Described by its CEO as a "10-year overnight success story", helium exploration group Renergen has snagged a major backer — Canada’s Ivanhoe mines, which will take an initial 4.35% of the company for R200m with an option to buy a 55% share down the line. The FM spoke to CEO Stefano Marani.
How did Ivanhoe’s involvement come about?
SM: We are both companies that play in the critical minerals space and [CEO] Robert Friedland came across the story and asked to be introduced, so we met with them, had a coffee and from there things escalated pretty quickly when we saw the synergies between the two companies.
Synergies: are you referring to their Platreef mine in SA?
SM: No — way more than that. He’s invested in various businesses across the globe … from clean energy to alternative mining and exploration technologies. Ivanhoe’s entire portfolio is strategic and critical minerals for the new economy. Now more than ever, helium is probably one of the most critical commodities that we have on the planet and people just don’t realise. You think we’ve got helium problems now? Wait, it’s coming.
If Ivanhoe takes its stake to 55% would you keep your public status?
SM: Yes. There’s no point in delisting. We’ve walked the road, we’ve felt as much pain as we have to get to this point, so to give that all up now and take it private would be an absolute shame.
It’s clearly fantastic for Renergen but it’s obviously not enough capital to take you to full production. For that you need about R12bn …
SM: Getting there is a function of debt and equity so we’ve got multiple lines in the water. It’s no secret that the US government funded the first project, and we’d be remiss in not exploring a debt package from the US government for the second phase, especially in light of what’s going on now, geopolitically, and in light of what’s happened to helium production globally.
What has happened?
SM: You cannot make this up. We’d entered helium crisis 3.0, as the industry refers to it, in 2019. And that was by virtue of the fact that the BLM [Bureau of Land Management in Amarillo, Texas] had seriously ramped down production. They hosted their last auction in 2018 because there was less helium than anticipated in the reserve and it dropped to about 15% of world production. Approximately seven weeks ago, both of the compressors at the BLM failed. So for all intents and purposes, the BLM is now gone, probably for more than a year.
Then, the semiconductor index on Nasdaq crashed 10% because the semiconductor markets weren’t getting their allocations of helium. The world car shortage is actually the result of a lack of helium. Then the Russian Amur plant, which was meant to come online in September last year, suffered a catastrophic failure. That was meant to be about 25% of global supply online this year, and that’s disappeared.
And the third in the trifecta was Qatar. Qatar produces about 20% of the world’s liquid helium and they were meant to turn on another plant in March this year, but the plant isn’t going to be turned on until after calendar year 2025.
It would be unbelievable luck if you were at full capacity, but you’re not…
SM: That may be true. However, if you think about all of the world’s new helium projects that are coming online, we’re the most advanced. So our phase 2 is probably shortest to market.
How much could you actually supply?
SM: The entire planet consumes about 80t a day. What we planned for our phase 2 project was about 5t a day. The 5t represent about 40% of our phase 2 proven reserves and our proven reserves are only 14% of our field. That puts the size of what the Virginia gas project is into perspective.
Will Ivanhoe’s entry usher in more institutional interest in Renergen? And do you want that?
SM: I think it would be fair to say that Renergen has never had an SA following, with the exception of two or three loyal fund managers. We’ve never ever purported to look for capital in SA and we’re not going to start that now. We’re not interested in SA fund managers.
Because they’re not interested in you?
SM: SA does not have a very good history of fund managers capable of understanding junior mining investments — and that’s why we have a sunset mining industry despite the fact that we probably have some of the richest mineral wealth on the planet. So instead of bumping our heads here, we’d rather just look to the economies that understand the minerals. Aside from liquid natural gas, the helium is all going to go internationally anyway. I get the sense that unless it’s fast-moving consumer goods or property, they don’t really understand how to value it.