With global supply shortages and rising prices is it time to get long of Helium One?
“…Helium One, therefore, with its highly promising Tanzanian assets, is well placed to provide a valuable new source for a gas for which demand continues to grow…”
Helium is one of the most enigmatic of the elements on which today’s most advanced technologies depend.
It is the second most abundant element (after hydrogen) in the universe, but relatively scarce on Earth. Formed by the decay of radioactive rocks in the world’s crust, helium accumulates in deep porous rock strata, and if it escapes to the earth’s atmosphere it is rapidly lost to space and gone forever. That matters, because it cannot be manufactured artificially.
Helium is well known for its extreme lightness – second, again, only to hydrogen – but has other qualities that set it apart. It is colourless, odourless, and – unlike hydrogen – inert, one of the ‘noble’ gases that does not react with other substances. It has the lowest boiling point of any element, only changing from a liquid to a gas at a temperature close to absolute zero.
These ghostly qualities make helium essential for a wide range of technologies. It is best known for its use in airships, as a breathing gas for deep sea divers, and, of course, for inflating party balloons. But it is also fundamental for a wide range of cryogenic, scientific and manufacturing processes.
Helium’s low boiling point makes it ideal for cooling superconducting magnets used in the magnetic resonance imaging (MRI) machines widely deployed in modern medical diagnosis, a booming market that has grown at an annual compound rate of more than 3pc over the past decade. It also facilitates the low temperature environments necessary for research in fields like particle physics and space flight. Helium is used, for example, to ensure the smooth operation of the Large Hadron Collider, for the pressurisation of rocket propulsion systems, and the development of space vehicles: it was used to cool the liquid oxygen and hydrogen that powered the Apollo missions, although its primary use is to pressurise the cryogenic liquid rocket fuel not for cooling specifically of course.
It creates the inert, sterile, super-clean conditions required for the manufacture of semiconductors and optic fibres, and also plays an important role in industrial manufacturing, serving for example as a shielding gas for welding. Its lightness and low reactivity also make it essential for leak detection.
These and other specialist applications ensure that helium ranks high in the world’s critical minerals lists, and allow it to generate a global market estimated to be worth more than $6 billion a year.
Helium One’s assets
Helium One is a seeking to establish itself as a major new player in the international helium market by realising the promise of its set of highly prospective exploration licences in Tanzania.
Founded five years ago, the company is led by CEO David Minchin, a geologist and Executive Director of multi-commodity exploration company ScandiVanadium Ltd, and Non-Executive Chairman Ian Stalker, a former CEO of UraMin Inc and LSC Lithium. The company is backed by AIM-listed Solo Oil, which holds a 12pc interest and draws on its hydrocarbon exploration expertise to provide technical support. Helium One also has an agreement with Lockheed Martin for the use of airships to transport the helium it hopes to produce from its three projects, Rukwa, Eyasi and Balangida.
Rukwa is currently by far the most significant. An independent analysis published last October by SRK Consulting Ltd estimated that the 3,590 km2 prospecting area contains a best estimate, un-risked, prospective recoverable Helium resource (2U/P50) of 138 billion cubic feet (bcf), with potential outcomes ranging from 30 bcf to 521 bcf. Exceptionally high helium concentrations of up to 10.2pc have been recorded in the field’s surface seeps (the helium grade associated with hydrocarbon byproduct production is typically around 0.1 to 0.3pc). In short, Rukwa is the largest known primary helium (Nitrogen Gas with a high percentage of helium concentration) resource in the world, with the potential to supply the equivalent of 10 years’ global demand.
High-resolution aerial gravity surveys and seismic data analysis undertaken by the company over the past few years have identified 21 prospective licences across Rukwa, permits for which have already been granted by the Tanzanian government, and renewed as required, the most recent set of renewals being confirmed earlier this month. Rukwa has been fast-tracked for exploration, with preparations underway to confirm the field’s prospectively through a drilling programme that would use simple vertical wells without the expense of horizontal drilling.
Eyasi and Balangida are promising exploration projects in their early stages. Eyasi has four prospecting licences covering an area of approximately 910 km2, with gas analysis indicating helium concentrations in thermal springs. Balangida currently consists of a single prospecting licence covering an area of approximately 260 km2.
Supply shortages, high prices
As with so many of the world’s other critical materials – lithium, cobalt, vanadium – the supply of helium is dependent on a few core suppliers. Perhaps surprisingly, until very recently the primary supplier was the US government, which from time-to-time has auctioned quotas from the strategic reserve of helium it originally accumulated for its military airships. The reserve has been gradually run down, with the final sale expected next year. The final US BLM reserve auction was in 2018 for delivery in 2019, now only for federal use, although some private helium storage is ongoing. The world’s dependence on this facility was vividly demonstrated last year when the most recent auction forced a doubling of helium’s price as industrial users rushed in to guarantee their future stocks. At times helium prices have touched levels 30 to 50 times those of hydrocarbon gas, although in some cases a lot more than that! Prices for finished product have varying price points that range from $490 per mcf for shield gas to $3200 per mcf for extreme high purity gas. At $3000 that is 1000x that of the Henry Hub futures.
The closure of the reserve will put significant further pressure on supply and prices, leaving the world dependent on just 10 helium plants principally concentrated in Qatar and Algeria, which produce helium as a by-product of liquid natural gas. The vulnerability of Qatar – which accounts for a third of this production – as a supplier was demonstrated by the 2017 diplomatic crisis that temporarily cut off its economy.
This year the Covid-19 pandemic has temporarily eased supply shortages, demand for helium falling in line with the global economic downturn. By the end of this year’s first quarter the supply of helium was actually outpacing demand, though it has picked up in lock-step with the global economy. And prices will rise again if new supply sources cannot enter the market quickly enough to bridge the gap. A few significant helium projects are underway. Qatar continues to develop its Helium 3 project and Gazprom is building a massive new plant. China is also stepping up production. It is unclear, however, just how quickly these new supplies will come onstream.
Helium One’s prospects
Helium One, therefore, with its highly promising Tanzanian assets, is well placed to provide a valuable new source for a gas for which demand continues to grow. The company has access to the technical expertise it requires, and has proven its capacity to raise financial resources when required: two years ago the company raised $2 million for its pre-drill activities. The company is currently looking at a range of options to raise $5 million to fund its proposed drilling programme, including the option to list on an international exchange to access capital.
Helium One should be on the radar of investors seeking exposure to companies positioned to supply the – often unsung – commodities that will power the continued development of the global economy’s cutting-edge technologies.
What do balloons, MRIs and rockets all have in common? They all rely on helium — and the global market for the noble gas has been deflating for years…
The Author was paid for this article but does not hold shares in the above named company.