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pace Co. Signs Offtake with Helium Explorer

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One helium company operating in western Canada that's slated to launch helium production in Q1/23 just signed a helium offtake agreement with a 'space launch company' — and it might just take a rocket scientist to find out the name of its offtake partner.

If you’re a Royal Helium Ltd. (RHC:TSX.V; RHCCF:OTCQB) shareholder, life could soon become a real gas.

Royal Helium, a small cap helium exploration company with near-term production assets in the Canadian provinces of Saskatchewan and Alberta, just signed an offtake deal with a North American space launch company.

The supply agreement will start in 2023, which coincides with the Q1/23 production launch at the Steveville helium property in Alberta.

Steveville was added to the fold when Royal announced in early May that it would acquire Imperial Helium in an arm’s length, all-share deal. The takeover became official in late July.

Production at the Climax acreage in southwestern Saskatchewan is also slated for Q1/23. The combined throughput for both the Climax and Steveville plants is slated to be 20,000 million cubic ft (MCF) per day.

Hannam & Partners gives Royal Helium a risked Net Asset Value of CA$0.58 per share, a 48% increase from the CA$0.39 close on Aug. 26.

The helium in both reservoirs is carried primarily by nitrogen, which is not considered a greenhouse gas. This gives Royal’s operations a low carbon footprint, as most wells rely on natural gas to extract helium.

The name of the rocket launcher that signed the offtake was not divulged by Royal Helium but it’s likely to leak out in the coming weeks.

There are only a few companies in the space launch business, some of which are helmed by billionaire rocket men like Richard Branson (Virgin Galactic), Jeff Bezos (Blue Origin) and Elon Musk (SpaceX). The others include Arca Space Corp., Boeing, and of course, the National Aeronautics and Space Administration (NASA).

Pressure provided by expanding helium pushes fuel into the rocket engines at launch. The gas is optimal because it is inert, expands when heated and won’t explode – handy attributes you’re dealing with extreme temperatures in a volatile environment.

If helium wasn’t part of the process, the rocket fuel would not load fast enough and the engine would fail.

Royal Helium has exploration permits and leases covering 348,908 hectares prospective for helium in southwestern and southeastern Saskatchewan. The province has well developed infrastructure, and is virtually void of geopolitical risk.

Saskatchewan produces about 1% of world’s helium but the provincial government has its sights set on 10% by 2030 and as such has introduced further production incentives for helium producers. The government is also paying for a portion of the Climax plant.

In a report on helium published in late 2021, Haywood Securities Analyst Christopher Jones called Western Canada “one of the most attractive jurisdictions to explore, produce, and develop a booming helium industry… helium was declared a critical mineral in Canada which means it is considered essential to Canada's economic security."

Catalysts

 

Royal also announced that it has nearly finished engineering work on its helium processing facilities and is about to hand out contracts to builders.

Exploration drilling at Climax encountered 0.65% helium, while drilling at the company’s Ogema discovery returned 0.76%. Typically a commercial operation in Saskatchewan can be viable at 0.30% helium.

Royal Helium plans further drilling at Ogema once it receives the necessary permits.

Perhaps more importantly, the company has found a deeper, unconventional helium play at Climax called Nazare that is estimated to contain 2.5-6 billion cubic ft. (BCF) helium. Royal plans to drill a horizontal well to further test Nazare’s potential and derisk the resource.

A July 5 research report by London-based Hannam & Partners compares Nazare to the generous Montney shale that straddles northeastern British Columbia and Alberta and suggests that if Royal Helium were to define a 3 BCF helium resource at Nazare it could be worth more than CA$0.50 per share.

The current spot for helium exceeds $1,000/million cubic ft (mcf) — a 150% increase from $400/mcf Hannam & Partners uses in its base case modelling.

There is also potential for other commodities in the different shales such as hydrogen, methane and lithium.

Samples of brine water taken from the Climax-1 well, drilled in January 2021, demonstrated significant concentrations of lithium in brine, as much as 84.9 milligrams per liter. The company is now looking to secure the mineral rights for 60,000-hectare Climax, which would make it the largest lithium project in western Canada.

“Climax is set to not only become a cash generative helium play, but also now presents potential additional value to stakeholders with a lithium exploration and development project,” Royal Helium President and CEO Andrew Davidson said in a release.

The company is also seeking an AIM listing in London to boost liquidity.

Helium Demand Outlook

 

FutureMarketInsights.com reports that the helium market in the U.S. in worth almost $3 billion but will approach $5 billion within a decade.

The spot price for helium has skyrocketed in recent months and topped out above $2,000/MCF in May following a fire at a large helium development project in Russia, and ongoing issues at the U.S. Bureau of Land Management’s Cliffside Gas Field, a helium repository in Texas.

Forget Mr. Fredricksen’s helium balloons in Disney’s Up or the countless helium-enhanced voice gags on Tik Tok, the lion’s share of helium production is used to purge fuel lines in space rockets.

It’s also used in semiconductors, MRI machines, and in helium-filled hard drives used by companies like Netflix. These drives have 50% more capacity than a typical hard drive and run cooler so they’re cheaper to operate. And Tesla uses helium to detect lithium leaks in its battery banks.

Hannam & Partners gives Royal Helium a risked Net Asset Value of CA$0.58 per share, a 48% increase from the CA$0.39 close on Aug. 26.

Bloomberg reports that Royal Helium’s top 5 shareholders include Kyler Hardy with 2.72% of Royal Helium or 5.45 million shares; 49 North Resources with just less than 1% at 1.94 million shares; Jeff Sheppard, 0.70% or 1.4 million shares; TMM Portfolio, 0.4% or 911,152 shares; while Davidson owns 1.04% or 2.08 million shares.

At the end of the Q1/22 the company had about CA$4.5 million in working capital.

Royal Helium has about 206.6 million shares issued, with more half of those free floating. The company also has about 53 million warrants outstanding at an average strike price of CA$0.58. It trades in a 52-week range of CA$0.59 and CA$0.28.

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1) Brian Sylvester wrote 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 and 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.

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4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Royal Helium Ltd., a company mentioned in this article.




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