Renergen is the company that found a very, very large deposit of natural gas near Virginia in the Free State many, many years ago.

This gas contains some of the highest concentrations of helium in the world, and is regarded as one of the most promising mining developments in South Africa in many years.

RYK VAN NIEKERK: Renergen announced it has started to produce its first commercial helium this month, which makes South Africa the eighth country in the world to produce this extremely valuable gas. The group started with commercial production of natural gas in December last year.

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Stefano Marani is on the line. He is the CEO of Renergen. Stefano, thank you so much for joining me. It’s been a long journey. I read a press release issued in 2015 when you said you aimed to start production of gas and helium in 2019, which is a few years ago. There were delays. But I would imagine this must be one of the most significant milestones for the company since its inception.

STEFANO MARANI: Listen, it’s been a long, long time coming, and in 2015 we didn’t realise just how big the field was. So all of the plans we had back then had to be completely rewritten after several discoveries.

So in earnest we started construction of the plant in 2019, with the intention of bringing it online back in ’21, beginning of ’22. Then obviously there was Covid, and a few other mishaps. But we are there, and we have proved all of the naysayers wrong, all those who said that we wouldn’t be able to produce liquid helium. There we are – the Free State now produces liquid helium.

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SA one of the top 10 countries producing helium

RYK VAN NIEKERK: And it’s the eighth country in the world to do so. That number actually surprised me.

STEFANO MARANI: It’s the second time in history that liquid helium has been produced in the southern hemisphere, which is just amazing. A plant in Darwin in Australia got the title first. And yes, in terms of the number of countries, there are more countries with nuclear warheads than there are countries that have the capability of producing liquid helium.

RYK VAN NIEKERK: So how much can you produce now?

STEFANO MARANI: When we ramp up the full-scale production towards the back end of this year, the nameplate capacity of the plant is going to have us producing at around 320kg a day. That doesn’t sound like a lot, but to put that into context, the whole of South Africa uses about 200kg a day. So it’s about 1.5 times South Africa’s consumption.

But then, if you look at it in the context of what the United States consumes, the US itself uses about 35 tons a day compared to our paltry 200kg. So it’s a scarce commodity.

Our first phase is a proof of concept. It was always designed to be a proof of concept. And then phase two is where we ramp up and we end up producing somewhere between 5% and 8% of the entire planet’s helium supply.

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Phase two

RYK VAN NIEKERK: That is the very ambitious phase two that you have referred to on many occasions. So when do you see phase two being completed, and running on all cylinders?

STEFANO MARANI: That’s always the subject of many caveats – in part the signing off of the debt and the raising of the capital. But all things being equal, based on the current projects we are anticipating that phase two will be in production in 2026.

RYK VAN NIEKERK: 2026? Not that far in the future. But how much have you invested in this project so far, and will the current production of the 200kg of helium per day, as well as the natural gas you are producing already, make the company operationally at least profitable?

STEFANO MARANI: Yes. So when phase one is up in full production, then absolutely; phase one will in and of itself be profitable. Bearing in mind that with ongoing phase two, phase one will be carrying some of the costs of phase two. It’ll be difficult to distinguish between the two on the income statement. But, suffice it to say that as a standalone project phase one is absolutely profitable. Yes, it’s a healthy little return.

Helium
Source: Highcharts.com

RYK VAN NIEKERK: How much have you invested in this project?

STEFANO MARANI: To date, between phase one and phase two combined, it is around R1 billion, and that includes a lot of the studies and some of the drilling work for phase two. In terms of the capex and the actual build on the equipment for phase one, it’s a little past R800 million rand.

RYK VAN NIEKERK: You have production rights over close to 190 000 hectares of land in the Free State, which is a massive area. What is your relationship with the farmers on that land?

STEFANO MARANI: I’m proud to say it’s an excellent relationship. We have WhatsApp groups, we’ve got a forum. We are very, very actively engaged with them. We speak about issues; not just our project, but also other issues relating to the area. And we see it as a very, very collaborative venture. We’ve to date never had any issues, any material issues that couldn’t be resolved over a cup of tea and a little bit of commercial negotiation. So I’m very, very pleased with the state of the relationship with [them].

RYK VAN NIEKERK: That was the Stefano Marani, the CEO of Renergen.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.

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