Helium Global One: a potentially lucrative gamble for the brave

If Helium Global One (LON:HE1) can pull off its ambitious plans to become a producer of high-grade helium for the international market, investors could be set for some rich rewards. The question is how great a leap of faith they must first make.

The market for this gas has increased dramatically: prices for bulk liquid helium jumped 135% percent in the last two years. A recent Research and Markets report forecasts that the market, worth $3.65 billion in 2020, will be worth $7.65 billion in 2030.

Demand for helium has accelerated notably in the medical sector, the largest consumer, where its uses include for MRI scanners and refrigeration of Covid 19 vaccines. What’s more, in most applications, there are no substitutes for helium.

Helium One has said it expected annual global growth of about 3%, driven by increasing demand in the medical sector (particularly from MRI demand in developing countries), as well as the technology and aerospace sectors.

As well as increasing demand, supply has been squeezed. Last year, the US Bureau of Land Management closed its reserve to private industry. Until that point, it had been supplying up to a quarter of world demand. This global shortage has been responsible for much of the price increase.

The largest known helium reserve in the world

The company, founded in 2015 and run by a team of directors with experience in mining and exploration, has three projects in Tanzania where it’s a first mover. In Rukwa in the south-west, it will start drilling next month. Rukwa has been independently verified as the largest known primary helium resource in the world.

All this doesn’t mean that the project is financially viable — the company cautioned in its AIM submission documents that it has no drilling production history and has yet to determine whether extracting the helium would be economically rewarding.

There are substantial regulatory risks. Companies extracting helium obviously need licences. So far, Helium One has been ticking the boxes with the Tanzanian regulatory authorities and as it’s got to the point of drilling, investors can be optimistic this will continue. The company has warned investors, however, that the granting of mining licences comes with share entitlements for the Tanzanian government.

While this might be potentially the world’s future largest resource, it’s not the only area that companies are exploring. With the closure of the US Reserve, it’s inevitable that many companies want to get in on the act, including incumbents in oil and gas.

What are the other options in the helium space?

Investors wanting exposure to helium might also want to look at Canada’s Avanti (TSXV:AVN) which announced this week that it has acquired a land package under lease from the government of Alberta. Big players include Air Liquide (EPA:AI), Linde (NYSE:LIN), which is newly merged with Praxair, and Air Products (NYSE:APD).

Shares in Helium Global debuted in December on AIM at 5.875p and opened on Tuesday at 19p, but down off their all-time high of 24.50p. The company also listed on the US OTCQB market at the end of last month (HLOGF), noting it expected this to have a positive impact on liquidity.

We think the risks, although decreasing as the company moves further to determining the economic viability of exploration, are still high for all but the boldest of investors. For the less bold, the potential is enough for us to recommend keeping a close eye on developments in Rukwa.

This article was brought to you in partnership with The Armchair Trader.

Emma Portier

Emma Portier has more than 20 years’ experience as a financial journalist, starting out as a regulatory correspondent for Euromoney and then joining the Financial Times group as a wealth management writer. She has spent several years as a financial markets reporter for AFX News in Stockholm and then as an EU antitrust reporter in Brussels where she then joined Reuters.

Emma’s core expertise is following EU regulatory developments and how these affect financial markets. She set up the climate change and energy news service for the regulatory risk news agency MLex and then worked as a special EU correspondent for the Bureau of National Affairs. Emma has advised key players in Brussels on their media relations strategy and provides content to a range of private and institutional clients.