geothermal industry, page-33

Cheers Gurubob. Are you a holder?

The industry is just coming up to the most interesting stretch now. The Lightning Rig should remove much of the well development risk, but the major issues still to be addressed will be:

1)Establishing a resevoir with a large volume (preferably with very large surface area)

2)Establishing and maintaining high flow rates and fluid temperatures

3)Concluding that the underground exchanger is a closed circuit, and does not lose fluid to the surrounding environment

4)Development of demonstration plant, then HotRock40, then connecting to the grid and scaling up the MWs.

These issues are the major barriers to institutional investment at the moment. The first three relate to the fundamental geology of the granite bodies, and are outside management's control. The development of the Kalina Demonstration plant will be comparatively lower-risk, as this technical challenge is under the control the experienced contactors who will develop the site. The total cost for the required transmission infrastructure (including total capital cost and transmission losses) is $8/MWh, which is more than offset by the extremely high granite temperatures, and the 30% gain in effeciency the Kalina Cycle provides.


The upside more than justifies the risk, in GDYs case.

A resevoir has already been established, and needs only to be intersected by HAB3. The resevoir is by far the biggest in the world, at 11 000 000 cubic metres. This major risk for geothermal operations is in fact much smaller for GDY, as we know the massive volume is there.

Flow rates from the previous well were huge, at up to 20kg/second, and had to be restricted, or else the fluid would have erupted kilometres into the air. This was the hottest geothermal fluid ever produced in Australia, and will be absolutely instrumental in determining GDY's status as market leader. The risk inherent to all other geothermal operations is very much reduced for GDY.

Unfortunately, we are yet to see how the dissolved minerals will react to the drop in pressure and temperature as the fluid rises to the surface. Scale may be an issue to address in the future.

A space to watch with interest will be the water consumption of these operations. GDY's granites are already saturated, and under pressure, so any water removed creates a region of lower pressure, which will immediately seek equilibrium by drawing water from the surroundings. Due to the unique geology GDY has access to, the Habanero resevoir may be an entirely closed circuit, requiring no additional water.

I hold other GEO stocks, but view them as vastly more speculative, because they are. None of them even have a rig capable of drilling the wells. There is no way to price the risk out of them until they complete a successful well, and suitable rigs are very hard to aquire.

It is the reduction of risk, and increased potential for success that makes GDY the standout geothermal share. The market cannot sustain such speculative days, and in the future, results will be needed to continue SP increases.

These risks are the reason we are currently getting such amazing leverage on a company that can offer what GDY does. Real, sustainable gains will be made if and when these risks are removed.

Essentially, not only does GDY has a vastly lower risk profile than other geothermal stocks, but it is by far the closest to demonstrating the technology at their world-class Cooper Basin tenement.