Penny stocks are notorious for being risky. And shareholders in Helium One Global (LSE:HE1) have learned that first-hand. The young helium exploration company has seen its valuation tank following its peak in 2021, falling 96% over the last three years.

However, at the start of 2024, the stock popped by 1,400%! While that’s not nearly enough to undo its lost market-cap since 2021, investors who bought in right before were likely quite excited. After all, a £1,000 investment was turned into £14,000 in just a few weeks.

Even after this burst, Helium One’s market-cap is still just shy of £60m. That means there’s still plenty of space left for more quadruple digit returns if it successfully transitions to commercial production of helium. But is that likely to happen in 2025? And could it return to 2021 levels over the next 12 months?

Revenue incoming

As previously mentioned, Helium One’s still in the exploration phase of development. That means no revenue will be generated in 2024. However, 2025 could change all of that.

In addition to its exploration efforts in Tanzania, the firm owns a 50% stake in the Galactica-Pegasus project in the US. And while there have been a few weather-related delays pushing the commencement of drilling back to next month, the project remains on track to begin production within the first half of 2025.

Meanwhile, over in its flagship Tanazia project, management’s submitted its request for a mining license with drilling equipment already on site and ready to go.

Assuming the license is granted, 2025 looks like the year Helium One will finally be generating some operational cash flow. And while profits might still be a few years away, a successful transition to commercial production could send shares flying on higher expectations. At least that’s what the 3.96p share price forecast from City analysts suggests.

What could go wrong?

As exciting as these operational milestones are, it’s important to keep expectations in check. Commercial production might only be a few months away, but that’s plenty of time for something to go wrong. Continued unfavourable weather could delay progress in Colorado, while the firm’s mining license application could be rejected if regulators aren’t happy.

Even if the license is granted, a fault in machinery or unexpected interruption to drilling could prevent a smooth transition. And with Helium One’s valuation currently driven almost entirely by expectations, the slightest bit of bad news could trigger another share price collapse.

Needless to say, an investment today would likely be exceptionally volatile, either surging higher or imploding. A lot of things have to go right if Helium One wants to see its share price return to 2021 peak levels, especially since management has issued a massive amount of new shares to raise capital since then. For reference, the number of shares outstanding has increased from around 615 million to 5.3 billion over this period.

Personally, the risk’s too high for my portfolio. But compared to other exploration penny stocks, Helium One certainly looks like a promising contender. So investors comfortable with high levels of risk may want to consider taking a closer look.