Helium One Global (LON: HE1) shares are up 16% this morning. HE1 shares have risen on the basis that they’ve been able to source the spare part necessary for their drill and can therefore resume the exploration well. At which point our attitude is, well, yes. We do sort of assume that if a drilling rig breaks then yes, it’ll be repaired and so therefore exploration will resume. Is that this happened really worth 16% on the share price?
Well, possibly, maybe: “Civils work is continuing for the second well in this drilling campaign on the Itumbula-C well pad and access road. The Company remains on track to drill this well prior to the wet season commencing.” If they don’t complete before the wet season then that’s at least a 6 month delay if not longer. And, if we’re polite about it, it’s not obvious the corporate finances would survive such a delay, Or, at least, not without a very dilutive capital raise. So it’s not so much “Hey, they repaired the rig!” it’s that we’re not - perhaps - looking at being asked for more capital as yet. We will be asked, that’s near certain, but hopefully only after some value adding discoveries and proofs.
Helium One Global share price from Google Finance
As we’ve said before we like the initial idea at Helium One: 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.”
We’ve also suggested that it’s operational skill that’s the worry at HE1: “HE1 shares are down because they're having problems getting hold of a drilling rig. Which, when you're intending to drill for gas, is something of a problem - no drilling rig, no drilling, obviously. The more specific problem seems to be that they chose the wrong subcontractor: “Helium One Global (AIM: HE1), the primary helium explorer in Tanzania, provides a rig update in relation to the Company's contractual relationship with SOFORI taking into account today's announcement by Noble Helium (ASX: NHE). The Company has previously issued a number of deadlines to SOFORI but continues to have concerns about the lack of operational and contractual progress required under the terms of the non-binding Letter of Intent ("LoI") and, pursuant to legal advice received by the Company, have issued SOFORI with a rectification notice.””
That first hiring of a rig that didn’t turn up was not a good sign. Ourselves we’re reasonably confident that helium will be found. It’s operational and pricing difficulties for us here.
