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Interview with Irwin Olian, President and CEO of Desert Mountain Energy Corp. (TSX.V:DME)(U.S. OTC: DMEHF) (Frankfurt: QM01): Exploration and Development of Helium, Oil & Gas and Mineral Properties in Arizona

on 4/15/2019
Desert Mountain Energy Corp. (TSX.V: DME) is engaged in exploration and development of helium, oil & gas and mineral properties, in the Southwestern United States. At PDAC2019, we learned, from Irwin Olian, President and CEO of Desert Mountain Energy, the Company's current focus is on helium, which is in surging demand in the high-tech world. There is currently a worldwide shortage of helium, its price has gone up 135%, in the last 12 months at public auction, to the equivalent of $279 per thousand cubic feet of crude helium gas. Desert Mountain's flagship Heliopolis Project comprises 39,742 acres of key helium prospects, located in prolific Holbrook Basin, in East Central Arizona, widely considered to be the world’s best address for helium. Near term plans include a drilling program, late in the second quarter this year.

Irwin Olian, President and CEO of Desert Mountain Energy at PDAC 2019

Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-Chief of Metals News, here at PDAC 2018, speaking with an old friend, Irwin Olian, President and CEO of Desert Mountain Energy Corp.

Irwin Olian: Hi, Al, how are you?

Dr. Allen Alper: Very well.

Irwin Olian: A pleasure to see you, as always. I enjoy speaking to you and sharing some of our ideas and events with your people.

Dr. Allen Alper: That's great. Could you give us an overview of your Company and your goals?

Irwin Olian: Desert Mountain Energy was formerly called African Queen Mines. About a year and a half ago, we became aware that helium was presenting a remarkable opportunity in the commodities markets, due to a severe dislocation between supply and demand. Helium has emerged as the hottest commodity. Its price has been soaring in the last 12 months. Helium prices have gone up 135% to the equivalent of $279 per thousand cubic feet. Most of us think of helium as something for balloons, children's parties, blimps and so forth. But in the last eight to 10 years, it has been embraced by the high-tech world. Helium is now used in a great many new high tech applications, unbeknownst to most people. This has created a surging demand. There is a worldwide shortage of helium right now, with no immediate solution insight. There is actually a projection from the US Geological Survey of a 20% decline in the available supply of helium in the next three years in the face of surging demand.

It's a remarkable macro story of misallocation in this helium market. To give you an idea of what's happening with helium, the big high tech companies, like Google, Facebook, Netflix, and Intel, are all buying helium to put in the hard drives of the computers at all the big data centers, because helium is a natural coolant. It also has a very tiny atom and when it's injected into computers instead of oxygen, it allows the computers to operate much more quickly and efficiently. Saving energy costs as much as 23%. It's also used in MRIs all over the world to cool the big magnets. It's used now in barcode readers in supermarkets. It's even being used to cool nuclear reactors, to prevent the core meltdowns. It continues to be used as a lifting gas. A whole new generation of airborne vehicles is now being created.

The trucks of the future, that are going to sail along just above the ground, instead of on wheels, are all helium based. The demand for helium has surged. It is now the high tech rare gas. It's a niche commodity that most people don't realize is so hot. This has created a great opportunity for us to get in, as an early mover.

About a year and a half ago, we started looking for good prospects. There's an old adage that the gold miners like to say, “The best place to find gold is where they've already found gold.” We went directly to the most productive basin in North America. It's called the Holbrook Basin. It's in Arizona. We did a lot of geological work to identify the structures that are capable of serving as traps for helium. Helium is a gas. Because of the very lightweight of the atom, it wants to escape out of the Earth's crust, escape gravity, and dissipate into space. The key to finding helium is to look for the structural controls and trapping mechanisms capable of maintaining it in situ.

What's so key about the Holbrook Basin is, that it has a very thick salt and anhydrite cap. It also has anticlinal features, with structures that act as traps for the helium. There are, in fact, very few places in the world that have helium, because in most places where it's created by radioactive decay, it evaporates. It dissipates into space. Here in the Holbrook Basin, it's been retained in the Earth's crust. So we're in a great address. It's had the highest grades of helium production, eight to 10% helium in the gas, in this basin. The production, historically, has been at a very high level with over 9.2 Billion cubic Feet produced over a 15 year period.

We have a wonderful opportunity. We are planning to drill late in the second quarter this year, subject to receiving our permits and completing our targeting work.

At the same time, the Company has assembled a terrific team of technical professionals, headed up by Robert Rolfing with 25 years’ experience. He's been one of the top oil and gas operations people in the southwest US. He's drilled over 250 wells, 95% of which were successful. We have Soren Christiansen, one of our Directors, who has drilled all over the world for Encana Corporation, Canada's largest energy producer. He was the first guy ever to be permitted to drill in mainland China, years ago. Greg Nowak is on our team, 15 years as a Petroleum Geologist, then went on to be a manager of exploration for Ashanti Goldfields and Golden Star Resources in Africa, now back in oil and gas staying closer to home in the U.S.

We're excited by the opportunity. We think that the potential for our Company is exceptional. Some of your readers/investors will remember our prior deal, Pan African Mining Corp. We were the early mover in Madagascar, first guys to go in and get a big property position.

In fact, Pan African had the largest land position in the country of Madagascar and controlled 22 different mineral properties. We took that company public. You could have bought our stock in the first financing for 25 cents. We sold Pan African four and a half years later for $4.50 plus a spin-off dividend share. The early investors made almost 20 times their money. We're hoping we can replicate that kind of result here, with Desert Mountain, because we're well positioned in helium, which is now a strategic commodity. It's a niche commodity that not everyone knows about. I think the early birds are going to get the worm here. I think people who get in now, before everyone else has heard the helium story and before we make a significant new discovery, are going to reap the greatest rewards.

Dr. Allen Alper: That sounds excellent. Could you tell us a little bit about your capital structure and your share structure and where your shares are listed?

Irwin Olian: We have 35 million shares outstanding, trading in the 20 cent range. We were actually up at 27 cents and now on a bit of a correction, which actually creates a nice entry opportunity. Our market cap is about 7 million Canadian, just over 5 million US. Just to give you an idea, we have no debt and the insiders control almost 30% of the company. Haywood securities has participated significantly in each of our financings, in the past. Their client's own probably another 25% of the Company. All in all, a great many of our shareholders are friends and family, very committed to our success and excited to be part of this deal. A lot of the stock is in very strong hands.

To give you an idea of the scope of the opportunity, we're sitting with a market cap of, as I mentioned, $7 million Canadian. We're going to be drilling three wells this summer.

If you look at the historic results of the 22 other wells in this basin, the best wells were generating $7,000 to $10,000 dollars a day at today's price equivalents for 15 years. Those wells cost about $400,000 at today's prices. We're going to drill three wells for about $400,000 each. The potential is there! If we come up with a strong well, it could generate as much as $20 to $30 million from that well alone in cashflow, depending upon grade, pressure and the size of the gas reservoir. It's a huge opportunity. People ask, how much does it cost to get it out of the ground. Helium is very cheap to extract. You typically drill shallow vertical gas wells. The cost is $4 to $5 an Mcf and we can sell this for $280 per Mcf at today's prices. Processing and transportation costs will add approximately $50 per Mcf, but that still leaves a huge 80% profit margin. Very profitable business!

The onus is on us to prove our proof of concept, with the first three wells. We're working very hard to do that with a wonderful technical team in a great location. We're expecting success!

Dr. Allen Alper: Well that sounds excellent. Sounds like a great commodity in the growing market and a unique opportunity.

Irwin Olian: If your readers/investors had bought lithium or vanadium, the first time they had heard that word, they would have all made a killing.

This is the beginning of something that's going to be very big. Helium! Every day somebody comes up with a new use for it in the high tech world and the new economy. I think that there's tremendous upside here. We're very well positioned to achieve that.

Dr. Allen Alper: Well that sounds great. Thanks for sharing all this info.

Irwin Olian: Thank you for coming, for speaking with us. We're always pleased to see you and appreciate the opportunity to speak to your readers/investors.

Dr. Allen Alper: Thank you. We’ll publish your press releases as they come out so our readers/investors can follow your progress.

Irwin Olian
President and CEO
Tel: +1-604-788-0300

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