Helium, a lightweight gas, is a highly desirable commodity widely used in medical research, semiconductor manufacturing, space exploration, fiber optics, nuclear power generation, and other advanced technology sectors, as well as arc welding and rocket propulsion.
"In our view, Western Canada is one of the most attractive jurisdictions to explore, produce, and develop a booming helium industry."
—Christopher Jones, Haywood Securities
Haywood Securities analyst Christopher Jones, in a recent industry report, noted that the combination of the 2018 drawdown of the U.S. helium reserve along with demand growth has "driven some remarkable price increase to this important commodity. With the price of helium at ~US$300/Mcf for producers (50x that of natural gas) even small amounts or low concentrations can be highly economic." Industry research predicts helium demand to "at least sustain the growth it has experienced over the last decade ([compound annual growth rate] of ~5%) through 2030."
Jones noted that there have not been any new helium supply sources in North America for years and that most of the new supply will come from geopolitically unfavorable areas. "This has created an opportunity for Western Canadian producers to fill the void," he stated. Most helium is produced as a byproduct of natural gas, but Western Canada boasts non-hydrocarbon sources of the gas.
"In our view, Western Canada is one of the most attractive jurisdictions to explore, produce, and develop a booming helium industry," the Haywood report stated. "Of note, in 2021, helium was declared a critical mineral in Canada which means it is considered essential to Canada's economic security."
Haywood counts six publicly listed helium pure plays active in North
America: Desert Mountain Energy Corp. (DME:TSX.V), Royal Helium Ltd. (RHC:TSX.V; RHCCF:OTCQB), First Helium Inc. (HELI:TSX.V), Avanti Energy Inc. (TSX-V : AVN.V), Imperial Helium Corp. (IHC:TSX.V; IMPHF:OTCQB), and Global Helium Corp. (HECO:CSE), along with the privately held North American Helium Inc.
The Canadian province of Saskatchewan is actively promoting helium production and recently announced an initiative to supply 10% of the world’s helium supply by 2030.
The Saskatchewan Ministry of Energy and Resources outlined its plan for the province to become a world leader in helium production and exports over the next decade in its “Helium Action Plan: From Exploration to Exports.”
Canada ranks fifth in the world in known helium resources, with considerable underground reserves in Saskatchewan. The “Helium Action Plan” provides policy and program commitments to support and grow the entire helium value chain, with a focus on exploration, production, innovation, processing, and export infrastructure.
To further aid the vigorous helium industry, the provincial government also has expanded the Saskatchewan Petroleum Innovation Incentive (SPII) to include helium projects. Administered by the Ministry of Energy and Resources, SPII offers transferable royalty/production tax credits for innovative Saskatchewan projects at a rate of 25% of eligible costs, including capital and operating expenditures, up to a maximum of CA$5 million in credits.
Additionally, the Oil and Gas Processing Investment Incentive (OGPII) provides qualified Saskatchewan infrastructure projects with a 15% transferable royalty credit, based on capital expenditures, up to a maximum of CA$75 million in credits. The program targets a broad range of innovations deployed across all segments of Saskatchewan's oil, gas, and helium industries.
The unique geology of Saskatchewan allows for an environmentally friendly extraction of the commodity. Dedicated wells yield high concentrations of helium while generating a low greenhouse-gas-emissions profile. This impact is up to 99% less than in other helium-producing areas.
The booming helium industry also is projected to provide significant economic benefits to the region, including more than 500 new permanent jobs, plus thousands of service and construction jobs, while generating more than CA$500 million annually in helium exports.
"In Saskatchewan, helium exploration and production are leading to more wells, more jobs, more facilities, and, ultimately, more exports," Energy and Resources Minister Bronwyn Eyre said in a press release. "We have high helium concentrations in the province and some of the most attractive geology in the world for low-emission helium production."
Of the seven pure-play helium companies that Haywood listed, Royal Helium and Global Helium hold properties in Saskatchewan.
Royal Helium is playing a leading role in the sustainable development of Saskatchewan's world-class helium resources, alongside neighbors North American Helium and in concert with the government of Saskatchewan, President and CEO Andrew Davidson said.
North American Helium opened its CA$30 million Battle Creek helium purification facility, the largest in Canada, in April 2021. This plant also qualified under the provincial OGPII. Global Helium controls more than one million acres in Saskatchewan.
"This is a tremendous opportunity for Saskatchewan to become a major supplier of helium, which is critical for healthcare and high-tech industries both locally and around the world,” Davidson said in a press release.
In 2021, the Saskatoon-based company announced a significant helium discovery at its Climax project, which has the potential to be one of the largest helium discoveries in Saskatchewan’s history.
The company controls more than one million acres of prospective helium land in southwestern and southeastern Saskatchewan. Royal's properties are in proximity to existing helium-producing locations—and, more important, are near existing transportation and petroleum-processing infrastructure.
Imperial Helium's first helium well recently began producing in Alberta; Avanti Energy has land holdings in Alberta and Montana and is preparing to spud its first well.
Desert Mountain has spudded and tested two wells in Arizona.
1) Hal Walter compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None. His company has a financial relationship with the following companies referred to in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Imperial Helium Corp. and Royal Helium Ltd. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Royal Helium Ltd. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
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Disclosures from Haywood Securities, Nov. 10, 2021
This report is intended for institutional investors and may only be distributed to non-institutional U.S. clients in the following states: nil. Otherwise, this report may only be distributed into those states with an institutional buyer state securities registration exemption.
Analyst Certification: I, Christopher Jones, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer's shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Of the companies included in the report the following Important Disclosures apply: N/A