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Helium One Announces ERT Survey – Is This Important?

Tim Worstall
Tim Worstall trader
Updated 7 Feb 2022

Trade Helium One Shares Your Capital Is At Risk

Key points:

Helium One Global Ltd (LON: HE1) shares haven’t really reacted to the announcement that the company has started an ERT survey at Rukwa. So, at this first level of consideration, we can conclude that it’s not in fact important to the company nor the Helium One share price. Not important because the news has led to no movement.

However, we then need to go on to consider what would be important news that would move the share price at HE1.

This brings us back to the basics of the valuation of any junior miner – usually defined as someone looking for minerals to exploit instead of actually producing them. There are a number of hoops to jump through, is there a deposit here? Then it is worth exploiting, then can we raise the capital to do so, and finally, what’s the market going to be like when we produce?

Also Read: Natural Gas Trading Guide

Helium One is, as we’ve said before, good on that first step. Helium is a product of the radioactive decay of uranium and thorium. These are often found in volcanic rocks, the area being surveyed in Tanzania is just that. So, yes, there’s helium around. HE1’s discovery of anomalies – natural gas deposits which appear to be as much as 10% helium – are also proof of that base concept.

The second step is the one that’s being proven – in the sense of to test – right now. This ERT survey (no, it doesn’t matter what that really means) and the other work going on is to find out whether it’s actually worth drilling in these areas to find that natural gas and thus helium. Finding some isn’t enough, it’s necessary to find enough to make it worthwhile setting up the fixed costs of an extraction system and then a shipping one. Rural Tanzania is not exactly replete with industrial infrastructure after all.

Given the interest in helium and new sources of it assuming that there are exploitable deposits there we’d not expect much difficulty in financing extraction. It really is true that the world’s stockpile and decades-long supply from Texas and Oklahoma is running down.

But this then comes to that other issue we’ve also mentioned before about Helium One. It matters, hugely, what everyone else is going in this field. This often does happen with minor minerals and metals. Prices, supply or demand, change and too many folks get the same idea together. Let’s go and find more of this stuff then. We get a surge of investment and all that new supply comes to market at the same time – prices then crash. The 2013 lithium boom has already led to at least one producing mine going bust.

This is likely the limitation on Helium One shares. There are others out there prospecting directly and there’s competition from the LNG industry too. Finding, proving the viability of deposits, helium is not enough that is.

This specific news on the ERT survey seems not to be important to the Helium One share price. The consideration about the market at the time of any production is some way off into the future. So, the likely determinants of the share price are going to be news about the volumes, not just concentrations, of helium being found by HE1.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.