Smart investors are preparing to profit from a supply squeeze in an $18-billion market.
So, what’s a supply squeeze?
Simple: When the supply of something goes DOWN at the same time demand for it goes UP...
A supply squeeze triggers.
When that happens, you can potentially make more in a short time than you would normally make over a lifetime.
For example, it just happened with lumber.
The coronavirus shut down logging. Supply DOWN.
At the same time, the coronavirus ramped up home remodeling. Demand UP.
In one year, you could have made 400%... more than you would have made in a lifetime.
Even better … if you invested in the smaller lumber companies in this supercycle—the ones whose earnings are tied directly to the price of lumber--you could have made even more.
Early investors in the lumber supply squeeze saw share price increases of over 400% on West Fraser Timber (NYSE:WFG) ... 515% on Canfor (OTCMKTS:CFPZF)... 677% on Interfor Corporation (OTCMKTS: IFSPF)…
But lumber is a renewable resource. We can always plant more trees.
But when it happens with a non-renewable resource… prices can go exponential.
So now, early investors are getting in position for a new supply squeeze in a relatively under the radar non-renewable resource -- helium.
In short: A post-coronavirus supply squeeze could trigger helium sooner than we first thought – helium is already a market projected to be worth $18.1 billion by 2025.
Why? 40% of supply has been taken off the market.
Here’s one stock that could profit from it…
RARE AND GETTING RARER: 40% OF U.S. SUPPLY IS ABOUT TO DISAPPEAR... AND IT'S HEADED TO ZERO
So, what's about to happen?
The global market for this non-renewable resource is set to grow—even by conservative estimates—at a CAGR of over 11% by 2025…
And, 40% of the US supply has now disappeared, while in the coming weeks, the entire U.S. national reserve will be shut down.
Since the First World War, a federal reserve in Amarillo, Texas, has been stockpiling this strategic gas, providing some 40% of the supply.
Most of that has been used up now. Between 2005 and 2018, the Reserve sold off more than $2 billion in these precious reserves. Now, it’s mostly been depleted, and in September, the reserve will be shut down, while the existing price ceiling will disappear.
“In the past, we were considered a flywheel—whenever there were impacts in the delivery system, we could ramp up and produce … where the shortages were short-term,” Samuel Burton, BLM manager for Reserve told the Smithsonian Magazine. “Now, as we wind down our program, there really needs to be more […] found, more production created, and more secure delivery systems in place.”
Longer term, the supply of this non-renewable resource could be heading toward zero.
In fact, prices have just broken out of their 19-year trading pattern...
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 could go exponential as this news filters up through the media.
WHY YOU HAVEN'T HEARD ABOUT THIS SUPPLY AND DEMAND SQUEEZE (YET)
While this “boring” resource is quietly going up… the smartest resource investors are piling in before the squeeze.
They may soon be followed by the really big money...
Including resource ETF firms like BlackRock and Vanguard... with $9T and $7T in assets under management.
So, right now, there's a small window of opportunity to get in... ahead of the big money.
When this big money floods in, you can expect the price of this resource to go much higher...
With the price of small stocks like this one with the potential to go up substantially.
Investors haven't heard about it yet because it doesn't affect their daily lives...
But soon they will because it could affect everything from computers to MRIs...
To Google, Facebook, Amazon, Netflix and more.
SUPPLY SQUEEZE 2021:
Google, Facebook, Amazon, and Netflix could soon be locked in a battle for this resource because existing mines are rare.
There are only 14 refineries in the entire world, with 7 in the United States.
But one little known stock is building up a portfolio of some of the most favorable land where this non-renewable resource can be extracted in North America.
In fact, Beacon Securities Limited recently initiated coverage on this tiny stock...
And said it could deliver well-level payouts of only a few months and IRRs of 122%-635%. Returns like these would rival (or beat) most O&G plays in Canada and the U.S… and that doesn’t even factor in that the helium supply squeeze is likely just beginning.
Smart investors will want to be in before the story of this non-renewable resource - helium - is all over the news.
Few people know anything about this $18.1 billion helium market...
But Helium is critical to our daily lives because it has the lowest melting point of all the elements (-272.2 °C)...
Which makes it the go-to commodity when it comes to cooling.
There is no substitute.
Liquid helium is used for cooling everything from magnets in MRI machines and ventilator machines to supercomputers and data centers.
About 30% of the world’s helium supply goes into MRI scanners...
While another 20% of the world’s helium supply goes into the manufacture of hard disks and semiconductors.
With Big Tech companies such as Google, Facebook, Amazon, and Netflix being heavy users of helium in their massive data centers, we may soon see them all scramble to secure it.
If that happens... the earliest investors will be rewarded with more gains in a short time...
More gains than you would normally make in a lifetime.
THE #1 STOCK TO PLAY THE 40% DROP IN THIS NON-RENEWABLE RESOURCE
Canadian junior explorer Avanti Energy Inc. (TSX:AVN.V; US OTC:ARGYF) is in a prime position to benefit from the emerging helium rush.
It has a team with a proven exploration and discovery track record, working to discover key tracts of Canada’s Montney (for $8 billion oil giant Encana), one of the richest natural gas deposits in the world. Now, it’s snapping up prime new helium territory ahead of what might be the biggest rush in history.
Avanti have made four key license acquisitions--two in Alberta and two in Montana (the Montana acquisitions are not closed yet, but the Company is confident they should close soon).
On June 14th, Avanti announced its biggest play yet, an intention to acquire the helium license rights a massive ~50,000 acres of highly prospective helium land in Montana. If completed, that will bring its total prospective helium holdings to some 75,000 acres in North America.
Remember, these are the same guys who discovered the Montney.
So why is Beacon Securities Limited so bullish on this stock? Lets try to read between the lines…
REASON #1: We are running out of helium. The US government has now sold off 2 billion cubic feet of the helium it had in reserve. That reserve was 40% of supply. And by September, by law, it has to begin disposal of all helium assets and operations, including the helium storage reservoir and pipeline system.
Canaccord Genuity Capital Market says the helium market is “chronically undersupplied”.
Cormack Securities says: “The current landscape for new entrants into this emerging industry has never been better. Currently there is a global helium supply shortage that is being multiplied by the growing demand, which “has driven renewed interest into securing reliable sources. This growing demand in part is responsible for the US Federal Helium Reserve depleting its resources.”
Eight Capital says: “Prices have been anywhere from $200 to $400/MCF. As a frame of reference, natural gas trades at about $3/MCF. Base case, we could see helium demand outpace supply at least until 2025.”
REASON #2: Avanti is acquiring the helium rights to land in some of the best helium prospecting areas in North America, in Alberta and Montana, both ground zero for helium.
In March, 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 boasts the Knappen and Aden projects in Alberta and has made its even bigger strategic move on Montana.
Knappen is ~6,000 acres of 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. 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.
And let’s not forget that Avanti Energy Inc. (TSX:AVN.V; US OTC:ARGYF) is led by the same team that “identified, modeled and developed” the infamous Montney play for $8 billion oil giant Encana (now Ovintiv Inc – NYSE: OVV). Beacon’s guidance aptly notes that the Montney project has achieved nearly 300,000 boe/d in production over the past 15 years, so it seems like this team knows how to explore and discover.
Bet the jockey, not the horse… And perhaps double down when you learn that the jockey has a proven track record of discovering gargantuan oil/gas assets for massive conglomerates, and even once more when you learn that the jockey has been buying a considerable amount of stock at levels higher than where the share price sits as I write this piece…
Perhaps the early innings of this new helium exploration gig reminds Bakker and his team of their prior successes?
Is ‘The Montney of Helium’ About to be Discovered in Montana?
In April, Avanti moved to acquire the license to a 12,000-acre land package in Montana that is on-trend with an active, nitrogen-rich helium drilling area in Saskatchewan. Although the acquisition is not closed yet, it has been announced, and the collection of 2D and 3D seismic 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. (In the 1970s, the USGS drilled high-grade helium wells nearby, yielding commercially viable helium at today’s prices.)
And the biggest move yet … on June 14th, Avanti announced its intention to capture ~50,000 more acres of licenses in Montana.
The highlights from this highly prospective helium property are 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 showing helium in multiple Devonian and Cambrian targets with helium percentages of up to 2%. (1.5% to 2.2% in the Cambrian and 0.7% to 1.7% in the Devonian).
- Helium shows associated with favorably high nitrogen percentages of up to 96%.
- Area well logs and core analyses indicating excellent reservoir quality in Devonian and Cambrian target intervals.
The next moves that could boost this stock will be the finalization of due diligence on this 50,000 acres, which is expected to be done next month, and then the start of the drilling campaign before the end of this year.
REASON #3: You can’t invest in helium directly. Most of these companies are private and super profitable so their executives are collecting multi-millions in profits every year. There are very few public companies for investors to get in on. That makes Avanti a rare opportunity to potentially get in on the ground floor of the next big supply squeeze for a gas that is one of the most critical drivers of the global economy.
That’s why Beacon Securities Limited has set an initial price target of $3.80 per share on 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 maintain our $3.80 price target and our Spec Buy rating.”
And in their report Beacon Securities Limited indicates that Avanti may deliver well-level payouts of only a few months and a IRR of 122-635% on its land packages; and Beacon further opines that “Returns like these would rival (or beat) most oil and gas plays in Canada and the US”.
Everything’s lined up here:
A supply squeeze is coming SOON, and September marks the end of the massively important US federal helium reserve in Texas.
Prices just broke out of a 19-year trading pattern but will almost certainly go higher. Small stocks like Avanti could go up even more.
Beacon Securities Limited has placed its initial bet on Avanti and sees upside to $3.80, but we think it could potentially go higher because longer-term this resource is non-renewable... and currently appears headed toward zero supply.
Plus, Google, Facebook, Amazon, and Netflix may need to battle over it.
Other companies navigating the helium and semiconductor supply squeeze:
Lithium Americas Corp. (TSX:LAC) is one of America’s most critical and promising pure-play lithium companies. With two world-class lithium projects in Argentina and Nevada, Lithium Americas is well-positioned to ride the wave of growing lithium demand in the years to come. It’s already raised nearly a billion dollars in equity and debt, showing that investors have a ton of interest in the company’s ambitious plans.
Lithium America is not looking over the growing pressure from investors for responsible and sustainable mining, either. In fact, one of its primary goals is to create a positive impact on society and the environment through its projects. This includes cleaner mining tech, strong workplace safety practices, a range of opportunities for employees, and strong relationships with local governments to ensure that not only are its employees being taken care of but local communities, as well.
Celestica (TSX:CLS) is a key company in the resource boom due to is role as one of the top manufacturers of electronics in North America. 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 even healthcare tech.
Due 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 producers.
Turquoise Hill Resources Ltd. (TSX:TRQ) is a key player in Canada’s resource and mineral industry. It is a major producer of coal and zinc, two resources with distinctly different futures. While headlines are already touting the end of coal, zinc is a mineral that will play a key role in the future of energy for years and years to come.
In addition to its zinc operations, Turquoise Hill is also a significant producer of Uranium. Uranium is a key material in the production of nuclear energy, which many analysts are suggesting could be a major component in the global transition to cleaner energy. While the mineral has not seen significant price action in recent years, there are a number of new projects set to come online across the globe in the medium term, which could be a boon to Turquoise Hill, especially as alternative energies gain traction in the marketplace.
Teck Resources (TSX:TECK) could be one of the best-diversified miners out there, with a broad portfolio of Copper, Zinc, Energy, Gold, Silver and Molybdenum assets. It’s even involved in the oil scene! With its free cash flow and a lower volatility outlook for base metals in combination with a growing push for copper and zinc to create batteries, Teck could emerge as one of the year’s most exciting miners.
Though Teck has not quite returned to its January highs, it has seen a promising rebound since April lows. In addition to its positive trajectory, the company has seen a fair amount of insider buying, which tells shareholders that the management team is serious about continuing to add shareholder value. In addition to insider buying, Teck has been added to a number of hedge fund portfolios as well, suggesting that not only do insiders believe in the company, but also the smart money that’s really driving the markets.
Maxar Technologies (TSX:MAXR) is one of the leading space companies on the planet, founded nearly 20 years ago. Maxar has a variety of services, including satellite development, space robotics, and earth observations. One of their most well-known products is the Canadarm2 robotic arm for the International Space Station (ISS). The ISS has been operational since 1998 with more than 100 missions to date. Maxar Technologies has had a history of partnering with NASA to maintain the ISS's systems as well as providing them with new technologies such as the Canadarm2 robotic arm. is a moon-bound tech stock to keep an eye on. 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.
More importantly, however, Maxar’s subsidiary, SSL, a designer and manufacturer of satellites used by government and commercial enterprises, 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.
By: Richard Sanderson
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