Key points:
- The Helium One share price has jumped 40% in the last couple of days
- This is on reports that remote sensing has revealed multiple anomalies in the target area
- Helium One’s future though depends more on what everyone else does in the helium market
- Helium One Global Ltd Stock Forecast
Helium One Global Ltd (LON: HE1) share’s have bounced 40% this week on reports that remote sensing has revealed multiple anomalies in the prospecting area in Tanzania. As we’ve discussed before about Helium One we’ve no problem with the basic geological idea being employed here. The results of that remote sensing are also encouraging. But the long-term future does still depend upon what everyone else in the helium market does, not just the prospects for Helium One’s own survey area.
The basic geology is that helium is alone among the stable elements that we actually use as a society in being constantly created anew here on the planet. Helium is a daughter product of the radioactive decay of uranium and thorium. Much of this happens underground of course – that’s where most of the uranium and thorium is – and the helium created can seep through to the surface or get trapped along with natural gas (created by an entirely different process) in reservoirs.
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So, prospect in areas where the rock has known high uranium and thorium levels, like Tanzania, and finding helium may well be possible.
The new report is that using remote sensing (that is, finding helium seeping through the surface into the atmosphere) Helium One has found significant areas of this happening. The indications are that some of the natural gas down there is as much as 10% helium – this is a very high level by the standards of these things.
Like every junior miner (the usual definition of which is a company not yet producing anything) Helium One has to go through a number of stages of proof. Firstly, gain an area to survey, then prove there’s something in that area, then come the economic tests – is it worth extracting? Helium One has achieved the first, definitely, this report now indicates that the second is likely true. So, all done then and the sky’s the limit?
Sadly, no, there’s now that last stage of proof required. That the deposits are worth exploiting. This depends partly upon how much gas there is in those anomalies. The content of certain of them – that 10% – is definitely worth it, given helium prices today. But how much gas is there in each of those anomalies? That’s something for the next stage of exploration.
But more than that this all depends upon that price of helium. This is a small enough market that increases in production at the margin can have significant price impacts. In the economic jargon, the elasticity of demand – how much demand changes when price does – with respect to price is low. This means that increases in supply can feed through into dramatic price changes. The competition here is not other companies looking for helium, it’s liquefied natural gas producers who install the necessary extra equipment to extract helium.
Helium One’s prospects, therefore, depend not just on that Tanzanian exploration but also on what other gas producers do. That makes valuing Helium One difficult. A reasonable expectation might be that the share price at Helium One will continue to be volatile and a real breakout might only occur when economic viability is fully proven.