Helium One share price has a bullish catalyst in 2023
- Helium is an important gas used in the medical and other industries.
- There is an ongoing global helium shortage because of Russia sanctions.
- Helium One expects to start drilling in Q1 of 2023.
Helium One (LON: HE1) share price has pulled back in the past few weeks as investors anticipate the upcoming drilling activity. The stock rose to a high of 7.28p, which was higher than the year-to-date low of 5p. Its market cap has risen to more than £57 million.
Drilling to start in 2023
Helium is an important gas that is used in several industries, including scientific research, medical technology, weather balloons, and high-tech manufacturing. It is one of the most useful gases in the industrial world and its uses is expected to grow in the coming years.
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Helium, like other commodities, is going through a major global shortage even as demand rises. Most of this demand is coming from the medical sector, where it is widely used to conduct MRI scans.
A key challenge is that while the US is the biggest producer of Helium, Russia is the biggest exporter. As such, with Russian sanctions continuing, there are concerns about supplies in the coming years. Other top Helium producers are Qatar, Algeria, and Australia.
Helium One, a small London-listed company, hopes to become a major player in the industry. It has fields in Tanzania, where it has been exploring in the past few years. It holds 4,512 square kilometers of licenses in key areas in the country: Rukwa, Balanginda, and Eyasi.
Helium One stock price recovered modestly after the company announced that it would start drilling in the first quarter of 2023. The company hopes to first harness the reserves that lie about 1.3 kilometers below the ground.
As part of this preparation, the firm raised £9.9 million from investors. If the drilling is successful, the firm estimates that it will produce 350k mcf of helium per year worth over $94 million. The firm also expects that its EBITDA margin will be almost 90%, making it one of the most profitable firms.
Further, Helium prices are soaring. NASA recently signed a long-term contract at $920 per mcf while the spot price stands at over $1,000.
Helium One share price forecast
The daily chart shows that the HE1 share price has been in a bearish trend in the past few months. As it dropped, the stock has formed a falling wedge pattern, which is usually a bullish sign. It is now at the upper side of this wedge. The stock has risen above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved above the neutral level.
Therefore, the stock will likely continue rising in 2023 as buyers target the key resistance point at 15p.