Can The Helium One Share Price Provide Investors With Sustainable Growth?
The Money Cog | Aug 10, 2022 11:08
The Helium One Global (LON:HE1H) share price has failed to recover its glory even after a year. Despite receiving massive levels of excitement in the first half of 2021, the stock has been unable to maintain its momentum. And in the following August, Helium One Global watched its share price plunge from 28p to 9.1p.
Seeing this level of volatility is not uncommon amongst young mining stocks. In the case of this business, the downward trend was triggered by a failure to find an economically viable helium deposit at its highly anticipated Rukwa project in Tanzania.
While management tried to provide reassurance to investors, it seems to have fallen on deaf ears. And even today, the stock continues to trade significantly below its peak.
Having said that, 2022 has had some positive returns. The helium stock is trading up around 12% year-to-date, placing its market capitalisation at around £50 million. However, investors should be aware that despite being listed on the London Stock Exchange, the group reports its financial statements in US Dollars.
So, can this latest growth be maintained in the long term to provide investors with sustainable returns? What does Helium One even do as a business? And what do analysts think about the future of this business? Let’s explore.
What does Helium One do?
Founded in September 2015, Helium One Global is, as the name suggests, a helium exploration company in the process of transitioning into a producer. The company aims to become a global producer of high-grade helium for the international market.
Under the leadership of key directors David Minchin, as CEO & Director, as well as Russel Swarts, as Financial Director, the company operates three distinct project areas within the company’s portfolio in Tanzania. The Tanzanian-based miner manages around 20 employees and holds 4,512 km exploration licenses in prospective helium provinces within the country.
It’s worth noting that despite the element being the second most abundant substance in the universe, helium gas is notoriously difficult to find in economically viable deposits.
This, paired with growing demand from the aerospace and healthcare industry, makes it a valuable commodity to pursue. Hence the initial excitement surrounding this firm sending the Helium One share price through the roof in 2021.
Details behind the stagnant Helium One share price
Helium One has had a transformational 2021. After completing an aggressive exploration program, the company has moved to Phase two of its drilling plan bringing it one step closer to commercial development.
Looking at the financial position, helium production has remained well-funded. And management is confident about securing future funding, despite the unfavourable economic conditions the United Kingdom is currently facing. On 31 December 2021, the business reported $15.8 million in cash on its balance sheet versus only $1.2 million in current liabilities. In other words, the firm has more than enough capital to fund its immediate expenses as well as its phase two drilling plan.
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Having said that, I’m sceptical that $16 million will be enough in the long run, especially since its drill results failed to live up to expectations. With no actively producing sites, this business is pre-revenue and unprofitable, meaning it’s impossible to even calculate a Originally Published on The Money Cog
Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.
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