The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
From what I believe it's hard to get a solid helium price. As you found, consumer helium price is far different to wholesale and even on a wholesale level it may differ depending on the quantity (and thus discount etc). I also believe that wholesale helium is the same as oil and natural gas where contracts are formed where two parties agree to a set price over a given time period, so you may have different producers of helium selling at wildly different prices to various people.
However, again as you kind of found, I think at the minute the norm is around $350 to $400/Mcf before any discounts
@Trek
Is the appraisal phase when they have a better understanding of the volume of helium present around that drill site, it's purity, flow rate etc? Good to hear you've got so many shares, I've been buying quite a lot and wasn't too sure if it's all too good to be true and I'm missing something here, so it's nice to hear other people are in the same boat!
HE1 to the Moon haha
I think as others have basically said, there aren't many players in the helium market and most helium at the minute is produced as a by-product of natural gas and oil, which are slowly going offline. I didn't know about what Trek said regarding the US shutting helium exports but that is a pretty huge deal. Given the points I've made plus HE1 having the biggest reserve and China having no domestic supplies of helium, I don't think supply would be an issue. Obviously, HE1 wouldn't start extracting 10 bcf per annum out, they'll self-regulate it so that they make the most amount of profit whilst ensuring a steady but not over supply of helium to the market. In summary, the discovery won't do a thing because it's still in the ground and HE1 would never extract huge amounts of it just because they can, so the price won't really change. Maybe level off, but I can't see it dipping
Trek, you're making me blush ;D
Noob67
Yeah exactly mate! I'm seriously struggling to understand the negatives of the test drills. I'm trying not to be like a Tesla fanboy and ignore any bad signs, it's just that I can hardly see any. The only real potential issue is finding a bad spot to drill but I mean again, you've got a team with a tremendous amount of experience, loads of data and surveys, an incredible amount of helium, helium extraction taking place there already and they've got 3 sites to pick from. You're probably right about underplaying expectations though, maybe even a ploy to send the share price that bit higher? Who knows
And I'm with the pair of you on this one, have to remember one of the many positives about this company and industry in general is that helium can't be substituted, can't synthesised and demand will only ever grow, whereas natural gas is slowly be phased out. I can't see computer chip and LCD display manufacturing slowing down, nor can I see hospitals (MRI scanners) being shut down nor the same with rocket launches; I think most will only see a steady growth but I bet, because of SpaceX, helium use in the rocket industry will.. take off. Pun 100% intended :) If Elon wants his 1 million people on Mars to become a reality, that's going to take a lot of rockets and every rocket/booster of his is reusable and needs to be cleaned with helium after every single launch.
Thank you for providing that link though, appreciated!
@Oiler87 I would expect so, but the £1.04 expected share price is the price given by the same company who priced HE1 for their stock listing. Given the scale of helium that they would then have confirmed beneath them, the price of helium etc I could possibly see an Mcap 3/4x that, but that's just my subjective opinion.
@Noob67 Although HE1 said there's a 20% chance of finding helium (which I really struggle to believe personally) they have 9 chances of hitting it. I don't fully know how in all honesty but I know that they have three attempts within each test drill, the three attempts being at different levels. Now I don't know whether the 20% is across all 9 attempts, again I find that near impossible to believe, but if it's not then I think it's pretty certain that they'll find it. I mean, given the amount of surveys conducted proving helium to be there, the fact that helium is seeping from the ground and that small scale helium extraction has taken place in the past I can't honestly see why they won't find it. You don't have any ideas as to why they won't do you? Just want to kind of make sure that I'm not being blinded by my bullish sentiment
I thought I would just add to what Trek has said, a good thank you to him for providing such good detail for everyone in various threads.
The company who priced HE1 for their stock listing estimate a share price of £1.04 if all three test drills go well. If one goes well, the other two will most likely go well too and the data is overwhelmingly positive already. So we have a potential SP of £1.04 in a couple months just from a few test drills, incredibly significant drills but test drills nonetheless. Along with shooting the price up, this will also attract attention to the company. So already you're looking at a 15x return on investment. Given that helium is far more expensive than gas, far cheaper to setup in terms of production, the market grows 6-8% a year which will surely grow far more in the coming years due to space travel predominately and, I believe, HE1 has licences over land that contains the world's largest helium reserve, one day £1 may seem like an absolute bargain.
When you couple this with how quickly (and cheaply as mentioned before) production can be setup (quick ROI and less cash flow issues, for example), how great the profits can potentially be (cheap to extract, high selling price, company located in a tax haven etc), the potential for a big company, potentially such as SpaceX, to swoop in and buy the company etc etc you'll probably be kicking yourself for not buying more at £1, nevermind 7p especially if SpaceX were to buy in because then you would have his entire army focused on HE1 who would send a tremendous amount of liquidity this way.
This is all up in the air at the minute. As Trek said, we just need to focus on the drills and see where that gets us
That's more good news if that's true regarding the government pushing for better access. David himself has said that access already isn't too bad. I think he mentioned that they're around 15/20 miles from the nearest motorway which then takes them straight to the capital/port.
I attempted to look for proof of them mentioning previous drilling but it's quite late where I am and my quick look resulted nothing unfortunately. I'm pretty sure David has mentioned it in an interview previously though I'm sure.
I believe the 138 bcf is purely for the Rukwa project so I believe the other two will hold some more however from what I've gathered, the Rukwa project comprises most of the potential helium there. However, so long as these other two projects hold helium then that'll send the price up even further when they conduct the same drills on them as they are about to conduct with Rukwa (stock price will go up on the back of more positive news)
All in all, I'm very excited for this company and the next couple of months
Dai, if I remember right I think their estimates for the Rukwa project alone are 138 bcf. Also, I find their 20% chance of success hard to believe. Again, if I recall right, there were studies in the 80's proving helium to be there, HE1 have conducted their own studies proving helium to be present, they brought in two independent companies who both, again, proved helium to be there, there's helium seeping from the ground and there's been small scale helium production in the vicinity in the past. I would say it's more borderline a given that they'll find helium there. Also, if they find helium in one of the drills then it's highly likely they'll find helium in the other two