Yee-hah! You could buck up your funds with a metal miner in cowboy country
IT’S rodeo season in Wickenburg, Arizona, and thousands of cowboys have descended on the town for competitions, campfires and camaraderie.
Wickenburg is the rodeo capital of America. It is also the local headquarters for Bradda Head, an AIM-listed lithium explorer, with two mine sites in Arizona and a third in Nevada.
Bradda Head was set up by British billionaire investor Jim Mellon and he remains a 17 per cent shareholder. But the company is run by Charlie FitzRoy, a geologist by trade, who spent five years in the Household Cavalry, coincidentally using a saddle almost identical to that worn by Wickenburg ranchers.
Having moved from Army life to the world of mining, FitzRoy took the reins at Bradda Head in the spring of 2021. The company joined AIM shortly afterwards at 5.5p a share.
The stock shot up to almost 16p earlier this year but has since tumbled back to 7p, as conditions have become more volatile and investors have turned away from smallscale mining stocks. At current levels, the shares are well worth a punt.
Lithium is an essential component of the batteries used in electric cars and the price of the metal has soared as these motors have started to become popular, not just with eccentric eco-warriors but with ordinary drivers.
When Bradda Head listed last year, lithium was changing hands at $12,000 (£9,800) a ton. Today, the price is around $80,000 a ton. Long-term forecasts vary considerably but all suggest it will be selling at prices far in excess of 2021 levels, driven by a growing gap between supply and demand. By 2030, for example, experts expect demand to exceed 2.1million tons per year, with supply languishing at 1.6million tons. Ten years later, that gulf is forecast to be more than 3.5million tons.
Lithium is found in clay, hard rock and brine and most explorers and developers specialise in one of these three types. Bradda Head is different as its mine sites span all three, with clay and hard rock in Arizona and brine in Nevada.
The clay site is the most advanced. At around 15 square miles, it is a sizeable area and independent analysts have already said it will yield up to 6million tons of lithium, a substantial resource that has attracted the attention of specialist funder
Lithium Royalty Corporation. The Canada-based firm has given FitzRoy $2.5million cash in return for future royalties and $5.5 million more is expected in the next year or two.
Over the long term, however, the hard rock site should prove the most rewarding, as lithium from this type of deposit, known as spodumene, is the most highly prized.
The site was mined by locals in the 1940s and 50s, because lithium is a key component of US weaponry and nuclear devices, considered particularly valuable as the Cold War intensified. Results from those early exploration efforts mean that FitzRoy and his team know there is lithium on site.
Now they are focused on drilling down beneath the surface to see how much metal they might be able to find. Initial results are positive and more data should flow through in the coming months.
There is an environmental angle to Bradda Head as well. Today, 60 per cent of the world’s top-quality lithium comes from hard rock mines in Australia, most of which is turned into battery grade lithium in China before being shipped across the world for use in electric cars.
The US government is keen to reduce this reliance on the Xi Jinping regime and has pledged to support new processing facilities at home. Four are already up and running, with 19 more expected to open by 2026, including a Tesla factory in Texas.
All this means that Bradda Head will be able to send its deposits for processing in nearby states and the resultant batteries can be used for domestic vehicles.
Bradda Head is a small business and, although it has money in the bank, FitzRoy intends to be careful with it, focusing efforts on the clay and hard-rock mines right now, with the brine sites likely to see more action from next summer.
Traded on: AIM Ticker: BHL Contact: braddaheadltd.com or 01624 639 396