Helium One shares back in limelight as first five Galactica development wells get approval
Helium One, a UK-based helium exploration and production company, has been making waves in the stock market with its focus on developing helium assets in Tanzania and the US. The company's share price has seen a remarkable 305% increase year-to-date (YTD), attracting significant attention from investors and speculators alike.
The company's exploration licenses cover an extensive area of 4,512 km2 in the Rukwa Rift Basin, Tanzania, which independent research suggests could become a major global helium province. Recent developments have further bolstered investor confidence. The company's Colorado venture, Galactica-Pegasus, has received approval from the Colorado Energy and Carbon Management Commission (ECMC) for five new development wells. This progress satisfies a crucial condition for the farm-in agreement between Helium One Global and Blue Star Helium. Drilling at the Galactica Project is expected to commence in the fourth quarter (Q4) of 2024, subject to final permit approvals.
With global helium supplies tightening, Helium One's potential to tap into this valuable resource has sparked considerable interest. However, the question remains: is Helium One still a good investment opportunity, or are the risks too high?
The investment case for Helium One is compelling. Global helium demand is steadily rising, driven by applications in MRI scanners, semiconductors, fibre optics, and rocket propulsion systems. With limited substitutes available, helium prices have surged over 250% in the past two decades. As an early-stage explorer in a potentially major helium province, Helium One is well-positioned to capitalise on this trend.
The company's management team boasts extensive experience in exploring and developing assets across Africa, the Middle East and the US. Helium One has already discovered and sampled helium along a 55km stretch in its license area. Independent research suggests that the Rukwa Rift Basin could contain over 138 billion cubic feet of helium, enough to meet over four years of total global demand. If subsequent appraisal wells confirm these volumes, Helium One's shares could see significant growth.
Following a successful £15 million initial public offering (IPO) in 2021, the company is well-funded to advance drilling on several promising helium prospects. Success in these endeavours could substantially increase the value of Helium One's shares.
However, investing in Helium One is not without risks. As with most explorers, there is no guarantee of discovering commercial volumes of helium. The company may require additional funding in the long term to build infrastructure and advance commercial development. Operating in Tanzania also presents potential economic uncertainties and governmental policy changes.
Environmental studies and community engagement are ongoing concerns, although progress has been positive thus far. The company's shares are thinly traded due to its small market capitalisation, which can lead to significant price volatility.
Analyst ratings for Helium One are limited but positive, with a consensus "strong buy" rating, albeit by only one analyst, and a target price of 3.44 pence, representing a potential 236% increase from current levels.
Technically, Helium One's share price has been trading sideways below its 200-day simple moving average (SMA) and late September high at 1.25p-to-1.27p since the beginning of October. For the August peak at 2.15p to be back in the picture, a rise and daily chart close above the 1.27p high needs to ensue.
Helium One daily candlestick chart
Support below the current October low at 0.98p can be seen between the January-to-October uptrend line and the September trough at 0.81p.
In conclusion, Helium One represents a high-risk, potential high-reward opportunity in the helium exploration sector. For investors with a high risk tolerance, early investment could prove lucrative if the company makes a commercial helium discovery. However, failure to discover significant helium volumes or advance commercial development could jeopardise the share price. Potential investors should carefully consider their risk tolerance and portfolio diversification before making any investment decisions.