Royal Helium advancing on several fronts in SK and AB, announces bought deal financing
By Brian Zinchuk
SASKATOON – Royal Helium Ltd. published a substantial update on April 24, announcing ongoing plans for further helium development in southern Saskatchewan and Alberta, as well as bought deal financing to pay for some of those plans. It’s also got a buyer purchasing all of its helium production from the company’s Steveville, Alta., facility, its first production plant.
On April 24 Royal Helium Ltd. (TSXV:RHC) (OTCQB:RHCCF) announced that it has entered into an agreement with Research Capital Corporation as the lead underwriter and sole bookrunner, on behalf of a syndicate of underwriters, pursuant to which the underwriters has agreed to purchase, on a bought deal basis, 66,667,000 units of the company at a price of $0.09 per Unit for aggregate gross proceeds to the company of $6,000,030.
Testing the Royal Helium Climax-3 well in July, 2021. Photo by Brian Zinchuk
Each Unit shall be comprised of one common share of the company and one common share purchase warrant of the company. Each warrant shall entitle the holder thereof to purchase one common share at an exercise price of $0.12 per common share for a period of 36 months following closing of the offering. In addition, the company will use commercial reasonable efforts to obtain the necessary approvals to list the warrants on the TSX Venture Exchange.
The net proceeds from the offering will be used for new high-impact drilling on the 40 Mile project in southern Alberta, development through the Saskatchewan helium corridor, completion and testing of an existing discovery at the Ogema project, working capital and general corporate purposes, the company said.
The company has granted to the underwriters an option to increase the size of the offering by up to an additional number of units, and/or the components thereof, that in aggregate would be equal to 15 per cent of the total number of units to be issued under the offering, to cover over-allotments, if any, and for market stabilization purposes, exercisable at any time and from time to time up to 30 days following the closing of the offering.
At the time of the announcement, the closing of the offering was expected to occur on or about May 1, 2024, or such other earlier or later date as the underwriters may determine. Closing is subject to the company receiving all necessary regulatory approvals, including the approval of the Exchange to list, on the date of closing, the common shares, and the common shares issuable upon exercise of the Warrants and the underwriters’ broker warrants, on the exchange.
In connection with the offering, the company intends to file a prospectus supplement to the company’s short form base shelf prospectus dated September 28, 2022 following pricing of the offering with the securities regulatory authorities in each of the provinces and territories of Canada (except Quebec).
Steveville Helium Purification Facility, Alberta: Ramping up and continuing sales
Since officially coming online at the end December 2023, Royal has delivered 9 trailers of high purity helium to its end customer in the aerospace and defence industry. Royal noted, “As a reminder, this customer has entered into offtake agreements with Royal to purchase all of the helium volumes from this flagship facility; these two offtake agreements are at an average net sales price of approximately USD $500 per mcf or approximately CAD $700 per mcf. Given the increasing demand for purified helium, Royal Helium anticipates a robust pricing environment for the foreseeable future.”
Royal Helium said it is continuing to ramp up its throughout volumes through the plant site and steadily increase the number of helium trailers leaving the plant gate and is expected to reach an optimal run rate capacity volume over the coming months.
“The processing facility at Steveville is being fed by highly productive Devonian horizons that will provide material cash flow to Royal through the offtake agreements that are already in place,” the company said.
The Steveville plant is designed to process 15,000 mcf/day of raw gas fed by the two 100 per cent owned helium wells at Steveville, Alberta and produce 22,000 mcf of 99.999 per cent helium per year. The engineered life of the plant is 25 years, produces enough fuel gas to power the plant itself, and is capable of producing up to 22,000,000 pounds of commercial CO2.
The facility captures more than just helium, however. Royal has also recently entered into its first offtake agreement for the sale of food and beverage grade CO2 from its Steveville facility. This initial CO2 offtake agreement significantly expands the overall economics and cashflows of the plant facility with this new offtake to primarily serve markets in the Pacific Northwest Region of the United States, the company said.
40-Mile Project, Alberta: High Impact New Appraisal Drilling
In 2023, Royal acquired its newest project area in southern Alberta. Acquired under a seismic option agreement with an independent private vendor, the 40 Mile project is comprised of 7,000 acres and boasts one historic well that was drilled, flow tested and assayed. “This well flowed at exceptionally high rates during initial testing and returned helium concentrations exceeding anything that Royal has tested or produced to date,” the company said.
Royal completed seismic work at 40 Mile in 2023 and has multiple seismically defined drill targets across multiple prospective zones. Royal plans to drill a “high impact well” on the 40 Mile project in H2 2024.
Climax/Cadillac: Core Project, Saskatchewan: Developing in the Existing Helium Fairway
The core of Royal’s Saskatchewan lands are located within the prolific southwestern Saskatchewan helium fairway that features highly economic helium concentrations coupled with multiple helium purification facilities near its borders. Royal said its technical team has completed extensive geological and geophysical subsurface work in the Climax/Cadillac corridor and, with many new analog wells adjacently offsetting these core lands, the team has identified and selected numerous new drilling targets among these three project areas.
The amount of drilling and testing data available in the area has helped verify Royal’s subsurface model and has enabled the team to understand the different Helium play types that are found in Saskatchewan and more importantly on Royal leasehold, the company said.
Royal has several seismically defined drilling targets in the Climax/Cadillac corridor that it intends to drill in a follow-on program to the initial drilling already completed.
Ogema Project, Saskatchewan: Testing of an Already Drilled Discovery
The Ogema project in south central Saskatchewan comprises more than 60,000 acres and is home to the eastern most helium wells drilled in Saskatchewan. Drilled in 2021, Royal received helium concentration tests results of 0.60-0.70 per cent. The company now intends to complete and test the newly acquired rights to the Ordovician Red River formation within the wellbore with the view of making a production and plant decision, once final testing of both concentration and flow rate have been completed.
The Red River formation in south central and southeastern Saskatchewan has long been a prolific oil and gas producing formation that boasts helium prospectivity with numerous shows across the province, Royal said. This formation has returned some of the highest concentrations of helium historically in Canada, with test results as high as 2.45 per cent.
Strategic $25 Million Joint Venture and Economic Partnership with Sparrow Hawk for New Multi-well Development and Plant Construction on the Val Marie Project in Saskatchewan
As announced on April 16, 2024, Royal Helium has entered into an economic partnership with Sparrow Hawk Developments Ltd. to develop the Royal’s next core area for helium production. Under the terms of a signed Economic Participation Agreement and letter of intent, Sparrow Hawk Developments Ltd. will fund $25,000,000 into the drilling and completion of new wells (drill, test and tie-in 4 to 5 new development wells), as well as the construction of the associated helium purification facility. Pursuant to the agreement terms, Sparrow Hawk will have an approximate 57.5 per cent non-operating working interest in the wells and an approximate 46 per cent non-operating interest in the processing facility. The Val Marie helium project comprises a 32,000-acre, 21-year lease land package representing approximately 3 per cent of Royal’s current helium permit and lease lands across Saskatchewan and Alberta. Royal Helium will operate the newly constructed plant facility and multi-well development.