JUNIOR helium and natural gas miner Renergen saw its share price surge 5.6 percent yesterday after it announced an agreement with Ivanhoe Mines that may provide up to $250 million (R3.77 billion) in funding for the Virginia Gas Project.
At R39.78, Renergen’s share price yesterday had rebounded strongly by more than 156 percent from its 52-week low. The company aims to become the world’s biggest helium producer, with plans to go into commercial production this year.
Helium is used for space exploration, scientific applications, in medical MRI machines, fibre optics, electronics, telecommunications, superconductivity, underwater breathing, welding, nuclear power stations and for lifting balloons.
Renergen said yesterday Ivanhoe Mines’ taking up of an initial 4.35 percent shareholding was a precursor to Ivanhoe possibly increasing its stake to up to 55 percent.
Ivanhoe gained the 4.35 percent stake after Renergen did a share placement of 5.63 million shares at R35.65 each, equal to a 5 percent discount to a 30-day average price, raising R200.6m in the process.
A second subscription to take the shareholding to 25 percent, would depend on a due diligence. An option to take the stake to 55 percent and provide funding of up to $250m to scale up Renergen’s Virginia Gas Project, could follow a “commissioning and commencement of Phase 1 commercial production,” a statement said yesterday.
“This major transaction is a landmark deal for Renergen and one that recognizes strong synergies with our new partners, Ivanhoe,” Renergen’s chief executive Stefano Marani said in a statement.
Ivanhoe’s option to increase its stake to 55 percent would also be at a market related price (10 percent discount to 30-day average share price).
The investment comes at a time when global LNG and helium markets are in shortfall, Marani said.
The investment also paved the way for Renergen to access capital towards its Phase 2 development, it diversified Renergen’s investor base into North America, while the potential dilution to existing shareholders was minimised as further investments from Ivanhoe were linked to prevailing share prices.
Ivanhoe is a Canadian-listed, African-focused natural resources development company, led by its founder, executive co-chairman Robert Friedland.
“Renergen’s Virginia Gas Project has the potential to provide clean, reliable electricity to augment our own solar-generated power for a 24-hour-a-day alternative to the coal-fired national electrical grid,” said Friedland.
BUSINESS REPORT ONLINE