Separating fact from fiction

1 July 2024

Since Renergen became one of the more spoken about and speculated over small caps in social media, we lost our voice. In that time, many accusations were, and continue to be, thrown at the Company and some of its directors. Admittedly we are late on reaching steady-state helium production in Phase 1, but this remains a key focus and priority of the Company.

In social media today, however, accuracy hardly matters. I am reminded of this in a great publication by Professor Dan Ariely called Misbelief, which explains the process of rational people believing irrational things. This “funnel of misbelief” trend is on the rise globally and isn’t likely to abate.

So why does any of this matter? Misbeliefs in social media are often amplified by sponsored and co-authored news publications, making people less likely to change their opinions or minds and hindering the meaningful exchange of ideas. Where financial analysts are forced to disclose compensation, the media is not. This makes it harder to distinguish fact from fiction, thus entrenching the funnel of misbelief.

So, where have we stumbled? It primarily stems from the delay in the turn-on of the helium system in Phase 1. We are late, we know it. Does the tardiness imply:

1. That Phase 2 project’s financial characteristics have changed? No. The fundamentals remain intact and unchanged. In certain instances, commodity prices are higher to the project’s benefit.
2. That methane or helium is not in the gas, or is it not in recoverable concentrations? No. The Reservoir valuations are calculated by independent professionals using standard international principles which have validated all modern oil and gas Reserves.
3. That there is not enough gas for Phase 2, and potentially beyond? No. Based on internationally defined scientific principles, the 1P (“Proven”) category exceeds Phase 2’s requirements alone, and the 1P is a third of the Defined Reserve Area, which is only 14% of the production right.
4. That the Virginia Gas Project is no longer transformational? No. Bringing a new source of energy to an energy insecure country, along with a new diversified source of helium is a game changer, and this hasn’t changed.
5. That Phase 1’s helium will not turn on? No. We have independent verification that the helium liquefier does what it needs to; in the grand scheme of things a few weeks to stabilise the system for robust production doesn’t imply that we don’t have helium, or that the plant doesn’t work.
   
   

So why write this now? New beginnings. The country has a new government, and markets are responding well in the hope that the GNU can encourage a unified growth mindset. The country has a world-class project in the Free State and something that will be a significant catalyst to the local economy and pave the way for international investment into South Africa’s alternative energy sector. South Africans are a resilient people; too often, we berate ourselves or what we have. The easiest way to see proof of this is that stocks in the US trade at a PE multiple of around 25 times; in South Africa, the figure is almost a third of that, which makes the US a perfect hunting ground for the capital in Phase 2. Their deep understanding of helium and natural gas ascribes more accurate values to assets.

Do I expect this article will silence the “funnel of disbelief” against the Company and its directors? Of course not. It might make it louder. Is it likely that certain media houses will stop publishing mistruths? Of course not. But are we going to stop on our stated mission to bring Phase 2 into operation? Absolutely not. We will do everything in our power to ensure the Virginia Gas Project becomes a world-class helium and premium domestic LNG supplier and commit to having productive dialogues and engagements with all our stakeholders throughout our journey, and we appreciate the support and patience we’ve received as we complete the development of this transformational asset to the country’s benefit.