10/06/2021 - 13:32

Blue Star Helium on the rise ahead of US drilling start

10/06/2021 - 13:32


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Leading ASX-listed pure helium play, Blue Star Helium continues to expand its landholding around one of the world’s highest-grade helium producing fields in Colorado, USA, ahead of its planned drilling start in the next quarter. The company has now more than doubled its tenure near the old Model Dome helium field in the past 12 months with its latest addition of nearly 33,000 net acres.

Blue Star Helium on the rise ahead of US drilling start
Blue Star Helium’s expanded leasehold position in Las Animas County in Colorado, USA. Credit: File

Another significant expansion of its acreage around Colorado’s historically significant Model Dome helium field has ASX-listed Blue Star Helium uniquely leveraged for drilling success later this year. The company, which says it remains on track to have its maiden drilling program permitted in the September quarter, has now more than doubled the size of its Las Animas tenure in the past 12 months.

Blue Star has now picked up leasehold land covering an additional 32,858 net acres of prospective Lyons Formation Helium Play Fairway in Las Animas County after a successful application process through the US Federal Bureau of Land Management.

The expansion gives it 173,000 net acres around the former Model Dome helium gas field that produced super high-grade 8 per cent helium concentrations and vertical well initial flow rates of 500,000-to-1 million cubic feet in its day. Blue Star has leases within about six miles of Model Dome including its large Enterprise block immediately to the west and is looking to test its theory that its ground is similarly well endowed with helium.

The company expects a final permit soon to drill its planned Enterprise 16#1 well. It then plans to drill a series of wells in a rolling strategy aimed at maximising the prospective resources tested.

Blue Star says expansion of its land position might have elevated its P50 net unrisked prospective helium resource by 39% to 13.4 billion cubic feet. P50 denotes a mid-range probability used in gas resource estimates. “Net” relates to Blue Star’s economic interest in any resources after accounting for royalties.

The resource target uses a 7-9 per cent helium concentration evidenced by the Model Dome helium field past production and by helium testing in the Govt Cynthia True#1 well on trend from Blue Star’s central Galactica, Argo and Pegasus lease areas.

The company has also done some petrophysical analysis of historical wells within the Galactica and Pegasus leases that produced “highly encouraging” results.

Management says: “The issue of these leases confirms Blue Star’s strategic leasehold position in Las Animas County, Colorado, at 173,000 net acres across a proven helium play fairway.”

“Helium charge is regionally proven as demonstrated by the Model Dome field analogue. Gas analysis for eight wells in the Model Dome area showed an average of 8% helium content.”

Blue Star also cites additional wells in the area where helium tests have reportedly shown the helium source and migration routes are widespread. One example, the Govt Cynthia True #1 well on an interpreted independent fault-bounded structure on the northern nose of the larger regional structure that hosts Galactica and Pegasus about 20km away, flow tested 8.8% helium.

The company says its petrophysical analysis on wells “associated with” and surrounding Argo, Pegasus and Galactica confirms the “presence and reservoir quality of the Lyons Formation sandstone to be consistent and as good as seen at the Model Dome analogue”.

Blue Star is seeking to permit multiple potential wells across its various Las Animas prospects on a rolling basis to give it optimum flexibility around well selection and responsiveness to drilling outcomes.

The company, which had more than A$4 million in the bank at the end of March this year, has estimated costs in the order of US$300,000 for test wells and US$400,000 for a producing well. Target reservoir strata are reportedly shallow at about 300m below surface.

An external research report produced on the company earlier this year suggested low-capital-cost, mobile processing units used to remove nitrogen and CO2 and concentrate raw helium gas streams for transport to a liquification plant or end-user meant any exploration success should translate readily into a scalable business.

The Independent Investment Research report noted: “If the resource grade is 4 per cent or more we expect Blue Star will be a low-cost producer with a business that is profitable throughout the helium cycle.”

Las Animas County has a mature helium industry and is well located within trucking distance to established liquefaction plants with material available capacity. Blue Star has described the US as the “centre of the global helium market and supply chain” accounting for 40 per cent of global demand.

The company’s Managing Director, Trent Spry tells BullsnBears helium prices are being buoyed by robust demand from traditional and growth markets. The gas is used to super-cool magnetic resonance, or “MRI” scanners, in semi-conductor manufacture, purging tanks on space launch vehicles and a host of specialty gas applications.

Mr Spry says: “The market is experiencing continued demand from the high-tech space, semi-conductors, hard drives, fibre optics, etc, which seems to be keeping prices strong.”

Blue Star’s share price was up about 3 per cent after the latest lease-expansion announcement and has drifted this year in the lead-up to the anticipated drilling start being delayed by the new US Government which placed a temporary freeze on some gas drilling activity. That suspension looks close to being lifted however on strategically valuable commodities such as helium.

Blue Star’s current market value is about A$48 million.

The Blue Star research report released in March this year said Toronto-listed Arizona helium explorer Desert Mountain Energy leapt last August from a market value of circa C$17 million to $78 million on the back of two drill holes that hit 4 per cent and 7 per cent helium concentrations.

Desert Mountain has a current market capitalisation above C$290 million.

The grades and market trajectory augur well for Blue Star as it prepares to drill near one of the world’s richest helium accumulations after quietly amassing the dominant helium land position in Las Animas County.

The Perth-based company has gone all in on its assessment that the helium market is set to move into the spotlight and if that assessment is right, it has set itself up with an enviable land position in one of the most prolific helium jurisdictions around the globe.

And with almost every country town and even some smaller cities in the western world clamoring for more helium-based MRI machines, there is at least one ready-made market for the product that doesn’t look like abating anytime soon.


Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au


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