Three ASX Minnows To Tap Into Helium Upside

This story features NOBLE HELIUM LIMITED, and other companies. For more info SHARE ANALYSIS: NHE

Tim Boreham reports the world might soon be scrambling for helium, while also identifying three ASX-listed exposures.

-Concerns are growing about future supply of helium
-Russia and Qatar are critical producers
-Share market turmoil has not been kind to ASX-listed exposures this year

By Tim Boreham

While hydrogen hogs the headlines as the vogue investment theme in decarbonisation, investors should cast their eyes one down the periodic table to another gaseous element starting with H.

We’re talking about helium, which until recently was synonymous with party balloons more than any serious applications. But the realities of constrained helium supply – and burgeoning demand in critical applications – are fast becoming apparent.

While helium balloons still might be a crucial component of any self-respecting party clown’s toolbox, the lightweight gas is critical for manufacturing semiconductors, launching missiles, making medical magnetic resonance imaging (MRI) scanners work and in weather observation balloons.

As well as being lighter than air, helium is inert and non-toxic with high thermal conductivity (it removes heat). The gas has the lowest freezing point, which means it remains a liquid rather than ice at ultra-low-temperatures.

Because of its small molecular size, helium is useful for finding the smallest of leaks in applications such as offshore welding.

Supply-wise, the western world is concerned that supply is dominated by Russia and the world’s biggest helium producer Qatar (where it is produced as a side product of LNG).

In the US, the Bureau of Land Management (BLM) historically supplied 40% of the nation’s helium, from a strategic reserve in Texas.

But the BLM has been winding down this reserve for decades. The agency makes its last delivery next year, leaving domestic users scrambling for new supply.

Supply has been further disrupted by a string of incidents. In eastern Siberia, Gazprom’s huge Amur project was hit by fires and explosion, delaying production until at least 2023. Qatar has had unplanned disruptions, while a BLM facility in Texas sprung a gas leak.

Kornbluth Helium Consulting assesses annual global helium demand at six billion cubic feet,  a piddling figure compared with natural gas. 

But the emerging uses – notably semiconductors – mean that, rather like the gas itself, demand will soar.

The market already has taken its cue, with the long term contract price rising from around US$70 per million cubic feet a decade ago, to around US$220 mcf. Spot prices are reported at US$3000mcf and beyond.

So, with helium facing a structural deficit, how can local investors float away on the helium story?

There are three ASX-listed pure-play helium explorers and developers, two of them operating in the US and one in Tanzania.

The latter is Noble Helium ((NHE)), which listed in April this year on the back of its four projects in the east African nation: “the best acreage in the most prospective untested helium system on the planet.”

Noble’s flagship project, in the North Rukwa Basin, already has an independently certified mean prospective helium volume of 176bn cubic feet – enough to supply the world’s current heeds for 30 years. The company has applied to double this acreage to just over 3000 square kilometres.

All up, Noble Helium has dibs on 5464 square kilometres in the East African Rift System, a geological wonder of the world that forms a chain of basins from Ethiopia to Mozambique.

An initial soil gas survey has found “elevated” helium concentrations, with a drill program planned for two targets in 2023.

More than 14,000 kilometres away, Blue Star Helium ((BNL)) is furthering an active program at its Las Animas project in Colorado.

Blue Star has made four discoveries, with three prospects moving to development as early as 2023. The area is in helium elephant country – if there’s such as thing – given the gas has been produced there since the 1920s before the men in black reserved it for military use.

Over five prospects, the company reports independently assessed current helium resources of 13.4bn cubic feet, on a P50 (50% probable) basis.

On Wednesday the company added a further 643m cubic feet of contingent resource from its Voyager prospect, where the company’s discoveries include a 134 foot column grading 8% helium – one of the highest concentrations in the world.

On Friday, the company followed up with the results of a fourth well at its Galactica/Pegasus prospect, which graded a hearty 6.5% helium, compared with up to 3.14% for the previous three.

Voyager would be the company’s first planned development, with 15 permitted wells and a targeted commissioning date of late 2023.

Blue Star chief Trent Spry says the company has a clear commercial pathway to delivering low cost helium projects.

“The [resource certification] is a key step in the process to allow us to make a final investment decision for the development of the Voyager helium field and move the project into commercial production,” he says.

Blue Star  is also eyeing an interesting sideline: the helium occurs alongside nitrogen and CO2 and the latter can be recovered and sold to fizzy drink manufacturers.

Just over the border in mining-friendly Utah, conventional oil and gas explorer turned helium hunter Grand Gulf Energy ((GGE)) owns the Red Helium project, consisting of 29,000 leased acres in the Four Corners area.

Four Corners is not related to the long-running current affairs show and it doesn’t take an investigate reporter to know that it’s just down the road from Doe Canyon Field, North America’s premier helium address.

Grand Gulf cites a pre-drill prospective resource of 10.9bn cubic feet, potentially supporting a flow rate of 20m cubic feet per day.

In June his year the company announced the discovery of Jesse#1A, after its maiden well confirmed a large gross gas column with a helium concentration of up to 0.65%.

Flow test results have confirmed grade of 0.8% helium – 40% more than expected – but the operation was suspended after the operators were “unable to isolate water ingress” from the lower well reaches.

A second well is planned in the current quarter.

Grand Gulf recently signed an offtake agreement with Paradox Resources, which operates over 430 kilometres of gas pipelines and the nearby Lisbon processing plant.

Despite the promising prospects of the ASX’s helium trio, the market has not been kind to them.

Blue Star and Noble shares have lost about half their value over the last 12 months, valuing them at $44m and $14m respectively. Grand Gulf shares are down 43%, for a market cap of $22m.

If only had they been looking for lithium instead!

As the closest to production, Blue Star deserves its sector-leading status. In all cases, access to funding will determine whether their buoyant prospects translate to reality.

This article does not constitute share recommendations and readers should seek their own financial advice from a property qualified party

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