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@xvoilet, yes but its not green Helium being linked to fossil fuels.. As the demand for fossil fuels drop so will their helium production... Listening to what DM has said, Rukwa alone could supply 10-15% of the worlds demand for the next 100 years, it would be an nice addition to Qatars portfolio.. Coupled to their current helium production, plus the flexibility of He1 helium production to ease or squeeze demand, could give some control over pricing well into the future..
All speculation though...But then He1 could go it alone, or whatever...
@Glib, I thought the rig was upgraded courtesy of MM, upgraded to appraisal drilling capabilities, so no need to source another after the exploration phase...
@smallfishbigpond
As I recall, HE1 were actually going to go with a smaller rig at the start, but Mitchell said that this larger one was available, which would save us money in the long term as it was suitable for appraisal drilling. This upgrade was what resulted in the last placing. It was more powerful and would ensure we got to depth, so it was a case of the wrong drill, but not as a result of not spending money.
@DirtyDozen13
Of course you are right that the true value would be greater further down the line with significant volumes being extracted but every man has their price;
If Total turned round and said to Ian we are going offer £2 a share, that would give you £22m to go now and DM would get £500k but we will give him a £1m a year over the next three years as earn out deal to support the transfer. Are you saying they would say no? Might be further negotiation and adjustment but a deal would be done imo.
Also the majors need and are active looking for green plays, the level of interest here will be huge, step one is to prove the extractable volume then deal time imo
See how it works out
Mitchell Drilling are a highly respected drilling company, but their speciality is in mineral drilling, not oil & gas. They do not have O & G rigs. I suspect that the original decision was made on the fly, in the belief that the drilling depth was not nearly as far as most O & G reservoirs, so a small bore mineral rig would work for a low cost. With the benefit of hindsight, that was clearly the wrong decision.
HE1 now have a significantly enlarged team that includes O & G specialists, which rather oddly it did not last year. I think they have learned a lot from the mistakes, and that the problems were all engineering issues. not geological. With a proper specialist rig and team, guided by improved seismic integrated with what looks like fantastic MSS data, I am very confident that we will see a successful drilling campaign later this year.
I re-confirm my belief that serious partnering or sale discussions will not start until after a discovery.
qatargas
already in helium biz.
Fish,
Who knows, its still a speculative binary stock. The key is not to over commit and then it really starts to not matter what the result is. Once the individual is in that happy place then its far easier to be objective and make better decisions.
Greed & Fear normally does it every time though....
Good luck
Well done Keith .. a well researched post instead of often crazy speculation here ... in many ways Bradda Head Lithium (who Ian Stalker is also non executive chairman of) are quite similar projects and both Bradda and Helium one have had blinding starts to this year on their share prices. It's always a gamble investing in early stage mining companies as it's s-hit or bust so to speak ... when people start talking about this instantly being worth several £s as a share price you worry about their strategy but at the end of the day we're all just gambling on stocks like these as they are high risk. Cheers
Wyndrum
I was in at 5.5p but ended up with an average of 10p. Made a wee bit after cashing out. I’ve been keeping an eye on H1 ever since.
It seems to me that this time around all the stops are being pulled out and nothing is being left to chance. Makes me wonder why all this research and diagnoses wasn’t done first time around. If it was down to money they should have done a bigger raise than they did,
We had a saying in the Army. It’s called “the 5 P’s”
Perfect Planning Prevents Pi** Poor Performance.
Pity DM and Mitchells hadn’t heard of it before they started drilling.
I do think they have a better chance of hitting the jackpot this time with the MSS and all the data they have from the first time around but they need a JV or major on board to get to the production stage. Long way to go, let’s see where it goes.
Fish,
Given none of iu know its only going to be conjecture but fwiw (and its not much), I think it was down to money.
You don't know exactly what the conditions will be several thousand meter's down so in an effort to save money on an over sized rig, they went for what they thought would just about do it, allowing more money for more drills in other areas.
So i would think it was a joint decision between DM and the Rig people that almost by the looks of things paid off, but then failed at the very last hurdle.
Shame....
Reading through the posts this morning I’ve picked up 2 interesting points. The first is from Glib at 04:10 this morning.
Basically Glib said when the rig was announced he checked to see the spec’s but he didn’t think they had any rigs that drilled deeper or with a larger bore. If that is correct then it makes sense that we would be getting a different contractor.
If that is true about the rig then it sound to me like Helium One needed the bigger drill but went with what was left on the shelf basically. So that’s like going to a one of those tool/plant hire shops and asking for a SDS drill with a 200mm x 18mm drill bit and coming back with a hand drill with a 75mm x 6 mm drill bit.
So, again, IF that is true why have Mitchell drilling not advised DM that they would be drilling with the wrong rig?
Like Porky9 said in his post at 07:00, Mitchell drilling are a fairly established rig provider in this region so I might be wrong, but I can’t see DM just going for another firm for the sake of it that’s similar to Mitchell.
If they are fairly established rig provider in the region, surely they would know the size of the rig required to drill for gas, do we agree or am I wrong?
This then begs the question who’s decision was it to drill with possibly the wrong rig?
Did Mitchells advise DM that the rig was suitable or did DM ignore their advice and gambled with shareholders money with possibly wrong rig?
Just my thoughts from what I’ve read off the board this morning but I would like to know the facts about the drill.
@KeithOz raises some really good points
Personally, as I stated before, whilst I can see merit in extracting liquid Helium from this resource in phases, I’m still of the opinion that a JV with a Major or an outright sale to a Major is the way forward.
For me it’s the sheer scale of this project. I mean come on you are probably talking about 144 rigs or more across this basin, you are talking a vast area here. You can see from the satellite images the Helium is literally oozing out of the ground in some parts, so its clearly a case of having rigs situated in the right places to meet the main seams.
DM highlights in the recent interview that apart from HE1 having a busy quarter the next move is that having the team analysed and reviewed the data he intends to: -
* Talk about 2D Seismic Results
* Bring some of that detailed information to SH
* Signing an MOU with a rig provider
And moreover, Confirming in DMs words
“What we’re drilling, where we’re drilling, who we’re drilling with & When we are drilling”
Now as far as I understand it, they recently closed off the position with Mitchell Drilling. They are a fairly established rig provider in this region so I might be wrong, but I can’t see DM just going for another firm for the sake of it that’s similar to Mitchell? He was out recently in the middle east looking for support, he must have reasons for that. Which is why I believe ultimately a JV with a Major more likely.
That being said, I guess it’s valuing the asset is the first stage. If the team can accurately prove the volume of extractable Helium in the ground, then offers will be flying in.
As it stands Minchin himself only holds quarter of a million shares unless he has some other options, but the Executive Chairman Ian Stalker owns 10.9m so a fairly substantial holding. An offer of a few quid a share I’m sure a deal would get done.
This resource in the hands of a Major would be producing billions of values.
Could well get very interesting.
Keith,
Absolute brilliant posts. Couldn't agree more
Up until the final buyer. I think the US would defo be wanting to gain thier own helium reserve again as he1 has the potential to control the market. The US love to control to markets and with how hostile the world is right now, I personally believe a US government take over would be strategic in multiple domains.
But yes. A buy-out would seem almost guaranteed as he1 would be highly underfunded to go at it alone once a discovery is made.
My personal strategy here is to just hold.
Never invest anything you aren't prepared to lose and I haven't. It's make or break from a discovery and once a discovery is made.... we will see so much happen over the other 2 basins and with plants and contracts and probable buy outs that the sp after a discovery will only be the start.
I think people could potentially be looking at a 20fold here on discovery and many will leave.
I will hold for longer (providing I don't get cold feet haha) and I see the sp rising closer to my long lost poster treks (£5) prediction.
Again! This is my theory. And it is simply that.
Please dyor and have a safer plan than me cause I'm probably being over ambitious haha
Gla.
Tom
The country was heavily dependent on oil, that is..
There is a middle east state owned company, which was heavily dependent on oil based production until it moved into gases, DM knows who they are..
But I think they will be the biggest off-taker, after all 50m is not much for a production plant.
ADV just blew 20m on a duster...another 150m was required for production..
Too much production will flood the markets with Helium, so maybe 2 or 3 plants...
3 plants together producing about 1bcf/y would provide 10-15% of the global market
I believe it is inevitable that not only will HeliumOne receive a takeover offer, but that there will be a bidding war. I intend to hang on to every share until the HE1 board agrees a recommended offer. I'm not going to start speculating on a likely take out price, since I (nor anyone else) do not have sufficient information to do such a calculation. But I am going to speculate on potential bidders.
Government-related entities.
Tanzania – privatisation would be the worst possible option. Very unlikely since they know after the Acacia Mining debacle that would put off every single international investor, and Tanzania is desperately in need of such investment.
USA – the BLM reserve is almost completely depleted. The US has a list of strategic commodities that includes Helium, and it is unlikely that the US would be happy seeing HE1 bought by a Chinese company, but they do have new indigenous supply.
China – believe that they have automatic right to acquire any vital resource, especially in Africa, and especially if they can then control supply. A Chinese SOE is almost certainly waiting in the wings.
Oil & Gas companies
Obvious acquirers, since they can readily leverage their exploration, production & transport capabilities, and gain ESG brownie points for moving away from hydrocarbons. All the US and European majors have announced diversification targets, and some of the Chinese outfits (mostly SOEs) are already going down that road, particularly CNOOC, Sinopec & CNPC.
High Tech manufacturers
Semiconductors – Intel, Samsung, TSMC, plus emerging Chinese players.
LED/LCDs – LG, Samsung (again)
MRIs – Fujifilm, Siemens, Philips, GE, Toshiba, Hitachi, etc
Companies with vast server farms requiring supercooling
Google, Amazon, Netflix, Facebook, etc
Existing specialist gas distribution companies
Air Liquide, Praxar, BOC, LG (again), Samsung (yet again)
Others
Spacex, Blue Origin, Virgin Galactic (big users for tank flushing)
Any additions to this potential list are welcome. My bet is on an O & G major.
Part 1.
I've said all I can say with my geologist's hard hat on, until we see the latest seismic superimposed on the MSS data, which I think will be more than just interesting. So a comment today with my business development hat on, concerning speculation by a small group of posters here over a JV or sale.
DM, like us all here, has one overriding objective - to make as much money as possible. He has a simple problem - how to find enough money to develop Rukwa and the other two basins. Everyone knows this will take a lot of drilling, and a lot of infrastructure to start producing on a commercial scale, and that means a lot of cash is needed. So where will it come from?
First, how much cash? Suppose Tai-3 is a winner, and there is sufficient He to justify a modular production plant. Details of the capital costs ($50M + infrastructure) are found in Section 9.1 & 9.3 of the original SRK CPR in the prospectus:
https://www.helium-one.com/wp-content/uploads/2020/11/259989-Project-Apollo-CLN-reduced-memory-Final-13.11.20.pdf
Section 9.4 tells us that at a bulk He price of $250/MCf (it is now higher), profit would be in excess of $200/MCf. That's a nice little earner, and on its own would be an attractive investment to a third party. So if you were DM, would you try to raise $50m, or try to sell half or all of the project? To get the best price, you need to be as advanced as possible - proof of commerciality is worth far more than just the current exploration potential. It would make a lot of sense to get to the small scale proof of concept, before selling out to a major partner. Market cap is currently £70M / $94M. On a discovery, market cap could easily go well north of $200M, so raising $50M would not be a problem, and not desperately dilutive, considering the opportunity. This is the route I would choose. Interesting to note that our very well connected Chairman, Ian Stalker, is also the chairman of Bradda Head Lithium, whose 20% shareholder happens to be Jim Mellon, who is not short of a bob or two, and has a strong interest in tech-related mining companies.
To maximise our return, I think it best to first prove up commerciality, then open up negotiations to the big boys for developing the whole of the "Saudi Arabia of Helium". Who would be the joint venturer or purchaser? That was the subject of a post I did back in July 31st last year, which I will repeat below.