BHL Bradda Head Lithium Limited

10   Equity settled share based payments (continued)

The amount expensed in the income statement has been calculated by reference to the fair value at the grant date of the equity instrument and the estimated number of equity instruments to vest after the vesting period.

During the period ended May 31, 2024, no options were granted.

During the period ended May 31, 2024, total unexercised supplier warrants of 6,684,563 expired.

11  Warrants

As part of the fundraise completed during April 2022, all participating shareholders received a warrant on 1:1 basis for shares acquired. As a result, 73,195,560 warrants have been issued. All un-exercised warrants expire after a period of 2 years from grant date. During April 2024, all unexercised warrants issued in April 2022 expired.

12  Basic and diluted loss per share

The calculation of the basic loss per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares, on the assumed conversion of all dilutive share options.

An adjustment for the dilutive effect of share options in the current year has not been reflected in the calculation of the diluted loss per share, as the effect would have been anti-dilutive, due the Company recognising a loss for the year.

For the period ended May 31, 2024, the earnings applied are the same for both basic and diluted earnings calculations per share as there are no dilutive effects to be applied.

13   Related party transactions and balances

Edgewater Associates Limited ("Edgewater")

During the three-month period ended May 31, 2024, Directors' and Officers' insurance was obtained on an arms-length basis 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.

During the period, the premium payable on the policy was US$ Nil (year ended February 28, 2024: US$ 43,061). A total of US$ 794 was prepaid as at the period end (February 28, 2024: US$ 11,560).

14   Commitments and contingent liabilities

The Group has certain obligations to expend minimum amounts on exploration works on mining tenements in order to retain an interest in them, equating to approximately US$ 434,704 during the next 12 months. This includes annual fees in respect of licence renewals. These obligations may be varied from time to time, subject to approval and are expected to be filled in the normal course of exploration and development activities of the Company.

15   Events after the reporting date

On 1 July 2024, the Company announced a new Mineral Resource Estimate ("MRE") at the Company's 100% owned Basin Project in Arizona, USA. The new MRE consists of 99kt of of lithium carbonate equivalent ("LCE") at an average grade of 929 ppm lithium in Measured classification, 560kt of LCE at 860ppm Li in the Indicated classification; and 2,175kt of LCE at 808ppm Li in the Inferred classification following the completion of drilling, reception and analysis of geochemical results, and new modeling of the Basin project. As per the Gross Overriding Royalty Agreement ("Royalty Agreement") with the Lithium Royalty Company ("LRC"), the new contained LCE Tonnage surpassed the contracted threshold of 2.5Mt and has enabled the Company to trigger the payment of US$3.0 million from LRC to Bradda Head, with funds being received on 8 July 2024.

Bradda Head Lithium Limited

Management discussion and analysis for the three-month period ended May 31, 2024

This management's discussion and analysis ("MD&A") reports on the operating results and financial condition of the Company for the three-month ended May 31, 2024, and is prepared as of July 23, 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 28, 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.

(a)           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

On March 12, 2024, the Company commenced drilling at its Basin North lithium in clay project in Arizona, USA. The six-hole program was designed to significantly expand the Company's existing lithium in clay Mineral Resource Estimate ("MRE").

Program Summary:

·      Six-hole core drilling program of approximately 8,800 feet (2,680m) planned;

·      Program anticipated to expand LCE from 1.085MT to >2.5MT;

·      Step-out drill holes at 500 to 700m spacing to maintain Inferred category of MRE;

·      One hole will be drilled into Precambrian basement in center of gravity low;

·      Gravity low may represent extensively thick clays both in the Upper, Lower, and Basal Red-Beds; and

·      Holes will test Lower Clay to expand tonnage potential and thicker sequence correlative with gravity low which also has the potential for exceptional lithium grades

The drill program was successfully completed on May 9, 2024, with two additional holes drilled for a total of eight holes drilled. Average hole depth of 285 meters (934 feet) with a range of 231 to 387 meters (757 to 1,269 feet) in a total of 2,353 meters (7,720 feet) drilled. This was less than the 2,682 meters (8,800 feet) initially envisaged as a result of finding shallower clay targets than anticipated.

Drilling highlights include:

·      Further resource increase anticipated following the definition of a window 900 meters wide (east-west) by 1,780 meters in length (north-south), consistent continuous lithium-bearing Upper and Lower Clay units, it has the potential to continue expanding, being wide open in all directions;

·      Thickest Upper Clay unit at 103 meters in the center of the drill pattern discovered at hole BND24-19;

·      Two holes were drilled on State Lands and designed to capture lower clay; substantially increasing the lower clay reach from Basin East to the northern end of Basin North, a linear distance of 3.3km;

·      Program was successfully completed under budget and without any environmental or safety incidents;

·      Completion of this program has produced promising visual results, Bradda Head's geology team are now able to recognise that the clays contained strong characteristics of high lithium values, and are greatly encouraged by the clays seen in the past eight drill holes; and

·      The Qualified Person (QP) has made a site visit and was provided with all the geological and technical information, and the geologic block model has been revised to reflect the new intervals from drill hole lithologies and peripheral surficial geology.

Post period end on July 1, 2024, the Company announced a new MRE at the Company's 100% owned Basin Project in Arizona, USA. The new MRE consists of 99kt of lithium carbonate equivalent ("LCE") at an average grade of 929 ppm lithium in Measured classification, 560kt of LCE at 860ppm Li in the Indicated classification; and 2,175kt of LCE at 808ppm Li in the Inferred classification following the completion of drilling, reception and analysis of geochemical results, and new modelling of the Basin project. As per the Gross Overriding Royalty Agreement ("Royalty Agreement") with the Lithium Royalty Company ("LRC"), the new contained LCE Tonnage surpassed the contracted threshold of 2.5Mt and has enabled the Company to trigger the payment of US$3.0 million from LRC to Bradda Head, with the funds being received on 8 July 2024.

Basin Project Permitting Update

A Basin West drilling permit kick-off meeting was also held with the BLM in April and organised to initiate the NEPA (National Environmental Policy Act) process for development of the EA (Environmental Assessment) Report that, once approved, will allow the Company to commence drilling. This process follows the BLM's letter of EPO (Exploration Plan of Operations) completeness which the Company received earlier this year and marks an important step on expanding our ability to extend exploration over the very promising Basin West target.

Wikieup Project

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

Arizona Pegmatite District

San Domingo Project

On April 8, 2024, the Company released results from its channel sampling program. The results included 5.00 meters of 2.33%, 4.10 meters of 2.81%, and 4.00 meters of 1.26% Li2O at the White Ridge Target and 5.30 meters of 1.25% Li2O at Morning Star. These and other surface samples collected were designed to augment the Phase II, 2023 drilling program as well as determine that this technique can and will be applied to future surface exploration programs planned in Q3 of this year.

Highlights

·      A total of 77 samples were collected from strategic targets across the San Domingo project, with locations designed to supplement drill holes that contain lithium (spodumene) mineralization, particularly those that could result in mineable resources;

·      Some locations were chosen as a result of newly exposed spodumene bearing pegmatites at new drill sites;

·      White Ridge channel samples correspond to drill hole SD-DH23-072, confirming continuity of spodumene rich pegmatite, indicates mineralization is open to the north and at depth;

·      Channel samples at Morning Star drill site SD-DH23-090 cut, 5.30 meters at 1.25% Li2O, clearly connect and add confidence in continuity, building on resource potential;

·      The channel samples at Midnight Owl likely connect to drill hole SD-DH23-049 which had an intercept of 6.35 meters @ 0.83% Li2O and 3.05 meters of 1.03% (see 11 Nov 2023 Press Release for details), a distance of 55 meters from surface; and

·      The Company is capitalizing on surface lithium mineralization exposures through channel sample techniques and by connecting to drill holes; this continues to demonstrate open cut potential and in part, will drive the next exploration program.

As at period end, the Company is diligently working on the next phase of exploration at the 100% owned San Domingo pegmatite project. The team believe that there is excellent potential to find new lithium bearing pegmatites given the extensive size of the nearly 33 square kilometer property and limited amount of ground coverage to date. In addition, to developing new targets, there will be follow-up on last year's drill hole intercepts, as well as this year's excellent channel sampling at Morning Star, White Ridge, and Midnight Owl. The future plan will be to strategically place drill holes to test channel sample mineralization and offset down-hole mineralization in order to grow resource potential at all three targets.

Lithium Brine and Oil Brine Projects

Wilson Project

No field work has transpired over the last 3 months.

Eureka Project

No field work has transpired over the last 3 months.

Oil Brine Projects - Pennsylvania & Texas

Additional legal documents were filed in Pennsylvania to update various leases and bring them up to date with the county.

A forgotten lease from 2018 in Texas was executed with another member of the Cooner family to further lock-up our position on the 40-acre lease in Cass County. All legal documents were signed by both Zenolith USA LLC and the lessor, then filed with the county. The Company continues to track activity in the area, notably exploration drilling by Standard Lithium and a newcomer named Terravolt, a privately financed company. Both have significant tenure and licenses in East Texas and within the Smackover Formation.

Corporate Highlights

On May 20, 2024, the Company announced that it entered into a settlement agreement regarding the fraudulent payment made to an unidentified party, as disclosed in the prior year accounts. Pursuant to the settlement agreement, the Company has been partially reimbursed for the fraudulent funds transfer. The partial settlement is consistent with Company's expectations at the time of initiating enforcement proceedings with gross recovery of approximately 40% of total misappropriated funds.

(b)           Selected Financial Information

The following table sets forth selected financial information with respect to the Company for the 3-month period ended May 31, 2024 and the year ended February 28, 2024. The selected financial information has been derived from the audited financial statements for the period 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 quarterly financial statements are presented in US dollars and are prepared in accordance with IFRS, See "Summary Financial Data" and "Currency Information".

MANAGEMENT DISCUSSION AND ANALYSIS: QUARTER ENDED MAY 31, 2024

(c)           Introduction

(d)           This Quarterly Management Discussion and Analysis (the "quarterly MD&A") should be read in conjunction with the audited financial statements of the Company for the year ended February 28, 2024, and related notes. This MD&A is made as of July 23, 2024.

(e)           Results of Operations for the three-months ended May 31, 2024

The Company's net loss before and after tax for the three-month period to May 31, 2024 was US$ 569,408, compared to a loss of US$ 1,084,192 for the comparative period ended May 31, 2023.  The major expenses for the three-month period ended May 31, 2024 were operational expenses incurred on the Company's exploration projects, and are broken down in the respective projects as follows:

During this time period, the Company incurred and capitalised exploration expenditures of US$ 1,191,930, compared to US$ 1,228,739 for the comparative three-month period to May 31, 2024.

The capitalised exploration costs for the three-month period ended May 31, 2024 have been allocated amongst the Company's exploration projects in approximately the following amounts:

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 three-month period to May 31, 2024 totalled US$ 1,258,841, compared to US$ 1,258,841 for the comparative three-month period to May 31, 2023. General and administrative expenses are broken down as follows:

During the three-month period to May 31, 2024, there have been no changes in financial performance or other elements that relate to non-core business activities and operations.

(f)            Cash flows

During the three-month period ended May 31, 2024, the Company had net cash outflows of US$ 1,130,225, compared to outflows of US$ 6,653,661 during the comparative three-month period to May 31, 2023. Net cash outflows for the current 3-month period ended May 31, 2024, include return of cash amounts placed on short term deposits, totalling US$ 1,000,135. The cashflows for the two periods are shown below:

* includes US$ 3,905,582 placed on short term deposit for the period ended May 31, 2023.

(g)           Liquidity and Capital Resources

As at May 31, 2024, the Company had cash and cash equivalents (including short term cash deposits) of US$ 534,437, and a working capital deficit of US$ 166,102. As of February 28, 2024, the Company had cash and cash equivalents of US$ 1,664,662, and a working capital surplus of US$ 1,601,571.

(h)           Outstanding Share Data

As of May 31, 2024, the following securities were outstanding:

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 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".

(i)            Off-Balance Sheet Arrangements

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

(j)            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 three-month period ended May 31, 2024, Directors' and Officers' insurance was obtained on an arms-length basis 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.

During the period, the premium payable on the policy was US$ Nil (year ended February 28, 2024: US$ 43,061). A total of US$ 794 was prepaid as at the period end (February 28, 2024: US$ 11,560).

(k)           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 May 31, 2024, the Company had incurred capitalised exploration expenditures, including capitalised licence and permit costs, of US$ 14,999,089. 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.

ENDS