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It has been a wild previous few weeks for the Helium One (LSE:HE1) share worth. The inventory was just about nugatory, buying and selling at 0.19p in January. But because of some excellent news, a rally has been sparked on this penny inventory.
The query from right here for potential traders like myself is that if this has the legs to maintain going increased.
The lengthy story brief
This isn’t the primary time I’ve lined Helium One. I wrote in regards to the inventory final September, when one other retail investor pushed rally pushed the inventory increased in a lot the identical means as we’ve seen once more this yr.
Final time round the excellent news was that it had acquired a drilling rig. This can be a fairly essential ingredient for a fuel exploration firm! In any case, it has exploration permits which have proven sturdy helium concentrations are current at totally different areas.
With a scarcity of significant progress over current months, the inventory has fallen decrease. In any case, I imagine a whole lot of the motion within the inventory is pushed purely by speculative consumers, hoping to make a fast buck. It’s down 60% over a one yr timeframe.
Nevertheless, traders have been piling again in just lately, because of information on the Itumbula West-1 properly within the Rukwa Rift Basin in Tanzania. Testing revealed excessive helium concentrations of as much as 4.7%, which may make it one of many largest sources of helium globally.
Take a look at the numbers
Naturally, this can be a milestone discovery for the enterprise and one which could possibly be very worthwhile additional down the road. But we will’t get forward of ourselves simply but.
The enterprise raised £4.7m from the fairness market final week to safe extra funding. This could assist to pursue the undertaking and take issues additional.
That is essential as a result of the 2023 annual report confirmed revenue of lower than £40k. With thousands and thousands being spent on all the pieces from wages to analysis, the enterprise is closely loss-making. Clearly, the potential for giant income is there, ought to the agency be capable to commercially extract and distribute helium from totally different initiatives.
But till then, it must preserve elevating cash because it burns by way of money.
Additional factors to think about
The present share worth leap does have advantage to it, if an investor believes that the Itumbula West-1 properly is a real money-maker. These traders will doubtless maintain the inventory for the long-term potential. But I imagine that a whole lot of the shopping for proper now’s from short-term merchants who’re merely trying to maintain the inventory for a few weeks.
There’s nothing incorrect with this in any respect. However it will probably distort the truthful worth of the inventory. If we don’t get any new optimistic information within the coming months, I may see the inventory plummeting once more, prefer it did final yr. This won’t be something to do with the corporate, however fairly impatient traders shifting on to the following scorching inventory.
This finally implies that it’s very difficult and dangerous for me to get entangled, as a result of unpredictable and wild swings. Final time I wrote in regards to the inventory I concluded that this isn’t a inventory for the faint hearted. I reiterate that view in the present day!
