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Geodynamics - The Hot Rock Hot Stock
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Australia's Geodynamics (GDYMF.PK) remains a geothermal stock with more potential than just about any other listed geothermal company in the world. A good news announcement early in 2009 about its closed-loop circulation test could make it even more compelling.
The company is a leader in hot fractured rock technology. It has drilled two wells, Habanero 1 and Habanero 3, at its site in central Australia, and has successfully developed an underground heat exchanger. In March it completed an open circulation test between the two wells.
All that remains for Stage One is the completion of a six-week closed-loop circulation test, followed by independent data validation. This has been held up by damage to some equipment. According to Geodynamics Managing Director Gerry Grove-White, in an interview with Green Technology Investor:
We are currently awaiting the delivery of the repaired re-injection pump from Schlumberger’s Singapore workshop (the pump supplier). We will then re-start the six-week circulation test. The test involves injecting organic tracers and measuring their return to the surface.
The results will be analyzed and fed into the reservoir model to confirm “Proof of Concept”. The results will be externally validated by Geothermex of the USA. The review of the results will take some six weeks after completion of the tests. It is expected to re-start the test before the end of November.
The next step will be small-scale regular power generation, primarily for the company's own needs, followed by the construction of a 50MW commercial power plant, which is planned for 2012.
In fact, the company recently released a statement of its estimated geothermal resources, suggesting it is eventually capable of providing something like 20 per cent of Australia’s entire power needs. In his interview with Green Technology Investor, Mr Grove-White said that within 10 years Geodynamics could be generating well in excess of 500MW of power. (For comparison, California's 43 operating geothermal power plants have an installed capacity of nearly 1,800MW.)
Geodynamics has no debt and A$140 million (US$98 million) in cash holdings. It also has support from two major partners, Australia's Origin Energy and India's Tata Power Company. Eventually, together with Tata, it expects to enter into geothermal ventures abroad.
Certainly, in the current market environment, smaller companies with no profits are hardly being keenly sought by investors. Geodynamics right now is no more than a speculative buy.
Even a successful Proof of Concept announcement may not be sufficient to stimulate the price. After all, in January it announced success in drilling the Habanero 3 well on the day of a major share market slump, and the shares fell.
Nevertheless, the potential for Geodynamics is enormous, and at some point the shares should move. This is a stock to watch.
Disclosure: no positions.
November 9th, 2008
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