Member Info for Blubay

Just be aware that more money is stolen from retail investors on AIM by pump and dumpers than by shorters (and some of the chief pumpers on AIM are CEOs and brokers). DYOR make your own decisions.

I'm not going to do the maths but I'm sure IG will be relieved to learn that his IACX plant may be receiving somewhat closer to 10% than 3% helium gas, and so the stage processing should work out cheaper than his false assumption, maybe he'll invest ;-)

Yes, the dilution is achieved through HE1's reduced interest/share in the project and its revenue, rather than a reduced interest in HE1 for existing shareholders (i.e. no new HE1 shares need to be issued to achieve any amount of equity sharing in the project, no AIM placement is required). They might issue shares for other purposes but not for the purposes of establishing the shared equity SPV in TZ.

Of course there will be some split of debt and equity. Everyone knows this. For a start there will be equity split with the TZ government and there may be equity split for other investors. Why would this be a surprise? It's NOT equity in HE1, there are no HE1 shares involved, it's equity in the project venture company, which is precisely how that is supposed to work. I appreciate you're repeating yourself deliberately to undermine the investment case but at least do everyone the decency of not inventing stuff.

IG - the test and flow results so far exceed the expectations on which the commercial modelling was done prior to HE1's acquisition last summer, on which they will have done due diligence. Take the following example from BNL annual report to shareholders. Note in particular, (a) there is more helium flowing now than there was when HE1 acquired an interest in the project, (b) the gas flowing into the helium processing plant will be helium enriched at much higher % than raw gas because they are extracting the CO2 first!

"In May 2024, we commenced stage one development works at Galactica/Pegasus through the successful drilling of our first development well at State 16 SWSE 3054 (State 16).

State 16 returned a significant helium discovery with helium concentrations containing an average 1.65% helium from the lab, and up to 1.90% air corrected. Notably, this gas composition also consisted of up to 28.54% nitrogen and 69.56% carbon dioxide (CO2). At these CO2 content levels, we recognised both a significant and scalable opportunity to deliver

a valuable additional gas product to end-users in critical markets that are undersupplied with reliable, sustainable CO2 streams. Subsequent to the year end, the Company announced that further recent samples tested returned a helium increased concentration of 2.17%.

CO2 purification technology overlaps significantly with the processes necessary to harness high-grade helium. As a result, Blue Star is currently planning for the raw gas volumes from Galactica/Pegasus, from several proposed development wells will flow first into a CO2 processing plant prior to feeding what is then helium-enriched feed gas into a helium processing plant.

The scale of this opportunity to augment our projected helium revenues prompted us to add CO2 to our industrial gas portfolio in June 2024. It also warranted a reassessment of our existing assets portfolio for complementary CO2 opportunities."

I've no clue why you spend time reading discussions that bore you but interest others. It's a public discussion board, for public discussion, take it or leave it.

The current low share price reflects the current unknowns. If you think there's too many unanswered questions for your risk appetite then you'd be best to stay away and stick to the FTSE100. We could discuss the misunderstandings in your post but I don't think you'd be interested.

Yes, I'd imagine HE1 would transfer or lease the licence to the operating company, at least for the duration of the licence period, and to collateralise it. The opinion certainly points to non-recourse loans as a norm for mining project finance, which implies that the loans are secured by charge on the project asset or revenues but without recourse to recovery from the borrower or its other assets or revenues.

Hence I agree on the appraisal and CPR etc or something like it

The relevant part of the legal opinion is...

"In a typical Tanzanian project financing, repayment of the loan is made from the revenues generated by the sale of the end product of the Project. If the Project does not proceed according to plan, a lender may suffer a loss since the only recourse they will have is against the Project Company and the Project Company’s only asset is likely to be the Project. Although extensive security will be taken, the nature of project finance in Tanzania is such that it is unlikely that the security taken will provide full collateral for the amount of the loan. It is a typical non-recourse lending structure.

Given a lenders reliance on the success of the Project, the technical feasibility of the Project and its economic viability will be of enormous importance and extensive due diligence by a lender’s lawyers, independent consultants, accountants, engineers and insurers will take place. Therefore, the input of independent experts will be far greater at the early stages of a Tanzanian project financing than in a traditional facility as it is the success of the Project, rather than the scope of the security, which will be fundamental to a lender’s prospects for repayment."

I agree with the potential off taker sweetener investment as a possibility, but I think the typical mining project company structure in TZ is ringfenced in terms of debt liabilities etc, as per the legal advice in the article posted below. I may be wrong.

So, following that advice, we should expect...

HE1 will NOT be financing the development of the Southern Rukwa project, not by raising shares, not by taking on debt.

The Rukwa project will be developed and operated by a new company established in Tanzania for that purpose, in Tanzanian ownership shared between HE1 (via a local subsidiary) and the government. HE1 will be a shareholder in that company, hopefully a controlling share holder, receiving a share of the profits from that company, hopefully a majority share, but it will not liable for the losses of that company, which will be ring fenced by the company structure.

Any preliminary discussions between HE1 and funders will now pass over to the new company. The new company will seek loans to capitalise the project development, probably in phases, not all at once. The project company will likely seek to collateralise its loans against future sales, ideally by demonstrating commitment from a potential off taker at the outset. HE1 will not be liable for these loans, the new company will.

If the project makes a profit then HE1 makes a share of that, as they will in Colorado. If the project fails then HE1 loses face and probably market value, but is not liable for the debt or loss, which falls on the new company.

Investing in the new company is risky for the banks so the more HE1 can do to prove up the commerciality of the project then the more surety they can provide. Hence the appraisal phase they are about to enter is a critical first step. But that does not cost $100m, or anything like it, so don't expect them to suddenly wave the big cheque out of a hat. I don't think that's remotely likely. What they need is a significant pump priming loan or investment to fund phase 1 (just like the Colorado project). Hopefully, that also comes with a guarantor of off taker backing.

The results at Jackson 4 were good too, the business plan is based on combined processing of CO2 and helium, both of which are commercially valuable. If their weakest helium location flows more than 3Mcf helium free gas a day and maybe 25Mcfd CO2 then great.

WKW - that's right, but it's a different consideration. There will significant debt and/or equity share which ever way the cake is cut. No one can have the cake and eat it, which is what most retail AIM traders seem to want, massive investment and no debt or dilution. Either there is debt and dilution in the operating company or debt and dilution in the parent company. Is HE1 going to take on $100m debt liability for the Rukwa project when they can entirely ring fence that risk within the operating company? Of course not. Would existing shareholders vote to dilute 75% to raise $100m capex at discount (if the market would take it) when they could avoid dilution by splitting future profits 50-50 with a farm in partner (if one comes forward)? We have no idea what the splits might be of course but I'm pretty sure how the vote would go on this forum.

Fubar - HE1 do not need £100m. The total capex is closer to £75m ($100m). Nor do they need anything like that up front to begin the first phase of development. They can easily get started on appraisal and first stage development for a fraction of that, and it's not coming from HE1 anyway. The award of the ML is tied to the formation of a new venture company in TZ and that new company will be raising the capital for the project development, not HE1. I don't know why this is so hard to understand.

"In relation to Resolutions 5 and 6 – the Company understand shareholders have concerns about dilution and the board will therefore seek approval from shareholders for appropriate authorities as and when required in the future."

So, there should be no dilution this year unless shareholders agree that a proposal is worthwhile, and anyone who says 'placing this week' is making it up.

I don't think the Board has any current authority mandate to issue new shares without seeking prior shareholder consent, either for capital or options (following its withdrawal of those two motions prior to the AGM). That was intended to reassure shareholders I think but the message doesn't seem to have percolated very far.

That's right, "no less than the highest price paid during the preceding 12 months" (by that bidder or a member of their consort)?

Jock - nah, Rule 9 requires a mandatory cash offer to be at or above the highest price paid by that bidder or any concert party for any interest in shares of the relevant class during the 12 months prior to the announcement of the offer (not the highest price paid by any other buyer in the market in that period). But again, totally hypothetical in HE1's case.

Buy shares at or below 1p and sell them at 1.1p, rinse and repeat, gain 10% more shares each time. But that's entirely hypothetical as there's no evidence of any such declared voting rights. More likely to be range trading for cash profit or just MMs maintaining a market during a lengthy period of low volume demand.