Are Helium One shares an under the radar opportunity?

As several early-stage helium miners push ahead with projects, Helium One’s Tanzania extraction project could give it an edge on the market. With the HE1 share price jumping on confirmation of the presence of helium at the Rukwa mine earlier this year, the firm could represent a good value long-term option as the helium market takes off.

Image courtesy of the marketing department at Renergen.

Helium One [HE1.L] shares are up 27.6% year-to-date as the company moves ahead with its mining plans in Tanzania. Demand for the critical gas has surged due to supply fears and its use in cutting-edge technologies.

The company is one of several helium miners on course to set up large-scale mining operations, and with the helium market on course to expand over the next few years, it could be set to see its share price expand in the near term.

What’s happening with Helium One’s share price?

While London-listed shares in Helium One have made a considerable jump this year, closing Friday 20 May at 9.22p, historically the stock has been volatile. On 20 January, Helium One was trading at just over 15p, only to close at 9.95p five days later. During both April and May the stock touched lows of around 8.5p — a level that seems to be providing some support this year.

Over the past 12 months, the stock has fallen 54.1%, and has been unable to pare the losses the stock sustained when it collapsed last summer. It reached a 52-week high of 29p on 1 August 2021, and a fightback to this point would represent a substantial upside on Friday’s close.

Can Helium One provide investors with sustainable growth?

UK-based Helium One is one of several firms vying to take the lead in a helium mining market that is growing increasingly competitive. Over the past few months, several companies have made strides towards extracting the resource, hinting at a helium landscape that could soon generate an explosive market.

Earlier this month, Canada’s Global Helium [HECO.TX] acquired a large, helium proven structure in Montana known as the ‘Pale Rider’. Following extensive seismic studies, Global Helium has mapped an 18 square-mile helium pool, which would offer potential for “significant helium returns”.

Elsewhere in the Canadian market, First Helium [HELI.CVE] has said it plans to drill two targets at its 100% owned 79,000-acre Worsley Property in Alberta. The wells are expected to contain commercial quantities of helium and natural gas.

As the North American market heats up, Helium One’s flagship extraction project in Tanzania is under way. A recent study conducted by research teams from Durham University and the University of Oxford found that Tanzania’s helium deposits could provide Helium One with a sustainable source of the gas, giving strong signals that the investment case for the stock could be open.

Tanzania is due to start helium production in 2025 after the conclusion of exploratory work in the country. It is home to what is currently understood to be the largest primary helium deposit in the world at Rukwa, which stands at 138 billion feet.

Scirocco Energy, which has a small stake in Helium One, updated its shareholders on the progress that was being made in Tanzania.

“It is pleasing to note that Helium One continues to make strong progress, with positive indications coming from the 2D Seismic interpretation which will enhance the portfolio of drill-ready targets,” said Scirocco CEO Tom Reynolds.

Reynolds added that the “upcoming drilling at Rukwa [represents] a good value catalyst for Scirocco within our diversified portfolio of assets”.

The one analyst offering a price target on the Financial Times reckons Helium One’s share price could hit 18p over the next 12 months.

What kind of potential is there for helium and natural gas?

Helium is a critical gas with no known substitute. Aside from balloons and blimps, uses for the natural gas include tech company data centres, refrigeration, coolant for nuclear reactors and cryogenic research. The Japanese SC MagLev — one of the world’s fastest trains — uses the gas to cool its superconducting materials.

Threats of a supply shortage have driven up prices this year. According to a US government geological survey, in fiscal 2021 the price for crude helium to US government users was $3.61 per cubic metre ($100 per 1000 cubic feet). The estimated price for private industry’s Grade-A helium was about $7.57 per cubic metre ($210 per 1000 cubic feet), with some producers posting surcharges to this price.

According to Future Market Insights, the global market for bulk liquid helium is thought to reach $2.8bn by the end of 2022, with the unit price (dollar per thousand cubic feet) rising by over 135% in the past three years. Should demand and prices keep surging, the Helium One share price could see long-term growth.