Las Animas Plan Of Development: Key Outcomes

Blue Star Helium Limited (ASX:BNL) (Blue Star or the Company) advises of the key outcomes from the initial Plan of Development for its Las Animas Helium Project in Colorado, U.S.A.

Highlights

• Initial Plan of Development completed for Blue Star’s world-class Las Animas helium project.
  
  • First helium output and sales targeted for H2 CY2023 from Voyager.
  • Low capex of US$2.9M for initial development at Voyager.
  • Targeting short-term contract market and spot sales to capitalise on premium pricing dynamics.
  • Permitting of production wells underway ahead of first production guidance.
• Voyager – low capital intensity development of high-grade discovery:
  
  • Initial 3-4 development wells planned.
  • Contract negotiations underway for processing facility to be leased from and operated by an experienced US mid-stream party with expected delivery during H2 CY2023.
  • 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 38 mmcf net to Blue Star in first full capacity year.
  • Forecast pre-production capex of approximately US$2.9M (drilling of US$1.5M plus gathering system and site works of US$1.4M) and unit operating cost after ramp up of approximately US$84/mcf He product gas.
  • Targeting short-term contract market and spot sales to capitalise on premium pricing dynamics; leasing plant eliminates need for price-concession offtake agreement.
  • Current tube trailer price estimates in the U.S. short-term contract and spot markets are understood to be US$750 – 3,000/mcf He product gas.
  • Output expansion potential via addition of membrane module and/or tie in of offsetting discoveries and addition of second PSA plant.
• Galactica/Pegasus – larger-scale helium project development with additional potential CO2 product stream:
  
  • Range of development pathways under consideration, including leased plant option.
  • Expected CO2 extraction route and by-product stream.
  • Further study work underway to refine initial planned development configuration and forecast helium production and cost estimates.
• Both facilities to be permitted in parallel and a final decision on the Galactica/Pegasus plant configuration is expected during H1 CY2023.
  
• Confirmation of Voyager process facility lease agreement with mid-stream operator expected in Q1 CY2023.

“We have evaluated multiple options for our initial project developments in Las Animas. These included new builds, the purchase and refurbishing of used facilities, and lease options. The work covered pressure swing adsorption (PSA) only plants, membrane only processing facilities, membrane and PSA combination plants, and various CO2 gas removal and concentration options. Market research was also conducted covering potential offtakers, helium purity, tolling (liquification), and transport options to inform the selection of the initial development phases and further optimisation and expansion potential.

“For the initial development at Voyager, we have selected the leased and third party operated plant option with a helium purity output of over 98%. This will 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. 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.

“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. 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.”

Las Animas Helium Field: Plan of Development

Blue Star is pursuing a mid-stream solution for its initial facility, which is to be located at the high- grade Voyager discovery. This involves a mid-stream company supplying and operating the facility for Blue Star in return for a monthly lease payment. This solution is attractive as it minimises Blue Star’s 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.

Blue Star is currently negotiating contracts with its preferred provider. The selected provider is a midstream company that owns and operates gathering, compression, dehydration, NGL processing, condensate removal and gas treating facilities and deploys proprietary nitrogen rejection and helium recovery units. It currently operates helium processing facilities in North America.

The Company received a progressive series of reports from its consulting engineers, SIGIT, regarding the plan of development for its Voyager and Galactica/Pegasus fields. SIGIT’s engagement included identification of a facility plan for the processing of raw gas from the dedicated acreage and design of a drilling plan and gathering system to effectively optimise capital and operating cost structures. The Company has also received proposals for helium and CO2 processing plants from another provider. These proposals remain under consideration for Galactica/Pegasus.

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