Strategic alliance with helium offtake partner

Just days out from drilling its pure play helium well Jesse#1, Grand Gulf Energy (ASX:GGE) has entered into a strategic alliance with helium refiner and seller Paradox Resources.

Paradox owns the advanced Lisbon Valley Helium Plant that’s located 20 miles north of GGE’s Red Helium Project in Utah, USA. Today’s agreement comes on the back of a recent offtake agreement with Paradox, which provides a low cost, quick path to monetisation for GGE for its Jesse#1 well.

This strategic alliance is designed to fast-track and optimise commercial opportunities in the current buoyant helium market. It sees GGE become the priority raw gas helium supplier to Paradox’s liquefaction plant and to the high-purity helium market, which is now commanding prices of around US$1,000/mcf.

A specialist helium consultant with considerable experience in helium processing, sales and marketing has been appointed to facilitate and drive the strategic alliance, which includes a number of key items, as follows:

Restart of Paradox Resources’ Helium Liquefier:

• At present, Paradox is producing gaseous helium via its purification plant.
• A helium discovery at GGE’s project could provide the needed supply for Paradox to restart its liquefaction plant and produce high purity helium (99.9995% helium) that can be sold into markets where prices are fetching upwards of US$1,000/mcf.

Collaborative Marketing to High Purity End Users:

• The two parties will together market helium to high-purity helium end-users in the semiconductor, medical, research, space and defence industries.
• The key takeaway from this is that GGE will become the supplier direct to the buyers meaning it will sell at the highest possible price the buyer is willing to buy at. Generally producers of raw materials would be selling to someone like a Paradox and leaving a lot of the margin on the table for the processor to take up.

Expansion of Existing Offtake and Commercial Alignment:

• Recognising synergistic commercial benefits, the parties will assess and jointly pursue corporate opportunities.
• The key point is that the offtake agreement (signed 16 March 2022) is limited to the Jesse #1 well. After today’s announcement Paradox have effectively expanded the relationship beyond just the single well.

Explore Options for CO2 Disposal - Enhanced Oil Recovery and Carbon Sequestration:

• Explore pathways to dispose of, and derive revenue from, the Red Helium residual gas stream (primarily carbon dioxide and nitrogen) including enhanced oil recovery at Paradox-owned oil fields and carbon sequestration. Two potentially revenue-generating CO₂ disposal options have already been identified and will be more fully developed in the short term.
• With CO₂ being sold for US$1.50/mcf, this could potentially add additional revenues to GGE’s project via the processing of a by-product.

The upcoming drilling event at Jesse#1 is the primary reason why we invested in GGE and is the main objective that we want to see it achieve in 2022. You can see our other objectives and reasons for investing in our GGE Investment Memo here.