Highlands Natural Resources is developing the Helios 2 Project, which comprises 221,973 acres in Custer, Carter and Fallon Counties, Montana. Highlands has drilled two wells on the project to date.

Numerous gas shows have been observed throughout the region where historic gas analysis indicates high biogenic methane (natural gas) concentrations and 0.36% helium content (similar to world-class Hugoton field in Kansas). An Independent Report by RPS Knowledge Reservoir indicates a “best estimate” indicative success case NPV10 of US$341 million for the natural gas development project on a 69,120 acre area. This success case valuation does not include specific economics for the Helium and RPS’ best estimate of 2.1 Bcf of net attributable helium for a 69,120-acre area would be incremental to natural gas development economics.

Highlands is conducting a pilot programme to demonstrate the technical and economic viability of dewatering; validate the engineering and economics outlined in the RPS Competent Person’s Report and; affirm RPS’ projections of the long-term economic potential of the Helios Two prospect. Significantly, Highlands has confirmed through multiple gas analyses the presence of 90% methane and 0.31% to 0.33% helium in gas produced from Highlands’ first well in the project.

Highlands is employing innovative drilling and completion techniques with the intent to unlock commercial gas production. The strong natural gas production rates were delivered by opening up just two of the frack stages. At the time, the third stage of the frack, or Stage #1, was closed so that the Company could observe the productivity impacts of long-term clay hydration. The Eagle formation has been soaking for more than seven months. Highlands is now prepared to drill out the bridge plug and begin flow and testing of the well

Having deployed a fresh water clay hydration completion aimed to create swelling-related cracks and permeability over a multi-month process, the Company hopes to have strengthened production even further. If this test is successful, this will go some way to validating the project and although it will not provide a definitive understanding of the commercial viability of the project immediately, given the size of the project, it will help Highlands determine the next steps and this project’s future. Total costs for completing stage 1 are estimated to be less than US$100,000 but the potential upside to Highlands in the event of success could be significant.

Helium, which is auctioned by the U.S. BLM for more than $100/mcf, is an essential feedstock for numerous industrial, medical, scientific and commercial applications including nuclear power generation, magnetic resonance imaging (‘MRI’), industrial fabrication and welding, fundamental sciences and research, fiber optics, space and defence applications, semiconductor manufacturing, and many other applications. Significantly, helium currently has no substitute in cryogenic applications requiring temperatures below -220 degrees Celsius. Highlands believes that helium’s role as a critical and irreplaceable component of numerous modern industries will underpin future global demand.