Where to next for the Helium One share price?
Where to next for the Helium One share price?
Helium One, the UK-based helium exploration and production company focused on exploring and developing helium assets in Tanzania, remains a favourite among stock speculators, having risen by around 484% year-to-date (YTD).
The company holds exploration licenses covering an area of 4,512 km2 in the Rukwa Rift Basin, which independent research indicates could become a new major global helium province. With global helium supplies tightening, shares in emerging helium exploration companies like Helium One have attracted significant investor interest recently. But is Helium One still a good investment opportunity or are there too many risks?
The Investment Case
There is a strong case to be made that buying shares in Helium One early could prove rewarding. Global helium supplies are declining while demand continues rising steadily in applications like MRI scanners, semiconductors, fibre optics, and rocket propulsion systems. With limited substitutes available for many key uses, helium prices have increased over 250% in the last 20 years. As an early-stage explorer in a region that could become a major new helium province, Helium One is well-positioned to benefit from rising long-term helium demand and pricing.
Helium One's management team has extensive experience exploring and developing assets across Africa and the Middle East. The company has already discovered and sampled helium along a 55km stretch in its license area. Independent research by renowned helium expert Erasmus Kloppers concludes that the Rukwa Rift Basin could contain over 138 billion cubic feet of helium - enough to meet over 4 years of total global demand. If subsequent appraisal wells confirm anywhere near these volumes, Helium One shares would likely surge higher.
With the company well-funded following a successful £15 million initial public offering (IPO) in 2021, it is advancing drilling on several promising helium prospects that could substantially re-rate its shares if successful. Exposure to a critical industrial gas like helium through an early-stage explorer provides exceptional leverage to success.
Risk Factors
However, as is the case when investing in most explorers, buying shares in Helium One is high-risk. Its licenses are in frontier exploration regions and while initial sampling and seismic imaging has been encouraging, there is no guarantee commercial volumes of helium will be discovered. Additional funding may also be required longer-term to build out infrastructure and advance commercial development.
Exploration in Tanzania can also come with economic uncertainties and potential governmental policy changes. Environmental studies and community engagement have thus far been progressing well but remain ongoing watch items. While Helium One's experienced management team mitigates operational risks, exploration is inherently risky and success cannot be assured.
The company's shares are also thinly traded given its small market capitalization, which can amplify share price volatility. Speculative trading has already led to periods of extreme price swings since listing. Risk tolerant investors must be prepared to stomach such volatility even if exploration proceeds successfully.
Analyst ratings for Helium One
LSEG data & analytics shows a consensus analyst rating of ‘strong buy’ for Helium One, by only one analyst though, with an upside target at 5.30 pence, a 266% rise from current levels (as of 16 August 2024).
Technical outlook on the Helium One share price
Helium One’s share price, which rose by around 215% from its June low to its early July high, has been sideways trading below its 200-day simple moving average (SMA) and 9 July peak at 1.60p since then.
Helium One Daily Candlestick Chart
Were the Helium One share price to exceed its July peak at 1.60p, the April high at 1.766p would represent the next upside target ahead of the psychological 2.00p region. Further potential upside targets are the mid-February highs at around the 2.70p mark and the February peak at 3.70p.
Technically speaking, while the early August low at 1.21p underpins, further range trading with a bullish bias remains in store. Below the 1.21p low support can be found between the 55-day SMA and the 10 and 11 July lows and psychological level at 1.00p.
Conclusion
Helium One represents a highly speculative but high-upside opportunity in the helium exploration space. For risk tolerant investors, buying shares early could prove extremely lucrative if the company makes a commercial helium discovery. However, failure to discover material volumes of helium or successfully advance commercial development would jeopardize its share price and investment outlook. Careful consideration of risk tolerance and portfolio diversification remains key before considering any investment.