With a market cap of £65m and a current (13 April) share price of 0.64p, Helium One Global (LSE:HE1) comfortably meets the definition of a penny stock. But is it really 463% undervalued? That’s what one analyst reckons.
Sounds too good to be true? Let’s see.
Risk versus reward
There are some great examples of penny stocks delivering huge returns. But there are also plenty of dismal failures.
Although devastating to those who have lost their jobs, as well as investors and shareholders, we shouldn’t be put off by these flops. Personally, I think it’s important to encourage entrepreneurship and risk-taking. Otherwise, economies are likely to stagnate.
That’s why I appreciate what Helium One, the AIM-listed gas explorer, is trying to do.
However, investing in the business is, undoubtedly, risky. Why do I say that? Well, it’s yet to generate any revenue and its primary asset, the Southern Rukwa helium project in Tanzania, is a long way from being commercialised.
Despite this, one broker has set a price target for the stock of 3.6p, valuing the company at over £370m.
Clearly, this is based on future potential rather than what’s happening at the moment. Having said that, the group’s on the verge of selling the first helium from its other project in Colorado. If all goes to plan, carbon dioxide sales will then follow.
The US Galactica-Pegasus project is a 50:50 joint venture, which means the operational risk is shared with another party. However, it’s fairly small and doesn’t have the same potential as Helium One’s mine in Africa. For example, its Australian partner for the Colorado operation, Blue Star Helium, has a market cap of only £15m.
Rising prices
But now appears to be a good time to be in the helium business. Global supply is tightening with demand rising sharply. Last month’s attack on the Ras Laffan facility in Qatar removed a third of the world’s supply in a single morning. This is pushing prices higher.
Critically, the gas has unique cooling properties, which make it essential for certain medical and space exploration applications. It also has uses in the semiconductor and quantum computing industries.
The helium under the ground in Tanzania is, therefore, increasing in value. In June 2025, an independent firm of experts estimated that there’s 1.345bn standard cubic feet (scf) of “proved, possible, and probable” helium at the site. For context, global demand is currently estimated to be 6bn scf.
A more conservative estimate — described as “most likely” in the world of mining — is 296m scf.
What do I think?
If it can continue to raise the necessary cash to fund its exploration activities, find a partner to help ease the financial burden, successfully extract the helium unusually contained within water aquifers, bring the helium to the mine’s surface at the anticipated flow rates, secure customers in the right locations, and overcome the logistical and financial challenges of transporting the gas off the African continent, then I think Helium One will be worth — at least — £370m.
However, these are big obstacles to overcome, which makes an investment at this stage too risky for me. Personally, I think there are better opportunities to consider elsewhere in the mining sector and beyond. However, in the spirit of entrepreneurship and taking risks, I wish the company well.
