It’s fair to say UK investors are suddenly fascinated with Helium One (LSE:HE1) and its share price.
Shares in the Tanzania helium explorer have rocketed more than 1,000% in a month.
This kind of explosive growth has become the talk of share price bulletin boards everywhere. So why is this happening? And should I pile in now in the hope of getting filthy rich?
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First of all…
It seems there’s a clear market opportunity to take advantage of a recent helium supply shortage to make serious money.
This is a non-renewable element that’s hard to find and expensive to store. MRI machines need thousands of litres of liquid helium to function.
Chip manufacturers also use helium. NASA is a big buyer, alongside China’s space authority, where helium is used to pump rocket fuel.
And the world’s largest helium producer is the US. In late January 2024 the country sold off its huge national stockpile along with its Federal Helium Reserve.
Meanwhile China only began producing helium at commercial scale in the last few years.
So what’s behind the surging Helium One share price?
Big business
CEO Lorna Blaisse has come out with some extremely bold language recently. This is after Helium One completed its latest drill campaign in Tanzania.
The Itumbula West-1 well showed “hugely significant” results that “clearly confirm” a working helium system, we’re told.
The company says it has the “potential to become a strategic player” in helium markets.
This could make the £75m market cap firm dramatically more valuable. But finding a viable system — and extracting what’s there — are two very different things.
Backstory
Helium One started trading on London’s AIM market in December 2020 after merging with Attis Oil & Gas. Attis shareholders got 1 share of Helium One for every 236 Attis shares they owned.
As of 6 February 2024, the share price was around 2.2p.
And that price is up 1,000%+ because the shares were trading at 0.2p as recently as 23 January.
But anyone buying at IPO would be 50% down. Plus there was a massive run up to a peak of 28p in August 2021.
In fact, anyone who bought before December 2023 is still be in the red.
If, if, if…
I won’t sneer at Helium One shareholders. I’ve chucked money at small-cap high-risk/high-reward AIM-listed miners before.
One was drilling for copper in Botswana, the other for nickel and lithium in Canada.
Because I’m not writing this from a beach in Bali, readers can conclude that neither they — nor I — struck it rich. At the time I classed my stake as money I could afford to lose.
But there’s a difference between me saying I can afford to lose money, and me feeling sick as I watch it disappear.
What comes next
AIM-listed miners often need to dilute existing shareholders to raise enough cash to drill and exploit well options.
Mining and exploration is a speculative business. The rewards can be extreme. But they require a lot of upfront cash for uncertain results and irregular payouts.
If anyone investigates Helium One, they should go into it with their eyes open. This market is littered with defunct mining operations that promised big and delivered little. So while Helium One could deliver, I won’t be investing as the risks are too great for me.
