The province of Saskatchewan has been the beneficiary of one resource boom after another in recent years. Agricultural commodities have always been part of the story. Conventional oil-and-gas production remains significant. Massive coal fields and potash deposits supply steady output of these essential resources for worldwide markets. Saskatchewan is also a global leader in uranium production with some of the richest uranium deposits in the world located in the Athabasca Basin.
Benefit from another Saskatchewan resource boom
What you may not have been hearing as much about is the development and production of helium currently underway in the province. Helium is an inert gas that is essential for health-care, aerospace and numerous technological applications. Several countries, including Canada, have designated helium as a critical resource. The worldwide market for helium is relatively modest with much of the current supply coming as a byproduct of natural gas production.
However, similar to conventional oil-and-gas resources, helium also accumulates in natural basins underground within favourable rock units. Some of the most prospective geological formations for helium are located in southern Saskatchewan.
Like many other essential resources, the market value of pure helium has been trending higher. If you need it right now, expect to pay upwards of US$600 per thousand cubic feet (mcf) wholesale and up to US$2,000 per mcf retail. Demand is also trending higher, which suggests the bullish price outlook may remain a factor for a long time into the future. Despite the high value for helium as a commodity play, there are very few companies active in this subsector.
The opportunity for exploration and production of helium resources is attractive and Saskatchewan has rolled out the proverbial red carpet with incentives to support this emerging subsector. To encourage exploration activity, help kick-start the industry and create new jobs, the province offered exploration licences for large land holdings that could be acquired for attractive costs. These property rights, covering some of the most favourable geology for potential helium basins, also include attractive land retention terms.
The province offers an initial three-year exploration term requiring certain minimum capital expenditures and payment of annual lease rentals, with the option to extend ownership for over 20 years at a nominal cost. Royalty payment commitments are also extremely low in situations where a new gas field is developed through to production.
A new kid in town
A recently-listed junior explorer, Helium Evolution Inc. (TSX/VEN—HEVI) was established with the singular focus of participating in this burgeoning play. While the company itself is a new player, the management team is stacked with seasoned professionals from the Saskatchewan energy sector.
There has been a steep learning curve nonetheless. HEVI has been working for more than two years to secure an enormous land position and prepare its exploration strategy. Strong contracts within the industry have enabled the company to secure a premium drilling rig and service contractors. All of the fundamentals necessary for a successful exploration effort are now lined up.
Plenty of space to roam
The company controls an eye-popping 5.5 million acres of permitted land in Saskatchewan. This is the largest helium land package of all the public companies active in this space. Some of the land rights are immediately adjacent to established helium basins controlled by industry-leading helium player, private company North American Helium Inc., which is producing helium and has three commercial helium plants currently online. In June 2022, HEVI entered into an agreement with North American Helium for a proposed farm-out on HEVI’s lands.
North American Helium will fund 100 per cent of the drilling costs for five wells to earn an 80 per cent interest in the land and wells. Concurrent with this agreement, the company raised $8.5 million through a private placement, under which North American Helium committed a strategic investment into HEVI of $3.5 million.
Mike Kachanovsky is a freelance writer who specializes in junior mining stocks and also covers technology companies.
This is an edited version of an article that was originally published for subscribers in the July 1, 2022, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
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Investor's Digest of Canada •8/11/22 •