Hot rock pioneer set for next phase

A "WARM red" paint job decorates the walls of Geodynamics' new office in Brisbane's Milton, reflecting the company's ambitions of tapping power from deep underground.

Geodynamics needed bigger office space as it moves into critical phases of a project in SA's Cooper Basin, which involves pumping water through hot rocks underground via some of the world's deepest wells.

The company is regarded as a speculative investment with potential, but risks include the efficiency of tapping power in this way.

The project has also been hampered by costly delays. A drill bit broke off, a plug was lost in a well and a connection between a reservoir and a hole "was essentially lost".

Yet managing director Bertus de Graaf sounded confident last month that hurdles would be overcome and a side track was being built to detour around the lost plug.

"We're making progress," he said.

He cited the discovery of an underground reservoir as a big plus in the history of the company, which listed in 2002 and has raised $74.6 million so far.

Now Geodynamics plans to test the project's economics by mid-year.

This will lead to a decision on whether to proceed with a small demonstration plant. A fully fledged plant is still years away.

"The key to the (project) will be to show that we can expand the resource, the hot rocks, for large-scale developments," Dr de Graaf said.

ABN Amro Morgans analyst Roger Leaning said the delays had been disappointing but par for the "new ground" Geodynamics was working in.

Geodynamics' recent win of a $5 million government grant was an encouraging sign for shareholders, he said.

Milestones that Mr Leaning was watching for included completion of the side track, resumption of reservoir circulation and definition of the size of reserves.

He expected Geodynamics to then tap the market and lenders for additional funds.

ABN Amro Morgans rated Geodynamics as a speculative buy with a target price of $3.10. Its shares gained 1¢ yesterday to $1.595.