Fads are fascinating, especially when they hit the stock market. A few years ago we saw a stampede to get aboard the laterite nickel fad (failed), then came west coast steel mill proposals (failed), and who can forget the mighty dot.com boom itself (failed, failed, failed!).
Get-rich-quick is the common theme linking investment fads, so it is with no real surprise that Briefcase notes the latest fad, hot rocks.
At last count there were five ‘players’ in this sector-from-nowhere and more angling to join. Geodynamic, Petratherm, Tasman Resources, Scopenergy and Perilya are the leaders with most of their interest centred on a slice of South Australia where there is a proven zone of high-temperature rocks, some up to 300 degrees Celsius, albeit at a great depth of five kilometres.
The game, sorry, the business proposition, is to tap the heat in the hot zone by drilling a series of deep holes. Water is then injected down one series of holes, it becomes super-heated to 200 degrees or more, is extracted up another series of holes, converts to steam at 100 degrees when it reaches the surface and is used to drive a turbine that generates electricity, which is sold to nearby customers, and then it’s just a case of banking the monthly cheques.
In theory, and when said quickly, it is simple and beautiful.
In one marvellous step the world’s energy crisis is solved.
True believers are already boasting of the potential for SA hot rock energy to be the equivalent of 50 billion barrels of oil (more than all the oil ever found in the US and 15-times that found in Australia), and for the hot rocks energy source to solve the greenhouse gas dilemma
But, like everything in life that is simple and beautiful, looks can be deceiving.
In fact, Briefcase believes there may be more holes in the theory than those simply drilled into the ground. And, there may also be a very interesting trap waiting for everyone who sinks their cash into hot rocks investments.
For starters, the hot rocks being pursued are seriously remote. If electricity is ever generated at Innamincka, Moomba, or other parts of central SA it is an awfully long way to a major market such as Adelaide, Sydney or Brisbane. And electricity is a bit like wine – it does not travel well over long distances.
Secondly, the theory depends on the rocks at depth being sufficiently permeable.
For non-geologists out there, this means it must be either full of holes through which the injected water can pass, or have a lot of cracking in it.
Oil production techniques can fracture rock, but that is generally done in softer, sedimentary rocks, not granite which is, forgive the pun, rock hard.
Having outlined a couple of the negatives, Briefcase has to acknowledge that the theory is causing quite a stir on the stock market.
Since this time last year, Geodynamics (which has Woodside Petroleum and the Australian National University on its side) has risen from 59 cents to recent sales around $1.20, a price that values the business at a very impressive $80 million.
Newer players have yet to feel the surge of enthusiasm, which is strongest in Adelaide, where crowds have flocked to investment presentations on this new-found energy phenomena.
Tasman, which launched its adventure in hot rocks on June 16, has ‘rushed’ all the way from 7.9 cents to 7.9 cents. Perilya, which has a few mining problems at Broken Hill and is a very early player having only just picked up a handful of hot-rock leases, has fallen from around $1 to 88 cents.
Scopenergy is not listed, and Petratherm was finalising a $6 million capital raising as Briefcase dashed off to the printer.
The next six-to-12 months will be critical for the hot rocks energy theory.
Geodynamics should be testing its water flows, the other “early movers” will be looking for drill sites, and the outside world might actually start to take an interest in where the heat comes from, because this is the really interesting bit.
So far, everyone playing the hot rocks game has promoted (heavily) the ‘green’ credentials of the energy source and the fact that it emits no greenhouse gas.
What they do not promote is that the heat is not from just being closer to the centre of the earth – it is from the decay of radioactive minerals such as uranium and thorium in the granite.
Briefcase, which has always had an open mind on the question of uranium mining and the nuclear fuel cycle, finds this immensely amusing.
Here we have stock market speculators, the green energy lobby, corporate heavyweights, and the Balmain basket-weavers’ association, singing from the same hymn sheet which praises the brilliant concept of hot rock energy – while none of them talks about the fact that it is nothing more than a variation on the nuclear fuel cycle (naturally occurring division).
The argument even goes as far as to say that so long as the hot rocks stay five kilometres underground there is not a potential problem.
Oh yeah, and what about the water passing through the radioactively-heated granite which is drawn to the surface complete with the odd molecule (or two) of radon gas.
Ah, say the true believers, we have a closed circuit. The radon gas, which is a dinkum killer, cannot escape from our pipes.
To which Briefcase says, pull the other one, because there is as much chance of an accident at a hot rocks energy plant as there is at a man-made nuclear reactor.
Briefcase, having done its bit to educate readers about hot rocks, wishes everyone a heap of fun, and even the odd profit.
But, do not be surprised if this fad, like those which have come (and gone) before, turns out to have more hooks in it than you thought.
“A bore is a fellow who can change the subject back to his topic of conversation faster than you can change it back to yours.” Laurence Peter.
