Noble Helium to tap ballooning demand

For most investors, helium is a commodity that makes an appearance in balloons for birthday parties and celebrations. 

Despite flying under-the-radar, helium is vital for a wide range of applications and industries, including semiconductor production, fibre optics, rocket fuel pressurisation and cryogenics (low-temperature freezing).

Noble Helium (ASX: NHE) is one of few ASX-listed helium players to have made its debut at 12:30 pm AEST after successfully raising $10m at 20 cents per share.

At 12.35 pm AEST the stock was trading at $0.38.

The company is focused on exploring for helium in Tanzania, with the goal of establishing a new commercially viable green helium source. 

Project rundown 

Noble Helium holds a number of tenements in Tanzania, which comprise four project areas.

• The North Rukwa Basin Project

• The North Nyasa Basin Project

• The Eyasi Basin Project

• The Manyara Basin Project

Most of these projects are undergoing early stage exploration activities in the lead up to potential drilling. This includes work programs such as geochemistry surveys, geologic sampling and airborne gravity surveys.

The company's exploration expenditure does not yet include any budget for drilling programs.

Understanding helium

Helium use

The largest application of liquid helium is to cool magnents used by MRI scanners, followed by its use in producing semiconductor chips.

Growth drivers

According to Kornbluth Helium Consulting, the helium market has experienced a decade of zero net growth. That said, helium prices have flucated considerably due to periods of over-and-under supply.

Helium demand is expected to pick up at an estimated annual growth rate of around 4% between 2023 and 2031. The growth rate assumes demand growth from key sectors, notably semiconductor and other high-tech applications.

Producers and supply

From a supply perspective, the helium industry is dominated by six major multinationals who control at least 95% of the world's helium supply at the source, according to Kornbluth.

At the present, there are only 16 liquid helium production facilities in the world.

By 2025, Russia is forecast to have a circa 26% control over global capacity, which is viewed as a potential supply risk given the nation's recent use of natural resources as political leverage.

A major Russian helium project, Amur, is expected to come online in the fourth-quarter of 2022. This is expected to bring the market progressively towards a surplus.

Outlook

Kornbluth expects the global helium market to be "very tight and susceptible to shortages throughout 2022." Amur is expected to transition the market towards "plentiful supply" from 2023 onwards.

Helium prices broadly peaked around US$250 per million cubic feet (MCF) in 2019. Kornbluth expects Amur supply to weigh on prices, with a medium-term price forecast between US$168 to US$180/MCF.