Cilandia Capital activist investment manager Albie Cilliers said Renergen would eventually go bankrupt or need regular equity raises, and it is a share for gamblers and speculators, not serious investors.
Cilliers has previously accused Renergen of running a comprehensive public relations campaign, which created a misleading perception about its helium production.
Concerns were raised following Renergen’s interim results, which showed it only generated R23.76 million in revenue with a net loss of R43.5 million.
What stood out was that all the revenue came from selling liquefied natural gas (LNG) to two customers. Renergen CEO Stefano Marani confirmed that they had not sold any helium during the reporting period.
He said they have only started with the commercial production of LNG, claiming it was the only thing they have told the market.
However, this claim is questionable. On 8 March 2023, Renergen said the first phase of the Virginia Gas Project had produced both liquid helium (LHe) and LNG.
“Phase 1 of the Virginia Gas Project has commenced commercial LNG and liquid helium operations,” it told stakeholders.
Marani explained that they had started to produce helium but that a leak in the helium cold box halted production.
“The leak in the helium cold box necessitated its removal for repair with a corresponding return and reintegration back into the plant,” he said.
“This requires downtime, so we decided to bring forward the annual maintenance to coincide with this reintegration.”
Marani explained that while the plant is capable of producing helium, they have, to date, not sold any helium.
The share price plummeted on the news, which is unsurprising considering Renergen’s previous guidance regarding helium production.
Since its JSE AltX listing on 9 June 2015, Renergen consistently promised investors strong revenue from LHe production.
In May 2016, Renergen announced signing a major helium deal with Afrox. It said this deal would enable Afrox to source and supply helium locally by 2018/19.
After the 2019 deadline was missed, Renergen provided new guidance regarding commercial LHe production.
In August 2019, Renergen said it would produce 350 kg of LHe daily by 2021. Again, this did not materialise.
In an update published in October 2023, Renergen promised to start producing helium by the end of 2023.
“Commissioning is on track to commence production of LHe before the end of this calendar year,” Renergen said.
Despite these promises, Cilliers believes Renergen will eventually go bankrupt or need regular equity raises, as the company’s cost of production and the amount of gas it produces per well is too little to justify economic returns on shareholder capital.
However, he told Daily Investor that this might take years, “especially if they continue to convince investors to give them money and get loan funding”.
He pointed to the example of Steinhoff, which took six years to get close to zero before it was delisted in 2023.
During that time, the company’s stock price had multiple runs higher and lower.
“It even went from 73 cents to above R5 at one stage, more than 7x higher, even though most professional investors knew they were bankrupt since the end of 2017,” he said.
Cilliers said he has no position in Renergen but at the opportune time, he might take either a long or short speculative position in the company.
“Renergen is a share for gamblers and speculators, not serious investors, in my opinion,” he said.
Daily Investor reached out to Renergen for comment but did not receive a response by the time of publication.