Industry-leading helium operator, North American Helium, to participate with $3.5 million strategic equity investment
Helium Evolution Incorporated a Canadian-based helium exploration and production company focused on developing assets in southern Saskatchewan, has entered into an agreement with North American Helium Inc. (“NAH”) with respect to a proposed farmout agreement (the “Farmout Agreement“). NAH is a private helium company which is engaged in the exploration, development, production, refining and marketing of helium in North America. Concurrently with the entering into of the Farmout Agreement, the Company intends to complete (i) a private placement of units (“Units”) to NAH for total gross proceeds of $3.5 million (the “Strategic Investor Private Placement”), (ii) an insider private placement of Units to directors, officers and employees of the Company for gross proceeds of approximately $500,000 (the “Insider Private Placement”), and (iii) a brokered commercially reasonable efforts private placement, with Peters & Co. Limited (“Peters & Co.” or the “Agent“) for up to $4.5 million (the “Brokered Offering”, and combined with the Strategic Investor Private Placement and Insider Private Placement, the “Offering”), for combined aggregate gross proceeds of up to $8.5 million. In connection with the Brokered Offering, the Company has granted the Agent an option to sell up to an additional 15% of the Units issued under the Brokered Offering (up to 1,687,500 Units), exercisable in whole or in part at any time until 48 hours prior to the time of closing of the Brokered Offering. The Offering will close on or about June 28, 2022 (the “Closing Date“).
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The Units
Each Unit will consist of one common share of the Company (a “Common Share“) and one third of one Common Share purchase warrant (each whole warrant, a “Warrant”). Each Warrant shall entitle the holder thereof to purchase one Common Share of the Company at a price of $0.70 at any time on or before the date which is 24 months after the Closing Date (the “Expiry Date”). If the 30-day volume weighted average trading price of the Common Shares on the TSX Venture Exchange (the “TSXV“) is at or above $1.20 per share, the Company may accelerate the Expiry Date by giving notice thereof to the holders of the Warrant, and in such case the Expiry Date will be the day that is 30 calendar days after the date on which such notice is given by the Company. Notwithstanding any of the foregoing, the Expiry Date will be no less than six months from the Closing Date.
Farmout Agreement with North American Helium
NAH will drill a total of five wells, incurring 100% of the drill expenditures, on three predetermined blocks of land in Saskatchewan comprising approximately 2.3 million acres located west of the third meridian (the “Blocks”). For each well, NAH shall have earned an 80% operated interest in the section on which the well was drilled plus nine contiguous sections of land adjoining to the well, up to a maximum of 32,000 acres. The Farmout Agreement specifically excludes HEVI’s current drilling focus in the McCord area. The Company will retain a 20% working interest in the earned lands and each successful well drilled by NAH (the “HEVI Working Interest“).
NAH must notify HEVI of its five drilling targets within six months following the execution date of the Farmout Agreement, with a requirement to drill all five wells within 24 months. NAH must drill one well in each of the three Blocks, with no more than three wells drilled in any given Block. HEVI remains on track to spud our first McCord well in June, with up to six potential targets identified.
“This Farmout Agreement with North American Helium truly sets us apart, as we are able to work with one of the helium industry’s leading operators, and to welcome them as a strategic equity investor,” said HEVI CEO, Greg Robb. “Having this Farmout Agreement validates our original strategy to acquire sizeable acreage in Saskatchewan in regions featuring a high probability of helium reserves, while the Offering allows HEVI to successfully fund the farmout arrangement with North American Helium and provides substantial financial flexibility to continue executing our overall strategy.”
Strategic Investor Private Placement
Pursuant to the Strategic Investor Private Placement, NAH will subscribe for 8.75 million Units for total gross proceeds of $3.5 million. In connection with the Strategic Investor Private Placement, the Company will pay a finder’s fee on terms compliant with the policies of the TSXV.
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HEVI and NAH will enter into a standstill agreement pursuant to which NAH will be subject to certain standstill restrictions relating to, among other things, the acquisition of HEVI securities for a 24-month period following completion of the Offering. In addition, HEVI and NAH have entered into a pro rata participation and board nomination agreement pursuant to which NAH will be permitted to maintain its pro rata undiluted percentage of HEVI Common Shares following completion of the Offering for a 24-month period. Furthermore, should NAH’s ownership reach over 10% in the next two years, NAH will have a right to appoint a nominee to the HEVI board of directors.
Use of Proceeds of the Offering
The Offering is integral to funding the Company’s obligations with respect to the HEVI Working Interest and as such the Company will be relying on the ‘part and parcel pricing’ exemption allowed by the TSXV with respect to the pricing of the Offering. The net proceeds of the Offering will be used to fund HEVI’s obligations with respect to the HEVI Working Interest, including with respect to drilling and facilities, the ongoing drilling and development capital expenditure program of the Company and for general corporate purposes.
Other Terms and Conditions
The Offering is subject to certain conditions including, but not limited to, the receipt of all necessary regulatory and other approvals including the approval of the TSXV.
The Common Shares, Warrants and any Common Shares issued upon exercise of the Warrants will be subject to a four month and one day hold period under applicable Canadian securities laws from the Closing Date.
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