Hunt is on to harness WA's hot rocks

West Australian
Monday 18/8/2008 Page: 39

The State election campaign has already produced its fair share of hot air but also possibly delayed news of which explorers have picked up hot rocks licences in WA. The Government's maiden geothermal acreage program has received 64 bids from nine parties for 38 of the 320sqkm blocks up for grabs. Winning bidders were to have been announced this month but, with August more than half gone, it remains unclear what is holding up the notifications.

The Government's focus on geothermal to complement traditional energy sources of coal and gas does not seem to have waned, given the Department of Industry and Resources only three weeks ago called for expressions of interest for stage two of the State-wide acreage release. The second round centred on the Pilbara and Gascoyne, following the maiden release which focused on acreage from Kalbarri to Dunsborough and 250km inland.

Geothermal energy, otherwise known as hot rocks, is an unknown in this State's resources sector. But the need to find alternative sources of energy supply, coupled with the prospect of heavy carbon taxes on hydrocarbon projects, is likely to catapult the search for hot rocks into as much prominence as it has received in South Australia.

There is also the matter of there only being a 2.5 per cent well head royalty demanded by the WA Government, compared to 10-12.5 per cent for hydrocarbons. It is a guessing game as to which junior applied for WA licences. Interestingly, one of the more active SA hot rocks hunters is the West Perth-based Torrens Energy, whose board includes former Western Power boss David Eiszele.

Torrens last month signed an alliance with AGL Energy, under which they plan to pursue geothermal baseload opportunities in SA close to the national electricity market. AGL also took a 9.9 per cent stake in Torrens priced at 40¢ a share. Torrens shares closed at 34¢ on Friday.

The hot rocks hunt focuses on geothermal prospects generating heat of at least 200C about 5km beneath the surface. Once found, water is injected into the hot rocks region where it is heated before being recovered through another well and used Electricity Production to drive an electricity turbine hooked up to the local grid. The used water is then reinjected into the closed-loop system.

It is simple in theory but likely to be complex in practice. But the high level of interest in WA acreage, in particular around the Dongara, Eneabba, Kwinana and Pinjarra areas, augurs well for WA's latest energy sub-sector. United Minerals Corp has boosted its senior management ranks as it works on plans to best commercialise its Pilbara iron ore assets.

The junior has poached Sten Soderstrom from the Sinosteel-Midwest Corp Weld Range joint venture and appointed him development manager for UMC's iron ore projects, notably Railway Prospect which has an inferred resource of 84.5 million tonnes grading 60.15 per cent.

UMC has made much of Railway's high grade and low impurities when compared to other juniors' ore bodies in the Pilbara, and is now looking at a host of options, including developing a 10 million tonne-a-year operation. Railway is close to BHP Billiton's railway, although another option would be to build a spur line to the Fortescue Metals Group link. Yet another option, of course, would be to sell Railway to the highest bidder.