The alternative energy company has blasted onto the global stage just as helium and lower-carbon fuels such as LNG are the talk of the town.

Alternative energy stock Renergen is a familiar name to IM readers. The first quarter has been an active one for the company.

Selected as a wild card stock at R13 at the start of 2021, Renergen ended the year 161% higher. Again selected as a stock to buy in 2022 at R32.50, the stock is 28% higher year to date and in late March hit a record high of R43.90. At the time of writing it is R41.55.

The catalysts for this meteoric rise were the key points IM identified in early 2021. They have come to pass. First, the development site showed promise and potential. Wells drilled displayed strong gaseous flows with a high concentration of helium gas. Some wells emitted 11%, though the site should average 3%-4%, significantly higher than major global competitors.

An independent review in November 2021 by global energy consultancy Sproule caused significant market excitement as findings confirmed Renergen’s gas deposit as being of world-class significance. The stock was off to the races.

Renergen rapidly went from a speculative exploration stock to one that could enter commercial viability and operation. The company’s first project on the 187,000ha Free State site is Virginia Phase 1 (VP1). That liquefied natural gas (LNG) and helium production site has cost R1bn and is undergoing testing, or in industry parlance, “hot commissioning”.

VP1 will be inaugurated and the taps turned on in the coming weeks; production is estimated at 40t-50t a day of LNG and up to 350kg of helium. Some offtake contracts have been signed, most notably for LNG, with Consol Glass and Ceramic Industries.

With the project resource and reserve confirmed and VP1 completed on time and budget, this drew interest in Renergen’s overall potential. VP2 is 10-12 times larger than VP1 with an estimated capex of $800m-$900m. The project will increase production of LNG and helium up to 800t and 5t a day respectively on commissioning in late 2024 into 2025.

On helium, that quotient in today’s terms equates to 5% of world supply. Material helium supply contracts have been signed with international corporates. In mid-March, a global financier of standing in commodities and energy, Robert Friedland — co-chair of Ivanhoe Mines, a $12bn company — bought a 4.35% equity stake in Renergen for R200m, with Ivanhoe potentially investing up to $250m in Renergen.

In late March the SA Central Energy Fund took a 10% stake in a Renergen’s Tetra4 LNG division, investing R1bn. That imputed a value for Renergen of double the present market cap and left zero value for the highly valuable helium production and reserves. These events, alongside recent news on new wells drilled indicating further and improved gaseous flow, have propelled Renergen’s share price.

With about 40% of the funding for VP2 seemingly secured, the market’s eyes will be on the funding balance. IM speculates that with security now in place for the project, not just from a geological, production and initial equity funding stance, international funding agencies must be lining up to participate.

CEO Stefano Marani is overseas at the time of writing. IM suggests that with two major equity funders on board, it may not be too long until the funding balance is secured via another entity participation or, more likely, judicious debt funding. After a busy March, perhaps the coming autumn could also be newsworthy for Renergen?

With global black swan events playing into Renergen’s hands, especially in helium, the counter is well placed to now grab an international stage. The gas that is critical for everything from supercomputing, space travel and MRIs to medical and scientific research was facing a supply shortage even before Russia invaded Ukraine. There is now a global supply squeeze and helium prices could go sky-high.

An explosion at the giant Russian Amur helium project has crippled a new supplier. Qatar has delayed its helium production expansion until 2025 and in the US, the largest helium market, the Bureau of Land Management (BLM) helium storage facility in Texas has shut down supply due to technical problems.

Renergen is in a sweet spot. It has blasted onto the global stage just as helium and lower-carbon fuels such as LNG are the talk of the town. There is certainly an expectation of ongoing positive news flow to maintain momentum and keep Renergen in the investor spotlight.

IM would be cavalier to suggest that the 28% run the stock has enjoyed will continue unabated. However, in the March edition of IM we issued a target of R60. That holds firm.

For long-term holders, IM maintains its buy.