Renergen Limited (ASX:RLT) CEO, Stefano Marani discusses the company’s helium and natural gas projects in South Africa, exploration upside and its IPO.
Jessica Amir: Joining me today from Renergen (ASX:RLT) is CEO Stefano Marani, and I'm Jessica Amir for the Finance News Network. Stefano, welcome to the network.
Stefano Marani: Pleasure to be here. Thank you.
Jessica Amir: So for those who haven't heard of Renergen (ASX:RLT) before, just give us a quick introduction.
Stefano Marani: We are an emerging natural gas and helium producer. We're in South Africa, and the field is in South Africa. We've got proven reserves. We're now moving to the stage of production with the construction of equipment to extract the gas.
We are currently listed on the JSE, and as it stands, we are now dual listing on the ASX and raising additional cash through the process of the IPO for the purpose of exploring a portion of the field where we've discovered particularly high concentrations of helium in the field.
Adding to this, we've got an experienced management team from a technical perspective as well as from the business perspective. And in the process of listing on the Australian Stock Exchange, we've also appointed to our board Dr David King, who should be relatively well known to the Australian investor community for successes such as Eastern Star Gas (ASX:ESG).
Jessica Amir: And before we talk about your project, can you tell us what helium is used for?
Stefano Marani: So predominantly, its main use goes into MRIs. You can't run CAT scans and MRIs without helium. In addition to that, you use it for the manufacture of fibre optic and for cell phones, TVs. Pretty much any high-end electronics, you're going to need helium if you want to manufacture them. In addition to that, there are also some other uses, so rocket launches, SpaceX can't put anything up into space without helium. Then, of course, there's party balloons, which is a small part of the market.
Jessica Amir: Now, can you tell us about the demand for helium?
Stefano Marani: It's one of those commodities which as much you can produce, the world would consume. So the issue is not so much the demand, the question is a supply issue, which is currently in severe shortage. The total global helium market at the moment is in excess of around $3 billion at current estimates. The price of helium as it stands right now is escalating quite rapidly.
Jessica Amir: Now, let's talk about your key Virginia gas project. Just tell us about its size and where it's located.
Stefano Marani: So it's around 250 kilometres away from Johannesburg, the main business hub in South Africa. The total area that we have is around 1,800 square kilometres, so it's quite a sizeable reserve. It's got proven reserves of roughly, let's call it proven recoverable gas of a quarter of a Tcf. But more importantly, where helium in other projects in the world is recoverable at 0.1 per cent concentration up to say a 0.5 per cent concentration, which would be amazing, our average is around 3.4 per cent, and the last well that we drilled comes in at 11 per cent, which is an unprecedented concentration of helium.
Jessica Amir: That's great. What's your business model?
Stefano Marani: Well head to tank on the gas side. So we extract the gas, we process it. The methane we convert into LNG, and that we sell as a substitute for diesel for trucks and buses. So it's also going green for the environment.
With regards to the helium, it's literally as simple as separating the helium, liquefying the helium, and then selling it to the users that need this vital commodity.
Jessica Amir: What about the economics?
Stefano Marani: So the economics, by virtue of the nature of our gas, which is unique in many respects. Firstly, our gas is generated from bacteria, which has never been discovered anywhere else in the world. So our fields regenerates, which is also very unique. The result of this means that our cost of production is exceptionally low. As a result of that, the economics in our project are quite healthy. We've got a current independent valuation which puts the NPV of the business, the net present value, somewhere in the region of around AUD$960 million, and we have a market cap at the moment of around AUD$80 million. So there's quite a bit of upside here.
Jessica Amir: And Stefano, can you tell me how the project is funded?
Stefano Marani: In November of last year, we concluded a rights issue on the JSE where we raised about AUD$13 million. In conjunction with that, we were then also the recipient of a loan from the United States government through its organization, the OPIC, which is the organization for private investment. That was a very big endorsement of the project, and really the genesis of that loan was the fact that we are an emerging helium producer in a time when helium is particularly scarce. From a shareholder perspective, I think people can gain a lot of comfort from the fact that you've got the United States government that did a lot of due diligence on this project prior to granting us that facility. So phase one is fully funded, and the proceeds of this IPO are really now all going towards exploration for phase two, which is the upside in the project.
Jessica Amir: Now, can you tell us about the IPO in Australia?
Stefano Marani: We're coming to the market raising around AUD$10 million. The purpose of the raise is for us to explore a new portion of the field where we discovered the helium at concentrations of around 11 per cent. We're going to be issuing at somewhere between 80 and 85 cents, which is equivalent to the price on the JSE. The book will open shortly after Easter with an anticipated listing, I'd guess probably somewhere around May.
Jessica Amir: Great, and where can investors find more information?
Stefano Marani: First and foremost, you can find it on our website, so www. Renergen.com.au, or www.Renergen.co.za or obviously through your broker.
Jessica Amir: Well, Stefano Marani, good luck with the IPO and thanks for the introduction.
Stefano Marani: Thank you very much.