Helium

We see helium resources as a proxy exposure for technological advancement, an exposure that has the additional benefit of being in the commodities space as it is a finite resource that emanates from the Earth’s core.

Helium remains a critical resource, a non-substitutable, key component of many forward facing technologies. These include but are not limited to, MRIs, computer chip manufacturing, space exploration and particle accelerators (even the most cutting-edge “infinite energy” fusion technology involves helium).

And what we know about technology is that it is inherently exponential in nature.

So we really like helium as an investment proposition because it enables the world to advance important technological goals AND crucially, helium is used extensively in high growth industries.

The base of the helium industry, magnetic resonance imaging (MRI) machines - which makes up some ~22% of global demand for helium forms a big part of helium’s profile as a tech exposure. People aren’t going to stop needing scans of their body any time soon, if anything this need will increase.

The chip manufacturing industry is also worth consideration as it has grown at a near exponential rate courtesy of Moore’s law - and there’s good evidence to suggest that the most advanced chips require helium.

Meanwhile the space exploration industry is currently growing at a compound annual growth rate of 12.25% - both NASA and SpaceX use helium to keep hot gases and ultra-cold liquid fuel separated during rocket launches.

So despite helium being “just” a ~US$4.5BN industry, we think there are big things ahead for helium companies. Helium shortage 4.0 was driven by geopolitical events and caused a number of physics labs, including those at Harvard, to shut down - there just wasn’t enough helium to go around.

Because of this, we think our two helium Investments are well positioned to benefit from market sentiment towards the premium pricing that helium can attract now, and well into the future.

Click here to see our helium investments

What do the analysts say?

Phil Kornbluth is a key proponent of a growing corporate helium ecosystem.

Kornbluth has this to say about helium’s prospects in 2023:

“The worst of Helium Shortage 4.0 should be behind us if the BLM [Bureau of Land Management, major US supply source] is able to maintain stable operations, and 2023 may be a year of transition to ample supply. But it all depends on the timing and magnitude of Amur’s production, [Russia’s new helium source, estimated to be roughly a third of global production by 2029] ; the restart and ramp-up is likely to be delayed…

What I can say right now is, there’s definitely not going to be any helium production from Amur before the end of 2022. There probably will be some helium production beginning mid-year 2023, but there’s still a lot of uncertainty around those dates. Certainly the timing of the restart has been delayed by the war in Ukraine and the logistics to get product to and from or to get transport containers to and from Amur will be much more challenging due to sanctions.”

We note that liquid helium can be stored without loss for 45 days, so in a world of constrained supply and geopolitical conflict, the prospect of fractures between countries only heightens helium’s supply chain risk - meaning more potential pricing upside for producers and future producers in Western/US aligned/neutral countries.

What about the bear case?

It may seem hard to consider for helium aficionados, but the geopolitical nature of helium could be a pitfall for the industry.

A potential cooling of the war in Ukraine could impact the helium market negatively as Ukraine’s foreign minister says peace talks could be in the pipeline for February.

Regardless of short term supply shocks and these geopolitical dynamics, we remain Invested in our two helium companies for the long-term - aware that both near-term production and the proving out of massive prospective resources could generate the re-rates we desire.

With an opaque market and highly volatile spot rates, helium companies remain highly speculative Investments for us that could be negatively affected by a range of geopolitical factors, the emergence of new supply sources or a drop off in demand driven by slowing global growth.