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Renergen: ‘Cash flow is just around the corner’


FIFI PETERS: The stock price of gas and helium producer Renergen caught quite a number of market participant by surprise in today’s a session. It rocketed to a new record high on the JSE. At one stage, the stock price was up 18%. It’s come a bit off that level, but the company announced that it has quite a considerable amount of extra gas reserves at its Virginia plant in the Free State. Investors seem to be buying into its story and its dream of becoming a significant helium producer – not only here in South Africa, but also to the rest of the world in terms of its supplies. We have Renergen’s CEO Stefano Marani on the Market Update to tell us more.

Stefano, thanks so much for your time. I know you were listening in on our previous conversation with our market watcher, just raising a bit of reservations, and perhaps we can deal with that matter first, in terms of what you have and how soon it will take for what you have to start trickling into real income to offset your debt.

STEFANO MARANI: Thank you for having me and thanks for the right of reply. I don’t get that very often. The long and the short of it is that there are different kinds of investments on the stock exchange. If everyone was the exact same kind of investor the stock exchange would go nowhere. We are what you would classify as a junior mining house and, while junior mining is actually quite active and prevalent throughout the rest of the world, unfortunately South Africa has a distinct lack of analysts with an ability to understand junior mining, which is why in and of itself the junior mining, the mining industry in South Africa is in a sunset site.

Unless we actually start getting investment managers attuned to the concept of what it takes to invest in junior mining, and that junior mining returns follow an S-curve, our mining industry will die.

That’s kind of the route that it’s going. We like to hold the light up for the junior mining industry in South Africa. We’re trying to show that it’s going up.

That aside, the path to cash flow is actually just around the corner and David [Shapiro] would have seen that at the presentation had he opened it. The plant turns on in terms of hot commissioning this December, so that’s just around the corner. In December we start hot commissioning, in January we move into a phase of cooling down the plant, and then in January and February we fill our tanks and we’re in commercial operation with sales to Consol [Glass] and one or two other customers starting February or March.

And then today’s announcement marks the remaining outstanding component that we needed in order to prove the feasibility and reach bankability.

On our second phase, which is obviously the big plant, that’s where we start to become meaningful – not only from a helium perspective, but from a South African perspective this is an important discovery.

If you think about South Africa’s energy needs and the fact that we trying to transition to cleaner energy, this is a godsend, and this will become a meaningful part of South Africa’s energy mix.

It’s fine to stand in an ivory tower and point fingers but, at some point, someone actually has to put the shovel in the ground and make things happen, otherwise we’re going to stay in this quagmire of a deficit of energy – and we are standing up and we are doing it.

FIFI PETERS: Sure, point taken, but let’s perhaps then talk timelines. At what point will this second plant or the other part of the plant actually realise the potential that you think it has, and become a significant supplier and partner in solving the energy crisis in this country?

STEFANO MARANI: We are anticipating that, if everything goes according to plan – and nothing ever does, so I’ll caveat that up front – but if everything goes according to plan on our current timetable, then we’re expecting that the second phase will turn on during the calendar year of 2024. To put the energy metrics into perspective, if you consider that the whole of Gauteng uses 80 petajoules of energy per annum in terms of gas from the Rompco pipelines, today’s announcement is that our proven reserves, the 2P level, clocks in at 407 petajoules. That just gives you a feel for the magnitude of energy discovery that we’ve had. It’s the same as turning on a 280 megawatt power station for 21 years.

FIFI PETERS: I read about the gas component and what came to mind initially was that Europe has a gas crisis. To what degree are you looking at that market, and what has happened in terms of gas prices and looking to perhaps be one of the knights, as it were, that helps save the day?

STEFANO MARANI: While we would love to do that, I think there’s gas and there’s gas. There is the stuff that comes in off the pipeline, and that is unrefined and perfect for thermal purposes. Our primary market is for substitution of diesel in trucks, and for people that don’t have access to the pipeline who are looking for a premium product. So it’s the same as buying a high-octane, highly refined fuel versus 500 PPM diesel. You know, the two command a different premium given their different levels of refinery.

We’ve got a niche over here. We’ve got a highly, highly refined product which is by global standards among the best LNG [liquefied natural gas] in the world. That’s the target segment. Unfortunately, because of where we are in the country, we wouldn’t be able to make large-scale gas available into that pipeline without having to refine it first. That’s just one takeaway from it. This is an off-gas-pipeline solution.

But, that said, the amount of energy that we bring to the table and the fact that it is such an enormously smaller carbon footprint relative to coal or LPG or any one of these other fuels, it really is going to make a meaningful difference towards South Africa’s transition to a greener future.

The way that we price it, we’re selling the energy at a significant discount to diesel, which means that trucking companies end up saving an inordinate amount of money along the way while actually improving their carbon footprint.

FIFI PETERS: Stefano, in terms of the helium, I know that Covid-19 gave the business a bit of a boost – or was expected to – just given what you could do in helping to keep the vaccines stored at ideal temperatures. Where is that part of the operation for the company, and are you seeing any more opportunity just to get involved in the vaccine-storage component?

STEFANO MARANI: That part of the business is actually starting to take off really nicely now. I’m pleased to say that we delivered another batch of Pfizer, and so far I think we’ve been responsible for more than 700/800 000 people getting Pfizer vaccines. So that’s gone nicely.

From a revenue perspective we’re now at the sharp end of that stick, and we’re starting to enter into commercial arrangements. We needed to field-test it first before we took on the liability of moving precious cargo like that.

We see this as a very long-term opportunity because the point about mRNA is that you don’t just get two jabs and then you’re done. mRNA is for life – and you’re going to be getting these boosters for life. If you ever want to travel, you have to have had a booster within four months of boarding the plane. That’s just the very science behind how mRNA works. We see this as being an ongoing need – three days versus our potentially two to three weeks of no battery power at those temperatures. It’s a game-changer.

FIFI PETERS: All right. Stefano, thanks so much for your time as always, sir. That was the Stefano Marani, the CEO of Renergen, just talking about the jump in the company’s share price on the reserve announcement that has taken everyone by surprise, but pleasantly so.

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