On 4 December 2020, Helium One Global (LSE:HE1) shares were traded on the UK stock market for the first time. But what’s happened since? More importantly, what might the future hold?
No change
When the group listed at the end of 2020, it had already been in existence for over five years. At the time of its IPO, it said it had been set up to “actively pursue the exploration, commercial development and monetisation of a discovery-ready, non-hydrocarbon associated helium rich gas composition within the Tanzanian Rift Valley in East Africa”.
Well, it’s still doing that. The group’s signed an exclusivity agreement with the country’s government which, in return, now has a 17% stake in the Southern Rukwa project.
The shares were listed at 2.84p, which means anyone investing £15,000 at the time would have been able to buy 528,169 of them. The group was valued at £14.1m.
Today (4 March), the group’s market-cap is just over £50m and its shares are changing hands for 0.58p. As a result, an initial investment of £15,000 would now be worth only £3,063. Ouch!
Since listing, the company’s repeatedly had to raise money. As a result, it’s issued another 5.72bn shares, which has diluted the shareholdings of early-stage investors. Some of the fund-raising has been restricted to institutional investors only so not everyone’s been able to participate, even if they wanted to.
But the need for additional cash shouldn’t have come as a surprise to anyone. At the time of listing, the company said it will “likely require additional financing in order to carry out its gas and associated liquids exploration and development activities”.
Without any assets generating money, it’s typical of pre-revenue companies. And unavoidable.
More of the same
Yet the company’s going to need more cash if it’s to start producing gas in Tanzania. Initial estimates are around $100m. The company’s in talks with potential backers but further shareholder dilution looks inevitable to me.
Since its IPO, the group’s acquired a 50% interest in another helium project in Colorado. Production should commence soon, although it’s a relatively small operation.
Helium has many unusual characteristics, which is pushing demand higher. It has the lowest boiling point of any gas, which makes it particularly valuable in the health and space exploration industries. If the group can get large volumes out of the ground then shareholders are likely to be well rewarded.
However, the gas in Tanzania is found in water aquifers, which Helium One’s described as a “unique play”. Transporting helium from East Africa to the world’s markets is also going to be logistically challenging. The continent also has a reputation for economic and political instability, which could prove to be a problem.
Personally, I’d rather invest in a mining company that’s already overcome these obstacles. Fortunately, there are plenty to choose from and — with the price of precious metals soaring over the past couple of years — many are doing very well.
