RE: What is the overview?16 Oct 2022 00:38
Good morning Nigel, I hope the conversation on this board can proceed in a more adult fashion than on the PRD board :-)
First, let me try to answer your questions. Yes, this is elemental He, at a concentration of possibly up to 10%, combined with Nitrogen. I would expect this to be almost entirely 4He, since 3He occurs incredibly rarely on earth, and all the other isotopes have a half-life of less than one second.
The first hole, Tai-1, was an engineering failure as a result of using a small-bore mineral rig - this resulted in low drilling speed combined with high mud pressure, resulting in washouts that prevented lowering of logging probes. Plenty of He bubbled to the surface, but the well could not be formally declared a discovery since gas could not be measured at the actual producing horizons. HE1 were still reasonably happy, since they had confirmed He presence, and multiple working traps & seals. No equipment was left underground.
HE1 have a lot less than £10M left, since they have been performing extensive survey work and paying salaries since the last published results. They still have enough to do another drill on the Tai prospect, using a proper fit for purpose O&G rig, for which they are currently raising export/import documentation.
HE1's CPR gives 138BCF of He. I have sound reasons for believing that to be very conservative. The CPR uses a concentration of 4.4%, whereas surface seeps show 8-10%. Substantial seismic and other work has been done since then, over two seasons. This work has almost certainly increased both the area and potential depth of prospects, and provided further confirmation of seal quality. Re-drilling Tai with a proper rig is almost certain to enable HE1 to declare a discovery and a Contingent Resource for that prospect (5-10 BCF?), as well a de-risk the other prospects in the Ruwa area. Hannam & Partners have suggested a value of 25p per share for each 5 BCF. The 138 BCF is for Rukwa only, and does not include Balangida & Eyasi, where work has started this year.
Given the above factors, I see plenty of reasons for a post-Tai drill (Q1 2023) CPR to include anything between 200-500 BCf, some of which will be classified as Contingent. Helium market pricing is non-transparent, and you will see all sorts of wild prices claimed by folks with vested interests, but if you assume a reasonable ex-producer price of $250 per MCF, you will see that's a lot of in-ground value ($50Bn for 200 BCF). Bearing in mind the low capital and production costs of extraction, concentration & shipping to Dar-es-Salaam, it is easy to come up with a range of NPVs that make the current market cap of £40M look like a joke.
All that is necessary is to get the drill going - unfortunately there has been a whole chain of delays which has depressed the share price. That looks set to be resolved very shortly.
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