Looking for an alternative commodity play? Take a look at Helium One
“…Investors interested in a slightly different commodity play should keep a close eye on Helium One this year as it continues to define the scope of what might prove to be a highly valuable resource of one of the world’s scarcest gases…”
With the commodities price boom looking ever more likely to mature into a long term trade, investors might want to investigate the prospects for helium, a resource somewhat overshadowed by staples such as oil, gas, copper, steel, aluminium and lithium that nevertheless forms part of the backbone of the global economy, and the supply of which may be curtailed by sanctions against Russia.
Helium One (AIM:HE1) was founded in September 2015 to explore, develop, and ultimately, become a producer of low-carbon helium. The company holds 18 fully-owned prospecting licences in Tanzania, covering more than 4,512 km2 in three project areas at Rukwa, Balangida and Eyasi. Rukwa is currently the most significant, with a Best Estimate Un-risked Prospective Resource of 138 Bcf, potential outcomes ranging from 30 Bcf to 521 Bcf. Helium concentrations of up to 10.6pc have been recorded in the field’s surface seeps, well above typical grades of around 0.1 to 0.3pc when helium is produced as a hydrocarbon byproduct.
Eyasi and Balangida are at earlier stages of development. The 804 km2 Eyasi Project is some 600 km to the north of Rukwa, but has numerous geological similarities. High-grade helium has been measured at surface and structural leads have been identified from surface geochemical exploration carried out last year. Balangida is a single prospecting licence covering an area of approximately 260 km2 that has not yet been explored.
Helium One says that Rukwa’s P50 resource of 138 Bcf has the potential ‘to supply the entirety of global demand for over twenty years, or 10-15pc of global demand for more than a century’, a projection backed by a paper published earlier this month by researchers from the University of Oxford and Durham University drawing on sample data collected from all three project areas. The study indicated that the ‘Tanzanian East African Rift contains most, if not all, of the prerequisites for an economic helium province’, and that data from gas seeps in the west and east branches of the Tanzanian section of the East African Rift System contain 4 He concentrations of up to 10.5pc – and unlike other known helium provinces are essentially free of greenhouse gases. The potential 4 He generated by the Tanzanian Craton, together with surrounding mobile belts of around 700,000 Bcf, suggest that ‘even with inefficient release, migration and trapping, these regions could provide high-helium content reservoirs’.
Helium is valuable for the exceptional qualities that make it essential for many of today’s most advanced technologies. As well as being extremely light, it is colourless, odourless, and 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. In the popular imagination it is best known for powering airships, as a breathing gas for deep sea divers, and, of course, for inflating balloons. But it is also essential for a wide range of cryogenic, scientific and manufacturing processes. These and other specialist applications make helium one of the world’s most critical commodities, generating a global market estimated to be worth more than $6bn a year. Like other critical materials, such as lithium, cobalt, and vanadium, its supply is limited to a few key producers. Helium supply looks likely to be further constrained by sanctions against Russia: Gazprom has been constructing a new plant that would have produced up to 60 million cubic meters of the gas each year.
Phase I drilling
Helium One’s 2021 Phase I drilling campaign, designed to ‘de-risk’ Rukwa’s resource,got off to a positive start, chromatograph data showing helium concentrations of up to 22,084 ppm (2.2pc) in mud exposed while drilling the first well, Tai-1, with further helium shows in zones above the well’s primary targets. Subsequent updates were somewhat more mixed, however, the campaign concluding ‘without identifying helium gas’ at Tai-2. But the campaign served as the foundation for this year’s activity, significantly enhancing the company’s understanding of Rukwa’s helium system. Helium shows were encountered the project’s Lake Bed Formation, Red Sandstone Group and Karoo Group regions, and petrophysical analysis confirmed the presence of quality reservoirs beneath thick sealing units with multiple prospective intervals from basement to near surface, allowing identification of ‘shallow’ and ‘deep’ target types for this year’s drilling.
Last winter the company completed a 220 km 2D seismic operation over Rukwa’s northern extensions to further inform this year’s Phase I operations, which draws on the surface helium anomalies, shallow resistivity anomalies, airborne gravity gradiometry highlighted by the Phase I programme. A multispectral satellite spectroscopy (MSS) study completed in January identified several new surface helium anomalies across the company’s entire 4,500 km2 licence area, offering further evidence of a robust helium anomaly across the area’s Tai structure, where last year’s drilling encountered several helium shows. The update reported that ‘the occurrence of multiple analogous anomalies across all three basins … excites the team about how widespread and prolific this system may be’. The data will help delineate the prioritisation of subsurface traps to be tested this year.
This year’s operations
The following month work got underway on an Electrical Resistivity Tomography (ERT) survey at Rukwa designed to identify resistivity anomalies within the licence’s ultra-shallow zone, and facilitate a better understanding of near surface geology than seismic can provide. The survey will image specific priority areas indicated by seismic data, and investigate surface helium anomalies identified in the recently completed MSS study. The work has been timed to take advantage of Tanzania’s rainy season, which provides ideal saturated ground conditions for ERT surveying. The company says that ‘results to date have shown interesting resistivity anomalies that justify additional data acquisition, interpretation and evaluation.’ The survey team will move on to investigate other priority targets identified in Phase I and Phase II 2D seismic, as well as areas with near surface helium anomalies identified in the MSS study.
The company has also announced the results of a Quantitative Evaluation of Minerals by Scanning Electron Microscopy (QEMSCAN) study on drill cuttings collected from Rukway’s Tai-1/-1A wells. The analysis has provided information on reservoir quality, mineralogy, seal potential and grain size distribution of the full sedimentary sequence at Tai-1/-1A, indicating the presence of a ‘good to excellent quality reservoir, demonstrating clean sands with very low clay content’ within all three target horizons. The study, which confirmed the presence of thick claystone units at Top Karoo Group and Base Lake Bed Formation, as well as multiple intra-formational claystone units, will help identify potential sealing horizons throughout the company’s target stratigraphy.
Funded for a busy year ahead
Helium One is fully funded for its Phase II exploration programme, having completed two fundraises over the past two years. The company raised $7.8m when listing in late 2020, and a further $13.8m last spring. Helium One’s most recent annual report reported cash balances of $9.7m as at 30 June 2021. Ongoing exploration has increased the company’s net assets to $28,536,258 from $7,783,836.
The company’s share price has fluctuated over the past few months according to drilling updates. Its stock fell from around 30p in August to 6p after early hopes of free gas at Rukwa disappointed. But the price surged again in January to 14p following news of helium anomalies indicated by the MSS study. Investors interested in a slightly different commodity play should keep a close eye on Helium One this year as it continues to define the scope of what might prove to be a highly valuable resource of one of the world’s scarcest gases.
