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I think the relevant clarification is that they’re open to both “Suitable investors and joint venture partners”

I don’t think there are any surprises here. It’s a suitably optimistic but cautious outline of the prospect, which remains to be proved, if the further appraisal is successful in converting contingent or prospective resources to proven reserves. They’re looking for a partner to share in the risk/reward of further appraisal (i.e. to put up enough money for data acquisition, drilling and testing in exchange for equity of priority credit before knowing the outcome). The field development concept and plan with potential well locations was previously published in the CPR.

That includes a cash flow report.

Accounts are made up to end June but AGM is in December, keep up. HE1 can’t make production announcements about Galactica because they’re not the operating company but they have to share operating disclosures in RNS. BNL’s next activity and earnings report will be due end of June for Q2.

Brad - who mentioned ramp up end of May? And if they did wouldn't that be Friday 29th?

Previous announcements have trailed transition to 24/7 helium processing, with the planned schedule for CO2 production, and additional well tie in, by end of H1 2026, so that’s end June. Would certainly expect a production update by then as its BNL quarterly update and HE1 financial year end.

Why would there be an update on Friday?

It will be a very significant asset if they can prove the remaining piece in the appraisal puzzle. If their hypothesis is correct that higher gas water ratios can be tapped from the basement faults with better data or well engineering then that would be a game changer for the asset value. The proposed farm is for an industry partner to help them prove the licence value with a bookable reserve. Discussion of production or sale value comes later.

My point was just that the value of the project asset won’t be framed by HE1’s past costs (the notional $60m) but by proving reserves in the ongoing appraisal stage, which is what the farm in is intended to fund. Presumably they’ll want to keep the % equity release to an absolute minimum as the project would be worth far more if proven. Just enough to fund the next step, and perhaps a mix of debt+equity+incentives

Yes it’s a project vehicle farm in, like HE1’s farm in to the Galactica Pegasus project. It may involve debt+equity, there may be royalty or first refusal options on participation in future production or field development (like HE1 have on BNL’s licence areas in Colorado). But at this stage it’s about the appraisal stage not production, hoping to convert contingent resources into proven reserves. Proving the project would unlock its asset value (at which point they could choose to either develop it or sell it).

It’s possible that some of the sunk cost might be capitalised/amortised towards tax deductions but the government 17% free carry participates in any upside with a clean sheet.

It’s not government investment. The government has not claimed any investment equity in Songwe Helium. The $60m mentioned in the Ministry press pack represents the amount ‘already’ invested by HE1 and associated companies over the past decade (on seismic, logistics, drilling, testing, licensing, etc). It’s non-recoverable sunk cost. That seems to be misreported in some secondary media outlets as government investment.

No, the 17% is the ‘minimum’ free carry the government are entitled to by law without making any investment. If they chose to invest in the project or supportive infrastructure then they could argue for up to 50%. They didn’t. The comment refers to the amount so far invested in the wider project by HE1 over the past decade or so.

Following the two completed fund raises, this is what we're waiting for new details on...

"Stage 2: Galactica-Pegasus Expansion

...Following optimisation of the plant settings established during Stage 1, operational focus will turn to optimising existing well and gathering system flows and planning and permitting additional wells.

A further 20 to 30 potential drilling locations have been identified within the greater Galactica-Pegasus Project area. Future infill and expansion drilling will consider strategies for both the Upper and Lower Lyons formations, with the JV parties evaluating the sequencing and prioritisation of future drilling to maximise efficiency, production scalability and resource recovery. This multi-staged approach allows for efficient capital deployment and leverages operational learnings from the Pinon Canyon Plant.

Based on the performance of the Pinon Canyon Plant and ongoing appraisal drilling success, the JV parties will also assess the potential for establishing additional processing facilities at multiple new locations to develop the extensive resources within the broader Galactica-Pegasus Project area. All production forecasts and commissioning timelines remain subject to final engineering, regulatory approvals, equipment availability and market conditions."

The key information pending is how they're spending all the capital that was raised from BNL and HE1 shareholders to accelerate the project development and capitalise on current market pressure. Presumably they had a plan before raising the cash. The priority is to bring the CO2 on stream (planned before end June) and bring the processing plant closer to its capacity for helium processing (by drilling new infill wells or extending the field north). One or both of those news items should be due imminently.

Prior to drilling, the project had a CoS of 10-14%. They’ve significantly derisked that with the discovery and flow testing, but they don’t yet have proven helium reserves so it’s still an ask for an industry partner to invest millions in the remaining risk in hope of success. The CoS seems to hang now on the company’s basement isolation hypothesis (whether the water dilution/porosity was a well engineering problem or a geological problem), and the chances of avoiding that problem when drilling future wells in other locations. We don’t know exactly what the data room shows or what the proposed farm in work programme is (3D seismic? Deepening Tai or Itumbula? A new appraisal well? Multiple sites? Etc). The value of the asset rests on proving it so the JV on offer would likely be limited in scale to preserve maximum equity until proven, maybe a debt+equity consortium with partner options to participate in future development if successful?

The TZ funding for ‘small scale’ miners means those with a primary mining licence (PML), typically requiring capex under $100k, so it wouldn’t apply to a big project like HE1 in Rukwa.

If I was Clive Carver, I might be looking back to the example of Heritage Oil in Uganda, who also acquired their frontier basin acreage early, took high geological risk, proved it commercial, then cashed in on its high strategic value to Tullow. All HE1 need really is enough of an appraisal shot a this stage to prove it up and then let others run with it.

They do for sure, although the current regulatory context in Tanzania is pretty assertive in preserving local content as far as the mining sector goes.

Not necessarily, but we know HE1 have pursued informal discussions with potential partners for a long time so they aren't starting from scratch and will be pursuing established leads. Appointing advisors is a significant step and I doubt they'd be incurring that cost if they weren't optimistic about leading to negotiations. Appointing PVE rather than some boutique/AIM outfit looks significant too and maybe that suggests a search for competing parties or consortium rather than just a stitched up investment agreement.

Based on trade data and HE1 disclosures, HE1 (Njozi) have mostly imported oilfield equipment from US suppliers, high-value engineering from the UK, logistics and oilfield services from Kenya, hardware from RSA etc. There have been equipment and systems from China (we know about the ESP supply), and they also used UEA as an import intermediary (which could mask Chinese stuff). Suppliers include Baker Hughes Oilfield Operations, Geo Associates, Bentworth Energy Kenya, CenerTech-related service/equipment providers, as we know. If there was Chinese interest then it might follow the known pathway from equipment supply and technical services to engineering a pilot, financing/EPC and equity participation or off-take agreement. That might make CNOOC/CenerTech a candidate, given their participation already, although Sinopec might have a better fit for helium extraction? But you could equally just have a structure involving the Tanzanian banks for equity/debt and simply contracting with CNOOC/Sinopec to supply engineering and services. If I understand the local content rules correctly, I think Songwe would probably need to offer the TZ banks participation in any project finance model anyway (on terms approved by the government) so I'd be surprised if it was a simple as a 'Chinese' JV.