MIDAS SHARE TIPS: You could buck up your funds with Bradda Head

It’s rodeo season in Wickenburg, Arizona, and thousands of cowboys have descended on town for competitions, bonfires, and camaraderie.

Wickenburg is the rodeo capital of America. It is also the local headquarters of Bradda Head, an AIM-listed lithium explorer, with two mining sites in Arizona and a third in Nevada.

Bradda Head was founded by British billionaire investor Jim Mellon and he remains a 17 percent shareholder. But the company is run by Charlie FitzRoy, a geologist by trade, who spent five years in the Household Cavalry and happened to be using a saddle almost identical to that worn by the Wickenburg farmers.

After moving from army life to the mining world, FitzRoy took over at Bradda Head in Spring 2021. The company joined AIM shortly afterwards for a share of 5.5 pa.

The stock shot up to nearly 16p earlier this year, but has since fallen back to 7p as conditions have become more volatile and investors have turned away from small-scale mining stocks. At current levels, the stock is well worth a point.

Lithium is an essential part of the batteries used in electric cars and the price of the metal has skyrocketed as these engines have become popular not only with eccentric eco-warriors but also with ordinary drivers.

When Bradda Head listed last year, lithium switched hands for $12,000 (£9,800) a ton. Today, the price is around $80,000 per ton. Long-term forecasts vary widely, but all point to it being sold at prices well above 2021 levels, due to a widening gap between supply and demand. For example, experts expect demand to exceed 2.1 million tons per year by 2030, while supply is dwindling at 1.6 million tons. Ten years later, that wave is expected to exceed 3.5 million tons.

Lithium is found in clay, hard rock, and brine, and most explorers and developers specialize in one of these three types. Bradda Head is different in that the mining sites include all three, with clay and hard rock in Arizona and brine in Nevada.

The clay site is the most advanced. Covering about 25 square kilometers, it is a significant area and independent analysts have already said it will yield up to 6 million tonnes of lithium, a substantial resource that has caught the attention of specialist financier Lithium Royalty Corporation. The Canadian-based company has given FitzRoy $2.5 million in cash in exchange for future royalties and another $5.5 million is expected over the next two years.

In the long run, however, the hard rock site should be the most rewarding as lithium from this type of deposit, known as spodumene, is most valued.

The site was mined by locals in the 1940s and 1950s, as lithium is an important component of US weapons and nuclear devices, considered particularly valuable as the Cold War intensified. Results from those early reconnaissance efforts mean FitzRoy and his team know lithium is on the scene.

Hold on: Wickenburg, Arizona is America’s rodeo capital

Now they’re focused on drilling below the surface to see how much metal they could find. The first results are positive and more data should flow in the coming months.

Bradda Head also has an ecological angle. Today, 60 percent of the world’s best lithium comes from hard rock mines in Australia, most of which is converted into lithium for batteries in China before being shipped around 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 domestically. Four are already operational, with 19 more expected to open in 2026, including a Tesla factory in Texas.

All this means that Bradda Head can ship its deposits for processing in nearby states and the resulting batteries can be used for domestic vehicles.

Bradda Head is a small company and although it has money in the bank, FitzRoy intends to take it cautiously and focus on the clay and bluestone mines now, with the brine sites likely to see more action from next summer.

Midas verdict: Bradda sponsors two rodeos in Wickenburg (including one for women), but this is more than just a boxing bronco stock. There is a demand for lithium and it will only increase as more and more countries stipulate that all new vehicles must be electric. Bradda’s mines are well located, initial exploration results are promising and the group is backed by Jim Mellon, a billionaire with a string of successful investments under his belt. At 7p, the shares are a buy for the adventurous investor.

Traded on: GOAL Ticker: BHL Contact: braddaheadltd.com or 01624 639 396