Helium One (LON: HE1) starts out with a rather good idea. The world's looking short of helium so why not go drill for some? Well, OK, that's a bit simple but there's good method there as well. We should know - and geologists do - that helium is the one non-radioactive element that is continually created newly here on Earth. The amount we had in the beginning boiled off into space billions of years ago. Everything that we have now has been much more recently created.
The creation process is that when uranium and thorium (well, complicated, but often this is true) decay they throw off an alpha particle. The other name for which is the nucleus of a helium atom. The other thing we know about helium is that it often turns up associated with natural gas deposits. So, think a little laterally and go looking for natural gas in areas where the rocks have a lot of uranium and thorium in them. We might well then find that the gas is high in helium. So far so good and that's just what Helium One has been doing. They've found exactly that in areas of Tanzania. OK, not everyone's favourite operating country but reasonable enough.
Helium One share price from London Stock Exchange
So if helium is that terribly sexy beast that everyone wants to have lots of, Helium One has helium, then why aren't the shares roaring ahead? Well, one answer is that we all want to see actual production. Good stories are just that, good stories, we want to see cash before we truly believe them.
But the other reason is that the current high helium price is because there's not much production right now. But there are many looking for more - Helium One is only, ahaha, one of them. And that's where things become more complex. For while we say helium is “often” found with natural gas the truth is that near all gas has some helium in it. Normally of a level so low that it's not worth taking it out. Because doing so involves huge amounts of energy to liquefy the natural gas.
But now the world is turning to liquefied natural gas, LNG. Which has to be liquified, meaning the energy cost is carried by the gas, not the helium. That, in turn, means that much lower grade deposits now become viable sources of helium. Supply increases that is and therefore there's reasonable thought that high prices will not continue.
The nett effect of this is that for Helium One to be successful as a primary helium producer it needs to become one quickly. Which may or may not happen and it's this uncertainty over the wider market which holds the price down.