In an Oct. 13 research note, analyst Michael Mueller reported that Cormark Securities initiated coverage on Royal Helium Ltd. (RHC:TSX.V), an early-stage helium explorer in Saskatchewan, with a Buy rating and an CA$0.80 per share target price. The stock is currently trading at about $0.40 per share.
"Royal Helium presents a rare opportunity for investors to gain exposure to the emerging helium industry in a region with proven helium production and known concentrations," Mueller wrote.
The current macroeconomic environment is highly favorable for Royal Helium, noted Mueller. Against a backdrop of a global helium supply shortage, demand for the commodity is increasing, and end users need a stable source. In terms of the market, sentiment toward the sector improved during the year, evidenced by recent rises in helium companies' stock prices and their ability to raise equity. Royal Helium's stock more than doubled in the past three months, and it closed an oversubscribed CA$1 million private placement in July.
Mueller pointed out that the Saskatoon-headquartered firm is one of the largest helium lease and permit holders in North America, with more than a half million acres of helium lands and another 0.4 million permitted acres.
He added that Saskatchewan is an ideal jurisdiction for a helium company for a few reasons. The possibility of producing helium in the province has already been proven. There is an established oil and gas industry in the area, from which Royal Helium could gain knowledge, skills and equipment. North America needs helium, with the U.S. alone accounting for 25% of global demand.
Royal Helium is at the stage, highlighted Mueller, where it has delineated 12 drill targets, seven at its Climax property in southwest Saskatchewan and five at its Bengough property in southcentral Saskatchewan.
Between the two assets, it plans to drill three to five exploration wells. This constitutes phase 3, of its four-phase strategy, which is to convert its targets into resources, reserves and sales. Phase 4 is to build a processing facility to convert raw gas into 99.999% pure helium gas/liquids, carbon dioxide for enhanced oil recovery, and nitrogen for ammonia and urea fertilizer production.
Mueller concluded, "With neighboring private company, North American Helium, paving the way for a new wave of exploration in the Western Canadian Sedimentary Basin with first sales commencing this summer, Royal stands out as the 'heir apparent' atop this emerging Western Canadian industry."
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Disclosures from Cormark Securities, Royal Helium Ltd., October 13, 2020
I, Michael Mueller, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company(ies) and its (their) securities. I also certify that I have not been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.
The Disclosure Statement Chart for Royal Helium can be found on the website.