Gold bug Sprott invests $25M in hydrogen

MAX Power Mining (CSE: MAXX; US-OTC: MAXXF) has secured a $25-million investment from Eric Sprott to advance commercial evaluation of its Lawson hydrogen discovery in Saskatchewan, marking one of the largest financings yet in the emerging natural hydrogen sector.

The funding consists of 12.5 million units priced at $2 each, the company said on Friday. Each unit includes one share and one warrant exercisable at $2.75 over two years. MAX Power said the funding will support additional drilling, seismic surveys, resource modelling and commercial validation work at Lawson, part of the company’s 475-km-long Genesis Trend in southern Saskatchewan.

“With over $40 million in the treasury, we’re ready to execute an aggressive, disciplined approach at the Lawson Complex and elsewhere across our Saskatchewan holdings,” CEO Ran Narayanasamy said in a release. “We thank Eric for his continued strong support.”

MAX Power has described Lawson as Canada’s first confirmed subsurface natural hydrogen system following drilling that returned hydrogen concentrations of up to 286,000 parts per million and free-flowing gas to surface. The project lies about 140 km south of Saskatoon near Central Butte, within Saskatchewan’s Prairie Evaporite formations that the company says may help trap hydrogen underground.

High concentration

The concentration reported at Lawson — about 28.6% hydrogen — is high relative to most early-stage natural hydrogen occurrences, which are often in the low single digits or less. More important is the presence of free-flowing gas to surface, suggesting the system has pressure and permeability, a key requirement for production.

Even so, the result is not yet proof of a commercial discovery. What matters next are sustained flow rates, pressure behaviour over time, reservoir size and continuity, and whether the system can naturally recharge.

Shares in Max Power Mining rose 6.6% by mid-Friday in Toronto to $2.43 apiece, valuing the company at $364 million. They’ve traded in a 52-week range of 19¢ to $2.69.

Max Power says the geology along the trend is favourable for trapping hydrogen, similar to conventional oil and gas systems. It has identified more than 80 additional targets across its 5,260 sq. km land package, with upcoming drilling aimed at testing flow rates, reservoir continuity and overall deliverability.

Emerging uses

Hydrogen is used today mainly in fertilizer production, petroleum refining and chemical manufacturing. But governments and industry are increasingly targeting its use in fuel cells for heavy trucks, buses and trains, as well as steelmaking, shipping, backup power systems and electricity storage. Fuel cells generate electricity by combining hydrogen and oxygen, producing water vapour instead of carbon emissions.

Natural hydrogen — sometimes called white hydrogen — differs from conventional hydrogen because it occurs naturally underground rather than being manufactured from natural gas or renewable-powered electrolysis. Advocates argue naturally occurring hydrogen could become a lower-cost and lower-emission energy source if commercial deposits can be proven.

Subsurface system?

For explorers, important measurements include hydrogen concentration, reservoir pressure, gas flow rates, recharge rates and whether hydrogen can be produced continuously over long periods. Free-flowing gas and evidence of reservoir drive are considered particularly important because they may point to a functioning subsurface system rather than isolated gas pockets.

The sector remains at an early stage globally, with few projects yet near commercial production. Analysts say proving consistent flow rates and economic recoverability remains the key hurdle before natural hydrogen can become a large-scale energy business.

MAX Power has applications pending for more exploration land. The company has also reported helium associated with the Lawson system, which could provide an additional commercial product stream.