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Dr. Allen Alper Interviews Andrew Davidson, Founder, President and CEO Royal Helium Ltd. (TSXV: RHC): Has Over 400,000 Acres of Prospective Helium Land in Southern Saskatchewan

on 8/5/2020
Royal Helium Ltd. (TSXV: RHC) has over 400,000 acres of prospective helium land in southern Saskatchewan. All of Royal’s lands are in close vicinity to highways, roads, cities and importantly, close to existing oil and gas infrastructure, with a significant portion of its land in close proximity to existing helium producing locations. We learned from Andrew Davidson, who is Founder, President and CEO of Royal Helium, that they are the only publicly traded helium exploration company, focused on helium production in Canada. After very successful seismic and airborne mag surveys, the Company is currently looking for funding of their first drilling program, scheduled for fall 2020. Initially they plan three to five wells, two or three-thousand-meter-deep and, if successful, that will be followed up with more aggressive drilling and additional seismic and airborne mag exploration programs. With stable, rising prices and limited, non-renewable sources for helium worldwide, Royal intends to become a leading North American producer of this high value commodity.

Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-Chief of Metals News, interviewing Andrew Davidson, who is Founder, President and CEO of Royal Helium LTD. Andrew, could you give our readers/investors an overview of your Company and what differentiates your Company from others?

Andrew Davidson: Sure. Thanks for this opportunity. Royal Helium is a publicly traded company under the ticker symbol RHC, listed on the Toronto Venture Exchange. We've been in existence since 2016, for the first year and a half as a private company. We went public in July of 2017 and became Royal Helium. What we have at Royal is a land package that we've assembled in Saskatchewan that is almost unmatched. There's one other party that owns more land than we do. Other than that, it's us and nobody else. And we chose our land for specific geological reasons.

The Company was created to find prospective helium ground in Saskatchewan. We started compiling a land package around that and were very successful in doing so. We were one of the first two companies to get in on the helium staking rush that occurred in 2017,2018. As such, we were able to compile about 400,000 hectares, when you include all the land we have, plus the leases and permits that we have pending approval, and those approvals are coming shortly. So, we have that and we've done some significant work in a couple of different areas, within that land package, to de-risk the drilling of these wells. That includes seismic and airborne mag surveys, which we've completed. Both very successful and they both correlate very, very well.

Importantly, what they do is they show us the basement structures and the basement structures that are associated with the historic well tests that returned helium. So that tells us that we have the proper structure down there and, when combined with our review of all available wells with a helium test, shows that it likely contains helium. So that's great news for us. That’s the last step in our program before we go out looking for drilling capital. And that's going to be our next big step here, sourcing the capital needed to drill a well. So what does that look like? We have budgeted one and a half million dollars per well. The wells are relatively deep, but they are vertical wells. It's a two to three week process to drill and complete and we are looking to do three to five wells initially starting fall of 2020.

As to how we compare to our competitors and how we differentiate ourselves, it's a pretty simple question to answer in that there really are no other comparables in Canada. We're the only publicly traded helium exploration company focused on production in Canada. There are a couple of private companies doing it, in our area specifically. They are larger than we are in terms of capitalization and in terms of advancement, but functionally the same in every other way. They've targeted their exploration the same way we did, and they've drilled successful wells as a result. We intend to do just the same. Importantly, the pre-drilling work that they've completed is exactly the same as the pre-drilling work that we've completed. So, we're essentially in the same boat. There is one other publicly traded helium company listed on the Venture and that's Desert Mountain Energy. They're focused on the Holbrook Basin in Arizona and New Mexico region. However, Royal Helium is the only Canadian-listed, Canadian-focused helium exploration company.

Dr. Allen Alper: That's great. By the way, we did several articles on Desert Mountain Energy, too.

Andrew Davidson: Oh, good. They are a great company with good looking assets in the Holbrook.

Dr. Allen Alper: So we have an audience that's interested in that and this area, but just to refresh the memory of our readers/investors, could you tell them the importance of helium and its uses, its market and why helium is so important.

Andrew Davidson: I'd love to, and I trumpet this from the rooftops whenever I can because the importance of helium really can't be overstated. It's not even a misunderstood market, it's a market that hasn't existed, frankly. People aren't aware of it. When you talk about helium, the first thought is balloons, which is certainly a section of the helium market, but it's a very, very small segment of it. Helium is used for a number of different purposes globally. The largest is for superconductivity. It's used specifically to keep the magnets in MRI machines cool to allow them to do their work. Without liquid helium those magnets would just melt. The same is true with synchrotrons and large hadron colliders around the world. They are absolutely reliant on helium and there is no replacement product for it.

Helium plays a very key role in scientific research and development in healthcare. The largest emerging market is certainly the high-tech sector. It's been used extensively in the manufacture of high-tech component products, semiconductors, microchips, and fiber optics. It’s used as a coolant when needed, and also as an atmospheric purge product in the manufacturing process, because helium is unique in that it's completely inert. It will not bind to anything and consequently, it will not react. So when you have a very controlled manufacturing environment, where any sort of contamination can cause significant downtime, helium is your option for purging that atmosphere of pollutants and it's used extensively there. Another large use of helium is rocketry. Whenever a rocket is shot up into space, whenever SpaceX puts a Tesla in orbit, there's a lot of helium involved in that process, again, as a coolant on the exterior skin, and to counterbalance gas and fuel tanks as the fuel is expended.

So those are the principle uses. The market itself is a bit cloudy, in that there's not a lot of transparency in the helium market globally, in terms of total sales or market price. All of these parameters are very, very quiet because it operates on a contract price basis and the price for mcf of helium, either liquid or gas, is generally negotiated between producer and seller and not a publicly available number like it is in oil and gas. The highest quality industry stats that we find, show it is a multibillion dollar per year industry globally and it is dramatically under supplied.

Historically, this production gap has been filled by sales out of the BLM strategic Helium Reserve in Texas. But that has been pulled off the markets, really bringing to light the need for exploration and discovery of new deposits. That's what Royal Helium is focused on because the world needs it. There's no real price on product for it. There are some other emerging uses as well such as in the operation of small scale nuclear reactors, where it again is used for its cooling properties. So as the world greens itself by shifting from coal and gas-fired power plants, and moving more to nuclear to play a key role, the demand for helium is growing and the supply of it is shrinking.

Dr. Allen Alper: Well, that sounds excellent. I appreciate you giving an overview of the uses of helium and what's happening in the market. Could you also tell our readers/investors a little bit about your background and your Board?

Andrew Davidson: I've spent over a decade in the junior resource space, with a focus on taking properties and developing them into deposits and then either taking them to production or selling them. I shifted my focus towards helium back in 2016, 2017, because it's just such an interesting industry, with so much potential.

To build a Company like this takes a certain skillset and we've set to building a team around myself and our CFO, Jeff Sheppard, that can provide such a skillset. We have Mr. Tom MacNeill on our Board, he is a legend in the junior resource market, as a resource developer and company builder. Tom is also based in Saskatoon as we are, and is very active in the strategy behind everything we do at Royal.

We also have securities lawyer John Pringle on our Board. John provides us with great guidance on how to structure placements, financings, and understanding the regulations associated with operating a publicly traded company. Having been a practicing lawyer with a focus on the resource industry, John brings a wealth of experience and knowledge to our team.

Our other Director, whom we just added, is Mr. Sylvain Laberge, based out of Montreal. Sylvain has had a long successful career in the junior resource market, focusing on the investor relations and financing side of it. Helium exploration and production is not a cheap venture and you need individuals who have deep experience in money raising and structuring deals and that's one of the things Sylvain brings to the table. He was really a key piece of the puzzle for us and I wanted to bring him on board for a couple of reasons. One, because he's very good at what he does, but two, because he's based in Eastern Canada and has deep relationships in Montreal and Toronto. Sylvain opens up that new market for us.

I am the other Board member and the four of us combined hit all the points required to develop a junior resource company.

On the technical side, we have Steve Halabura, who is one of the most well-renowned sedimentary and petroleum geologists in Saskatchewan. Steve has been involved in the oil and gas and potash sectors in Saskatchewan for over 30 years, and is also a Professor at the University of Saskatchewan in geology and petroleum geology. He has been working with us, on and off, since 2017, but permanently started in 2019 as our VP of exploration, here at Royal Helium. All of our work and all of our exploration programs have been designed by Steve and his experience has shown, considering everything we've done has proven successful.

The way Steve can attack a sedimentary geology project is really amazing to watch. His ability to synthesize data going back to the thirties and modernize it, digitize it, and know how to interpret it with new technology, well, it's really quite stunning. His skillset and his experience are without a doubt second to none. That’s why we brought him in and we're sure happy we did.

The final member of our team is Dean Nawata. Based in Vancouver, Dean has been involved in the resource industry in one form or another his entire professional career. As our VP of Business Development, Dean is the leader of our market-focused efforts at Royal. His ability to think strategically about project development has been key.

Dr. Allen Alper: Well it sounds like you have a very strong, well-balanced team, so that's excellent! Could you tell our readers/investors a little bit about what your plans are going forward in 2020 to 2021?

Andrew Davidson: Absolutely. Readers may or may not know, we completed an aeromag program over our Climax asset, which is our highest priority asset in Saskatchewan. It's a very large land block. We acquired seismic on it in 2019 and had that reinterpreted. It showed some very interesting looking targets that we wanted to follow p. So we flew an aeromag over, starting in May of this year and completed in late June, and we're just waiting on the final results and the final interpretation to come out. The point of that is to show if the structures are associated with the Precambrian basement movement, where the source rock was for the helium that's been generated. The results, we think, are going to confirm what we saw in seismic. That really narrows down our drill targeting process.

We have seven identified targets from of the size of the program we completed. The aeromag will help us refine those targets, right down to where we are going to drill the first well, which we will do next, go straight to drilling. Once we're done and have this compiled and we've done all the correlations we need to do, there's really not much more work we can do on this property, aside from drill it. There's nothing that could increase our confidence about structure any more than it is. We have the historic helium test in the immediate area to show that helium is in fact present. Currently, we are setting ourselves up for a drilling program, hopefully Fall, Q4 would be ideal. We're looking to drill at least three wells at one time; we're not going to do a one-off well.

We think that drilling three to five wells provides us the best probability of success and the best opportunity for significant growth right off the hop. We have those targets relatively identified and we’ll have them refined within the next month. After that, we’re going to be coming to market for drilling capital or to find a partner to go drill them with us. And once we start that process, I don't see it stopping anytime soon.

As discussed, the first program is going to be three to five wells. Then we will follow that up with another three to five in the Climax area. At the same time we're doing that, we are also acquiring additional seismic, programming and aeromag programs on the remainder of our Climax package, as well as our projects in the southeast of Saskatchewan. The plan is to develop our new target field, as we're drilling out the current target field. We will start at Climax, then do a secondary round at Climax, and finally we move over to our Bengough asset, in the southeast and start there. We announced just a couple of weeks ago that we've identified some targets at that Bengough project from seismic. We're excited to get down there again as well. In sum, the future for Royal is drilling.

Dr. Allen Alper: That sounds like an excellent approach and an excellent plan. That's very good. Could you tell our readers/investors a little bit about your share and capital structure?

Andrew Davidson: We are a relatively tightly held Company. The public Company has only raised money twice. We just completed our latest round and we raised a million dollars. We have about 50 million shares outstanding and some warrants and options associated with that. We have a relatively tight share structure, in that the management and insider team owns approximately 20 percent. We have a couple of significant investors holding about the same number. And a lot of very strategic investors, who have followed myself and my team's career around the junior resource sector and make follow-on investments based on successes in the past. We have a patient group, who have seen some incredible growth already in their share price and are very Management friendly and, a technically savvy group as well. Many geologists have taken positions in it, as well as oil and gas people because it's very similar to an oil and gas project. The difference is just simply what comes out. It's not flammable gas. In this case, it's inert. However, the principles are fundamentally the same.

Dr. Allen Alper: Well that sounds very good. Andrew, could you tell our readers/investors the primary reasons they should consider investing in Royal Helium, LTD?

Andrew Davidson: The shortest answer to that is it's the only way to participate in the Canadian helium market. Canada has been a helium producer since the 1960s with Saskatchewan being the premiere postal code for helium production and development. We feel that we are on to one of the larger helium finds in North America and it has the potential to be very, very significant. Having said that, it has to be proven, with the drill bit and we are feeling very confident with our approach, which is exciting. More importantly, helium itself is becoming an increasingly important resource people are becoming aware of its significance in their everyday lives. Even the impact of COVID on the healthcare industry and the research and development industries is proving how important little-known things like helium are to ensuring the health and safety of people. As the world moves towards continued technological development and increased space travel rocketry, everything is pointing towards the demand for helium.

The problem is, there just simply is not a lot of helium being developed in North America. The North American supply is dwindling and in terms of exploration projects to bring it online, there’s only a small group of us doing this work. Royal Helium and Desert Mountain are such companies and we are each focused on different regions of North America. Helium is becoming a very strategic mineral, as well, it is on the US strategic minerals list. It's going to become economically much more important and it's really going to become a public resource and mineral that's in the public eye. It's never been there before and we are excited to be a part of its journey to fame. What this means for your readers and investors, is that it’s an early stage entry point for anyone following trends in the mineral space. We truly are the only option for doing this in Canada.

Dr. Allen Alper: That sounds very good. Is there anything else you'd like to add, Andrew?

Andrew Davidson: I could talk about Helium for days. I am so passionate about this element. But if there were one thing I could stress, is that it is imperative that people begin to understand the importance of helium to their everyday lives. Helium is something that you don't see, you don't hear, you don't smell, you can’t feel, but it exists in just about everyone's daily life. And it's critical to our continued development and the continued health of the world. I would encourage all of your readers/investors to invest some time and have a look at the helium industry, the helium market and learn about it. It's really quite interesting when you get into it and see all of these specific uses for it. The story of how it was discovered is just fascinating. It is the only mineral on the periodic table that was discovered in outer space and not right here on earth. It's a curious and intriguing element.

Dr. Allen Alper: Well, that sounds excellent. We’ll publish your press releases as they come out so our readers/investors can follow your progress.

Andrew Davidson, President and CEO
Royal Helium Ltd.
1 (306) 653-2692

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