It’s not all hot-air balloons and funny voices. Investors are starting to get excited about Helium stocks, and for good reason.
The well-known and little-produced gas is important for a variety of industries. The most commonly known include filling up balloons and airships, but today helium’s low temperature liquidity makes it a cooling agent for superconducting magnets in medicine, especially MRIs, as well as rockets, plasma processes, and other high-tech uses.
But the market is getting hot because supply is about to hit a tipping point. Most of the world’s helium is produced as a by-product of natural gas production, and direct production from the US government is coming to a close by 2021 as it makes way for the public sector. With demand for helium related products set to increase over time, a looming supply glut exists.
With natural gas refiners and oil drillers looking for a potential pivot, many have highlighted helium as the next big gas play. Additionally, the direct production of helium usually comes from reserves made of primarily nitrogen, which can be safely released into the atmosphere with minimal impact to the environment compared to other gas products.
That’s why over the last few years, many in Western Canada’s energy sector have been looking at helium, and over the last month we’ve seen activity pick up. In May, Exploration company
Royal Helium Ltd. (
TSX-V:RHC)
commenced a survey program at its southern Saskatchewan project and then
signed an MOU with The Saskatchewan Research Council to review the development of an integrated facility for the production and refinement of helium and associated inert gases.
(Image via Royal Helium)
Following that, private Calgary company
North American Helium received approval from Saskatchewan for the largest planned helium purification facility in the country. The provincial government has even stated that it plans to expand sales tax exemptions for exploratory and downhole drilling for helium, and offer a 4.25% royalty rate for the gas seen as competitive to other jurisdictions.
And with prices of helium already up more than 160% in the last three years, the government isn’t alone in acting to get into the market. Private company
Weil Group Resources is looking to start up drilling for new reserve in the province and looking to build a liquification plant next door in Alberta, and outside of Canada, exploration company
Desert Mountain Energy Corp. (
TSX-V:DME) is rapidly moving forward with
drilling two initial wells in Arizona.
A rise in helium action has also coincided with a rise in helium stocks. Alongside those already mentioned, the world’s largest helium supplier
Air Products and Chemicals Inc. (
NYSE:APD) has already recovered from the March selloff to a near record high in share price and market cap, and even small-caps like
American Helium Ltd. (
TSX-V:AHE.H) are benefiting from the positive traction.
What’s next for the helium market? Demand and supply issues aren’t going away any time soon, so keep an eye on additional moves from companies and governments alike looking to cash in and set up for the future.
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FULL DISCLOSURE: Desert Mountain Energy Corp. and Royal Helium Ltd. are clients of Stockhouse Publishing.