The average penny stock is incredibly volatile and Helium One Global (LSE: HE1) is certainly no exception. Since the start of 2024, it’s surged 272%, yet it’s also down 66% since February.
The exploration firm floated in late 2020, after which its shares took off like a helium-filled balloon. However, since reaching 27p in mid-2021, they’ve steadily deflated and now trade for less than 1p each.
But the company has been making notable operational progress. So, could this be the next millionaire-maker penny stock? And if it might, should I invest? Let’s dig in.
Not just hot air
Helium One is a pre-revenue company focused on exploring and developing helium resources. It has projects in Tanzania and a 50% interest in the Galactica-Pegasus project in Colorado, USA.
The company has already identified helium-rich gas in Tanzania, and it’s applied for a mining license there.
Meanwhile, Colorado regulators have approved five new proposed helium wells at the US project. Drilling was meant to be getting under way now but has been delayed (more on that below).
What’s so special about helium?
Helium is a colourless, odourless gas that’s abundant in the universe but rare on Earth. Most of it’s found in natural gas fields, though in small quantities, making it difficult to extract.
It has a wide range of applications across various industries and fields. For example, it’s critical in MRI scanners, is used in semiconductor production, and is needed in space exploration to cool rocket engines and pressurise tanks.
As global demand increases for these technologies and the supply of this resource is limited, prices are expected to rise. Therefore, it’s a valuable commodity and not just about filling balloons!
Rained off
Today (13 December), the company announced that due to rainy weather the construction of well sites and access roads at its Colorado project has been postponed.
Its partner and project operator, Blue Star Helium, has rescheduled drilling to mid-January 2025 to avoid unnecessary costs during the Christmas period.
However, the overall project timeline remains on track, the firm said, with production still expected to start in H1 2025.
As I write, the market doesn’t seem worried because the share price is up very slightly.
Getting to £1m
If Helium One can get this precious gas flowing and enters into supply contracts, the share price could rocket much higher.
We got a glimpse of such potential in January 2024 when it exploded 1,300% higher in the space of two weeks. If it went up that much again from today, an investor would need to have roughly £71,500 in the stock to reach £1m.
I wouldn’t put £71k into a penny stock, so it won’t be making me a millionaire, at least under this scenario.
But should I take a punt?
For the financial year ended 30 June, the company reported a total loss of $11m. It had $11.6m in cash in June, highlighting its limited financial resources and the risks here.
This year, it raised funds issuing shares in February, June and August. Then this month it issued a load of shares to a service provider instead of cash. This level of shareholder dilution turns me off.
Helium One is an interesting penny stock with potential, but it’s far too risky for my liking. I’ll be investing elsewhere.
