Timely interview, Pres. & Dir. Don Mosher, helium gas junior Desert Mountain Energy

CEO + Exec. Chairman Robert Rohlfing & [Pres. + Dir.] Don Mosher of Desert Mountain Energy (TSX-V: DME) / (OTCQB: DMEHF) are very busy junior mining executives. Luckily, they’ve surrounded themselves with a highly talented team; Dr. James Cronoble [Dir. + VP Exploration], Jessica Davey [Dir. + VP Land]. Scott Davis [CFO + CPA/CGA].

But wait, there’s more…. Soren Christiansen [Ind. Dir. + expert, oil field operations]. Jenaya Rohlfing [Ind. Dir. + experienced P. Eng], Dr. Kelli Ward [Ind. Dir. + physician + Arizona politician], Weldon Stout [Ind. Dir. + judge & lawyer], Eric Witt [drilling operations mgr.], Ched Wetz [VP Risk Mgmt.], James Hayes [VP Engineering].

I’ve spoken at length with Rohlfing & Mosher. They’ve built a tremendous team that’s in the right place [85,000+ acres in Arizona, USA] at the right time [ongoing helium supply concerns] and the right business model [fully-integrated, refined He production].

Desert Mountain expects to be one of the greenest mining operations on the planet by using a solar farm onsite + its own produced hydrogen gas for back-up power generation.

In addition to its use in MRI machines, helium is critically important in semiconductors / fiber optics, data centers, LCD displays, hard drives, quantum computing, rocketry & lasers.

There are not many helium juniors to invest in, [less than 20]. Fewer still listed in N. America. The following interview of President Mosher discusses where Desert Mountain Energy stands today, and where it’s headed.

Thank you Don for taking time out of your busy schedule. Can you please give us the latest on Desert Mountain Energy?

My pleasure. We’re a primary helium gas development company soon to be entering production in the southwestern state of Arizona. Helium is an essential high-tech enabling commodity, yet few readers know of its uses & critical importance. For most applications, there are no substitutes.

In addition to MRI machines, helium is crucial in manufacturing, operations and/or R&D for semiconductors / fiber optics, data centers, LCD displays, hard drives, quantum computing, rocketry, lasers and more.

We’re sitting on nearly C$25M in cash, but we will spend a good bit of that to enter production in the 2nd half of this year. Our team is building a customized helium refinery, allowing us to deliver up to 99.9999% pure products to the U.S. government & regional customers. We’ve identified nearly 40 prospective clients within 300 miles of our first facility.

Intel & Taiwan Semiconductor are each investing $10’s of billions into new semiconductor plants in Arizona. How important is this to Desert Mountain? 

Yes, this helps indirectly. Although we can’t supply the extremely high-purity specs those companies will need. They will pull highly-refined helium out of the market, removing potential surpluses in the U.S.

Can you comment on Russia’s giant new nat gas production facility (that produces helium as a by-product) being offline? 

Yes, wow. To be fair, this is a highly complex, very remote project in far east Russia. It was talked about for years, causing some producers to slow rollouts of new helium supply for fear Russia would flood the market. 

Due to an explosion & fires, reports indicate the Phase 1 ramp up will be largely offline for 6-12 months. This shows how difficult it is to secure clean high-grade helium from safe, reliable sources. And, it’s not just Russia, Qatar is having problems ramping up a major refinery and in Texas, the BLM is experiencing operating issues.

Your team is planning seven wells in 2022, three wildcats + four offsets. Please tell us about those plans. 

The first two offset wells will supply the McCauley Finishing Facility that we’re building. Although we’re 4 for 4 on wildcats so far, there’s no guarantee of future outcomes. The oil & gas industry average success rate is ~17%, so we will have some misses.

What do you mean when you say that Desert Mountain will be a zero-carbon, green-helium operation?

Great question. The composition of our initial helium wells is very clean, with no wastewater. There are relatively few gases to contend with, and nitrogen can be freely vented. Hydrogen is in the mix, so that can be used for back-up power onsite. We’re building a solar farm to work in conjunction with hydrogen-generated back-up power.

This adds up to a low-cost, simple, modular refining plant. Our McCauley Field Finishing Facility will be the first solar / hydrogen-powered helium plant in the world. The only emissions will be from trucks hauling crude gas to the Facility…. Over time, those haul trucks will likely be replaced by electric vehicles.

You said in a recent interview that Desert Mountain might be able to sell finished helium (up to 99.9999% purity) for $1,000-$3,000/mcf. What factors will determine the difference between receiving $1,000 vs. $3,000/mcf? 

The exact grades, proposed volumes & contract durations will dictate prices. We expect to be the only fully-integrated premium quality, primary helium producer in N. America, if not the world. 

Depending on market conditions & internal factors, we may sell some or most of our helium for < $1,000/mcf. For instance, if we sell 99.995% He, we might get $500/mcf, but it costs far less to produce that grade. We should have a better idea of where we stand this Spring. In the chart below is a wide range of scenarios for 2023 given potential flow rates, He grades & pricing.

Your team mentioned a goal of bringing 60-70 primary helium wells online in the next five years. How uniform might those wells will be in terms of flow rates & decline curves?

We have ambitions for 60-70 wells based on our knowledge of the geology across 85,000+ acres in Arizona. That could change. At this time, there are more unknowns than knowns, so we need to wait for the drill bit to deliver us the data we need to answer these questions.

Some helium junior peers are offering more certainty with regard to their future operations than we’re comfortable with. We have a very skilled & experienced team that’s doing a lot of hard work in a prudent manner. Since we have nearly C$25M in cash, there’s no pressure to (potentially) over-promise & under-deliver.  

With lead times for new equipment stretched, will Desert Mountain have a pause in growth after its first production facilities are maxed out?

We have pre-ordered key components for the next plant but expect roughly an 18-month flat line in production before the 2nd unit is started. That means we could be maxed out at ~10 million cubic feet/day until our Rohlfing facility is up & running. That’s unless we acquire existing facilities with free cash flow, but that’s not on the table at this time.

Producing & refining helium is not rocket science, but it’s not easy either to do things the right way. We expect to have C$8M+ in cash as we reach cash flow breakeven in the back half of the year. A strong balance sheet allows us to avoid the need to sign onerous off-take contracts where we give up most of the upside.    

Can you please reiterate near-term investment catalysts for Desert Mountain over the remainder of 2022?

Sure. We will have a very busy year. Over the past 12 months, we proved we can find helium. Our team, led by CEO Rob Rohlfing, is 4 for 4 on wildcats. Well #5, an offset, will be completed this month along with two more wells by early March.

In total, we hope to drill seven wells in 2022. Initially we will sell helium directly to the U.S. government. While we don’t know the specifics yet, and things can certainly change, we expect to enjoy high margins and to generate substantial revenue & cash flow.

If all goes as planned, wells #2, #4, #5 & #6 should go into production in late 2nd qtr. or early 3rd qtr., with crude gas sent to our refinery at a measured pace so that we can work out any kinks. Next year should be a big one for Desert Mountain.

Thanks Don, very helpful. It’s truly amazing what’s happening in the helium market. Pricing looks like it will be stronger for longer. I look forward to seeing your team’s progress in coming months!

Disclosures / disclaimers: The content of this interview is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Desert Mountain Energy, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Desert Mountain are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It’s assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Peter Epstein owned shares in Desert Mountain Energy and the Company is an advertiser on [ER]

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