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Tapping Into a Major Blue Sky Helium Opportunity

Dave Jackson Dave Jackson, Stockhouse
0 Comments| October 30, 2020

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In a recent Stockhouse Media podcast, we introduced our investor audience to an intriguing mining play in the heart of Canada’s most prolific helium region – Southern Saskatchewan. No longer just the breadbasket of Canada, investors are now waking up to a new play that’s very much part of the New Green Revolution.

With over 900,000 acres of prospective helium lands in southwestern and south-central Saskatchewan held under lease, permit, or application, Royal Helium Ltd. (RHC) (TSX-V.RHC, Forum) is currently one of the largest helium leaseholders in North America.

Located next to highways, roads, cities and, importantly, close to existing oil and gas infrastructure, RHC’s projects have been methodically evaluated for helium potential for over two years, and have been vetted by helium experts, professional geologists and engineers. In July, the Company added to their existing target inventory another five wells in Southeast Saskatchewan bringing their target inventory to 13 over the first two of nearly a dozen chosen areas.

The Company has been busy lately. It recently received the final analysis from the triaxial magnetic survey conducted over its Climax helium permit lands.

Stockhouse Editorial reached out to Royal Helium’s Chairman, President, and Chief Executive Officer, Andrew Davidson to tell us more about where the Company, the helium mining industry as a whole, and the market are headed.

SH: To start off, Andrew, can you update our investor audience and your Royal helium shareholders on any new company developments, especially in the wake of COVID-19?

AD: Hello and thank you for the opportunity to speak to your audience. Since our last interview, the helium market has only grown stronger. Of course, we are all deeply concerned and affected by COVID 19, and Royal is committed to pushing forward, not only for the well-established medical applications of helium but an environmentally friendly way to supply this important element to the high-tech industries in the world.

SH: For investors who may be new to Royal Helium, and helium mining in general, can you give us a snapshot of your operations and why the sector is really heating up right now?

AD: Royal is one of the largest helium land holders in North America in a past and current helium producing region in southern Saskatchewan. We are positioning to become a dominant producer/supplier of helium to the worldwide medical and technology markets.

Helium is used across multiple growth industries, being non-substitutable in most applications, growing demand especially in the high tech industries has been outstripping supply for the last number of years. This basic mismatch of supply and demand has caused a significant increase in market prices for helium globally which has, in turn, led to an increase in exploration efforts to locate new sources. Launching in 2016, Royal has been on the leading edge of this and we continue to be a leader in exploration.

SH: What are some of the unique features to helium mining that investors should know about?

AD: Perhaps the most unique aspect of the helium industry is the fact that most people are not aware of the size or scope of it. Helium is a multi-billion-dollar global industry, and demand for the gas is currently mitigated by supply. The drilling for primary helium production in North America represents one of the largest economic opportunities that our team has seen.

SH: How does helium mining differ from say, natural gas extraction?

AD: Essentially there is no difference in the exploration, drilling and production, which is a large benefit to explorers like Royal. Given that we operate in southern Saskatchewan, which has a mature oil and gas industry, means that all of the experience and services required to drill a deep gas well are readily available. We are not re-inventing the wheel here with helium drilling, we are simply altering the target gas from methane to helium. With the pricing for helium being 100 times the price for natural gas, substantially lower processing costs and lower land and royalty rates, the economics of doing this are implicit.

SH: What are the core benefits to helium, especially as a market driver in the New Green Economy?

AD: One of the beautiful things about helium is the completely inert nature of it. Amid a significant and prolonged downturn in the oil and gas sector, combined with a general move towards industries with a lower carbon footprint has presented a potentially generational opportunity for helium production. In Saskatchewan specifically, the fact that the oil and gas industry which surrounds us has been largely shelved offers the opportunity to source top end talent to work with us in developing this industry.

Further, the gas stream that we intend to tap into is almost completely carbon free. The produced gas, comprised principally of nitrogen and helium, is processed by simple membrane separation technology with a minimal footprint related to its production, which positions us near the top in terms of industries that target the global green movement. Royal will be producing a critical gas, used in high growth and high technology industries such as high-tech manufacturing, rocketry and health care.

SH: Can you give us some updates on what’s happening right now with the Climax lands, along with Swift Current, Cadillac, and Val Marie?

AD: The Climax project is now drill ready. With 7 identified drill targets, the next step in the development process there is to complete our initial exploration and production wells. We intend to do this in Q4 of 2020 and Q1 of 2021.

The remaining land packages in the southwest, including Swift Current, Cadillac and Val Marie, as well as our projects in the southeast are in the exploration phase. Our approach will be the same as we completed at Climax, with a focus on seismic, deep aeromagnetics and well logs to identify wells in target formations and traps.

SH: As RHC readies for its first drill program at your Climax helium property, the magnetic survey program firms up your first set of drill targets ahead of this fall’s drill program. What’ll this initial bit of work look like and what do you hope to achieve?

AD: The magnetic survey provided the final piece of the puzzle at Climax. It successfully defined the basement structure and movement that would allow for the release of helium from the Precambrian basement. It also showed that the areas of uplift are covered by significant closures, which implies that any gas released would also be trapped. This is the specific confluence of events required for economic helium deposits.

SH: Meanwhile, Royal Helium plans to continue and repeat the geophysical work and drill programs over several regional targets that you have in inventory. What are the overall expectations there?

AD: Expectations at the remaining properties are in line with what we have seen at Climax. We anticipate locating a combination of basement movement and seismic closures. Given the apparent scope of helium in Saskatchewan, as is evidenced by current and past production, combined with the multitude of wells drilled in southern Saskatchewan with gas tests that return helium, our level of confidence is understandably high.

SH: What are some of the key markets and major industrial applications that helium serves?

AD: The most notable application that most people might identify with would be medical MRI machines which use helium to super cool the magnets used within the machine. Helium, although doesn’t degrade, does escape almost any container that it is in, and applications like MRIs need to be recharged with high purity helium. Newer, high growth areas include the manufacturing of semiconductors, LCD/LED panels, fiber optics as well as rocket engines – in fact, the largest single corporate buyer of helium is NASA.

SH: There are significant helium projects either underway or in the works in places like Arizona, Oklahoma, and Texas. What makes Saskatchewan such an attractive location and potentially lucrative global supplier of helium?

Click to enlargeAD: All of those fields also have proven success in the past and good probability for continued success in the future, but that is more what we have in common with them than what differs in Saskatchewan. The principal differences related to depth of well, gas pressures and composition. The wells in Saskatchewan are typically deeper than in those other jurisdictions, which has both positives and negatives. While marginally more expensive, given the difference in depth, the pressures that Saskatchewan wells generally flow at can be quite high, comparatively speaking. The other significant difference is the composition of the gas stream itself.

Saskatchewan is a rare place globally, as we produce primary helium – which is helium carried in nitrogen. The overwhelming majority of helium globally is produced as a by-product of natural gas production. The advantages of a nitrogen driven field are severalfold: the green, an environmental factor previously discussed; land costs and royalty rates are substantially cheaper than oil and gas; processing is easier, cheaper and greener than that for hydrocarbon distillation. As well, southern Saskatchewan has existing infrastructure and transportation logistics suitable for export to both the US and the rest of the world. Canada also enjoys a favourable geopolitical situation, unfettered by political sanctions or export restrictions.


SH: With demand soaring and supplies shrinking for this finite resource, how isRoyal Helium positioned to gain a major market foothold globally?

AD: As I mentioned, we have one of the largest helium land packages in North America, in an area that produces primary helium with excellent infrastructure and economics at a time when the world’s largest producer (the USA) is declining its production, amidst growing worldwide demand. Saskatchewan, fortunately, is blessed with the right (currently unique) geology for success in this field.

SH: You’ve said that “Royal’s southeast Saskatchewan lands, which comprise roughly 50% of the total land holding, all show robust helium occurrences.” How robust and how sky-high can the find go?

AD: Well everything in this answer firmly falls into the range of forward-looking information, but we feel the upside to the southeast Saskatchewan assets is potentially very large. Given the combination of helium results from the region, and the sheer size of our land holdings overlying the main helium bearing formation and its potential traps, bode well for defining a new helium field in the southeast. While still undeveloped, some of the highest helium test results in Saskatchewan history come from this region, and we intend to develop it. The Bengough region, which is our largest individual land block in the southeast is the next stop on our development path. With seismic already completed, the next step for Royal is to complete the magnetic survey over the property, which will bring it to full drill-ready status.

The seismic we have acquired and reprocessed has indicated possible multiple four-way closures, “pools” or traps. Should the deep magnetic survey analysis line up as they do in Climax, an initial drilling program at Bengough will follow shortly.

SH: What sets RHC apart from other helium exploration companies in this space and what makes your business model unique?

AD: We believe that we are in a unique position to take advantage of the large and increasing gap in the helium supply and growing demand market. With supply decreasing and a rapidly increasing demand for helium, the market will be in high demand for years to come. Several years ago, our team of geologists identified our own backyard of Saskatchewan as a potential primary supplier for the helium market. As such, being amongst the largest land holders for helium in the best (only) primary helium producing area in the world.

SH: Can you tell us a little bit about your corporate management team and the experience and ideas they bring to this industry?

AD: Our management team boasts a long track record of successfully developing resource assets in Canada and has the necessary combined skillset to do it again here. Steve Halabura, our VP of Exploration, is known throughout the world for his expertise in sedimentary geology in Saskatchewan, having been the geological lead in the development of several oil and gas and potash companies here. This made him the perfect choice to lead our efforts to develop a world-leading helium company.

Our CFO, Jeff Sheppard, has been working in the junior resource development industry for a decade and has a full understanding of what it takes to advance projects from a financial perspective. An expert in planning and taxation, he is leading our push to become one of the most competent economic modelers of helium projects in North America, as well as structuring investment and capital raising in a tax-efficient manner.

The bench strength of our board of directors is a terrific advantage for us. The economic and geological expertise of Tom MacNeill combined with the capital markets expertise of Sylvain Laberge, and the securities law and general business expertise of John Pringle all combine to produce sage guidance at all times for Royal. All have been involved in successful development companies for decades.

SH: Thanks for taking the time to speak with us today, Andrew. Is there anything we’ve overlooked or omitted that you would like to add?

AD: I would encourage everyone to review the analyst coverage that has been put out on Royal by Cormark Securities, as well as the industry coverage, also by Cormark. Both are very thorough reports.

Finally, I would encourage all resource, tech and med-tech investors to have a long look at the helium space, and Royal specifically. Helium is a technology gas, utilized in emerging and stable industries. The minimal carbon imprint to its exploration and production make it a clear leader in terms of next generation resource plays.


For more information, please visit www.royalheliumltd.ca


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


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