I recently came across Desert Mountain Energy Corp - Canadian company listed on Toronto and US exchanges as DME or DMEHF. It’s current CA$1.40 or US$1.03
I normally avoid small mining companies because of the risk of fund raising and failure. However, reading the info on DME I’m fairly positive and would be interested in views.
So the company is working in Arizona developing helium fields. It has drilled 8 wells all successful. It has built it’s own processing facility and is in the process of commencing shipments. There is a good broker note https://www.desertmountainenergy.com/wp-content/uploads/2023/04/DME-2022-04-06-Initiating-Coverage.pdf
What made me more interesting was that in March the company raised over $20 million. However, it didn’t do it by issuing heavily discounted shares. It sold 11.8 million units for CA$1.95 each with each unit being 1 normal share and 1 warrant that can be exercised at CA$2.70 for one additional share. There is also a clause that enables the time limit for the warrants to be accelerated if the share price exceeds CA$4 for more than 10 days. So they raised a fairly significant amount of money at roughly 40% above the current share price with the warrant being exercised at twice the current price. With production about to start and a timeline that includes multiple milestones during the remainder of this year there was obviously a lot of confidence behind the March 2023 fund raising
Company website: www.desertmountainenergy.com
I have a position in DME
But I just can’t understand the sp action. Being so close to cashflow, having recently done a successful raise and sitting potentially on large He reserves with skyrocketing demand the falling sp just does make me think I might have missed something. I have to admit I am a bit shaky
That’s partly why I appreciate other people’s comments and views. I agree that the sp should be stronger. However, I am seeing this a lot recently where the sp is weak or dropping before strong rises. I’ve got some other shares in similar situations.
We know that there are some people who put over CA$20 into DME in March so I guess they have their positions and are simply holding and the sp moving by a few % doesn’t make much difference.
If they had raised money with heavily discounted shares that are just dumped onto the market then I would be suspicious but the fund raising using warrants does give some comfort. I like charts and some indicators turned positive today (others haven’t yet).
At least we should have some news by the end of the month when there should be an earnings update
I have looked everywhere but could not find an estimation regarding the amount (not grade) of helium in the field/basin. How are they going into production without putting out those numbers?! Have you found something? @WakeMeUp
@JustLookingThx I don’t have much time this week to go through the data but there is some volume info in the broker note but it doesn’t give a value for the total field volume just the processing volume and they do give values for the processing capacity of the processing facility. There is also a broker/analyst note that I have not been able to access (I assume it is a client only document)
“We have modelled the McCauley plant and field to reach an average
throughput of 7.0 mmcf/d of raw gas at a 3.0% helium concentration, resulting in 210 mcf/d
of He production by FQ1/24”
“The production profile for those two fields can be seen in Exhibit 9. Once both fields are at
optimal production levels, DME should be producing approximately 400 mcf/d of helium,
which should generate over $100 million of annual EBITDA at a US$750/mcf He price.”
Yes exactly, I have read those notes.
But trying to play the pessimist I could argue, who knows how long those fields last at a given production rate. Hopefully we know more soon. I will remain invested for now
As I am not a trader I am interested in longterm cash generation, possibly dividends
I completely agree and I understand your point. My assumption at the moment (could be completely wrong) is that the issue isn’t the field size but the cost of extraction/processing. I read somewhere (maybe in the note) that there was a field producing in the 1960s/1970s which stopped because of the market price dropped. Thus my suspicion that the issue isn’t the total reserves but the quality of the gas, the cost of setting up the processing capacity and the extraction/distribution cost. Obviously once they have the processing capacity established and paid the ongoing processing costs effectively reduce