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London – April 29, 2021 – The next supply squeeze that may take markets by surprise isn’t lithium. It isn’t even a battery metal …While everyone is distracted by the media barrage surrounding EVs, another commodity may be creating an investment opportunity to rival all … Mentioned in today’s commentary includes: Apple Inc. (NASDAQ: AAPL), Alphabet Inc. (NASDAQ: GOOG), Suncor Energy Inc. (NYSE: SU), Westport Fuel Systems Inc. (NASDAQ: WPRT), Enphase Energy, Inc. (NASDAQ: ENPH).
It’s helium. And some experts say we’re running out of it. It’s not just a niche commodity anymore. It’s not just about balloons. And we think it’s positioned to become the focus of increased investor interest.
Like oil and gas, this is about exploration, discovery, and development. And we think the biggest returns may end up coming from the small-cap explorers trying to hit the big time with a new discovery – all on their own.
Right now, we think that’s looking like Canadian Avanti Energy Inc. (AVN.V; ARGYF) backed by an experienced team that’s been involved in the discovery of the Montney, one of North America’s largest natural gas discoveries and is now ready to try it again, hot off the acquisition trail.
The Montney discovery still produces and has produced for over twenty years and at its peak, was producing up to 300,000 boe/d. Now, Avanti has acquired the license for 6,000 acres from the Government of Alberta in highly prospective helium territory at what looks to us like the tipping point of a global supply squeeze. But Avanti has its sights set on North America at large–not just Canada. On April 16, they announced entry into a letter of intent to acquire a 12,000-acre prospective helium land package, this time in Montana.
Growing Helium Demand
Demand for helium is increasing, and it’s coming from multiple sectors, including everything from the tech and biomedical industries, to space, medical equipment and national security. And, yes, of course, party balloons and Thanksgiving Day parades. Many industries require helium.
It’s been reported that the tech industry has been a massive catalyst, and that 2013 was a game-changing year for helium supply. That’s when the world’s first ‘helium drives’ were made commercially available, making helium a key ingredient to fill our monstrous appetite for data.
Some 3.7 billion people are generating some 2.5 quintillion bytes of data every single day. And even those numbers may grow by up to 60% a year. By 2025, it is projected to be more like 160 zettabytes per year. Helium drives were apparently a breakthrough that replaced the air in hard drives with helium to reduce the energy used. They went from concept to commercialization in 2013.
Amazon (AMZN), Alphabet (GOOGL), Facebook (FB), Netflix (NFLX)–all are said to need tons of it for their massive data centers. Demand is set to surge into the helium-driven territory of zettabytes. And the growing semiconductor market may depend on helium, too. Why? Because helium can bring temperatures down to below -450 degrees Fahrenheit–lower even than liquid nitrogen. This is important for superconducting equipment in particle accelerators and the magnets used to build semiconductors, according to Forbes.
Driving this further is a global computer chip shortage. In Geneva, Switzerland, the Large Haldron Collider (LHC), the largest high-energy particle accelerator on Earth–and the biggest machine in the world, needs a truckload of helium every week.
Nor does the demand story end there …The health sector is another major driver of helium demand. It’s also critical for use in cooling magnets in MRI machines. Without helium, we won’t have working MRIs. The shortage also threatens NMRs–nuclear magnetic resonance spectroscopy, which in turn is a crucial aspect of medical research.
It wasn’t without reason or rationality that some medical scientists are said to have begged helium balloon retailers to give it a rest. They were reported to be sucking up 10% of the helium supply. NASA relies heavily on helium, too, as a key gas used in space exploration.
The Real Helium Shortage and the Avanti Opportunity
This is reported to be the world’s third major helium shortage in 14 years. And some experts say it will be a much tighter supply squeeze than ever before.
Until recently, the U.S. Federal Helium Reserve (FHR) in Amarillo, Texas, seemed to have an inexhaustible supply for the past seven decades. It’s reported to have provided some 40% of the world’s supply. But that supply may become exhausted. North America is now desperately in need of new helium discoveries.
Avanti Energy (AVN.V; ARGYF).now has two key helium exploration positions. One in Canada–home to what is reported to be the world’s 5th largest helium reserve that remains gloriously untapped–and one in the US.
In 2019, the global helium market was said to be worth approximately $10.6 billion. By 2023, it is predicted to close in on approximately $16 billion. But that depends on production, which in turn depends on new discoveries.
Not only has Avanti’s team just acquired (in March) the license for over 6,000 acres of land from Alberta, but the company says that land is highly prospective for helium.
Avanti’s new project is reported to reside in an area with confirmed reservoir rock that has seen multiple DSTs (drill stem tests) with analyzed gas. And the company says it has high-grade helium potential, with anything above 2% comparing favorably to commercially viable grades ranging from 0.3% to 1%. A previously drilled well on the property returned gas with high helium content (2.18%) and high nitrogen content (96%).
On April 16, Avanti announced it has signed a letter of intent (LOI) to acquire the helium rights on approximately 12,000 acres of prospective land in North-Central Montana. This land package is in close proximity to and on trend with an active drilling area just north of the border in Saskatchewan, which has nitrogen-rich helium tests in Cambrian and Devonian zones. Seismic data (2D and 3D) has already mapped out structures that appear prospective for helium.
Helium Veterans Return for Another Opportunity
The key figures behind Avanti helped develop a world-class resource–Encana/Ocintic’s Montney production in British Columbia, which they identified, modeled, and helped develop to production which, over approximately 15 years, reached nearly 300,000 boe/d.
Genga Nadaraju, Dr. Jim Wood, and Ali Esmail are reportedly building a proprietary model to target significant helium accumulation that may strengthen North America’s strategic helium position. Just like they did with Encana.
The strategy appears to use “conventional” exploration to identify structural Cambrian-aged traps and the high point of drilling. Avanti is reportedly pursuing an 80%-20% model, with 20% following conventional natural gas exploration strategies, and 80% proprietary methods.
Bonus: Other Companies Set To Win On This Gigantic Shift In Commodity Consumption
Technology companies are some of the biggest consumers of alternative fuels and renewable energy. Take Apple (AAPL), for example. It is a leader in Big Tech’s sustainability push… But now, it’s even getting into the transportation business.
Apple’s rumored car design means that more active material can be packed inside the battery, giving the car a potentially longer range. Apple is also examining a chemistry for the battery called LFP, or lithium iron phosphate which is inherently less likely to overheat and is thus safer than other types of lithium-ion batteries.
While electric vehicles are the talk of Wall Street right now, autonomous vehicles are on the horizon as well, and they too will rely on a number of key metals and resources. And the leader in this push is Waymo, a subsidy of tech giant Alphabet Inc. (GOOGL). Waymo may just be the de facto leader in the emerging autonomous vehicle industry. It’s already had cars driving themselves across the United States for several years. In fact, in Arizona alone, Alphabet’s self-driving cars have logged over 6.1 million miles. To put that in perspective, that means that Alphabet’s autonomous cars have driven the distance between New York City and San Francisco over 2100 times. Or, as the company explains, “over 500 years of driving for the average licensed US driver.” Even more impressive, however, the vehicles were only involved in 47 “contact events”, and the vast-majority of the collisions were the result of human error and none resulted in any sort of severe injury for anyone involved.
Renewable energy providers are some of the driver factors in the commodity demand boom, as well. That’s why lithium companies are scrambling to snag deals with companies like Enphase Energy (ENPH). Enphase is a Fremont, California-based company that designs and manufactures software-driven home energy solutions used in solar generation, home energy storage, and web-based monitoring and control.
Despite the tough first half of 2020, however, Enphase has remained a favorite on Wall Street. Since January of last year, Enphase has seen its share price rise by a massive 472%, and it’s only just getting started. As the renewable push kicks into high gear, and with the United States expected to spend over $1.7 trillion on green energy initiatives over the next decade, Enphase might just emerge as one of the biggest winners.
Even old-school fossil fuel producers are getting in on this race. Suncor (SU) might be known mostly for its oil production. But it’s one of the few majors really pushing the boundaries. In fact, it has pioneered a number of high-tech solutions for finding, pumping, storing, and delivering its resources.
But that’s just one part of its business, however. Suncor is also a world leader in renewable energy innovations. Recently, the company invested $300 million in a wind farm located in Alberta. Additionally, as Canada moves away from oil, Suncor is well positioned to take advantage of another one of the country’s resource reserves; Lithium. The best part? It doesn’t even have to move very far. In fact, Alberta’s oil sands are a major hotspot for lithium production.
Westport Fuel Systems (WPRT) isn’t necessarily a resource play, but it is an important company to watch as new fuels and new forms of energy take the spotlight. Especially as the world races to leave behind traditional gasoline and diesel-powered vehicles. That’s because, while it is a manufacturing play at heart, it offers a particularly unique way to gain exposure to the alternative fuels market. As a key manufacturer of the hardware needed to build natural gas and other alternative-fueled cars, Westport is definitely a company to watch in this scene.
By. Carl Green
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This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that prices for helium will significantly increase due to global demand and use in a wide array of industries and that helium will retain its value in future due to the demand increases and overall shortage of supply; that Avanti can pursue exploration of the recently acquired licenses of property in Alberta; that Avanti’s licenses in respect of the Alberta property can achieve drilling and mining success for helium; that Avanti will be able acquire the rights to helium on 12,000 acres of prospective land in Montana pursuant to its recently announced letter of intent; that the Avanti team will be able to develop and implement helium exploration models, including their own proprietary models, that may result in successful exploration and development efforts; that historical geological information and estimations will prove to be accurate or at least very indicative of helium; that high helium content targets exist in the Alberta and Montana projects; and that Avanti will be able to carry out its business plans, including timing for drilling and exploration. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that demand for helium is not as great as expected; that alternative commodities or compounds are used in applications which currently use helium, thus reducing the need for helium in the future; that the Company may not fulfill the requirements under its Alberta licenses for various reasons or otherwise cannot pursue exploration on the project as planned or at all; that the Company may not be able to acquire the helium rights to the Montana lands as contemplated in the letter of intent or at all; that the Avanti team may be unable to develop any helium exploration models, including proprietary models, which allow successful exploration efforts on any of the Company’s current or future projects; that Avanti may not be able to finance its intended drilling programs to explore for helium or may otherwise not raise sufficient funds to carry out its business plans; that geological interpretations and technological results based on current data may change with more detailed information, analysis or testing; and that despite promise, there may be no commercially viable helium or other resources on any of Avanti’s properties. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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