Helium One (HE1) - Focused on Making World-Class Discovery

The focus of Helium One is to explore, develop, and ultimately become a producer of high-grade helium for the international market, a critical material essential in modern technologies. Helium One holds 4,512km2 of exploration licences in highly prospective helium provinces in Tanzania. The Company holds 100% of these licences and has exclusive rights to develop the assets.   

We met with David Minchin, CEO of Helium One for the first time. We wanted to talk to the company as we have received lots of questions about Helium. People are excited about Helium right now so it will be interesting to hear the Helium One story.

Helium: The Market, Uses, Supply & Demand. Is There a Substitute? 

Helium comes out of the ground and it has many other uses than for party balloons and squeaky voices! It is in critical under-supply and is a high-value commodity which is essential for the future technological growth of our economy.  Helium is used in a wide range of high value and next-gen technology applications. It has a number of unique properties, which makes it unsubstitutable in a range of high-value end-uses. It's got the lowest boiling point of any gas so if you want to cool something to within 5 degrees above absolute zero, to take advantage of its conducting properties, you need to use Helium. It is used in MRI scanners to cool the magnets which is a growing market as MRI scanners move from being used only in hospitals in the first world to being part of a diagnostic toolkit for doctors and physicians globally.

It's also used in a number of next-gen technology manufacturing processes. It is used in large quantities in semiconductor chip manufacturing. China has doubled the amount they import over the last 10-years, as the semiconductor chip industry has increased. It looks set to double again in the next 10-years. It is used in fibre optics and China imports a huge amount for the construction of fibre optics.

It has the smallest core size of any gas, so if you want to make a very high purity glass, you need to make it in a Helium atmosphere. By making fibre optics in a Helium atmosphere, you guarantee minimal data loss across the length of the cable. It's used in flat-panel display manufacturing which is going to be the dominant technology in the next 10 years. China is an important market for Helium because it doesn't have any Helium domestically, so it imports 1Bn cubic ft/year, which is set to increase dramatically as we increasingly use things with flat-panel displays, semiconductor chips and the internet. Fibre optic cables need to go everywhere. Data centres use a huge amount of Helium. Google and Netflix buy a huge amount every year because it's used in high-density hard drives. If you replace the air gap in a hard drive with Helium, because it's got the lowest viscosity of any gas, it can increase the efficiency of the hard drive and uses less energy and produces less heat.

In all the instances where Helium would be a better thing, but you can substitute it for something else, those substitutions have already happened. Within the last 3-years, the price of imported Helium into China has increased from USD$200/mcf up to USD$375/mcf. So it's already seen a 150% pricing increase. All the instances where you can substitute Helium have been removed, which means 2 things: current demand cannot really erode, especially given the speed of growing industries, but importantly, if the price were to be reduced, there is a latent demand for operations which would rather use Helium.

Inserting Helium One into the Supply Chain 

The market is sized currently at about 6Bn cubic feet, which is predicted to increase over the next 10-years to 8.5Bn cubic feet. The value of that market, depending on what price you use on Helium, you're looking at anything between USD$2.5Bn-$4.5Bn/year. The main players, or the main producers are companies like Exxon, Mobil, Qatar Gas, RasGas are coming in as well. It's produced by majors as a by-product of liquid natural gas production. This is important because the supply is genuinely quite inflexible. It's a low-grade by-product for multibillion-dollar gas developments.

There is a strong reason for a new form of primary Helium supply to come onto the market. A primary Helium supplier with a high-grade deposit, who is focused just on Helium economics and on Helium supply and demand.

The Helium One gas is completely different in composition than what is already in production as a by-product. That Helium is produced from a gas which contains between 0.05 and a maximum 0.3% Helium. The Helium One Helium is measured at surface at 10.5% Helium which is up to 200x higher grade than the Helium by-product. Helium One has a carrier gas which is nitrogen, which they’re finding at surface, seeping at 10% Helium and 90% Nitrogen with very few impurities. That means that for Helium One to come into production, their capital cost is much lower. They can separate out pure liquid Helium, which goes into truck-mounted ISO containers to the port of Dar es-Salaam and mount it onto normal container ships, and the nitrogen can be vented into the atmosphere.

Identification of Helium, the Same as Regular Gas?

In terms of geology, Helium is very similar to a normal gas deposit with the same constraints of source, migration of reservoir seal and trap. However, the source is completely different. Helium forms in ancient continents or crusts, over millions of years through the breakdown of radioactive isotopes. It's released when that crust is opened for the very first time.  

Helium One has the advantage in Tanzania with all the areas with high concentrations of Helium seeping up into the surface, and these seeps are adjacent to sedimentary field basins, which have the potential to store and trap the Helium as it comes to the surface. In Rukwa, the most advanced project, they have 1,000km of historical seismic data. They have flown high-resolution, falcon gravity-grade geology over the entire basin, which gives a great map of the basin contact, based on the density difference in the ancient crust and the basin floor. They've done macro-seep analysis, which identified the high-grade Helium seeps at surface. They've also done micro-seep analysis, which identified anomalous Helium gas across the basin, indicating that the Helium is migrating out across the basin. 

This year is a very big year for Helium One. They will start in Q1/21 with an infill seismic survey and do infill work over the shallow traps that they've identified and want to test. In Q2/21, they will drill 3 holes to identify Helium gas.

Process of Development & Logistics

Helium One is about 35km away from the Tan-Zam Highway, the main highway connecting the Zambian coast to the port of Dar es-Salaam. It's flat-lying ground so it's relatively simple in terms of access. They plan to have a camp and are using a slimline mineral rig which is a normal mineral rig drilling to target traps at a maximum depth of 1,200m. Mineral rigs are much lighter, which means getting access to these areas is much easier and cheaper.

Sustain Interest & Educate: Economics & Opportunity

Helium One has had a good share price response from the market since they listed, up 2.5x since listing day which is a great response for a new company. The company is confident that the share price will increase rapidly in the next 6-months as they move from being an explorer with a good concept to being a developer with a good discovery. There will be news flow coming out of the seismic as they define the traps and refine targets and once they start drilling. If it's a significant show, they will report that, and that's triggering the proof of concept that there is Helium in the ground. On completion of the programme they will do drill string testing and run lines first to identify where the reservoir units are, then put inflatable packers in the hole to isolate them. A test is then run through those packers to determine how much Helium is flowing out of our reservoir, and to take samples of gas that we've discovered.

By August-September of this year, Helium One will be able to confirm that they have Helium in the ground and at which grade and can then start the process of running Feasibility Studies and define the engineering and the economics of the project.

Process, Financing, Extraction: A Timeline

The size of this project, at 138Bn cubic feet has the potential to provide a meaningful quantity of the world market for over 100-years. This could be globally strategic as a price maker.  

Helium One has done an engineering-study based on a theoretical gas composition from what they've seen at surface, the result of which was to get 150,000mcf of production a year, with a plant capsule cost of about USD$50M. They have done 2 independent studies, 1 completed by NS&I, and the other by SRK which have independently verified these numbers based on the seismics they have. This is the best estimate of the discovery which will be refined once they've drilled. 

Helium One is fully financed to complete the exploration that they have planned. They raised  USD$6M, which finances the infill, drill and seismic and 3 drill holes. Once they've completed the exploration and made a discovery they're going to need to raise finance to complete the Feasibility Studies, the field evaluation program and the engineering on surface. When the Feasibilities and the engineering are complete and the project economics are known, they can start raising the equity debt they need to bring it into production.

Helium One aims to complete the discovery drilling and field evaluation in the second half this year and the Feasibility in the first half of 2022 and fast track it into production soon afterwards, aiming for first Helium production in 2023.

Business Plan: What is in Their Control & for How Long? 

Most Helium is sold to industrial majors who have the logistics and the market. Helium One is looking to target a number of end users as well with their own trucks to deliver it to capture the value. However, their primary aim is to focus on production.

There is certainly pricing sensitivity in terms of demand. Helium One will be a high margin producer at any price because of the grade of Helium that they have in the ground and the low capital costs and low operating cost. 

Moments to Look Out for From Helium One

The next step for Helium One will be to mobilize the seismic crew team and get a lot more information on the subsurface geology, which will help to refine the geo-targeting. They will then be mobilizing, drilling in Q2/21 and reporting results throughout Q2/21 and into Q3/21. That's where the real evaluation catalyst is going to be; in making that discovery and flowing Helium gas to surface.

We enjoyed speak to Helium One to hear more about the Helium space and understand the opportunity. It's a commodity that is little understood but seemingly much in demand. The macro story is clear and we are intrigued as to how they position themselves in the market. There aren't many direct competitors to Helium One, so they have very clear and distinct advantage and that's always attractive to an investor.

To Find out more, go to the Helium One website