Renergen seals ‘landmark’ deal

Resource explorer Renergen, whose shares have more than doubled so far in 2021, has signed its first direct helium supply deal, allowing it to diversify its customer base from just wholesalers. The “landmark transaction” will cause a substantial volume of helium from phase two of Renergen’s Virginia Gas Project to be placed directly with the customer, the group said.

Resource explorer Renergen, whose shares have more than doubled so far in 2021, has signed its first direct helium supply deal, allowing it to diversify its customer base from just wholesalers.

Helium is important for the medical industry and is used for cooling in magnetic resonance imaging (MRI) machines. It is also needed for the manufacture of fibreoptic cables, cooling during the production of nuclear power and the propulsion of rockets into space. It is a key input for the defence industry, and for balloons.

The “landmark transaction” will cause a substantial volume of helium from phase two of Renergen’s Virginia Gas Project to be placed directly with the customer, the group said.

Upbeat reports on test drilling of wells have helped the group’s share surge 124.9% so far in 2021. On Monday Renergen’s shares rose 3.7% to R28. This put it on track for its best day since March 29, when the group rocketed 15%, and Renergen had reported “exceptional” helium concentration levels during test drilling.

Renergen said on Monday it is unable to disclose the customer or details of the sales agreement, but that the helium is destined for the automotive sector.

“What really excites the team about this sales agreement is that from 2024, if you purchase a German premium brand vehicle, the overwhelming probability is that Renergen’s helium will be powering the airbags keeping you safe,” said CEO Stefano Marani.

The contract shows the “viability of accessing helium directly from the refinery by customers and Renergen diversifying its customer base beyond wholesalers”, Marani said.

Renergen’s Free State gas field, which boasts SA’s only onshore petroleum production right, has extremely high helium concentrations.

Two weeks ago, the company’s shares surged more than 21% after it announced that helium concentrations from recently drilled test wells have exceeded expectations.

One well, P007, returned a concentration of 4.38%. The colourless, odourless, insipid and non-toxic gas becomes economically viable to extract from natural gas at concentrations as low as 0.1%.

P007 was a wildcat well that was not in the Virginia gas project’s proven or prospective reserve areas.