Investors dumping Renergen shares

Renergen’s share price has dropped over 30% since the start of the year as the company has struggled to deliver on its promises to profitably produce liquid helium (LHe) and liquid natural gas (LNG).

Renergen’s share price peaked at just over R40 per share in 2022. However, it has plummeted by nearly 80% since it reached this high.

At the start of January 2024, Renergen traded around R15 per share. On 13 February 2024, it is trading at just over R10 per share.

In October last year, Renergen released its results for its interim financial period that ended 31 August 2023.

Renergen reported a revenue figure of R23.76 million and a net loss of R43.5 million – a significant deterioration from the previous period’s net loss of R24.5 million.

While revenue increased from the previous period, it is miles away from the expectations that Renergen created with investors in the past.

Investors have been eagerly waiting for Renergen to produce and supply the LHe they have been so vocal about.

In May 2016, Renergen announced that it signed a major helium deal with Afrox. It said this deal would enable Afrox to source and supply helium locally by 2018/19.

Renergen also stated in August 2019 that it would be producing 350 kg of liquid helium (LHe) per day by 2021.

However, this did not happen. Investors had to wait years longer than the promised deadline before Renergen claimed to have finally produced its first LHe.

In January 2023, Renergen announced that it had produced its first LHe and claimed that its helium module was in production and being optimised.

Investors reacted positively to the long-promised news of helium production, with the share price jumping more than 8% in two days.

This was primarily due to the expected increase in revenue, as Renergen told investors it had many helium sale agreements lined up.

This included deals with Afrox in 2016, automaker iSi Automotive in 2021, forward sale agreements, and other agreements covering 65% of its phase 2 helium production.

Since Renergen began producing helium at the start of 2023, investors were expecting a strong boost in revenue due to the added helium sales.

However – to many investors’ surprise – Renergen’s interim results revealed it did not record any revenue from selling helium.

Following the release of the results, CEO Stefano Marani said the company has not produced any helium for sale yet and has only produced helium for their tanks.

Marani said the reason for not selling any helium was that there had been a gas leakage at the helium cold box.

However, the first mention of the gas leakage was only made in July 2023, giving Renergen six months to produce and sell their helium since the production announcement.

Based on Renergen’s information, investors expected around 350 kg of helium to be produced per day.

And with the many sale agreements lined up, Renergen surely would not have struggled to sell its helium.

Marani said the gas leakage had been fixed, and the helium plant would be online before the end of 2023.

However, he warned shareholders that the company would not be profitable by the end of the 2023 financial year.

Based on the latest performance guidance shared by Renergen, the company will only be producing the promised 350 kg of helium per day by the end of the 2024 financial year – three years later than promised.

However, there is currently no proof that the company will meet its promise to investors.

Renergen’s failure to fulfil its promises has caused its share price to tumble as investors lost trust in the company. It includes small retail investors and larger shareholders.

For example, Canadian miner Ivanhoe has been selling its shares in Renergen following a deal with the company that did not materialise.

According to Renergen’s share register, Ivanhoe held just over 5.6 million of the company’s shares in November 2023.  In late January, Ivanhoe had sold 1.06 million shares, equal to about 20% of its initial stake.

Daily Investor reached out to Renergen for comment but the company did not respond by the time of publication.