Jul 08, 2021 (Financial News Media via COMTEX) -- FN Media Group Presents Oilprice.com Market Commentary
London - July 8, 2021 – We've had supply scares for this gas before; but this time around, it coincides with the depletion of the US federal reserve and soaring demand from some of the biggest industries on earth. Mentioned in today's commentary includes: Nvidia /zigman2/quotes/200467500/composite NVDA -1.54% , Netflix Inc. /zigman2/quotes/202353025/composite NFLX +0.49% , Alphabet /zigman2/quotes/205453964/composite GOOG -2.02% , Taiwan Semiconductor Manufacturing Co. /zigman2/quotes/204359850/composite TSM -2.52% , Advanced Micro Devices /zigman2/quotes/208144392/composite AMD -2.20% .
The tech industry is likely to find itself scrambling to secure supply...It's key to hard drives. It helps feed our insatiable hunger for big data. Without it, medicine would be deprived of MRIs and critical R&D.
Even billionaire Jeff Bezos' Blue Origin space mission depends on it... as the richest man in the world prepares to go on the maiden commercial flight into space. So does Elon Musk's SpaceX, Richard Branson's Virgin Galactic, and of course, NASA.
That's why we've had a federal reserve for this gas and price controls since the early days of the Cold War. The gas is helium, and we're running out. The Federal Reserve has all but been depleted and the bottom of the barrel, so to speak, is being auctioned off. By September, this supply will likely cease to exist. So will the price controls.
That puts a junior explorer like Avanti Energy Inc. (AVN.V - ARGYF.PK) in a prime position to benefit from the anticipated helium rush. Avanti is aiming to become a helium leader, and the natural gas track record of some of its team suggests it can pull it off.
The Lucrative Helium Paradox
Demand for helium is so high right now because it has so many medical, scientific, big tech and industrial applications, and some think it can't be replaced by anything else in most cases. And big tech is only getting bigger.
This is way beyond balloons, here, and that's exactly why Avanti (AVN.V - ARGYF.PK) is scooping up property so quickly. Helium is essential for MRIs and it is a critical component of scientific, and medical research. It may also be used to help treat pulmonary disease, which has come into sharp focus as a result of COVID-19.
Our thirst for big data may hinge on helium, too. Helium is required for the manufacture of semiconductors and chips. Netflix /zigman2/quotes/202353025/composite NFLX +0.49% is reported to store data on helium-filled drives, which revolutionized data storage starting in 2013.
Without helium, Netflix's 74 million subscribers won't be binge-watching anything. Netflix stores its data on 36 drives that can use helium to increase their storage capacity and hold about 100TB of data. And the amount of big data being stored continues to grow at an unimaginable pace, with Amazon, Google, IBM, Apple, Facebook, and countless others binge-collecting with no end in sight. Some estimates suggest that at least 2.5 quintillion bytes of data is produced every single day. That's a number followed by 18 zeros.
This gas is behind our race to dominate quantum computing and to develop rocket technology, too. Even bitcoin mining may be dependent on helium, which is used as a coolant. Until now, we've always had the U.S. Federal Helium Reserve (FHR) in Amarillo, Texas, to rely on. Since the Cold War, the Fed has been stockpiling helium, providing some 40% of the world's supply.
~60,000 Acres of Prime-Time North American Helium Prospects
Avanti is harnessing what we think promises to be a major supply squeeze. And it's not wasting any time. In rapid succession...
On March 29th, Avanti acquired the license for over 6,000 acres from the Government of Alberta in highly prospective helium territory, and it's snowballed from there. Now, Avanti owns the Knappen and Aden projects in Alberta and has made its even bigger strategic move on Montana.
Knappen is ~7,000 acres with nitrogen-rich helium in multiple zones. Gas analysis shows helium concentrations up to 2.18% and nitrogen up to ~98%. It also shows the presence of several deep structural high features that are ideal for trapping helium.
Right nearby, Aden is a ~2,500-acre play with a closed structural high, also ideal for trapping helium, and multiple shows of up to 2%. It's also the first asset to advance into the exploration phase and drilling is expected by the end of this year already.
On April 16th, Avanti (AVN.V - ARGYF.PK) entered a letter of intent to acquire a 12,000-acre land package in Montana that is in close proximity to, and on-trend with, an active, nitrogen-rich helium drilling area in Saskatchewan. 2D and 3D seismic data shows several structures prospective for helium trapping, while multiple gas analyses show notable concentrations of helium, suggesting upward migration of helium and good potential for deeper helium-rich zones.
It's got a history, too: In the 1970s, the USGS drilled high-grade helium wells nearby, yielding helium that would be commercially viable at today's prices. But it was on June 14th that investors might have gained the biggest boost of confidence when Avanti moved to capture ~50,000 more acres in Montana.
100X More Valuable Than Natural Gas
Helium is about 100X more valuable than Natural gas. Natural gas prices (Henry Hub) are hovering around $3 per Mcf. Helium runs at $200-$400 per Mcf.
Raw helium is now selling for ~$350 per Mcf, while refined helium is selling for a whopping $600-$650 per Mcf, making it a fantastic low volume/high-value commodity.
That's what happens when the US takes over 2 billion cubic feet off the market.
And Avanti has the Alberta advantage in more ways than one. Not only is Alberta shaping up to be prime time land for our helium supply future, but 1% helium is considered a solid concentration. So far, data is showing 2% helium indications on some areas on Avanti's acquisitions.
All of this may combine to make helium one of the biggest commodity stories of the decade. It's been a "strategic" gas since the Cold War, but until recently, its main attraction has been ... balloons.
That story has changed in such a dramatic way, and we think its ending could be a very solid play for investors. Big tech and scientific, medical, and space developments have rendered this a "supergas".