Helium One Global Ltd(LON: HE1) shares are bouncing around a 5 and 10% fall this morning. The reason why is probably that the effect of the recent interesting news is wearing off. To produce another significant change in the Helium One share price is going to require another announcement of something new and of interest.
It’s worth taking a step back and considering the project as a whole. We’ve talked about the major headwind facing Helium One before. Which is that while helium is important as an industrial element – we can’t have MRIs, let alone party balloons, without it – and it has recently been in short supply that’s not enough to prove that a helium miner will succeed. For there are two entirely different ways to go get helium. One is to find helium-rich natural gas deposits – the Helium One route. The other is to process far larger but far lower helium concentration natural gas supplies. That’s the liquefied natural gas route. The value of helium is clearly going to be determined by how many folk follow each path and so what’s the total helium supply going to be?
Given that Helium One is going about its exploration in the right way. Helium deposits are the result of the radioactive breakdown on uranium and thorium – the helium atom is an alpha particle after all. So, rock with high uranium and thorium content, if there are also natural gas reservoirs, should have gas high in helium. This works entirely logically.
The area of Tanzania being explored is the right sort of volcanic rock to have those high levels of thorium and uranium. Helium One then announced, here, that they had found multiple anomalies. By which they means that there were seeps of gas from presumed underground reservoirs which were high in helium – as much as 10%. By the standards of natural gas that is indeed a high helium content.
So, the basic geologic logic is working. The stringing together of helium formation, rock content, place, all works. Thus we got that jump in the Helium One share price as it is a validation of that chain of logic.
What comes next though? We got that news, it’s good, the share price jumps, but what’s going to move Helium One again? The other news we’ve got is of some warrants being exercised but that’s trivial, a few thousand pounds worth.
A reasonable expectation – a sensible enough view of the immediate future – is that the good news about those anomalies is now embedded in the Helium One share price. To gain another significant move either way it’ll be necessary to gain new information. This could be of some other helium miner reaching production, or it could be results from within Helium One itself. But if everything we know is now already in that share price then we need new information to move it again.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.