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‘Go long helium’ could be good advice

Unlike most other commodities, helium is not traded in any public spot market – or at least that was true until recently …
Tradeable ArgHe tokens for future helium physical delivery give investors a compelling new option to consider. Image: AdobeStock

Helium is a noble gas that is in scarce supply in world markets.

Beyond discretionary party balloons (accounting for around 8% of demand), helium is critical in healthcare (MRIs account for some 20% of demand), aerospace (think SpaceX launches) and manufacturing (including fibre optics and semi-conductors).

Importantly, its use in these industries is non-substitutable.

Against this backdrop (listen to this interview for context) of growing helium demand, tight global supply and the limited ability to stockpile the gas for any length of time combine to imply an attractive spot helium market.

Tradeable token

Unlike most other commodities, helium is not traded in any public spot market – or at least that was true until recently when, with some nuances, Renergen (REN) partnered with Argonon and launched the tradeable ArgHe (ARG) tokens for future helium physical delivery.

Simplistically – built off blockchain infrastructure – one ARG token represents 1/1 000th of an mcf (one thousand cubic feet) of helium from Renergen’s Phase 2 project. Therefore, 1 000 ARG tokens can be physically redeemed for one mcf of helium from Renergen once Phase 2 starts production (likely to be during 2025).

In this way, pre-Phase 2 production, ARG’s spot price is closer to a futures price with some degree of delivery risk if Phase 2 never happens.

However, given all the positive updates from Renergen about Ivanhoe Mines and Central Energy Fund lining up to be equity investors and the US International Development Finance Corporation and friends signing as potential debt funders,  the pieces are falling into place for Phase 2.

Phase 1 is also currently successfully ramping up and should turn the group cash flow positive.

ARG/USDT secondary market price

Source: BitMart.com

The combination of the above is that the risk that Renergen does not arrive at Phase 2 production is lowering and the ArgHe token price is thus responding positively.

Given the above noted positive demand-supply dynamics, is it also logical to see a positive trend for the noble gas’s spot price.

How much of ARG’s recent movement is pre-production risk lowering and how much is spot helium upside? Impossible to say, but there is anecdotal evidence that users of helium are currently signing spot purchases of the gas well above the last official public price.

Finally, post-production we may see ARG trade above the spot price of helium.

Why? Well, you can neither practically nor economically store helium for extended periods of time.

Thus, holding a token for deliverable gas (at your option) instead of the physical gas (which you would need to store or use) means that storage is not your problem or your cost anymore.

In an efficient market, it is logical for the token’s fair value to start to reflect this advantage.

All in all, a unique off-the-radar investment from a wonderful, home-grown success story.

Listen to this MoneywebNOW podcast with independent analyst Jimmy Moyaha and Simon Brown discussing Renergen securing funding for phase 2

Keith McLachlan is investment officer at Integral Asset Management.

* Keith McLachlan and some of Integral Asset Management clients hold shares in Renergen.

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