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The next supply squeeze that may take markets by surprise isn't lithium. It isn't even a battery metal …While everyone is distracted by the media barrage surrounding EVs, another commodity may be creating an investment opportunity to rival all … Mentioned in today's commentary includes: Apple Inc. (NASDAQ: AAPL), Alphabet Inc. (NASDAQ: GOOG), Suncor Energy Inc. (NYSE: SU), Westport Fuel Systems Inc. (NASDAQ: WPRT), Enphase Energy, Inc. (NASDAQ: ENPH). It's helium. And some experts say we're running out of it. It's not just a niche commodity anymore. It's not just about balloons. And we think it's positioned to become the focus of increased investor interest.
Like oil and gas, this is about exploration, discovery, and development. And we think the biggest returns may end up coming from the small-cap explorers trying to hit the big time with a new discovery - all on their own.
Right now, we think that's looking like Canadian Avanti Energy Inc. (AVN.V; ARGYF) backed by an experienced team that's been involved in the discovery of the Montney, one of North America's largest natural gas discoveries and is now ready to try it again, hot off the acquisition trail.
The Montney discovery still produces and has produced for over twenty years and at its peak, was producing up to 300,000 boe/d. Now, Avanti has acquired the license for 6,000 acres from the Government of Alberta in highly prospective helium territory at what looks to us like the tipping point of a global supply squeeze. But Avanti has its sights set on North America at large--not just Canada. On April 16, they announced entry into a letter of intent to acquire a 12,000-acre prospective helium land package, this time in Montana.
Growing Helium Demand
Demand for helium is increasing, and it's coming from multiple sectors, including everything from the tech and biomedical industries, to space, medical equipment and national security. And, yes, of course, party balloons and Thanksgiving Day parades. Many industries require helium.
It's been reported that the tech industry has been a massive catalyst, and that 2013 was a game-changing year for helium supply. That's when the world's first 'helium drives' were made commercially available, making helium a key ingredient to fill our monstrous appetite for data.
Some 3.7 billion people are generating some 2.5 quintillion bytes of data every single day. And even those numbers may grow by up to 60% a year. By 2025, it is projected to be more like 160 zettabytes per year. Helium drives were apparently a breakthrough that replaced the air in hard drives with helium to reduce the energy used. They went from concept to commercialization in 2013.
Amazon (AMZN), Alphabet (GOOGL), Facebook (FB), Netflix (NFLX)--all are said to need tons of it for their massive data centers. Demand is set to surge into the helium-driven territory of zettabytes. And the growing semiconductor market may depend on helium, too. Why? Because helium can bring temperatures down to below -450 degrees Fahrenheit--lower even than liquid nitrogen. This is important for superconducting equipment in particle accelerators and the magnets used to build semiconductors, according to Forbes.
Driving this further is a global computer chip shortage. In Geneva, Switzerland, the Large Haldron Collider (LHC), the largest high-energy particle accelerator on Earth--and the biggest machine in the world, needs a truckload of helium every week.
Nor does the demand story end there …The health sector is another major driver of helium demand. It's also critical for use in cooling magnets in MRI machines. Without helium, we won't have working MRIs. The shortage also threatens NMRs--nuclear magnetic resonance spectroscopy, which in turn is a crucial aspect of medical research.
It wasn't without reason or rationality that some medical scientists are said to have begged helium balloon retailers to give it a rest. They were reported to be sucking up 10% of the helium supply. NASA relies heavily on helium, too, as a key gas used in space exploration.
The Real Helium Shortage and the Avanti Opportunity
This is reported to be the world's third major helium shortage in 14 years. And some experts say it will be a much tighter supply squeeze than ever before.
Until recently, the U.S. Federal Helium Reserve (FHR) in Amarillo, Texas, seemed to have an inexhaustible supply for the past seven decades. It's reported to have provided some 40% of the world's supply. But that supply may become exhausted. North America is now desperately in need of new helium discoveries.
Avanti Energy (AVN.V; ARGYF).now has two key helium exploration positions. One in Canada--home to what is reported to be the world's 5th largest helium reserve that remains gloriously untapped--and one in the US.
In 2019, the global helium market was said to be worth approximately $10.6 billion. By 2023, it is predicted to close in on approximately $16 billion. But that depends on production, which in turn depends on new discoveries.
Not only has Avanti's team just acquired (in March) the license for over 6,000 acres of land from Alberta, but the company says that land is highly prospective for helium.
Avanti's new project is reported to reside in an area with confirmed reservoir rock that has seen multiple DSTs (drill stem tests) with analyzed gas. And the company says it has high-grade helium potential, with anything above 2% comparing favorably to commercially viable grades ranging from 0.3% to 1%. A previously drilled well on the property returned gas with high helium content (2.18%) and high nitrogen content (96%).
On April 16, Avanti announced it has signed a letter of intent (LOI) to acquire the helium rights on approximately 12,000 acres of prospective land in North-Central Montana. This land package is in close proximity to and on trend with an active drilling area just north of the border in Saskatchewan, which has nitrogen-rich helium tests in Cambrian and Devonian zones. Seismic data (2D and 3D) has already mapped out structures that appear prospective for helium.
Helium Veterans Return for Another Opportunity
The key figures behind Avanti helped develop a world-class resource--Encana/Ocintic's Montney production in British Columbia, which they identified, modeled, and helped develop to production which, over approximately 15 years, reached nearly 300,000 boe/d.
Genga Nadaraju, Dr. Jim Wood, and Ali Esmail are reportedly building a proprietary model to target significant helium accumulation that may strengthen North America's strategic helium position. Just like they did with Encana.
The strategy appears to use "conventional" exploration to identify structural Cambrian-aged traps and the high point of drilling. Avanti is reportedly pursuing an 80%-20% model, with 20% following conventional natural gas exploration strategies, and 80% proprietary methods.
Beacon's surprising conclusion? Avanti Energy's (AVN.V; ARGYF) wells may "payout in only two to eight months and generate an IRR of 122-635%".
Bonus: Other Companies Set To Win On This Gigantic Shift In Commodity Consumption
Technology companies are some of the biggest consumers of alternative fuels and renewable energy. Take Apple (AAPL), for example. It is a leader in Big Tech's sustainability push… But now, it's even getting into the transportation business. Buy AVN Stayhard