Right Place, Right Time, Right Commodity for Helium One
“…As we said last year Helium One should be on the radar of investors looking to back something a bit different…”
As the presence of a ticker suffixed to its name indicates, much has changed at Helium One (AIM:HE1) since our last report in late October.
The company became the market’s first enterprise focused on helium production when it listed in December, raising £6m to develop three 100pc owned projects in Tanzania, with the first exploration programme now underway.
Today, the company announce the appointment of Canaccord Genuity as the joint broker effective immediately. Canaccord Genuity will bring an additional global reach and increased access to institutional investors to assist in financing the future development of Helium One’s Rukwa project.
Weightless, colourless, inert, cold – and very useful
As we wrote last year helium’s ghostly properties make it one of the world’s most valuable elements, a quiet but essential component for many established and emerging products and technologies.
Although the second most abundant element in the universe (after hydrogen), it is relatively scarce on Earth. Formed by the decay of radioactive rocks in the world’s crust it accumulates in natural gas deposits, but when released rises rapidly through the atmosphere and is soon lost to space. That ethereal quality accounts for perhaps its most well known usages: as a fuel for airships; a breathing gas for deep sea divers; and, of course, for inflating party balloons (an application which is being increasingly recognised as wasteful).
One of the inert ‘noble’ gases that does not react with other substances, helium is also colourless, odourless, and very, very cold (in its liquid form it is the coldest substance we know with a boiling point just above absolute zero), properties that make it ideal for a wide range of cryogenic, scientific, and manufacturing processes.
Helium is used for cooling 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 facilitates the low temperature environments necessary for research in fields like particle physics and space flight, employed, for example, to ensure the smooth operation of the Large Hadron Collider, and to cool liquid oxygen and hydrogen in rockets (including the Apollo missions). It is also used to create the ultra sterile conditions necessary for the manufacture of semiconductors and optic fibres.
Supply concerns
Helium’s versatility generates a global market estimated to be worth more than $6bn a year. Chinese demand, driven by the elements use in the manufacturing of semi-conductors and fibre-optic cables, is particularly intense, doubling over the past decade, and now growing at annual rate of 6pc per year.
Increasing concerns about a supply shortage – helium cannot be manufactured artificially – pushed helium stocks up by more than 650pc in 2020. As with other critical elements like lithium, cobalt, and vanadium, helium’s supply depends on a few countries, in its case Qatar and the United States. But the primary source of US supply, the strategic reserve of helium accumulated early in the 20th century for military airships, is now running down, with the final quota due for release in 2023.
The reserve’s closure will put further pressure on supply and prices, leaving the world dependent on just 10 helium plants concentrated in Qatar and Algeria, where it is produced as a by-product of liquid natural gas. Production at 5.6 billion cubic feet (bcf) has fallen behind global demand of 6.3 bcf.
Qatar is planning new refineries, but there have been concerns about the reliability of its supply since the 2017 diplomatic crisis that temporarily isolated the country from the global economy. Russia, already self-sufficient, plans to become a major exporter through a huge new Gazprom production facility in Siberia, now nearing completion. After ramping up to full production within the next five years Gazprom is aiming to meet up to 30pc of the world’s supply, raising fears helium supply could become entangled in the same political machinations that beset the supply of Russian natural gas and crude oil.
Helium rising
All of which opens opportunities for Helium One to establish itself as a significant new player in a lively market. Since listing the company has reported on progress at two of its projects, Rukwa and Eyasi.
The Rukwa Project, covering 3,448km2 of the Rukwa Rift Basin in south-west Tanzania, remains the most prospective. With an un-risked prospective Helium P50 resource of 138 bcf (estimate of potential outcomes ranging from 30 bcf to 521 bcf), and helium concentrations of up to 10.2pc (the helium grade associated with hydrocarbon byproduct production is typically around 0.1 to 0.3pc), Rukwa has the potential to meet the equivalent of 10 years’ global demand.
High-resolution aerial gravity surveys and seismic data analysis undertaken by the company have identified 21 prospective licences across the project area. A seismic acquisition programme to identify the best prospects for a drilling campaign began last month, designed to improve resolution on identified trap structures and identify prospective drill sites. A drilling campaign based on the seismic data – expected to be available for interpretation later this or next month – is scheduled for Q2 this year. The company has already submitted the programme’s Environmental Impact Assessment to the Tanzanian regulators, and is currently awarding drilling contracts.
The company has also announced progress with one of its other two licences. Eyasi, some 600km north of Rukwa, 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.
In January Helium One announced the commencement of surface geochemical exploration at Eyasi. A spectrometer survey will assess whether the project’s helium-rich geochemical fairway can be extended, evaluating historic seep locations and identifying new ones at the southern end of the project area.
Looking ahead
As we said last year Helium One should be on the radar of investors looking to back something a bit different: a prospective producer of a relatively unsung material crucial for some of the world’s cutting edge industries, the secure supply of which is currently uncertain.
The company’s share price soon doubled after listing, rising to more than 8p to take its market cap to £35m. The price has since fallen back a little to just under 7p. With the prospect of a positive run of news over the next few weeks regarding developments at Rukwa and Eyasi, it might be heading up again before long.
