A Global Helium Shortage: Why This Investment Opportunity is Heating Up
Helium is experiencing an increasing level of demand for its applications in the medical, research, aerospace and technology industries.
Helium has countless uses outside of floating party balloons. This rare and finite element is used in MRI machine technology, fibre optics, semiconductors, space exploration and more. Helium is also valuable for scientific research, medical use and in other specialized industries.
Helium is a colorless, odorless, tasteless, inert and non-toxic gas that sits first in the group of noble gases on the periodic table of elements. Since it has so many important uses in the modern world, helium stocks are being reduced at a steady rate and at current rates of consumption the world could see its supply potentially dry up in the not too distant future.
While the United States was once the dominant global supplier of helium, Canada and other countries around the world are emerging as also having large reserves of this noble gas, which could help with the looming helium shortage.
Is there really a helium shortage?
Unlike base and precious metals, which are found in numerous countries around the world, the world’s supply of helium is less well understood and is believed to mainly be located in only a handful of countries, including the United States, Canada, Algeria and Qatar. Helium’s unique chemical properties and inert behavior make it a finite commodity in high demand.
According to Sophia Hayes, a chemist at Washington University in St. Louis, “Helium is the one element out of the entire periodic table that escapes the Earth and goes out into space.” The element does not readily combine with other elements, which means as it reaches the surface of the earth, it can easily escape the planet’s gravitational pull.
As the demand for helium grows, analysts expect the market to reach estimated highs of approximately US$18.18 billion by 2025. However, meeting forecasted demand based on current supply chains may not be possible.
The world’s top locations for helium exploration
Much of the world’s helium resources exist in a handful of jurisdictions, including the United States, Canada, Algeria and Qatar. With only a few countries producing helium, the world’s production can be described with a single word: fragile.
For over 100 years, the US Government managed the global supply of helium. Although 75 percent of all the world’s helium production has traditionally come from three locations in the US, the Federal Helium Reserve operated by the Bureau of Land Management (BLM) in Amarillo, Texas is set to stop production in 2021. As one of the biggest military powerhouses in the world, the withdrawal of the US Government as the key supplier from the helium industry provides a large opportunity for the private sector, as helium is critical for specialized welding, low-temperature research, high-tech manufacturing, missile and rocket development and observation balloons.
According to the BLM, “recognizing this important military use for the second most common element in the universe, the Mineral Leasing Act of 1920 reserved all helium produced on Federal lands to the Federal government.” However, as of September 30, 2021, the BLM will no longer manage the Federal Helium System and excess helium will be transferred to the General Services Administration (GSA) to follow its statutory disposal process. The beginning of this disposal process opens the doors for helium exploration companies and resource-rich jurisdictions to further develop this industry and broaden its reach outside of the US.
Canada: A hotspot for helium exploration and production
In 2021, helium was deemed a critical mineral by the Government of Canada, aligning it with the likes of highly sought-after minerals like copper, uranium, zinc and others. The country now stands as having the fifth-largest helium reserves in the world.
Companies looking to leverage North American helium resources include Imperial Helium (TSX:IHC), a Canadian company focused on acquiring, developing and operating helium properties located in the Western Canadian Sedimentary Basin and Avanti Energy (TSX:AVN), a gas exploration company focused on assets across western Canada and the United States. Both companies have assets in Southern Alberta, a helium-rich region in North America
Another major player in the helium space is First Helium Inc. (TSXV:HELI), a helium-focused Canadian company positioned to become a leading North American producer, that is employing a de-risked, low-cost strategy to achieve near-term cash flow. Its flagship Worsley project strategically sits atop a helium-rich area of the Western Canadian Sedimentary Basin north of Grande Prairie, Alberta.
As an emerging leader in helium exploration and resource development, First Helium expects to bring its helium processing facility on stream by the end of 2022 to create operating cash flow for the company. With the end of the Federal Helium System, a large opportunity exists for companies like First Helium to supply helium via industrial gas aggregators in the US to North America, and potentially globally as an increasingly finite and valuable commodity.
Many areas of Alberta and southern Saskatchewan naturally contain large amounts of helium. As an indication of the growing importance of helium development in Canada, the country’s largest processing facility opened near Battle Creek, Saskatchewan in April of 2021. Commissioned by North American Helium, the C$32 million plant is expected to produce more than 50 Mcf of purified helium for commercial sale.
Helium is a rare and finite resource that is experiencing an increasing level of demand for its applications in the medical, research, aerospace and technology industries. Based on the paradigm shift in the helium supply chain due to the US Government ending the Federal Helium System, many companies in countries like Canada are beginning to capitalize on the substantial investment opportunity that exists to participate in this space and replenish the depleting global stockpiles of this valuable noble gas. As an early mover in the nascent Canadian helium sector, First Helium is well-positioned to establish itself as a leading, emerging helium supplier.
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