Making its debut on AIM today, Helium One Global (HE1:AIM) was up 89.4% on the 2.84p placing price from its oversubscribed £6 million fundraise in November to 5.38p.
As its name suggests the company is a play on the helium sector and has 3,590 square kilometres of acreage in Tanzania, it came to the market through an amalgamation with cash shell Attis Oil & Gas which was struck earlier in November.
The company plans to use the funds it has raised to run a seismic survey and drill three wells on its Rukwa project – all in the first half of 2021.
Supply of helium is constrained with the price surging after the US Federal Helium Reserve, a stockpile built up by the US during the Cold War and depleted over the last 15 years, ceased sales to industrial customers in 2019 having previously provided between 20-25% of global supply.
Although there isn’t the same transparency in the helium market as there is in other commodities, Helium One suggests the price has increased 135% in the last 12 months to a price of $280 per million cubic feet – around hundred times the price of natural gas. Helium stocks listed in Canada and Australia have seen their shares surge in 2020.
Helium’s chemical properties mean it is critical component in products such as MRI scanners, computer components and it is also used in space rockets to expel residual gases.
Typically helium is produced as a by-product alongside natural gas at concentrations of between 0.05% and 0.35%. Helium One CEO David Minchin tells Shares that it has seen surface helium concentrations of up to 10.6% on its assets in Tanzania.
He says the Rukwa project is in a ‘Goldilocks’ zone because it sits in a sedimentary rift basin which contains the essential components necessary for the production of helium and is neither too close or too far away from a volcanic source which provides the hot fluid required to release the helium.
Too far away and the helium isn’t released and too close and the helium is swamped by carbon dioxide.
Rukwa was drilled for oil and gas in the 1980s without making a discovery but this means the company does have plenty of information about the sub-surface.
Assuming the company is successful with its drilling goals it estimates capex of $50 million would be required to construct a plant to process the helium, which means separating off the around 90% of associated nitrogen gas.
‘This is all known technology,’ Minchin says. He describes the modular construction of the plant as effectively using the ‘porta cabins’ which would normally sit on the edge of a natural gas field to process associated helium.
The helium would then be trucked to the nearest port to be exported on container ships. He puts operating costs at $15 to $20 per mcf.
The assets come under the remit of the Ministry of Mines in country and Minchin acknowledges that 'it has been a difficult few years in Tanzania' with the government embroiled a long-running tax dispute with mining group Acacia, which major producer Barrick Gold bought in a $1.2 billion transaction in 2019.
However he points to the fact that Barrick has resolved this situation and is back to operating normally in Tanzania as a sign that things have improved.