US media could learn from slow SA scepticism over Renergen

Despite liquefied natural gas (LNG) producer Renergen by the looks of it being years away from turning a profit, it featured in a glowing news story on the prestigious CNN website in January.

CEO Stefano Marani excels at telling the Renergen story with a contagious passion and self-belief. He is a nice guy, and could offer master classes in marketing. The CNN article had a click-worthy, attentiongrabbing title: “The company bought gas rights to this land for $1. Helium means it could be worth billions.”

The rags-to-riches story of how Marani and CFO Nick Mitchell paid next to nothing for the exploration rights to the land and then found “abnormally high concentrations” of helium is always going to attract an audience.

But while Marani fundraises for the firm in the US, its media should learn from SA’s mistakes. Local journalists, paid analysts and tweeters gave the small-cap breathless coverage and many mom-and-pop investors piled into the stock that reached a record close of R43.65 in March 2022.

That same year, Renergen issued a JSE news service announcement guaranteeing ongoing media coverage and social media hype.

The share, which closed at R12.68 on Wednesday, is up from a low in the past year of R9. The big fall from about R40, however, is not only due to a lack of transparency as suggested by CNN.

The market is cautious, and journalists should be too. Mining and gas development is high risk, with returns sometimes only coming decades after resource discoveries.

The CNN story and many SA articles spoke of the importance of helium and its rarity, pointing out the potential of the gas found in extremely high concentrations at Renergen’s Virginia site. What the stories often failed to note is that helium in the ground needs to be pumped out, and transported to its destination, and much can be lost along the way.

In 2021, Business Day reported how Renergen would be producing 350kg a day of helium that year. Then Business Day reported on how it expected to produce this amount from 2023, but this hasn’t yet happened.

Renergen told CNN they hope the helium will flow in February, after leaks and setbacks. Here is hoping it does. SA needs more successful businesses.

It took a while before the SA media started asking questions about Renergen and became more circumspect about a company that is likely to be years away from making serious money.

Contrast Renergen with Impact Oil and Gas, a Londonbased exploration company, half-owned by SA’s Hosken Consolidated Investments (HCI), that last week sold half its stake in offshore oilfields in Namibia to TotalEnergies. The French behemoth will finance the development of the deepsea fields. Impact and HCI don’t have hundreds of billions for the development.

Hopefully, Renergen can raise the cash it needs. As CNN notes, it has a promised loan of $500m from the US International Development Finance Corporation and $250m from Standard Bank. But what is not said, is that these loans are given on condition that Renergen raises $200m.

Renergen missed its own deadline to list on the Nasdaq in 2023 to raise some of this capital. It held a shareholder approval vote in April, but in terms of Australian listing rules, the approval expired after three months.

It missed other deadlines too, as happens in oil development and mining. What happened to the Central Energy Fund’s promised R1bn investment in Renergen’s subsidiary Tetra?

In its 2023 annual report, auditors issued a “material uncertainty” about whether Renergen would continue to be a going concern if it failed to raise sufficient funding to develop the resource.

Let’s hope the CEO raises the money he needs in the US.

SA is watching, with the market eager to see consistent resource and cash flows, rather than media hype.