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Tapping into Potentially the World’s Best Helium Resource

Stockhouse Editorial
2 Comments| May 5, 2020

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Click to enlargeIt may be lighter than air, but its value can’t be understated. Helium is shaping up to be an immensely valuable resource and one Company is sitting on what could be a top global reserve.

A recent report by Transparency Market Research forecasts the global helium market to reach $3.5 billion (USD) by the end of 2027. Expanding at a compound annual growth rate (CAGR) of 4% or more.

Headquartered in Vancouver, British Columbia, Desert Mountain Energy Corp. Click to enlarge(TSX-V: DME, OTCQX: DMEHF, Forum) is an exploratory resource Company engaged in the exploration and development of helium properties in the Southwestern United States. Currently, the Company holds properties in two projects:

  • Its flagship Heliopolis Helium Project in Arizona’s Holbrook Basin
  • Kight Gilcrease Sand Unit (KGSU Helium, Oil and Gas Project in Seminole County, Oklahoma

Its helium project in Arizona contains the highest grades of the element found anywhere in North America and this proposition has come at what could be the most crucial time in our history. The world’s largest supplier of helium for the past 70 years is drying up - The US National Helium Reserve in Amarillo, Texas has essentially become exhausted and has terminated public sales.

The Company recently closed its $1.6 million (CAD) private placement and is now moving forward with its drill programs.

Not just for balloons:

(Image via Desert Mountain Energy. Source: US Geological Survey, Mineral Commodity Summaries, January 2018.)

The major factors driving growth in the helium market include its increasing consumption in the computer, electronics and semiconductor industries, as well as its growing usage in the healthcare industry.

The element is known for its excellent cooling capabilities and it is being used to develop cryogenic devices, which accounts for the second-highest production in the helium market. Since it can reach temperatures down to -269°C, it is the best option for cooling magnets in MRI machines when it is in its liquid form. It is also used for ventilator machines to enhance breathing in patients with pulmonary conditions such as emphysema, asthma, COPD, lung cancer and other conditions. There are two sources for Helium on Earth, either primordial, part of the original formation of the planet, or from radioactive decay of uraniumand thorium in the earth’s crust. Because of its light weight and small size of its atom, Helium escapes gravity and dissipates into space almost as soon as it is formed, unless it is captured in a trap within the earth’s crust. Its value is also rising, prices increased from $119.31 to $279.95 in 2018, a year-to-year jump of 135%, due to a rapidly shrinking supply. While prices have stabilized during the current covid-19 crisis, higher prices are anticipated once the world is back at work

Impact of COVID-19:

The ongoing crisis related to the spread of the COVID-19 coronavirus pandemic has had a staggering effect on businesses around the world in a number of ways. . While prices have stabilized during the current covid-19 crisis, higher prices are anticipated once the world is back at work as new applications for helium are continuing to be
developed for high tech and the new economies.

In an update published for investors, DME Chairman & CEO, Irwin Olian highlighted the fact that it is moving forward with its drill programs for helium in the Holbrook Basin as well as in the KGSU. In his overview on the Company’s operations in the current helium environment during this pandemic, he pointed to several key bullet points about the Company:

  • Large cash reserves to fund future work programs, as well as for working capital
  • No long-term debt
  • The Company is fully operative with no illnesses or disruptions from covid-19
  • Moving forward with planned drill programs for Helium, with the permitting process well underway

While the short-term demand for helium has been affected, several strategic industries that rely on it are staying open, such as the internet, computers, semiconductors, as well as military and space craft applications.

This is where Desert Mountain Energy holds a key advantage. The Company’s main project in Arizona is a primary helium deposit that is of a very high grade and can be produced on a stand-alone basis. Most other operators in the helium space are focused on secondary helium production as a by-product of oil and gas, which means they are always under pressure from volatile oil and gas prices. The glut of oil on the market at present and collapse of oil and natural gas prices suggests a strong likelihood for a decline in future oil & gas production, and with it secondary production of Helium.

Company leadership anticipates everything will be in place to permit commencement of the first hole by June 2020 in the Holbrook Basin.

Let’s take a deeper look into the Company’s two main projects.

Holbrook Basin, The Heliopolis Project:

Click to enlargeAn early mover for helium in this region, Desert Mountain is working to make a world-class discovery in this region, often called “the Saudi Arabia of helium”, as global supplies continue to dwindle. Hailed as the world’s best address for the element, the Heliopolis Project contains 65,911 acres of key helium prospects under lease or option.

Located in East Central Arizona, two of the richest historic producing helium gas fields are found in this region - the Pinta Dome and Navajo Springs Fields. Historic production has yielded 261.3 million cubic metres (9.23 billion cubic feet) with exceptionally high grades of helium gas, ranging from 8%-10%, versus the industry benchmark of 0.3% to 1% for commercial grade.

The location of Desert Mountain’s project is ideal, very close to high-tech buyers in the US who are in need of what helium can provide. From digital platforms of Google to Facebook, as well as Netflix and manufacturers like Texas Instruments and Microsoft. They won’t have far to look and won’t need to rely as heavily on overseas supply. Helium is shipped in either its gas or liquid form and costs can be significant over large distances, especially continents.

Desert Mountain, developing its own source in Arizona, can have a distinct pricing advantage operating close to buyers in the U.S., making their helium resource that much more attractive.

Kight Gilcrease Sand Unit, Helium, Oil and Gas Project:

Located in the Gilcrease sand formation 12 kilometres south of Wewoka and directly along State Highway 56, in Seminole County, Oklahoma, this project sees 3.5 square kilometres (883.7 acres) under lease and has produced 1,690,240 BO. This is without having had any water-flood enhanced recovery techniques applied.

The KGSU project is an oil and gas field where the Company has found helium ranging in grade up to 1.3% in a number of Click to enlargeexisting wells The helium zone is very shallow and sits above its oil and gas zone, which DME intends to exploit on its own as a standalone asset, believing it to contain a 183-metre-wide zone (600 feet).

The Company’s development plans for this project consist of reworking the seven existing wells and drilling two new vertical wells to a depth of up to 914 metres (3,000 feet). Previous drill tests had confirmed high porosity and permeability, which revealed the thickness of the sand pay zone may be 30-40% wider than projected.

Helium on the global stage:

The largest producer of helium is the United States, followed by Qatar which produces roughly 30% of the world’s supply, with Algeria in third at around 15%-20%. Qatar’s supply is relatively vulnerable to geopolitical issues and has had several shutdowns already in its industry due to its ongoing conflicts with Saudi Arabia. Algeria, similarly, is not a safe, secure jurisdiction, from a geopolitical standpoint. The recent collapse of oil and gas prices suggests that there is likely to be a significant reduction in secondary
Helium production from Qatar and Algeria.

Canada, up until now, has had very low production, approximately 1% of the world’s helium supply. Some Canadian producers have reworked old oilfields in an effort to pull out helium from wells, which has yielded low-grade helium that was subject in some cases to hydrogen sulphide contamination. Desert Mountain doesn’t have that type of contamination in Arizona and isn’t reworking old oil wells, making them a potentially pure primary source of Helium.

Private placement:

In late February 2020, DME closed its non-brokered private placement raising gross proceeds of $1,602,850.16 (CAD) for exploration and development of the Company's helium projects, including its upcoming drill programs in Arizona and Oklahoma.

Meet the team:

Desert Mountain Energy is led by an experienced team of industry professionals hailing from a wide background.

Chairman, CEO and President Irwin Olian formerly served as founder, CEO and Chairman of Pan African Mining Corp. until its acquisition by Asia Thai Mining in 2008. He was also the co-founder of numerous successful NASDAQ companies in medical device and biotech spaces. A graduate of Harvard Law School and Princeton University, he holds an A.B. degree in Economics.

Executive Vice-President, Head of Technical Operations and Director, Robert Rohlfing is a seasoned oil and gas industry operations executive who is taking the lead of the Company’s technical operations and running the field program, overseeing drilling and exploration. With more than 25 years’ experience in formulating, conducting and managing successful exploration, drilling, development and production programs for oil and gas and minerals worldwide, he has backed exploration and drilling operations for helium, hydrocarbons, gold, silver, rare earth metals, diamonds and gemstones around the world.

Senior Consulting Geologist Greg Nowak, M.S. is Desert Mountain’s Qualified Person, as defined by NI 43-101 and has more than three decades of exploration experience. He was the Exploration Manager in Africa for Golden Star Resources and Ashanti Goldfields, where he planned and conducted mineral field exploration and drilling projects throughout the West Africa Sub-Region. His experience focused on oil & gas, gold, uranium, and base metals. In the US, he has worked in the Permian Basin, the Gulf Coast and the Williston Basin of Montana, managing prospect screening, project generation, wellsite geology, drill log interpretation and planning of development wells. He is a Certified Professional Geologist (CPG # 10864) of the AIPG, and a Fellow of the Society of Economic Geologists (SEG).

Director Soren Christiansen was Team Leader and Drilling Manager for one of Canada’s largest energy producers, Encana Corp., where he oversaw drilling operations around the world. He has directed oil field operations both onshore and offshore. He is a graduate of the University of Calgary, where he received a B.Sc. degree in Mechanical Engineering.

Senior Consultant and Director Dr. Edward A. Schiller, PGEO, is a well-known name throughout the industry. He boasts 40 years’ experience across the mineral spectrum and supervised drilling of Dia Met’s Ekati Diamond Discovery in Canada.

Desert Mountain Energy has more value in place than ever before:

Click to enlargeBetween the OPEC / Russia dispute and COVID-19 pandemic, the recent collapse of oil and gas prices that saw oil fall to around $20 a barrel and gas down to $1.73 on average has caused a great deal of oil and gas production to shut in and deals shut down.

This would likely lead to a significant drop in secondary production of helium around the world and further contain its existing supply, which has already been experiencing a downtrend over 10 years, even though demand has gone up 6% - 7% every year. It is an unusual market dynamic, unique among commodities, but good news for Desert Mountain Energy, who has secured a rare, pure and potentially immense source of helium.

Many major markets are emerging to claim a piece of helium for their requirements. From medical equipment, to space applications, alternative energy sources and even the computer and video gaming industries. Each one distinct and full of opportunity in their own right.

The Company has targeted five holes in its upcoming drill program and will start drilling two of them, adjusting based on what is found within. If initial results come in strong, DME leadership indicated that it will continue work in that zone in order to create a significant resource that can be turned into cash flow relatively quickly and focus on creating revenue in the shortest possible time.

Investors should definitely keep Desert Mountain Energy Corp. on their radar and follow their endeavours to see what the Company discovers in their highly prospective operation.

FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.

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