Pulsar Helium Inc. (TSX-V: PLSR): Initiating coverage

Pulsar Helium is a new ~US$22 mm market cap TSX Venture listed helium E&P. Helium has unique properties that make it critical to high growth sectors such as technology and space. Helium has been historically produced as a by-product of natural gas extraction. The rapid dwindling of the world’s largest helium inventories and the fast rise of price indicators have drawn junior companies to the exploration and production of helium. So far most of their focus has been around exploration/appraisal in a few states in the USA, in Canada, Australia, South Africa and, to some extent, Tanzania and France. Pulsar’s assets are located in Minnesota (USA) and Greenland, which are new and less competitive areas but where helium has been encountered in large concentrations. The story benefits from imminent and very high impact appraisal drilling newsflow at a discovery that has already flowed helium at a high rate. Our C$0.90/sh target price reflects our ReNAV. It implies over 3x upside.

High impact drilling in Minnesota
Pulsar holds 100% WI in the Topaz gas project with mineral rights and leases secured for up to 3,132 acres of land surrounding a 2011 helium discovery. A drill hole targeting nickel hit gas at a depth of ~542 m and flowed at a very high rate (beyond the range of the gas metering device) for 4 days with no pressure drop. Helium concentration was measured at ~10.5% with ~2.4% CH4. Based on very limited data, the reserves auditor has already attributed up to ~0.3 bcf of helium Contingent Resource to this single well. There could be much more. Pulsar plans to twin this well and establish a flow rate in 4Q23. This activity, combined with new passive seismic acquisition, will allow Pulsar to quantify the size of the discovery better and potentially book helium reserves. The Topaz project is located in a mining district, with access to infrastructure and the US helium market, allowing rapid monetization. A 5 mmcf/d development with 10% helium pays back in 4 months.

Combining geothermal and helium in Greenland
In East Greenland, Pulsar holds 100% WI in the Tunu project, comprising the first helium and hydrogen licence ever awarded in the country over 2,772 km2. Helium concentrations of up to 0.8% were measured from hot spring sampling. Further technical work is ongoing to scope a joint geothermal/helium project with support from Iceland.

Value build-up and newsflow
Assuming gross gas production of 5 mmcf/d at Topaz with 10% helium (~0.3 bcf of helium) and 40% of achieving that rate leads to a ReNAV of ~C$0.65/sh. Adding the risked value (15% probability) of achieving 10 mmcf/d takes our ReNAV to ~C$0.90/sh. The 4Q23 drilling/testing programme could boost our valuation for the company to >C$3.45/sh. Assuming US$15 mm development capex (helium sold in gaseous form) and first gas in July 2024, net cash is forecast to be 2x the current market cap by YE25.