Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Last of the mohicans: Some back of the envelope numbers for people to think about.
It is clear from today's interview that this is not a conventional discovery, so we can't just think of it as a normal oil & gas well. There going to have to generate there own data as they go & that includes stable flow rates / decline rates once in production etc.
There is then the issue of Cryogenic recovery verses PSA (Pressure Swing Absorption). Given the fact they maybe able to use the geothermal energy from the wells to create electricity, it also means the gas stream is going to be hotter. PSA recovery should therefore be cheaper.
I think there is a real case for them setting up a test facility, so that they can learn from it & get a good understanding of what the actual facility should be like.
Let's say one of the gas companies lends them $15M to install a modular 2 Million cubic feet a day PSA facility & gathering system with a Helium offtake agreement at $600 per MCF for the next 5 years.
The company then drills 5 new wells at $3M each back to back (which should lower the well costs). I'm going to assume each well is capable of supplying 0.5 Million cubic feet of gas a day.
They might need to buy a generator depending on how quickly they could get mains electricity connected & the cost comparisons.
All told they should be able to this up & running inside 9 month's.
I've used the following numbers Helium concentration 4.5% average, 1.5% Argon 2% Hydrogen.
Therefore the 2 MMCFGD of gas supplied to the PSA facility daily will contain 90 MCF of Helium, 30 MCF of Argon & 40 MCF of Hydrogen.
At $600 per MCF of Helium that comes to gross revenue of $54,000 per day.
Running cost's Electricity $100 per MCF of Helium is $9,000 per day, others costs for the plant including labour $70 per MCF of Helium or $6,300 per day. I've also allowed $500 per well as well $2,500 per day. Bringing the total daily cost to $17,800.
Next we need to deduct the 16% Government royalty (16% of $54,000 = $8,640) & a 4% tax (I believe) (4% comes to $2,160) which then total's $10,800.
Giving us a net daily cashflow number of approximately $25,400 or $720,000 per month or $9.271M annually for the Helium alone.
There would also be by-product credits for the Argon & Hydrogen although the Argon maybe as little as $600 per day net to us, unless it has some of the rare isotope which is worth $ thousands per MCF instead of the say $25 for the common form.
Once they work out the best way of harnessing the geothermal energy & yes having the above facility up & working would allow them to run tests along side it. The electricity cost would drop & boost our daily margin accordingly.
Then move onto a much bigger facility capable of handling say 20 MMCFGD & you'd be looking at net annual cashflow of over $100M.
Any response on here for this
GLA