In a June 11 research note, analyst Brent Watson reported that Cormark Securities changed its recommendation on Royal Helium Ltd. (RHC:TSX.V) to Buy from Speculative Buy after the energy firm closed an equity financing. Watson also reported that the company announced a summer program, intending to start production this year.
"With massive optionality remaining in its acreage position and first production expected by year-end, Royal continues to stand out as a leader in the North American helium pubco space," Watson wrote.
He noted that Royal Helium generated about CA$17.3 million in gross proceeds via the upsized bought-deal equity financing, in which it issued 34.5 million units. Each unit comprised one common share and one-half warrant.
"Royal's equity raise substantially de-risks the company's path to first production," Watson wrote. The financing "affords it a high degree of flexibility to continue operations through the balance of the year."
Watson described the work that the near-producer has under way and has planned.
Moving forward, the analyst indicated, Royal Helium will simultaneously concentrate on two objectives: advancing its Climax helium project toward production and growing its helium resources through drilling and exploring its southeast Saskatchewan property. These efforts will include resuming production testing at its Climax-2 and Climax-3 wells and continuing to plan production and facility design for Climax-1, -2 and -3.
The company also is preparing to drill six new wells (it is currently budgeted for seven) in the Bengough, Griffin and Ogema blocks and is now planning that work, Watson noted. One of those wells will be Climax-4, targeting the regolith discovery encountered in Climax-3. Via Climax-4, Royal Helium aims to identify the best way to produce helium from the sizable reservoir of 2.5 billion–6.0 billion cubic feet of helium there. Climax-4 drill permitting is underway, and the company expects to spud the well by mid-July.
Cormark's target price on Royal Helium is CA$1.70 per share, and the stock is trading now at about CA$0.53 per share.
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Disclosures from Cormark Securities, Royal Helium Ltd., June 11, 2021
The Disclosure Statement Chart for Royal Helium can be found on the website.
