HS Orka currently produces 175MW of geothermal power and 150MW of thermal energy for district heating. It also has plans to increase power production to 405MW by 2015. The company, which currently supplies 9% of Iceland’s power needs, sells much of the energy it generates to a large aluminium smelter (and one of the world’s lowest cost aluminium producers) under US dollar contracts. The expansion plans will enable HS Orka to provide power for a new aluminium smelter that is currently under construction.
The deal increases Magma’s geothermal power production to 186MW, its geothermal reserves to 193MW and its indicated and inferred geothermal resources to more than 1.1GW.
Last month, Magma released its third quarter results, covering the three month period to 31 March 2010. The firm’s Q3 revenue fell to $1.3 million, from $1.9 million during Q3 2009, while income for the period came in at $142,000 (Q3 2009: $683,000 loss).
Cost of energy production fell to $878,000, against $1.4 million in Q3 2009. The firm’s net income included $3.6 million from Magma’s share of HS Orka, while its Soda Lake operation contributed revenues of $1.3 million and a net income of $72,000.
In January, Magma was awarded an exploration permit for the 100,000 hectare Pellado property in Chile. This was soon followed by a 50MW exploration permit for the 4,000 hectare Laguna de Maule property that adjoins the Pellado site. Together the two properties comprise the Mariposa Geothermal Resource, which is estimated to contain an inferred resource of 320MW of electrical generation capacity.
“This geothermal exploitation permit will enable us to proceed directly to construction of our operating plant once we complete our drilling programme and studies on detailed capital and operating costs and environmental impacts,” said Dr Catherine Hickson, Magma’s chief geologist.
Despite the progress, Magma’s shares, which are quoted on the Toronto Stock Exchange, are trading near their lows for the past year.
12 month high/low: C$2.10/$1.32
Market cap: C$338m
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