Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from geo-thermal energy producer, Geodynamics, for an update on how it is performing is CEO and Managing Director, Gerry Grove-white. Gerry welcome to FNN. Given you are still in the development phase, how are your funding requirements holding up given the credit crunch and shut down in equity markets?
Gerry Grove-White: Well we were very lucky last year in that we had a very successful series of capital raisings starting off with the Origin farm-in, where they farmed-in for 30% of our South Australian tenements, and that was worth in total $150 million of development costs for us. Additionally we had a very successful Share Purchase Plan, and then Sunsuper and Sentient came in as cornerstone investors, followed in September by Tata Power. So all in all last year we raised $300 million of funding. Now I’m not complacent in any way, but it does leave us very well positioned to continue the development program at the pace we’d set ourselves. And with regard to future capital raisings we have a bonus option issue out in the market as we speak.
Clive Tompkins: For those outside your industry, tapping into the earth’s core sounds like the stuff of science fiction, is the technology being commercialized anywhere else?
Gerry Grove-White: There are two other active projects in Europe at Soultz and Landau where they both develop very small generation capability, ours is by far the largest identified resource so far anywhere in the world and Professor Jeff Tester at the Massachusetts Institute of Technology classed it as the most prospective for successful base load generation anywhere in the world.
Clive Tompkins: You have achieved a dominant tenement position with respect to hot fractured rocks, where are those tenements and who will use the power?
Gerry Grove-White: Well we have tenements in NSW and QLD – but those are secondary in size and development compared to our South Australian tenements. And we have established a tenement position covering some 2000 square kilometers and we are very confident about the nature of that because of the very extensive drilling that Santos did for oil and gas, or has done over the years. And when they didn’t find oil and gas, what they did find was the granite and they also very kindly measured the temperature for us, so we have a very, very high degree of confidence about the temperature of the granites and a lot of offset drilling information to assist us in our exploration. By our estimation we think we could support anything up to five to ten thousand mega watts of base load generation fully developed on our tenements alone, which clearly is a substantial proportion of Australia’s base load electricity needs. In the short term we will probably look for co-located power consumers, and we have some quite innovative ideas as to who those might be, but within a few short years the future of the company’s production will all head to the national electricity market.
Clive Tompkins: So what affect will the emissions trading scheme have on geodynamics?
Gerry Grove-White: Clearly the enterprise is predicated upon a carbon…a price being set for carbon in the electricity market, absent that its business as normal and we wouldn’t be economic quite frankly, unless the price of oil goes up above one hundred dollars in which case we’re economic in our own right. So yeah carbon trading is important to us, we’ve taken a conservative view as to what that carbon price will be over the next ten years – we’re not being aggressive in that. Clearly Geodynamics offering to the power market is a hedge against the barrel of oil and the cost of carbon, and that’s what we offer. And we believe, and certainly our discussions with potential power purchasers, is what they’re looking for.
Clive Tompkins: Looking at your most recent financials to the 31st of December, operating loss came in at $5.9 million up from $4.9 million on the same period a year ago, where did the money go?
Gerry Grove-White: The money runs entirely on our exploration and the development of the necessary technologies and designs for the commercial demonstration plant. Additionally the board charged me on my appointment back in 2007, with developing capability within the company to execute, I guess if there’s a characteristic that people would say in the markets, it’s a great story Geodynamics but there are a few question marks about execution. Well I joined in August 2007 there were 12 people in the company and we now have 70 highly skilled professionals and our execution is improving accordingly. So that loss is inevitable at this stage of the company’s development, you know we don’t have an income stream as such, but its been I believe, wisely spent in building the capability to equip the company to deliver, and in particular the commercial demonstration plant.
Clive Tompkins: And were there any notable equipment losses as has occurred in the past, or was the loss consistent with budget?
Gerry Grove-White: We had a well controlled incident at Savina, I think that’s probably what you’re referring to recently in January, where we intersected a very freely flowing fracture quite close to the top of the granite, and this was classic good news, bad news story. The good news was we hit the water and the reservoir was confirmed 20 kilometers away from Habenero and that was tremendous news for us. But in trying to control it we ended up with a stuck drill pipe. And whilst we managed to recover about 400 metres of that drill pipe we had to abandon about one kilometer, total value about one million dollars, and some bottom hole equipment. We didn’t lose the well, we’ve cemented it and we will side track that well in the future to continue the reserves delineation program. But drilling these wells is challenging, we’re right at the limits of what oil and gas technology have done in the past, we’re dealing with very, very high pressures and very, very high temperatures which puts it right at the envelope, the limits of the envelope that the oil and gas industry operates. So we’re now moving into technologies that we are having to develop ourselves, supported by international funding and university funding and government funding worldwide.
Clive Tompkins: Gerry Grove-White thank you for giving your time.
Gerry Grove-White: Pleasure, thank you.
