Renergen’s share price ended 9.14% higher after disclosing that it was finally producing liquid helium at its Virginia Gas Project in the Free State, making SA one of the handful of countries producing the substance.
The share price was R27 at close of trade, having made its biggest one-day gain since March.
Helium is a by-product of natural gas and used in producing semiconductors, an essential element of cars, computers, medical devices, cellphones and other technology.
Initially, the company, which has a primary listing on the Australian stock exchange, was to start producing helium in July 2021. But it faced many delays, due in part to delays in receiving equipment from abroad due to Covid-19 supply chain issues.
Renergen became the first SA company to produce liquefied natural gas, starting in September and beginning commercial deliveries in December.
In a brief statement on Monday, CEO Stefano Marani called this a “truly spectacular achievement” and a “major and critical milestone”.
“All components of the phase 1 plant are now in operation, and SA joins the ranks of only eight countries in the world to produce this rare and valuable liquid,” said Marani.
Renergen, which is still not making a profit as it has been in development, had debt of R870m, according to cash flow documents released on the Australian stock exchange at end- December.
The company experienced engineering challenges in October as it commissioned its helium plant, which led to further delays, and a spate of negative attention on social media and Australian investor forum Hot Copper. The share price ended 2021 about 30% lower.
Smalltalkdaily analyst Anthony Clark, who has long punted the stock while admitting it comes with an element of risk and is not “for widows and orphans”, said the production of helium showed the naysayers’ negativity was “in vain”.
“I have always believed that a project of this complexity ... in this country, with all the parts and equipment being bought in from overseas was never going to be fit for purpose from day one. I’m an engineer by training and for anything to work on the first day is a near impossibility.”
Explaining that the production of helium was an important milestone, chief investment officer at Integral Asset Management Keith McLachlan said the “business of exploration and development of natural resources is risky and, thus, naturally attracts doubters”.
This was normal in public markets. “Thus, the evolution of Renergen into a producer of gas is an exceptionally important milestone for settling these arguments in favour of the company and its management team.”
The milestone is likely to help Renergen raise capital after it showed in cash flow documents released at the end of the year that it had enough cash left for one-and-a-half quarters, or about 4.5 months.
Renergen said previously that phase 1 is expected to produce 2,700GJ of liquefied natural gas a day and 350kg of helium, while the group is also gearing up for phase 2 of its development, a more substantial project that is expected to produce at least 24,000GJ, at an estimated cost of $800m-$900m.
According to Clark, Renergen will ramp up to about 300kg of a helium a day by early October as plants seldom run at 100% capacity.
Renergen’s subsidiary, Tetra4, wholly owns the Virginia Gas Project, which contains helium concentrations that are among the world’s highest.
The state-owned Central Energy Fund (CEF), which has a mandate that includes securing SA’s energy security, said in March that it was looking to buy a 10% stake in Tetra4.
Renergen will seek a Nasdaq listing round about May-June this year, said Clark.
Renergen has been a favourite of SA retail investors, but has struggled to gain support from large fund managers due to the high risk of exploration.
Clark said the listing on the Nasdaq will create global interest, because Renergen is one of the very few listed helium companies “that is actually producing helium”.
Many other global companies listed on the Canadian, US and Australian stock exchanges have advanced to exploration and have extremely higher valuations and share prices, he said.
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