Drilling in the Free State. Photo: Renergen.
  • Renergen, the JSE-listed company mining gas in the Free State, is committing at least R370 million worth of helium to a token scheme.
  • The tokens, not unlike bitcoin will represent units of helium, which can then be easily traded – or redeemed for actual helium.
  • The plan allows Renergen to sell forward production, to fund its cash-hungry expansion.
  • With helium scarce and thinly traded, it will also establish a spot market for price discovery, Renergen says.
  • For more stories go to www.BusinessInsider.co.za.

A new scheme plans to turn helium from the Free State into tradable tokens – not unlike bitcoin – which can then be traded, securitised, or swapped just like any other cryptocurrency, before being redeemed for actual helium at a factory gate.

JSE-listed Renergen unveiled the plan on Monday, alongside Delaware-domiciled partner Argonon Helium, with a commitment to put some R370 million of the rare gas into play to begin with.

Argonon was set up specifically for the purpose, and is now taking registrations for what it refers to as its efforts at "[d]emocratizing access to natural resources".

Renergen will sell the helium rights to Argonon at fixed prices per standard unit of helium, where a unit weighs 4.7kg, to make for 37.5 litres of helium in its liquid form. For everything the Delaware company buys before 29 October, it will pay $230 for a unit, and for everything it buys before the end of November it will pay $245 million. For the rest of 100,000 units, the price goes up to $270 per unit, currently the equivalent of not much under R4,000.

Trade in that helium, a very small fraction of the global demand for a gas critical to many high-tech applications, is intended to set a price governed by supply and demand in transparent fashion for the first time. Further sales from Renergen to Argonon will then be priced according to that spot market level for the next 20 years, which is how long Renergen's licence for its Virginia gas project still extends.

"Unlike other more transparent commodities, helium is not presently traded in the spot market and a visible price per mcf is not available," the companies said in a statement. "The collaboration between Renergen and Argonon is specifically designed to bring transparency of pricing into the helium market and highlight the growing global importance of helium."

The mechanics of creating blockchained tokens and making those easy to trade are to be handled by South African finance company Purple Group.

The scheme will allow Renergen to cash in on what it estimates are massive reserves of highly-concentrated helium – and use the money from the pre-sales to fund the plant needed to extract more helium.

The global helium market is believed to require some six million units of helium per year, worth around R24 billion at the pricing the scheme sets. 

Right now supply is particularly constrained, though that may change – in the short term – Renergen told its shareholders on Monday.

"The market is likely to experience some easing in short term with Qatar and Russia bringing additional capacity online, however, given the increasing focus on decreasing fossil fuel production, lower concentration helium fields are likely to come under pressure since more associated methane is produced to extract the same volume of helium, placing additional constraint on future helium supplies."

Renergen previously secured a R600 million loan from a US government agency keen to get greater helium supply online. It has reported some "spectacular finds" in exploration of gas fields in the Free State, with relatively high concentrations of helium.

The company has offered its even more plentiful natural gas from similar wells as a cheaper alternative to diesel, for the use of trucks along specific routes.

See also | From next year trucks on the N3 could save 25% on fuel thanks to LNG – but motorists can’t have any

(Compiled by Phillip de Wet)

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