At the start of every new month we get to see what investors were buying across the UK’s top share trading platforms. One name that stuck out immediately was penny share Helium One Global (LSE: HE1).
This was very popular with investors on Hargreaves Lansdown in August. Indeed, it was rubbing shoulders with the likes of Nvidia, Rolls-Royce and BP as the most bought stock. Not bad company even if it is still down 82% over 12 months.
What are investors seeing in Helium One shares? And should I rush to join them? Let’s explore.
A volatile stock
Helium One is focused on developing helium assets in Tanzania, East Africa. Its primary asset is the 100%-operated Rukwa Project, which potentially contains a load of high-grade helium gas. Additionally, the company is advancing two other projects in Africa (Eyasi and Balangida).
As is common with penny stocks, this one has been incredibly volatile. It’s down about 20% over the past month but up 344% year to date. Since August 2021 though, it’s shed 96% of its value.
As I type, the share price is a mere 1.1p, giving the AIM-listed explorer a market cap of just £65m.
Why helium?
Helium is a valuable commodity with a growing demand due to its unique properties. There’s no way of manufacturing it artificially, nor can it be commercially extracted from the atmosphere.
Beyond balloons, it has a wide range of applications. Indeed, Helium One calls it the “unsung commodity of the digital revolution” due to its use across technology, science, medicine, and manufacturing sectors.
According to the firm, global demand is estimated to increase to 8.5bn cubic feet (Bcf) by 2030 from 6 Bcf today. Unsurprisingly, China will be importing a lot of that.
Not just hot air
So, why have investors turned bullish here? Well, earlier this year the firm successfully achieved a helium flow to the surface from its Itumbula West-1 exploration well.
Then in September, it flowed a sustained average of 5.5% helium. CEO Lorna Blaisse commented: “This is yet another huge milestone for the company and we are delighted to have successfully flowed helium, of significant concentration, to surface from both intervals during the [extended well test].”
Data is now being evaluated for a feasibility study, which will support a mining licence application in Tanzania. This is expected to be submitted this month, with the firm hoping for 20-30 development wells in the production phase.
Should I buy Helium One shares?
The bulk of my portfolio is made up of high-yield dividend shares and growth stocks. But I’m also partial to an exciting small-cap stock. Two that have done really well for me this year are hVIVO (up 23%) and Windward (up 89%).
However, both of those companies have growing revenues and earnings. Helium One obviously doesn’t have any sales yet. Therefore, it’ll need to keep the lights on by issuing new shares.
Last month, the firm raised funds to finance the acquisition of a 50% stake in the Galactica-Pegasus project located in southern Colorado. This sent the share price down by double-digits.
The explorer is making exciting progress in Tanzania. But any regulatory, logistical or capital issues could affect its ability to move the projects forward.
Weighing everything up, I think there are safer penny stocks for my money right now.
