Brian Zinchuk is editor and owner of Pipeline Online
Royal Helium’s third well, drilled at Climax, Saskatchewan, the summer of 2021. Photo by Brian Zinchuk
SASKATOON – In the pursuit of other products, lithium is popping up. Indeed, much of the lithium exploration today is based on wells that were drilled for oil. But lithium has shown up elsewhere. As identified in the previous two stories in this series, that can result in opportunity, but also headaches. (Look up Part 7 and Part 8 for more details.)
Royal Helium has spent $46 million to date in its helium exploration program, drilling wells at Climax, Ogema and Val Marie, Saskatchewan and in Steveville in Alberta.
At its initial Climax wells, while performing standard testing procedures, Royal found elevated levels of helium, as well as lithium, hydrogen and in some cases natural gas. The lithium was found in concentrations of 80+ milligrams per litre, which puts it in the similar range as the lithium explorers in Alberta and Saskatchewan have reported.
According to Royal Helium’s president and CEO Andrew Davidson, they are not a lithium explorer, nor are they a natural gas explorer. Their focus is helium and they have spent a pretty penny to complete exploration specific to helium. In analyzing the samples recovered in its well testing program, Royal did something that is commonplace for oil and gas companies: they tested everything captured in flowback tests.
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“When the assays came back showing elevated lithium concentrations, we noted it and quickly moved on to reviewing the helium results. When we came back to the lithium results months later, we consulted with the ministry about how to acquire the mineral rights, as we were viewing the zones showing lithium as potential helium production zones as well. We assumed it would fall under the negotiated rights provisions that currently exist. When we provided notice to the ministry of our desire to acquire these rights, we were informed that this provision was not going to be made available to us, so we promptly posted the lithium rights in the next land sale.
“From there, we were told by the Province that we do not need to bid on them in the land sale, as we were the only party who could acquire them as we already had helium rights in these specific zones. The Province then withdrew the posting we had made. When we pursued this again, we were told that the rights were the subject of new regulations that were in the process of being drafted, and they were essentially sterilized for the foreseeable future. Needless to say, this has been a frustrating process. Given the uncertainty around the process, we have put the matter to the side until the Ministry determines how they are going to treat this issue. We are paying close attention and look forward to acquiring the rights once that path to do so is clearly set.”
Royal was not looking to have rights granted to it at no cost. Rather, they were offering to acquire them at fair market value, as had been well defined by previous land sales in the Province. That was the October minerals land sale, Davidson explained. And since they were advised that the postings had been withdrawn, they didn’t pursue them.
Royal Helium’s third well, near Climax. Photo by Brian Zinchuk
“We are in a unique position,” Davidson continued, “as lithium is not our focus. We can put this issue aside and continue developing our helium assets in Saskatchewan and Alberta. That said, timeliness would be in everyone’s best interest here. Resource markets are notoriously cyclical, and if the window for funding lithium-in-brine projects passes, a great opportunity may have been missed for Saskatchewan to be a leader in the battery metals market.”
Davidson takes issue with the notion that they and other explorers are using helium exploration a could result in a form of a “back door,” to mineral rights for other resources. “Our company has spent $46 million exploring for helium. That is the most expensive backdoor into another mineral I have ever seen” Davidson said. He called the idea “absolutely ludicrous.” Davidson said their track record proves it.
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The key issue at hand is the concept of “mineral trespass,” which is limits production or recovery of a mineral to the horizons which have been permitted or leased. But it also means that you aren’t supposed to test for it, either. So, if you drill a multi-million dollar well to explore for mineral “A,” theoretically, you are not supposed to test for mineral “B.”
Davidson said, “We have been accused by certain parties of “trespass” as it relates to lithium. We were drilling wildcat wells in a region where no wells had been drilled in decades. When drilling a wildcat well, or virtually any well for that matter, you test everything that has been recovered. The testing of production water is commonplace. It is one of the reasons we know that there is lithium in brines in west central or other parts of the province. Furthermore, nobody owns the lithium rights where we are operating. The fact that it appeared in an assay simply makes the ground more valuable to the Province, and we subsequently offered to purchase the rights at that higher value under the existing guidelines on mineral acquisition.
More importantly, the testing provides Royal with a proper characterization of the fluids that will be going through a very expensive helium recovery facility, Davidson noted. This is critical information as the lithium rich brine can have a material adverse impact on the plant if the metallurgy isn’t designed properly using the best information on potentially corrosive elements.
“Royal Helium was not and is not planning to shift to Royal Lithium,” he said. “A two-minute review of our public disclosures and operations will tell you that. Any accusation to the opposite is simply baseless, and quite likely self-serving by the party(ies) making the accusation.”
Davison said, “There may or may not be a mineral deposit in the same zones where Royal has helium rights. More exploration work is required. It is simply our view that Royal should have the ability to acquire the rights to lithium at fair market value. It is the only way that lithium can be developed in these zones, as they are competing with the helium rights already issued.”
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