
by SRK Consulting (UK) Ltd in accordance with the terminology and definitions
given in the JORC Code (2012). This update led to a) a 65% increase in
contained LCE tonnes, b) the identification of a continuous higher grade
internal layer with a grade of c. 1,300ppm Li in the upper part of the
deposit, and c) the identification of a 1Mt to 6Mt LCE Exploration Target
within the Basin Project district we hold.
The key points following this updated MRE are:
- an Indicated Mineral Resource of 17.7 Mt at an average grade of
912 ppm Li and 3.4% K for a total of 85 kt LCE; and
- an Inferred Mineral Resource of 57.6 Mt at an average grade of 717
ppm Li and 3.3% K for a total of 220 kt LCE.
Basin East 2022 Mineral Resource Estimate
Classification Domain Tonnes Mean Grade Contained Metal
Mt Li (ppm) K (%) LCE (kt) K (Mt)
Indicated Upper Clay 12.0 730 3.6 46 0.4
Upper Clay HG 5.7 1,296 2.8 39 0.2
Lower Clay - - - - -
Sub Total 17.7 912 3.4 85 0.6
Inferred Upper Clay 29.6 766 3.4 121 1.0
Upper Clay HG 2.6 1,345 3.1 18 0.1
Lower Clay 25.4 597 3.1 81 0.8
Sub Total 57.6 717 3.3 220 1.9
Total 75.2 763 3.3 305 2.5
Following the successful completion of a follow-up drill programme during
October 2022, which consisted of 14 holes covering 1,200m of drilling, on 16
January 2023, the Company updated its Basin East MRE, resulting in a 22%
increase in LCE tonnes. The Indicated category of the MRE, which is all
located in the upper part of the deposit, has increased by 17%. Following
completion of the Basin East Step Out drill programme, a total of 1.4km(2) of
Bradda's 46km(2) of sedimentary claims been drilled.
The updated MRE comprises:
- an Indicated Mineral Resource of 21.2 Mt at an average grade of
891 ppm Li and 3.5% K (potassium) 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 (potassium) for a total of 271 kt LCE.
Basin East 2023 Mineral Resource Estimate
Classification Domain Tonnes Mean Grade Contained Metal
Mt Li (ppm) K (%) LCE (kt) K (Mt)
Indicated Upper Clay 16.0 738 3.6 63 0.6
Upper Clay HG 5.2 1,354 3.0 38 0.2
Lower Clay - - - - -
Sub Total 21.2 891 3.5 100 0.7
Inferred Upper Clay 31.7 767 3.6 129 1.2
Upper Clay HG 2.3 1,448 3.5 18 0.1
Lower Clay 39.3 592 2.9 124 1.1
Sub Total 73.3 694 3.2 271 2.4
Total 94.5 738 3.3 371 3.1
During March 2023, the Company commenced sonic drilling at the Basin Project,
with the intention of further adding to its existing NI 43-101 Compliant
Mineral Resource of LCE tonnes. As part of the programme, the Company expected
to drill up to 25 holes at Basin East, Basin East Extension and Basin North.
The intent at the Basin Project in 2023 is to increase coverage over as much
of the Project's 17km(2) area as possible.
The Company will continue to make certain that all efforts are focused on
ensuring that work is carried out in these areas with as little disturbance as
possible. Bradda Head is using sonic drilling, which is more environmentally
sensitive as it uses very little water compared to diamond core or reverse
circulation drilling.
The Company also continued to progress metallurgical testing, with positive
results received from the second stage progrmame completed during August 2022.
The results show that a 26% upgrade factor (from 1,500ppm Li to 1,900ppm Li)
is achieveable by rejecting 32% of the unmineralised waste material. A
reduction in these impurities in the Pregnant Leach Solution helps reduce acid
consumption and, therefore, processing costs. Acid leach results from the
upgraded concentrate sample continue to be impressive, indicating >98%
lithium extraction to solution within 1 hour using a 90°c sulphuric acid
leach approach at atmospheric pressure. Further metallurgical testing still
needs to be completed in order to refine the process.
Wikieup Project
During June 2022, the Company received the results of an initial Scout
drilling programme at Wikieup in Sections 12, 13 and Northwest. This
represents Bradda Head's first drill programme at Wikieup, consisting of 18
holes and 1,875 meters of sonic drilling. Sonic drilling was preferred due to
reduced water use compared to diamond core or reverse circulation drilling.
The results demonstrate the presence of lithium bearing clays, opening up a
new potential resource area for the Company and warranting further work in
this area.
Key highlights include:
- Section 12 encountered several intersections of lithium
mineralised clay at 68 metres and 71 metres at 686ppm Li and 519ppm Li
respectively, and also 26 metres at 808ppm Li from hole W12-22-07;
- Only three holes were drilled into Northwest Wikieup with
promising intersections in the southernmost hole of 55 metres at 621ppm Li,
including 16.5 metres at 824ppm Li;
- Lithium mineralised clay was intercepted in the southern portion
of Section 13.
The Wikieup project covers a total area of 28km(2), with a total of under 6%
having been drilled following completion of this maiden drill programme.
In addition, the Company settled a claim dispute with Arizona Lithium. The
settlement led to a gain at our Wikieup project of an additional c.5km(2).
Arizona Pegmatite District
San Domingo Project
A significant milestone was reached during the year, with a maiden drill
programme commencing at our pegmatite asset during July 2022. A total of
7,000m diamond core drilling was planned, with 7,300m or 47 holes being
completed. Lithium bearing minerals (spodumene and minor lepidolite) have been
identified in c.60% of the total holes completed and importantly the programme
has only covered just over 1% of the 23km(2) that Bradda holds in Arizona.
Following receipt of the final assay results in May 2023, the results not only
demonstrate significant intersections of pegmatites with visible lithium
minerals in the Northern Claim blocks, but also that the Company has
intersections of visible spodumene at the Central Claim blocks too (Lower
Jumbo and Jumbo), strengthening the presence of a 9km mineralised trend.
Highlights from the assay results include:
Central Claims:
5.94m @ 1.22% Li2O in SD-DH23-046
4.72m @ 0.67% Li2O in SD-DH23-038a
9.54m @ 1.85% Li2O, 3.02m @1.49% Li2O, and 2.90m @ 3.03% Li2O in SD-DH23-037
7.35m @ 0.68% Li2O, 4.79m @ 0.87% Li2O, 3.20m @ 1.22% Li2O, and 3.21m @ 0.75%
Li2O in SD-DH23-036
9.85m @ 0.86% Li2O in SD-DH23-034
4.02m @ 1.27% Li2O in SD-DH23-035
Northern Claims:
31.85m @ 1.60% Li2O (including 3.90m @ 2.88% Li2O, and 20.03m @ 1.97% Li2O
(including 7.06m @ 1.92% Li2O, 3.21m @ 3.74% Li2O and 3.81m @ 3.25% Li2O)) in
SD-DH22-024
6.52m @ 1.24% Li2O in SD-DH23-041
2.74m @ 2.12% Li2O in SD-DH23-042
1.77m @ 1.10% Li2O in SD-DH23-040
3.75m @ 2.37% Li2O, 0.85m @ 2.44% Li2O, 1.10m @ 0.82% Li2O, and 0.67m @ 1.77%
Li2O in SD-DH22-025
3.35m @ 2.23% Li2O in SD-DH22-018
3.20m @ 1.70% Li2O, 1.89m @ 2.89% Li2O, and 2.75m @ 0.67% Li2O in
SD-DH22-019
9.75m @ 0.78% Li2O (including 5.36m @ 1.20% Li2O) in SD-DH22-003
4.27m @ 1.86% Li2O in SD-DH22-005
2.44m @ 1.63% Li2O in SD-DH22-001
The Company also completed an extensive soil sampling programme across the
majority of the 23km(2) landholding. The final figures were received post
year-end, with very promising results showing priority targets along the
complete 9km mineralised trend. Alongside of soil sampling, Bradda's
geologists, following a review of the GPR work carried out in 2021/2022,
initiated a structural mapping programme to help with drill hole targeting for
the follow-up drill programme at San Domingo designed to start in Q3 2023.
Post year-end, the Company extended its project area at San Domingo, acquiring
three inlier lode claims for a total increase in project area of 60 acres.
Bradda Head is in the process of finalising a follow-up drilling programme to
start in Q3 of this year aimed at testing additional ground within the much
wider 23km(2) of lithium pegmatite claims and leases held in Arizona. The
acquisition of the inlier claims strengthens our position and funds are
already in place for this planned work, and ongoing exploration work by our
geologists suggests that we have only just scratched the surface of what we
have at San Domingo with just over 1% of the area tested from this first
programme.
Nevada Lithium Brine Projects
Wilson Project and Eureka Project
Work programmes have been focused on our Arizona pegmatite and clay projects
over the last year to conserve funds and maximise potential return for
shareholders. Discussions are underway on the potential for joint venture
interest in our Nevada based brine projects, and Bradda will update the market
when any developments are secured.
Financial Review
For the year ended 28 February 2023, the Company recorded a net loss of US$
3,887,588 (28 February 2022: US$ 3,554,468). Expenditure totalling US$ 547,916
(28 February 2022: US$ 1,022,837) is considered to be one-off items, as these
related directly to the Canadian TSX-V Exchange listing, completed on 10
November 2022.
As at year end, cash balance stood at US$ 7,746,519 (28 February 2022: US$
7,327,303), capitalised deferred mining, exploration, licence, and permit
costs stood at US$ 9,574,266 (28 February 2022: US$ 5,732,820), and total
assets were US$ 18,198,559 (28 February 2022: US$ 13,354,840). The Company is
in a net asset position of US$ 16,984,940 (28 February 2022: US$ 12,257,165).
The Company continues the process of actively pursuing recovery of the US$
600,000 fraudulent payment made to an unidentified party, as disclosed in the
prior year accounts. The Board will provide an update once further progress
has been made.
Approach to Risk and Corporate Governance
"The Company's general risk appetite is a moderate, balanced one that allows
it to maintain appropriate growth, profitability and scalability, whilst
ensuring full corporate compliance."
The Group's primary risk drivers include: -
Strategic, Reputational, Credit, Operational, Market, Liquidity, Foreign
Exchange, Capital and Funding, Compliance and Conduct.
Our risk appetite is classified as High under an "impact" matrix defined as
Zero, Low, Medium, and High. Appropriate steps have been taken and adequate
controls implemented to monitor the risks of the Company, and the appropriate
committees and reporting structures have been established to monitor risks
facing the Company.
Financing
On 13 April 2022, the Company completed an over-subscribed secondary
fundraise, with shares commencing to trade on 20 April 2022. The Company
raised total gross proceeds of US$ 12.9 million, issuing 73,195,560 new
ordinary shares to institutional and other investors. All subscribers were
issued with warrants on a 1:1 basis, with 73,195,560 warrants being issued
with an exercise price of £0.21. Listing related expenditures amounted to US$
547,916 and these are considered to be non-recurring items. The fair value
applied to the shareholder warrants has been classified as a financial
liability. At year end, the warrant liability of US$ 230,201 has been
re-measured to fair value, with a corresponding gain recorded in profit and
loss of US$ 4,518,470 (28 February 2022: Nil).
On 10 November 2022, the Company's shares were admitted to trading on the
Canadian TSX-V Exchange under the ticker BHLI.TSXV. Bradda Head's board of
directors believes that the listing will be beneficial to the Company and its
shareholders, in addition to the AIM listing, bringing the Company's lithium
project portfolio to the attention of a robust resources market, and expanding
Bradda Head's potential shareholder base.
Strategy and Outlook
Under the Biden administration, clean energy production will be ramped up in
the USA, with lithium considered to be a key resource. Under the Inflation
Reduction Act, US$ 369 billion has been dedicated to foster a domestic
clean-energy manufacturing base. Grants will be made available to produce keys
metals such as lithium. They are intended to reduce reliance of the US on
countries such as China, which has been historically leading the way in
lithium-ion batteries. The Company, with its portfolio of assets covering all
three main lithium deposit types, is ideally positioned to take advantage of
this demand growth. The projects held are in strategic locations with respect
to end-users, power, rail and road transport, renewable electricity and gas
infrastructure. Multiple lithium end users are located in the Western states
close to the Company's projects, most notably the Tesla's Gigafactory in
Nevada and, by 2025, LG Chem will be producing EV batteries at its US$ 5.5
billion Arizona battery complex. Tesla this year broke ground at its lithium
refinery in Corpus Christi in Texas where it plans to produce battery grade
lithium hydroxide, a sign of the increasing demand in the US for raw
materials, like 6% spodumene concentrate, which is typically shipped from
Australia to China for processing to Lithium hydroxide, a EV battery
pre-cursor chemical.
The Board believes with its current portfolio, coupled with an extremely
experienced and motivated team, it is in a strong position to both unlock
value from its projects, and create significant value for shareholders.
Charles FitzRoy
Chief Executive Officer
24 August 2023
Directors' report
The Directors present their annual report and the consolidated financial
statements for Bradda Head Lithium Limited (the "Company") for the year ended
28 February 2023.
Principal activity
Bradda Head Lithium Limited is a lithium exploration Group focused on
developing its high-quality projects in the USA.
Results and transfers to reserves
The results and transfers to reserves for the year are set out on pages 30 to
34 of the consolidated financial statements.
The Company made a total comprehensive loss attributable to equity
shareholders for the year after taxation of US$ 3,887,588 (28 February 2022:
US$ 3,554,468).
Dividend
The Directors do not propose the payment of a dividend for the year (2022: US$
Nil).
Policy and practice on payment of creditors
It is the policy of the Company to agree appropriate terms and conditions for
its transactions with suppliers by means of standard written terms to
individually negotiated contracts. The Company seeks to ensure that payments
are always made in accordance with these terms and conditions.
Financial risks
Details relating to the financial risk management are set out in note 16 to
the financial statements.
Directors
The Directors who served during the period and to date are:
Denham Eke
James Mellon
Ian Stalker
Euan Jenkins
Charles FitzRoy
Alex Borrelli
Directors' report (continued)
Directors' interests
As at 28 February 2023, the interests of the Directors and their families (as
such term is defined in the AIM Rules for Companies) in the share capital of
the Company are as follows:
28 February 2023 28 February 2022
% of issued % of issued
Number share capital Number share capital
James Mellon (1) 65,097,004 16.67% 64,145,176 20.21%
Denham Eke 124,307 0.03% 124,307 0.04%
Ian Stalker (2) 3,870,140 0.99% 3,616,267 1.14%
Charles FitzRoy 13,265 0.00% 11,091 0.003%
Euan Jenkins 2,198,934 0.56% 2,055,454 0.65%
Alex Borrelli 343,329 0.09% 315,649 0.10%
────── ────── ────── ──────
71,646,979 18.34% 70,267,944 22.143%
══════ ══════ ══════ ══════
(1) James Mellon's interest comprises of 63,879,831 (2022: 62,928,003) shares
directly held by Galloway Limited, which is indirectly wholly owned by James
Mellon. Denham Eke is a director of Galloway Limited. Burnbrae Limited holds
200,000 (2022: 200,000) shares, which is indirectly wholly owned by James
Mellon. Denham Eke is a director of Burnbrae Limited. A total of 1,017,173
(2022: 1,017,173) shares are held directly by James Mellon.
(2) Ian Stalker's interest comprises of 3,786,717 (2022: 3,532,844) shares
directly held by Promaco Limited, which is wholly owned by Ian Stalker. The
balance of 83,423 shares are held directly in his name.
Significant shareholdings
Except for the interests disclosed in this note, the Directors are not aware
of any holding of ordinary shares as at 28 February 2023 representing 3% or
more of the issued share capital of the Company:
Number of Percentage of total
ordinary shares issued capital
James Mellon (1) 65,097,004 16.67%
Zenith Minerals Limited 43,959,305 11.25%
Electrification and Decarbonization AIE 28,400,000 7.27%
Hargreaves Lansdown private clients 25,430,049 6.51%
Nigel Wray 20,375,000 5.22%
Lithium Royalty Corporation 19,481,475 4.99%
Anthony Baillieu 14,400,000 3.69%
Jason Macdonald (2) 14,095,706 3.61%
(1 ) James Mellon's interest comprises of 63,879,831 (2022: 62,928,003)
shares directly held by Galloway Limited, which is indirectly wholly owned by
James Mellon. Denham Eke is a director of Galloway Limited. Burnbrae Limited
holds 200,000 (2022: 200,000) shares, which is indirectly wholly owned by
James Mellon. Denham Eke is a director of Burnbrae Limited. A total of
1,017,173 (2022: 1,017,173) shares are held directly by James Mellon.
(2 ) Jason Macdonald's interest comprises of 12,307,004 (2022: 12,307,004)
shares directly held by the J&E Macdonald Trust, in which Jason Macdonald
has a vested interest. The balance of 1,788,702 (2022: 1,788,702) shares is
held directly in his name.
Auditors
PKF Littlejohn LLP, being eligible, have expressed their willingness to
continue in office.
By order of the Board
Denham Eke
Director
24 August
2023
Corporate Governance Statement
The Board of Bradda Head Lithium Limited (the "Board") is committed to best
practice in corporate governance throughout the Company (the "Company"). The
Directors have agreed to comply with the provisions of the Quoted Companies
Alliance ("QCA") Corporate Governance Code for Small and Mid-Size Quoted
Companies (2018) to the extent which is appropriate to its nature and scale of
operations. This report illustrates how the Company complies with those
principles.
QCA Principle 1: Establish a strategy and business model which promotes
long-term value for shareholders
The strategy and business operations of the Company are set out in the
Chairman's Statement and Chief Executive Officers operational review on pages
6 to 10.
The Company's strategy and business model and amendments thereto are developed
by the Chairman and his senior management team and approved by the Board. The
management team is responsible for implementing the strategy and managing the
business at an operational level.
The Company operates in an inherently high-risk sector and this is reflected
in the principal risks and uncertainties.
In executing the Company's strategy and operational plans, management will
typically confront a range of day-to-day challenges associated with these key
risks and uncertainties and will seek to deploy the identified mitigation
steps to manage these risks as they manifest themselves.
QCA Principle 2: Seek to understand and meet shareholder needs and
expectations
The Company via the Chairman seeks to maintain a regular dialogue with both
existing and potential new shareholders in order to communicate the Company's
strategy and progress and to understand the needs and expectations of
shareholders.
Beyond the Annual General Meeting, the Chairman and, where appropriate, other
members of the senior management team or Board will meet with investors and
analysts to provide them with updates on the Company's business and to obtain
feedback regarding the market's expectations of the Company.
The Company's investor relations activities encompass dialogue with both
institutional and private investors. From time to time, the Company attends
private investor events, providing an opportunity for those investors to meet
with representatives from the Company in a more informal setting.
QCA Principle 3: Take into account wider stakeholder and social
responsibilities and their implications for long-term success
The Company is aware of its corporate social responsibilities and the need to
maintain effective working relationships across a range of stakeholders. These
include the Company's advisors, suppliers and investee companies. The
Company's operations and working methodologies take account of the need to
balance the needs of all of these stakeholders while maintaining focus on the
Board's primary responsibility to promote the success of the Company for the
benefit of its members as a whole. The Company endeavours to take account of
feedback received from stakeholders, and where appropriate, ensures any
amendments are consistent with the Company's longer-term strategy.
The Company takes due account of any impact that its activities may have on
the environment and seeks to minimise this impact wherever possible.
QCA Principle 4: Embed effective risk management, considering both
opportunities and threats, throughout the organisation
The Board is responsible for the systems of risk management and internal
control and for reviewing their effectiveness. Internal controls are designed
to manage rather than eliminate risk and provide reasonable but not absolute
assurance against material misstatement or loss. Through the activities of the
Company Audit, Risk and Compliance Committee, the effectiveness of these
internal controls is reviewed annually.
A comprehensive budgeting process is completed once a year and is reviewed and
approved by the Board. The Company's results, compared with the budget, are
reported to the Board on a monthly basis.
The Company maintains appropriate insurance cover in respect of actions taken
against the Directors because of their roles, as well as against material loss
or claims against the Company. The insured values and type of cover are
comprehensively reviewed on a periodic basis.
The senior management team meets at least quarterly to consider new risks and
opportunities presented to the Company, making recommendations to the Board
and/or Company Audit, Risk and Compliance Committee as appropriate.
QCA Principle 5: Maintain the board as a well-functioning, balanced team led
by the chair
The Company's Board currently comprises four Non-Executive Directors and two
Executive Directors.
All of the Directors are subject to election by shareholders at the first
Annual General Meeting after their appointment to the Board and will continue
to seek re-election at least once every three years.
The Board is responsible to the shareholders for the proper management of the
Company and intends to meet at least four times a year to set the overall
direction and strategy of the Company, to review operational and financial
performance and to advise on management appointments. All key operational
decisions are subject to Board approval.
Alex Borrelli and Euan Jenkins, both Non-Executive Directors, are considered
to be independent. The QCA Code suggests that a board should have at least two
independent Non-Executive Directors. The Board considers that the current
composition and structure of the Board of Directors is appropriate to maintain
effective oversight of the Company's activities for the time being.
Directors receive their fees in the form of a basic cash emolument. The
current remuneration structure for the Board's Executive and Non-Executive
Directors is deemed to be proportionate.
QCA Principle 6: Ensure that between them the Directors have the necessary
up-to-date experience, skills and capabilities
The Board considers that the Executive Directors and Non-Executive Directors
are of sufficient competence and calibre to add strength and objectivity to
its activities and bring considerable experience in the operational and
financial development of the Company.
The Directors' biographies are detailed on the Company's website
www.braddaheadltd.com (http://www.braddaheadltd.com) .
The Board regularly reviews the composition of the Board to ensure that it has
the necessary breadth and depth of skills to support the ongoing development
of the Company.
The Chairman, in conjunction with the Finance Director, ensures that the
Directors' knowledge is kept up to date on key issues and developments
pertaining to the Company, its operational environment and to the Directors'
responsibilities as members of the Board.
Directors' service contracts or appointment letters make provision for a
Director to seek professional advice in furtherance of his or her duties and
responsibilities, normally via the Company Secretary.
QCA Principle 7: Evaluate board performance based on clear and relevant
objectives, seeking continuous improvement
Internal evaluation of the Board, the Committees and individual Directors is
undertaken on an annual basis in the form of peer appraisal and discussions to
determine their effectiveness and performance as well as the Directors'
continued independence.
The results and recommendations that come out of the appraisals for the
Directors shall identify the key corporate and financial targets that are
relevant to each Director and their personal targets in terms of career
development and training. Progress against previous targets is also assessed
where relevant.
QCA Principle 8: Promote a corporate culture that is based on ethical values
and behaviours
The Board seeks to maintain the highest standards of integrity and probity in
the conduct of the Group's operations. These values are enshrined in the
written policies and working practices adopted by all employees and
contractors in the Group. An open culture is encouraged within the Group, with
regular communications to staff regarding progress and staff feedback
regularly sought. The Executive Management regularly monitors the Group's
cultural environment and seeks to address any concerns that may arise,
escalating these to Board level as necessary.
The Group is committed to providing a safe environment for its staff and all
other parties for which the Group has a legal or moral responsibility in this
area. The Group's health and safety policies and procedures are enshrined in
the Group's documented quality systems, which encompass all aspects of the
Group's day-to-day operations.
QCA Principle 9: Maintain governance structures and processes that are fit for
purpose and support good decision- making by the board
The Role of the Board
The Board is collectively responsible for the long-term success of the
organisation. Its principal function is to determine the strategy and policies
of the Company within an effective control framework which enables risk to be
assessed and managed.
The Board ensures that the necessary financial and human resources are in
place for the Company to meet its objectives and that business and management
performance is reviewed. Furthermore, the Board ensures that the Company
operates within its constitution, relevant legislation and regulation and that
proper accounting records and effective systems of business control are
established, maintained, documented and audited.
There are at least four formal Board meetings each year. All Board members
have the benefit, at the Company's expense, of liability insurance in respect
of their responsibilities as Directors and have access to independent legal or
other professional advice if required. The Board has a formal schedule of
matters which are reserved for its consideration and it has established three
committees to consider specific issues in greater detail, being the Company
Audit, Risk and Compliance, Remuneration and Nomination Committees. The Terms
of Reference for each of these Committees are published on the Company's
website.
The Chairman
The Chairman is responsible for leading the Board, ensuring its effectiveness
in all aspects of its role, promoting a culture of openness of debate and
communicating with the Company's members on behalf of the Board. The Chairman
sets the direction of the Board and promotes a culture of openness and debate
by facilitating the effective contribution of Non-Executive Directors and
ensuring constructive relations between Executive and Non-Executive Directors.
The Chairman also ensures that Directors receive accurate, timely and clear
information. In doing so, this fosters a positive corporate governance culture
throughout the Company.
The Chief Executive Officer
The CEO is responsible for managing the Group's day to day business and
operations within the parameters set by the Board.
Non-Executive Directors
The Non-Executive Directors are responsible for bringing independent judgement
to the discussions held by the Board, using their breadth of experience and
understanding of the business. Their key responsibilities are to
constructively challenge and contribute to strategic proposals, and to monitor
performance, resources, and standards of conduct, compliance and control,
whilst providing support to executive management in developing the Company.
Board Committees
The Board has established a Company Audit, Risk and Compliance Committee
("ARCC"), and a Remuneration Committee with formally delegated duties and
responsibilities.
Company Audit, Risk and Compliance Committee
The Company Audit, Risk and Compliance Committee (the "ARCC") meets at least
two times each year and is chaired by Alex Borrelli. The external auditors
attend by invitation. Its role is to be responsible for reviewing the
integrity of the financial statements and the balance of information disclosed
in the accompanying Directors' Report, to review the effectiveness of internal
controls and risk management systems and recommend to the Board (for approval
by the members) the appointment or re-appointment of the external auditor. The
ARCC reviews and monitors the external auditor's objectivity, competence,
effectiveness and independence, ensuring that if it or its associates are
invited to undertake non-audit work it will not compromise auditor objectivity
and independence.
Further information can be found within the Company Audit, Risk and Compliance
Report contained within this Annual Report.
Remuneration Committee
The Remuneration Committee intends to meet at least once a year and comprises
of two Non-Executive Directors. It is chaired by Euan Jenkins and is
responsible for determining the remuneration of the Executive Directors, and
other members of the management. Committee members do not take part in
discussions concerning their own remuneration.
Further information can be found within the Remuneration Report contained
within this Annual Report.
Re-election
The Company's Rules require that all Directors are submitted for election at
the AGM following their first appointment to the Board. Thereafter all
Directors will submit themselves for re-election at least once every three
years, irrespective of performance.
Board and committee attendance
The number of formal scheduled Board and committee meetings held and attended
by Directors during the year was as follows: -
Name Board ARCC Remuneration
James Mellon 16 - -
Denham Eke 16 - -
Ian Stalker 16 5 -
Charles FitzRoy 16 - -
Euan Jenkins 16 5 4
Alex Borrelli 16 5 4
QCA Principle 10: Communicate how the company is governed and is performing by
maintaining a dialogue with shareholders and other relevant stakeholders
The Company places a high priority on regular communications with its various
stakeholders and aims to ensure that all communications concerning the
Company's activities are clear, fair and accurate. The Company's website is
regularly updated, and users can register to be alerted when announcements or
details of presentations and events are posted onto the website.
Notices of General Meetings of the Company can be found here:
https://www.braddaheadltd.com/investor-centre/regulatory-news/
(https://www.braddaheadltd.com/investor-centre/regulatory-news/)
The results of voting on all resolutions in general meetings are posted to the
Company's website, including any actions to be taken as a result of
resolutions for which votes against have been received from at least 20 per
cent of independent shareholders.
Approval
This report was approved by the Board of Directors and signed on its behalf
by:
Denham Eke
Finance Director
24 August 2023
Audit, Risk and Compliance Committee Report
The Directors ensure the Company complies with the provisions of the Quoted
Companies Alliance ("QCA") Corporate Governance Code for Small and Mid-Size
Quoted Companies (2018) to the extent which is appropriate to its nature and
scale of operations.
This report illustrates how the Company complies with those principles in
relation to its Audit, Risk and Compliance Committee (the "ARCC").
Membership
The members of the ARCC are Ian Stalker, Alex Borrelli ("AB") and Euan Jenkins
("EJ"), with AB and EJ being the independent Non-Executive directors, with
Alex Borrelli being the Chairman. The composition of the Committee has been
reviewed during the year and the Board is satisfied that the Committee members
have the relevant financial experience and the expertise to resource and
fulfil its responsibilities effectively, including those relating to risk and
controls.
Meetings
The Committee meets at least two times a year, including the review of the
interim and full year results. Other Directors and representatives from the
external auditors attend by invitation.
Duties
The Committee carries out the duties below for the Company, as appropriate:
§ Monitors the integrity of the financial statements of the Company,
including annual and half-yearly reports, interim management statements, and
any other formal announcement relating to financial performance, reviewing
significant financial reporting issues and judgements which they contain.
§ Reviews and challenges the consistency of the information presented within
the financial statements, compliance with stock exchange or other legal
requirements, accounting policies and the methods used to account for
significant or unusual transactions.
§ Keeps under review the effectiveness of the Company's internal controls and
risk management systems.
§ Oversee the relationship with the external auditors, PKF Littlejohn LLP,
including meetings when considered appropriate to discuss their remit and
review the findings and any issues with the annual audit. It will also review
their terms of appointment, and plans to meet them once a year independent of
management and will consider and make recommendations to the Board, to be put
to the Company for approval at the Annual General Meeting, in relation to the
appointment, re-appointment and removal of the Company's external auditor.
There are no contractual restrictions in place in respect of the auditor
choice.
§ The Committee is governed by a Terms of Reference and a copy of this is
available on the Company's website.
2023 Annual Report
During the year, ARCC confirms that it has received sufficient, reliable and
timely information from management and the external auditors to enable it to
fulfil its responsibilities.
The Committee has satisfied itself that there are no relationships between the
auditor and the Company which could adversely affect the auditor's
independence and objectivity.
All internal control and risk issues that have been brought to the attention
of ARCC by the external auditors have been considered and the Committee
confirms that it is satisfied that management has addressed the issues or has
plans to do so.
The Company has a number of policies and procedures in place as part of its
internal controls and these are subject to continuous review and as a minimum
are reviewed by ARCC on an annual basis.
§ ARCC has reviewed and discussed together with management and the external
auditor the Company's financial statements for the year ended 28 February 2023
and reports from the external auditor on the planning for and outcome of their
reviews and audit. The key accounting issues and judgements considered
relating to the Company's financial statements and disclosures were as
follows:
o Carrying amount of capitalised deferred mining and exploration costs, and
capitalised licences and permits - US$ 9,574,266; and
o Going concern - ARCC reviewed the going concern position of the Company,
taking into account the 12-month cash flow forecasts. ARCC is satisfied that
preparing the financial statements on a going concern basis is appropriate.
Disclosures are included in note 2.
Alex Borrelli
Chairman of Audit, Risk and Compliance Committee
24 August 2023
Report of the Remuneration Committee
As a BVI registered company there is no requirement to produce a Directors'
Remuneration Report. However, the Board follows best practice and therefore
has prepared such a report.
The Directors have agreed to comply with the provisions of the Quoted
Companies Alliance ("QCA") Corporate Governance Code for Small and Mid-Size
Quoted Companies (2018) to the extent which is appropriate to its nature and
scale of operations.
This report illustrates how the Company complies with those principles in
relation to Directors' remuneration.
The Level and components of employee remuneration
The Remuneration Policy reflects the Company's business strategy and
objectives as well as sustained and long-term value creation for shareholders.
In addition, the policy aims to be fair and provide equality of opportunity,
ensuring that:
§ the Company is able to attract, develop and retain high-performing and
motivated employees in the competitive local and wider markets;
§ employees are offered a competitive remuneration package to encourage
enhanced performance and are, in a fair and responsible manner, rewarded for
their individual contribution to the success of the Company;
§ it reflects the Company's culture and values; and
§ there is full transparency of the Remuneration Policy.
In line with the Board's approach, which reflects that adopted within other
comparable organisations, the Remuneration Policy provides for the reward of
the employees through salary and other benefits.
Executive Director's Emoluments
The remuneration for the Executive Directors reflects their responsibilities.
It comprises basic salary, eligibility to participate in an annual bonus
scheme when this is considered appropriate, private healthcare and share
option incentives.
Annual bonus scheme payments are not pensionable and are not contracted.
As with staff generally, whose salaries are subject to annual reviews, the
basic salary payable to the Executive Directors are reviewed each year with
reference to jobs carrying similar responsibilities in comparable
organisations, market conditions generally and local employment competition in
view of the Group's geographical position.
The Committee believes that share ownership by executives strengthens the link
between their personal interests and those of shareholders. Options are
granted to executives periodically at the discretion of the Remuneration
Committee. The grant of share options is not subject to fixed performance
criteria. This is deemed to be appropriate as it allows the Committee to
consider the performance of the Group and the contribution of the individual
executives and, as with annual bonus payments, illustrates the relative
importance placed on performance-related remuneration.
The Group does not intend to contribute to the personal pension plans of
Directors in the forthcoming year.
Executive Directors' Contractual Terms
The service contract of the Executive Directors provides for a notice period
of six months.
Non-Executive Directors' Remuneration
Non-Executive Directors do not receive any benefits other than their fees and
travelling expenses for which they are reimbursed. The level of fees payable
to Non-Executive Directors is assessed using benchmarks from a group of
comparable organisations.
The Procedure for Determining Remuneration
The Remuneration Committee, comprising two Non-Executive Directors, is
responsible for setting the remuneration of the Executive Directors. Committee
members do not take part in discussions concerning their own remuneration. The
basic Non-Executive Director fee is set by the Chairman. The Chairman of the
Committee reports at the Board meeting following a Committee meeting.
It is the view of the Committee that Directors' remuneration awarded across
the Company for the year has been in accordance with the Company's stated
Remuneration Policy and, on behalf of the Committee I recommend that you
endorse this report. An analysis of Directors' emoluments is as follows:
Directors' Emoluments
Share based payment remuneration 2023 2022
Fees US$ Total Total
US$ US$ US$
Executive - salary
Denham Eke 57,345 - 57,345 40,956
Charles FitzRoy 169,105 576,243 745,348 544,983
Non-Executive - fees
Jim Mellon 47,333 - 47,333 30,000
Ian Stalker 142,000 432,182 574,182 1,020,494
Alex Borrelli 47,333 29,572 76,905 30,000
Euan Jenkins 47,333 29,572 76,905 40,000
Aggregate emoluments 510,449 1,067,569 * 1,578,018 1,706,433
* represents the share-based payment charge for share options granted..
Approval
The report was approved by the Board of directors and signed on behalf of the
Board.
Euan Jenkins
Chairman of Remuneration Committee
24 August 2023
Statement of Directors' responsibilities in respect of the Directors' report
and the consolidated financial statements
The Directors are responsible for preparing the Directors' Report and the
consolidated financial statements in accordance with applicable law.
The Directors are required to prepare financial statements for each financial
year. They have elected to prepare the financial statements in accordance
with International Financial Reporting Standards, and applicable law.
The Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Group and of its profit or loss for that period. In preparing each of the
consolidated financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable and prudent;
· state whether applicable International Financial Reporting
Standards have been followed, subject to any material departures disclosed and
explained in the financial statements;
· assess the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either
intend to liquidate the Group or the Company or to cease operations, or have
no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Group. They
are responsible for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general responsibility
for taking such steps as are reasonably open to them to safeguard the assets
of the Company and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BRADDA HEAD LITHIUM LIMITED
Opinion
We have audited the group financial statements of Bradda Head Lithium Limited
(the 'group') for the year ended 28 February 2023 which comprise the
Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Cash Flows and notes to the financial statements,
including significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs).
In our opinion, the group financial statements:
· give a true and fair view of the state of the group's affairs as
at 28 February 2023 and of the group's loss for the year then ended; and
· have been properly prepared in accordance with International
Financial Reporting Standards ("IFRS").
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK) and applicable law. Our responsibilities under those standards
are further described in the Auditor's responsibilities for the audit of the
financial statements section of our report. We are independent of the group in
accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the group's ability to continue to adopt the going concern basis
of accounting included:
- Reviewing the cash flow forecasts prepared by management for the
period up to 31 December 2024 for reasonableness and agreeing these to
corroborating evidence; and, by providing challenge on key assumptions and
inputs, including an assessment of the likelihood of raising additional funds
and performing sensitivity analysis;
- Assessing and evaluating the liquidity of existing assets as of the
year end;
- Reviewing and assessing the cash flows forecasts for plausible
scenarios;
- Reviewing post-year end Regulatory News Service (RNS) announcements
impacting going concern; and
- Assessing the adequacy of going concern disclosures within the
Annual Report and Consolidated Financial Statements.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group's ability to continue as
a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
We apply the concept of materiality in both planning and performing the audit
and evaluating the effect of misstatements. For the purposes of determining
whether the group financial statements are free from material misstatements,
we define materiality as the magnitude of misstatement that makes it probable
that the economic decisions of a reasonably knowledgeable person, relying on
the group financial statements, would be changed or influenced. We also
determine a level of performance materiality which we use to assess the extent
of testing needed to reduce to an appropriate level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality for
the group financial statements as a whole. When establishing our overall audit
strategy, we determined a magnitude of uncorrected misstatements that we
judged would be material for the group financial statements as a whole.
The materiality applied to the group financial statements was $183,000, based
on a 1% of gross assets, as we consider gross assets to be the most relevant
performance indicator for an exploration group having no trade.
A benchmark of 65% for performance materiality during our audit of the group
was applied, being $118,000, as we believe that this would provide sufficient
coverage of significant and residual risks.
We agreed with the audit committee that we would report to them all audit
differences identified during the course of our audit in excess of $9,000. We
also agreed to report any other audit misstatements below that threshold that
we believe warranted reporting on qualitative grounds.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas at
greatest risk of material misstatement, aspects subject to significant
management judgement as well as greatest complexity, risk and size.
In designing our audit, we determined materiality and assessed the risk of
material misstatement in the consolidated financial statements. In particular,
we looked at areas involving significant accounting estimates and judgements
by management, such as the recoverability of exploration and evaluation
assets.
We also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Capitalisation and assessment of impairment of deferred mining and exploration How our scope addressed this matter
costs and exploration permits and licenses (refer note 2 'critical accounting
estimates and judgements', note 7 'Deferred mining and exploration costs' and
note 8 'Exploration permits and licenses'.
The group has reported deferred mining and exploration costs and exploration Our audit work in this area included:
permits and licenses of $7.5m and $2.1m respectively. There is a risk that the
carrying values of these non-current assets are not fully recoverable and · Substantive testing of a sample of additions to assess their
should be impaired in line with IFRS 6. eligibility for capitalisation under IFRS 6 by corroborating to the original
source documentation;
This risk also relates to the appropriate capitalisation of exploration costs
in accordance with IFRS 6. · Confirming the group has good title to the permits and claims;
The group capitalises all expenditure incurred directly relating to · Ensuring, where applicable, that any specific requirements
exploratory activities as deferred mining or exploration costs once a licence contained within the permits and claims have been met, to include minimum
or permit has been obtained for exploratory activities. expenditure clauses;
The estimated recoverable amount of these assets requires judgement in · Making enquiries of management regarding future plans for each
determining whether future economic benefits will arise either from future project including obtaining cashflow projections;
exploitation or sale. The costs are capitalized to the extent that they do not
exceed the estimated economically recoverable amount from mineral interests. · Considering whether there are indications of impairment on a
project-by-project basis in accordance with IFRS 6 criteria;
The costs relate to projects which are at an early stage of exploration and · Reviewing management's impairment paper in respect of the
there is no certainty as to whether commercially viable quantities of mineral carrying value of assets and providing challenge, corroborating any key
resources will be discovered, whether the group will continue its exploration assumptions used; and
activities in each of its licence areas or whether the group will have
sufficient funding to undertake the required exploration activities. · Evaluating the independence and competence of the experts engaged
by management to calculate the mineral resource estimates.
Other information
The other information comprises the information included in the annual report,
other than the group financial statements and our auditor's report thereon.
The directors are responsible for the other information contained within the
annual report. Our opinion on the group financial statements does not cover
the other information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the
consolidated financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the group financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of group financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the group and the sector in which
it operates to identify laws and regulations that could reasonably be expected
to have a direct effect on the financial statements. We obtained our
understanding in this regard through discussions with management, as well as
the application of cumulative audit knowledge and experience of the sector.
· We determined the principal laws and regulations relevant to the
group in this regard to be those arising from AIM rules, CSE rules, the QCA
Corporate Governance Code, the operating terms set out in the mining licenses,
as well as local laws and regulations.
· We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by the group
with those laws and regulations. These procedures included, but were not
limited to:
o enquiries of management;
o review of minutes of board meetings;
o review of stock exchange announcements; and
o review of legal and professional fees to understand the nature of the
costs and the existence of any non-compliance with laws and regulations.
· We also identified the risks of material misstatement of the
group financial statements due to fraud at the group level. We considered, in
addition to the non-rebuttable presumption of a risk of fraud arising from
management override of controls, that the potential for management bias was
identified in relation to the impairment assessment of non-current exploration
and evaluation assets. We addressed this by challenging the assumptions and
judgements made by management when evaluating any indicators of impairment.
· We addressed the risk of fraud arising from management override
of controls by performing audit procedures which included, but were not
limited to: the testing of journals; reviewing accounting estimates for
evidence of bias; and evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with our engagement letter dated 5 June 2023. Our audit work has been
undertaken so that we might state to the Company's members those matters we
are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the Company and the Company's members as
a body, for our audit work, for this report, or for the opinions we have
formed.
David Thompson (Engagement Partner)
15 Westferry Circus
For and on behalf of PKF Littlejohn LLP
Canary Wharf
Registered Auditor London E14 4HD
24 August 2023
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF BRADDA HEAD LITHIUM LIMITED IN
RESPECT OF CANADIAN NATIONAL INSTRUMENT 52-107 (ACCEPTABLE ACCOUNTING
PRINCIPLES AND AUDITING STANDARDS) FOR THE YEAR ENDED 28 FEBRUARY 2023
Opinion
We have audited the group financial statements of Bradda Head Lithium Limited
(the "group") for the year ended 28 February 2023 which comprise the
Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Cash Flows and notes to the financial statements,
including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board ("IAASB").
In our opinion, the group financial statements:
• present fairly, in all material respects, the financial position
of the group as at 28 February 2023 and 28 February 2022 and its financial
performance and its cash flows for the years then ended; and
• the group financial statements have been properly prepared in
accordance with IFRSs as issued by the IAASB.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing
(ISAs) as issued by the International Auditing and Assurance Standards Board
(IAASB) and applicable law.
Our responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial statements section
of our report. We are independent of the group in accordance with the
International Ethics Standards Board for Accountants' Code of Ethics for
Professional Accountants (IESBA Code) together with the ethical requirements
that are relevant to our audit of the group financial statements in the UK,
and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the IESBA code. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions related to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the group's ability to continue to adopt the going concern basis
of accounting included a review of budgets and cash flow forecasts covering a
period of at least 12 months from the date of approval of the financial
statements, including challenge of management on the basis of preparation,
together with ascertaining the most recent cash position of the group, and
identifying subsequent events impacting the going concern position.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
year and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in
the audit; and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key Audit Matter How our scope addressed this matter
Capitalisation and assessment of impairment of deferred mining and exploration Our audit work in this area included:
costs and exploration permits and licenses (refer note 2 'critical accounting
estimates and judgements', note 7 'Deferred mining and exploration costs', and · Substantive testing of a sample of additions to assess their
note 8 'Exploration permits and licenses'. eligibility for capitalisation under IFRS 6 by corroborating to the original
source documentation;
The group has reported deferred mining and exploration costs and exploration
permits and licenses of $7.5m and $2.1m respectively. There is a risk that the · Confirming the group has good title to the permits and claims;
carrying values of these non-current assets are not fully recoverable and
should be impaired in line with IFRS 6. · Ensuring, where applicable, that any specific requirements
contained within the permits and claims have been met, to include minimum
This risk also relates to the appropriate capitalisation of exploration costs expenditure clauses;
in accordance with IFRS 6.
· Making enquiries of management regarding future plans for each
The group capitalises all expenditure incurred directly relating to project including obtaining cashflow projections;
exploratory activities as deferred mining or exploration costs once a licence
or permit has been obtained for exploratory activities. · Considering whether there are indications of impairment on a
project-by-project basis in accordance with IFRS 6 criteria;
The estimated recoverable amount of these assets requires judgement in
determining whether future economic benefits will arise either from future · Reviewing management's impairment paper in respect of the
exploitation or sale. The costs are capitalized to the extent that they do not carrying value of assets and providing challenge, corroborating any key
exceed the estimated economically recoverable amount from mineral interests. assumptions used; and
The costs relate to projects which are at an early stage of exploration and · Evaluating the independence and competence of the experts engaged
there is no certainty as to whether commercially viable quantities of mineral by management to calculate the mineral resource estimates.
resources will be discovered, whether the group will continue its exploration
activities in each of its licence areas or whether the group will have
sufficient funding to undertake the required exploration activities.
Other information
The other information comprises the information included in the annual report
and the management discussion and analysis, other than the financial
statements and our auditor's report thereon. The Directors are responsible for
the other information.
Our opinion on the group financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Responsibilities of directors
The Directors are responsible for the preparation and fair presentation of the
financial statements in accordance with IFRSs, and for such internal control
as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the Directors are responsible for
assessing the group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with International Standards on Auditing
(ISAs) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these
financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the
group's financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
control.
· Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
group's internal control.
· Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
Directors.
· Conclude on the appropriateness of the Directors' use of the
going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the group's ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw
attention in the auditor's report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of the
auditor's report. However, future events or conditions may cause the group to
cease to continue as a going concern.
· Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.
· Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within the group
to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for the audit opinion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the financial
statements of the current year and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The partner in charge of the audit resulting in this independent auditors'
report is David Thompson.
David Thompson (Engagement Partner)
for and on behalf of PKF Littlejohn LLP
Registered Auditor
24 August 2023
Consolidated Statement of Comprehensive Income
for the year ended 28 February 2023
Notes Year ended 28 February 2023 Year ended 28 February 2022
US$ US$
Expenses
General and administrative 4 (5,880,205) (3,459,272)
Exceptional cost 4 - (600,000)
Foreign exchange losses (1,408,001) (231,613)
Share based payments 15 (1,148,456) (1,433,749)
Impairment 8 (19,470) (230,230)
Other income - 20,000
──────── ────────
Operating loss (8,456,132) (5,934,864)
Other income
Gain on sale 5 - 2,383,003
Unrealised gain on investment 13 37,804 30,225
Warrant fair value re-measurement 15, 16 4,518,470 -
──────── ────────
Loss before finance costs (3,899,858) (3,521,636)
Finance income 12,270 -
Finance costs - (32,832)
──────── ────────
Loss before income tax (3,887,588) (3,554,468)
Income tax expense 6 - -
──────── ────────
Total loss and total comprehensive loss for the year (3,887,588) (3,554,468)
════════ ════════
Basic and diluted loss per share (cents) 19 (1.018) (2.855)
The notes on pages 35 to 59 form an integral part of these consolidated
financial statements.
Consolidated Statement of Financial Position
as at 28 February 2023
Notes 28 February 2023 28 February 2022
US$ US$
Non-Current assets
Deferred mining and exploration costs 7 7,461,851 4,183,744
Exploration permits and licences 8 2,112,415 1,549,076
Plant and equipment 12 79,602 54,170
Advances and deposits 10 104,192 88,594
Investment at fair value through profit or loss 13 91,761 53,957
─────── ───────
Total non-current assets 9,849,821 5,929,541
─────── ───────
Current assets
Cash and cash equivalents 7,746,519 7,327,303
Advances and deposits 10 385,624 -
Trade and other receivables 10 216,595 97,996
─────── ───────
Total current assets 8,348,738 7,425,299
─────── ───────
Total assets 18,198,559 13,354,840
═══════ ═══════
Equity
Share premium 14 30,616,373 23,434,385
Retained deficit (13,631,433) (11,177,220)
─────── ───────
Total equity 16,984,940 12,257,165
═══════ ═══════
Current liabilities
Trade and other payables 11 983,418 1,097,675
Warrant liability 16 230,201 -
─────── ───────
Total current liabilities 1,213,619 1,097,675
─────── ───────
Total equity and liabilities 18,198,559 13,354,840
═══════ ═══════
The notes on pages 35 to 59 form an integral part of these consolidated
financial statements.
These financial statements were approved by the Board of Directors and were
signed on their behalf by:
Denham
Eke
Director
24 August 2023
Consolidated Statement of Changes in Equity
for the year ended 28 February 2023
Share premium Retained deficit Total equity
US$ US$ US$
Balance at 1 March 2022 23,434,385 (11,177,220) 12,257,165
Total comprehensive loss for the year
Loss for the year - (3,887,588) (3,887,588)
────── ─────── ──────
Total comprehensive income for the year - (3,887,588) (3,887,588)
Transactions with owners of the Company
Issue of ordinary shares (note 14) 7,729,904 - 7,729,904
Capitalised share issue costs (547,916) - (547,916)
Equity settled share-based payments (note 15) - 1,433,375 1,433,375
────── ─────── ──────
Total transactions with owners of the Company 7,181,988 1,433,375 8,615,363
────── ─────── ──────
Balance at 28 February 2023 30,616,373 (13,631,433) 16,984,940
═════ ═════ ═════
The notes on pages 35 to 59 form an integral part of these consolidated
financial statements.
Consolidated Statement of Changes in Equity (continued)
for the year ended 28 February 2023
Share premium Retained deficit Foreign currency translation reserve Total equity
US$ US$ US$ US$
Balance at 1 March 2021 9,443,676 (9,056,687) 186 387,175
Total comprehensive loss for the year
Loss for the year - (3,554,468) - (3,554,468)
────── ─────── ─────── ──────
Total comprehensive income for the year - (3,554,468) - (3,554,468)
Transactions with owners of the Company
Issue of ordinary shares (note 14) 14,404,440 - - 14,404,440
Capitalised share issue costs (413,731) - - (413,731)
Equity settled share-based payments (note 15) - 1,433,749 - 1,433,749
Transfer to retained deficit - 186 (186) -
────── ─────── ─────── ──────
Total transactions with owners of the Company 13,990,709 1,433,935 (186) 15,424,458
────── ─────── ─────── ──────
Balance at 28 February 2022 23,434,385 (11,177,220) - 12,257,165
═════ ═════ ═════ ═════
The notes on pages 35 to 59 form an integral part of these consolidated
financial statements.
Consolidated Statement of Cash Flows
for the year ended 28 February 2023
Year ended 28 February 2023 Year ended 28 February 2022
Notes
US$ US$
Cash flows from operating activities
Loss before income tax (3,887,588) (3,554,468)
Adjusted for non-cash and non-operating items:
Depreciation 12 33,240 1,548
Unrealised loss/(profit) on investment 13 (37,804) (30,225)
Finance income (12,270) -
Non-cash interest expense - 32,832
Equity settled share based payments expense 15 1,148,456 1,433,749
Impairment of deferred mining and exploration costs and licences and permits
7, 8 19,470 230,230
Deferred mine exploration and licence and permit costs written off 7, 8 - 116,997
Warrant fair value re-measurement (4,518,470) -
Unrealised FX on cash balances - 203,562
─────── ───────
(7,254,966) (1,565,775)
Change in trade and other receivables (519,824) (106,913)
Change in trade and other payables (114,253) 1,068,414
─────── ───────
Net cash flows from operating activities (7,889,043) (604,274)
Cash flows from investing activities
Amounts paid for deferred mining and exploration costs (3,278,107) (2,501,853)
Amounts paid for licences and permits (582,809) (1,119,455)
Interest received 12,270 -
Plant and equipment purchased (58,672) (55,718)
─────── ───────
Net cash flows from investing activities (3,907,318) (3,677,026)
Cash flows from financing activities
Related party loans received - 60,000
Related party loans settled - (20,000)
Cash received from share issues 12,782,135 12,098,924
Share issue commissions paid (566,558) (413,731)
─────── ───────
Net cash flows from financing activities 12,215,577 11,725,193
─────── ───────
Increase in cash and cash equivalents 419,216 7,443,893
Cash and cash equivalents at beginning of year 7,327,303 86,972
Effect of movements in exchange rates - (203,562)
─────── ───────
Cash balances at end of year 7,746,519 7,327,303
═══════ ═══════
The notes on pages 35 to 59 form an integral part of these consolidated
financial statements.
Bradda Head Lithium Limited
Notes
forming part of the annual report consolidated financial statements for the
year ended 28 February 2023 (continued)
1 Reporting Entity
Bradda Head Lithium Limited (the "Company") is a company domiciled in the
British Virgin Islands. The address of the Company's registered office is
Craigmuir Chambers, Road Town, Tortola, British Virgin Islands. The Company
and its subsidiaries together are referred to as the "Group".
Bradda Head Lithium Limited is a lithium exploration Group focused on
developing its projects in the USA.
2 Basis of preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs).
(b) Basis of measurement
Functional and Presentation Currency
The consolidated financial statements of the Group are presented in US Dollars
(US$), which is also the functional currency of all entities in the Group. All
financial information presented in US Dollars has been rounded to the nearest
dollar.
Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management
to make judgments, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected. Significant estimates
and assumptions include those related to recoverability of mineral properties
and determination as to whether costs are expensed or deferred.
The Company is in the process of exploring its mineral properties and has not
yet determined whether the properties contain economically recoverable mineral
reserves. Including whether a commercially feasible means of extraction from
clay deposits is established. The recoverability of carrying amounts for
mineral properties is dependent upon the discovery of economically recoverable
mineral reserves, the ability of the Company to obtain the financing necessary
to complete exploration and development, and the success of future development
of the properties. It is also dependent on all claims being properly legally
established.
Judgement is required in applying the Company's accounting policy for
exploration and evaluation assets in determining whether it is likely that
costs incurred will be recovered through successful exploration and
development or sale of the asset under review when assessing impairment.
Furthermore, the assessment as to whether economically recoverable reserves
exist is itself an estimation process. Estimates and assumptions made may
change if new information becomes available. If information becomes available
suggesting that the recovery of expenditures is unlikely, the amount
capitalised is written off to profit and loss in the period when the new
information becomes available. In situations where indicators of impairment
are present for the Company's exploration and evaluation assets, estimates of
recoverable amount must be determined as the higher of the estimated value in
use or the estimated fair value less costs to sell. Refer to notes 3, 7 and 8.
Impact of Ukraine conflict on the financial statements
The Directors have considered the ongoing conflict in Ukraine, and its impact
on the Group's operations and information included in these financial
statements. The Group's operations are largely based in the USA, which
currently has seen no direct impact due to the conflict. The Directors are
aware of increases in global oil and gas prices, which could have an impact on
fuel and electricity prices in the USA, and knock-on price impacts on the
Group's USA based suppliers and contractors. Management is in regular
communication with suppliers and contractors, and no significant impact has
been seen relating to this.
The Group is in a net asset position of US$ 16,984,940 as at 28 February 2023
(28 February 2022: US$ 12,257,165). Given the early exploration stage of the
Group's projects, the Group is not yet generating any revenue and is incurring
expenditure in progressing its exploration work. Accordingly, the Group
incurred a loss attributable to equity shareholders of US$ 3,887,588 for the
year ended 28 February 2023 (28 February 2022: loss of US$ 3,554,468). As at
28 February 2023, the Group had cash balances of US$ 7,746,519 (2022: US$
7,327,303).
Further expenditure will be necessary in order for the Group to progress the
projects to a stage where their feasibility can be assessed and where they may
potentially be able to ultimately generate revenue, if economically viable.
Continued operations of the Group and further progressing its exploration and
evaluation activities is dependent on the Company's ability to obtain
additional financing and generate profitable operations in the future.
Following the successful completion of the IPO and raising of the target
funds, and an additional fundraise completed during April 2022, the Group
expects to have sufficient cash resources to be able to complete its existing
and ongoing exploration programmes, and meet any committed operational
expenditures as they fall due, for a period of at least 12 months from the
date of signing the financial statements. If necessary, adjustments can be
made to defer the Group's discretionary exploration expenditure, based on
results of its exploration activities and cash resource levels whilst
maintaining good title to its licenses and permits, with the level of
exploration activities and related expenditure being full controllable by the
Company.
Based on forecasts prepared by Directors, they believe it remains appropriate
to prepare the financial statements on a going concern basis, taking into
consideration the level of cash held by the Group. The Directors are confident
that further funds can be raised and have a reasonable expectation that the
Group will have adequate resources for its continuing existence and projected
activities for the foreseeable future, and for these reasons, continue to
adopt the going concern basis in preparing the financial statements for the
year ended 28 February 2023.
3 Significant accounting policies
The accounting policies set out below have been applied consistently to all
periods presented in these financial statements, and have been applied
consistently by Group entities for the period ended 28 February 2023.
Basis of consolidation
The consolidated financial statements for the year ended 28 February 2023
incorporate the financial information of the Company and entities controlled
by the Company (its "subsidiaries"). The results of subsidiaries are included
in the consolidated statement of comprehensive income from the date on which
control is obtained, and up to the date control is lost.
Business combination
Acquisitions of subsidiaries and businesses are accounted for using the
purchase method. The cost of acquisition is measured at the aggregate of the
fair values (at the date of exchange) of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of
the acquiree plus any costs directly attributable to the business combination.
The acquiree's identifiable assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3 are recognised at their
fair value at the acquisition date, except for non-current assets (or disposal
groups) that are classified as held for sale in accordance with IFRS 5
'Non-Current Assets Held for Sale and Discontinued Operations', which are
recognised and measured at fair value less costs to sell.
Non-controlling interest
Non-controlling interests in the net assets of consolidated subsidiaries are
identified separately from the Group's equity therein. The interests of
non-controlling shareholders may be initially measured at fair value or at the
non-controlling interests' proportionate share of the acquiree's identifiable
net assets which are generally at fair value. Subsequent to acquisition, the
carrying amount of non-controlling interests is adjusted for the
non-controlling interests' share of subsequent changes in equity. Total
comprehensive income is attributed to non-controlling interests even if this
results in the non-controlling interests having a deficit balance.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements. Unrealised gains arising from transactions
with equity accounted investees are eliminated against the investment to the
extent of the Group's interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
Foreign currency transactions
Transactions in foreign currencies are translated into functional currency
based on the exchange rates prevailing at the transaction dates. Foreign
currency denominated monetary assets and liabilities are translated into
functional currency at the exchange rate prevailing at the reporting date.
Gains or losses arising from foreign currency transactions are recognised in
the consolidated statement of comprehensive income.
Non-monetary assets and liabilities denominated in foreign currencies that are
measured at fair value are retranslated to the functional currency at the
exchange rate at the date that the fair value was determined or if measured at
historical cost are translated using the exchange rate at the date of
transaction.
Consolidation of foreign operations
The assets and liabilities of foreign operations are translated to US Dollars
at exchange rates at the reporting date while income and expenses are
translated at exchange rates at date of transactions although if not
practically available, the average rate for the period is used.
Deferred mine exploration costs
The Group deems that all expenditure incurred in the country of the project,
directly relating to exploratory activities, in addition to the acquisition
costs of an existing, granted exploration permit or license, is capitalisable
as deferred mine costs once a license or permit has been obtained for
exploratory activities. Pre-license costs are expensed in the period in which
they are incurred. License costs paid in connection with a right to explore in
an existing exploration area are capitalised.
Exploration expenditures relate to the initial search for mineral deposits
with economic potential as well as expenditures incurred for the purposes of
obtaining more information about existing mineral deposits. Exploration
expenditures typically comprise costs that are directly attributable to:
· researching and analysing existing exploration data;
· conducting geological studies;
· exploratory drilling and sampling for the purposes of obtaining
core samples and the related metallurgical assay of these cores; and
· drilling to determine the volume and grade of deposits in an area
known to contain mineral resources or for the purposes of converting mineral
resources into proven and probable reserves.
The assessment of probability is based on the following factors: results from
previous drill programmes; results from a geological study; results from a
mine scoping study confirming economic viability of the resource; and
preliminary estimates of the volume and grade of the deposit, and the net cash
flows expected to be generated from its development. The application of the
Group's accounting policy for exploration and evaluation expenditure requires
judgment in determining whether future economic benefits will arise either
from future exploitation, or sale, or where activities have not reached a
stage which permits a reasonable assessment of the existence of reserves.
Deferred mine exploration cost are capitalised to the extent that they do not
exceed the estimated economically recoverable amount from mineral interests.
The deferral policy requires management to make certain estimates and
assumptions about future events or circumstances, in particular whether an
economically viable extraction operation can be established.
Estimates and assumptions made may change if new information becomes
available. If after expenditure is capitalised, information becomes available
suggesting that the recovery of expenditure is unlikely, the amount
capitalised is written off in the consolidated statement of comprehensive
income in the period when the new information becomes available. Management
reviews the carrying values of its deferred mine exploration costs at least
annually and whenever events or changes in circumstances indicate that their
carrying values may exceed their estimated net recoverable amounts. An
impairment loss is recognised when the carrying value of those assets is not
recoverable and exceeds their fair value.
These costs are carried forward provided that at least one of the following
conditions is met:
· the period for which the entity has the right to explore in the
specific area has not expired during the period or will expire in the near
future, and is expected to be renewed;
· substantive expenditure on further exploration for and evaluation
of mineral resources in the specific area is either budgeted or planned;
· such costs are expected to be recouped in full through successful
development and exploration of the area of interest or alternatively, by its
sale; or
· exploration and evaluation activities in the area of interest
have not yet reached a stage which permits a reasonable assessment of the
existence or otherwise of economically recoverable reserves, and active and
significant operations in relation to the area are continuing, or planned for
the future.
Upon reaching commercial production, these capitalised costs will be
transferred from development properties to producing properties on the
Consolidated Statement of Financial Position and will be amortised using the
unit-of-production method over the estimated period of economically
recoverable reserves.
Exploration permits
Exploration permits acquired by way of an asset acquisition or business
combination are recognised if the asset is separable or arises from
contractual or legal rights. On acquisition of a mineral property in the
exploration stage, an estimate is prepared of the fair value attributable to
the exploration potential, including mineral resources, if any, of that
property. The fair value of the exploration permits is recorded as an
intangible asset (acquired exploration permits) as at the date of acquisition.
When an exploration stage property moves into development, any acquired
exploration intangible asset balance attributable to that property is
transferred to non-depreciable mining interests within property, plant and
equipment. Impairment testing and the reversal of impairments are conducted in
accordance with the accounting policy adopted for deferred mine exploration
costs.
Mineral property expenses
Mineral property expenses are costs incurred that do not qualify for
capitalisation and are therefore expensed to the profit or loss as incurred.
These include payments for costs incurred prior to obtaining licenses.
Impairment of tangible and intangible assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable
amount of the CGU to which the asset belongs. An intangible asset with an
indefinite useful life is tested for impairment at least annually and whenever
there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than
its carrying amount, the carrying amount of the asset (CGU) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately. Where an impairment loss subsequently reverses, the carrying
amount of the asset (CGU) is increased to the revised estimate of its
recoverable amount but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (CGU) in prior years. A reversal of an
impairment loss is recognised as income immediately.
Financial instruments
Measurement
Financial instruments are initially measured at fair value, which includes
transaction costs. Subsequent to initial recognition these instruments are
measured as set out below:
Trade and other receivables
Trade and other receivables are stated at amortised costs using the effective
interest method less impairment losses.
Cash and cash equivalents
Cash and cash equivalents are measured at amortised costs and are due on
demand.
Financial liabilities
Non-derivative financial liabilities are recognised at amortised costs using
the effective interest method.
Fair value of financial instruments
The Company determines fair values using other valuation techniques in
compliance with IFRS9: Financial Instruments, IFRS13: Fair Value Measurement,
and based on the International Private Equity and Venture Capital Valuation
Guidelines ("IPEV").
For financial instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying degrees of
judgement depending on liquidity, uncertainty of market factors, pricing
assumptions and other risks affecting the specific instrument.
The Company measures fair values using the following fair value hierarchy that
reflects the significance of the inputs used in making the measurements:
· Level 1: Inputs that are quoted market prices (unadjusted) in
active markets for identical instruments;
· Level 2: Inputs other than quoted prices included within Level 1
that are observable either directly (i.e. as prices) or indirectly (i.e.
derived from prices). This category includes instruments valued using; quoted
market prices in active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are considered less than
active; or other valuation techniques in which all significant inputs are
directly or indirectly observable from market data; or
· Level 3: Inputs that are unobservable. This category includes all
instruments for which the valuation technique includes inputs not based on
observable data and the unobservable inputs have a significant effect on the
instrument's valuation. This category includes instruments that are valued
based on quoted prices for similar instruments but for which significant
unobservable adjustments or assumptions are required to reflect differences
between the instruments.
Various valuation techniques may be applied in determining the fair value of
investments held as Level 3 in the fair value hierarchy. The objective of
valuation techniques is to arrive at a fair value measurement that reflects
the price that would be received to sell the asset or paid to transfer the
liability in an orderly transaction between market participants at the
measurement date.
Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is
recognised as it accrues in profit or loss, using the effective interest
method.
Finance costs comprise interest expense on borrowings, unwinding of the
discount on provisions, and losses on hedging instruments that are recognised
in profit or loss. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognised
in profit or loss using the effective interest method.
Share premium
Ordinary shares are classified as equity. The ordinary shares of the Company
have a nil par value. As such all proceeds received for the issue of shares
has been credited to share premium. Proceeds from the exercise of stock
options or conversion of share purchase warrants are recorded in share premium
at the amount received on exercise or conversion. Commissions paid to
underwriters or agents and other related share issue costs, such as legal,
accounting and printing, are charged to share premium.
Share based payments
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value is calculated using the Black-Scholes option pricing
model (where no fair value of the service or assets provided is evident). The
fair value determined at the grant date of the equity settled share-based
payment is expensed based on the vesting period and based on the Company's
estimate of the number of shares that will eventually vest.
On determining fair values, terms and conditions attaching to the instruments
are taken into account. Management is also required to make certain
assumptions and estimates regarding such items as the life of instruments,
volatility and forfeiture rates. Changes in the assumptions used to estimate
fair value could result in materially different results.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business, being exploration for lithium in the USA. Information
presented to the Board of Directors for the purpose of decision making is
based on this single segment.
Property and equipment
Property and equipment assets are stated at cost less accumulated depreciation
and accumulated impairment losses.
Depreciation of fixed assets commences when the asset is available for use.
The Company assesses at each reporting date whether tangible fixed assets are
impaired. Depreciation is charged to the profit and loss account on a
straight-line basis over the estimated useful lives of each part of an item of
tangible fixed assets. The estimated useful lives are as follows:
Owned vehicles - 3 years
Depreciation methods, useful lives and residual values are reviewed if there
is an indication of a significant change since last annual reporting date in
the pattern by which the Company expects to consume an asset's future economic
benefits.
Gain on sale of mining interest
The Group may monetise its future revenue streams by entering into royalty
agreements with investment companies for a given percentage royalty. This
transaction represents a disposal of a portion of the relevant mineral
interest which is subject to the royalty, which is represented by deferred
mine exploration costs and exploration permits and licences in the financial
statements.
Where the consideration in exchange for the sale of the interest is variable,
the IFRS 15 variable consideration guidance is applied and the consideration
is included in the transaction price only to the extent that it is highly
probable that a significant reversal of revenue will not occur ('the
constraint').
A gain/loss on the sale is recognised in profit or loss.
Royalty payments due, under the royalty agreements, are recognised as a
reduction of revenue as amounts become due and payable.
3 Significant accounting policies (continued)
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are not
yet effective for the current period ended, and have not been applied in
preparing these consolidated historical financial statements:
New/revised International Accounting Standards / International Financial Effective date
Reporting Standards ("IAS/IFRS")
(accounting periods commencing on or after)
Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction (Amendments to IAS 12)
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2)
Definition of Accounting Estimates (Amendments to IAS 8)
Classification of Liabilities as Current or Non-current (Amendments to IAS 1) 1 January 2024
The Directors do not expect the adoption of the standards and interpretations
to have a material impact on the Company's financial statements in the period
of initial application.
4 General and administrative and exceptional cost
The Group's general and administrative expenses include the following:
Year ended 28 February 2023 Year ended 28 February 2022
US$ US$
Auditors' fees 113,173 134,042
Directors and management fees and salaries 599,824 430,667
Legal and accounting 492,041 667,392
Contractor costs 2,933,852 1,131,515
Professional and marketing costs 1,012,171 802,454
Other administrative costs 729,144 293,202
────── ──────
Total 5,880,205 3,459,272
══════ ══════
5 Gain on sale
On 21 December 2021, the Company completed a royalty agreement with the
Lithium Royalty Corporation ("LRC"). Key terms of the royalty agreement are:
- LRC has been granted a 2% gross overriding royalty (GOR) over Bradda
Head's sedimentary lithium claims in Arizona (Wikieup project
and Basin project) leaving the Company's pegmatite and brine projects
unencumbered;
- LRC has paid to the Company upon closing the sum of US$2.5 million
for granting of the Royalty;
- LRC will pay to the Company an additional US$2.5 million upon the
Company publicly reporting a 1 million tonne lithium carbonate equivalent
(LCE) Mineral Resource with a minimum lithium grade of 800 parts per million
(ppm);
- LRC will pay to the Company an additional US$3 million upon the
Company publicly reporting a 2.5 million tonne LCE Mineral Resource with a
minimum lithium grade of 800ppm.
In addition, LRC has also subscribed for US$2 million of new ordinary shares
(along with US$0.5 million via a further subscription from a LRC director)
alongside the royalty closing. See note 14 for details.
Reconciliation of gain on sale
Year ended 28 February 2022
US$
Initial proceeds received from royalty sale 2,500,000
Less: Deferred mine exploration costs disposal (note 7) (85,383)
Less: Exploration permits and licences disposal (note 8) (31,614)
──────
2,383,003
══════
6 Taxation
Income tax
The British Virgin Islands under the International Business Companies Act 2004
imposes no corporate taxes or capital gains taxes.
Zenolith USA LLC, Gray Wash LLC and Verde Grande LLC are Delaware (USA)
limited liability companies that have elected to be taxed as standard
corporations. To date, these companies have been loss making and therefore no
corporation tax is applicable.
The maximum deferred tax asset that could be recognised at year end is
approximately US$ 683,943 (2022: US$ 478,138. The Group has not recognised any
asset as it is not reasonably known whether the Group will recover such
deferred tax assets.
7 Deferred mine exploration costs
The schedule below details the current projects of the Group and the related
exploration costs capitalised:
Total
US$
Cost and net book value
At 29 February 2021 1,767,274
──────────
Capitalised during the year 2,501,853
Disposal under royalty agreement * (85,383)
──────────
At 28 February 2022 4,183,744
──────────
Capitalised during the year 3,278,107
──────────
At 28 February 2023 7,461,851
──────────
Cost and net book value
At 28 February 2023 7,461,851
At 28 February 2022 4,183,744
═══════
* In terms of the LRC royalty agreement, the Company has sold a 2% royalty on
future sales from its lithium clay assets. The Company has effectively sold 2%
of its capitalised deferred mine exploration costs to date, with this
adjustment being recorded to reflect this. See note 5 and 14.
All the deferred mining and exploration expenditure has been incurred by
Zenolith USA LLC, a subsidiary of Bradda Head Limited. See notes 8 and 9.
Deferred mine exploration costs ("DMEC") represent intangible assets. Refer to
note 8 for details on exploration permits and licences held.
The recoverability of the carrying amounts of exploration and evaluation
assets is dependent on the successful development and commercial exploitation
or sale of the respective area of interest, as well as maintaining the assets
in good standing. The Group assessed the DMEC relating to areas for which
licenses and permits are held for impairment as at 28 February 2023.
The Board reviewed the projects held and concluded that no facts and
circumstances have been identified which suggest the recoverable amount of
these assets would not exceed the carrying amount and, as such, no impairment
was recognised.
8 Exploration permits and licences
The schedule below details the current projects of the Group and the related
exploration permit and licence costs capitalised:
Total
US$
Cost and net book value
At 28 February 2021 691,465
──────────
Capitalised during the year 1,119,455
Disposal under royalty agreement * (31,614)
Impairment (230,230)
──────────
At 28 February 2022 1,549,076
═══════
Capitalised during the year 582,809
Impairment (19,470)
──────────
At 28 February 2023 2,112,415
═══════
Cost and net book value
At 28 February 2023 2,112,415
At 28 February 2022 1,549,076
═══════
* In terms of the LRC royalty agreement, the Company has sold a 2% royalty on
future sales from its lithium clay assets. The Company has effectively sold 2%
of its capitalised deferred mine exploration costs to date, with this
adjustment being recorded to reflect this. See note 5 and 14.
The licences and permits are held through indirect subsidiaries of the
Company. See note 9.
The Group assessed the carrying amount of the licences and permits held for
impairment as at 28 February 2023. Upon review, it was identified that certain
projects showed signs of impairment as the relevant project licences and
permits were not renewed, and thus an impairment charge of US$ 19,470 was
recognised during the year ended 28 February 2023 (28 February 2022: US$
230,230).
The Board reviewed the rest of the projects held and concluded that no facts
and circumstances have been identified which suggest the recoverable amount of
these assets would not exceed the carrying amount and, as such, no impairment
was recognised.
USA
The USA exploration permits and licences are held by Zenolith (USA) LLC
("Zenolith"), Gray Wash LLC and Verde Grande LLC, subsidiaries of Bradda Head
(see note 9). Zenolith holds licences and permits over land in the states of
Nevada and Arizona, USA, which provide Zenolith with exclusive rights to
explore for lithium. Gray Wash and Verde Grande hold licences over land in the
state of Arizona.
9 Investment in subsidiary undertakings
As at 28 February 2023 and 28 February 2022, the Group had the following
subsidiaries:
Name of company Place of incorporation Ownership interest Principal activity
Bradda Head Limited* BVI 100% Holding company of entities below
Zenolith (USA) LLC USA 100% Holds USA lithium licences and permits
Verde Grande LLC USA 100% Holds USA lithium licences and permits
Gray Wash LLC USA 100% Holds USA lithium licences and permits
Minera Salmuera, S.A. de C.V. Mexico 100% In process of being liquidated
* Held directly by the Company. All other holdings are indirectly held
through Bradda Head Limited
The consolidated financial statements include the results of the subsidiaries
from the date that control is obtained to 28 February 2023, and up to the date
that control ceases.
10 Prepayments and advances and deposits
Non-current
28 February 2023 28 February 2022
US$ US$
Advances and deposits 104,192 88,594
══════ ══════
Current
28 February 2023 28 February 2022
US$ US$
Prepayments 216,595 97,996
Advances and deposits 385,624 -
══════ ══════
11 Trade and other payables
28 February 2023 28 February 2022
US$ US$
Accounts payable 904,944 1,019,175
Accrued expenses and other payables 78,474 78,500
────── ──────
983,418 1,097,675
══════ ══════
12 Plant and equipment
Motor vehicle Total
Cost US$ US$
As at 1 March 2022 55,718 55,718
Additions during the year 58,672 58,672
────── ──────
As at 28 February 2023 114,390 114,390
══════ ══════
Motor vehicle Total
Accumulated depreciation US$ US$
As at 1 March 2022 (1,548) (1,548)
Depreciation charge for the year (33,240) (33,240)
────── ──────
As at 28 February 2023 (34,788) (34,788)
══════ ══════
Carrying amount
As at 28 February 2023 79,602 79,602
As at 28 February 2022 54,170 54,170
══════ ══════
13 Investment at fair value through profit or loss
On 1 July 2011, the Company acquired, by way of private placement, a strategic
investment in Crazy Horse Resources Inc. (which changed its name to Rockwealth
Resources Inc ("RWR"), a copper and gold company traded on the TSX Venture
Exchange, which owns the Taysan Project, an advanced copper gold porphyry
deposit located 100 km south of Manila in the Philippines. On 6 December 2021,
RWR changed its name to Strathmore Plus Energy Corp. On 22 September 2022,
Strathmore Plus Energy Corp changed its name to Strathmore Plus Uranium Corp
and its TSX-V ticker to SUU.
As at 28 February 2023, the Company holds 249,688 shares in SUU (2022: 249,688
shares).
This investment is classified as financial asset at fair value through profit
or loss. For valuation purposes, it was valued using the closing bid price as
at the reporting period.
28 February 2023 28 February 2022
Total number of shares held 249,688 249,688
US$ US$
Market value of investment at closing bid price 91,760 53,957
Total cost (5,861,409) (5,861,409)
─────── ───────
Unrealised loss on investment (5,769,649) (5,807,452)
═══════ ═══════
In line with IFRS13: Fair Value Measurement, and based on the International
Private Equity and Venture Capital Valuation Guidelines ("IPEV"), the
investment held is considered to be level 2 in the fair value hierarchy, due
to there being a lack of an active market for the traded shares.
The unrealised loss on the investment in SUU charged to the Consolidated
Statement of Comprehensive Income and movement in investment fair value is as
follows:
US$
Balance at 28 February 2021 23,732
═══════
Change in fair value 30,225
───────
Balance at 28 February 2022 53,957
═══════
Change in fair value 37,804
───────
Balance at 28 February 2023 91,761
═══════
14 Share premium
Authorised
The Company is authorised to issue an unlimited number of nil par
value shares of a single class.
Shares Share capital Share premium
Issued ordinary shares of US$0.00 each US$ US$
At 28 February 2021 75,040,282 - 9,443,676
═══════ ═══════ ═══════
Shares issued for cash 158,499,941 - 12,098,924
Shares issued to settle loans 48,618,529 - 2,159,722
Shares issued in lieu of Directors fees 3,037,362 - 145,794
Shares issued to Zenith Minerals Limited 32,217,765 -
Share issue costs capitalised - - (413,731)
─────── ─────── ───────
At 28 February 2022 317,413,879 - 23,434,385
═══════ ═══════ ═══════
Shares issued for cash (note 16) 73,195,560 - 7,729,904
Share issue costs capitalised - - (547,916)
─────── ─────── ───────
At 28 February 2023 390,609,439 - 30,616,373
═══════ ═══════ ═══════
On 13 April 2022, the Company completed a fundraise, issuing 73,195,560
ordinary shares for gross proceeds of US$ 12.9 million. Refer to note 16.
15 Equity settled share based payments
The cost of equity settled transactions with certain Directors of the Company
and other participants ("Participants") is measured by reference to the fair
value at the date on which they are granted. The fair value is determined
based on the Black-Scholes option pricing model.
Options and warrants
The total number of share options and warrants in issue as at the period end
is set out below.
Recipient Grant Term Exercise Number at March 1, 2022 Number Issued Number Lapsed/ cancelled/expired Number Exercised 28 February 2023 Fair value
Date in years Price
Options US$
Directors and Participants April 2018 5 US$ 0.15668 1,606,304 - - - 1,606,304 24,028
Directors and Participants June 2021 5 US$ 0.048 18,000,000 - - - 18,000,000 1,110,556
Directors and Participants September 2021 5 £0.09 4,000,000 - (500,000) - 3,500,000 314,962
Directors and Participants April 2022 5 £0.18 - 9,200,000 (275,000) - 8,925,000 1,089,312
Directors and Participants December 2022 5 £0.105 - 1,000,000 - - 1,000,000 273,727
Warrants
Supplier warrants July 2021 5 £0.0550 1,818,182 - - - 1,818,182 124,482
Supplier warrants July 2021 3 £0.0825 2,254,545 - - - 2,254,545 8,275
Shareholder warrants December 2021 2 £0.0885 1,185,687 - - - 1,185,687 44,858
Supplier warrants April 2022 2 £0.1350 - 3,244,331 - - 3,244,331 284,918
─────── ─────── ─────── ─────── ─────── ───────
28,864,718 13,444,331 (775,000) - 41,534,049 3,275,118
═══════ ═══════ ═══════ ═══════ ═══════ ═══════
Recipient Grant Term Exercise 1 March 2021 Issued Lapsed Exercised 28 February 2022 Fair value
Date in years Price
US$
Directors and Participants April 2018 5 US$ 0.15668 1,606,304 - - - 1,606,304 24,028
Directors and Participants June 2021 5 US$ 0.048 - 18,000,000 - - 18,000,000 1,110,556
Directors and Participants September 2021 5 £0.09 - 4,000,000 - - 4,000,000 314,962
─────── ─────── ─────── ─────── ─────── ───────
1,606,304 22,000,000 - - 23,606,304 1,449,546
═══════ ═══════ ═══════ ═══════ ═══════ ═══════
The amount expensed in the income statement has been calculated by reference
to the fair value at the grant date of the equity instrument and the estimated
number of equity instruments to vest after the vesting period.
28 Febraury 2023 28 February 2022
US$ US$
US$ US$
Share based payments charge 1,148,456 1,433,749
═══════ ═══════
The inputs used in the measurement of the fair values at grant date of the
equity-settled share-based payment plans issued during the period are as
follows:
April 2022 options Award date and exercise price
Fair value at grant date £0.09308
Exercise price £0.180
Weight average expected volatility 81.90%
Weighted average expected life (years) 5
Risk-free interest rate (based on comparable companies) 1.52%
Terms of the issued options are as follows:
- 8,925,000 options have been granted and are subject to the three
independent vesting conditions for 1/3 of the entitlement, relating to the
successful fund raising in respect of the Group's operational budget,
commencement of a drilling program in respect of the San Domingo project and
resolution of certain Wickieup project title claims. All un-exercised options
expire after a period of 5 years from grant date. It is assumed that options
are exercised within 5 years from date of grant. The applied volatility is
based on historical volatility.
December 2022 options Award date and exercise price
Fair value at grant date £0.0486
Exercise price £0.105
Weight average expected volatility 71.50%
Weighted average expected life (years) 5
Risk-free interest rate (based on comparable companies) 4.24%
Terms of the issued options are as follows:
- 1,000,000 options have been granted that vest fully on grant date. All
un-exercised options expire after a period of 5 years from admission date. It
is assumed that options are exercised within 5 years from date of grant. The
applied volatility is based on historical volatility.
April 2022 supplier warrants Award date and exercise price
Fair value at grant date £0.06697
Exercise price £0.135
Weight average expected volatility 81.90%
Weighted average expected life (years) 2
Risk-free interest rate (based on comparable companies) 0.80%
Terms of the issued warrants are as follows:
- As part of the fundraise completed during April 2022, certain service
providers of the Company received warrants for services rendered. As a result,
3,244,331 warrants have been issued. All un-exercised warrants expire after a
period of 2 years from grant date. It is assumed that warrants are exercised
within 2 years from date of grant. The applied volatility is based on
historical volatility.
16 Warrants
The cost of equity warrants granted during the period are measured by
reference to the fair value at the date on which they are granted. The fair
value is determined based on the Black-Scholes option pricing model.
During year ended 28 February 2023, the Company awarded warrants to investors
who participated in the fundraise completed during April 2022.
The total number of warrants in issue as at the period end is set out below.
Recipient Grant Term Exercise Warrants at 1 March 2022 Number of Warrants Issued Number of Warrants Lapsed/ cancelled/expired Number of Warrants Exercised Number of Warrants at 28 February 2023 Fair value
Date in years Price
Warrants US$
Shareholder warrants April 2022 2 £0.2100 - 73,195,560 - - 73,195,560 230,201
─────── ─────── ─────── ─────── ─────── ───────
- 73,195,560 - - 73,195,560 230,201
═══════ ═══════ ═══════ ═══════ ═══════ ═══════
The fair value applied to the shareholder warrants has been classified as a
financial liability. At the date of grant the fair value of shareholder
warrants of US$ 4,748,671 was deducted from the gross proceeds raised against
share premium. At period end, the warrant liability has been re-measured to
fair value, with a corresponding entry to profit and loss of US$ 4,518,470 (28
February 2022: Nil) within Warrant Fair Value Re-Measurement.
Reconciliation of warrant liability fair value:
Fair value
US$
Balance at March 1, 2022 -
Warrants issued during the period included within share premium 4,748,671
Fair value re-measurement through profit or loss (4,518,470)
───────
Balance at 28 Febraury 2023 230,201
═══════
17 Financial instruments
Financial risk management
The Company has risk management policies that systematically review the risks
that could prevent the Company from achieving its objectives. These policies
are intended to manage risks identified in such a way that opportunities to
deliver the Company's objectives are achieved. The Company's risk management
takes place in the context of day-to-day operations and normal business
processes such as strategic planning and business planning. Management has
identified each risk and is responsible for coordinating and continuously
improving risk strategies, processes and measures in accordance with the
Company's established business objectives.
The Company's principal financial instruments consist of cash, receivables and
payables arising from its operations and activities. The main risks arising
from the Company's financial instruments and the policies for managing each of
these risks are summarised below.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in
meeting the obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset.
Liquidity risk is managed by the Company by means of cash flow planning to
ensure that future cash requirements are anticipated. All liabilities are due
within one month and all cash maintained in call accounts. To date the Company
has relied upon equity funding to finance operations. The carrying amount of
financial assets and liabilities reported in the consolidated statement of
financial position represents the maximum exposure to liquidity risk.
Management is confident that adequate resources are available to meet current
obligations. See note 2(b) in respect of the Board's going concern assessment,
and note 19 regarding exploration commitments.
The residual undiscounted contractual maturities of financial liabilities are
as follows:
28 February 2023
Less than 1 month 1-3 months 3 months to 1 year 1-5 years Over 5 years
US$ US$ US$ US$ US$
Trade and other payables 983,418 - - - -
28 February 2022
Less than 1 month 1-3 months 3 months to 1 year 1-5 years Over 5 years
US$ US$ US$ US$ US$
Trade and other payables 1,097,675 - - - -
Credit risk
Credit risk is the risk of loss associated with the counter-party's inability
to fulfil its payment obligations. The Company's credit risk is primarily
attributable to receivables and cash balances with the maximum exposure being
the reported balance in the statement of financial position. The Company holds
available cash with licensed banks which have strong history. The Company
considers the credit ratings of banks in which it holds funds in order to
reduce exposure to credit risk. All funds are available on demand.
The receivables are actively monitored to avoid significant concentration of
credit risk and the Directors consider there to be no significant
concentration of credit risk.
Interest rate exposure
Interest rate risk is the risk that the Company will sustain losses through
adverse movements in interest bearing assets or liabilities; however, it is
the Directors' opinion that the Company is not significantly exposed to
interest rate risk. Any interest-bearing liabilities carry fixed interest
rates and are not exposed to interest rate fluctuations.
Market price risk
Equity price risk arises from financial assets at fair value through profit or
loss due to uncertainties about future values of the instrument. The
investment at year end represents an interest held in the share capital of
Strathmore Plus Uranmium Corp, a company traded on the TSX Venture Exchange.
The performance of this investment is monitored and reviewed by management on
a regular basis. As at 28 February 2023, the fair value of equity security
exposed to price risk was US$ 91,760 (2023: US$ 53,957). A 5% increase or
decrease in the fair value of this listed investment, with all other variables
constant, would have increased/decreased consolidated profit or loss and
equity by US$ 4,588 (2022: US$ 2,698).
Foreign exchange risk
The Group was exposed to foreign currency risk on fluctuations related to
financial assets and liabilities that are denominated in Pounds (GBP). The
amounts exposed to foreign currency risk are as follows (in currency balance):
GBP
28 February 2023 Cash 4,374,471
═══════
GBP
28 February 2022 Cash 448,661
═══════
The impact of 10% strengthening of the GBP against the US Dollar to total
comprehensive income/loss is set-out below. A 10% weakening in these
currencies would have had the equal but opposite effect, on the basis that all
other variables remain constant.
28 February 2023 28 February 2022
US Dollars against: US$ US$
GBP 528,129 60,824
═════ ═════
There is no other impact on the Company's equity other than those already
affecting the consolidated statement of comprehensive income/(loss).
Political risks
The Company's operations are subject to laws and regulations governing
exploration activities. While the Company believes that it is in substantial
compliance with all material current laws and regulations affecting its
activities, future changes in laws and regulations could result in changes in
legal requirements or in the terms of existing agreements applicable to the
Company which could have a material adverse impact on the Company's current
operations or planned implementation of its strategy.
Accounting classifications and fair value
Financial instruments comprise cash and trade and other receivables
(classified as loans and receivables), accounts payable and accrued expenses
(classified as trade and other payables), investments and convertible loan
notes and working capital loan advances (classified as related party
balances). The carrying amounts of loans and receivables and trade and other
payables, reported in the consolidated statement of financial position,
approximate their fair values due to the short-term nature of these accounts.
The related party balances consist of convertible loan notes, which have fixed
interest rates and specified repayment terms and conditions. These have been
classified as non-current. The convertible loan notes accrue interest, with
the rate being charged considered to be similar to market related rates for
similar type instruments. Fair value is therefore considered to approximate
the carrying value of these instruments.
The working capital loan facility has a repayment term of one year, and has
therefore been classified as a current asset.
Financial liabilities not measured at fair value
Carrying amount, measured at amortised cost
28 February 2023 28 February 2022
US$ US$
Trade and other payables 983,418 1,097,675
═════ ═════
The fair value of investments is based on available market price data, taking
into account the liquidity of the listed securities.
Capital Management
The Company manages its capital to maximise the return to the shareholders
through the optimisation of equity. The capital structure of the Company at 28
February 2023 consists of equity attributable to equity holders of the
Company, comprising issued capital, reserves and retained earnings as
disclosed.
The Company manages its capital structure and makes adjustments to it, in
light of economic conditions and the strategy approved by shareholders. To
maintain or adjust the capital structure, the Company may adjust any dividend
payment to shareholders, return capital to shareholders or issue new shares
and release the Company's share premium account. No changes were made in the
objectives, policies or processes during the years ended 28 February 2022.
18 Related party transactions and balances
Key management personnel
The Directors of the Company received the following remuneration
during the year:
28 February 2023
US$ US$ US$
Fees and salary Share-based payment remuneration Total
Charles FitzRoy 169,105 576,243 745,348
Ian Stalker 142,000 432,182 574,182
Euan Jenkins 47,333 29,572 76,905
Denham Eke 57,345 - 57,345
Jim Mellon 47,333 - 47,333
Alex Borrelli 47,333 29,572 76,905
─────── ─────── ───────
510,449 1,067,569 * 1,578,018
═══════ ═══════ ═══════
* The fair value of the options issued has been determined in line with the
requirements of IFRS. Refer to note 3 and 15 for the basis of calculatuion.
28 February 2022
US$ US$ US$
Fees and salary Share-based payment remuneration Total
Charles FitzRoy 149,233 395,750 544,983
Ian Stalker 120,000 900,494 1,020,494
Euan Jenkins 40,000 - 40,000
Denham Eke 40,956 - 40,956
Jim Mellon 30,000 - 30,000
Alex Borrelli 30,000 - 30,000
─────── ─────── ───────
410,189 1,296,244 * 1,706,433
═══════ ═══════ ═══════
* The fair value of the options issued has been determined in line with the
requirements of IFRS. Refer to note 3 and 15 for the basis of calculatuion.
The Directors hold the following number of shares in the Company as at 28
February 2023:
28 February 2023 28 February 2022
% of issued Options held % of issued Options held
Number share capital Number share capital
James Mellon 65,097,004 16.67% - 64,145,176 20.21% -
Denham Eke 124,307 0.03% - 124,307 0.04% -
Ian Stalker 3,870,140 0.99% 17,250,000 3,616,267 1.14% 14,250,000
Charles FitzRoy 13,265 0.00% 10,000,000 11,091 0.003% 6,000,000
Euan Jenkins 2,198,934 0.56% 500,000 2,055,454 0.65% -
Alex Borrelli 343,329 0.09% 500,000 315,649 0.10% -
────── ────── ────── ────── ────── ──────
71,646,979 18.34% 28,250,000 70,267,944 22.143% 20,250,000
══════ ══════ ══════ ══════ ══════ ══════
Burnbrae Limited
The Company and its subsidiary, Bradda Head Limited, entered into service
agreements with Burnbrae Limited ("Burnbrae") for the provision of
administrative and general office services. Denham Eke and James Mellon are
Directors of both Burnbrae Limited and the Company. James Mellon indirectly
owns Burnbrae Limited. A monthly fee of £3,500 is charged by Burnbrae, for
the provision of the services. The service agreement was terminated effective
from 31 May 2021.
During the year ended 28 February 2023, the Group incurred costs of US$ Nil
(2022: US$ 47,065) under these agreements, of which US$ Nil was outstanding as
at the year-end (2022: US$ Nil).
Galloway Limited
On 16 August 2019, the Company entered into a Convertible Loan Agreement
("Loan") with Galloway Limited ("Galloway"), to the value of US$ 350,000. The
Loan has a repayment date of 31 December 2019, and carries interest at a rate
of 10% per annum. On 13 December 2019, the repayment date was extended to 31
December 2024. The Loan shall automatically be converted into shares in the
capital of the Company on Admission at the Issue Price.
On 09 December 2019, the Company entered into a Convertible Loan Note ("CLN")
agreement with Galloway, to the value of £650,000. The CLN has a maturity
date of 30 April 2020, and carries interest at a rate of 5% per annum. On 1
October 2020, the repayment date was extended to 31 December 2024. The CLN is
to be converted into ordinary shares of the Company on the occurrence of
either (i) a sale of the entire issued share capital of the Company (ii) a
listing of the Company's shares or (iii) upon completion of a fundraising of
$1,000,000 or more in a single fundraise round. The number of shares to be
issued upon conversion is determined as follows:
· On a fund raising a price per share being a 20% discount to the
price per share paid by the investors on the Fund Raising; or
· On a share sale, a price per Share being a 20% discount to the
price per share paid on the share sale; or
· On a listing, including by way of reverse takeover, a 20%
discount to the price at which the shares are proposed to be admitted to
listing (or the implied price per share paid by a buyer in the case of a
reverse takeover); or
· In the event there is no eligible fund raising, or share sale or
no listing by the maturity date the default price, being US$ 0.05 per share.
On 17 February 2021, the Company entered into a Term Loan Facility ("Term
Loan") with Galloway, to the value of US$ 500,000. The loan is interest-free,
and repayable on the earlier of 17 February 2022 or upon the completion of a
fundraise by the Company.
On 9 April 2021, Galloway advanced US$ 60,000 to the Company for working
capital purposes.
On 21 May 2021, the Company completed a private funding round. Following this
and in line with the CLN and Term Loan agreements, balances due to Galloway
under these agreements were settled, in full, by the issuance of 41,033,776
ordinary shares.
On 19 July 2021, the Company completed a successful listing on London AIM.
Following this and in line with the Loan agreement, all balances due to
Galloway were settled, in full, by the issuance of 7,584,753 ordinary shares.
Edgewater Associates Limited ("Edgewater")
During the year, Directors and Officers insurance was obtained through
Edgewater, which is a 100% subsidiary of Manx Financial Group ("MFG"). James
Mellon and Denham Eke are Directors of both the Company and MFG.
The premium payable on the policy was US$ 49,318 (2022: US$ 45,139), of which
US$ 14,497 was prepaid as at the period end (2022: US$ 13,646).
19 Basic and diluted loss per share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year.
The calculation of diluted earnings per share is based on the basic earnings
per share, adjusted to allow for the issue of shares, on the assumed
conversion of all dilutive share options.
An adjustment for the dilutive effect of share options in the current year has
not been reflected in the calculation of the diluted loss per share, as the
effect would have been anti-dilutive, due the Company recognising a loss for
the year.
28 February 2023 28 February 2022
US$ US$
Loss for the year (3,887,588) (3,554,468)
No. No.
Weighted average number of ordinary shares in issue 381,785,865 124,499,956
Dilutive element of share options if exercised (note 15) 33,031,304 23,606,304
Diluted number of ordinary shares 414,817,169 148,106,260
Basic earnings per share (cents) (1.018) (2.855)
Diluted earnings per share (cents) (1.018) (2.855)
The earnings applied are the same for both basic and diluted earnings
calculations per share as there are no dilutive effects to be applied.
20 Exploration commitments
The Group has certain obligations to expend minimum amounts on exploration
works on mining tenements in order to retain an interest in them, which would
be approximately US$ 432,029 during the next 12 months. This includes annual
fees in respect of licence renewals. These obligations may be varied from time
to time, subject to approval and are expected to be filled in the normal
course of exploration and development activities of the Company.
21 Subsequent events
No subsequent events have occurred that require disclosure.
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