Noble-Helium-Logo-2022-RGB.jpg

Noble Helium Pty Ltd Limited

(ASX:NHE)

Current Price:

$0.200

Our Investment Summary

Date of
Initial Coverage

08-Apr-22

Initial
Entry Price

$0.147

Returns from
Initial Entry

36%


What does NHE do?

Noble Helium (ASX:NHE) is a helium exploration company working to define a helium resource in the East African Rift (Tanzania). If proven, this resource has the potential to be the world’s third largest helium reserve behind the nations USA and Qatar, and the largest ever reserve held by a single company .

What is the macro theme behind NHE?

  • Helium is a critical part of the semiconductor (computer chip) supply-chain and cannot be substituted across most of its other industrial uses. We expect helium demand from semiconductors to increase rapidly as the world becomes more technologically advanced and countries seek to localise supply.
  • Helium prices have increased five fold in 2022 on supply chain issues, geopolitical tension and demand. We expect current price pressures to highlight the importance of helium, and improve investor sentiment around helium companies.

Investment Memo: Noble Helium Pty Ltd (ASX:NHE)

08-Apr-2022


Why did we invest in 2022?

  1. East African Rift System - Top helium experts highly rate NHE’s geology: - two prominent helium experts think the East African Rift is the best geology in the world for helium and it could house a globally significant resource. (NHE’s Mean unrisked prospective volume of 175.5 billion cubic feet (bcf) across nine structures).
  2. String of Pearls: NHE is aiming to identify drill targets from a series of leads across similar geology in the East African Rift system - known as a “String of Pearls”. If NHE drills the first “pearl” and it turns out successful, it implies all the other leads (pearls) could be successful too. This is similar to what happened to Africa Oil Corp’s “String of Pearls” back in 2012 when it surged 1,200% on a successful result from its first drill in a string of targets in the East African Rift System.
  3. Our past success with basin opening exploration - some of our best investing success has come from major drilling events in frontier exploration - companies like Elixir Energy, Invictus Energy, 88 Energy and our first ever Top Pick from many years ago - Africa Oil Corp in the East African Rift System. We hope to replicate that success with NHE.
  4. Founder owned and operated - NHE CEO Justyn Wood built the company over many years and holds more than a third of the company’s shares, so is heavily incentivised to deliver value for shareholders. Justyn brings significant East African Rift System experience. He played a key role in opening up the region’s geology with breakthrough exploration success in 2006 with Hardman Resources (~2c to $2.50). He knows the ground NHE is working with.
  5. Exclusive rights to global “Helium Atlas” - Years ago NHE commissioned and licensed the world’s first “helium atlas” from two of the foremost helium experts. Basically it’s many years of research into a detailed database of all the helium prospects in the world and is how NHE first settled on Tanzania. We think access to these experts and their “helium atlas” will also help NHE in selecting future helium project acquisitions.

What do we expect the company to deliver in 2022?

Key Objective #1: Target generation to produce two drillable targets

With drilling planned for late 2023, over the course of 2022 NHE will use modern exploration techniques to acquire data and then interpret that data to identify drill targets during the course of 2022. This work will include:

🔲 Airborne gravity gradiometry (Q2-Q3 2022)
🔲 3D seismic (Q2-Q4 2022)
🔲 Geochemistry survey (Q2-Q3 2022)
🔲 2022 Bonus: Resource re-quantification (Q4?)
🔲 2022 Bonus: finalise drill targets (Q4?)

Key Objective #2: Acquire more Tanzanian permits, strengthen in-country presence

NHE has 14 permits with 9 more to be acquired covering ~4000km2 in total. Along with acquiring these permits, we expect NHE to increase its stakeholder engagement efforts and add to their Tanzanian team:

🔲 Finalise licence areas (9 Prospecting Licences) (Q2 2022)
🔲 Stakeholder engagement (Ongoing)
🔲 Tanzanian team additions (Ongoing)

Key Objective #3: Explore new opportunities

With expert advice and based on their exclusive licence to the “helium atlas”, NHE may look to acquire another helium exploration asset.

🔲 Acquire a new asset

What could go wrong?

  • Permitting risk - While NHE currently holds 14 Prospecting Licences, there are 9 more yet to be granted and there is a risk that these additional licences are not granted.
  • Exploration risk - NHE may fail to find commercial quantities of helium despite having promising geology on its side. For example, 3D seismic data may not yield the drillable targets they are looking for.
  • Underlying commodity risk - Helium prices may fall as additional supply comes on line, forcing down prices and reducing investor appetite for new helium resources.
  • Country risk - Tanzania is an emerging resource jurisdiction and although a change in government has improved the ability to invest in Tanzania, local politics, changes to mining regulations and royalty systems may be a factor in NHE’s future prospects.
  • Operational risk - If NHE doesn’t achieve operational milestones before the start of the Tanzanian wet season, they could miss the start of the drilling window in 2023, leading to a 12 month delay in drilling. Weather is a factor in NHE’s prospects.

What is our investment plan?

As with our other previous exploration stage oil & gas investments (Helium is a gas) we invest early, well before the main drilling event and will aim to be free carried and have taken profit before the drill results are announced in 2023.

We look to hold at least 50% of our initial position into the first drill result and this is usually a ~3 year strategy. In the case of NHE, this investment plan is truncated to ~1.5 years.

NOTE: Our selling plan must adhere to our trading blackout policy and IPO escrow conditions shown below:


S3 Consortium Pty Ltd (The Company) and Associated Entities own 3,925,926 NHE shares and 1,851,852 options, The Company’s staff own 40,000 NHE shares at the time of publishing this article. The Company has been engaged by NHE to share our commentary on the progress of our investment in NHE over time.

Click here to read our trading blackout policy.


Investment Milestones for NHE

✅ Initial Investment: @0.1471
🔲 Top Slice

🔲 Free Carry
🔲 Take Profit

🔲 Price increases 300% from initial entry
🔲 Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
🔲 12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years


Articles Mentioning ASX:NHE


Our Past Commentary on Noble Helium Pty Ltd

Date Title
08-Apr-2022 $ Why We’ve Invested in Noble Helium



Stakeholder engagement - Helium Gas Research Agreement

ASX:NHE Apr 21, 2022

Our helium exploration investment, Noble Helium (ASX:NHE), is making progress on stakeholder engagement in Tanzania, as evidenced by the signing of a Helium Gas Research Agreement between the company (through its subsidiary Rocket Tanzania Ltd) and the University of Dar es Salaam.

We think building strong local relationships like this is important for NHE obtaining the social licence it needs to be successful.

This is frontier exploration, with no guarantee of success. However, if NHE’s prospective helium resource can be proven it has the potential to be the world’s third largest helium reserve behind the USA and Qatar. It will also be the largest ever reserve held by a single company - a globally significant amount of helium.

We like the high risk / high reward nature of this style of exploration.

Below is CEO Justyn Wood at the signing ceremony:

A Tanzanian news blog, Diramakini did a full write-up of the meeting.

We’ve sighted a professional translation, and the original blog post can be found here (use Google Translate).

Key Takeaways:

  • Staff at NHE’s helium project will be drawn exclusively from Tanzania
  • Tanzania has seen four different major mining contracts signed in the last five months, we think this is evidence of an improving environment for investment
  • Geological Survey of Tanzania (GST) to facilitate activities at NHE’s helium project

We think the collaboration between the two parties is a good step for NHE - one of the sub-objectives under Key Objective #2 from our NHE Investment Memo:

Here is why we invested in NHE and what we expect it to achieve in 2022 - NHE Investment Memo.

Tanzania's improving investment environment has much to do with the improved political situation in Tanzania since Samia Suluhu Hassan became President in March last year.

Hassan has embarked on amending the previous more divisive President Magufuli’s economic regulations in order to lure back investors.

This New York Times article looked at Hassan’s rise to power, her plans, and what that means Tanzania’s future.

It explained that “Ms. Hassan has positioned herself as a unifying national figure willing to challenge the establishment and bent on bringing her country in from the cold after five years of isolationism under Mr. Magufuli, who rarely travelled abroad.”

She has stated that her main priority is reviving the economy, building thousands of schools and health clinics, extending clean water and electricity to rural areas, and completing key infrastructure projects — including a railway line and a major hydropower plant.

What’s next for NHE: We think NHE will move quickly to secure an additional nine prospecting licences with the funds from the IPO.