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.
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.
With a team that’s already proved its exploration prowess for Encana in Canada’s Montney, one of the richest natural gas deposits in the world, Avanti is snapping up prime potential helium territory at a fast clip.
In the past two months, Avanti has made four acquisitions--two in Alberta and two in Montana.
On June 14th, Avanti made its biggest play yet, moving to acquire a massive ~50,000 acres of land highly prospective helium land in Montana. That will bring its total prospective helium holdings to some 70,000 acres in North America.
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.
And insiders have been reported as buying up the stock.
The Lucrative Helium Paradox
We think insiders are buying for three reasons:
- Some members of the management behind Avanti already have a successful track record with one of the biggest names in Canadian E&P, Encana
- It’s been hot on the acquisition trail and now has a huge prospective helium position which the company says has strong data to back it up
- Helium is heading for a major supply squeeze ...
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.
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 (NASDAQ:NFLX) 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.
But we’ve reached a major inflection point: Right as we realize the increasing global demand that can only continue to rise, one of the key providers of helium is shutting down, and new discoveries appear to be few and far between.
And the paradox is that helium is both the second-most common element in the universe and one of the rarest in concentrations on earth.
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.
Most of that has been used up now. Between 2005 and 2018, the FHR sold off more than $2 billion in helium reserves. Now, it’s mostly been depleted, and in September, the reserve will be shut down, while the existing price ceiling will probably disappear.
~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 (TSX:AVN.V; US OTC:ARGYF) 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.
We think investors were thrilled with the Montana buy ...
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.
The highlights from this highly prospective helium property are may be enough to boost investor confidence many times over. They include:
- Several closed structural highs, ideal for the trapping of helium, that exhibit 70m to 170m of relief.
- Surrounding wells have helium shows in multiple Devonian and Cambrian targets with helium percentages of up to 2%.
- Area helium shows associated with favorably high nitrogen percentages of up to 96%.
- Area well log and core analyses indicating excellent reservoir quality in Devonian and Cambrian target intervals.
We think the next moves that could increase excitement about this stock will be the finalization of due diligence on this 50,000 acres, which the company reports is expected to be done next month, and then the start of a drilling campaign before the end of this year.
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 we’re left with only a few players controlling 85% of the global market and a wide-open playing field for new entrants, like Avanti, which has shot out of the gate with four acquisitions that lead to some 70,000 acres of highly prospective helium territory.
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”.
And if we don’t find more, we risk losing it all. Helium is one of the few elements that can escape gravity and leak into space, chemist Andrea Sella of University College London told the BBC. “[Helium] is unique. When it’s gone it is lost to us forever.”
That’s a risky fate for a gas that has the lowest boiling point of any element at -269C, making it important to space exploration, our thirst for big data, superconductors, fiber optics, and quantum computing.
"We're going to be looking back and thinking, I can't believe people just used to fill up their balloons with it, when it's so precious and unique," Cambridge University chemist Peter Wothers told the BBC, right at the point in 2013 when helium became the backbone of hard drives.
Against this backdrop, Beacon Securities Limited has been following Avanti Energy Inc. (TSX:AVN.V; US OTC:ARGYF), noting: “We believe critical mass has been achieved and Avanti now has a key asset on which its world-class technical team can explore.”
We think everything is lining up for Avanti, with its largest acquisition to date now at the finish line and a helium supply crunch that could define the future of the world’s biggest technology threatening to make us regret all those party balloons.
Big Tech Is Reliant On Helium
Video streaming giant, Netflix Inc. (NASDAQ:NFLX), is just coming off a banner year whereby the company’s subscriber tally set new records, managing to once again shrug off intense competition from streaming rivals. Netflix gained 37 million new subscribers in 2020, easily besting its previous record gain of 28.6 million new subscribers in 2018, to finish the year with 203.67 million paid subscribers worldwide. Obviously, Netflix had Covid-19 and the stay-at-home trend to thank for the massive growth as consumers sheltering at home turned to streaming entertainment in droves.
And despite all of its gains, it’s still facing another major problem that is impacting all of Big Tech…a looming helium and semiconductor shortage. As previously mentioned, without helium, there would be no internet. And obviously, without internet, there would be no Netflix. That’s why as early as 2018, Netflix and Google both were buying up massive amounts of helium.
Alphabet (NASDAQ:GOOG), the parent company of Google, knows exactly how important this resource is. Not only is it key in making the internet possible, it is also a critical green component in Google’s massive data centers.
Though it is one of the largest companies on the planet, clocking in with a $1.6 trillion market cap, in many ways Alphabet has lived up to its original “Don’t Be Evil” slogan. Not only is it powering its data centers with renewable energy, it is also on the cutting edge of innovation in the industry, investing in new technology and green solutions to build a more sustainable tomorrow.
Alphabet CEO Sundar Pichai explained, “We are committed to doing our part. Sustainability has been a core value for us since Larry and Sergey founded Google two decades ago. We were the first major company to become carbon neutral in 2007. We were the first major company to match our energy use with 100 percent renewable energy in 2017. We operate the cleanest global cloud in the industry, and we’re the world’s largest corporate purchaser of renewable energy.”
Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) is the world’s largest contract chip manufacturer, meaning it’s tasked with making chips for dozens of fabless tech companies including Apple, Qualcomm, Nvidia and Advanced Micro Devices among others. That means Taiwan Semiconductor’s responsibility is unparalleled. If it can’t keep up with demand, there could be some serious problems. The fact that only a handful of chip manufacturers actually own chip-making facilities has made the situation even more dire. Indeed, many leading top semiconductor companies are "fabless," meaning they only design the chips but rely on other companies, known as foundries, to actually make the chips. The shift to outsourcing has been having a big effect on structural changes and related capacity because companies that cut orders in the early days of the pandemic have been forced to go to the back of the line.
Taiwan Semiconductor is a key player to watch in both the helium shortage and the semiconductor shortage. As the world’s largest chipmaker, it needs helium to survive. And with a semiconductor supply squeeze looming, it could stand to benefit big when Big Tech comes knocking.
Advanced Micro Devices (NASDAQ:AMD) is one of the world’s top chipmaker and semiconductor producers. And it is set to play a major role in producing the tech that will drive the future. While it’s primarily known as a gaming company, AMD, along with Nvidia are present in most modern computers, whether it’s a Dell, Lenovo, Razer or even an Apple, at least one component in that computer will likely be built and manufactured by either AMD or NVDA.
These tech giants aren’t just building home computers, either. AMD, for its part, is building CPUs to be used in massive data centers, the kind propping up Microsoft’s Azure cloud-based workstations and desktops. And its GPUs are providing the speed, security, and scalability to keep these data centers performing at the level needed to push modern tech into the future and beyond.
AMD’s most significant challenger, Nvidia (NASDAQ:NVDA), is also pushing new tech into the future. It’s even setting new records with the introduction of its A30 and A10 enterprise server GPUs. Thanks to its innovation and dedication to its clients, Nvidia is present within the highest levels of tech in just about every industry imaginable. From Big Finance and Fintech to robots, engineering, and even building the cities of tomorrow, Nvidia’s hardware is at the core of some of the most exciting innovations being rolled out into the world today.
With more and more demand coming for semiconductors and new chip technology hitting the market, companies like Nvidia, AMD, Taiwan, Samsung and Intel are going to be some of the biggest benefactors. They’re already well-known in the industry, and this could just be their time to really shine. But a looming helium shortage could present a number of complications for the booming technology industry.
Magna International (NYSE:MGA, TSX:MG) is an interesting roundabout way get in on the exciting resource and battery markets without betting big on one of the new unproven stocks captivating millennials right now. The six-decade-year-old manufacturing giant provides mobility technology for automakers of all types. From GM and Ford to luxury brands like BMW and Tesla, Magna is a master at striking deals. And it’s clear to see why.
Just over a decade ago, Magna was already making major moves in the battery market, investing over half a billion dollars in battery production while the market was still in its infancy. At the time, electric vehicles as we know them had barely hit the scene, with Tesla launching its premiere car just two years prior.
Magna’s rogue bet has paid if in a big way. Since its battery gamble, the company has seen its valuation soar by tens of billions of dollars, and it has solidified itself as one of the leaders in the business. With the semiconductor industry in chaos, and another looming lithium and helium shortage, it will be interesting to see how Magna deals with these hardships.
Like Magna, Celestica (NYSE:CLS, TSX:CLS), is another company in the alternative energy resource boom investors should watch due to is role as one of the top manufacturers of electronics in the Americas. Celestica’s wide range of products includes but is not limited to communications solutions, enterprise and cloud services, aerospace and defense products, renewable energy and enough health technology.
Thanks to its exposure to the renewable energy market, Celestica’s future is tied hand-in-hand with the green energy boom that’s sweeping the world at the moment. It helps build smart and efficient products that integrate the latest in power generation, conversion and management technology to deliver smarter, more efficient grid and off-grid applications for the world’s leading energy equipment manufacturers and developers.
Maxar Technologies (NYSE:MAXR, TSX:MAXR) is one of the most exciting space stocks around. While space firm specializes in satellite and communication technologies, it is also a manufacturer of infrastructure required for in-orbit satellite services, Earth observation and more. So what does Maxar have to do with the resource industry? Actually, a lot.
SSL, a designer and manufacturer of satellites used by government and commercial enterprises, is one of Maxar’s wholly owned subsidiaries. It has pioneered research in electric propulsion systems, lithium-ion power systems and the use of advanced composites on commercial satellites. These innovations are key because they allow satellites to spend more time in orbit, reducing costs and increasing efficiency.
Maxar’s role in the space race cannot be ignored. And with its battery innovations and leadership in the industry, it will play a vital role in the sector for years to come. And with helium as one of the key resources in this race, their fates are intertwined.
Canada’s technology industry could also be impacted by looming helium and chip shortages. Let’s look at Shopify Inc (TSX:SH), for example. It is an absolute beast in the e-commerce world. In fact, because of its simple-to-use platform, it would be hard to have not stumbled onto a shop built with its technology.
There is a chipmaker shortage and a helium shortage… and Shopify, though it does not produce any hardware, could be impacted indirectly. Whether it’s through lower demand from its numerous tech clients or disruption in chip supplies, all eyes will be on Shopify to see how it reacts.
Blackberry Limited (TSX:BB) is one of Canada’s premiere tech giants that could be impacted by looming shortages, as well. While it has pivoted away from its iconic cell phones of yesteryear, it is still very much involved in pushing the tech industry. It’s even building a global digitized healthcare database leveraging blockchain technology. From its high-profile partnerships with the likes of Amazon and more, to its key posturing in the Internet of Things explosion, BlackBerry is a great stock that could be trading at a relative discount compared to some of its peers.
The company even launched a new R&D arm, BlackBerry Advanced Technology Labs. “Today’s cybersecurity industry is rapidly advancing and BlackBerry Labs will operate as its own business unit solely focused on innovating and developing the technologies of tomorrow that will be necessary for our sustained competitive success, from A to Z; Artificial Intelligence to Zero-Trust environments,” explained Charles Eagan, BlackBerry CTO.
By. Celeste Barber
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
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 announced letter of intent; that Avanti will be able acquire the rights to helium on approximately 50,000 acres of additional prospective land in Montana pursuant to two recently announced binding agreements; 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, binding agreements 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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