HeLIX Exploration PLC (AIM:HEX) earlier this week released the results of its scoping study and economic analysis for the Ingomar Dome helium project.
David Minchin, the group's chairman, provided details on how the company is financing the project, how it is avoiding diluting shareholders and the strength of its cash flow in an interview with Proactive.
Proactive: Hello, today I'm joined by David Minchin, the chairman of HeLIX Exploration. David, you're speaking after the results of a scoping study and economic analysis for your Ingomar Dome project, and they look very impressive.
David Minchin: Yes, we're incredibly encouraged by these results, which show a robust economic rate of returns across a range of different scenarios. The headline NPV is $303 million, from an undiscovered net revenue of $605 million. That's after tax, royalties, CapEx, and operating costs. It's robust; it stands as a positive economic number all the way down to a helium grade of 0.4% or a helium price down to $125 per MCF.
On the initial CapEx, the capital that we need to bring this project into production is only $19.7 million.
Proactive: Are the economics better than you would have expected?
David Minchin: I'd say yes, 100%. It's the strength of where we're operating in Montana, where the operating costs are incredibly cheap. We can deliver a cheaper plant. We also benefited from a byproduct of natural gas. We've identified up to 15% natural gas as a byproduct in the Amazon Charles formation. We can feed that straight into a cogen facility, which would turn that gas into electricity, allowing us to power the plants for free. That has reduced operating costs by about 50%.
Proactive: So you're looking at a high return, low capital requirement project. How are you going to finance it?
David Minchin: It's incredibly easy. The feeling is to reduce, wherever possible, dilution to shareholders. You see a lot of companies at the moment who are quite happy to float around large discounted fundraisers. We're not one of them. The benefit of the high cash flow rate fee - we're producing $40 million per year on an initial CapEx requirement of only $19.7 million - is there's a range of options available to us to finance this project without having to go for large-scale dilution.
Proactive: You do say in the announcement that free cash flow is estimated at over $40 million a year. So I suppose the aim is for rapid payback of the initial capital requirements as well as funding the project going forward?
David Minchin: Yeah, and it gives us an opportunity to grow the company through acquisitions and pay dividends. All these things are on the horizon post-discovery and bringing the project into production.
Proactive: Now that you have the scoping study and economic analysis, what are the next steps?
David Minchin: We are drilling in Chief Revisit. That's very important because it allows us to appraise the gas, which we expect to identify and come up. From there, it's into detailed engineering and construction with a target for first gas flow before the end of 2025.
Proactive: Are you already speaking to potential financial partners?
David Minchin: We are in conversations with people and looking for a way to bring this project into development as quickly, cheaply, and cost-effectively on an NPV per share basis as we can possibly achieve.