Blue Star’s initial helium resource could be the tip of the iceberg
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Special Report: Blue Star has a prospective helium resource and plans to kick off drilling to unlock its bounty, which could in turn open up the rest of its acreage.
Helium, traditionally a by-product of natural gas production, is used in a variety of critical modern technology applications but global supplies are dwindling.
This has sparked a growing trend towards exploration and production focused primarily on helium content, rather than hydrocarbons.
This is exactly the route that Blue Star Helium (ASX:BNL) is taking. The explorer recently presented an independent prospective resource estimate of 3 billion cubic feet (Bcf) of helium for its first two prospects in Colorado.
While the typical natural gas investor will scoff at a 3 billion cubic feet resource, the number is incredibly deceptive given that the helium is a great deal rarer than natural gas.
It commands an eye-popping $US280 ($400) per thousand cubic feet, the last published price from the Bureau of Land Management auction.
At this price, which has historically served as a “defacto” crude price for plant-gate helium sales, Blue Star’s resource would be worth a very tidy $US840m.
The Enterprise and Galileo prospects are also considerably de-risked by their location within a fairway proven by the Model Dome helium field, which produced gas with grades of up to 8 per cent helium before it was acquired by the federal government for its strategic reserve.
This helium content outstrips the 0.5 per cent to 1.1 per cent helium content of the Cliffside Field that formed a key part of the US Natural Helium Reserve and Bayu-Undan gas field, which has a helium content of up to 0.3 per cent.
And it gets even more interesting.
Enterprise and Galileo may well be the tip of iceberg given that they cover just a small part of Blue Star’s landholding, which stretches over 120,000 gross acres (65,000 net acres) that host nine other prospects and numerous other leads.
Not only does this present the possibility of further increasing the company’s helium resource, the large landholding also highlights the leading position that the company has carved out in Colorado.
Recent bids in auctions for Las Animas County land have increased tenfold, highlighting the growing interest in the region.
Once all relevant permits are approved, Blue Star currently plans to drill one well at the Enterprise prospect as soon as possible and is currently preparing to stake out the well location.
It estimates that drilling will cost $US300,000 on a dry hole basis.
Should the first well discover helium, Blue Star intends to conduct a log evaluation and well testing program. This could be completed as a producer if commercial rates of helium are indicated during testing, which would add about $US100,000 to the well cost.
Success will also lead Blue Star to advance additional prospects on its acreage towards drilling.