Blue Star Helium has thought long and hard about the initial Plan of Development for its Las Animas Helium Project in Colorado, U.S.A, eventually settling on a leased and third party operated plant option.
The company expects that the Voyager and Galactica/Pegasus facilities will be permitted in parallel – with a final decision on the Galactica/Pegasus plant configuration expected during H1 CY2023.
The leasing option involves a midstream company supplying and operating the facility for the company in return for a monthly lease payment.
This solution is attractive as it minimises Blue Star Helium (ASX:BNL) up-front capital commitments while still delivering highly attractive returns, enabling low-risk access to premium-priced spot helium markets, and bringing an experienced helium facility operator to the company’s first development.
The confirmation of the Voyager process facility lease agreement with a mid-stream operator is expected in Q1 CY2023.
Targeting premium pricing
The company’s first helium output and sales are targeted for H2 CY2023 from Voyager, with a low capex of US$2.9M for initial development at the plant, and unit operating cost after ramp up of approximately US$84/mcf He product gas.
Leasing the process facility also enables Blue Star to avoid the requirement for any substantial debt funding, which would have necessitated the execution of long term offtake contracts, rather than delivering the ability for immediate sales into the premium priced spot market.
Current tube trailer pricing estimates in the U.S. short-term contract and spot markets are understood to be US$750 – 3,000/mcf helium product gas.
“The leased plant option eliminates any requirement for price-concession offtake agreements, allowing us to target the premium pricing available in short-term contract markets and spot sales, as well as allowing flexibility and ramp up at the start-up phase of the facility,” MD and CEO Trent Spry said.
“The current helium market affords us the ability to maximise these opportunities.
“Once both plants are operational, and in line with the helium market at the time, we may then seek to enter longer term offtake arrangements.”
Contract negotiations are underway for the Voyager processing facility to be leased from and operated by an experienced US midstream party with expected delivery during H2 CY2023.
Tailgate sales and tolling arrangements
The Voyager plant will have nameplate (Pressure Swing Adsorption (PSA) plant) raw gas throughput of 2 mmcf/day for expected helium product gas output (98.0%+ purity) and targeted helium production of 38mmcf net to Blue Star in first full capacity year.
And the leasing option will also allow plant tailgate sales as well as tolling arrangements through surrounding liquefiers.
“The plant can be expanded via the addition of a modular membrane unit to produce higher purity product and increased helium output in the future,” Spry said.
“With additional high helium raw gas contribution from surrounding discoveries the facility can also be further expanded with the addition of a second PSA plant.”
Galactica/Pegasus development
Sproule is currently finalising a resource update for Galactica/Pegasus which is expected to result in the declaration of contingent helium and CO2 resources.
The development is a larger-scale project that Voyager, with multiple potential product streams and work is underway to refine the initial planned development configuration and forecast helium and CO2 production and cost estimates.
The company is considering a leased plant and third party operated option and the final development is expected to include a CO2 extraction route and by-product stream.
A final decision on the initial Galactica/Pegasus plant configuration is expected in H1 CY2023.
This article was developed in collaboration with Blue Star Helium Limited, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.