Helium One Global Ltd’s shares (AIM: HE1, OTCQB: HLOGF) saw a significant rise, nearly doubling in value, in early July following the company’s announcement that it had procured a drilling rig.
With the rig now under its control, the company can proceed with drilling its promising Rukwa project in Tanzania later this year under its own conditions.
The rig market has been tight, making it challenging to secure the right type of equipment for their needs. As the new CEO since February, and former principal geologist for Helium One, Lorna Blaisse, understands these challenges well. The mixed results of the first round of drilling increased the need for a more reliable rig for the second round.
The company had previously announced plans to begin a new round of drilling by the end of Q3 this year. With the rig acquisition, this timeline is now achievable. The newly-acquired rig, designed for use in the oil and gas industry, will arrive at the drilling site soon, with expectations of drilling the Tai-C well in September.
Contrasting with the mining rig used previously, this new rig, having superior power, can drill wider diameter boreholes, which are more stable. The rig will drill an 8.5-inch diameter hole compared to the 3.5-inch hole drilled in the previous round.
Moreover, the rig is capable of reaching depths between 2,000 and 2,400 meters, but the company’s targeted Tai prospect is estimated to be around 1,200 meters deep.
The drilling plan includes 30 days of drilling, followed by the evaluation of results. This approach will likely yield more definitive outcomes compared to the previous drillings that took several months due to issues with the mining rig.
The preparation work includes crewing the rig, completing civil work, and preparing the wellsite, which includes road upgrades and setting up a camp near the wellsite.
Helium One is financially ready for the well, thanks to a £10mln fundraising effort last December, with enough funding possibly even for a second well.
Blaisse expresses the primary goal is to secure a discovery at Tai. The Tai-1/-1A well showed promise, although a full set of wireline logs couldn’t be run nor total depth be reached.
A successful discovery by Helium One could have significant implications. A report in May suggested the Tai location could hold up to 2.8bn cubic feet of helium, equating to half the global demand. There are other potential sites in Rukwa, though Tai is considered the least risky and the most promising.
The goal now is to commence drilling at Tai-C and see how the project evolves. If a discovery is made, it could attract significant investor attention and potentially result in a company re-rating.
Given the high global demand for helium, and Helium One’s position as the main helium explorer in Tanzania, a successful discovery could quickly escalate the company’s size and value. The transition from exploration to production is expected to be smooth, as Tanzania has proven to be a friendly jurisdiction for Helium One.
Production could potentially start within 18 months of discovery.
