Helium One Global PLC (LON: HE1) has an entirely sensible plan to prospect for and then extract helium. There is however a potential problem with that plan which is nothing at all to do with the internal mechanics of that plan. The problem is one that afflicts every junior miner looking for minor elements. Which is that the market is small enough that it truly matters what everyone else is doing.
For many global markets, it just doesn’t matter what the competing suppliers are trying to do. One more wheat farmer changes the global wheat price at the margin but not so that anyone would notice. We need entire countries to enter the market – Ukraine over the past two decades – to make a difference.
The problem every company prospecting for minerals in smaller markets though is that this isn’t true. The arrival of just the one more supplier can radically change the price of that product globally. This is the problem that Helium One faces.
The base idea is entirely sound. Helium is a vital resource – we can’t have MRI machines without it, let alone party balloons – and the long-term supply of it is being exhausted. The US used to run a stockpile which is being run down. So, new supply, yes, the world would like it.
Helium One is also entirely correct in that helium is the byproduct of the radioactive decay of uranium and thorium. So, gas pockets should exist in certain volcanic rocks (which are high in U and Th) and those gas pockets will be high in helium content. Helium One has found at least significant indications of such pockets where we’d logically expect them to be, in volcanic rocks in Tanzania. This all makes entirely logical and geological sense. There are very serious market analyses that show how successful Helium One could be.
So, what’s the problem that Helium One faces? Helium One’s problem is one faced by many companies looking for minor minerals and elements. Which is that sure, primary exploration for them can make sense. But it’s also possible – often enough – for the same mineral or element to be produced as a byproduct of something else. There are plenty of gold miners but it’s also often a byproduct of copper mining. Germanium mining is possible, it has been done, but fly ash from coal plants supplies about half the world's demand.
This is Helium One’s problem with helium prospecting. Yes, there are deposits out there, Helium One seems to have a lock on some. But Helium One’s competition isn’t other helium deposits. For helium can also be – is – produced as a byproduct of liquefied natural gas (LNG) production.
This doesn’t mean that Helium One can’t successfully produce, nor that it can’t be profitable doing so. What it does mean is that everyone’s going to have to wait and see whether they can. For the price they can sell their helium at does not depend upon other deposits being found and produced from – rather, how many LNG producers decide to do the marginal extra work to extract the helium already in their processes?
Helium One’s problem, to the extent that it has one, is simply that the helium market is more complex than just finding deposits of helium.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.