strong companies comment, page-8

Ohmygod,

I have taken the liberty of editing your post, extracting the relevant content and including it in my response. The stock-specific version reads as follows:




"GRK's OD project at the front door of a power line is strategically excellent. The thermal gradiants are good.

My concern is that gdy shareholders will end up getting their skin blasted off by 230 degree steam at 5000 psi. If the government doesn't stump up and pay for the powerline then I can't see the economics of building a new one.

I firmly believe GRK will end up with a jv partner -it is just a matter of time. Yes OD will be developed - wait and see. yes the WA assets are up for grabs and I think you should not discount this at all. Yes the desal aspect in the Spencer Gulf will be a goer.

Oh by the way, you are wrong about the drilling



To address the first statement, proximity to market is a very real advantage that nobody here is denying (you made the comparison to GDY, so lets say the savings could potentially approach $1B). It is this very advantage that sees most listed GEO companies pursuing tenements that are adjacent to or intersected by transmission infrastructure.

Proximity is, however, a relative concept. That I am, right now, holding a warm cup of tea in close proximity to the national grid is an irrelevancy. Similarly, a thermal gradient of roughly 40C/km is not particularly attractive, despite the distance to market, and is one of the lowest gradients being actively pursued in the sector. I have included a link here to my calculations, which conclude that at these temperatures, GRK is likely to face up to $3.1B in well replacement costs every 50 years. This is not good.

The best thing that O.D has going for it, and one that you neglected to mention, is resource size. Unlike my tepid tea, O.D is likely part of a fairly homogeneous heat anomaly that could be measured in hundreds, even thousands of cubic kilometres.

It is the size of the resource that may be a saving grace for O.D (true for all lower-quality projects). The company could, however, place O.D on the backburner for the shallower potential of Spencer Gulf, and any further acquisitions in WA.

Unlike the deep, difficult to access resource at O.D, there will be projects that have much higher target depth temperatures and pressures (whether conventional, HFR or HDR). At these temperatures and pressures, the major limitation is the pump, and, specifically, the gaskets and valves. These items are relatively exotic, but they can be ordered. The easiest reference for me to give you is KSB Ajax, for which I have included the link. A mate of mine works with the company, and has guided me through the process of determining whether such temperatures and pressures can be dealt with viably (the answer was resoundingly yes). If you are concerned about these variables, contact the company with your enquiries and they can put your doubts to rest. For any items they do not stock, they can point you in the direction of the appropriate vendor.

Regarding the GDY transmission infrastructure you referred to, it will cost roughly $0.7B to $1B. At the 500MW stage (an intermediary milestone on the scale-up process towards thousands of MWs installed capacity), annual income will be in the region of $230M/annum (allowing for a wholesale price/MW of $65). Do you really doubt that, if proven viable, the project will be able to attract adequate private and public funding? Do you actually expect that no amount of debt funding will be made available? This resource will last for hundreds of years, with new wells constantly expanding the available heat for extraction.

Now, with the pursuit of a JV partner, I too am sure GRK will have success, but it would be the most rewarding (and likely) for shareholders if the JV covered either the Spencer project or additional acquisitions. Geothermal is by far one of the most attractive energy options for Australia (the most attractive in my opinion), and GRK have the chance to get an early start before we see a geothermal repeat of the recent crop of uranium hopefuls.

GRK can and should do better that O.D.