Is anyone surprised that the completed fundraising from Bradda Head Holdings Ltd was oversubscribed?
The company initially set out to raise GBP4mln, but when it realised that at least GBP9mln was on offer from enthusiastic investors, upped its offering to GBP6.2mln.
Three factors underpin this high demand.
The first is the quality of the team behind Bradda Head. Chief executive Charlie FitzRoy was a significant figure inside China Molybdenum, and recently participated in deals worth around US$1.1bn. And chairman Ian Stalker has had several significant mining successes in the past, some of them in conjunction with fellow non-exec Jim Mellon.
It’s a formidable team, capable in itself of bringing significant funding to the table if required, and capable in turn of attracting significant funding.
The second reason for the over-subscription is the current supply-demand dynamic in the lithium market. Overall lithium demand is set to grow exponentially in the coming years, as the world’s vehicle fleets increasingly transition towards electricity and batteries constructed to a large degree around lithium.
The third reason for the enthusiastic reception is the quality of the company’s suite of assets.
These are spread across two US states, Nevada and Arizona, and come in three types: sedimentary, pegmatite and brines. All are proximate to relevant infrastructure such as road, rail and electricity, and all look highly prospective.
What’s more, work is already underway on the ground. Senior management from Bradda Head based out in the US have already initiated a drill programme at the company’s Burro Creek East project in Arizona. This programme will twin five reverse circulation holes that were sunk in 2018, as well as drilling five new holes to test for potential extensions to the existing 42.6mln tonne resource.
That in turn means that newsflow is likely to be coming in thick and fast almost from the get-go, another factor that always plays well with potential investors.
Burro Creek East already has plenty going for it, and it’s perhaps not surprising that this will be the company’s initial focus. As it stands, the rings in at 818 parts per million lithium to give a total of 185,000 tonnes of lithium carbonate equivalent, with an additional 1.4mln tonnes of potassium.
But the key point is that there’s also additional exploration potential for extensions that could add anything between a further 50,000 and 300,000 tonnes of lithium carbonate equivalent.
Across the wider sedimentary portfolio, the upside is even greater.
There’s the Burro Creek East Extension project and Burro Creek West, which is currently the subject of permitting, as well as Wikieup, a project adjacent to discoveries on claims held by Hawkstone Mining.
“On the clays, we’ve only drilled about 4% of the surface area,” says chief executive Charlie FitzRoy, and it’s clear he’s hoping for significant gains to the portfolio in the months and years ahead, particularly from Wikieup, where a 30 hole programme will get underway in due course.
Drilling is also lined up for the Wilsons Flats brine project, but it’s the pegmatites at San Domingo in Arizona, which really look like whetting investors’ appetites.
San Domingo looks to have certain similarities to well-known Australian deposits and is, says FitzRoy, “very exciting.”
It’s here, he reckons, that the company offers its biggest upside.
“The area at San Domingo is nine kilometres long,” he says. “If we find a pegmatite at depth it could be huge.”
All told, Bradda Head is covering an awful lot of bases here. It’s not often you see three types of lithium deposit inside the same company, but it’s certainly one way of offsetting exploration and execution risk. More to the point, taken together it amounts to a sizeable portfolio, and could end up making a serious contribution to domestic lithium production inside the USA.
As it stands, there’s only one operating lithium mine in the whole of the USA, Albemarle’s Silver Peak mine. Silver Peak produces around 5,000 tonnes of lithium carbonate equivalent per year, which is all very well – until you consider that some estimates reckon that the requirement for domestically produced lithium in the US could rise to as high as 210,000 tonnes by as soon as 2025.
Certain hypotheticals are involved here, of course, but the overall economic environment is pretty clear. Demand for lithium is almost certain to increase, while policy and prudence will dictate that the US increasingly look to within its own borders rather than to China for security of supply.
That’s where Bradda Head comes in, with its upside apparent from many angles. Hardly surprising, then, that so many investors have been keen to get in on the act.