Helium One has provided an update on its Tanzanian helium operations and the completion of extended well tests at Itumbula. The company said the well tests were a major milestone and that it was looking forward to the next stage of development.
Investors will be pleased to see strong shows of helium during the tests.
The fractured Basement interval yielded a sustained average of 5.5% helium (air corrected), with peaks reaching 6.7%. Equally promising results were observed in the faulted Karoo Group, which produced a sustained average of 5.2% helium (air corrected), achieving a maximum concentration of 7.9%.
In terms of flow rates, the well demonstrated robust natural performance. Under current conditions, using a 36/64ths of an inch choke setting, the well achieved a maximum flow rate of 2,701 barrels per day (bpd) of fluid. This translates to approximately 834 standard cubic feet per day (scf/d) of helium.
The major constraint for new Helium projects is the cost to bring to production. Finding Helium is one thing; commercialisation is something completely different.
Although today’s announcement was broadly positive, the company has yet to confirm the commercial viability of the Itumbula West-1 project. The mixed nature of today’s update was reflected in mixed trading for Helium One shares, which started the day positively but were quickly sold into.
The company suggested they would have to employ a form of artificial lift to make the project economically viable. However, the company didn’t share the type of artificial lift being considered, leaving questions about how expensive the next phase of testing may be and how the artificial lift will impact the economics of the project.
The company also said financial modelling demonstrated positive ‘project economics with artificial lift and additional development wells’. The statement suggests that economic viability is conditional and requires an expanded work programme.
Investors won’t have to wait too much longer for formal evaluations with the feasibility study underway that will form Helium One’s mining application.