Key Points

• Helium One focuses on the exploration and development of Helium mining sites.
• The company’s key asset, the Rukwa project, has been proven to hold significant helium resources.
• The Helium one share dropped massively by almost 68% in less than a month in August 2021.

What is Helium One?

Helium One (LSE:HE1) focuses on the exploration and development of helium, and its shares have been on quite the rollercoaster ride in recent years. The company aims to become a high-grade helium producer at an international level. While the element is commonly known for making people’s voices squeaky, it actually has vast practical uses from manufacturing to medical equipment.

So, with that in mind, let’s consider whether buying Helium One shares is a good move for my portfolio.

Why Helium One shares could go up

The company’s key asset, the Rukwa project, has been proven to hold significant helium resources, as per the research by Oxford and Durham universities. In fact, it is expected to hold around 20 years of the global supply.

Needless to say, that’s quite a substantial deposit, especially for an element that is notorious for being scattered. I believe with this reserve, Helium One could become a strategic player in the Helium supply market. Also, the company could also be able to resolve the long-term Helium supply issues. Providing I’m right, this will give a huge push to the Helium One share price over the long term.

Additionally, Helium One is part of the green transition targeting production and is needed for a zero-carbon world. In my opinion, these are all the more reasons to invest in Helium One shares. Why? Because the entire industrial world, globally, is currently undergoing the green transition.

What Could Go Wrong?

Nothing is risk-free. And after explosive growth in the HE1 share price, the stock plunged from 28p in August 2021 to around 9p today. What happened? Well, early drilling results didn’t meet investors’ expectations. And when a firm’s valuation is driven by future predictions rather than existing fundamentals, volatility is not uncommon.

But phase two of the drilling supposedly has better prospects. It’s expected to outline the 2022 drill programs soon. And could ultimately trigger another round of growth for the HE1 share price.

As an investor, what is a concern worthy for me is the volatility of the share. Helium One shares dropped massively by almost 68% in less than a month just because of the unmet expectations of investors. Moreover, young exploration businesses like HE1 are typically at a high risk of failure. Therefore, if the second round of drilling does not go as expected, the HE1 share price will undoubtedly be in for another double-digit tumble.

Should I buy Helium One shares?

The global demand for Helium is estimated to be around 6 billion cubic feet (Bcf) per annum, with a CAGR of approximately 3%. The £56m Helium exploration company has high expectations from its next phase of drilling to the point that it expects to resolve the global Helium supply issue.

But as exciting as that prospect is, as an investor, I believe this is currently a high-risk company. Until the second phase of drilling results are released, I do not intend to invest in Helium One shares for my portfolio. Instead, I’ll be keeping it on my watch list until more results are released, with a clearer picture of the group’s future.

Learn more about Helium One shares

• Where is the Helium One (HE1) share price going?

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.