anyone topping up today?, page-26

From a long term GDY watcher but not in the stock yet....

I am rather concerned that GDY are in a bit of trouble now. Several years ago the economics was such that a single fracture level was contemplated to make the power generation process viable, and when discovered multiple fracture levels were something of a *bonus*.

e.g. the following from the 1995 annual report (words: "further enhancing the potential of the project"):

"Chemical injection in August, 2005 into Habanero #2
to improve the connectivity before the commencement
of the short circulation test (the last step of the
diagnostic phase) eventually led to essentially blocking
off the connection. It indirectly led to the discovery of
additional fracture zones higher up in the well, further
enhancing the potential of the project. The blocked
Bottom Zone fractures presented an opportunity to
hydraulically stimulate the Top Zone fractures.
This resulted in the development of a second reservoir
(September, 2005), demonstrating that geological
conditions are favourable for multiple reservoir
developments, a key to large scale commercialisation
of the Cooper Basin HFR geothermal resource."

Now it seems that additional fracture zones are *necessary* for the viability of the project....

GDY's 'proof of concept' announcement (31 March 2009 to ASX) said:

"Modelling of wells theoretically located at the extremities of the Habanero stimulated zone showed that the wells would be capable of extracting more than 40 megawatts thermal for over 20 years with only a 5°C temperature
draw-down for circulation rates higher than 70 kg per second. Circulation rates during closed loop testing between Habanero 1 and 3 reached a maximum of 15.5 kg per
second from a single stimulated zone. Production rates of 25 kg per second have been achieved from Habanero 3. Although these flow rates have not approached 70 kg per second at this time, the results are an indication of the heat capacity of the reservoir." and...

"These achievements do not necessarily imply economic viability at this time. Commercial demonstration will, among other things, focus on improving drilling
performance and well costs and demonstrate the ability to stimulate and circulate through multiple zones in the granite to enhance well productivity and injectivity to
required levels and to increase the recoverable resource base."

The important statement that has me most worried is from Geothermex's report on the proof of concept under the heading "Achievement of Adequate Well Productivity and Injectivity" which said:

"Production testing of wells Habanero 2 and Habanero 3 confirmed flow rates of 18 to 27 l/s from the single stimulated layer. If multiple stimulated layers are created the production rate would be several times this amount. Well Habanero 1, even though it showed evidence of significant mud damage, has accepted injection rates of 18.5 l/s, which is modest but acceptable. But more relevant is the good productivity encountered at well Habanero 3, indicating that comparable injectivity should be achievable provided mud damage is avoided. Therefore assuming the development of multiple stimulated layers, adequate well productivity and injectivity have been demonstrated."

Now, that last sentence has me VERY worried. Given that GDY's well has blown it's top with only one fracture zone working, and given that there is no proven ability YET to harvest more than one fracture zone at much higher well pressures, and given that it may be that viability *depends* on multiple fractures, there are some issues!!!

Not least we can't know whether this thing stacks up unless GDY can now demonstrate the ability to manage multiple fracture zones within the the one set of wells- something that has not been done. There may be enough heat flow for a 1kW plant for Innaminka but is there enough for commercial operation????.

Any others have views? Sorry to be a (hot) wet blanket.

Phillip