This could be one of the most critical supply squeezes of our lifetimes … for a gas that is oddly both abundant and rare.
And tech giants are about to find themselves fighting for who gets the leftovers, while the next explorer to make a discovery will probably reward investors multiple times over.
This gas is a very important part of hard drives.
It’s the linchpin of big data storage, which we can’t get enough of.
It’s essential to IBM (NYSE:IBM), the king of quantum computing.
Tesla CEO Elon Musk’s SpaceX needs tons of it. Musk says this gas costs him more than liquid oxygen, and prices are about to skyrocket.
Google, owned by Alphabet (NASDAQ:GOOGL) needs this gas for a novel way to offer rural areas internet--from the stratosphere, and streaming giant Netflix (NASDAQ:NFLX) has joined the list of major consumers of this gas for its massive data storage.
A new discovery would help science and medicine.
It will save money for big data, too.
And is critical for fiber optic cables, semiconductor chips, and superconductors.
It might even be the life of the party …
NASA and Space X space missions need it.
And without a new discovery, tech giants like Alphabet, SpaceX, Microsoft, IBM, and even Netflix will suddenly find that what used to be a commodity taken for granted is now priced to reflect a short squeeze.
The gas is helium. And we’re running out--fast.
It’s abundant in the universe, but more rare on earth, and almost no one’s been seriously exploring for it. Until now.
The team at Avanti Energy Inc. (TSX: AVN.V; US OTC: ARGYF) has already made a discovery in Canada’s prized Montney, for Encana. That’s one of the richest natural gas deposits in the world. And the team is using the same methodology to explore for what it hopes will prove to be some of the richest helium deposits in the world.
Now, they're back to explore again, but this time, they’re not just looking for helium as a by-product of natural gas--they’re looking for the mother lode of helium to feed the big tech, big data needs.
Three Prime-Time North American Helium Prospects
In just the past month, Avanti has made three key acquisitions--two in Alberta and one in Montana--that it hopes will put it on track to become the next potential leader in new helium discoveries.
That’s significant because we’re in the middle of the world’s third major helium shortage in 14 years, and this time it may be a supply squeeze like we’ve never seen before.
Why? Because we are now officially out of our helium comfort zone. 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.
But we’ve used most of that up, and in September, the reserve will be shut down, while the existing price ceiling will disappear.
Without new discoveries, we’ll fall short of what big tech, medicine, and space exploration need, and prices could skyrocket.
That’s why Avanti has jumped on three major acquisitions.
First, on March 29th, Avanti acquired the license for over 6,000 acres from the Government of Alberta in highly prospective helium territory.
A previously abandoned natural gas well on the property showed 2.18% helium and 96% nitrogen in the Cambrian and 0.3% helium and up to 98% nitrogen in the Devonian.
Offsetting wells in the area have multiple tests in Cambrian and Devonian intervals with up to 1.79% helium and 83-93% nitrogen content, and drill stem tests (DSTs) indicate reservoir quality rock in the Cambrian and Ordovician zones.
Next, on April 16th, Avanti made its move on ~12,000-acre prospective helium land package, this time in Montana, with a letter of intent to acquire.
This is a large land position in the northern part of Montana, and it’s right near--and on-trend with--an active, nitrogen-rich helium drilling area in Saskatchewan.
Basement highs mapped with 2D and 3D seismic data show several structures prospective for helium trapping in overlying sedimentary formations. Multiple gas analyses also show notable concentrations of helium, suggesting upward migration of helium and good potential for deeper helium-rich zones. It’s all on-trend with helium-producing areas in this region.
High-grade helium wells drilled nearby in the 1970s by USGS in the Maison formation yielded commercially viable helium at today’s prices.
The newly acquired property resides over an area with a closed structural high that is ideal for trapping helium and multiple helium shows have been identified in and around the property with shows up to 2%.
Previously drilled oil and gas wells showed high nitrogen content of ~95% in multiple zones. Nitrogen at this concentration is important because it is often associated with producible quantities of helium and the production of helium is a relatively simple process.
With helium running low, demand on the rise, and prices which could soar in the squeeze, Avanti is out in front of this game with the exploration advantage.
And they’re moving fast …
They plan to spud their first well in by the end of 2021.
A World Without Helium?
Not if Avanti can help it. And all the better, geopolitically, if the next big helium discovery comes from North America.
Helium powers our most critical tech projects. It’s a gas that supports superpower status, which makes the looming shutdown of the federal helium reserve all the more profound for explorers.
Beyond our breakthrough helium-powered hard drives that enable our massive data storage, superconductors, semiconductors, and space exploration, Google’s Project Loon initiative seeks to deploy a network of helium-filled balloons to provide internet connections to the rural world from the stratosphere. It hopes to connect the entire world using a gas we’re almost out of.
And Netflix needs massive data storage capabilities (as does everyone in the streaming industry). Without helium, it’s much harder. Helium increases hard drive storage capacity by 50% and reduces power consumption while doing it.
Everyone wants helium-powered hard drives.
That’s on top of helium’s critical use in scientific and medical research, and even medical equipment. No more helium. No more MRIs.
The helium narrative is now the best commodity story out there for some investors, and if a small-cap miner makes the next big discovery … well, that’s where the biggest rewards (and risks) come from.
That’s why Beacon Securities Limited recently initiated coverage on Avanti, calling it an “enticing investment opportunity” because of its “world-class team” and “supportive He market fundamentals”.
Pointing to the Avanti team’s past high-profile natural gas exploration and discovery track record, Beacon sees the payout on this one in only 2-8 months, with targets of up to 122-635% return on investment.
With Avanti’s (TSX: AVN.V; US OTC: ARGYF) plans to use both “conventional” exploration to identify structural Cambrian-aged traps and the high point of drilling, and 80% proprietary methods, Beacon sees significant potential netbacks from this of C$309/mcf (with $300 helium prices) and C$548/mcf (with $500 helium prices).
With a clear helium supply squeeze looming large, a Fed helium reserve shut down, and growing demand, this is shaping up to be the Avanti advantage, and they could be in prime position for the next big commodity supercycle.
Other Supply Shortages To Watch
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 another 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.
The companies 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.
AMD’s biggest competitor, 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 tech giants.
Maxar Technologies (NYSE:MAXR, TSX:MAXR) is a high-flying space stock with a lot of skin in the game. 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 tech and innovative approach to the already-extremely complicated space industry, has helped the company see its share price climb where many of its peers have struggled. In fact, in just the past two years, Maxar has seen its share price increase by well over 1000%. And as the company secures more deals in the great beyond, the innovative firm will likely maintain its upward trajectory for some time.
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. The company has the experience and reputation that automakers are looking for.
Over 10 years 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 massive investment has paid if in a big way, however. Since its battery bet, 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 challenges.
Canada’s tech sector could be impacted by looming shortages as well. Take Shopify Inc (NYSE:SHOP, 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.
In addition to its revolutionary approach on e-commerce, Shopify is also delving into blockchain technology, making it a promising pick for investors, especially given that the sector is red hot right now. Its clients are even able to accept bitcoin and a variety of other cryptocurrencies as payments with a few clicks.
If there is a chipmaker shortage or a helium, Shopify, though it does not produce any hardware, could be impacted indirectly. Whether it’s through limited demand from its numerous tech clients or disruptions in infrastructure shortages.
Blackberry Limited (NYSE:BB, TSX:BB) is another one of Canada’s tech giants that could be impacted. 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.
Supply disruptions can impact anyone, even fossil fuel producers. Westshore Terminals (TSX:WTE) is a coal export terminal located at Roberts Bank Superport in Delta British Columbia. It is Canada's largest coal export facility, surpassing the combined coal shipments of all other terminals in Canada. The company exports thermal and metallurgical coals to markets around the world, including Japan, South Korea, China, India and Taiwan. Westshore also offers services to ship various bulk cargoes through its marine facilities. Westshore Terminals has been operating for over 30 years and employs more than 240 employees that work 24/7 shifts to ensure continuous operation.
By. Terry Church
**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 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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