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When exploring the world of penny stocks, tools like ChatGPT can be helpful in discovering under-the-radar stocks. And upon asking it about the best UK penny stocks to buy, the artificial intelligence (AI) model suggested taking a look at Helium One Global (LSE:HE1).
A few years ago, this enterprise was getting a lot of attention, with its shares surging by over 500% in less than a year following its IPO in late 2020. The momentum was driven almost entirely by the hype surrounding the group’s helium exploration projects that could position the firm to become a global industry titan in the long run.
Sadly, following the 2022 stock market correction, the hype fizzled out as investors started to realise the group still had a long way to go. Now, three years later, the stock’s down over 95% from its 2021 peak. And even in the last 12 months, the shares have continued their downward trajectory, falling by 50% to less than 1p.
However, could that soon be about to change?
Production on the horizon
One of the biggest risks surrounding this enterprise is a lack of a revenue stream. With no active production generating cash flow, management’s entirely dependent on external equity financing and its residual cash on the balance sheet.
As of December, the firm had just $10m in the bank. Needless to say, that’s not enough to fund the high cost of exploration and project development. So it should come as no surprise that the number of shares outstanding over the last five years has skyrocketed by over 2,700%, due to management raising more money by issuing shares.
However, this equity dilution may soon be coming to an end. 2025 has proven to be a solid year of operational milestones. In March, the company secured its mining license in Tanzania for its flagship Rukwa project. A few weeks later, intermediate drilling at the Jackson-29 well (in which Helium One has a 50% working interest) was sucessfully completed.
In terms of the next steps, Jackson-29 will undergo safety tests to verify well integrity which, if successful, will make it ready to enter and move into the production phase. In other words, Helium One’s finally on track to gain revenue stream.
Taking a step back
Reaching production is an impressive milestone that most young exploration companies fail to achieve. And while Helium One still has some challenges to overcome, it appears to be taking the right steps. However, it’s important to remember that this transition process won’t happen overnight.
Even if everything goes smoothly at Jackson-29, building a production facility could potentially take years, especially if infrastructure (roads, power, water, etc) also needs to be built out. And it’s a similar story to the other projects in Helium One’s portfolio.
There’s no denying the explosive potential of Helium One’s share price. After all, helium gas is steadily rising in demand thanks to its aerospace and medical applications. But a lot of things have to go right before the firm can realise this potential.
So while ChatGPT’s bullish, I’ll be waiting on the sidelines until this penny stock makes more progress.
