The Helium One Global (LSE:HE1) share price surged by over 80% in the past month and it caught my attention. Helium One Global aims to explore, develop and supply high-grade helium to several global industries. It owns the rights to develop several locations in Tanzania where helium has been detected in gases seeping from the ground.
Helium One share price rises
Helium is perhaps best known for its use in balloons. Fittingly, the Helium One share price has risen to lofty heights recently. It climbed more than 80% in the past month, and over 220% since its shares listed in December 2020.
Despite the sharp rise in share price, I think it still has vast potential as an investment. Some of the greatest investment potential can come from small-cap stocks. With a market capitalisation of around £80m, Helium One certainly fits this category.
What so great about Helium?
Helium is commonly found as a by-product of liquified natural gas. The global helium gas market is expected to grow from $2.7bn in 2018 to $4.5bn in 2025. In addition, global helium supply is limited and demand is greater than supply. This is leading to higher prices.
The US Federal Helium reserve is a strategic stockpile started in 1925. But it ceased sales to industrial customers in 2019, further constricting supply.
Why is demand so high? Helium’s use in balloons is just 8% of the market. More importantly, 20% of helium is used in MRI scanners, which is a globally growing market. Other uses include high-growth areas such as in hard drives, data centres and rockets. Up-and-coming space exploration companies like Space X would be buyers of this non-toxic gas.
In the long term, in a world moving away from fossil fuels, alternate sources of helium will need to be found.
Why I like Helium One
This is where Helium One comes in. I’m bullish on it for a number of reasons. It has a pipeline of advanced and early-stage targets. Having been active in Tanzania for five years, it has a first-mover advantage in the area. It has also managed to secure some of the best locations.
At 138 billion cubic feet, it has the biggest resource of any listed primary helium explorer. It’s “drill-ready”, and well-financed.
Encouragingly, the management team also has a track record of delivering natural resource projects in Africa.
What about competition? Competitors have projects that are smaller, earlier stage and lower grade. The Helium One resource is 50 times larger than any other listed competitor.
The risks
Bear in mind though, the Helium One share price has risen significantly since it listed. Could its future prospects be priced in to the share price already? Possibly. There are certainly risks with investing in a small exploration company. There are no guarantees, in my opinion.
Encouragingly, Helium One has a good relationship with the authorities in Tanzania and licences were recently renewed. That said, there is a risk with authorities reviewing licences, particularly if the find is successful. However, it’s worth pointing out that there are several multinational and junior miners successfully operating in Tanzania.
All things considered, the surging Helium One share price could signal further interest in this small explorer. I already own a small the shares in the higher-risk portion of my portfolio, but I might consider buying some more on further positive updates.
