Tuesday, May 22, 2012
Geothermal Down Under
My in-box recently included an interesting note about a small Australian company raising funds to support geothermal exploration and development. Based in Brisbane, Panax Geothermal, Inc. (PAX: ASX) has projects in Australia, Indonesia and India.
Although Australia has a significant geothermal development within the Limestone Coast area in southern Australia, Panax appears to have had more success in Indonesia. Panax recently reported that the development study has been completed for the Sokoria Project in Indonesia. A pre-feasibility study has been started for the Ngebel Project and a Power Purchase Agreement with the local utility is being drafted. A power transmission study has been commenced for the Dairi Prima Project and there has been progress toward a power purchase agreement there as well.
The same cannot be said for Panax’s projects in Australia. Drilling and production testing has been completed on Panax’s Penola project in Australia’s Limestone Coast, but the company announced it is not devoting anymore resources toward Penola until the Australia government provides more support for geothermal. A recent plus for Panax in Australia is a new R&D collaboration with the University of Melbourne at Panax’s Salamander-1 well in southern Australia. The University of Melbourne will conduct research on aimed at providing insight into the complications found during previous well-testing. Panax hopes the data will lead to remediation options for the well.
By contrast Indonesia policy makers have fallen in love with geothermal. The Indonesian government has made plans to more than double geothermal capacity over the next few years. The feed-in tariff has been set at a favorable level of US$97 per megawatt hour. The government is also prepared to guarantee power purchasers. Panax and its partners are clearly benefiting from Indonesia’s policies.
The reality of Panax’s balance sheet might also play a part in setting the company’s priorities. Panax reported AUS$900,000 in cash on its balance sheet at the end of March 2012. Panax noted in its March 2012 Quarter report at it was expecting in April 2012 a payment of $454,291 from the Australia government for a research and development rebate. No further word on whether that payment is still in the mail, but if received it would have boosted cash in the bank to AUS$1.4 million. We estimate the company is spending about AUS$200,000 per month so that would give Panax about seven months operating budget.
We have added Panax to the Geothermal Group in our Electric Earth Index.
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. PAX is included in Crystal Equity Research’s Electric Earth Index in the Geothermal Group.