With markets in such an uncertain state at the moment, for a junior exploration company having a significant amount of cash already in the bank can make all the difference.

It’s not just that work programmes can be designed secure in the knowledge that the money’s in place to make sure they get completed.

It’s also that the market likes a good cash buffer in difficult times – it means investors won’t fret – or at least will fret less – about the possibility that further discounted fundraisings will be needed to keep the show on the road. That in turn tends to depress share prices, meaning that companies that actually do need to raise money find it even harder.

Bradda Head Lithium Limited (AIM:BHL, OTCQB:BHLIF) has avoided all of these traps.

A couple of months ago the company raised US$12.9mln on the strength of its diverse lithium exploration portfolio in the USA. American investors and institutions were amongst the new names on the register, and the enthusiasm was such that as at the end of May Bradda Head’s cash balance stood at US$16.5mln.

Since then, of course, the lithium price has been a bit unsteady, in the wider context of slowing economic output in the US and elsewhere, and as inflation continues to eat into the value of everything.

But for Bradda Head the outlook remains distinctly sunny, because by most reckonings the lithium it’s likely to end up producing will still be able to generate plenty of margin, even if the selling price isn’t quite at the stellar levels it reached earlier this year.

First off, it’s worth pointing out that Bradda Head’s portfolio consists of several different types of lithium deposit. All are located in the US, in either Arizona or Nevada, and the idea is that production from all of them will feed directly into US markets. In an environment in which headlines about securing supplies of critical minerals are ten-a-penny these days, it’s not surprising then, that Bradda Head garnered such interest in its recent fundraise.

But not all lithium deposits are created equal.

In Bradda Head’s case, there’s the hard rock pegmatite deposits it holds at San Domingo in Nevada; there’s the clay deposits it holds in Basin East, Basin West and Wikiup in Arizona; and there’s the brine deposits it holds at Wilson Salt Flat and Eureka, also in Nevada.

Which of these groups of assets will deliver the most value?

That’s an open question, as they all have their attractions and their upside.

But the market tends to like pegmatites best because they’re more familiar.

As Bradda Head’s chief executive Charles FitzRoy puts it: “pegmatites are a mining operation, not a chemistry set.” And he cites a telling statistic too: round 60% of the world’s lithium comes from existing pegmatite mines.

That’s one reason why Bradda Head’s recent move to initiate drilling on the pegmatites at San Domingo is likely to meet with significant enthusiasm. The drill permits are already in place, and all the company needs is a final piece of documentation in regard to environmental bonds, and it can push the go-button.

The plan is to spend around US$2mln-to-US$3mln on the programme. Fifteen holes will go to a depth of 150 metres and fifteen holes down to 300 metres. The market’s likely to follow progress at San Domingo with interest, all the while noting that significant cash will still remain in Bradda Head’s coffers once all the bills have been paid.

At the end of the process the hope is that Bradda Head’s geologists will have a significantly greater understanding of the underground workings of a system that they already know is highly mineralised. But in what style? – could it be that San Domingo bears significant similarities to the famously prolific Kathleen Valley in Australia? The early signs say yes, but that’s what the drill programme is designed to find out.

Overall, the drilling is likely to take between four and five months, so it will be a little while yet before we know anything tangible on that score, but once the results are in, the likelihood is that Bradda Head will be able to move rapidly to take the project on to the next stage. For one thing, there’s that chunky cash pile, which means distractions from outside pressures can be batted away.

But more significantly, pegmatites can be moved towards production fairly rapidly and at fairly modest cost, because the end goal, at least initially, would be to produce a concentrate rather than pure lithium.

“A spodumene concentrate is cheaper and easier to do,” says Charles FitzRoy. “Really, you’re just using a dense media separator to get the product.”

So for the rest of the year it looks like Bradda Head will be ticking a lot of boxes with work at San Domingo.

But that’s not the only thing that’s going on. Not at all. On the clays a 44-hole programme is likely to kick off later in the year, designed, if possible, to join up the known deposit at Basin East with Basin North. If that works out as hoped, the plan is to produce a preliminary economic assessment for Basin by the end of next year. Again – look at the cash pile, the money’s there, all Bradda Head need to get is the right drill results.

The brines in Nevada are in country that’s more remote, however, and FitzRoy is open to bringing in a potential joint venture partner really to get them moving.

In the immediate term, though, interest on the market is likely to come from the drilling at San Domingo, and from the upcoming dual listing of the company’s shares on the Venture Exchange in Canada. This is the world’s number one market for junior mining companies, and its investors have considerable interest and expertise in North and South American lithium companies. New liquidity on the Venture Exchange could create a positive feedback loop to London and provide further support for the shares.

In the final analysis though, it will be the drillbit that decides the value. And it will have had its say by the end of the year.

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