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The average penny stock is incredibly volatile and helium one global (LSE: HE1) is certainly no exception. Since the beginning of 2024, it is up 272%, but it is also down 66% since February.
The exploration company went public at the end of 2020, after which its shares took off like a helium-filled balloon. However, since reaching 27p in mid-2021, they have steadily deflated and are now trading for less than 1p each.
But the company has made notable operational progress. So could this be the next penny stock that makes millionaires? And if you could, should you invest? Let's dig deeper.
Not just hot air
Helium One is a pre-revenue company focused on the exploration and development of helium resources. It has projects in Tanzania and a 50% stake in the Galactica-Pegasus project in Colorado, USA.
The company has already identified helium-rich gas in Tanzania and has applied for a mining license there.
Meanwhile, Colorado regulators approved five new helium wells proposed at the US project. Drilling was supposed to start now, but was delayed (more on this below).
What's so special about helium?
Helium is a colorless, odorless gas that is abundant in the universe but rare on Earth. Most of it is found in natural gas fields, although in small quantities, making it difficult to extract.
It has a wide range of applications in various industries and fields. For example, it is essential in magnetic resonance scanners, used in the production of semiconductors, and is necessary in space exploration to cool rocket engines and pressurize tanks.
As global demand for these technologies increases and supply of this resource is limited, prices are expected to increase. Therefore, it is a valuable asset and it is not just about filling balloons.
It rained
Today (December 13), the company announced that construction of wells and access roads at its Colorado project has been postponed due to rainy weather.
Your partner and project operator, blue star heliumhas rescheduled drilling for mid-January 2025 to avoid unnecessary costs during the Christmas period.
However, the overall project schedule remains on track, the company said, with production still expected to begin in the first half of 2025.
As I write, the market does not seem concerned because the share price has risen very slightly.
Reach £1 million
If Helium One can get this precious gas flowing and enter into supply contracts, the share price could soar much higher.
We caught a glimpse of that potential in January 2024, when it exploded 1,300% higher in the space of two weeks. If it were to rise that much again from today, an investor would need to have approximately £71,500 in shares to reach £1 million.
I wouldn't invest £71,000 in a penny stock, so I wouldn't become a millionaire, at least in this scenario.
But should I bet?
For the financial year ending June 30, the company reported a total loss of $11 million. It had $11.6 million in cash in June, which highlights its limited financial resources and the risks here.
This year it raised funds by issuing shares in February, June and August. Then this month, it issued a large number of shares to a service provider instead of cash. This level of shareholder dilution discourages me.
Helium One is an interesting penny stock with potential, but it's too risky for my taste. I will be investing elsewhere.
