REG - Bradda Head Lithium - MD&A for the three and 12 months ended 29 Feb 2024

Bradda Head LithiumAnnouncement

27/06/2024 07:00

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RNS Number : 0355U  Bradda Head Lithium Ltd  27 June 2024

 

 

Bradda Head Lithium Limited

 

Management discussion and analysis for the three and 12-month periods ended
February 29, 2024

This management's discussion and analysis ("MD&A") reports on the
operating results and financial condition of the Company for the three and 12
months ended February 29, 2024, and is prepared as of June 26, 2024. The
MD&A should be read in conjunction with Bradda Head Lithium Limited's (the
"Company" or "Bradda Head") audited consolidated financial statements for the
year ended February 29, 2024, and the notes thereto which were prepared in
accordance with International Financial Reporting Standards ("IFRS").

 

All dollar amounts referred to in this MD&A are expressed in United States
dollars except where indicated otherwise.

 

Overview

Bradda Head Lithium Limited was incorporated on October 28, 2009, in the
British Virgin Islands under the British Virgin Islands Companies Act with
registered number 1553975 with the name Copper Development Corporation. On
October 5, 2015, the Company changed its name from Copper Development
Corporation to Life Science Developments Limited, and on April 18, 2018, the
Company changed its name to Bradda Head Holdings Limited.  On September 15,
2021, the Company changed its name to Bradda Head Lithium Limited.

 

The Company has one business segment, being mineral exploration. The Company
is focused on appraising and developing lithium mining projects within North
America and currently has interests in a variety of projects in the United
States.

 

Corporate and Exploration Highlights

 

Exploration Highlights

 

Set forth in this section is a description of the Company's material mineral
projects. All scientific and technical data contained in this MD&A has
been reviewed and approved by Joey Wilkins, B.Sc., P.Geo., who is Chief
Operating Officer at Bradda Head and a Qualified Person as defined by National
Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI
43-101").

 

Arizona Sedimentary Hosted Lithium Projects

 

Basin Project

 

No significant work has been undertaken on this project during the 3-month
period, aside from drill hole permitting for an upcoming core drilling program
at Basin North.

 

During March 2024, the Company commenced drilling at its Basin North project.

 

Wikieup Project

 

On February 28, 2024, the Company announced the completion of the land
exchange over the unpatented lode claims at the Wikieup clay project in
Western Arizona. Bradda Head retained 66 new claims equating to 1,302 acres
(5.27 km(2)), which the Company staked in early 2019, and held in its
subsidiary Zenolith (USA) LLC. In turn, Bradda Head transferred 55 unpatented
lode claims to Arizona Lithium's subsidiary, Big Sandy Inc., to the amount of
roughly 1,136 acres (4.60 km(2)), per the terms of this settlement.

 

Arizona Pegmatite District

San Domingo Project

 

During December 2023, the Company completed its second phase 18,950 feet
(5,776m) drilling programme at San Domingo. Final assay results were received
during January 2024, with the programme delivering an abundance of encouraging
results.

 

Summary of results:

·      High grade lithium mineralisation found at intervals such
as 4.14m at 2.07% Li(2)O at a depth of 54.56m in drill hole SD-DH23-104
and 5.40m of 1.70% Li(2)O at a depth of 31.39m in 093, both at the Morning
Star pegmatites (all holes are abbreviated from SD-DH23-)

 

·      Again, favoured coarse-grained spodumene crystals were observed
as the dominant lithium mineral with minor amounts of lepidolite and
montebrasite

 

·      Large, cohesive, and mostly vertical pegmatite bodies were
verified at Morning Star, which were strongly zoned with massive quartz,
fine-grained albite, and minor schorl as well as massive zones of potassium
feldspar

 

·      Pathfinder elements of tin ("Sn"), tantalum ("Ta(2)O(5)"), and
beryllium ("BeO") are found to be highly anomalous in the drilling, such as
6.76m at 145ppm Sn in hole 100, 872ppm Ta(2)O(5) with 0.23% BeO in drill
hole SD-DH23-088 over 2.90m

 

·      Morning Star drill hole 088 contains high-grade Ta(2)O(5) with
an interval of 872ppm Ta(2)O(5) ppm and anomalous Sn over 2.90m at a depth of
39.26m and 477 Ta(2)O(5) ppm over 5.34m at 75.74m depth

 

·      Lithium, plus the bonus of ore grade Ta(2)O(5)with discrete
anomalous Sn and BeO in the Morning Star drill holes in a shallow environment,
bodes well for the potential of open cut mining.

 

Results from the Morning Star and South Morning Star targets are highlighted
by the following intervals:

·      4.14m at 2.07% Li(2)O in drill hole 104 at Morning Star

·      5.40m of 1.70% Li(2)O followed by 4.18m of 1.63% Li(2)O (within
14.63m at 0.54% Li(2)O) plus 0.67m of 1.21% BeO, all above 55.93m depth in
drill hole 093 at Morning Star

·      5.55m of 1.03% Li(2)O in hole 099 at South Morning Star

·      6.67m at 0.82% Li(2)O in drill hole 100 at South Morning Star

·      2.01m at 1.84% Li(2)O in drill hole 091 at Morning Star

·      2.80m at 0.65% Li(2)O in drill hole 090 at Morning Star

·      Morning Star surface samples of 4.35% and 3.67% Li(2)O above
holes 093 and 104 highlight open pit potential

·   Wide-open potential >100m depth, virtually unexplored by this
second program and presents impressive opportunities district wide

 

Total drilled metres at San Domingo, from both drill programmes completed to
date, is 13,076 meters, covering less than 1% of the total property held.

 

Nevada Lithium Brine Projects

 

Wilson Project

 

No significant work has been undertaken on this project during the 3-month
period.

 

Eureka Project

 

No significant work has been undertaken on this project during the 3-month
period.

 

Corporate Highlights

With effect from January 1, 2024, the Company delisted its shares from trading
on the US OTCQB Market, due to share trading liquidity expectations not having
been met and cost saving in this current market environment.

The Company's shares continue to trade on the London AIM Market and on the
Canadian TSX Venture Exchange.

Issuance of Stock Options

 

On April 6, 2023, the Company announced that is awarded a total of 4,800,000
options to acquire ordinary shares (the "Options") at an exercise price of
£0.06 (or C$0.10 to the Company's directors and operational team.

On February 14, 2024, the Company announced that is awarded a total of
2,850,000 options to acquire ordinary shares (the "Options") at an exercise
price of £0.02 (or C$0.034) to the Company's directors and operational team.

The options issued are subject to the following conditions:

-       Options vest immediately;

-       The options have no performance or non-performance conditions
attached to them;

-       Are exercisable for a period of five years from date of issue;
and

-       The options issued to each participant should lapse upon any
participant no longer being an employee or connected person remunerated by the
Company.

Directors included in the awards are detailed in the table below:

 Director     Total options held at February 28, 2023  Total options awarded during the 12-month period ended February 29, 2024  Total options held at February 29, 2024
 Ian Stalker  17,250,000                               2,000,000                                                                 19,250,000

 

Selected Financial Information

The following table sets forth selected financial information with respect to
the Company for the years ended February 29, 2024, and February 28, 2023. The
selected financial information has been derived from the audited financial
statements for the periods indicated.  The following should be read in
conjunction with the said financial statements and related notes that are
available on the Company's website - www.braddaheadltd.com.

 

The annual financial statements and interim financial statements are presented
in US dollars and are prepared in accordance with IFRS, See "Summary Financial
Data" and "Currency Information".

 

                             Year ended February 29, 2024  Year ended February 28, 2023
                             (Audited)                     (Audited)

                             (US$)                         (US$)
 Statement of Operations:
 Total operating expenses    (4,009,472)                   (3,899,858)
 Net finance income          135,487                       12,270
 Gain on sale *              2,370,127                     -
 Net loss                    (1,503,858)                   (3,887,588)
 Loss per share (cents)      (0.385)                       (1.018)
 Balance Sheet Data:
 Cash & cash equivalent      664,527                       7,746,519
 Cash deposits               1,000,135                     -
 Total assets                15,848,063                    18,198,559
 Total liabilities           (186,359)                     (1,213,619)
 Accumulated deficit         (14,954,669)                  (13,631,433)
 Total Shareholder's Equity  15,661,704                    16,984,940

 

* 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.

 

During the year, the Company hit the next milestone of a 1 million tonne
lithium carbonate equivalent (LCE) Mineral Resource with a minimum lithium
grade of 800 parts per million (ppm), thereby triggering the next royalty
payment from LRC. This has been recognised as a gain on sale in the
consolidated statement of comprehensive income.

 

      Reconciliation of gain on sale

                                                  12-Month Period Ended February 29, 2024

                                                  (Audited)

                                                  US$
 Initial proceeds received from royalty receipt   2,500,000
 Less: Deferred mine exploration costs disposal   (105,273)
 Less: Exploration permits and licences disposal  (24,600)
                                                  ──────
                                                  2,370,127
                                                  ══════

MANAGEMENT DISCUSSION AND ANALYSIS: QUARTER ENDED FEBRUARY 29, 2024

Introduction
This interim Management Discussion and Analysis (the "interim MD&A") should be read in conjunction with the audited financial statements of the Company for the year ended February 29, 2024, and related notes. This MD&A is made as of June 26, 2024.
Results of Operations for the 12-months ended February 29, 2024

The Company's net loss after tax for the 12-month period to February 29, 2024
was US$ 1,503,858, compared to US$ 3,887,588 for the comparative period ended
February 29, 2023.  The major expenses for the three and 12-month periods
ended February 29, 2024 were operational expenses incurred on the Company's
exploration projects which have not been capitalised, and are broken down in
the respective projects as follows:

 

 Project              Expensed Exploration Expenditure
                      12-Month Period Ended February 29, 2024  Three-Month Period Ended February 29, 2024

                      (Audited)                                (Unaudited)

                      US$                                      US$
 Basin Project        817,044                                  69,475
 San Domingo Project  722,275                                  35,807
 Wikieup Project      17,143                                   -
 Other projects       10,341                                   880
 TOTAL                1,566,803                                106,162

 

During the 12-month period to February 29, 2024, the Company incurred and
capitalised exploration expenditures of US$ 4,232,891, compared to US$
3,841,146 for the comparative 12-month period to February 28, 2023.

 

The capitalied exploration costs for the three and 12-month periods ended
February 29, 2024 have been allocated amongst the Company's exploration
projects in approximately the following amounts:

 

 Project                         Capitalisied exploration costs                                                       Capitalised expenditires for licences and permits
                                 12-Month Period Ended February 29, 2024  Three-Month Period Ended February 29, 2024  12-Month Period Ended February 29, 2024  Three-Month Period Ended February 29, 2024

                                 (Audited)                                (Unaudited)                                 (Audited)                                (Unaudited)

                                 US$                                      US$                                         US$                                      US$
 Basin Project                   1,078,265                                27,465                                      69,927                                   8,970
 San Domingo Project             2,590,580                                510,873                                     372,153                                  -
 Wikieup Project                 -                                        -                                           101,640                                  -
 Other Projects                  -                                        -                                           150,200                                  -
 Less: royalty receipt disposal  (105,274)                                -                                           (24,600)                                 -
 TOTAL                           3,563,571                                538,338                                     669,320                                  8,970

 

During the 12-month period to February 29, 2024, as part of receiving the next
tranche of royalty funds from LRC, the Company expensed US$ 105,273 and US$
24,600 of capitalied exploration costs and capitalised expenditures for
licences and permits respectively.

 

The exploration expenditures have been primarily costs associated with
drilling, assaying, resource and mining consultants, metallurgical testing,
environmental studies, project team fees, acquisition of new leases, and
annual renewal of existing leases.

 

General and administrative expenses for the 12-month period to February 29,
2024 totalled US$ 4,208,142, compared to US$ 5,880,205 for the comparative
12-month period to February 28, 2023. General and administrative expenses are
broken down as follows:

 

 Project                                     General and administrative expenditures
                                             12-Month Period Ended February 29, 2024  Three-Month Period Ended February 29, 2024

                                             (Audited)                                (Unaudited)

                                             US$                                      US$
 Auditors' fees                              55,640                                   19,600
 Directors and management fees and salaries  569,599                                  132,517
 Legal and accounting                        335,677                                  73,690
 Contractor costs                            1,566,803                                106,162
 Professional and marketing costs            690,897                                  161,509
 Other administrative costs                  989,526                                  234,841
 TOTAL                                       4,208,142                                728,319

 

During the 12-month period to February 29, 2024, there have been no changes in
financial performance or other elements that relate to non-core buisness
activities and operations.

 

Cash flows

During the 12-month period ended February 29, 2024, the Company had net cash
outflows of US$ 7,081,992, compared to inflows of US$ 419,216 during the
comparative 12-month period to February 28, 2023. The cashflows for the two
periods are shown below:

 

 

                                           12-Month Period Ended February 29, 2024  12-Month Period Ended February 28, 2023

                                           (Audited)                                (Unaudited)

                                           US$                                      US$
 Statement of cashflows
 Cash flows from operating activities      (2,317,456)                              (7,889,043)
 Cash flows from investing activities      (3,764,401)                              (3,907,318)
 Cash flows from financing activities      (1,000,135)                              12,215,577
 Net cash flows during the period          (7,081,992)                              419,216
 Cash balances at beginning of the period  7,746,519                                7,327,303
 Cash balances at the end of the period    664,527                                  7,746,519

 

Liquidity and Capital Resources

As at February 29, 2024, the Company had cash and cash equivalents, including
cash deposits, of US$ 1,664,662, and a working capital surplus of US$
1,601,571. As of February 28, 2023, the Company had cash and cash equivalents
of US$ 7,746,519, and a working capital surplus of US$ 7,135,119.

 

Outstanding Share Data

As of February 29, 2024, the following securities were outstanding:

 

 Shares                            390,609,439
 Warrants                          81,698,305
 Stock options                     37,871,052
 Fully diluted shares outstanding  510,178,796

 

The Company's objectives when managing capital are to safeguard its ability to
continue as a going concern, so that it can continue to provide returns for
shareholders, benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.

The capital structure of the Company includes cash and cash equivalents,
equity attributable to equity holders comprised of contributed equity,
reserves and accumulated losses.  In order to maintain or adjust the capital
structure, the Company may issue new shares, sell assets to reduce debt or
adjust the level of activities undertaken by the Company.

 

The Company monitors capital based on cash flow requirements for operational,
exploration and evaluation expenditures.  The Company has no debt or other
borrowings as at the date of this Application. The Company will continue to
use capital market issuances to satisfy anticipated funding requirements.

 

The availability of equity capital, and the price at which additional equity
could be issued, is dependent upon the success of the Company's exploration
activities, and upon the state of the capital markets generally.  Additional
financing may not be available on terms favourable to the Company or at all.
If the Company does not receive future financing, it may not be possible for
the Company to advance the exploration and development of its mineral
exploration properties.  If the Company is not able to fund these minimum
expenditures, it may not be able to maintain part or all of its mineral
exploration property interests.  See "Risk Factors".

 

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

 

Transactions with Related Parties

The Company has conducted transactions with officers, directors and persons or
companies related to directors or officers and paid or accrued amounts as
follows:

 

Edgewater Associates Limited ("Edgewater")

 

During the 12 month period ended February 29, 2024,, 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$ 43,061 (2023: US$ 49,318), of which
US$ 11,560 was prepaid as at the period end (2023: US$ 14,497).

 

Critical Accounting Estimates

The preparation of financial statements in conformity with IFRS requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period.  Such estimates and assumptions affect
the carrying value of assets, and impact decisions as to when exploration and
development costs should be capitalized or expensed.

As at February 29, 2024, the Company had incurred capitalised exploration
expenditures, including capitalised licence and permit costs, of US$
13,807,158. Changes in management's judgment as to the prospective nature,
assessment of the existence or otherwise of economically recoverable reserves,
technical feasibility and/or commercial viability of the relevant tenements
and the Company's intentions with respect to the relevant tenements, could
affect the assessment of the recoverable amount.

 

The Company regularly reviews its estimates and assumptions: however, actual
results could differ from these estimates and these differences could be
material.

 

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", "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 SEDARplus. 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.

 

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