SMALL CAP IDEA: Time to deliver for Helium producers
The hype and speculation surrounding helium explorers such as Helium One and Helix Exploration has eased in recent months, replaced by a sharper focus on tangible progress as London's leading helium stocks move closer to production.
Investors have long bought into the concept: the promise of value creation through extracting a strategically important, non-hydrocarbon gas.
Until now, companies have spent as much time educating investors on the virtues of helium as they have on progressing their assets. They have sold the big idea. Now, it is time to deliver.
And deliver they appear to be.
Both companies Helium One and Helix are moving steadily towards production, with projects advancing through testing and into what their investors hope will be a phase of commercial scale up.
There is still speculation. Small-cap investors know what a good oil or gas well looks like in testing. That has made the process a trading opportunity, with each snippet of well data acting as a potential catalyst.
But when it comes to helium, investors are far less familiar with how to judge a well's success.
They rely instead on sentiment, through chief executive commentary and analyst reports, while recognising that both have skin in the game. It is harder to let the data speak for itself.
That is why investors are now waiting for the simplest data of all: dollars and cents.
The helium opportunities
AIM quoted Helium One is perhaps the best known name among small cap helium investors.
The company has two main projects. First came an exploration venture in Tanzania, and then, in November, it acquired a fast track opportunity in the US with the Galactica Pegasus project in Colorado.
It can take years to become an overnight success. Investors first heard of Helium One and its Tanzanian venture long before helium became the commodity of the moment on AIM.
Back then, the helium assets were a fringe part of a wider portfolio. That changed with a spin out and a focused listing.
Helium One joined AIM in late 2020, and its trading history since has been eventful.
Under chief executive Lorna Blaisse, the company is pursuing progress on two tracks. In Tanzania, the project is advancing through regulatory steps, with testing underlining commercial promise. In the US, the company is pushing ahead to bring Colorado wells into production.
Helium sales could begin in the coming months, potentially by the end of the first half, once the six well development programme is complete. In Tanzania, Helium One recently secured a mining licence for its Rukwa project, enabling it to move forward with appraisal and feasibility work.
Establishing production and sales
Helix Exploration is the other standout name in London's nascent helium market, with attention firmly on its US assets.
It began with the Ingomar Dome acreage in Montana, including the Clink well, which was recently drilled and tested. Activity accelerated in June with the acquisition of the Rudyard project, which is expected to move quickly into production and revenue.
Further testing is planned at Clink, where multiple zones were discovered but not yet fully evaluated.
At Rudyard, the path is clearer. A run of well tests has encouraged management, and newly acquired gas processing equipment is now being shipped for installation.
First production and helium sales are expected before year end, once the plant is operational.
Growing in number
Other small caps are also turning to helium, and building investor interest along the way.
Mosman Oil & Gas is advancing two projects in Colorado. Work has begun on the 20 per cent owned Vecta exploration site, where five wells are planned, while feasibility work continues at the Sagebrush project. The company could potentially see its first helium revenues within a year.
In Kansas, micro cap explorer Mendell Helium is working to bring its Rost 1 26 well into production. It is a smaller scale venture, supported by an £800,000 equity raise and a $1million loan, but production from a single existing well could be just months away.
Georgina Energy, which has ambitions in both helium and hydrogen, is earlier in the cycle. It is working to establish drill ready projects in Australia's Northern Territory, focusing on re entering existing wells and preparing for operations.
As a group, London's helium hopefuls are beginning to move from promise to production, something investors will be watching closely.
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