Low Cost With the Potential to Scale Rapidly As a stable and extremely light element, helium has many uses for industry applications, and this has caused prices for helium to rise rapidly due to the exponential increase in demand coupled with a supply shortage. A larger domestic North American supply of helium is needed to help simplify the supply chain and to satisfy the growing demand.
One risk with many exploration-stage companies is that they may take a long time to begin generating cashflows through production. However, with the JV acquisition now closed, $TOH.V has a clear path for production growth.
- They now hold 20% interest in 2 producing wells with 50% interest in 8 wells that are currently being connected to a helium processing plant.
- For the helium produced by the first 10 wells, they have an off-take agreement with Linde at $500/Mcf allowing for additional upside relative to spot prices outside of the 10 wells.
- Grades average 5-8% helium, and $TOH.V is also entitled to a 50% working interest in over 150 potential wells.
- Due to the near-surface nature of each well, the estimated cost of drilling and completion is only $220,000, providing a payback period of just 3 months.
I would recommend reading more about the Pinta South operations on their website: https://www.totalhelium.com/operations-projects/arizona/
With the Pinta South JV partner having a strong team and the relevant machinery for drilling, $TOH.V is able to both streamline efforts and minimize costs. Considering the potential cash flows as production increases, the current $33M valuation provides a significant upside once the numbers start to roll in.
Posted on behalf of Total Helium Ltd.