ANNUAL REPORT
2013–2014
GEODYNAMICS LIMITED
Our Vision:
We are working to
establish Geodynamics
as a world-class energy
provider creating
shareholder and customer
value by supplying clean
energy products and
sustainable services.
CON TENT S
Our Vision
Inside cover
About Geodynamics
Highlights
Chairman & Chief Executive
Officers Report
Operations Review
Exploration Projects
Our Health and Safety Performance
Our Environmental Performance
Our Community Performance
Resource Statements
Financial Report
Directors’ Report
Auditor Independence Declaration
Corporate Governance Statement
Statement of Comprehensive Income
Statement of Financial Position
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the
Members of Geodynamics Limited
Off-take Agreements
Shareholder Information
Useful Terms
Corporate Directory
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2014 Annual Report GEODYNAMICS LIMITED 1
ABOUT GEODYNAMICS
Geodynamics Limited is a publicly listed company, incorporated and domiciled in Australia.
Geodynamics listed on the Australian Securities Exchange (ASX) in September 2002.
We are Australia’s most advanced geothermal exploration and development company, and
a world leader in the emerging field of Enhanced Geothermal Systems (EGS). This year, the
Company passed a major milestone with completion of the 1 MWe Habanero Pilot Plant trial
near Innamincka, South Australia, one of only three EGS plants operating globally.
Following the successful pilot plant trial, the Company signed an exclusivity agreement
with Beach Energy Limited, in regards to our exploration tenements in the Cooper Basin,
an important step towards securing a customer for the geothermal resource. Under the
agreement, a research program will assess the potential of the Habanero resource to supply
heat and/or power to Beach’s potential gas developments in the area.
Geodynamics is also developing conventional volcanic-hosted geothermal projects in
Vanuatu and Solomon Islands which have the potential to deliver cleaner, cheaper and more
reliable power to these Pacific Island nations.
The Company is focussed on securing value from each of our Cooper Basin, Solomon
Islands and Vanuatu assets through identifying a clear path to market and funding, securing
customers and environmental approvals, and defining a clear technical and operational plan.
Whilst Geodynamics is principally focussed on geothermal exploration and development, the
Company also possesses a strong capability in a range of clean energy, technology and the
associated utility and infrastructure sectors. With the significant changes occurring in these
markets, we are continuing to actively assess and consider opportunities outside our existing
portfolio that can provide returns to shareholders.
2 GEODYNAMICS LIMITED 2014 Annual Report
HIGHLIGHTS
Successfully completed 160-day, 1 MWe Habanero Pilot Plant trial demonstrating
EGS power for Australian and global markets;
Signed Exclusivity Agreement with Beach Energy Limited to negotiate farm-in
to Geodynamics’ geothermal exploration tenements in the Cooper Basin;
Received development consent from Solomon Islands Department of
Environment in relation to exploration activities for the Savo Island Geothermal
Power Project. Consent followed completion and submission of the Savo Island
Geothermal Project Environmental and Social Impact Assessment;
Sold Cooper Basin Operating Base to Beach Energy for a consideration of
$1.5m, with Geodynamics to retain all geothermal assets and power plant facilities;
Acquired KUTh Energy Limited under a scrip-only deal, strengthening our
portfolio of smaller scale conventional geothermal projects; and
Completed Environmental and Social Impact Assessment for Takara Geothermal
Project in Vanuatu.
2014 Annual Report GEODYNAMICS LIMITED 3
C HAIRM AN & CH IEF EXECUTIVE OFFICER S REP ORT
Geoff Ward, Managing Director and CEO (left)
and Keith Spence, Chairman (right).
2014: NOTABLE MILESTONES
2014 commenced with the achievement of a long awaited
milestone – the operation and successful demonstration of
power generation from the Habanero Pilot Plant. The pilot trial at
Habanero, commenced in March 2014 and completed in October
2014, demonstrated the reliability and capacity of the Habanero
geothermal system, and achieved some notable operational
successes including the highest flow rates yet achieved in open
and closed flow modes.
In July 2014 we were honoured to host Federal Minister, the Hon
Gary Gray AO and former Minister, the Hon Martin Ferguson
AM as well as representatives from industry, the Government
of South Australia and CSIRO to a demonstration at Habanero.
All were impressed by the quality of the operation that we have
built, our achievements in HSE and depth of understanding
and technical rigour that our team had brought to bringing
this project to operation. This was further reinforced in late
July when we were recognised by the Clean Energy Council in
winning the Innovation Award.
Following the pilot plant trial we proceeded to complete the
integrated Field Development Plan (FDP) and Feasibility Study
for the development of Enhanced Geothermal Systems (EGS)
energy at Habanero. We believe this study is a first of its type
for a geothermal project, integrating sub-surface, drilling and
surface engineering for a whole of life assessment of a range of
development options for the Habanero EGS resource. Significantly
the FDP Study identified the potential to economically supply
process heat or combined power and process heat to possible
future unconventional gas developments in the Nappamerrie
Trough area of the northern Cooper Basin.
An Exclusivity Agreement with Beach Energy, secured in
March 2014, builds on this opportunity. As noted last year
the increasing interest in unconventional gas exploration in
the Cooper Basin presents an opportunity for considerable
growth in local energy demand (both process heat and power)
in the Cooper Basin. This agreement with Beach Energy is
the first stage in securing a long term customer and partner
for the further development of Habanero. This will be a long
term prospect which is dependent on successful exploration
for unconventional gas in the area being sufficient to support
the development of new gas processing facilities. A future
development at Habanero is tied to the timing and pace of the
development of this nascent industry which is likely to have a
significant lead time, with large scale development not likely
until the period 2020 - 2025. Currently this remains the best
opportunity to secure a viable customer to support the further
development of Habanero and we continue to work with ARENA
and Beach on a robust long term plan that will preserve the
knowledge and options for future development created by our
work at Habanero.
4 GEODYNAMICS LIMITED 2014 Annual Report
As noted last year the increasing interest in unconventional gas
exploration in the Cooper Basin presents an opportunity for
considerable growth in local energy demand (both process heat
and power) in the Cooper basin.
PROGRESS IN THE PACIFIC
Throughout the year we have continued to progress our
Pacific Islands conventional geothermal project strategy,
which commenced with the acquisition of our interest in the
Savo Island Geothermal Project in November 2012. January
2014 saw the completion of the acquisition of KUTh Energy
Limited adding the Takara Geothermal Project in Vanuatu to
our portfolio. We continue to see significant potential in the
supply of geothermal power to replace imported diesel fuel in
these developing island markets. Based on high quality shallow
volcanic resources, geothermal power has the potential to
reduce costs for consumers, support economic development
through reduced business costs, increase availability of
power, reduce emissions and improve energy security and self
sufficiency for these nations.
At Savo Island we have secured several key milestones with the
completion of the Environmental and Social Impact Assessment
(ESIA), receipt of Development Consent being the required
environmental approval to progress with exploration drilling
and development activities and continued positive engagement
with the local community on Savo Island allowing good
progress with pre-drilling planning activities. We continue to be
warmly received within the local Savo community and remain
focussed on building good relations with local landowners and
community, contributing to small scale community development
projects throughout the year.
Progress in negotiating required commercial arrangements to
support the project moving into the drilling phase slowed after
Honiara was significantly impacted by flooding in the aftermath
of Tropical Cyclone Ita in April, with government resources
focussing, appropriately, on assisting people displaced from their
homes and restoring basic services in the capital. The impact
of this flooding also significantly affected the finances of the
Solomon Islands including loss of royalties with the shutdown of
the Gold Ridge Mine, following flood damage to its operations.
The mine is yet to fully resume production. At year end we are
continuing to negotiate with the Solomon Islands Electrical
Authority and the Ministry of Finance to secure the required
Power Purchase Agreements and guarantees.
Acquisition of KUTh Energy Limited in January has increased the
depth of our Pacific portfolio allowing us to transfer knowledge
and capability acquired in the Solomon Islands to accelerating
development of the Takara Geothermal project while bringing
to bear our strong balance sheet to progress early stage project
activities, while also reducing Geodynamics reliance on the
Solomon Islands electricity market for short term growth.
Since acquiring the Takara project we have made strong
headway on this project gaining agreement with all local
parties to restart field work, completing a comprehensive ESIA
and identifying an accessible drill site, following verification of
suitable ground conditions. This significant progress has helped
to re-energise government and community support for the
project and we look to capitalise on this as we move into FY2015.
We continue to believe that our Pacific geothermal projects
are important projects that bring substantial benefits to host
nations, consumers and communities. They are important
examples of private investment in these small growing
economies and have a very material positive impact on
emissions in some of the countries that are most at risk from
the consequences of ongoing climate change. As we progress
this year we will look to work with governments (both host and
Australian), development agencies and international funders
to look at innovative ways these projects can be structured to
maximise their many benefits.
A CHALLENGING YEAR FOR AUSTRALIAN CLEANTECH
While Geodynamics has made steady progress at each of
our key assets and in implementing the first part of our
diversification strategy, overall 2014 was a very challenging
year for the renewable energy and clean technology industry
in Australia. With the election of the Coalition government in
September 2013 combined with a Senate balance of power
consisting of a historically diverse cross-bench, the focus on
all things carbon pricing and clean energy related has become,
if possible, even more politicised and fraught. Legislation to
repeal the carbon price, disband the Climate Change Authority,
Climate Commission, the Clean Energy Finance Corporation and
abolish the Department of Environment and Climate Change
was anticipated. Additional moves to abolish the Australian
Renewable Energy Agency (ARENA) and make sweeping
changes to the mandatory Renewable Energy Target (both
supported by the Coalition prior to the election) were less
expected. In June this picture became even more confusing with
the joint appearance of Palmer United Party leader, Clive Palmer
with former US Vice President, Al Gore, in Canberra to make a
joint declaration of support for the RET, CEFC, and ARENA.
As we write this report the RET review has just released its report
recommending a substantial reduction in support for renewable
energy in Australia, the consequences of which are expected to
be devastating for investment in large scale wind and solar and
will also harshly affect uptake of small scale solar PV. All this has
contributed to a hostile environment of amplified uncertainty
with very negative consequences for investment and consumers.
2014 Annual Report GEODYNAMICS LIMITED 5
CHAIRMAN & CHIEF EXECUTIVE OFFICERS REPORT (CONTINUED)
POWER MARKET IN TRANSITION
Political uncertainty aside, we remain poised at an inflection
point as we transition from a legacy power system based on
large centralised coal and gas fired power stations and a rigid
network grid system to a more decentralised smarter electricity
system maximising efficient use of power, and the ability of
consumers to generate their own power. Electricity demand in
Australia has continued to decline for the fifth consecutive year
leaving the National Electricity Market significantly oversupplied.
Innovation and improvements in areas of solar PV, battery
storage, grid integration of renewables, smart grids and micro
grids have made these energy supplies cheaper than the
existing coal and grid system for many consumers already, with
widely held predictions (amongst both renewable sceptics
and supporters alike) that this will be uniformly true in markets
like Australia within three to five years. This transition will not
be easy, affecting a very substantial industry and asset base,
requiring changes in regulation and market design. It is likely to
be characterised by boom and bust cycles and false starts as our
modern economy adapts to rapidly evolving ways of generating,
using, transporting and sharing energy. This transition is well
underway, driven by consumers and businesses looking for
better and cheaper energy solutions and seeking to reduce
harmful environmental impacts, and cannot be stopped.
SOUND CAPITAL MANAGEMENT
As noted in last year’s report one of the strategic aims of the
Board has been to ensure that Geodynamics is financially strong
enough to weather this uncertainty and be poised to take
advantage of new opportunities as they appear. Our efforts to
rebuild Geodynamics balance sheet have continued and during
FY2014 we received an $8.5 million rebate under the R&D Tax
incentive scheme, and drew $4.5 million of funding under our
Australian Renewable Energy Agency Grant. In addition to this
we completed the sale of our Habanero Camp to Beach Energy,
in doing so increasing our financial reserves and reducing our
future liabilities. With our major spending commitments at
Innamincka now completed we finished FY2014 with
$33.8 million in cash leaving us well placed financially.
During FY2014 we have also worked hard to reduce our
operating costs and expenses. This is a difficult process as it has
meant that we have reduced staff numbers through redundancy,
losing valued team members who have contributed significantly to
our operational success over the past 3 years. The team faced this
6 GEODYNAMICS LIMITED 2014 Annual Report
We are well positioned to identify, assess and progress
corporate or project opportunities created by the unfolding
energy transformation.
challenge with integrity and good spirit, and we would like to
thank everyone for their response. As a result of these efforts,
Geodynamics will be able to maintain our capability and progress our
existing projects over the next 2 years within our existing funding.
CHANGE BRINGS OPPORTUNITY
In addition to ensuring our Company is well positioned
financially we are also seeking to take advantage of
opportunities being created by the substantial change and
uncertainty in our sector. The first stage of this has been the
diversification from our solely Australian focus to acquire niche
conventional geothermal projects in the Pacific. Additionally
Geodynamics has a strong capability in a range of clean energy,
sustainable technology and associated utility and infrastructure
areas calling on the skills and experience of your Board and
staff. With the significant changes occurring in these markets
we believe good opportunities to create value for shareholders
can be identified. We are increasing or efforts in this area and
this has included a rigorous and deliberate review of emerging
opportunities in the energy and technology sectors that has
identified a number of areas for further consideration. As we
assess these opportunities we will keep shareholders fully
updated should they mature to a material position.
Looking forward to 2015, Geodynamics remains in a secure
position despite the challenging conditions faced by the
renewable energy and clean technology sectors. We are well
funded with a small but capable team. We have a specific plan
for each of our key assets focussed on securing value through
identifying a clear path to market and funding strategy, securing
customers and environmental approvals, and defining a clear
technical and operational plan. We are also well positioned to
identify, assess and progress corporate or project opportunities
created by the unfolding energy transformation. We would like
to thank all shareholders for your ongoing support and look
forward to 2015.
Keith Spence
Non-Executive Chairman
Geoff Ward
Managing Director and CEO
2014 Annual Report GEODYNAMICS LIMITED 7
OPERATIONS REV IEW
Following the successful commissioning of the 1 MWe Habanero
Pilot Plant in April 2013, Geodynamics completed the extended
closed loop test program at Habanero in October 2013. The
completion of the 1 MWe Habanero Pilot Plant Trial was a
significant milestone for the Company and an important
demonstration of EGS technology in Australia and globally.
1 MWe HABANERO PILOT PLANT TRIAL
The 1 MWe Habanero Pilot Plant trial ran for a period of 160 days
and concluded on 7 October 2013. A rigorous testing program
conducted during the trial period reported excellent results,
exceeding all modelled expected values to achieve the best
recorded closed loop and open flow test results at Habanero.
Key results of the trial:
• Recorded highest open flow results yet achieved with a stabilised
flow rate of 39 kg/s recorded in open flow testing at Habanero 4;
the test results indicate the potential of Habanero 4 to flow
between 40–50 kg/s at full drawdown in open flow mode.
• Strong and stable production observed at Habanero 4.
Temperature rises consistent with models and estimates,
coupled with improved injectivity in original Habanero 1 well.
• Prior to trial closure, pilot plant sustained a maximum closed
loop flow rate of 19 kg/s.
• New maximum well-head temperature of 215°C was achieved
at Habanero 4. At the time of completing the trial, well-head
temperature at Habanero 4 continued to rise after 160 days
of production.
• Plant demonstrated better than expected reliability and system
stability. Extended continuous production run in excess of 50
days was achieved with availability exceeding 75% up-time.
Wellhead Temperature VS. Cumulative Production
A green Gibber Plain surrounds the camp.
)
C
°
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H03 TOTAL
H04 TOTAL
H03 FLOW PTS
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CUMULATIVE PRODUCTION (TONNES)
100,000 120,000
140,000 160,000 180,000
Above: Graph plotting wellhead temperature vs. cumulative
production (tonnes) demonstrates increasing temperature trend
during the trial.
8 GEODYNAMICS LIMITED 2014 Annual Report
OFFICIAL SITE TOUR
In July 2013, Geodynamics hosted key stakeholders including
the Hon. Gary Gray AO, MP, Federal Minister for Resources,
Tourism and Energy, former minister the Hon. Martin Ferguson
AM, representatives from industry, Commonwealth and State
authorities, including the Australian Renewable Energy Agency
(ARENA), Clean Energy Finance Corporation (CEFC), the South
Australian Department for Manufacturing, Innovation, Trade,
Resources and Energy (DMITRE), and the Federal Department
of Resources, Energy and Tourism (DRET) at a demonstration of
the 1 MWe Habanero Pilot Plant Trial.
Speaking about the 1 MWe Habanero Pilot Plant, Minister Gary
Gray said: “This particular development is impressive because
of its technical excellence. It’s impressive because of its remote
location. It’s impressive because it’s allowed the exploitation of
a deep, hot resource that otherwise would simply have been
unknown and unremarkable”.
CASE STUDY
TRACER TESTING ADDS TO RESERVOIR UNDERSTANDING
During the trial, testing using naphthalene sulphonate
tracers was initiated to evaluate reservoir size, productivity
and other characteristics. This was achieved by injecting
the tracer in one well and monitoring the concentration of
tracer in produced fluid from another well or the same well.
Since testing began, brine samples from Habanero 4 have
been collected at regular intervals and analysed for tracer
concentration and chemical makeup.
In the initial test in October 2012, a tracer was added
to the water used for stimulation of Habanero 4. From
this tracer it has been interpreted that Habanero 4 is now
producing a mixture of about 15% stimulation water and
85% formation brine.
A second tracer was injected as a concentrated solution
into Habanero 1 in June 2013. The tracer fluid took about
25 days to travel between Habanero 1 and Habanero 4. The
data captured was used to establish the estimated volume
of the reservoir through which brine flows.
These results compare favourably with the tracer test
undertaken in 2009 in which the tracer fluid took nine
days to move from Habanero 1 to Habanero 3. The increase
in residence time is partly due to the greater separation
between the wells, but also suggests that reservoir volume
has been enhanced during the latest stimulation campaign
- meaning heat recovery should be improved.
Below: Graph tracking the time (days) since injection of tracer
into Habanero 1 against concentration (parts per billion) of
tracer in reservoir fluid at Habanero 4. A comparison of the
Habanero 1 - Habanero 3 results is also provided.
Habanero Naphthalene Sulphonate Tracer Results
H01-H03 1, 3, 5-NTS
H01-H04 2, 7-NDS
6,000
5,000
4,000
3,000
2,000
1,000
P
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DAYS SINCE TRACER INJECTION
2014 Annual Report GEODYNAMICS LIMITED 9
FIELD DEVELOPMENT PLAN
Following completion of the pilot plant trial, Geodynamics
technical staff completed a rigorous analysis of the trial results
through the production of an integrated Field Development
Plan. The Field Development Plan (FDP) is the key body of work
summarising the Habanero Trial results and applying them to
potential further development of the Habanero resource as part
of a future geothermal project. We believe this to be the first,
or one of the first, such integrated whole of life studies to have
been completed for an EGS reservoir, representing a significant
technical and engineering achievement.
This comprehensive engineering study addressed the feasibility and
economics of a number of heat and power project options based
on up to six EGS wells. The FDP identifies a number of pathways
to potentially develop the Habanero resource. The strongest of
these options proposes the supply of process heat to emergent
shale gas producers as an economically viable, long term
option with significant scale. This option has been strengthened
with ongoing expansion and appraisal of gas resources in the
Nappamerri Trough area in the northern Cooper Basin.
OPERATIONS REV IEW (CONTINUED)
Inspecting surface equipment during trial.
HABANERO KNOWLEDGE SHARING
Noteworthy publications during the period include:
The significance of our achievements at Habanero has attracted
substantial interest from geothermal organisations and research
institutes in Australia and internationally.
- Implications of Habanero EGS stimulation and testing;
proceedings of International Workshop on Hot Dry Rocks and
Enhanced Geothermal Systems, Changchun, China, July 2013
Over the past year, Geodynamics has been invited to present
and share its findings at several domestic and international
forums. In particular, our data relating to stimulation, closed
loop testing and reservoir modelling has proven to be of great
value to researchers in thermodynamic modelling and reservoir
interpretation as they develop tools to assist in resource
evaluation and reservoir planning.
Our data has been used by NICTA (National Information
Communications Technology Australia) in its machine learning
project, which aims to develop processes and software to merge
data from disparate sources into a single, unified model.
Geodynamics has also collaborated extensively with the South
Australian Centre for Geothermal Energy Research, based at
University of Adelaide, Geoscience Australia, and the Faculty of
Engineering at the University of Auckland.
- Production, injection and closed-loop testing at Habanero
enhanced geothermal system; proceedings of New Zealand
Geothermal Workshop, Rotorua, November 2013
- Case study of the seismicity associated with the stimulation
of the enhanced geothermal system at Habanero, Australia;
proceedings of New Zealand Geothermal Workshop, Rotorua,
November 2013
- Habanero pilot project, Australia’s first EGS power plant;
proceedings of New Zealand Geothermal Workshop, Rotorua,
November 2013
- First reverse circulation cement job in Australia executed
in HP-HT geothermal well in Cooper Basin; proceedings of
2013 Unconventional Resources Conference and Exhibition,
Brisbane, November 2013
- Australia’s first enhanced geothermal system pilot power
plant; MESA Journal 69, Issue 2 – 2013.
Following completion of the trial and FDP, Geodynamics
staff have also been invited to present on the learnings from
Habanero and potential of further EGS development to
companies and research institutes in Korea, China and Europe,
as well as attracting interest from USA.
10 GEODYNAMICS LIMITED 2014 Annual Report
The trial demonstrated excellent safety and environmental
performance, with zero incidents recorded during the commissioning
and trial period. Geodynamics is delighted to have conducted the
trial in such a successful manner.
Pressure gauges monitor steam turbine auxiliaries.
CASE STUDY
HABANERO RESERVOIR MODEL
Habanero (FDP); Anisotropic K; Rate: 35kg/s;
Scenario 9: triangular four spot
Trial data and results were used to further develop a 3D
numerical computer simulation model of the Habanero
reservoir using software known as TOUGH2, the geothermal
industry’s most widely used thermodynamic simulation tool.
This model was calibrated using data from the stimulations,
the closed loop tests and the tracer tests. The calibrated
simulation model has been used to guide the selection
of well locations for further development options as part
of field development planning and to forecast flowing
temperatures of production wells in development scenarios.
The model simulates the effect of long-term closed loop
production, allowing temperature changes in the geothermal
reservoir to be examined and visualised. The example right
shows the estimated temperature distribution within the
reservoir after 15 years of continuous closed-loop flow at
35 kg/s per well.
Right: Plan view of the thermodynamic model of the
Habanero reservoir, showing the locations of injection wells
(+) and production wells (*) and, in colour, the distribution of
temperatures within the reservoir after 15 years of closed-loop
circulation. The legend shows the temperature scale in °C. The
figure shows that the reservoir has been cooled around the
injection wells, but remains hot around the production wells
and outside the area of development.
6926000
6925000
6924000
6923000
6922000
6921000
I 2
P2
P3
I 3
H04
I 1
P1
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x
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T E M P E R A T U R E
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2014 Annual Report GEODYNAMICS LIMITED 11
OPERATIONS REV IEW (CONTINUED)
EXCLUSIVITY AGREEMENT WITH BEACH ENERGY LIMITED
Building on the findings of the Field Development Plan,
Geodynamics began engaging with potential customers involved
in unconventional gas exploration in the Cooper Basin region.
This engagement resulted in the Company signing an Exclusivity
Agreement with Beach Energy Limited (Beach) in May 2014.
Under the terms of the agreement which relates to
Geodynamics’ tenements in the Cooper Basin, Geodynamics
has granted Beach an exclusive right (until November 2015) to
negotiate a farm-in into the geothermal project.
During the Exclusivity Period, Geodynamics will lead a research
program focused on assessing the potential of the Habanero
resource to supply heat and/or power to Beach’s prospective
gas developments in the area. The research program will be
completed within the first 12 months of the Exclusivity Period.
Beach will contribute $200,000 towards the cost of the research
program. This amount is fully refundable if a farm-in agreement
is not agreed between the companies by the end of the
Exclusivity Period.
The signing of an Exclusivity Agreement with Beach comes at a
critical point for Geodynamics, and enables our flagship project
to progress in the face of regulatory, investor and political
uncertainty in the Australian renewable energy market.
We look forward to strengthening our relationship with Beach as
a potential customer and future joint venture partner.
CAMP SALE
Following completion of the Habanero trial in October, the 1 MWe
Habanero Pilot Plant was placed in care and maintenance mode for
possible future use as part of an initial commercial development.
12 GEODYNAMICS LIMITED 2014 Annual Report
Following our signing of an Exclusivity Agreement we look
forward to strengthening our relationship with Beach as a
potential customer and future joint venture partner.
Arial view of 1 MWe Habanero Pilot Plant and Operating Base.
The adjacent Habanero operating and logistics base, which
was not required for near term activities following the
completion of the Habanero trial, was sold to Beach in March
2014 for $1.5 million.
Our former operating base is well suited to Beach’s shale and
tight gas exploration program in the Nappamerri Trough.
Following a formal handover in June 2014, Beach has now
assumed responsibility for maintaining the operating base to
comply with regulatory requirements.
Geodynamics retains ownership and responsibility for all
geothermal tenements associated with its Innamincka granite
resource, and ownership and responsibility for geothermal
wells, brine pipelines and geothermal facilities including the
1 MWe Habanero Pilot Plant. The Habanero 1 and 4 wells have
been fitted with remote monitoring equipment to observe well
conditions. Data relating to well head pressures and temperature
is relayed back to the Brisbane head office via satellite link.
PLUG AND ABANDONMENT OF WELLS
Plug and abandonment (P&A) work on three wells no longer
required under ongoing operations commenced during the year
in review. Completion of this program will reduce our operational
footprint and future liabilities and decrease environmental risks
and exposures.
Celsius 1 and Habanero 2 have been successfully completed,
while planning for the P&A program for Habanero 3 is continuing
with operations scheduled to commence in CY 2015.
YEAR AHEAD
The year ahead for the Cooper Basin Project will see the
completion of the Research Program outlined in the Exclusivity
Agreement in collaboration with Beach. The program will focus
on the integration of the Habanero resource into a potential
future gas development. Geodynamics will also continue to
engage with Beach on a farm-in agreement into the Company’s
Cooper Basin assets.
2014 Annual Report GEODYNAMICS LIMITED 13
EXP LORATION PR OJECT S
PROGRESSING OUR PACIFIC PORTFOLIO
Over the past 12 months Geodynamics has continued to develop
our portfolio of conventional geothermal projects servicing
growing, import-dependent, power markets in the Pacific
Islands. This is a deliberate strategic decision of the Board to
de-risk our portfolio by diversifying our interests beyond our
Innamincka Deeps EGS resource in the Cooper Basin, South
Australia and seeking access to projects that we can develop
at lower costs and in a shorter timeframe than the Habanero
Project while leveraging our core geothermal skills.
In the past twelve months, the Company has made sound
progress in the Pacific by advancing the Savo Island Geothermal
Project in the Solomon Islands. The acquisition of KUTh Energy
Limited in January 2014 has added the Takara Geothermal Power
Project in Vanuatu to our portfolio, further augmenting the
Pacific Islands strategy.
SAVO ISLAND GEOTHERMAL POWER PROJECT
The Savo Island Geothermal Power Project, a joint venture with
KGL Resources Limited, progressed steadily during the period,
with key milestones including:
• Completion of an Environmental and Social Impact Assessment;
• Granting of development consent from the Department of
Environment;
• Procurement of a track mounted drill rig and long lead items
for exploration drilling;
• Progressed negotiation of Terms Sheet and draft Power Purchase
Agreement with Solomon Islands Electrical Authority; and
• Completion of customary land mapping and identification.
14 GEODYNAMICS LIMITED 2014 Annual Report
ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT
Geodynamics completed an Environmental and Social Impact
Assessment (ESIA) detailing the potential environmental and
social impacts of the Project. While focussed on the exploration
phase, the ESIA also addressed production drilling and operations.
The ESIA and associated Environmental Management Plan
(EMP) were submitted to the Solomon Islands Department of
Environment for review and public comment in March 2014.
The ESIA report found that the Project would positively impact
the Solomon Islands by replacing imported diesel fuel with a
sustainable, locally produced electricity supply. The report also
concluded that the development could be undertaken with a
low impact on the local environment at Savo Island, with risks
managed with good industry practice.
In June 2014, the Department granted development consent to
Geodynamics, covering exploration activities for the Savo Island
Geothermal Power Project. This consent, approving the ESIA and
EMP, is the final regulatory approval required prior to geothermal
drilling activities on Savo Island.
View of Undine Bay Efate Vanuatu.
CASE STUDY
SURVEYING AND MAPPING ON SAVO
In the Solomon Islands, the majority of land is held under
customary landownership with little land officially registered
and mapped. A key priority for Geodynamics has been the
establishment of a Customary Land Owner register, combined
with a cadastral mapping exercise over the Company’s key
area of interest in the south east quadrant of Savo Island.
Mapping and surveying was conducted by the Solomon Islands
Department of Mines and Department of Lands on the Project’s
behalf and was completed in September 2013.
The completion of mapping and landowner identification has
enabled Geodynamics to carry out further project planning
work, ensuring land access negotiations and compensation
payments for preliminary planning activities are carried out with
the correct parties.
In preparation for an exploration drilling campaign,
Geodynamics contracted a local, Honiara-based land surveying
company, Mosese & Associates, to conduct a topographic survey
of proposed drill site locations, laydown yard and access tracks.
Civil engineering design was then completed for these locations.
Cadastral surveying is the discipline of land surveying which
respects to land ownership laws and property boundaries.
It involves interpreting and advising on boundary locations,
the status of land ownership and on the rights, restrictions
and interests in property, and recording of such information
for plans and maps.
Cadastral surveying also involves the physical delineation of
property boundaries and the determination of dimensions,
areas and certain rights associated with properties on land,
water or defined by natural or artificial features.*
The cadastral survey in the South East quadrant of
Savo Island identified approximately 100 individual land
holdings in an area of 5 km2. These holdings are further
identified by six tribal groupings. It is believed the cadastral
survey on Savo Island is the first of its kind in the Solomon
Islands, where traditionally land ownership resides with
the village or clan and cannot be bought or sold like other
marketable commodities.
Above: Surveyors at work on Savo Island.
* Reference Surveyors Registration Board of Victoria.
2014 Annual Report GEODYNAMICS LIMITED 15
EXP LORATION PR OJECT S (CONTINUED)
Taking delivery of the track mounted drill rig in Brisbane.
The Taskforce agreed that the progression of both the
geothermal and hydro projects is in the best economic and
energy security interests of the Solomon Islands. As a result,
Geodynamics and the Solomon Islands Electricity Authority
have been investigating a staged development of the Savo
Geothermal Project in alignment with Honiara grid requirements
and the presence of a second power generation source - the
proposed Tina River Hydro Project.
The staged development of the Savo Island project will see a
first phase 10 MWe development of the Savo resource, with
subsequent phases to be constructed post-2020, in line with
increases in local energy demand.
Throughout the year, negotiations with the Solomon Islands
Electricity Authority on the key terms of the Power Purchase
Agreement continued to progress. Agreement on the customer
off-take contract is a vital next step, prior to Geodynamics
commencing exploration drilling.
PREPARATIONS FOR DRILLING
A highly mobile, track mounted, mineral style drill rig suited
to the tropical terrain of Savo Island and Vanuatu has been
procured by Geodynamics.
The Hanjin DB35 rig and accompanying rod carriers are currently
being stored in Brisbane ready for transportation once a start
date for exploration drilling is confirmed. Further long lead items
such as wellheads and drill pipe were also procured during the
financial year.
POWER PURCHASE AGREEMENTS /
GOVERNMENT ENGAGEMENT
Building relationships and ongoing engagement with Solomon
Islands Government departments and with their representatives
is extremely important to Geodynamics.
During the year in review, the Solomon Islands appointed a
Large Scale Renewable Energy Taskforce chaired by Prime
Minister, Gordon Darcy Lilo, to review the merits of the Savo
Island Geothermal Power Project and the proposed Tina River
Hydro Project. Both projects offer significant benefits to the
Solomon Islands. The provision of reliable, renewable power to
the Honiara grid will help enable the economic development of
the Solomon Islands.
16 GEODYNAMICS LIMITED 2014 Annual Report
Over the past 12 months Geodynamics has continued to develop
our portfolio of conventional geothermal projects servicing growing,
import-dependent, power markets in the Pacific Islands.
View of Guadalcanal from Savo Island.
KUTh ACQUISITION
TAKARA GEOTHERMAL POWER PROJECT
In line with the Company’s strategy of portfolio diversification,
Geodynamics announced an off-market bid for geothermal peer,
KUTh Energy Limited (KUTh) in September 2013. The acquisition
was based on an offer of one (1) Geodynamics share for every
five and a half (5.5) KUTh shares, and resulted in Geodynamics
issuing 26,517,390 shares to complete the acquisition.
The Takara Geothermal Project is located on the north east
corner of Vanuatu’s main island of Efate. Initial geological and
geophysical studies have identified a commercial exploration
prospect with an estimated temperature of 180 – 220°C at
depths of 1,200 - 1,500 m. A inferred resource assessment
reports a resource with an estimated capacity of 18 MWe.
The transaction was successfully completed in January 2014,
following the compulsory acquisition of all outstanding shares
in KUTh.
KUTh Energy Vanuatu, now a wholly owned subsidiary of
Geodynamics, holds a 30-year production licence with exclusive
rights to develop geothermal energy from the identified prospect.
Rationale
The portfolio of geothermal energy projects acquired from KUTh
is focussed on the growing energy needs of the Pacific Islands.
The primary project, the Takara Geothermal Project in Vanuatu,
has substantial synergies with the Savo Island Geothermal Project,
and merging the portfolios ensures technical capability is available
to accelerate the development of the Takara Geothermal Project
alongside development of the Savo Island Geothermal Power
Project. Significant benefits through combined drilling campaigns,
shared technical resources and cost efficiencies can be realised
through the parallel progression of both Pacific Island projects.
The addition of the Takara Geothermal project also increases
our portfolio diversification and reduces our reliance on and
exposure to the single market of the Solomon Islands.
Following the acquisition in January, Geodynamics’ first
priority was the completion of an Environmental and Social
Impact Assessment (ESIA) for the Takara project area. Prior to
commencing work on the ESIA, Geodynamics consulted with
kastom (traditional) owners and the Takara community and an
agreement enabling full access to undertake an ESIA was signed
by all parties in February 2014. It was agreed that Geodynamics
would commence work on the ESIA, community mapping and
land evaluation works, all of which have now been completed.
2014 Annual Report GEODYNAMICS LIMITED 17
EXP LORATION PR OJECT S (CONTINUED)
Potential Market
Takara Project Development
Like many other Pacific Island nations, electricity supply in
Vanuatu is dominated by diesel generation. The concession
for the Port Vila area is held by UNELCO, a private electricity
provider which operates 23 MWe of diesel power capacity and
3 MWe of wind power capacity. As a result of the reliance on
diesel generation, the base tariff is relatively high. The Takara
Geothermal Power Project has the potential to supply reliable
base load power to the expanding Port Vila / Efate network at
a lower cost than current diesel generation. It is anticipated that
the Takara Geothermal project will initially be developed as a
4 MWe project with potential to expand through a second
4 MWe stage as demand permits.
Following successful exploration drilling, the project would
be developed in two stages of 4 MWe each for 8 MWe in
total. Exploration drilling to confirm the resource is due in
2015 following the completion of the environmental studies
and landholder agreements. Production drilling and plant
construction will follow given successful exploration results.
Preparations for Drilling
Synergies between the Takara and Savo Island projects have
enabled the planning and ordering of long lead items that can be
utilised in both locations. A track mounted Hanjin DB35 rig and
accompanying rod carrier, wellheads and drill pipe have been
procured and are ready to be utilised for the two exploration
drilling campaigns.
18 GEODYNAMICS LIMITED 2014 Annual Report
The ESIA report found that the Project would positively impact the
Solomon Islands by replacing imported diesel fuel with a sustainable,
locally produced electricity supply.
Community consultation of Kaogele Village Savo Island.
AUSTRALIAN EXPLORATION INTEREST
Queensland
Relinquishment of Queensland and New South Wales tenements
In line with Geodynamics’ increased focus on regional and remote
markets and their higher value diesel replacement markets, the
Company has reviewed its tenement portfolio. The following
tenements have been or will be relinquished once remediation
work in accordance with permit obligations has been completed.
New South Wales – Hunter Valley
• The two tenements EL5886 and EL5560 will be relinquished
following completion of rehabilitation work. Planning for
the remediation of the tenements in the Hunter Valley has
commenced. Shallow temperature gradient holes located on
the Muswellbrook tenement, and geothermal temperature
wells located in the Bulga tenement will be remediated.
• Nappa Merrie and Tennaperra tenements in south west
Queensland have both been relinquished. Gravity surveys
conducted in 2011 confirmed that the high heat producing
granite at Innamincka does not extend into these tenements,
making them unsuitable for geothermal exploration.
• KUTh tenement applications for Weipa on Cape York Peninsula
and Epsilon Bore in south west Queensland were withdrawn.
Tasmania
• Geodynamics has submitted surrender applications for the
Tasmania tenements held by KUTh. The Company is currently
working with the Department of Minerals Resources Tasmania
(MRT) to confirm any rehabilitation work that may be required
and to determine the process for surrender.
2014 Annual Report GEODYNAMICS LIMITED 19
OUR H EALTH AND S AFETY PERFORMA NCE
GEODYNAMICS IMPLEMENTS SOLID SAFETY
MANAGEMENT STRATEGIES FOR KEY PROJECTS
Geodynamics strives to be an incident-free workplace.
The Company works with employees and contractors to build
a strong culture ensuring a healthy, safe and productive work
environment embodying the motto; “nothing is so important, it
cannot be done safely”.
A GREAT YEAR IN SAFETY PERFORMANCE IN 2014
Total Recordable Injury Frequency Rate (TRIFR) is the primary
industry standard measure of safety performance, representing
the number of medical, restricted work and lost time injuries
recorded for every million hours worked.
Geodynamics achieved an enviable TRIFR of 0.0 in 2014,
a record we will strive to maintain in 2015. We are greatly
appreciative for all the efforts our staff and contractors have
made to work safely over the past year.
Medical oxygen in Field Ambulance.
EMERGENCY RESPONSE IN THE COMMUNITY
Whilst operating in the Cooper Basin Geodynamics has
maintained a strong emergency medical response capability
to support our activities. Good management and fortune has
seen no injuries or call-outs relating to our own operations. The
capability of our Emergency Response Team though was called
upon several times this year to assist the general public.
Geodynamics’ Emergency Medical Technicians were requested
to assist in several vehicle incidents involving tourists in the
Innamincka area. Over the past few years, the Cooper Basin
has experienced an increase in tourist traffic seeking 4WD and
motorbike adventures, particularly in the cooler winter months.
Geodynamics’ technicians have been called upon to provide
first-response medical support, involving stabilising the patients
and providing transport to the nearest Royal Flying Doctors
Service (RFDS) airstrip.
We are happy to report that all injured parties were successfully
stabilised before treatment and transportation by the RFDS to
larger medical centres for further treatment where needed.
20 GEODYNAMICS LIMITED 2014 Annual Report
The Company works with employees and contractors to build
a strong culture ensuring a healthy, safe and productive work
environment embodying the motto; “nothing is so important,
it cannot be done safely”.
Emergency Response Team Ambulance.
TAILOR MADE SAFETY MANAGEMENT PLANS
FOCUS ON TRAINING
Ongoing efforts to improve staff health and safety culminated
in the completion of Safety Management Plans (SMP) for key
operational activities and a revised SMP for the Habanero
operational site.
Key components of the SMP include plans for the “plug and
abandon” program in the Cooper Basin, de-manning of our
operations base and ongoing management of facilities in care
and maintenance.
A strong safety culture relies on a confident, competent and
informed workforce. All employees and contractors who
undertake tasks posing significant health and safety risks are
therefore required to complete the necessary training prior to
commencing work. To support a strong safety culture across the
business, training takes the highest priority within Geodynamics,
with competency levels constantly tracked and maintained.
YEAR AHEAD
The Company has also put in place a number of safety measures
to manage drilling and operational activities in preparation for
exploration in the Pacific Islands.
Geodynamics will continue to place a strong emphasis on hazard
identification, risk assessment and risk management across all work
activities to prevent injuries and minimise impact on the environment.
SMPs are structured on the Geodynamics Safety Management
System, itself aligned with principles of the Australian/New
Zealand Standard (AS/NZS) 4801 and its framework. These
plans set requirements for managing health and safety across
operational projects and various activities across the business.
These new plans are at the core of our broader health and
safety management system, which is essential for improved
safety processes, systems and governance requirements.
These systems in turn manage and measure company-wide
performance and align with our operational activities.
Our goals for the year ahead include:
• Target zero incidents in the workplace;
• Further embed and implement our SMP and reporting
structure throughout the business;
• Ensure competence levels of employees and contractors are
maintained and enhanced in their occupation area promoting
safe work behaviours; and
• Continue to improve our health and safety culture and maintain
our strong position with respect to incident prevention.
2014 Annual Report GEODYNAMICS LIMITED 21
OUR E NVIR ONMENTAL PERFORMA NC E
OVERVIEW
Sound environmental performance is an essential component to
a successful operation.
Geodynamics is committed to minimising the impact of its
activities on the natural landscape, waterways, flora and fauna in
a manner consistent with environmental best practice standards.
To act on this commitment, Geodynamics continues to work
within the framework of its Environmental Management System
(EMS) which sets out policies, procedures and processes to
reduce and mitigate the impact of the Company’s activities.
OUR ENVIRONMENTAL PRINCIPLES
• Maintain and continually improve the Environment
Management System across the organisation.
• Comply with all relevant laws, regulations and standards and
aspire to higher standards within the business.
• Ensure that all employees and contractors receive appropriate
training to fulfil their individual environmental responsibilities.
• Ensure that we have the necessary resources and skills to
achieve our environmental commitments.
Andamooka Lily “Crinum flaccidum”.
• Implement strategies to minimise pollution, manage waste
effectively, use water and energy efficiently and address
relevant cultural heritage and biodiversity issues.
• Formally monitor, audit, review and report annually on our
environmental performance against defined objectives.
• Require that companies providing contract services to
Geodynamics manage their environmental performance in
line with this Policy.
• Work towards the achievement of a high level of
external recognition for the quality of our on-site
environmental management.
COOPER BASIN OPERATIONS
Geodynamics is pleased to report that during the year there
were zero environmental incidents as defined by the Petroleum
and Geothermal Energy Act 2000 (SA).
In June 2014 Geodynamics de-manned the Cooper Basin
operating base. The Company retains ownership and
responsibility for all geothermal permits, wells, brine pipelines
and geothermal facilities including the 1 MWe Habanero
Pilot Plant. In line with our responsibilities in the Cooper, it
is important that the Company maintains an ongoing high
standard of environmental management and protection for this
period where we have no permanent presence at the site.
22 GEODYNAMICS LIMITED 2014 Annual Report
Geodynamics is committed to minimising the impact of its
activities on the natural landscape, waterways, flora and fauna in
a manner consistent with environmental best practice standards.
To ensure the continued high level of environmental performance,
the Company has implemented a surveillance plan to monitor
all facilities and tenement areas, which is designed to ensure
compliance with all environmental obligations and monitor the
status of remediation.
Integral to this surveillance plan, as provided to the South
Australian Department of State Development, is the incorporation
of remote sensing technology for our wells which provide real
time alerts to ensure timely intervention can occur if required.
To minimise our environmental footprint several areas have
been cordoned off to allow regeneration of vegetation.
The environmental remediation program of wells Celsius 1,
Habanero 2 and Habanero 3 will continue, following the
completion of plug and abandonment programs.
SAVO ISLAND GEOTHERMAL POWER PROJECT
During the year in review, Geodynamics received Development
Consent from the Department of Environment for exploration
activities relating to the Savo Island Geothermal Power Project.
Approval from the Department followed the completion of an
Environmental and Social Impact Assessment (ESIA) for proposed
exploration activities on Savo Island. The ESIA highlights significant
social and economic benefits for the Solomon Islands, the city of
Honiara and the local community on Savo Island. Importantly, the
study also found environmental and social impacts associated with
the exploration phase of the Project are considered acceptable
with the implementation of good international industry practice,
monitoring and mitigation measures.
Incorporated in the ESIA was a comprehensive Environmental
Management and Monitoring Plan (EMMP), which provides a
guide to the monitoring, mitigation and remediation measures
which will be implemented by Geodynamics during and post
exploration drilling activities. The EMMP has been developed
in line with our environmental objectives and principles, and
incorporates the needs and requirements of the Savo Island
community and Solomon Islands Environmental Act.
The ESIA and associated technical report are available from the
Company website www.geodynamics.com.au/Savo_ESIA.aspx
TAKARA GEOTHERMAL PROJECT
In March 2014, Geodynamics engaged SLR Consulting to
conduct an ESIA covering the Takara Geothermal Project area.
The key elements of the ESIA are:
1. Socio-economic / cultural heritage;
2. Land (soils and land-use);
3. Water (surface and groundwater);
4. Ecology (terrestrial);
5. Noise and acoustics;
6. Air / greenhouse gas emissions;
7. Waste and hazardous substances;
8. Visual impact assessment; and
9. Marine ecology.
Post the reporting period a draft of the ESIA was released
for a public consultation period, during which meetings and
consultation with Government and the local community took
place. Community and Government representatives will also
be briefed and invited to make submissions on the Draft ESIA,
after which the final ESIA will be submitted to the Vanuatu
Government for approval.
The ESIA and associated technical reports are available from
the Company Website www.geodynamics.com.au/Vanuatu_
ESIA_English.aspx
YEAR AHEAD
Geodynamics will continue to focus on improved environmental
performance as we work to achieve our strategic goal of
recording zero environmental incidents.
Our targets for the year ahead are to:
• Refine Environmental Management and Monitoring Plans in
line with exploration drilling campaigns;
• Complete the ESIA for Takara and receive environmental
approvals for the exploration drilling campaign; and
• Remediate Cooper Basin and Hunter Valley sites following
the successful plug and abandonment program for selected
geothermal well locations.
2014 Annual Report GEODYNAMICS LIMITED 23
OUR CO MMUNITY PERFORMAN CE
ENGAGING WITH THE COMMUNITY
The ongoing positive engagement with the communities in
which we operate is an integral part of ensuring the success of
our projects. Geodynamics seeks active, inclusive engagement
with our stakeholders, while respecting their rights and wishes
to engage with us on their terms.
Our aim is to ensure that local stakeholders and the community
are well informed about all the key operational aspects and
developments of our projects. Listening to the feedback and
recommendations of community members as well as providing
opportunities to raise questions and voice any concerns, will help
us develop a project that brings benefits to all.
SAVO ISLAND STAKEHOLDER ENGAGEMENT
During the year Geodynamics appointed an in country manager
Mr Mal Küper, to assist with day-to-day community relations
and communications in the Solomon Islands. Mr Küper has
been engaging with the community to build and maintain good
working relationships, while also keeping stakeholders informed
of relevant business activities and staying abreast of stakeholder
issues and concerns.
Community Consultation
With the completion of the Environmental and Social Impact
Assessment (ESIA) in March, Geodynamics collaborated with
the Department of Environment to conduct several Public
Hearings on Savo Island and in Honiara. These meetings
were an important opportunity for the community members
and stakeholders to respond to the draft ESIA and seek any
clarification from Geodynamics or SKM Consulting on the
findings. To ensure a more inclusive discussion and to enable
the dissemination of information to the broader community,
translations of the executive summary and key ESIA findings in
Pijin and Savo Savo were distributed. The high attendance and
level of interest shown at the meetings was an encouraging sign
of the strong community support for the Project.
As well as hosting formal meetings as part of the ESIA
consultations, Geodynamics has placed a strong emphasis on
the value of informal engagements. As part of field trips to Savo,
we have sought to meet with land owners, community groups
and the House of Chiefs whenever possible. Informal meetings
lead to more open feedback and dialogue, enabling us to gain a
better understanding of their concerns and needs, as we work to
foster a strong relationship with the communities.
24 GEODYNAMICS LIMITED 2014 Annual Report
ESIA Outcomes
A key finding of the ESIA details the potential socio-economic
impact of the Project. The significant project expenditure is
expected to have major direct and indirect economic benefits
to industry and the wider regional economy of Honiara and the
Solomon Islands.
Specifically exploration activities will increase access to
economic resources for individuals and households, while also
providing training and employment opportunities for local
people. Local business and industry are also expected to benefit
through the increased demand for goods and services to
support exploration activities.
Listening to the feedback and recommendations of community
members as well as providing opportunities to raise questions
and voice any concerns, will help us develop a project that brings
benefits to all.
TAKARA STAKEHOLDER ENGAGEMENT
Mr Tim Hewatt was engaged as in country manager for Vanuatu.
Based in Port Villa, Mr Hewatt has been working closely with the
kastom (traditional) land owners and users in the Takara area to
build their understanding of the proposed geothermal project
and develop community ties.
The commencement of the ESIA saw the first in a series of
community consultation conducted by Geodynamics. An
important first meeting laying the foundations of our ongoing
engagement with the community was held in February 2014.
An agreement was signed at the meeting between the Takara
Community and Geodynamics, enabling commencement of the
first stages of the exploration project.
In combination with the ESIA field studies, community meetings
focused on cultural and socio-economic factors were held
in Takara and nearby Emao Island. Meetings with special
interest groups including women and youth groups were of
particular importance, ensuring that all community groups were
represented and consulted.
Further consultation with the community will be held as part of
the ESIA public consultation process. As we progress the project
to the exploration phase, it is our priority to work in close co-
operation with stakeholders to ensure that all parties are informed
and consulted, enabling a mutually beneficial outcome for all.
THE YEAR AHEAD
The continued regular engagement with the communities
in which we operate is of high importance to Geodynamics.
Our project’s long term success is dependent on the
positive relationships and collaborative, transparent work
within the community.
We will continue to strengthen our community performance
during the coming year by:
• Maintaining effective community consultation across our
projects to provide a forum for ongoing feedback and to
ensure local stakeholders are informed of key developments;
• Further consulting and negotiating on land access
agreements, as exploration drilling programs are confirmed;
• Collaborating with local communities in preparation for
exploration drilling to ensure all parties are informed and
consulted on the process; and
• Supporting community development through
community projects.
2014 Annual Report GEODYNAMICS LIMITED 25
ESIA community consultation
at Kaogele Village on Savo Island.
Community development
Geodynamics has now entered the third year of the Surface
Access agreement under which the Company has committed
to fund thirty community projects on the Island (ten per year
for the duration of the three year prospecting licence). To date,
twenty projects supporting local infrastructure improvements,
particularly upgrades of health and education facilities have
been completed. The community projects are overseen by the
Savo House of Chiefs and are identified, scoped and carried
out by the local community using funds provided by the Joint
Venture to secure materials and equipment.
While most projects are focused on the improvement of
infrastructure and facilities, projects have also included the
support of community events. The Savo Island Football
tournament, a key sporting and social event for the youth of the
Island, was supported by the community projects fund. A boys
tournament and a girls tournament were both held over several
weekends, with teams representing their villages, and games
being hosted around the island.
RESO UR C E STATEM ENT S
INNAMINCKA RESOURCES STATEMENT
Background
Located in the Nappamerrie trough area of the northern Cooper
Basin in South Australia, our geothermal resources are based
on the heat stored within the Innamincka granite body drilled at
Habanero, Jolokia and Savina locations.
The Innamincka granite resource is held by Geodynamics under
ten (10) geothermal retention leases, GRLs 3-12. Since the
withdrawal of Origin Energy from the Innamincka joint ventures,
Geodynamics holds 100% of all these licences.
Geodynamics also holds GRLs 20-24 over the Moomba area
and GELs 211 and 268 which adjoin the GRLs 3-12. Since no
deep wells have yet been drilled to test the temperature
and productivity of granite bodies known or believed to
exist beneath these other tenements in South Australia, no
geothermal resources have been declared in these areas.
Resource Estimation
The Innamincka tenements, GRLs 3 -12, cover an area of 991 km2.
These are areas where Geodynamics has high confidence in the
presence of hot granite lying immediately below the Cooper
Basin sedimentary sequences and are the basis of the “in-place”
thermal energy estimates.
Resources estimated for this granite area has been referred
to as “Inferred Geothermal Resources”. Within this larger
area, Indicated and Measured Geothermal Resource estimates
have been based on a small areas around Habanero where
Geodynamics has secured greater geological data through
drilling activities, remote sensing and geological studies over
previous years.
In parallel with the successful Habanero Pilot Plant Project
and preparation of the Field Development Plan, our resource
estimates have been revised and externally reviewed to ensure
compliance with The Geothermal Reporting Code Second
Edition (2010). Key inputs into the resource estimates include:
• Resource estimates are based on 991 km2 of the Innamincka
tenements where the presence of conductive faults within the
granite have been proven at Habanero and Savina;
• Measured Geothermal Resources are estimates based upon a
reasonable, but limited, extension of the existing seismic cloud
at Habanero;
• Measured and Indicated Geothermal Resources are estimates
based upon the presence of one conductive fault as proven at
Habanero and indicated at Savina;
• Inferred Geothermal Resources are estimates based upon the
presence of a possible, second, deeper conductive fault;
• Estimates for all resources are based upon a 20 year project
life with wells drilled at 1,000 metre spacing; and
• Estimates of all geothermal resources are based upon
production forecasts.
As input to the Field Development Plan, a numerical 3D
thermodynamic simulation model of the Habanero reservoir
was developed. This model was used to derive forecasts of
temperature performance of the multi-well system for long-term
circulation at rates of 25, 35 and 45 kg/s. The heat extraction
derived from these models implies a recovery factor of
approximately 6% when circulating at the most likely rate of
35 kg/s for 20 years.
Resources Summary
Area
Depth Range
Temperature
Heat in Place
Geothermal Resources
(Recoverable Thermal Energy)
Units
km2
m
°C
PJth
PJth
Measured
16
Indicated
975
Inferred
991
4,000 – 4,500
4,000 – 4,500
4,500 – 5,000
247
1,400
80
250
89,000
5,000
266
111,000
5,700
Competent Persons Statement
The Exploration Results and estimates of Geothermal Resources and Geothermal Reserves in this report have been compiled in accordance with
The Geothermal Reporting Code, Second Edition (2010), prepared by the Australian Geothermal Reporting Code Committee.
The information in this report is based on data and estimates compiled by Robert Hogarth, who appears on the Register of Practicing Geothermal
Professionals maintained by the Australian Geothermal Energy Group Incorporated at the time of the publication of this report.
Robert Hogarth is an employee of Geodynamics. Robert Hogarth has sufficient experience which is relevant to the style and type of geothermal
play under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in The Geothermal Reporting
Code. Robert Hogarth has consented in writing to the inclusion in this report of the matters based on his information in the form and context in
which it appears.
26 GEODYNAMICS LIMITED 2014 Annual Report
2014 SAVO RESOURCE STATEMENT
Background
The Savo geothermal project is located on the south-east slopes
of Savo Island in the Solomon Islands, approximately 35 km from
the nation’s capital, Honiara. Savo Island is the top 490 m of a
sub-marine stratovolcano which displays numerous geothermal
features including boiling jets and springs, sulphurous steaming
fumaroles and areas of warm ground. Geodynamics has farmed-in
to the prospecting licence over Savo Island that was granted to
Kentor Energy Pty. Ltd. (Kentor). Geodynamics currently holds
25% of the licence and is the project operator. The joint venture
agreement with Kentor provides for Geodynamics to acquire 70%
of the licence after conducting agreed exploration activities.
Resource Estimation
The initial geothermal resource assessment for Savo was prepared by
Dr Graeme Wheller of Volcanex in 2013 and forms the basis for this
resource statement. This assessment is based upon a comprehensive
geothermal conceptual model for the island. The model incorporates
the nature and locations of the main surface thermal features, the
geochemical and isotopic compositions of the thermal fluids, and
a 3D model of the sub-surface resistivity structure derived from a
magneto-telluric (MT) survey of the island. The figure above shows a
cross-section through the 3D MT model and indicates the location of
the main surface features in the south-east of the island.
In the conceptual model, all of the known surface thermal fluids
are considered to be of secondary origin, formed as a result of
having absorbed H2S, CO2 and steam evolving from the boiling
tops of two hydrothermal systems about 350-500m below the
surface. The larger system occurs in the southern part of the
island and the smaller system in the north.
The surface thermal fluids contain very little chloride but substantial
and variable amounts of sulphate, silica and bicarbonate. Contrasting
low-volume acidic and high-volume alkaline sulphate fluids
are thought to have been derived from small, near-surface
ephemeral pools and a shallow flowing aquifer lying below
the summit crater floor, respectively. Silica contents suggest the
formation temperatures of the latter are probably in excess of 200°C.
Discharges of primary hydrothermal fluids from the deep
convection cells are not known on Savo Island but may
occur offshore on the lower flanks of the volcano. Resource
temperatures have been estimated from the minimum
temperatures at which water would boil directly below the
conductive clay caps suggested by the 3D resistivity model.
The absence of strong surface discharges of magmatic gases
suggests the primary fluids are unlikely to be excessively acidic
and therefore may be suitable for electricity generation.
The geothermal resource estimate for Savo Island has been
prepared based upon a probabilistic stored-heat assessment
using ranges of input parameters. Since no new data has been
acquired recently, the parameter ranges established by Wheller
(2013) have been adopted and are shown in the table below.
Input Estimates and Assumptions
Northern Area
Resource Area
Resource Temperature
Southern Area
Resource Area
Resource Temperature
Common
Resource Thickness
Porosity
Liquid Saturation
Cut-off Temperature
Rock Density
Rock Specific Heat Capacity
Recovery Factor
Conversion Efficiency
Plant Capacity Factor
Project Economic Life
Units Minimum
Most Likely Maximum
1.5
220
5.0
240
500
5
5
10
km2
°C
km2
°C
m
%
%
°C
kg/m3
J/(kg.K)
%
%
%
yr
3.9
260
8.9
280
1,500
9
25
14
2.6
240
6.5
260
1,000
7
100
180
2,500
900
17.5
12
90
30
Estimates and assumptions for Savo Island input parameter
Resource Summary
P90
Units
P50 (Median)
The results of this probabilistic assessment are shown below
in Table 2. Since neither prospect has yet been drilled, the
resources are categorised as Inferred Geothermal Resources.
Results
Northern Area
Stored Heat
Inferred Geothermal Resources
(Recoverable Thermal Energy)
Electrical Power Potential
Southern Area
Stored Heat
Inferred Geothermal Resources
(Recoverable Thermal Energy)
Electrical Power Potential
PJth
MWe
209
29
116
16
60
8
33
5
1,340
PJth
MWe
PJth
PJth
390
220
820
P10
620
100
14
2,020
329
46
Geothermal resource and power potential estimates for Savo Island
Geodynamics is planning to drill exploration wells in the
Southern Area, with a view to developing an initial 10 MWe
power project to supply the Honiara market.
NORTH WEST
SOUTH EAST
WESTERN CRATER
FUMAROLES
EASTERN CRATER FUMAROLES
POGO & REMBOKOLA SPRINGS
TAGHOMBA
SPRINGS
WEST TAGHOMBA
ACID SPRINGS
SOUTH TAGHOMBA
FUMAROLES
Ohm.m
100.0
79.4
63.1
50.1
39.8
31.6
25.1
19.9
15.8
12.6
10.0
7.9
6.3
5.0
4.0
3.2
2.5
2.0
1.6
1.3
1.0
0.8
0.6
0.5
)
.
l
.
s
.
a
m
(
n
o
i
t
a
v
e
l
E
1000
800
600
400
200
0
-200
-400
-600
-800
-1000
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Distance (Km)
3.5
4.0
4.5
5.0
5.5
MT Station
Horizontal scale 1:25000 Vertical scale 1:25000 Vertical Exaggeration 1
North-west to south-east section through the 3D MT model with topography and nearby surface geothermal features.
2014 Annual Report GEODYNAMICS LIMITED 27
RESO UR C E STATEM ENT S (CONTINUED)
of a 2009 magneto-telluric survey. The resource thickness has
been based upon the planned well design. There is no evidence
in the geochemistry for steam zones in the reservoir, so 100%
liquid saturation has been assumed. The range of recovery
factors assumed (10-30%) is based upon experience in similar
geothermal systems and projects elsewhere.
The resource temperatures used in this estimate have been
based upon geothermometry from surface water samples, with
a minimum value set at 120°C, just above the approximate 100°C
recorded near surface. The only new data obtained since 2011
have been temperature measurements recorded in shallow, soil
sampling holes drilled along the Takara airstrip. The deepest of
these holes was drilled to 29 metres below surface and borehole
temperatures were recorded at 9 metres and at 29 metres
depth. The temperature gradient between these two borehole
recordings suggests that the minimum resource temperature
of 120°C is overly conservative. This would suggest that the
resource estimate is conservative, but until an exploration well is
drilled the current estimate has been retained.
In addition, rock samples recovered from the bottom four metres
of the 29 metre hole at Takara are heavily altered basaltic rock,
consisting largely of smectite clays which indicates that the
hole has drilled into the top of the clay cap. This confirms the
presence of a hydrothermal system beneath the Takara airstrip.
Input Estimates and Assumptions
Resource Area (Target C)
Resource Thickness
Porosity
Resource Temperature
Base Temperature
Rock Density
Rock Specific Heat Capacity
Liquid Saturation
Recovery Factor
Conversion Efficiency
Plant Capacity Factor
Project Life
Units
km2
m
%
°C
°C
kg/m3
J/(kg.K)
%
%
%
%
yr
Minimum Most Likely Maximum
4.30
1,600
20
190
2.60
500
10
120
10
10
30
17
3.45
1,375
15
150
80
2,500
1,010
100
20
13.5
98
30
Input parameters for Takara stored heat resource assessment.
RESOURCES SUMMARY
The results of this probabilistic assessment for the Takara
geothermal prospect are shown in the table below. Since the
prospect has yet to be drilled, the resource is categorised as
an Inferred Geothermal Resource.
Results
Stored Heat
Inferred Geothermal Resources
(Recoverable Thermal Energy)
Electrical Power Potential
Units
PJth
PJth
MWe
P50
(Median)
730
140
18
P90
430
82
10
P10
1,000
220
28
Takara geothermal resource and power potential estimates
Geodynamics is planning to drill an exploration well at Takara,
with a view to developing an initial 4 MWe power project to
supply the Port Vila market.
2014 TAKARA RESOURCES STATEMENT
Background
The Takara geothermal project is located on the north-east
corner of the island of Efaté in the Republic of Vanuatu. Efaté
is the main island of Vanuatu and the nation’s capital, Port Vila,
is located approx. 25 km south-west from Takara. The Takara
production licence is held by KUTh Energy (Vanuatu) Limited
which became a wholly-owned subsidiary of Geodynamics in
January 2014.
The presence of hot springs at Takara and elsewhere on Efaté
has long been recognised as an indicator of the potential for
geothermal development on the island. Resource investigations
have been undertaken by several consulting groups including
BRGM (1972), KRTA-GENZL (1986) and Sinclair Knight Merz
(SKM, 2011).
Resource Estimation
The most recent and complete geothermal resource assessment
was prepared for KUTh by SKM in July 2011 and forms the basis
for this resource statement. The SKM 2011 assessment identified
three geothermal prospects within the Takara licence area,
labelled Targets A, B and C. Of these three, Target C, located in
the vicinity of the Takara airstrip, was recommended by SKM
as the “priority for drilling on the basis of the highest measured
surface temperature and where there is low resistivity and the
conductive cap is thin”. This Target C prospect described by
SKM is the focus for Geodynamics’ Takara geothermal project.
Limited new geological data has been obtained since 2011, hence
the resource estimates reported here have been taken directly
from the SKM report. The figure below provides a cross-section
view of the MT resistivity model looking towards the west-south-
west and shows the proposed exploration well trajectory.
Cross section view through Takara MT resistivity model looking
towards the west-south-west. Red shading indicates
<5 ohm.m and yellow shading indicates 5-8 ohm.m.
The resource estimate for Takara has been prepared based upon
a probabilistic stored-heat assessment using ranges of input
parameters. The inputs and results for this estimate are shown
in the tables below. The resource area has been based upon
the interpreted extent of the conductive layer using the results
28 GEODYNAMICS LIMITED 2014 Annual Report
2014 FI NANCIAL REP ORT
GEODYNAMICS LIMITED ABN 55 095 006 090
CONTENTS
Directors’ Report
Auditor Independence Declaration
Corporate Governance Statement
Statement of Comprehensive Income
Statement of Financial Position
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the
Members of Geodynamics Limited
30
44
45
51
52
53
54
55
77
78
2014 Annual Report GEODYNAMICS LIMITED 29
DIRECTOR PROFILES
Your Directors submit their report for the period ended 30 June 2014. The names and details of the Directors of Geodynamics
Limited in office during the financial year and until the date of this report are as follows. Directors were in office for this entire
period unless otherwise stated.
NAME & QUALIFICATIONS
EXPERIENCE
KEITH SPENCE
B.Sc (Hons), FAIM
Non-executive Chairman
GEOFF WARD
B.E (Chem) (Hons) MBA
Managing Director & CEO
ANDREW STOCK
B.Eng. (Chem) (Hons), FIE Aust
Non-executive Director
ROBERT DAVIES
CMA (Canada)
Non-executive Director
Mr Spence was most recently Executive Vice President Enterprise Capability for
Woodside and was responsible for ensuring the business operated with the best
people, technology and processes. Mr Spence held many roles during his time with
Woodside, including Chief Operating Officer, Acting Chief Executive Officer, Director –
Oil Business Unit, Director – Northern Business Unit and Exploration Manager – North
West Shelf. Mr Spence has gained a broad knowledge across the industry having over
30 years of experience in the oil and gas industry including 18 years with Shell.
Mr Spence is a Non-executive Director of Oil Search. He is Chairman of the State
Training Board of Western Australia, the National Offshore Petroleum Safety and
Environmental Management Authority Board and the Industry Advisory Board of the
Australian Centre for Energy and Process Training.
Mr Ward was appointed Managing Director and Chief Executive Officer of
Geodynamics in January 2011. Prior to his appointment he held the role of Director
at Azure Capital, a Perth-based independent advisory firm, offering corporate
advisory services to leading firms in the resources and engineering industries where
he had worked since 2007.
Mr Ward has over 20 years experience in the energy and finance industries in senior
roles covering business development, mergers and acquisitions, operations, oil and
product trading, strategic and organisational development, planning and economics,
investor relations and new project development.
Mr Ward holds an honours degree in Chemical Engineering from the University of
Melbourne and a Masters of Business Administration from the University of Western
Australia Business School, receiving the Director’s Letter of Commendation.
Mr Andrew Stock was formerly Director, Executive Projects for Origin Energy and in
previous roles, he was responsible for Origin’s major capital investments in upstream
petroleum, power generation, and low emissions technology businesses.
With over 35 years of experience, he previously held senior management positions
in energy industries in Australia and overseas. He is a Non-executive Director of
the listed Companies Horizon Oil Limited (since February 2011) and Silex Systems
Limited (since August 2013), a Board Member of Alinta Holdings and the Clean
Energy Finance Corporation, a member of the Advisory Board of the Faculty of
Engineering, Computer and Mathematical Sciences, Institute for Mineral and Energy
Resources and Centre for Energy Technology at the University of Adelaide, and
Melbourne University’s Energy Institute. He has a Chemical Engineering degree
(Honours) from the University of Adelaide, is a Fellow of the Institution of Engineers
Australia, and a Graduate member of the Australian Institute of Company Directors.
Mr Robert Davies is a Certified Management Accountant (Canada) and has extensive
senior finance experience with global mining and resource companies. He was
formerly the Chief Executive Officer and a Director of Australian Energy Company
Limited, an unlisted public company. Prior to that he was Executive Vice President
and Chief Financial Officer for Inco Ltd, the western world’s largest nickel producer.
Prior to that, he was Chief Financial Officer for Alumina Ltd., and General Manager
Treasury Tax and Investor Relations for WMC Ltd. He has previously held senior
finance positions with BHP in Canada, the US, Chile and Australia, acquiring
significant operational and corporate finance experience. He was also previously a
director of PT Inco and Alcoa of Australia.
30 GEODYNAMICS LIMITED 2014 Annual Report
DIRECTORS’ REPORT NAME & QUALIFICATIONS
EXPERIENCE
Dr Jack Hamilton was formerly CEO of Exergen Pty Ltd, a low emission coal resource
development Company and prior Director of NWS Ventures with Woodside Energy.
Dr. Hamilton is also a non-executive director of Southern Cross Electrical Engineering
Ltd, Calix Ltd, Duet Group, Antilles Oil and Gas NL and Federation Training. Dr
Hamilton graduated from Melbourne University with a Bachelor of Chemical
Engineering and Doctorate of Philosophy in 1981. He has over 28 years’ experience
both locally and internationally in operations management, in refining, petrochemicals
and gas production, marketing, strategy and LNG project management.
Mr Michel Marier joined The Sentient Group in 2009 and he is based at their office in
Sydney. Before joining the Sentient Group, Mr Marier worked 8 years at the Private
Equity division of la Caisse de dépôt et placement du Québec (CDPQ). While at
CDPQ, his responsibilities ranged from currency hedging, risk and return analysis to
investments. In 2006, he participated in the establishment of a new sector in the
Private Equity division – distressed debt. In less than two years, the portfolio grew to
billions through co-investments and private equity funds. After this accomplishment,
Mr Marier concentrated his efforts on restoring the natural resources sector within the
Private Equity division.
Michel Marier holds a Master’s degree in finance from HEC Montreal. He is a CFA
charter holder. He is a former Director of Natural Resources USA Corp, and a Director
of Samco Gold, a company listed on the TSX.V exchange.
Mr. George Miltenyi has been owner, investor and director in a wide range of
commercial ventures including companies engaged in geothermal energy, distributed
tri-generation, organisational development, marketing, immigration, education, life
insurance, water distillation technology and recruitment. Since 1989, George has been
the managing director of an organisation development company, EMD which consults
to some of Australia’s largest corporations.
For the past two decades George has had interest in renewable energy, energy
efficiency and ways to commercialise new technologies. He constantly scans the
market globally for new opportunities. His expertise is building and optimising
organisations. He was instrumental in building one of Australia’s largest English
language educational companies (ACL) and was involved in floating a recruitment
firm (Rubicor), which aggregated 19 separate recruitment companies.
JACK HAMILTON
B.Eng. (Chem), Ph.D, FAICD
Non-executive Director
MICHEL MARIER
BBA (Int’l Mgt), M.Sc. (Finance), CFA, FRM
Non-executive Director
GEORGE MILTENYI
LLB, BSW
Non-executive Director
(appointed 1 March 2014)
COMPANY SECRETARY
TIM PRITCHARD
MCom, MIT, CPA, GIA (Cert)
Mr Tim Pritchard joined Geodynamics in 2010 as Financial Controller and became Chief Financial Officer in May 2011 responsible for
managing all financial activities of the Company as well as leading the information technology team. He was appointed Company
Secretary in March 2012.
Mr Pritchard has over 20 years management experience in finance, accounting, consulting, project management and information
technology. In addition to extensive accounting experience, he has led a number of successful business transformation and system
implementation assignments that have resulted in significantly improved financial processes and business systems.
Before joining Geodynamics, Mr Pritchard was most recently engaged by leading institutional investment company, QIC as Head of
Management Information.
2014 Annual Report GEODYNAMICS LIMITED 31
D IR ECTOR S’ REP ORT (CONTINUED)
CORPORATE STRUCTURE
Geodynamics Limited is a company limited by shares, incorporated and domiciled in Australia. It listed on the Australian Securities
Exchange on September 2002 under code GDY. Its registered office and principal place of business is Level 3, 19 Lang Parade,
Milton QLD 4064.
PRINCIPAL ACTIVITIES
The principal activity of Geodynamics Limited during the financial year was to explore and develop areas suitable for geothermal
power production or utilisation of geothermal direct heat applications.
Geodynamics actively monitors developments in clean energy and clean technology markets to assess opportunities to utilise
its skills and capacity in clean energy and clean technology related projects, technologies or services that provide an acceptable
return for shareholders. Geodynamics has an advanced capability and understanding of energy markets and strategies, the impact
of emerging technologies and business models in the clean technology and energy sectors, and a well established framework for
business management and corporate governance that positions the company to be an active player in these sectors.
Geodynamics has established a leading capability in the exploration and development of Enhanced Geothermal Systems (EGS).
Through our Cooper Basin tenement position covering the Innamincka Deep granite resource the company has identified a
substantial heat resource with the potential to play a material role in Australia’s long term energy system as a reliable source of large
scale continuous and controllable energy. In exploring and demonstrating the capability of supplying EGS derived power from the
Innamincka Deep granite, Geodynamics has capacity to manage the technical and commercial development of major utility projects,
the identification, assessment and development of sub-surface resources, the management of construction and operational
activities associated with high risk activities in remote locations and the appropriate management of HSE and risk associated with
these activities to a high standard. The Company is pursuing the further development of the identified Innamincka Deep resources
through a research program together with Beach Energy Limited to investigate the use of geothermal resources to supply heat and/
or power to potential gas developments in the area.
Geodynamics continues to develop its portfolio of conventional geothermal projects based on hydrothermal (volcanic) resources.
The Company has identified that there is a good opportunity to utilise our geothermal development capacity to supply power to
isolated or island markets that have access to good high temperature geothermal resources and are currently supplied through
high cost imported liquid fuels such as diesel or fuel oil. The first project of this type is the Savo Island Project, located in the
Solomon Islands, approximately 35 km from the capital of Honiara. The Company acquired its interest in the Savo Island Project in
November 2012 and is targeting initial exploration drilling to be undertaken in 2015 with a target of first power production in 2018.
The second project is the Takara project in Vanuatu. The Company acquired this project through its acquisition of KUTh Energy
Limited during the financial year with exploration drilling targeted to be undertaken late 2014. Commercial negotiations, land
access and environmental studies are all being progressed for these projects to allow a decision on exploration drilling to be made.
Geodynamics continues to analyse other geothermal project opportunities both in the Pacific Islands as well as globally.
REVIEW AND RESULTS OF OPERATIONS
The Company realised a loss before tax for the financial period as set out below:
Loss before income tax expense
Net loss attributable to members of Geodynamics Limited
Earnings per Share
Basic and diluted loss per share
2014
$
2013
$
(14,780,549)
(105,092,252)
(14,780,549)
(105,092,252)
(cents)
(3.51)
(cents)
(25.86)
In the 12 months to 30 June 2014, Geodynamics has made further progress in its development of zero-emissions, renewable energy
generation. The key achievements and highlights for the 12 months to June 2014 were as follows:
32 GEODYNAMICS LIMITED 2014 Annual Report
Takara Project
• Signing of agreement with kastom (traditional) owners for
the commencement of first stage exploration activities at
Takara, Vanuatu, with strong support from Vanuatu Prime
Minister Carcasses and key stakeholders.
• Commencement of Environmental and Social Impact
Assessment and community engagement program for Takara
Geothermal Power Project in Vanuatu.
Other
• Geodynamics received the Clean Energy Council (CEC)
Innovation Award, which recognises the leading edge
technology developed and deployed in producing Australia’s
first Enhanced Geothermal Systems (EGS) power using the
1 MWe Habanero Pilot Plant. In addition, founding member of
Geodynamics and former Chief Scientist, Dr Doone Wyborn,
was awarded the Geothermal Resource Council Special
Achievement Award for his important contribution to the
development of EGS over 15 years.
EMPLOYEES
The Company had 23 equivalent full time employees as at 30
June 2014 (2013: 30 employees).
DIVIDEND
The Directors do not propose to recommend the payment of a
dividend in respect of the period ended 30 June 2014.
DIRECTORS’ INTERESTS IN THE SHARES AND OPTIONS
OF THE COMPANY
As at the date of this report, the interests of the Directors in
the shares of Geodynamics Limited were:
DIRECTOR
K. Spence
G. Ward
R. Davies
J. Hamilton
M. Marier
A. Stock
G. Miltenyi
FULLY PAID ORDINARY
SHARES
OPTIONS OVER ORDINARY
SHARES
212,413
730,319
120,775
481,708
-
62,315
2,648,152
-
-
-
-
-
-
-
REVIEW AND RESULTS OF OPERATIONS (continued)
Habanero
• The 1 MWe Habanero Pilot Plant Trial concluded on 7
October 2013 with no safety or environmental incidents
throughout the campaign. Prior to closure of trial, the plant
was operating at 19 kg/s and 215°C production well-head
temperature; the highest results ever achieved at the plant.
The Field Development Plan incorporating data from the trial
was also completed, identifying future development options
for this resource.
• Geodynamics hosted The Hon. Gary Gray AO, MP, Federal
Minister for Resources and Energy and other guests at a site
tour to observe the 1 MWe Habanero Pilot Plant in operation
in July 2013.
• Sale of Cooper Basin Operating base to Beach Energy
Limited for a consideration of $1.5m, with Geodynamics to
retain all geothermal assets and power plant facilities.
• Signing of an Exclusivity Agreement with Beach Energy
Limited, for the right to negotiate a farm-in to Geodynamics’
geothermal exploration tenements in the Cooper Basin.
Savo Island Geothermal Power Project
• Activities for the Savo Island Geothermal Power Project
focussed on continued engagement with customary
landowners to negotiate land access agreements, with
government ministries to secure further exploration
approvals and with the Solomon Islands Electricity
Authority to progress electricity supply and power purchase
agreements.
• Exploration drilling planning for the Savo Island Geothermal
Power Project included procurement of long lead items and
materials, the company purchased a track mounted drilling
rig for the campaign.
• Completion and submission of the Savo Island Geothermal
Project Environmental and Social Impact Assessment
to Solomon Islands Department of Environment. Report
highlights significant social and economic benefits for the
Solomon Islands, the city of Honiara and the local community
on Savo Island, through reduced reliance on imported diesel
fuel, increased reliability of power supply, reduced end user
prices and employment opportunities.
• Receipt of development consent from the Solomon Islands
Department of Environment in relation to exploration
activities for the Savo Island Geothermal Power Project.
KUTh acquisition
• In September 2013, Geodynamics announced its intention
to acquire 100% of geothermal energy company, KUTh
Energy Limited (KUTh), through a conditional off-market
acquisition offer. In January 2014, Geodynamics successfully
completed the compulsory acquisition of all outstanding
shares to hold 100% of KUTh. The acquisition of KUTh
aligns with Geodynamics’ strategy to develop a portfolio of
high quality, small-medium scale, conventional (“volcanic-
hosted”) geothermal projects initially targeting the Pacific
Islands region, capable of providing nearer term revenues to
shareholders.
2014 Annual Report GEODYNAMICS LIMITED 33
D IR ECTOR S’ REP ORT (CONTINUED)
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant changes in the state of affairs of the Company
during the financial period were as follows:
• The acquisition of KUTh Energy Limited was completed in
January 2014.
• The focus activities in the Cooper Basin after the completion
of the pilot plant trial is on the plugging and abandonment
of wells and progressing the research program with Beach
Energy Limited to investigate the use of geothermal
resources to supply heat and/or power to potential gas
developments in the area.
• The focus of geothermal exploration activities has moved to
the Pacific region, specifically the projects in the Solomon
Islands and Vanuatu.
There were no other significant changes in the state of affairs
of the Company during the financial period.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
There has not arisen between 30 June 2014 and the date
of this report any item, transaction or event of a relevant
and unusual nature likely, in the opinion of the Directors of
the Company, to affect significantly the operations of the
Company, the results of those operations, or the state of affairs
of the Company.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The principal activity of Geodynamics Limited during the
financial year was to explore and develop areas suitable for
geothermal power production or utilisation of geothermal
direct heat applications.
In addition to this historic focus, Geodynamics has a strong
capability in a range of clean energy technologies and
the associated utility and infrastructure sectors. With the
significant changes occurring in these markets we are
continuing to actively assess and consider opportunities
outside our existing portfolio that can provide returns to
shareholders. Our activities in this area have included a
rigorous and deliberate review of emerging opportunities in
the clean technology sectors that has identified a number of
areas of opportunity for further consideration.
While continuing to actively seek opportunities outside of our
traditional geothermal portfolio, we will continue to pursue
our planned programs for our Cooper Basin, Solomon Islands
and Vanuatu assets. The Company has a specific plan for each
asset focussed on securing value through identifying a clear
path to market and funding strategy, securing customers and
environmental approvals, and defining a clear technical and
operational plan.
Having successfully completed the Pilot Plant demonstration
during the past financial year and completing the sale of the
Habanero Camp to Beach Energy Limited, additional field
works in the Cooper Basin will be undertaken to plug and
abandon and complete site remediation works associated with
the earlier Habanero-3, Habanero-2 and Celsius-1 well sites in
line with our permit obligations.
With the continued exploration for unconventional gas and
oil in the Cooper Basin we believe there is potential for the
market for energy, both power and industrial heat, to grow
and which our Innamincka Deeps resource is well positioned
to supply. Securing such a customer capable of supporting
further capital expenditure will be a pre-requisite to any further
material spending at Habanero. Geodynamics is working
with potential customers however if further exploration
and development activities are required to allow potential
customers to enter into a contract this may be delayed.
ENVIRONMENTAL REGULATIONS AND PERFORMANCE
Geodynamics Limited is strongly committed to the effective
environmental management of our exploration, development
and operating activities. Our Environmental Policy is the driver
for maintaining our Environment Management System (EMS).
This in turn provides the framework to support and guide
activities, both in our offices and on our sites, in relation to
environmental performance.
A successful annual surveillance audit by SAI Global ensured
Geodynamics maintained ISO 14001:2004 certification in
2013/2014. Geodynamics made a business decision not to
continue our EMS Certification mid-2014 predominantly due
to our decreased presence in the Cooper Basin - the primary
focus area of our EMS. Geodynamics will continue to manage
the rehabilitation and plug and abandonment activity in the
Cooper Basin in line with the Statement of Environmental
Objectives (SEO) requirements for the area.
A summary of the Company’s environmental performance over
the year is as follows:
• Generally, compliance has been achieved with environmental
regulatory requirements.
• No serious environmental incidents occurred.
• All scheduled environmental audits have been completed on
time, with the majority of the findings closed out or in progress.
• Notices of Entry have been submitted to all relevant
stakeholders prior to commencement of activities, including
traditional owners and pastoralists, with no complaints received.
• The environmental best practice reference guide (‘The Green
Book’) is provided to site personnel and contractors once
inducted. It provides a best practice reference guide specific
to Geodynamics’ activities in the Cooper Basin.
• Environmental and Social Impact Assessments have been
carried out in the Solomon Islands and Vanuatu (Takara).
• The 1MW Geothermal Power Plant SEO 5-yearly review was
undertaken by Geodynamics.
We continue to build on our environmental achievements by
seeking ways to reduce the day-to-day impact of our activities
on the environment while at the same time maintaining
a framework for continued environmental performance
focussing on mitigating our environment impacts.
34 GEODYNAMICS LIMITED 2014 Annual Report
ENVIRONMENTAL REGULATIONS AND PERFORMANCE
(continued)
In particular, Geodynamics is focussing on rehabilitating those
areas that are no longer being actively used for geothermal
exploration and development. Monitoring and evaluation of
these areas indicates that Geodynamics’ rehabilitation work
at the Savina 1 and Celsius 1 & 2 well sites has resulted in good
vegetation cover that either meets or exceeds the revegetation
requirements for such well sites.
Even within active sites such as the main Habanero camp,
Geodynamics is minimising its footprint by cordoning off
areas not required for operations so that they can recover and
revegetate naturally.
The majority of rehabilitation work will commence once post-
abandonment monitoring activities have concluded.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND
OFFICERS
During the financial year, the entity paid premiums in respect
of contracts insuring directors, secretaries, and executive
officers of the Group and related entities against liabilities
incurred as director, secretary or executive officer to the extent
permitted by the Corporations Act 2001, subject to the terms,
conditions, limitations and exclusions of the policy.
ROUNDING
The amounts contained in this report and in the financial report
have been rounded to the nearest $1,000 (unless otherwise
stated) under the option available to the Company under ASIC
Class Order 98/0100. The Company is an entity to which the
Class Order applies.
SHARE OPTIONS
Unissued shares – employee options
As at the date of this report, there were NIL unissued ordinary
shares under employee options (2013 – 6,828,319).
Shares issued as a result of the exercise of employee options
There were no employee options exercised during the financial
year (2013 – Nil) or since the end of the financial year.
Unissued shares – shareholder options
As at the date of this report, there were no unissued ordinary
shares under shareholder options (2013 – Nil).
Shares issued as a result of the exercise of shareholder
options
There were no shareholder options exercised during the
financial year (2013 – Nil) or since the end of the financial year.
DIRECTORS’ MEETINGS
During the period there were eight directors’ meetings held of which four were by telephone conference. The number of directors’
meetings and the number of meetings attended by each of the Directors of the Company during the financial period are as follows:
DIRECTORS’ MEETINGS
AUDIT & RISK MANAGEMENT
COMMITTEE MEETINGS
REMUNERATION & NOMINATIONS
COMMITTEE MEETINGS
HEALTH, SAFETY & ENVIRONMENT
COMMITTEE MEETINGS
NUMBER HELD
WHILST IN OFFICE
NUMBER
ATTENDED
NUMBER HELD
WHILST IN OFFICE
NUMBER
ATTENDED
NUMBER HELD
WHILST IN OFFICE
NUMBER
ATTENDED
NUMBER HELD
WHILST IN OFFICE
NUMBER
ATTENDED
K. Spence
G. Ward
B. Davies
J. Hamilton
M. Marier
A. Stock
G. Miltenyi
8
8
8
8
8
8
2
8
8
8
8
8
8
1
-
-
2
2
2
-
-
-
-
2
2
2
-
-
3
-
3
-
-
3
-
3
-
3
-
-
3
-
1
-
-
1
1
1
-
-
-
-
1
1
1
-
2014 Annual Report GEODYNAMICS LIMITED 35
D IR ECTOR S’ REP ORT (CONTINUED)
DIRECTORS’ MEETINGS (continued)
The Company had three committees during the year with the
following membership:
Audit & Risk Management Committee – Membership
comprises three Non-executive Directors being Messrs Davies
(Chair), Marier and Hamilton.
Remuneration & Nominations Committee – Membership
comprises three Non-executive Directors being Messrs Stock
(Chair), Spence and Davies.
Health, Safety & Environment (HSE) Committee –
Membership comprises three Non-executive Directors being
Messrs Hamilton (Chair), Spence, and Stock with G. Ward as an
ex-officio member. The Company’s Health and Safety Manager
(K. Coates) is also an ex-officio member of this Committee.
REMUNERATION REPORT (AUDITED) (continued)
5. Executive contracts
6. Non-executive Director remuneration (including statutory
remuneration disclosures)
7. Additional statutory disclosures
1. Introduction
The remuneration report details the remuneration
arrangements for key management personnel (KMP) who are
defined as those persons having authority and responsibility
for planning, directing and controlling the major activities of
the Company directly or indirectly including any Director.
For the purposes of this report, the term ‘executive’
encompasses the Managing Director and the executive
management team of the Company.
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The Directors received a declaration from the auditor of
Geodynamics Limited which is listed immediately after this
report and forms part of this Directors’ report.
During the 2014 financial year, no non-audit services were
provided by the entity’s auditor, Ernst & Young (2013: $nil).
Other assurance services provided by Ernst & Young represent
audits of government grants.
NON-EXECUTIVE DIRECTORS (NEDS)
K. Spence
Chairman
R. Davies
J. Hamilton
M. Marier
A. Stock
Director
Director
Director
Director
G. Miltenyi
Director – appointed 1 March 2014
EXECUTIVE DIRECTORS
G. Ward
Managing Director and CEO
OTHER EXECUTIVES
K. Coates
Operations Manager
R. Hogarth
Reservoir Engineering Manager
T. Pritchard
Chief Financial Officer & Company Secretary
A. Hodson
Well Engineering and Technology Manager
A. Mills
Project Engineering Team Leader
2. Remuneration governance
Remuneration Committee
The Remuneration & Nominations Committee comprises three
Non-executive Directors (NEDs). The Remuneration and
Nominations Committee has the primary objective of assisting
the Board in developing and assessing the remuneration policy
and practices of the Directors, Chief Executive Officer (CEO)
and Senior Executives who report directly to the CEO.
Specifically, the Board approves the remuneration
arrangements of the CEO, the aggregate annual fixed
remuneration salary review, the level of the short-term
incentive (STI) pool and the methodology for awards
made under the long-term incentive (LTI) plan, following
recommendations from the Remuneration & Nominations
Committee. The Board also sets the aggregate remuneration
of NEDs, which is then subject to shareholder approval, and
NED fee levels.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst & Young, as part of the terms of
its audit engagement against claims by third parties arising
from the audit (for an unspecified amount). No payment has
been made to indemnify Ernst & Young during or since the
financial year.
CORPORATE GOVERNANCE
The Directors recognise the need for the highest standards of
corporate behaviour and accountability and therefore support
and have adhered to the principles of Corporate Governance.
The Company’s Corporate Governance Statement is printed
immediately following this Directors’ Report.
REMUNERATION REPORT (AUDITED)
This remuneration report for the year ended 30 June 2014
outlines the remuneration arrangements in place for Directors
and Executives of Geodynamics Limited in accordance
with the requirements of the Corporations Act 2001 and its
Regulations. This information has been audited as required by
section 308(3C) of the Act.
The remuneration report is presented under the following
sections:
1.
Introduction
2. Remuneration governance
3. Executive remuneration arrangements
A. Remuneration principles and strategy
B. Approach to setting remuneration
C. Detail of Incentive Plans
4. Executive remuneration outcomes for 2013/14 (including
link to performance)
36 GEODYNAMICS LIMITED 2014 Annual Report
REMUNERATION REPORT (AUDITED) (continued)
2. Remuneration governance (continued)
Committee assessments incorporate the development of
remuneration policies and practices which will enable the
Company to attract and retain executives who will create value
for shareholders.
Executives will be fairly and responsibly rewarded having
regard to the performance of the Company, the performance
of the executive and the general market environment. The
Committee also assists the Board in its own self evaluation
by annually reviewing the process for self evaluation. This
considers attributes such as the qualitative and quantitative
nature of the review, and the mix between total Board review
and individual Director review.
The Remuneration & Nominations Committee meets regularly
through the year. The CEO attends remuneration committee
meetings by invitation, where management input is required.
The CEO is not present during any discussions related to his
own remuneration arrangements.
Further information on the Remuneration & Nomination
Committee’s role, responsibilities and membership can be
found on the Company’s web site at www.geodynamics.com.au
Use of Remuneration Consultants
In keeping with the legislation relating to the appointment
of remuneration consultants for organisations, Guerdon
Associates was appointed by the Chair of the Remuneration
and Nominations Committee to provide advice on the Long
Term Incentive for the Managing Director.
Based on the advice and recommendation provided by
Guerdon Associates, the Geodynamics Limited Share
Appreciation Rights Plan was introduced and approved by
shareholders at the company’s Annual General Meeting on
Thursday 28 November 2013.
The fees paid to Guerdon Associates for the remuneration
recommendations were $40,481.
The Company is satisfied the advice received from Guerdon
Associates is free from undue influence from the Managing
Director to whom the remuneration recommendations apply as
the reports received from Guerdon Associates were presented
to the Remuneration and Nominations Committee.
Remuneration Report approval at FY12/13 AGM
The FY12/13 remuneration report received positive shareholder
support at the FY12/13 AGM with a vote of 94.5% in favour.
3. Executive Remuneration Arrangements
3A. Remuneration principles and strategy
Geodynamics’ executive remuneration strategy is designed to
attract, motivate and retain highly skilled executives and align
the interests of executives and shareholders.
To this end, the company embodies the following principles
in its remuneration framework:
• Provide competitive salaries to attract high calibre executives;
• Link executive performance rewards to medium and longer term
shareholder value creation through the KPI linked Short Term
Incentive plan and periodic grants of shares and share options;
• Establish appropriate share price performance hurdles under
its long term incentive plan to align executive reward with
shareholder value creation, the achievement of which will
depend on the Company achieving key corporate milestones
that are integral to the Company’s successful completion of
its business plan.
The Company aims to reward its Executives with a level and
mix of remuneration commensurate with their position and
responsibilities within the Company and so as to:
• Reward Executives for company, business division and
individual performance against targets set by reference to
appropriate benchmarks;
• Link reward with the strategic goals and performance of the
Company; and
• Ensure total remuneration is competitive by market standards.
3B. Approach to setting remuneration
The Managing Director’s and key executives’ emoluments
are structured to retain and motivate Executives by offering
a competitive base salary, a short term annual cash-based
performance related component together with longer term
performance incentives through the Geodynamics Limited
Share Appreciation Rights Plan which allow executives to align
with the success of Geodynamics Limited.
Remuneration consists of the following key elements:
• Fixed Remuneration – Base salary and superannuation;
• Variable Remuneration under the Geodynamics Short Term
Incentive Plan (STIP) – payable in cash at the end of the
financial year;
• Variable Remuneration under the Geodynamics Limited
Share Appreciation Rights Plan payable in Shares subject to
performance conditions in accordance with the Plan.
The level of fixed remuneration is set so as to provide a base
level of remuneration which is both appropriate to the position
and is competitive in the market. Fixed remuneration of the
Managing Director is reviewed annually by the Remuneration
and Nominations Committee and approved by the Board.
Factors considered include Company and individual
performance, relevant comparative remuneration in the market
and internal and, where appropriate, external advice.
The Remuneration and Nominations Committee has access to
external advice independent of management.
Senior Executives receive their fixed (primary) remuneration in
cash. The fixed remuneration component of KMP is detailed in
Table 1 of this report.
2014 Annual Report GEODYNAMICS LIMITED 37
D IR ECTOR S’ REP ORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
3. Executive Remuneration Arrangements (continued)
3C. Details of Incentive Plans
Short Term Incentive Plan (STIP)
The objectives of the Geodynamics STIP are to:
• Reward employees for their contribution in ensuring that
Geodynamics achieves the corporate key deliverables;
• Encourage team work;
• Enhance Geodynamics attracting and retaining high calibre
and high performing employees; and
second stretch targets are outlined that if achieved would
result in an award of up to the maximum of 30% of fixed
annual remuneration.
To participate in the Plan, eligible staff must be employed for
at least six months for the financial year in question meaning
that for the FY13/14 year, eligible staff must have started by
1 January 2014.
On an annual basis, after consideration of performance against
KPIs, the board, in line with their responsibilities, determine the
amount, if any, of the short-term incentive to be paid from the
pool of funds.
• Link remuneration directly to the achievement of key annual
Long Term Incentive Plan (LTIP)
organisational objectives.
The Company has in place an annual STIP that establishes a
pool of funds up to a maximum of 30% of annualised fixed
remuneration, adjusted in size according to the achievement of
key Company Business Plan milestones in a year.
The distribution of the pool is to be determined by team
achievement in delivering the team business plan milestones.
Specifically, base targets are outlined that if achieved would
result in an award of 20% of annualised fixed remuneration.
First stretch targets are outlined that if achieved would result
in an award of up to 25% of fixed annual remuneration and
The LTIP was terminated by resolution of the Board at a
meeting held on 27 February 2014. A final issue of shares was
completed at the discretion of the Board in consideration of
the termination of the LTIP on 1 May 2014. The final allocation
was subject only to a continuous service requirement being for
a 36 month period from 31 December 2011 or 31 March 2013.
Hedging of shares and options risk
Currently no Director or officer uses hedging instruments
to limit their exposure to risk on either shares or options in
the Company. The Company’s policy is that the use of such
hedging instruments is prohibited.
4. Executive Remuneration outcomes for FY13/14
Company performance and its link to short-term incentives
The key business plan milestones driving STI payment outcomes for FY13/14 with relevant performance against targets are outlined
in the table below:
MILESTONE
FY13/14 PERFORMANCE VERSUS TARGETS
Health Safety & Environment – delivering the business plan safely with low
environmental impact
All of four base targets and first
stretch target met
Delivery of operational results on schedule, quality and budget with a weighting of time
20%, cost 40% and quality 40%
All of four base targets met
Management of Finances – the Company remains securely funded through management
of income and costs, and uses financial resources to develop new opportunities.
Both of two base targets met
In FY13/14 the Board has elected not to make any payments under the Company’s Short Term Incentive Plan. This decision was
made taking into consideration the Company’s financial position, the continued short-term performance of Geodynamics securities,
and the efforts the Company had made through FY13/14 to reduce costs and preserve financial assets through cost saving measures
undertaken including reduction in staff numbers. The Company had established short term targets, approved by the Board, for
FY13/14 under the rules of the STI Plan. An assessment of performance against these targets indicates that all Base Targets had
been successfully achieved which would have resulted in an eligibility for a payment of 10% (33% of the eligible STI amounts) should
the Board have ruled that a payment under the STI was to be made.
The following table outlines the proportion of maximum STI that was earned and forfeited in relation to FY2014:
NAME
G. Ward
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
PROPORTION OF MAXIMUM STI EARNED IN FY14
PROPORTION OF MAXIMUM STI FORFEITED IN FY14
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
38 GEODYNAMICS LIMITED 2014 Annual Report
REMUNERATION REPORT (AUDITED) (continued)
4. Executive Remuneration outcomes for FY13/14 (continued)
Company performance and its link to long-term incentives
The graph below shows the performance of the Company as measured by its share price and therefore by definition its Total
Shareholder Return. The loss per share from continuing operations for the last five years was as follows: 2009/10 - $0.051, 2010/11 -
$0.43, 2011/12 - $0.031, 2012/13 - $0.26, 2013/14 - $0.03.
Geodynamics Limited Share Price 2009 - 2014
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
No options vested during the year under the Employee Option Plan as share price vesting performance hurdles were not met in
addition all unvested options were cancelled as part of the termination of the LTIP on 1 May 2014.
1,675,675 shares vested during the year for nineteen employees who met the vesting hurdle of three years of continuous service.
2,894,718 shares were issued to the Deferred Employee Share Plan in accordance with the process for the termination of the plan.
The final allocation was subject only to a continuous service requirement being for a 36 month period from 31 December 2011 or
31 March 2012.
Table 1 – Remuneration of KMP of the Company for the year ended 30 June 2014
SHORT-TERM
POST EMPLOYMENT
SHARE BASED PAYMENT
PERFORMANCE
RELATED
TOTAL
G. Ward 1
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Totals
SALARY
466,609
293,685
314,767
265,695
233,429
252,714
1,826,899
CASH BONUS – SHORT
TERM INCENTIVE
SUPERANNUATION
SHARES
(AMORTISED
COST)
OPTIONS
(AMORTISED
COST)
0
0
0
0
0
0
0
4,225
17,803
21,905
15,381
23,661
20,224
39,583
22,027
27,005
19,329
21,752
17,358
61,517
571,934
17.68%
0
0
0
0
333,515
363,677
300,405
278,842
6.60%
7.43%
6.43%
7.80%
17,080
307,376
11.20%
103,199
147,054
78,597
2,155,749
1 The share and option amortised cost relate to those shares and options issued to the CEO as approved by shareholders at the November 2011 Annual General Meeting
Table 2 – Remuneration of KMP of the Company or the year ended 30 June 2013
SHORT-TERM
POST EMPLOYMENT
SHARE BASED PAYMENT
SALARY
CASH BONUS
– SHORT TERM INCENTIVE
SUPERANNUATION
SHARES
(AMORTISED COST)
OPTIONS
(AMORTISED COST)
PERFORMANCE
RELATED
TOTAL
G. Ward 1
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Totals
475,000
288,546
366,992
244,220
257,562
264,962
194,508
27,345
26,819
29,808
16,519
38,142
42,992
21,760
22,441
24,737
16,071
24,712
39,286
29,573
36,960
19,086
28,880
12,500
104,265
856,051
39.49%
2,297
3,418
9,327
2,671
369,521
456,630
327,178
321,703
34,190
374,506
16.02%
14.72%
17.79%
14.94%
22.65%
1,897,282
333,141
152,713
166,285
156,168
2,705,589
1 The share and option amortised cost relate to those shares and options issued to the CEO as approved by shareholders at the November 2011 Annual General Meeting
2014 Annual Report GEODYNAMICS LIMITED 39
D IR ECTOR S’ REP ORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
5. Summary of Executive Contractual arrangements
Remuneration arrangements for KMP are formalised in
employment agreements. Details of these contracts are
provided below.
The contracts below include arrangements entered into prior
to the amendments to the Corporations Act 2001 regarding
termination payments which came into effect on 24 November
2009. No contracts of the Company however exceed the
revised limits on termination payments.
Managing Director and Chief Executive Officer
Mr Geoff Ward was appointed Managing Director on 31
January 2011. Mr Ward’s remuneration package is formalised in
an open ended contract, the details of which were disclosed in
the 2013 Notice of Meeting for the Annual General Meeting on
28 November 2013. The key terms of Mr Ward’s contract are
as follows:
• He currently receives a base remuneration including
superannuation of $450,000 per annum. As part of a
comprehensive review as set out in the notice of meeting
for the Annual General Meeting held on 28 November 2013,
his salary was reduced from $500,000 to $450,000 at 1
December 2013;
• Short Term Incentive – Up to $225,000 per annum which
is only payable on the achievement of certain performance
milestones.
The CEO’s termination provisions are as follows:
The members of the Remuneration and Nominations
Committee have assessed that Mr Ward is eligible for
a payment under the Short Term Incentive Scheme
having achieved key financial and operational milestones
identified for FY2014. In recognition of the continued
underperformance of GDY shares and negative returns
experienced by shareholders in FY2014, the Board have
used their discretion and have elected not to pay any short
term incentive payments for FY2014. The key performance
milestones set for Mr Ward for FY13/14 were focussed on
health and safety minimising risks of incidents and ensuring
close out of key actions within schedule, successful field
activities including progressing activities for the pacific
region, ensuring expenditure within approved budgets was
achieved, and completion of the acquisition of KUTh Energy
Limited.
• Long term incentive (Share Appreciation Rights) – an annual
grant of Share Appreciation Rights (SARs) based on a
maximum of 50% of his base remuneration. Performance
conditions for the vesting of the SARs at the testing dates
is based on growth in the GDY share price. No share
appreciation rights were granted during the financial year.
In addition no shares or options were issued under the
previous LTIP. It is the Board’s intention to issue SARs to Mr
Geoff Ward in accordance with the shareholder approval at
the Annual General Meeting on 28 November 2013.
NOTICE PERIOD
PAYMENT IN LIEU OF NOTICE
TREATMENT OF STI ON TERMINATION
TREATMENT OF LTI ON TERMINATION
Resignation
6 months
6 months
Unvested awards forfeited
Unvested awards forfeited
Termination for cause
14 days
None
Unvested awards forfeited
Unvested awards forfeited
6 months
6 months
Termination in cases
of long term illness,
disablement, or notice
without cause
Maybe prorated for time
and performance subject to
Board discretion
Maybe prorated for time and
performance subject to Board
discretion
Change of control
14 days
12 months
Prorated for time and
performance
Prorated for time and
performance
Other KMP
All other KMP have rolling contracts.
Other standard KMP provisions are as follows:
NOTICE PERIOD
PAYMENT IN LIEU OF NOTICE
TREATMENT OF STI ON TERMINATION
TREATMENT OF LTI ON TERMINATION
Resignation
3 months
3 months
Unvested awards forfeited
Unvested awards forfeited
Termination for cause
None
None
Unvested awards forfeited
Unvested awards forfeited
3 months
3 months
Termination in cases
of long term illness,
disablement, or notice
without cause
Maybe prorated for time
and performance subject to
Board discretion
Maybe prorated for time and
performance subject to board
discretion
Change of control
1 month
1 month
Prorated for time and
performance
Prorated for time and
performance
40 GEODYNAMICS LIMITED 2014 Annual Report
REMUNERATION REPORT (AUDITED) (continued)
Structure
6. Non-executive Director remuneration arrangements
Remuneration Policy
The Board seeks to set aggregate remuneration at a level
which provides the Company with the ability to attract and
retain directors of the highest calibre, whilst incurring a cost
which is acceptable to shareholders.
The amount of aggregate remuneration sought to be approved
by shareholders and the manner in which it is apportioned
amongst Directors is reviewed annually. The Board considers
advice from external consultants as well as the fees paid to
Non-executive Directors of comparable companies when
undertaking the annual review process. The amounts are set at
a level that compensates the Directors for their significant time
commitment in overseeing the progression of the Company’s
business plan.
The Constitution of Geodynamics and the ASX Listing Rules
specify that the aggregate remuneration of Non-executive
Directors shall be determined from time to time by a general
meeting. An amount not exceeding the amount determined
is then divided between the directors as agreed. The latest
determination was at the Annual General Meeting held on
28 November 2007 when shareholders approved an aggregate
remuneration of $700,000 per year.
The Board will not seek any increase for the NED pool at the
2014 AGM.
Each Non-executive Director receives a fee for being a Director
of the Company. The current fee structure is to pay Non-
executive Directors a base annual remuneration of $64,500
p.a. with the Chairman paid $118,250 p.a. The Chairman of
each committee receives an additional fee of $16,125 p.a.
These fee structures have remained the same with no increase
in the past five years. There are no retirement benefits
offered to Non-executive Directors other than statutory
superannuation which is in addition to these amounts. In
accordance with good corporate governance practice, the
Non-executive Directors do not participate in share and share
option based remuneration plans of the Company.
The Company notes that collectively Sunsuper Pty Ltd & The
Sentient Group, as major investors, have a right to appoint
a Non-executive Director to the Company and as such that
Director (where appointed) is not considered by the ASX
Corporate Governance Principles to be independent.
The remuneration of Non-executive Directors for the year
ending 30 June 2014 is detailed in Table 3 of this report and
the remuneration for the comparative year ending 30 June
2013 is detailed in Table 4 of this report.
Table 3 – Non-executive Directors’ Remuneration for the year ended 30 June 2014
SALARY &
CONSULTING FEES
DIRECTORS FEES
SUPERANNUATION
OTHER
K. Spence
R. Davies
J. Hamilton
M. Marier
A. Stock
G. Miltenyi 1
Totals
1 Appointed 1 March 2014
-
-
-
-
-
-
-
118,250
80,625
88,083
64,500
80,625
21,500
10,938
7,458
-
5,966
7,458
1,989
453,583
33,809
-
-
-
-
-
-
-
Table 4 – Non-Executive Directors’ Remuneration for the year ended 30 June 2013
K. Spence
P. Chopra 1
R. Davies
J. Hamilton
M. Marier
A. Stock
Totals
1 Retired 29 November 2012
SALARY &
CONSULTING FEES
DIRECTORS FEES
SUPERANNUATION
SHARES
(AMORTISED COST)
-
-
-
-
-
-
-
118,250
35,875
80,625
87,881
64,500
80,625
467,756
10,643
2,419
7,256
-
5,805
7,256
33,379
-
-
-
-
-
-
-
TOTAL
129,188
88,083
88,083
70,466
88,083
23,489
487,392
TOTAL
128,893
38,294
87,881
87,881
70,305
87,881
501,135
2014 Annual Report GEODYNAMICS LIMITED 41
D IR ECTOR S’ REP ORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
7. Additional statutory disclosures
Table 5 – Shares granted to executives as part of remuneration for the year ended 30 June 2014
During the financial year, shares were granted under the Long Term Incentive Plan to certain executives as disclosed below.
The shares were issued as a final grant as part of the termination process of the Long Term Incentive Plan.
Shares granted to executives for the year ended 30 June 2014.
R. Hogarth
K. Coates
A. Hodson
T. Pritchard
A. Mills
G. Ward
GRANT DATE
GRANTED NUMBER
VALUE OF SHARES GRANTED
DURING THE YEAR
% OF REMUNERATION
1/5/14
1/5/14
1/5/14
1/5/14
1/5/14
-
149,818
122,205
130,045
166,514
113,636
-
8,540
6,966
7,413
9,491
6,477
-
2%
2%
2%
4%
2%
-
Shares vested to executives for the year ended 30 June 2014.
VALUE OF SHARES VESTED
DURING THE YEAR
VALUE OF SHARES FORFEITED
DURING THE YEAR
VALUE PER SHARE
VESTED AT GRANT DATE
R. Hogarth
K. Coates
A. Hodson
T. Pritchard
A. Mills
G. Ward
9,983
8,143
7,724
-
-
15,517
-
-
-
-
-
-
0.52
0.52
0.52
-
-
0.29
During the financial year, no options were granted or were proposed to be granted under the Long Term Incentive Plan.
Table 6 - Employee Share Plan Option holdings of Key Management Personnel
BALANCE AT
BEGINNING OF PERIOD
GRANTED AS REMUNERATION/
BECAME KEY MANAGEMENT
PERSONNEL
OPTIONS
EXERCISED
2,700,000
-
-
-
-
-
-
-
-
-
-
1,079,914
3,779,914
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
OPTIONS LAPSED/
NO LONGER KEY
MANAGEMENT
PERSONNEL
(2,700,000)
-
-
-
-
-
-
-
-
-
-
(1,079,914)
(3,779,914)
BALANCE AT
END OF PERIOD
TOTAL VESTED
& EXERCISABLE
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
FY2014
Directors
G. Ward
J. Hamilton
R. Davies
M. Marier
K. Spence
A. Stock
G. Miltenyi
Executives
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Total
42 GEODYNAMICS LIMITED 2014 Annual Report
REMUNERATION REPORT (AUDITED) (continued)
7. Additional statutory disclosures (continued)
Table 7 - Shareholdings of Key Management Personnel
BALANCE AT
BEGINNING OF
PERIOD
01/07/13
APPOINTMENTS/
BECAME KEY
MANAGEMENT
PERSONNEL
GRANTED AS
REMUNERATION*
PURCHASED ON
MARKET, SHARE
PURCHASE PLAN
RESIGNATIONS
DISPOSED OF/
OTHER / NO LONGER
KEY MANAGEMENT
PERSONNEL
BALANCE AT END OF
PERIOD 30/06/14
730,319
120,775
481,708
-
212,413
62,315
-
-
-
-
-
-
-
2,648,152
279,191
394,451
118,171
309,394
187,500
-
-
-
-
-
2,896,237
2,648,152
-
-
-
-
-
-
-
122,205
149,818
166,514
130,045
113,636
682,218
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
730,319
120,775
481,708
-
212,413
62,315
2,648,152
401,396
544,269
284,685
439,439
301,136
6,014,194
FY2014
Directors
G. Ward
R. Davies
J. Hamilton
M. Marier
K. Spence
A. Stock
G. Miltenyi
Executives
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Total
* Shares granted as remuneration were issued under the Geodynamics Deferred Employee Share Plan and are held in escrow on behalf of the Executive. The Executive is
required to remain employed by Geodynamics for 36 months from the date of allocation for the shares to vest.
Signed in accordance with a resolution of the Directors.
K. Spence
Chairman
Brisbane, 28 August 2014
2014 Annual Report GEODYNAMICS LIMITED 43
AUD ITO R’S IND EP ENDENCE DECL ARATION
TO THE DIR ECTO R S OF GEODYNA MICS LI MIT ED
AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF GEODYNAMICS LIMITED
In relation to our audit of the financial report of Geodynamics Limited for the financial year ended 30 June 2014, to the
best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the
Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
Andrew Carrick
Partner
Brisbane
28 August 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
44 GEODYNAMICS LIMITED 2014 Annual Report
COR P ORATE GOV ERNANCE STATEMENT
The Board of Directors of Geodynamics Limited is responsible
for the corporate governance of the Company and is
committed to achieving and demonstrating the highest
standards of corporate governance.
For further information on corporate policies adopted by
Geodynamics Limited, please refer to “Governance” under the
Our Company Tab on our website located at
www.geodynamics.com.au
The Geodynamics Limited Corporate Governance Statement is
structured with reference to the Australian Securities Exchange
Corporate Governance Council’s “Corporate Governance
Principles and Recommendations with 2010 Amendments” as
revised in June 2010 the Principles of which are as follows:
Principle 1.
Lay solid foundations for management and oversight
Principle 2. Structure the Board to add value
Principle 3. Promote ethical and responsible decision making
Principle 4. Safeguard integrity in financial reporting
For 2014, the Company’s reporting against the Principles is as
follows:
1. LAY SOLID FOUNDATIONS FOR MANAGEMENT
AND OVERSIGHT
Companies should establish and disclose the respective roles
and responsibilities of Board and management.
The Board operates in accordance with the following principles
and guidelines.
• The Board does comprise a majority of Non-executive
Principle 5. Make timely and balanced disclosure
Directors.
• The Chairperson is an independent Director.
• The Board does comprise Directors with an appropriate
range of qualifications and expertise.
• The terms and conditions of the appointment of Non-
executive Directors are set out in a letter of appointment.
The appointment letter covers the following matters:
• the level of remuneration;
• the tenure of appointment;
• the expectation of the Board in relation to attendance and
preparation for all Board meetings;
• the Directors code of conduct;
• the procedures dealing with conflicts of interest; and
• the availability of independent advice - The Board has
agreed a procedure for Directors to take independent
professional advice at the expense of the Company.
Prior approval of the Chairman is required, but this will not
be unreasonably withheld.
• The Board meets as often as required to attend to the affairs
of the Company and follow meeting guidelines set down to
ensure all Directors are made aware of, and have available to
them all necessary information enabling them to participate
in an informed discussion of all agenda items.
• The Chairman of the Board meets regularly with the
Managing Director.
Principle 6. Respect the rights of shareholders
Principle 7. Recognise and manage risk
Principle 8. Remunerate fairly and responsibly
This Corporate Governance Statement contains certain specific
information and discloses the extent to which the Company
has followed the guidelines during the period. Where a
recommendation has not been followed, that fact is disclosed,
together with the reasons for the departure.
Geodynamics Limited’s corporate governance practices were
in place throughout the year ended 30 June 2014 and were
fully compliant with the Council’s recommendations except for
the following:
Recommendation 3.3 - Companies should disclose in each
annual report the measurable objectives for achieving gender
diversity set by the Board in accordance with the diversity policy
and progress towards achieving them.
The Company has adopted a Diversity Policy that encourages
the participation and provision of opportunity to all interested in
working at Geodynamics. As the Company has a relatively small
work-force with many requiring specific skills that may not be
widely available, the Company has not deemed it appropriate
to set specific numeric targets as these could be inappropriately
skewed by the small sample size. Geodynamics currently has
participation from a diverse workforce, with gender diversity
being in advance of industry averages for our sector.
Recommendation 3.4 - Companies should disclose in each
annual report the proportion of women employees in the whole
organisation, women in senior executive positions and women
on the Board. The Company has adopted a Diversity Policy that
encourages the participation and provision of opportunity to
all interested in working at Geodynamics. As the Company has
a relatively small work-force with many requiring specific skills
that may not be widely available, the Company has not deemed
it appropriate to publish specific employment numbers as
Company does not believe this information adds any meaningful
value due to its small workforce.
2014 Annual Report GEODYNAMICS LIMITED 45
CORP ORATE GOVERNANCE STATEMENT (CO NTINUED)
1. LAY SOLID FOUNDATIONS FOR MANAGEMENT
• Ensuring significant business risks are identified and
AND OVERSIGHT (continued)
appropriately managed; and
The Board is responsible for the direction and supervision of
the Company’s business on behalf of the shareholders, by
whom they are elected and to whom they are accountable.
This includes ensuring that internal controls and reporting
procedures are adequate and effective. The Directors
recognise the need to maintain the highest standards of
behaviour, ethics and accountability. The primary functions of
the Board include responsibility for:
• Approving objectives, goals and strategic direction for
management;
• Monitoring financial performance including adopting annual
budgets and approving the Company’s financial statements;
• Ensuring that adequate systems of internal control exist and
are appropriately monitored for compliance;
• Selecting, appointing and reviewing the performance of the
Managing Director and Chief Executive Officer and reviewing
the performance of senior operational management;
• Reporting to shareholders on performance.
The Company’s Managing Director’s performance and
remuneration is reviewed annually by the Non-executive
Directors. The performance criteria against which executives
are assessed is aligned with the financial and non-financial
objectives of Geodynamics Limited. Further details of
the process for evaluating performance are set out in the
Remuneration Report.
The Board may determine from time to time to establish
specific purpose sub-committees to deal with specific issues.
All matters determined by committees are submitted to the
full Board as recommendations for Board decision. Minutes of
committee meetings are tabled at the immediate subsequent
Board meeting.
2. STRUCTURE THE BOARD TO ADD VALUE
Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities
and duties.
SKILLS, EXPERIENCE AND EXPERTISE OF DIRECTORS
The Directors in office at the date of this statement are:
NAME
Keith Spence
Geoff Ward
Non-executive Chairman Yes
Managing Director
No
POSITION
INDEPENDENT
TERM IN OFFICE
EXPERTISE
6.1 years
3.6 years
5.8 years
7.9 years
3.5 years
Energy, Engineering and Management
Energy, Engineering, Corporate Finance
and Management
Finance, Governance and Management
Energy, Engineering and Management
Finance and Management
10.8 years
Energy, Engineering and Management
0.5 years
Energy, Management and Employment
In accordance with the definition of independence above,
and the materiality thresholds set, the Directors as marked
in the previous table are considered to be independent.
Therefore there are six Non-executive Directors, five of whom
are deemed independent, and one Executive Director. One
Non-executive Director who is not deemed independent is an
Officer of one of the Company’s three largest shareholders
which has a right to appoint a Director to the Board under their
Investment Deed. (The Sentient Group and Sunsuper Pty Ltd
are jointly treated as a cornerstone investor in so far as they
have a collective right to appoint a Director).
Further details of the members of the Board including their
experience and expertise are set out in the Directors’ Report.
Robert Davies
Non-executive Director
Jack Hamilton
Non-executive Director
Yes
Yes
Michel Marier
Non-executive Director No
Andrew Stock
Non-executive Director
George Miltenyi
Non-executive Director
Yes
Yes
INDEPENDENT DIRECTORS
Directors of Geodynamics Limited are considered to be
independent when they are independent of management
and free from any business or other relationship that could
materially interfere with, or could reasonably be perceived to
materially interfere with the exercise of their unfettered and
independent judgement.
In the context of director independence, ‘materiality’ is
considered from both the Company and individual director
perspective. The determination of materiality requires
consideration of both quantitative and qualitative elements.
Qualitative factors considered include whether a relationship is
strategically important, the competitive landscape, the nature
of the relationship and the contractual or other arrangements
governing it and other factors which point to the actual
ability of the Director in question to shape the direction of the
Company’s loyalty.
46 GEODYNAMICS LIMITED 2014 Annual Report
2. STRUCTURE THE BOARD TO ADD VALUE (continued)
PERFORMANCE
NON-EXECUTIVE DIRECTORS
The six Non-executive Directors periodically meet for a period
of time, without the presence of management, to discuss the
operation of the Board and a range of other matters including
those relating to Remuneration and Directors’ Nominations.
Relevant matters arising from these meetings are shared with
the full Board.
TERM OF OFFICE
The Company’s constitution specifies that all Directors (with
the exception of the Managing Director) must retire from office
no later than the third annual general meeting (AGM) following
their last election. Where eligible, a Director may stand for
re-election.
NOMINATIONS
The Company has established a combined Remuneration
and Nominations Committee. Membership and composition
of this Committee is discussed at the end of this Corporate
Governance Statement. With regard to the Nominations
charter of the Committee, the main functions of the
Committee are to:
• Devise criteria (necessary and desirable competencies) for
Board membership for approval by the full Board.
• Identify specific individuals for nomination.
• Make recommendations to the Board for new Directors and
membership of committees being always mindful that any
recommendation should ensure there is a complementary
mix of necessary skills.
• Annually, assist the Chairman of the Company in advising
Directors about their performance and tenure.
• Oversee management succession plans, including the
Managing Director and Chief Executive Officer and first line
managers;
• Review of the Board succession plan.
• Critically examine the Committee’s performance and
recommend any changes to the responsibilities to the Board.
In devising criteria for Board membership, the Company uses
a Board skills matrix to identify any gaps in the skills and
experience of the Directors on the Board. In addition, the
Company uses a combination of professional intermediaries
to identify and assess candidates as well as the network of
contacts within the Board itself.
In order to ensure that the Board continues to discharge its
responsibilities in an appropriate manner, the performance
of all Non-executive Directors is reviewed annually by the
Chairman. In addition during the year, all Directors completed
a structured self evaluation questionnaire that aimed to
evaluate the performance of the Board as a whole. These
responses are collated and subsequently discussed by the
Board to improve the functional operations of the Board.
The Chairman meets privately with each Director as
appropriate to discuss their individual performance. The
Chairman’s performance is reviewed by the Board.
3. PROMOTE ETHICAL AND RESPONSIBLE
DECISION-MAKING
Companies should actively promote ethical and responsible
decision-making.
The Company supports and has adopted the Code of Conduct
published by The Australian Institute of Company Directors
in 2005. This code recognises the need for Directors and
employees to observe the highest standards of behaviour and
business ethics and its commitment to ensuring compliance
with the insider trading laws.
The Company has established a policy regarding Diversity that
is underpinned by four key principles:
• Fairness: Every person will have the opportunity to work
and succeed at Geodynamics - regardless of their gender,
nationality, background, age, physical ability or sexual
orientation.
• Support: The Company will support the varying needs of its
diverse workforce by providing flexible working conditions
and ensuring programs are in place to enable every
Geodynamics employee to reach their career potential.
• Respect: Every Geodynamics employee will be treated with
dignity and respect, recognising that success depends upon
the commitment, capabilities and diversity of the Company’s
employees.
• Leadership: The Board and senior leaders will be ultimately
responsible for instilling a culture that embraces and values
diversity amongst the workforce.
At least once every 12 months, the Remuneration and
Nominations Committee will review the Diversity Policy
including a review of the diversity objectives and initiatives to
ensure they remain current and appropriate and a review of
progress on the achievement of diversity objectives over the
preceding year.
2014 Annual Report GEODYNAMICS LIMITED 47
CORP ORATE GOVERNANCE STATEMENT (CO NTINUED)
4. SAFEGUARD INTEGRITY OF FINANCIAL REPORTING
Companies should have a structure to independently verify
and safeguard the integrity of their financial reporting.
5. MAKE TIMELY AND BALANCED DISCLOSURE
Companies should promote timely and balanced disclosure of
all material matters concerning the company.
The Board has adopted an Audit & Risk Committee Charter to
ensure the truthful and factual presentation of the Company’s
financial position and to review and advise on the company’s
risk management processes. Audit & Risk Committee
meetings will be held periodically throughout the year. It is the
policy of the Board that the members of the committee shall
be a minimum of three Non-executive Directors. The Audit &
Risk Committee will be chaired by a Non-executive Director
other than the Chairman of the Board.
The Chief Executive Officer and Chief Financial Officer may
attend the committee meetings by invitation.
• The main functions of the committee will be to:
• Assess the appropriateness of accounting policies, practices
and disclosures and whether the quality of financial reporting
is adequate;
• Review the scope and results of internal, external and
compliance audits;
• Maintain open lines of communication between the Board and
external auditors and the Company’s compliance officers;
• Review and report to the Board on the annual report, the
half-year financial report and all other financial information
published by the Company or released to the market;
• Assess the adequacy of the Company’s internal controls and
make informed decisions regarding compliance policies,
practices and disclosures;
• Ensure effective deployment of risk management processes;
• Nominate the external auditors and review the terms of their
engagement, the scope and quality of the audit and the
auditor’s independence;
• Review the level of non-audit services provided by the
external auditors and ensure that it does not adversely
impact on auditor independence.
The Chairman of the Audit & Risk Management Committee
reviews the performance of the Committee with members and
reports annually to the Board.
The members of the Audit & Risk Committee during the year
were:
Robert Davies (Chairman)
Michel Marier
Jack Hamilton
For details on the qualifications of the audit & risk committee
members, the number of meetings of the Audit Committee
held during the year and the attendees at those meetings,
refer to the Directors’ Report.
The Board has adopted a Listing Rule 3.1 Compliance Policy,
which has been designed to ensure compliance with the
ASX Listing Rule disclosure requirements and to ensure
accountability at a senior management level for that compliance.
The Company Secretary has been nominated as the person
responsible for communications with the Australian Securities
Exchange (ASX). This role includes responsibility for ensuring
compliance with the continuous disclosure requirements in the
ASX listing rules and overseeing and co-ordinating information
disclosure to the ASX, analysts, brokers, shareholders, the
media and the public.
The Company rigorously polices its continuous disclosure
responsibilities to ensure a fully informed market at all times.
The Company’s Continuous Disclosure Policy is available on
the Company’s website.
6. RESPECT THE RIGHTS OF SHAREHOLDERS
Companies should respect the rights of shareholders and
facilitate the effective exercise of those rights.
The Board of Directors aims to ensure that the shareholders,
on behalf of whom they act, are provided with all information
necessary to assess the performance of the Company.
Information is communicated to the shareholders through:
• The Annual Report, which will be distributed to all shareholders
(unless shareholders specifically indicate otherwise);
• Quarterly Reports to all shareholders;
• The Annual General Meeting, and other meetings called to
obtain approval for Board action as appropriate; and
The Company’s Corporate Internet site at www.geodynamics.
com.au This web site is actively maintained and includes
all market announcements, research reports from analysts,
briefings to shareholders, full texts of notices of meeting and
explanatory material and compliance reports such as the
quarterly cash flow report and annual report.
Shareholders are actively encouraged to become ‘online
shareholders’ by registering electronically with the Company
to receive an email notification of announcements as they are
made. The Company endeavours to respond to all shareholder
queries on a prompt and courteous basis.
All information disclosed to the ASX is posted on the
Company’s website as soon as it is disclosed to the ASX.
48 GEODYNAMICS LIMITED 2014 Annual Report
HEALTH, SAFETY & ENVIRONMENT COMMITTEE
Health, Safety & Environment (HSE) meetings are held on
an as required basis. The Committee is comprised of a Chair
drawn from the Non-executives of the Geodynamics Board.
It is the policy of the Board that the members of the
committee shall be a minimum of three Non-executive
Directors. The HSE Committee has been given the following
Terms of Reference:
• Its primary objective is to assist the Board of Directors in its
responsibilities relating to establishing and maintaining the
highest standards of HSE performance by Geodynamics,
and compliance with all relevant legislation. In addition
the Committee will ensure that Management reports to the
Board on:-
• Compliance with statutory requirements, codes, standards,
and guidelines;
• Establishment of measurable objectives and targets aimed
at elimination of work related incidents or environmental
impacts from Geodynamics’ activities;
• The defining of roles, responsibilities and levels of
accountability for HSE within Geodynamics.
• Act as an independent and objective party to review the
safety and environmental performance reports presented by
management for the use of all stakeholders.
• Review HSE risk assessment processes and monitor their
effectiveness.
• Review all significant Geodynamics incident reports along
with the results of the subsequent investigations and the
implementation of the identified corrective actions.
• Oversee and appraise the quality of the health & safety and
the environmental audits conducted by the HSE auditors.
• Ensure through regular meetings that open lines of
communication exist among the Board, Management and
HSE Auditors.
The members of the HSE Committee during the year were:
Jack Hamilton (Chairman)
Keith Spence
Andrew Stock
7. RECOGNISE AND MANAGE RISK
Companies should establish a sound system of risk oversight,
management and internal control.
The Company is committed to having a culture of risk
management and has established a risk management system
that supports a pro-active approach to managing risk and to
exploiting opportunity at all levels.
A series of extensive workshop reviews have been held for
each component phase of the Company’s business plan
and these will continue to be held for subsequent stages
to highlight major risk areas and plan the treatment to
manage those risks. In addition, a formal risk management
plan is included as part of every major capital acquisition or
procurement decision and key risk/opportunity areas and
their drivers are included in the Management/Board reporting
system. The Board has also established a Health Safety and
Environment Committee which operates under a charter
approved by the Board.
Management, through the Managing Director and Chief
Executive Officer, is responsible for designing, implementing
and reporting on the adequacy of the Company’s risk
management and internal control system. Management
reports to the Audit and Risk Committee on the Company’s
key risks and the extent to which it believes these risks are
being managed. This is performed on a six monthly basis or
more frequently as required by the Board or Committee.
The Board is responsible for satisfying itself annually, or more
frequently as required, that management has developed
and implemented a sound system of risk management and
internal control. It reviews strategic, operational and technical
risks in conjunction with, and as a key input to an annual
corporate strategy workshop attended by the Board and
senior management. This workshop reviews the Company’s
strategic direction in detail and includes specific focus on
the identification of business risks which could prevent the
Company from achieving its objectives. Management are
required to ensure that appropriate controls and mitigation
strategies are in place to effectively manage those risks.
Compliance and reporting risks are reviewed on an ongoing
basis and independently audited from time to time.
The Audit and Risk Committee oversees the adequacy and
comprehensiveness of risk reporting from management.
The Board receives a written assurance from the Chief
Executive Officer and the Chief Financial Officer that to the
best of their knowledge and belief, the declaration provided
by them in accordance with section 295A of the Corporations
Act is founded on a sound system of risk management and
internal control and that the system is operating effectively
in relation to financial reporting risks. The Board notes that
due to its nature, internal control assurance from the Chief
Executive Officer and Chief Financial Officer can only be
reasonable rather than absolute. This is due to such factors as
the need for judgement, the use of testing on a sample basis,
the inherent limitations in internal control and because much
of the evidence available is persuasive rather than conclusive
and therefore is not and cannot be designed to detect all
weaknesses in control procedures.
2014 Annual Report GEODYNAMICS LIMITED 49
CORP ORATE GOVERNANCE STATEMENT (CO NTINUED)
With regard to the Remuneration charter of the Committee,
the main functions of the Committee are to:
• Set the terms and conditions of employment for the Chief
Executive Officer.
• Set policies for Senior Executive remuneration including the
Chief Executive Officer and other Executive Directors (if any)
and review from time to time as appropriate.
• Set policies for Non-executive Director remuneration and
review and recommend the level of remuneration with the
assistance of external consultants as appropriate.
• Make recommendations to the Board on remuneration for
the Chief Executive Officer and Executive Director(s).
• Review and approve the recommendations of the Chief
Executive Officer on the remuneration of Senior Executives.
• Review all equity based plans and make recommendations to
the Board for approval.
• Review and approve the design of Executive Incentive Plans
ensuring appropriate performance hurdles are in place.
• Review transactions between the group and the Directors,
or any interest associated with the Directors, to ensure the
structure and the terms of the transaction are in compliance
with the Corporations Act 2001 and are appropriately disclosed.
• Review and approve the annual Remuneration Report
contained within the Directors’ Report.
The members of the Remuneration and Nominations
Committee during the year were:
Andrew Stock (Chairman)
Keith Spence
Robert Davies
For details on the number of meetings of the Remuneration
and Nominations Committee held during the year and the
attendees at those meetings, refer to the Directors’ Report.
8. REMUNERATE FAIRLY AND RESPONSIBLY
Companies should ensure that the level and composition
of remuneration is sufficient and reasonable and that its
relationship to performance is clear.
REMUNERATION
It is the Company’s objective to provide maximum stakeholder
benefit from the retention of a high quality Board and
executive team by remunerating Directors and key executives
fairly and appropriately with reference to relevant employment
market conditions. The Managing Director’s and key
executives’ emoluments are structured to retain and motivate
executives by offering a competitive base salary together
with short and long term performance incentives through
cash, shares and options which allow executives to share in
the success of Geodynamics Limited. The Board will assess
the appropriateness of the nature and amount of emoluments
of such officers on a periodic basis by reference to relevant
employment market conditions with the overall objective of
ensuring maximum stakeholder benefit.
The Company currently has six Non-executive Directors and a
Managing Director. The Company’s Managing Director does
not receive Directors’ fees and his remuneration package
is formalised in a service agreement. The Non-executive
Directors’ maximum aggregate remuneration as approved
by shareholders is currently $700,000 and is set at a level
that compensates the directors for their significant time
commitment in overseeing the progression of the Company’s
business plan.
There are no retirement benefits offered to Non-executive
Directors other than statutory superannuation. For a full
discussion of the Company’s remuneration philosophy and
framework and the remuneration received by Directors and
Executives in the current period, please refer to the Remuneration
Report which is contained within the Directors’ Report.
REMUNERATION AND NOMINATIONS COMMITTEE
The Remuneration and Nominations Committee operates
under a charter approved by the Board. Remuneration and
Nomination Committee meetings are held at least semi-
annually and otherwise as required throughout the year. It is
the policy of the Board that the members of the Committee
shall be a minimum of three Non-executive Directors and a
majority of independent directors. The Remuneration and
Nominations Committee will be chaired by a Non-executive
Director other than the Chairman of the Board.
50 GEODYNAMICS LIMITED 2014 Annual Report
CON SOLIDATED STAT EMENT OF COMPREHENSIVE INCOME
FINANCIAL YEAR ENDED 30 JUNE 2014
NOTE
Continuing Operations
Interest Income
Total Revenue
Impairment of Property, Plant & Equipment
Impairment of Deferred Exploration & Evaluation Costs
Personnel expenses
Exploration and Evaluation Costs
Other General & Administrative Expenses
Corporate Expenses Recovered
Total Expenses
Income/(Loss) before Income Tax Expense
Income Tax Benefit
Income/(Loss) after Income Tax Expense
Other Comprehensive Income
Items that may be reclassified subsequently to profit and loss
Exchange differences on translation of foreign operations
Other Comprehensive Income for the period
Total Comprehensive Income/(Loss) for the period
attributable to the Owners
Basic and Diluted Earnings/(Loss) per share (cents per share)
Basic and Diluted Earnings/(Loss) per share attributable to the equity
holders of the entity (cents per share)
6
7
3A
3B
3C
4
12
15
15
2014
$’000
1,507
1,507
-
(40)
(5,694)
(8,425)
(2,740)
611
(16,288)
(14,781)
-
2013
$’000
1,166
1,166
(10,300)
(78,510)
(7,182)
-
(10,635)
369
(106,258)
(105,092)
-
(14,781)
(105,092)
(22)
(22)
-
-
(14,803)
(105,092)
(3.51)
(3.51)
(25.86)
(25.86)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
2014 Annual Report GEODYNAMICS LIMITED 51
CONSOLIDATED STATEMEN T OF FINA NCIAL P OSITION
AS AT 30 JUNE 2014
Current Assets
Cash Assets
Inventories – Rig Parts and Well Materials
Receivables
Total Current Assets
Non Current Assets
Property, Plant and Equipment
Deferred Exploration, Evaluation & Development phase costs
Total Non Current Assets
Total Assets
Current Liabilities
Payables
Provisions
Total Current Liabilities
Non Current Liabilities
Provisions
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed Equity
Other Reserves
Accumulated Losses
Total Equity
NOTE
21(A)
5
6
7
8
9
9
2014
$’000
33,815
893
5,335
40,043
4,127
7,390
11,517
51,560
4,091
3,001
7,092
6,052
6,052
13,144
38,416
2013
$’000
41,390
188
14,239
55,817
3,962
1,177
5,139
60,956
4,301
2,201
6,502
4,003
4,003
10,505
50,451
11
12
348,338
10,947
346,083
10,456
(320,869)
(306,088)
38,416
50,451
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
52 GEODYNAMICS LIMITED 2014 Annual Report
CON SOLIDATED C ASH FLOW STATEMENT
FINANCIAL YEAR ENDED 30 JUNE 2014
Cash Flows from/(used in) Operating Activities
Net Goods and Services Tax received
Payments to suppliers and employees
Net Interest Received
NOTE
Net cash flows from/(used in) Operating Activities
21(B)
Cash Flows from/(used in) Investing Activities
Proceeds from Government Grants
Proceeds from R&D Tax Incentive
Purchase of Property, Plant & Equipment
Payments for Exploration and Evaluation expenditure
Proceeds from Cash Calls
Cash acquired from KUTh Energy Limited
17
Proceeds from sale of property, plant & equipment
Net cash flow (used in) investing activities
Cash Flows from Financing Activities
Net cash flow provided by financing activities
Net increase / (decrease) in cash held
Add: Opening cash carried forward
Closing cash carried forward
21(A)
2014
$’000
138
(7,798)
1,388
(6,272)
4,500
8,542
(1,118)
(14,003)
-
186
590
(1,303)
-
(7,575)
41,390
33,815
2013
$’000
2,096
(10,020)
1,082
(6,842)
14,000
22,115
(3)
(38,657)
1,551
-
14,080
13,086
-
6,244
35,146
41,390
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
2014 Annual Report GEODYNAMICS LIMITED 53
CONSOLIDATED STATEMEN T OF CHANGE S IN EQ UITY
FINANCIAL YEAR ENDED
30 JUNE 2014
At 1 July 2013
Recognition of foreign exchange
hedge reserve
Total expense for period recognised
directly in equity
Loss for the period
Other comprehensive income
Total loss for the period
Equity Transactions:
Issue of Share Capital for the
acquisition of KUTh Limited
Share based payment on Employee
Share Plan
Cost of share-based payment -
recognition of share option expense
ISSUED CAPITAL
$’000
346,083
EMPLOYEE EQUITY
BENEFITS RESERVE
$’000
10,456
-
-
-
-
-
2,255
-
-
-
-
-
-
-
-
337
176
FOREIGN CURRENCY
TRANSLATION
RESERVE
$’000
-
-
-
(22)
(22)
-
-
-
ACCUMULATED
LOSSES
$’000
(306,088)
TOTAL EQUITY
$’000
50,451
-
-
-
(14,781)
(14,781)
-
(22)
(14,781)
(14,803)
-
-
-
2,255
337
176
At 30 June 2014
348,338
10,969
(22)
(320,869)
38,416
FINANCIAL YEAR ENDED
30 JUNE 2013
At 1 July 2012
346,083
9,336
Recognition of foreign exchange
hedge reserve
Total expense for period recognised
directly in equity
Loss for the period
Total loss for the period
Equity Transactions:
Share based payment on Employee
Share Plan
Cost of share-based payment -
recognition of share option expense
-
-
-
-
-
-
-
-
-
-
582
538
At 30 June 2013
346,083
10,456
-
-
-
-
-
-
-
-
(200,996)
154,423
-
-
-
-
(105,092)
(105,092)
(105,092)
(105,092)
-
-
582
538
(306,088)
50,451
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
54 GEODYNAMICS LIMITED 2014 Annual Report
NOTES TO TH E FINANC IAL STATEMENT S
NOTE 1 – CORPORATE INFORMATION
The financial report of Geodynamics Limited (the Company)
for the year ended 30 June 2014 was authorised in accordance
with a resolution of the Directors on 28 August 2014.
Geodynamics Limited is a Company limited by shares,
incorporated and domiciled in Australia whose shares are
publicly traded on the Australian Securities Exchange. The
nature of the operations and principal activities of the
Company are described in the Directors’ Report.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Basis of Preparation
The financial report is a general purpose financial report which
has been prepared in accordance with the requirements of
the Corporations Act 2001, Australian Accounting Standards
and other authoritative pronouncements of the Australian
Accounting Standards Board. The financial report has also
been prepared on a historical cost basis except for the
valuation of available for sale financial assets which are carried
at fair value. The financial report is presented in Australian
dollars and all values are rounded to the nearest thousand
dollars ($000) unless otherwise stated. The Directors have
adopted the going concern assumption in preparing the
financial report.
(B) Compliance with IFRS
The financial report complies with Australian Accounting
Standards and International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board.
(C) New Accounting standards and interpretations
Certain Australian Accounting Standards and interpretations
have recently been issued or amended but are not yet effective
and have not been adopted by the Company for the annual
reporting period ended 30 June 2014.
The new standards and amendments to standards that are
mandatory for the first time for the financial year beginning
1 July 2013 are:
• AASB10 Consolidated Financial Statements;
• AASB11 Joint Arrangements;
• AASB12 Disclosure of Interests in Other Entities;
• AASB13 Fair Value Measurement;
• AASB119 Employee Benefits;
• AASB2012-2 Amendments to Australian Accounting
Standards – Disclosures – Offsetting Financial Assets and
Financial Liabilities; and
• AASB 2011-4 Amendments to Australian Accounting
Standards to Remove Individual Key Management Personnel
Disclosure Requirements.
None of these standards or amendments to standards affected
any of the amounts recognised in the current period or any
prior period and are not likely to affect future periods.
Certain new accounting standards and interpretations have
been published that are not mandatory for the 30 June 2014
reporting period. The following new accounting standards and
interpretations are not likely to affect future periods.
• AASB2012-3 Amendments to Australian Accounting
Standards – Offsetting Financial Assets and Financial
Liabilities (effective 1 July 2014);
• AASB Interpretation 21 Levies (effective 1 July 2014);
• Annual Improvements to IFRS 2010-2012 Cycle
(effective 1 July 2014);
• Annual Improvements to IFRS 2011-2013 Cycle
(effective 1 July 2014);
• AASB 1031 Materiality (1July 2014);
• AASB 2013-9 Amendments to Australian Accounting
Standards- Conceptual Framework, Materiality and Financial
Instruments Cycle (effective 1 July 2014); and
• Amendments to IAS 16 and IAS 38 Clarification of Acceptable
Methods of Depreciation and Amortisation (effective July 2016).
The impacts of the following two standards are yet to be
assessed:
• AASB 9 Financial Instruments (effective 1 July 2018); and
• IFRS 15 Revenue from Customer Contracts (effective 1July 2017).
(D) Basis of Consolidation
The consolidated financial statements comprise of the financial
statements of the Group as at 30 June each year.
The controlled entities are all those entities over which the
Group has power, exposure or rights to variable returns from
its involvement with the entity, and the ability to use its power
over the entity to affect its returns.
The financial statements of the controlled entities are prepared
for the same reporting period as the parent entity, using
consistent accounting policies.
In preparing the consolidated financial statements, all
intercompany balances and transactions, income and expenses
and profit and losses resulting from intra-group transactions
have been eliminated in full.
The controlled entities are fully consolidated from the date
on which control is obtained by the Group and cease to be
consolidated from the date on which control is transferred out
of the Group.
A change in the ownership interest of a subsidiary that does not
result in a loss of control, is accounted for as an equity transaction.
2014 Annual Report GEODYNAMICS LIMITED 55
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Controlled entity/subsidiaries
The consolidated financial statements include the financial statements of Geodynamics Limited and its controlled entities listed in
the following table:
EQUITY INTEREST %
NAME
Parent Entity
Geodynamics Limited
Directly controlled by Geodynamics Limited
Geodynamics NT Pty Ltd
Geodynamics (Savo Island) Pty Ltd
Geodynamics Share Plans Pty Ltd
KUTh Energy Limited
Directly Controlled by KUTh Energy Limited
KUTh Exploration Pty Ltd
Mineral Ventures Pty Ltd
KUTh Pacific Ltd
Directly Controlled by KUTh Pacific Ltd
KUTh Exploration (Fiji) Limited
KUTh Energy (PNG) Ltd
KUTh Energy (Vanuatu) Ltd
COUNTRY OF INCORPORATION
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Fiji
PNG
Vanuatu
2014
100
100
100
100
100
100
100
100
100
50.2
100
(E) Significant Accounting Judgements, Estimates
Classification and valuation of investments
2013
100
100
100
100
-
-
-
-
-
-
-
The Company classifies investments in listed and unlisted
securities as ‘available for sale’ investments and movements in
fair value are recognised directly in equity unless impairment
has occurred in which case impairment is expensed. The fair
value of unlisted securities not traded in an active market
is determined by the pricing of those securities when share
allotments of those securities are made on or around balance
date to independent third parties.
(F) Foreign Currency Translation
Both the functional and presentation currency of Geodynamics
is Australian dollars ($A). Transactions in foreign currencies
are initially recorded in the functional currency at the exchange
rates ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at
the rate of exchange ruling at the balance date.
All exchange differences in the financial report are taken to
net income. Non-monetary items that are measured in terms
of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction. Non-
monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the
fair value was determined.
and Assumptions
The carrying amounts of certain assets and liabilities are often
determined based on judgement, estimates and assumptions
of future events. The key estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of certain assets and liabilities within the
next annual reporting period are:
Share-based payment transactions
The Company measures the cost of equity-settled transactions
with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair
value is determined using a Black Scholes model.
Provision for site rehabilitation
The Company reviews rehabilitation requirements for its
geothermal exploration tenements on a six-monthly basis by
undertaking an in-house analysis of the costs to rehabilitate
the sites including the plugging and abandoning of wells as
appropriate.
Capitalisation of Deferred Exploration and Evaluation
Expenditure & Impairment
The Company determines whether Deferred Exploration and
Evaluation Costs are impaired as described by AASB 6 at least
on an annual basis. The Company considers whether an area
of interest will be subject to further activity in the foreseeable
future. Where substantive expenditure on further exploration
and evaluation is neither budgeted or planned consideration is
given as to whether an impairment cost should be recognised
relating specifically to that area of interest.
56 GEODYNAMICS LIMITED 2014 Annual Report
As reported at 30 June 2013, the Company finalised the
technical appraisal of its Cooper Basin project and associated
resource. In the absence of a small scale commercial project
or other plan to commercialise the project in the medium term,
the Company impaired the carrying amount of its deferred
exploration, evaluation and development costs in respect of
the Cooper basin project to $nil.
Commensurate with the ongoing appraisal and review of
the Cooper Basin project additional evaluation costs have
been incurred since 1 July 2013. As it is not possible to
reliably demonstrate the additional costs in respect of the
Cooper Basin project will be recouped through successful
development or sale, the Company has recorded these costs
in the Statement of Comprehensive Income for the year ended
30 June 2014.
Grants and subsidies (including R&D incentives) relating
deferred exploration and evaluation costs are recorded as
a reduction in the carrying amount of the associated asset.
Grants and subsidies (including R&D incentives) related to
exploration and evaluation costs recorded in the Statement of
Comprehensive Income are recognised in profit or loss at the
same time as the expenses for the costs for which the grant is
expected to compensate.
Impairment
The carrying values of exploration, evaluation, development
and restoration costs are reviewed for impairment in
accordance with AASB 6 Exploration and Evaluation of Mineral
Resources when facts and circumstances suggest that the
carrying amount of such an asset may exceed its recoverable
amount. Any impairment loss identified is recognised as an
expense in accordance with AASB 136 Impairment of Assets.
Amortisation
Costs on productive areas will be amortised over the life of the
area of interest to which such costs relate on the production
output basis.
Restoration costs
Restoration costs that are expected to be incurred are
provided for as part of the cost of the exploration, evaluation,
development, construction or production phases that give
rise to the need for restoration. Accordingly, these costs
will be recognised gradually over the life of the facility as
these phases occur. The costs include obligations relating to
reclamation, plant closure and other costs associated with the
restoration of the site.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
(G) Property, Plant & Equipment
Property, plant and equipment is stated at cost less
accumulated depreciation and any impairment in value. The
costs include obligations relating to reclamation, plant closure
and other costs associated with the restoration of the site.
Depreciation is provided on a straight line basis on all property,
plant and equipment. All classes are depreciated over periods
ranging from 3 to 15 years (comparable to prior year).
The assets’ residual values, useful lives and amortisation
methods are reviewed, and adjusted if appropriate, at each
financial year end.
Impairment
The carrying values of property, plant and equipment are
reviewed for impairment at each reporting date, with the
recoverable amount being estimated when events or changes
in circumstances indicate the carrying value may be impaired.
For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash-
generating unit to which the asset belongs. An impairment
exists when the carrying value exceeds its estimated
recoverable amount. The asset or cash-generating unit is then
written down to its recoverable amount.
The recoverable amount of plant and equipment is the greater
of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset. Impairment losses are
recognised in the statement of comprehensive income in the
year the loss is recognised.
Derecognition and disposal
An item of property, plant and equipment is derecognised
upon disposal or when no further future economic benefits
are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount
of the asset) is included in profit or loss in the year the asset is
derecognised.
(H) Exploration, Evaluation, Development
and Restoration costs
Costs carried forward
Costs arising from exploration and evaluation activities are
carried forward provided such costs are expected to be
recouped through successful development, or by sale, or where
exploration and evaluation activities have not, at balance
date, reached a stage to allow a reasonable assessment
regarding the existence of economically recoverable reserves.
Costs carried forward in respect of an area of interest that is
abandoned are written off in the year in which the decision to
abandon is made.
2014 Annual Report GEODYNAMICS LIMITED 57
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
(I) Intangibles
The useful lives of intangible assets are assessed to be either
finite or indefinite. Intangible assets with finite lives are
amortised over the useful life and assessed for impairment
whenever there is an indication that the intangible asset may
be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life is
reviewed at least at each financial year-end. Changes in the
expected useful life or the expected pattern of consumption of
future economic benefits embodied in the asset are accounted
for by changing the amortisation period or method, as
appropriate, which is a change in accounting estimate.
The amortisation expense on intangible assets with finite
lives is recognised in profit or loss in the expense category
consistent with the function of the intangible asset.
(J) Impairment of Assets
At each reporting date, the Company assesses whether there
is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Company makes a formal
estimate of recoverable amount. Where the carrying amount of
an asset exceeds its recoverable amount the asset is considered
impaired and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to
sell and value in use. It is determined for an individual asset.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset.
(K) Cash and Cash Equivalents
Cash assets on the statement of financial position comprise
cash at bank and on hand and short-term deposits with an
original maturity of three months or less that are readily
convertible to known amounts of cash and which are subject
to an insignificant risk of change in value.
For the purposes of the Cash Flow Statement, cash includes
cash on hand and in banks and short term deposits with an
original maturity of three months or less, net of outstanding
bank overdrafts.
(L) Trade and Other Receivables
Trade receivables, which generally have 30 day terms, are
recognised and carried at original invoice amount. An
allowance for doubtful debts is made when there is objective
evidence that the Company will not be able to collect the
debts. Bad debts are written off when identified.
(M) Inventories
Inventories include spare parts and consumable items used in
drilling operations and are valued at the lower of cost and net
realisable value.
(N) Contributed Equity
Ordinary shares are classified as equity. Any transaction costs
arising on the issue of ordinary shares are recognised directly
in equity as a reduction of the share proceeds received.
(O) Trade and Other Payables
Trade payables and other payables are carried at cost and
represent liabilities for goods and services provided to the
Company prior to the end of the financial year that are unpaid
and arise when the Company becomes obliged to make future
payments in respect of the purchase of these goods and services.
(P) Provisions
Provisions are recognised when the Company has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks
specific to the liability. Where discounting is used, the increase
in the provision due to the passage of time is recognised as a
finance cost.
(Q) Employee Benefits
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be settled within 12
months of the reporting date are recognised in other payables
in respect of employees’ services up to the reporting date.
They are measured at the amounts expected to be paid
when the liabilities are settled. Liabilities for sick leave are
recognised when the leave is taken and are measured at the
rates paid or payable.
Long service leave
The liability for long service leave is recognised in the
provision for employee benefits and measured as the present
value of expected future payments to be made in respect
of services provided by employees up to the reporting date
using the projected unit credit method. Consideration is
given to expected future wage and salary levels, experience
of employee departures, and periods of service. Expected
future payments are discounted using market yields at the
reporting date on national government bonds with terms to
maturity and currencies that match, as closely as possible, the
estimated future cash outflows.
58 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
(R) Share-based Payment Transactions
The Company provides benefits to employees (including
executive directors) in the form of share-based payment
transactions, whereby employees render services in exchange for
rights over shares (‘equity-settled transactions’).
The current plan in place to provide these benefits is the
Geodynamics Limited Share Appreciation Rights Plan which both
provides benefits to executive directors and senior employees.
The cost of equity-settled transactions is determined by
the fair value at the date when the grant is made using an
appropriate valuation model. That cost is recognised, together
with a corresponding increase in other capital reserves in
equity, over the period in which the performance and/or
service conditions are fulfilled in employee benefits expense.
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and
the Group’s best estimate of the number of equity instruments
that will ultimately vest.
The statement of profit or loss expense or credit for a period
represents the movement in cumulative expense recognised
as at the beginning and end of that period and is recognised
in employee benefits expense.
No expense is recognised for awards that do not ultimately
vest, except for equity-settled transactions for which vesting is
conditional upon a market or non-vesting condition. These are
treated as vesting irrespective of whether or not the market
or non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the
minimum expense recognised is the expense had the terms
had not been modified, if the original terms of the award are
met. An additional expense is recognised for any modification
that increases the total fair value of the share-based payment
transaction, or is otherwise beneficial to the employee as
measured at the date of modification.
(S) Revenue Recognition
Revenue is recognised to the extent that it is probable that
the economic benefits will flow to the entity and the revenue
can be reliably measured. In the case of interest, revenue is
recognised as the interest accrues (using the effective interest
method, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
instrument) to the net carrying amount of the financial asset.
(T) Government Grants
Government grants are recognised at their fair value where
there is reasonable assurance that the grant will be received
and all attaching conditions will be complied with. When the
grant relates to an expense item, it is recognised as income
over the periods necessary to match the grant on a systematic
basis to the costs that it is intended to compensate. Where the
grant relates to an asset, the fair value is credited to a deferred
income account until such time as all conditions associated
with the grant are met. Once these conditions are achieved
the credit is allocated to the relevant asset. The amount of the
grant is then released to net income over the expected useful
life (by way of reduced depreciation or amortisation) of the
relevant asset.
(U) Earnings per Share
Basic earnings per share is determined by dividing the profit/
(loss) after tax by the weighted average number of ordinary
shares outstanding during the financial period. Diluted
earnings per share is determined by dividing the profit/
(loss) after tax adjusted for the effect of earnings on potential
ordinary shares, by the weighted average number of ordinary
shares (both issued and potentially dilutive) outstanding
during the financial period.
(V) Income Tax
Deferred income tax is provided on all temporary differences at
the balance date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences:
• except where the deferred income tax liability arises from
the initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction affects neither the accounting profit nor taxable
profit or loss; and
• in respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint
ventures, except where the timing of the reversal of the
temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax assets and
unused tax losses can be utilised. The carrying amount of
deferred income tax assets is reviewed at each balance date
and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of
the deferred income tax asset to be utilised.
For Geodynamics Limited, no deferred income tax asset
is being recognised in the accounts as the benefit is not
considered to be probable of being realised at this stage of the
Company’s development. Unrecognised deferred income tax
assets are reassessed at each balance date and are recognised
to the extent that it has become probable that future taxable
profit will allow the deferred income tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
balance date. Income taxes relating to items recognised directly
in equity are recognised in equity and not in net income.
2014 Annual Report GEODYNAMICS LIMITED 59
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
available and supportable market data as possible and keeping
judgemental inputs to a minimum.
(V) Income Tax (continued)
(Z) Joint Arrangements
Deferred income tax assets and deferred tax liabilities are
offset only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred
income tax assets and liabilities relate to the same taxable
entity and the same taxation authority.
The Company is also a party to a joint operation with Kentor
Energy Pty Ltd (Kentor). The joint operation assets comprise
the Savo Island prospecting license and all property plant
and equipment for use on Savo Island. The joint operation is
named the Savo Island Geothermal Joint Venture.
Under the terms of the agreement, Geodynamics (Savo Island)
Pty Ltd is entitled to earn an initial 25% interest in the Savo
Island Geothermal Power Project following the completion
of initial geophysical studies to determine target locations
for a drilling program. The Company has the right to earn an
additional 45% interest through exploration drilling and the
completion of a feasibility study for the Project. At 30 June
2014 Geodynamics had met all requirements for the initial
25% interest.
In prior years the Company was a party to two joint operations
named the Innamincka ‘Deeps’ Joint Venture and the
Innamincka ‘Shallows’ Joint Venture. The joint operations with
Origin Energy Limited were formed to explore and evaluate
enhanced geothermal systems in the Cooper/Eromanga basin
in South Australia. The joint operations comprised South
Australian geothermal tenements and all property plant and
equipment for use in the Cooper/Eromanga basin. At 30
June 2013, Origin Energy Limited withdrew from the joint
operations. Coincident with the withdrawal, the Company
became the 100% participant in the arrangement and obtained
control of its geothermal tenements and all property plant and
equipment.
(AA) Going Concern
As the Company’s assets are in the exploration and
development phase, Geodynamics is currently non-
revenue generating. As such a major focus of the Board
and management is on ongoing cash flow forecasting and
management of cash flows to ensure that the Company
always has sufficient funds to cover its planned activities
and any ongoing obligations. The Company has sufficient
cash resources to cover its near term planned exploration
expenditure. The Company also has significant ability to
slow or defer spending on its major activities to ensure that
it is always able to meet its obligations when they fall due,
including deferring expenditure on our drilling program as
the company’s permit expenditures are well in advance of the
minimum permit conditions.
While principally focussed on geothermal exploration and
development, Geodynamics will continue to actively monitor
developments in clean energy markets and technologies
to assess opportunities to acquire interests in projects or
technologies where it is able to utilise its skills and capacity
to develop further clean energy projects that provide an
acceptable return for shareholders.
(W) Other Taxes
Revenues, expenses and assets are recognised net of the
amount of GST except:
• where the GST incurred on a purchase of goods and services
is not recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of the
asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of
GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the statement of financial position. Cash flows
are included in the Cash Flow Statement on a net basis and
the GST component arising from investing and financing
activities, which is recoverable from, or payable to, the taxation
authority are classified as operating cash flows. Commitments
and contingencies are disclosed net of the amount of GST
recoverable from, or payable to, the taxation authority.
(X) Segment reporting
A business segment is a distinguishable component of the
entity that is engaged in providing products or services that
are subject to risks and returns that are different to those
of other business segments. A geographical segment is a
distinguishable component of that entity that is engaged in
providing products or services within a particular economic
environment and is subject to risks and returns that are
different than those of segments operating in other economic
environments.
(Y) Available for sale securities
Available for sale investments are those non-derivative
financial assets, principally equity securities that are
designated as available for sale. After initial recognition
available for sale securities are measured at fair value with
gains or losses being recognised as a separate component
of equity until the investment is derecognised or until the
investment is determined to be impaired, at which time
the cumulative gain or loss previously reported in equity is
recognised in profit or loss.
The fair values of investments that are actively traded in
organised financial markets are determined by reference
to quoted market bid prices at the close of business on the
balance date. For investments with no active market, fair
values are determined using valuation techniques. Such
techniques include: using recent arm’s length market
transactions; reference to the current market value of another
instrument that is substantially the same; discounted cash flow
analysis and option pricing models making as much use of
60 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 3A – PERSONNEL EXPENSES
Loss before income tax has been determined after charging/(crediting)
the following specific items:
Share Plan Expense
Share Option Expense
Employee Expenses
NOTE 3B – EXPLORATION AND EVALUATION COSTS
Loss before income tax has been determined after charging/(crediting) the following
specific items:
Expenditure for the period
Change in Rehabilitation
Proceeds from Government Grants
Change in R&D Tax Incentive for 2013 financial year
R&D Tax Incentive for the 2014 financial year
NOTE 3C – OTHER EXPENSES AND LOSSES/(GAINS)
Loss before income tax has been determined after charging/(crediting) the following
specific items:
Depreciation of plant and equipment and Amortisation of leasehold improvements 1
Interest expense
Operating lease rentals paid
Foreign exchange loss/(gain)
(Profit)/loss on disposal of property, plant & equipment
2014
$’000
337
176
5,181
5,694
8,300
2,157
(1,500)
1,468
(2,000)
8,425
522
4
1,143
(6)
(1,336)
2013
$’000
582
538
6,062
7,182
-
-
-
-
-
-
7,431
32
856
(27)
(79)
1 The 1MWe pilot plant was depreciated during the trial operating period at the end of the last financial year. At 30 June 2013 the carrying amount of the plant was impaired to
its residual value being an estimate of the fair value less costs to sell. No further depreciation expense was recorded for the pilot plant during the year ended 30 June 2014.
2014 Annual Report GEODYNAMICS LIMITED 61
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 4 – INCOME TAX
Income tax expense
2014
$’000
2013
$’000
The prima facie tax benefit on loss of 30% (2013 - 30%) differs from the income tax
provided in the financial statements as follows:
Prima facie tax on loss
(4,434)
(31,528)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
R&D Tax Incentive Receivable
Change in R&D Incentive for the prior year
Other income/(expenses)
Income tax benefit attributable to current year losses
Deferred tax asset not brought to account as realisation of the asset is not regarded
as probable
2,000
(1,468)
156
(3,746)
3,746
10,000
-
340
(21,188)
21,188
Income tax benefit attributable to operating loss
-
-
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Deferred exploration phase expenditure
Deferred evaluation phase expenditure 3
Other deferred tax liability
Deferred tax assets
Losses available for offset against future taxable income
Company1
Subsidiary2
Other deferred tax asset
Net deferred tax assets
Deferred tax asset for tax losses not recognised
Gross deferred income tax assets
Deferred tax income/(expense)
STATEMENT OF FINANCIAL POSITION
STATEMENT OF COMPREHENSIVE INCOME
2014
$’000
-
-
2013
$’000
(10)
(343)
(199)
(1,064)
77,433
4,407
2,944
84,585
(84,585)
-
-
75,925
-
1,924
76,432
(76,432)
-
-
2014
$’000
2013
$’000
-
-
-
-
-
-
-
-
-
-
-
-
1 The deferred tax asset arising from estimated tax losses is only brought to account to the extent that it offsets the Company’s deferred tax liabilities arising from temporary
differences. To the extent surplus tax losses are available, the deferred tax asset associated with these tax losses is not brought to account at balance date as the benefit is
not yet regarded as probable.
The deferred tax asset will only be obtained if:
(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and
(c) no changes in tax legislation adversely affect the Company in realising the benefit.
The Company’s tax losses for the 2013 financial year (reported above) have been adjusted to reflect the income tax return lodged during the 2014 financial year.
2 The subsidiary tax losses were acquired as part of the acquisition of KUTh Energy Limited (refer note 21). No fair value was allocated to the tax losses as part of the business
combination accounting as the tax losses are not considered probable of recovery. Given the change in ownership of KUTh Energy Limited and its controlled entities, the
recovery of the tax losses is likely to be subject to the same business test.
3 At 30 June 2014, the Group’s deferred exploration and evaluation expenditure relates to operations in the Solomon Islands and Vanuatu. As the corporate tax rate in Vanuatu
is nil%, no deferred tax liability is recognised in respect of this component for the deferred evaluation phase asset. In addition, it is yet to be determined whether
the company’s exploration expenditure in the Solomon Islands will be deductible for tax purposes (and in which jurisdiction).
62 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 5 – RECEIVABLES (CURRENT)
GST Receivable
Interest Receivable
Other Receivables
2014
$’000
295
432
4,608
5,335
2013
$’000
109
315
13,815
14,239
Accounts receivable, GST receivable, interest receivable and sundry receivables are non-interest bearing.
The other receivables balance represents an amount receivable in relation to the sale of the Habanero Camp as well as an estimate
of the amount due under the R&D Tax Incentive Scheme relating to expenditure incurred during the year ended 30 June 2014.
Allowance for Impairment loss.
No allowance has been made for impairment loss. A provision for impairment loss is only recognised when there is objective
evidence that an individual receivable is impaired. None of the balances within receivables contain impaired assets.
NOTE 6 – PROPERTY, PLANT & EQUIPMENT
Plant and Equipment at cost
Less: accumulated depreciation and impairment
Total Property, Plant and Equipment
Reconciliation of Plant & Equipment
Carrying amount at beginning
Additions (including KUTh acquisition)
Disposals
Impairment *
Reclassification from Deferred Exploration and Evaluation Costs
Less: Proceeds of Government Grants
Depreciation/Amortisation Expense
Carrying amount at the end
* Impairment of Property Plant & Equipment
2014
$’000
25,370
(21,243)
4,127
3,962
1,352
(1,450)
-
-
-
263
4,127
2013
$’000
25,467
(21,505)
3,962
19,771
127
(156)
(10,300)
9,919
(8,000)
(7,399)
3,962
The reclassification from Deferred Exploration and Evaluation costs at June 2013 related to the transfer of carrying costs for the
1MWe pilot plant and reclassification as a depreciable asset as at the time of commissioning.
While the technical appraisal of the resource and trial of the 1MWe Pilot Plant has been successful and provides proof of concept, the
development of EGS geothermal resources in Australia remains a long term challenge requiring significant capital investment and
extension of infrastructure.
The 1MWe pilot plant was designed to provide a platform for proof of concept but is not commercially viable as a long term source
of power production. The Board therefore impaired the carrying amount of the 1MWe pilot plant to its residual value being an
estimate of the fair value less costs of disposal at 30 June 2013. The Board has assessed residual amount of the 1MWe pilot plant
remains its best estimate of the fair value less costs of disposal at 30 June 2014.
2014 Annual Report GEODYNAMICS LIMITED 63
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 7 – DEFERRED EXPLORATION AND EVALUATION COSTS
Exploration Phase
Evaluation Phase
Total
Reconciliation of Deferred Exploration & Evaluation costs
Carrying amount at beginning
Add: Exploration Expenditure for period
Add: Evaluation assets acquired as part of KUTh transaction
Add: Evaluation & Development expenditure for period
Less: Proceeds of Government Grants
Less: Proceeds from R&D Tax Incentive
Reclassification to Property Plant and Equipment
Less: Impairment of Evaluation & Development expenditure
Carrying amount at the end
2014
$’000
-
7,390
7,390
1,177
-
2,485
3,768
-
-
-
(40)
7,390
2013
$’000
32
1,145
1,177
106,923
57
-
28,741
(14,000)
(32,115)
(9,919)
(78,510)
1,177
The carrying amount of deferred exploration and evaluation costs increased during the year mainly due to expenditure on the
Pacific Islands projects.
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful
development and commercial exploitation or sale of the respective geothermal exploration tenements.
As reported at 30 June 2013, the Company finalised the technical appraisal of its Cooper Basin project and associated resource.
In the absence of a small scale commercial project or other plan to commercialise the project in the medium term, the Company
impaired the carrying amount of its deferred exploration, evaluation and development costs in respect of the Cooper Basin Project
to $nil.
Commensurate with the ongoing appraisal and review of the Cooper Basin project additional evaluation costs have been incurred
during the year ended 30 June 2014. As it is not possible to reliably demonstrate the additional costs in respect of the Cooper
Basin project will be recouped through successful development or sale, the Company has recorded these costs in the Statement of
Comprehensive Income for the period in line with the Company’s accounting policy (refer note 3B).
NOTE 8 – ACCOUNTS PAYABLE
Current
Trade Creditors
Accrued Liabilities
Trade creditors and accruals
Terms and conditions
2014
$’000
2,293
1,798
4,091
2013
$’000
801
3,500
4,301
Accounts payable and accrued liabilities are non-interest bearing. Liabilities are recognised for amounts to be paid in the future for
goods and services received, whether or not billed to the Company. All amounts are normally settled within 30 days, and discounts
for early payment are normally taken where it is considered advantageous for the Company to do so. Due to the short term nature
of these payables, their carrying value is assumed to approximate their fair value.
64 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 9 – PROVISIONS
At 1 July 2013
Arising during the year
Utilised
At 30 June 2014
Current 2014
Non current 2014
Current 2013
Non current 2013
At 30 June 2013
EMPLOYEE
ENTITLEMENTS
$’000
RESTORATION
PROVISION
$’000
MAKE GOOD
PROVISION
$’000
TOTAL PROVISIONS
$’000
634
1,125
(441)
1,318
1,102
216
1,318
504
130
634
5,328
2,158
-
7,486
1,899
5,587
7,486
1,697
3,631
5,328
242
7
-
249
-
249
249
-
242
242
6,204
3,290
(441)
9,053
3,001
6,052
9,053
2,201
4,003
6,204
The restoration provision relates to the ultimate restoration of the Habanero 1, Habanero 2, Habanero 3, Habanero 4, Jolokia 1, Savina 1
and Celsius 1 sites including the wells themselves (permanent plugs), the monitoring wells and water supply pipeline routes.
Bank guarantees totalling $307,000 are held to cover South Australian, NSW and Tasmanian governments tenement
rehabilitation obligations.
The make good provision relates to the lease agreement on the Company’s corporate office premises in Brisbane. Under this
agreement, Geodynamics is required to restore the leased premises to its original condition at the end of the lease. A bank
guarantee totalling $465,820 is held by the landlord of these leased premises.
The components of the provision for employee entitlements is detailed in note 14.
NOTE 10 – FINANCIAL INSTRUMENTS
The Group’s principal financial instruments comprise of cash and cash equivalents, receivables and payables.
All financial assets are recognised initially at fair value plus transaction costs, and financial liabilities are recognised initially at fair
value. Subsequent measurement of financial assets and liabilities depends on their classification, summarised in the table below.
Financial Assets
Cash and Cash Equivalents
Receivables
Financial Liabilities
Payables
2014
$’000
2013
$’000
Amortised Cost
Amortised Cost
33,815
5,335
39,150
4,091
4,091
41,390
14,239
55,629
4,301
4,301
Financial assets and liabilities carried at amortised cost are measured by taking into account any discount or premium on
acquisition, and fees or costs associated with the asset or liability. Due to the short-term nature of these assets and liabilities, their
carrying value is assumed to approximate their fair value.
AASB7 Financial Instruments: Disclosures requires disclosures of fair value measurements by level of the following fair value
measurement hierarchy:
Level 1 – the fair value if calculated using quoted market prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
The Group does not have any level 1, level 2 or level 3 financial instruments as at 30 June 2014 or 30 June 2013.
2014 Annual Report GEODYNAMICS LIMITED 65
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 11 – CONTRIBUTED EQUITY
Authorised Shares
2014
$’000
2013
$’000
435,880,130 (2013 – 406,452,608) fully paid ordinary shares
348,338
346,083
NUMBER OF
SHARES
ISSUE PRICE
$ PER SHARE
MOVEMENT IN ORDINARY SHARE CAPITAL:
30/06/12 Balance end of financial year
NIL Movement
30/06/13 Balance end of financial year
Jan 2014
Ordinary shares issued for KUTh acquisition acceptances
Jan 2014
Ordinary shares issued for KUTh compulsory acquisition
May 2014 Ordinary shares issued for the deferred employee share plan1
406,452,608
406,452,608
24,128,364
2,404,440
1,331,425
May 2014 Ordinary shares issued for the deferred employee share plan 1
1,563,293
30/06/14 Balance end of financial year
435,880,130
$’000
346,083
346,083
2,051
204
-
-
348,338
0.085
0.085
0.155
0.165
1
The total movement in ordinary share capital for shares issued for the deferred employee share plan is lower than the total shown at note 14, the difference being shares
reallocated from the forfeited share pool.
Terms and Conditions of contributed equity
Ordinary Shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Effective 1 July 1998, the
Corporations legislation abolished the concepts of authorised capital and par value shares. Accordingly the Company does not have
authorised capital nor par value in respect of its issued capital.
Capital Management
When managing capital, management’s objective is to ensure the entity continues as a going concern and to maintain a structure
that ensures the lowest cost of capital available to the entity. As the entity is not in position to be debt funded until it advances its
projects to a completed feasibility phase which has the support of financiers, it must rely totally on shareholders and government
grants for its funding requirements.
Unissued Shares – Shareholder Options
At 30 June 2014, there were no unissued ordinary shares under shareholder options (2013 – Nil). Option holders do not have
any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate. There were no
shareholder options granted during the financial year ended 30 June 2014 (2013 – Nil).
NOTE 12 – RESERVES
Deferred Employee Share Plan Reserve
Employee Share Option Reserve
Foreign Currency Translation Reserve
Reconciliation of Reserves
Carrying amount at beginning
Recognition of Share Plan Expense – Transfer from Contributed Equity
Recognition of Share Plan Expense
Recognition of Share Option Expense
Recognition of Foreign Currency Translation Reserve
2014
$’000
3,462
7,507
(22)
2013
$’000
3,125
7,331
-
10,947
10,456
10,456
9,336
-
337
176
(22)
-
582
538
-
10,947
10,456
66 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 12 – RESERVES (continued)
Nature and purpose of reserves
Deferred employee share plan reserve
The employee share plan reserve is used to record the value of fully paid ordinary shares granted to employees, including key
management personnel, as part of their remuneration. Refer to Note 14 for further details.
Employee share option reserve
The employee share option reserve is used to record the value of share options granted to employees, including key management
personnel, as part of their remuneration. Refer to Note 14 for further details.
Foreign currency translation reserve
This reserve records the differences arising as a result of translating the financial statements of subsidiaries recorded in foreign
currencies to the presentational currency.
NOTE 13 – EXPENDITURE COMMITMENTS
Enhanced Geothermal Systems (EGS) Tenement Commitments
In order to maintain current rights of its EGS tenements, the Company is required to outlay annual rentals and to meet certain
expenditure requirements of the New South Wales, South Australian, Queensland and Tasmania Mines Departments. Also included
are fees for Solomon Islands licenses. These obligations are subject to renegotiation upon expiry of the tenements. The obligations
are not provided for in the financial report and are payable as follows:
Payable not later than one year
Operating Leases (non-cancellable)
Payable not later than one year
Later than one year but not later than five years
Other Commitments (Open Purchase Orders)
2014
$’000
245
1,127
18
1,145
1,423
2013
$’000
164
1,071
1,109
2,180
3,204
Included in the other commitments are open purchase orders in relation to the Deeps Joint Venture – refer to Note 25 for details.
The Company has no capital commitments at 30 June 2014.
NOTE 14 - EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS
Employee Benefits
The aggregate employee benefit liability is comprised of:
Provision for Annual Leave (current)
Provision for Long Service Leave (current)
Provision for Time off in Lieu
Provision for Terminations
Provision for Long Service Leave (non-current)
2014
$’000
2013
$’000
455
-
72
576
215
1,318
440
-
64
-
130
634
Superannuation Commitments
The Company contributes to external accumulation funds for its employees which provide benefits for employees and their
dependants on retirement, disability or death. These funds provide benefits on a defined contribution basis. Contributions are
enforceable to the extent of the contribution required by the Superannuation Guarantee Levy.
Employer contributions paid or payable to the plans
507
695
2014 Annual Report GEODYNAMICS LIMITED 67
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 14 - EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS (continued)
Long Term Incentive Plan (LTIP)
In October 2008, the Board resolved to approve a new Long Term Incentive Plan (LTIP) with the key objective being to retain,
motivate and reward senior executives and staff in a manner which aligns this element of remuneration with the creation of long
term shareholder value.
The LTIP is provided in two components being Geodynamics Limited shares as traded on the ASX and options to purchase Geodynamics
Limited shares at the current price, sometime in the future. The LTIP is designed to provide rewards over a three year term.
The Geodynamics LTIP offers eligible employees and Executive Directors of Geodynamics the opportunity to participate in the
growth of Geodynamics through participation in:
• the Geodynamics Limited Deferred Employee Share Plan (DESP); and
• the Geodynamics Limited Employee Option Plan (EOP).
Shares and Options issued under the DESP and EOP respectively are allocated and issued to participants for no consideration. The
issue of options and allocations of shares within the LTIP is also subject to the participants satisfactory performance as judged by
their line manager.
To become entitled to the shares and options, participants are required to satisfy certain performance requirements. On satisfying
the performance requirements for options, the options can be converted into shares by payment of the exercise price.
The service requirements for shares issued under the DESP require that for each annual allocation of shares made to participants
under the DESP, the participant will be required to remain employed by Geodynamics or a Related Body Corporate for 36 months
from the date of allocation of the shares for the shares to vest.
The performance requirements for options issued under the EOP requires that options will only vest should the compound growth
in the Geodynamics share price increase by 15% per annum and the participant remains employed by Geodynamics or a Related
Body Corporate for :
• 12 months from the date of allocation for 30% vesting of the total option number; and
• 24 months from the date of allocation for 30% vesting of the total option number; and
• 35 months from the date of allocation for 40% vesting of the total option number.
Employee Option Plan (EOP)
The options are issued for a term of three years. The options are valued using the Black-Scholes formula which is a function of the relationship
between a number of variables that principally comprise the share price, option exercise price, risk free interest rate and the volatility of the
Company’s underlying share price. Accordingly, the formula requires a number of inputs, some of which must be assumed.
The LTIP was terminated in March 2014. As such there were no options issued during the 2013/14 financial year and all remaining
options in the plan were cancelled.
3,490,087 shares were issued to employees as part of the process for the termination of the Long Term Incentive Plan. 2,894,718 of
these were new shares with the remainder being reallocated from the forfeited share pool. These shares are still subject to the Long
Term Incentive provisions and as such have a vesting period of 36 months.
Information with respect to the number of options granted under the EOP is as follows:
2014
2013
NUMBER OF OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE
NUMBER OF OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE
Balance at beginning of year
6,828,319
$0.39
10,729,530
-
(3,901,211)
$0.44
-
$0.55
6,828,319
$0.39
-
-
-
-
Granted during the year
- lapsed or forfeited
- cancelled
Balance at end of year
Options that vested during the period
Vested & Exercisable at end of year
-
2,887,463
3,940,856
-
-
-
-
$0.39
$0.40
-
-
-
68 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 14 - EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS (continued)
Options exercised
There were no options exercised by employees during the year ended 30 June 2014.
Total Options held at the end of the reporting period
The following table summarises information about options held by employees as at 30 June 2014:
GRANT DATE
NUMBER OPTIONS
TYPE
EXPIRY DATE
EXERCISE PRICE
All options cancelled as part of the
termination of the Long Term Incentive Plan
TOTAL
-
-
Deferred Employee Share Plan (DESP)
The shares are issued for a term of three years. The shares are valued using fair value at the date of grant which is deemed to be the
five day volume weighted average share price at the date of grant.
Information with respect to the number of shares granted under the DESP is as follows:
Balance at beginning of year
- granted 1
- transferred to employees or forfeited
Balance at end of year
Vested & Exercisable at end of year
2014
2013
NUMBER OF SHARES
WEIGHTED AVERAGE
ISSUE PRICE
NUMBER OF SHARES
WEIGHTED AVERAGE
ISSUE PRICE
3,119,681
3,490,087
(1,675,675)
4,934,093
-
$0.30
$0.06
$0.37
$0.11
-
4,512,489
471,698
(1,864,506)
3,119,681
-
$0.41
$0.16
$0.54
$0.30
-
1
The total amount granted for the year ended 30 June 2014 is greater than the movement in ordinary share capital due to a reallocation from the forfeited share pool
Refer to note 11
Total Shares held at the end of the reporting period
The following table summarises information about shares held by employees under the DESP as at 30 June 2014:
GRANT DATE
30/06/11
30/09/11
01/05/14
22/02/13
01/05/14
TOTAL
NUMBER SHARES
278,636
831,413
1,331,425
471,698
2,020,921
4,934,093
Deferred Employee Share Plan
Deferred Employee Share Plan
Deferred Employee Share Plan
Deferred Employee Share Plan
Deferred Employee Share Plan
TYPE
VESTING DATE
ISSUE PRICE
30/06/14
30/09/14
31/12/14
31/01/15
31/03/15
2014
$’000
(3.51)
$0.31
$0.20
$0.06
$0.16
$0.06
$0.11
2013
$’000
(25.86)
NOTE 15 - EARNINGS PER SHARE
Basic and diluted earnings/(loss) per share attributable to the equity holders (cents per
share)
The following reflects the income and share data used in the calculations of basic and
diluted earnings per share:
Net loss attributable to equity shareholders ($’000)
(14,781)
(105,092)
Weighted average number of ordinary shares used in calculation of basic earnings per share
421,547,416
406,452,608
2014 Annual Report GEODYNAMICS LIMITED 69
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 16 - SEGMENT INFORMATION
The Company operates in one segment, being geothermal energy exploration and evaluation.
The Company’s areas of operation are currently located in Australia, the Solomon Islands and Vanuatu (Pacific Islands). With the
expansion of the Company’s activities outside of Australia in the 2014 financial year, the Company has disclosed a geographic split
of non-current assets as at 30 June 2014 (comparative information has also been reported).
Operating segments are identified on the basis of internal reports that are regularly reviewed and used by the Board of Directors
(chief operating decision maker) in order to allocate resources to the segment and assess its performance. The financial information
presented in the Statements of Comprehensive Income and Financial Position is the same as that presented to the chief operating
decision maker.
Unless otherwise stated, all amounts reported to the Board of Directors as the chief operating decision maker are in accordance
with the entity’s accounting policies.
Geographic Split of Non Current Assets
YEAR ENDED 30 JUNE 2014
Property Plant & Equipment
Deferred Exploration and Evaluation
Total Non Current Assets
YEAR ENDED 30 JUNE 2013
Property Plant & Equipment
Deferred Exploration and Evaluation
Total Non Current Assets
PACIFIC
1,332
7,390
8,722
-
1,145
1,145
AUSTRALIA
2,795
-
2,795
3,962
32
3,994
CONSOLIDATED
4,127
7,390
11,517
3,962
1,177
5,139
The Company’s revenue represent interest on cash and cash equivalents and is all generated in the Australian geographic segment.
NOTE 17 – BUSINESS COMBINATION ACCOUNTING FOR THE ACQUISITION OF KUTH ENERGY LIMITED
On 4 December 2013, the Company announced its off-market offer to acquire shares in Kuth Energy Limited (“KUTh”) was
unconditional.
KUTh is a geothermal power project explorer/developer with interests throughout the Pacific and Australia. KUTh holds a
production Licence on Efate Island in Vanuatu which is the lead project in its portfolio.
As detailed in the Company’s Bidder’s Statement, dated 10 October 2013, on accepting the offer KUTh shareholders would receive
one (1) Geodynamics Limited share for every five and a half (5.5) KUTh shares. On 4 December 2013, the Company received
acceptances equivalent to 86.06% of the issued share capital of KUTh. On declaring the offer unconditional, the Company assessed
it had obtained control of KUTh and as such has accounted for the acquisition at that time.
Pursuant to the off-market offer (which remained open until 13 December 2013), the Company increased its beneficial interest in
KUTh to 90.45% as at 12 December 2013 and at that time commenced the process of compulsorily acquiring the outstanding shares
in KUTh. On 12 December 2013, Geoff Ward was also appointed to the Board of KUTh.
As the consideration for the acquisition was shares in the Company, the cost of the acquisition has been measured with reference to
the Geodynamics share price at the close of business on the day the offer was declared unconditional, being 8.5 cents per share.
Given the short period of time between obtaining control of KUTh and commencing compulsory acquisition of the remaining
interest in KUTh, the Company has treated the acquisition as a single transaction for the purpose of its acquisition accounting. The
consideration shares were issued to KUTh’s shareholders in two tranches of 24,128,364 shares on 3 January 2014 and 2,404,440 on
17 January 2014.
70 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 17 – BUSINESS COMBINATION ACCOUNTING FOR THE ACQUISITION OF KUTH ENERGY LIMITED (continued)
Assets acquired and Liabilities assumed
The business combination accounting resulted in the following fair values being allocated to the identifiable assets and liabilities of
KUTh at the acquisition date.
ASSETS
Current Assets
Cash and Cash Equivalents
Trade and Other Receivables
Total Current Assets
Non Current Assets
Property, Plant and Equipment
Deferred Exploration, Evaluation & Development phase costs
Total Non Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and Other Payables 1
Provisions (employee) 1
Total Liabilities
Total Identifiable Net Assets At Fair Value
Purchase Consideration
26,532,804 shares at 8.5 cents per share
4 DECEMBER 2013
$000
186
162
348
6
2,485
2,491
2,839
433
151
584
2,255
2,255
1 The reported trade payables and provisions include amounts payable in respect of terminating KUTh’s contractual obligations.
No changes have been made between the provisional combination accounting reported at 31 December 2013 and the final business
combination accounting at 30 June 2014.
In addition, general and administrative expenses in the Consolidated Statement of Comprehensive Income includes $154,782 of
transaction costs in respect of the acquisition.
Since acquisition, KUTh’s contribution to the Group’s loss for the year ended 30 June 2014 is $105,283. In addition, the Company has
determined it is impracticable to disclose the revenue and loss which would have been included in the consolidated statement of
comprehensive income had the acquisition of KUTh occurred at the beginning of the reporting period.
NOTE 18 – REMUNERATION OF AUDITORS
Amounts received or due and receivable by Ernst & Young Australia for:
An audit or review of the financial report of the entity
Other assurance services
2014
$
83,500
5,000
88,500
2013
$
92,500
5,000
97,500
2014 Annual Report GEODYNAMICS LIMITED 71
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 19 – KEY MANAGEMENT PERSONNEL
Details of Key Management Personnel
DIRECTORS
K. Spence
G. Ward
R. Davies
J. Hamilton
M. Marier
A. Stock
G. Miltenyi
EXECUTIVES
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Chairman (non-executive)
Managing Director & CEO
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive) (appointed 1 March 2014)
Operations Manager
Reservoir Engineering Manager
Chief Financial Officer
Well Engineering & Technology Manager
Project Engineering Team Leader
Compensation of Key Management Personnel
Short-term employee benefits
Post Employment benefits
Share based payment
2014
$
2013
$
2,280,482
2,698,179
137,008
225,651
186,092
322,453
2,643,141
3,206,724
Further information on remuneration of Key Management Personnel is shown in the Remuneration Report contained within the
Directors’ Report.
NOTE 20 – RELATED PARTY DISCLOSURES
Services rendered during the year
During the year electricity was provided to the Company by Origin Energy under normal commercial terms and conditions.
The Metasource (Woodside) environmental credits off take rights
In 2002 Metasource committed by an Agreement to subscribe for 10,443,392 fully paid ordinary shares as a pre-IPO investor in the
Company’s August 2002 Prospectus. Under the terms of that Agreement Metasource has the right to participate pro rata to its then
current shareholding in any further issue of equity in Geodynamics at the price payable by other parties at the time and Metasource
has a right to nominate a person to be appointed as a director of Geodynamics.
On 31 March 2004 the Company announced that it had executed an Environmental Credits Off take Deed with Metasource which
formalises Metasource’s rights to Environmental Credits. Metasource or its nominee has the right to procure all of the environmental
credits which arise from 50% (capped at 1,300 GWh/year) of the power generated by Geodynamics’ power plant(s). 37.5% of
the Environmental Credits can be sold to Metasource at full market price with the balance of 12.5% of the Environmental Credits
assigned to Metasource without separate consideration. The term for the purchase of Environmental Credits commenced on 8 April
2004 and ends on the earlier of:
a)
10 years after the commissioning of the first commercial power plant with capacity exceeding 250 megawatts;
b) 20 years after the Company achieves commissioning of EGS plants with a combined sales capacity exceeding 25 megawatts;
or
c) 80 years after the date of the contract.
72 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 20 – RELATED PARTY DISCLOSURES (continued)
The Origin Energy environmental credits and power
off take rights
On 5 August 2003, Geodynamics executed an Investment Deed
with Origin Energy Limited wherein the parties agreed to enter
into a strategic alliance under which Origin would subscribe for
10,000,000 shares in Geodynamics. Under the terms of the
Investment Deed, Origin Energy has a right of participation in
future share issues pro rata to its then percentage shareholding
in Geodynamics and Origin has a right to nominate a person to
be appointed as a director of Geodynamics.
On 29 April 2005, Geodynamics executed a Heads of
Agreement (HOA) with Origin Energy Electricity Limited
(Origin) under which, at the time final contracts are entered
into, the parties will enter into a power purchase agreement
(PPA) and Renewable Energy Certificate purchase agreement
(RPA). Under the terms of the PPA, Origin will have the right
to purchase 50% of the power generated by Geodynamics
(capped at 1300 GWh/year) from any power plant that is
connected to a transmission system at a discount of 5% to
the then market price. The term of the PPA will commence
on the first generation of power by Geodynamics from any
power plant that is connected to a transmission system and
end 10 years after the commissioning of Geodynamics first
large commercial power plant (being a power plant which has a
nominal rated capacity of 200 MW or more);
Under the terms of the RPA, Origin will have the right to
purchase any Renewable Energy Certificates (RECs) and/or
environmental credits (ECs) arising from 47.5% of all power
generated by Geodynamics at market price (up to a maximum
of the number of RECs and ECs arising from the generation of
1300 GWh of power which qualify for the issue of RECs or ECs
in each year). In addition a further 2.5% of the RECs and/or ECs
will be assigned to Origin without separate consideration. The
RPA will start on the first generation of power by Geodynamics
and will end 10 years after the commissioning date of
Geodynamics first large commercial power plant.
The Origin Energy Joint Ventures
In December 2007, shareholders approved a farmin with Origin
Energy (Origin) on the Innamincka ”Deeps” EGS geothermal
resource. In the subsequent 24 month period, Origin
contributed $105.6m to project costs in addition to its own 30%
share of project expenditure to satisfy the terms of the farmin.
The resulting Joint Venture is known as the Innamincka “Deeps”
Joint Venture and sees Geodynamics as Operator with a 70%
project interest and Origin with a 30% project interest. The
Joint Venture assets comprise the South Australian geothermal
tenements and all property plant and equipment in the Cooper
Basin including the drilling rigs.
In February 2010, Geodynamics announced that it had agreed
to enter into a second joint venture with Origin to explore for
shallow geothermal resources on existing Joint Venture licence
areas in the Eromanga Basin in South Australia.
The Innamincka “Shallows” Joint Venture focuses on the
exploration of shallow hot sedimentary aquifers (HSA) down
to approximately 3,000 m depth, as distinct from the existing
”Deeps” Joint Venture with Origin, which focuses on higher
temperature enhanced geothermal systems (EGS) in the deeper
granites generally below 4,000 m. The participating interests in
the “Shallows” Joint Venture are Origin as Operator with a 50%
interest and Geodynamics with a 50% interest. At 30 June 2014,
Origin Energy Limited, held 15,454,119 fully paid ordinary shares in
Geodynamics representing 3.6% of its issued capital.
As advised to the ASX on 28 March 2013, Origin Energy have
withdrawn from both of the above joint ventures effective 30
June 2013. The result being Geodynamics hold a 100% interest
in the Deeps and Shallows joint ventures as at 1 July 2013.
The Kentor Energy Joint Venture
In November 2012, Geodynamics Limited entered into a two
stage earn-in and joint operating agreement with Kentor
Energy Pty Ltd (“Kentor”), a subsidiary of Kentor Gold Ltd
(ASX: KGL), to acquire up to 70% interest in a conventional
geothermal power supply project in the Solomon Islands.
Under the terms of the agreement, Geodynamics is entitled
to earn an initial 25% interest in the Savo Island Geothermal
Power Project (“Project”) following the completion of initial
geophysical studies to determine target locations for a drilling
program. The Company has the right to earn an additional 45%
interest through exploration drilling and the completion of a
feasibility study for the Project.
In April 2013 Geodynamics fulfilled its commitments under
Stage One of the Earn-In by releasing a Savo Island Inferred
Geothermal Resource Assessment and became entitled to the
initial 25% in the Savo Island Geothermal Power Project.
The Sentient/Sunsuper investment
On 10 April 2008, Geodynamics announced that The Sentient
Group (Sentient) and Sunsuper Pty Ltd (Sunsuper) had agreed
to become joint cornerstone investors in Geodynamics. It had
been agreed that Sentient and Sunsuper would collectively
subscribe for 11.8% of the Company’s then current issued share
capital or 25 million fully paid ordinary shares in Geodynamics
at an issue price of $1.50 per share. In addition, one attaching
unquoted placement option exercisable at $2.00 per share for
every two Shares issued (i.e. 12.5 million options) and expiring
28 February 2009 would be issued. An extraordinary general
meeting of shareholders was convened on 29 May 2008 and
unanimously approved the placement.
As part of the investment, Sentient and Sunsuper have the right
to collectively appoint a Non-executive Director to the Board of
Geodynamics. Sentient and Sunsuper are collectively required
to maintain a 10% shareholding in Geodynamics to maintain
this Board representation. Mr Pieter Britz was appointed to the
Board on 25 June 2008 as the director representative under
this condition. He resigned as a Director on 24 February 2011
and Mr Michel Marier was appointed as his replacement on the
same date under that condition.
2014 Annual Report GEODYNAMICS LIMITED 73
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 20 – RELATED PARTY DISCLOSURES (continued)
The Sentient/Sunsuper investment (continued)
In March 2010, Sentient and Sunsuper purchased a combined total 14,974,385 fully paid ordinary shares in Geodynamics
representing 5.2% of its issued capital. This occurred in an off market transaction thereby increasing their respective holdings by
7,784,592 and 7,189,793 shares. The substantial shareholder notices lodged at the time by both Sentient and Sunsuper showed
that Sentient held 20,284,592 fully paid ordinary shares in Geodynamics representing 7.0% of its issued capital and Sunsuper held
19,689,793 fully paid ordinary shares in Geodynamics representing 6.8% of its issued capital.
The Tata Power investment
On 4 September 2008, Geodynamics announced that The Tata Power Company Limited (Tata Power) had agreed to become a
cornerstone investor in the Company. It had been agreed that Tata Power would subscribe for 11.4% of the Company’s then current
issued share capital or 29.4 million fully paid ordinary shares in Geodynamics at an issue price of $1.50 per share. In addition, one
attaching unquoted placement option exercisable at $2.25 per share for every two Shares issued (i.e. 14.7 million options) and
expiring 28 February 2009 would be issued. At the Annual General Meeting held on 20 November 2008 shareholders approved
the placement and attaching options issue.
As part of the investment, Tata Power has the right to appoint a Non-executive Director to the Board of Geodynamics. Tata Power
is required to maintain a 10% shareholding in Geodynamics to maintain this Board representation. Mr Minesh Dave was appointed
to the Board on 23 February 2012 as the director representative under this condition. At 30 June 2013, Tata Power through its
subsidiary Trust Energy Resources, held 29,400,000 fully paid ordinary shares in Geodynamics representing 7.2% of its issued
capital. Mr Minesh Dave retired from the Board on 29 November 2012 and, due to the Tata shareholding being below the required
level of 10%, was not replaced.
NOTE 21 - NOTES TO THE CASH FLOW STATEMENT
(A) Reconciliation of Cash
Cash is defined in Note 2K to this financial report. Cash balance comprises:
Cash on Hand
Cash at Bank
Bank Bills and Term Deposits
Total Cash
(B) Reconciliation of the operating loss after tax with the net cash flows used in operations
Loss after income tax
Depreciation and amortisation
Net (profit)/loss on disposal of property, plant & equipment
Share Option Valuation Expense
Shares issued under Deferred Employee Share Plan
Exploration and Evaluation Cost treated as an investing activity
Impairment of Property Plant & Equipment
Impairment of Exploration & Evaluation Costs
Changes in Assets & Liabilities
(Increase)/decrease in receivables and prepayments
Increase/(decrease) in other creditors and accruals
(Increase)/decrease in inventories
Increase/(decrease) in general provisions
Increase/(decrease) in provision for employee benefits
2014
$’000
2013
$’000
-
890
32,925
33,815
-
10,590
30,800
41,390
(14,781)
(105,092)
522
(1,538)
176
337
8,425
-
40
(477)
(393)
(704)
2,164
(43)
7,431
(90)
538
582
-
10,300
78,510
(90)
823
-
325
(79)
Net Cash Flow used in Operating Activities
(6,272)
(6,842)
(C) Non-Cash Financing and Investing Activities. During the year nil (2013 – nil) fully
paid ordinary shares were issued in consideration of professional services rendered
by external consultants to the Company in the ordinary course of business.
74 GEODYNAMICS LIMITED 2014 Annual Report
74 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 22 – CONTINGENT LIABILITIES
Geodynamics Limited has been advised that the South
Australian Geothermal Exploration Licences No. 211 (GEL) and
Geothermal Retention Licences (GRL) No. 3 through to 12 and
20 to 24 have been granted by the Department of Primary
Industries and Resources South Australia on the basis that
the grant of a GEL or GRL is not an act which creates a ‘right
to mine’ and therefore ‘the right to negotiate’ process in the
relevant native title legislation does not apply and the grant
of the GELs and GRLs are valid for native title purposes. The
Company’s legal advice is that this is a sustainable position
although it would be open to a Court to reach a different
conclusion. Any substantiated claim may have a financial
ramification for the Company.
The Company has also been advised that none of the New
South Wales tenements are invalid for native title purposes
or attract the relevant right to negotiate provisions in the
applicable native title legislation.
Bank guarantees totalling $307,000 are held to cover South
Australian, New South Wales and Tasmanian governments
tenement rehabilitation obligations. A bank guarantee
totalling $465,820 is held by the landlord for the lease of the
Brisbane office premises.
NOTE 23 – SUBSEQUENT EVENTS
There has not arisen between 30 June 2014 and the date
of this report any item, transaction or event of a relevant
and unusual nature likely, in the opinion of the Directors of
the Company, to affect significantly the operations of the
Company, the results of those operations, or the state of affairs
of the Company.
NOTE 24 – FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES
The Company’s principal financial instruments comprise cash
and short-term deposits. The main purpose of these financial
instruments is to manage the finances for the Company’s
operations. The Company has various other financial assets
and liabilities such as trade receivables and trade payables,
which arise directly from its operations. It is, and has been
throughout the period under review, the Company’s policy that
no trading in financial instruments shall be undertaken. The
main risks arising from the Company’s financial instruments
are cash flow interest rate risk and foreign currency risk.
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised, in respect of each class of financial asset, financial
liability and equity instrument are disclosed in Note 2 to the
financial statements.
Primary responsibility for identification and control of
financial risks rests with the board of directors, however the
day-to-day management of these risks is under the control
of the Managing Director and Chief Financial Officer. The
Board agrees the strategy for managing future cash flow
requirements and projections.
(A) Interest rate risk
The Company’s exposure to interest rate risks primarily relates
to the Company’s funds held on term deposit. The Company
has no debt obligations. At balance date, the Company had
the following mix of financial assets and liabilities exposed to
interest rate risk:
Cash and cash
equivalents
2014
$’000
33,815
2013
$’000
41,390
The Company’s policy is to place funds in interest-bearing
deposits that are surplus to immediate requirements. The
Company’s interest rate exposure is reviewed near the maturity
date of term deposits to assess whether more attractive
interest rates are available without increasing risk.
At 30 June 2014, if interest rates had moved, as illustrated in
the table below, with all other variables held constant, the post
tax loss and equity would have been affected as follows:
POST TAX PROFIT
HIGHER/(LOWER)
EQUITY
HIGHER/(LOWER)
2014
$’000
338
2013
$’000
414
2014
$’000
338
2013
$’000
414
(169)
(207)
(169)
(207)
+1%
-0.5%
The movements in the loss and equity are due to higher/
(lower) interest income from cash balances.
(B) Credit Risk
The Company’s maximum exposures to credit risk at balance
date in relation to financial assets, is the carrying amount
of those assets as recognised on the statement of financial
position. There are no derivative financial instruments currently
being used by the Company to offset its credit exposure.
The Company trades only with recognised, creditworthy third
parties, and as such collateral is not requested nor is it the
Company’s policy to securities its trade and other receivables.
It is noted that the company’s significant receivable balances at
30 June 2014 relate to the R&D tax incentive and the amount
receivable from the sale of the Cooper Basin Operating Base to
Beach Energy Limited.
(C) Foreign Currency Risk
During the course of its business activities, the Company has
had some transactional currency exposures, principally to the
US dollar. Such exposure arises from purchases in currencies
other than the Company’s functional currency. The Company
enters into forward currency contracts to hedge some of these
exposures due to the length and size of the currency exposure.
They generally relate to the purchase of capital assets or
major material purchases. Conversely, the purchase of foreign
currency operational supplies and services are generally
not hedged due to the short time frame associated with the
currency exposure and the relatively modest overall exposure
at any one point in time.
2014 Annual Report GEODYNAMICS LIMITED 75
NOTES TO THE FINANCIAL STATEMENT S (CONTINUED)
NOTE 24 – FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES (continued)
• This methodology reflects the translation methodology
undertaken by the Company.
(C) Foreign Currency Risk (continued)
(D) Liquidity Risk
The Company’s objective is to maintain sufficient funds to
finance its current operations with additional funds to ensure
its long-term survival in the event of a business downturn.
The Company’s policy is that it is dependent on shareholder
funds until such time as it commences generating revenue
from operations. It has no finance facilities in place and no
borrowings. The contractual maturity of the Company’s
financial liabilities are:
6 months or less
2014
$’000
4,091
2013
$’000
4,301
NOTE 25 – INTEREST IN JOINT OPERATIONS
The Company is a party to a joint operation with Kentor
Energy Pty Ltd (Kentor). The joint operation assets comprise
the Savo Island prospecting license and all property plant
and equipment for use on Savo Island. The joint operation is
named the Savo Island Geothermal Joint Venture.
Under the terms of the agreement, Geodynamics (Savo Island)
Pty Ltd is entitled to earn an initial 25% interest in the Savo Island
Geothermal Power Project following the completion of initial
geophysical studies to determine target locations for a drilling
program. The Company has the right to earn an additional 45%
interest through exploration drilling and the completion of a
feasibility study for the Project. At 30 June 2014 Geodynamics
had met all requirements for the initial 25% interest.
In prior years the Company was a party to two joint operations
named the Innamincka ‘Deeps’ Joint Venture and the
Innamincka ‘Shallows’ Joint Venture. The joint operations with
Origin Energy Limited were formed to explore and evaluate
enhanced geothermal systems in Cooper/Eromanga basin
in South Australia. The joint operations comprised South
Australian geothermal tenements and all property plant and
equipment for use in the Cooper/Eromanga basin. At 30 June
2013, Origin Energy Limited withdrew from the joint operations.
Coincident with the withdrawal, the Company become the
100% participant in arrangement and obtained control of its
geothermal tenements and all property plant and equipment.
Approved foreign exchange derivatives are limited to foreign
exchange forward contracts and foreign exchange swaps (i.e.
simultaneous purchase and forward sale) with tenors of less
than 12 months except for long lead time capital items where
the tenor shall be as specified under the contract.
Contractually agreed or committed (i.e. Board approval
received) foreign currency exposures in excess of the
equivalent of AUD 500,000 payable within 12 months are to
be fully covered. In addition, contracted capital items with a
foreign currency exposure in excess of the equivalent of AUD
500,000 payable beyond 12 months are to be fully covered.
Exposures of less than the equivalent of AUD 500,000 will not
normally be covered, as the business risk of not covering these
is considered negligible (due to the short time between supply
and payment).
It is the Company’s policy not to enter into forward contracts
until a firm commitment is in place and to negotiate the terms
of the hedge derivatives to exactly match the terms of the
hedged item to maximise hedge effectiveness.
At 30 June 2014, the Company had the following exposures to
foreign currency that is not designated in cash flow hedges:
Financial Liabilities
Trade and other
payables
Derivatives
2014
$’000
273
-
2013
$’000
41
-
At 30 June 2014, had the Australian Dollar moved, as
illustrated in the table below, with all other variables held
constant, the post tax loss and equity would have been
affected as follows:
POST TAX PROFIT
HIGHER/(LOWER)
EQUITY
HIGHER/(LOWER)
2014
$’000
25
(14)
2013
$’000
4
(2)
2014
$’000
25
(14)
2013
$’000
4
(2)
+10%
-5%
The movements in profit and equity in 2014 are more sensitive
than in 2013 due to the higher value of the financial liabilities.
• Significant assumptions used in the foreign currency
exposure sensitivity analysis include:
• Reasonably possible movements in foreign exchange
rates were determined based on a review of the last years
historical movements.
• The reasonably possible movement of 10% was calculated by
taking the relevant foreign currency spot rates as at balance
date, moving those spot rates by 10% and then re-converting
back into AUD with the “new spot-rate”.
76 GEODYNAMICS LIMITED 2014 Annual Report
NOTE 26 – INFORMATION RELATING TO GEODYNAMICS LIMITED (THE PARENT)
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Contributed Equity
Accumulated Losses
Other Reserves
Profit or loss of the Parent entity
Total comprehensive income of the Parent entity
2014
$’000
45,752
51,556
7,067
13,119
2013
$’000
55,817
60,956
6,502
10,505
348,338
346,083
(320,870)
(306,088)
10,969
38,437
(14,781)
(14,781)
10,456
50,451
(105,092)
(105,092)
The Parent has not issued guarantees in relation to the debts of its subsidiaries.
The Parent has no contingent liabilities nor any contractual obligations on behalf of its subsidiaries at 30 June 2014.
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of Geodynamics Limited, I state that:
1.
In the opinion of the Directors:
(a) the financial statements, notes and additional disclosures included in the Directors’ Report designated as audited of the
Company are in accordance with the Corporations Act 2001, including:
(b)
giving a true and fair view of the Company’s financial position as at 30 June 2014 and of their performance for the period
ended on that date; and
(c) complying with Accounting Standards and Corporations Regulations 2001; and
(d) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2; and
(e) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section
295A of the Corporations Act 2001 for the financial period ending 30 June 2014.
On behalf of the Board.
K. Spence
Chairman
Brisbane 28 August 2014
2014 Annual Report GEODYNAMICS LIMITED 77
INDEP ENDENT AUDITOR’S REP ORT
TO THE MEM BER S OF GEODYNAMICS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GEODYNAMICS LIMITED
REPORT ON THE FINANCIAL REPORT
We have audited the accompanying financial report of
Geodynamics Limited, which comprises the consolidated
statement of financial position as at 30 June 2014, the
consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then
ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’
declaration of the consolidated entity comprising the
company and the entities it controlled at the year’s end or
from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation
of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal controls as the
directors determine are necessary to enable the preparation
of the financial report that is free from material misstatement,
whether due to fraud or error. In Note 2B, the directors also state,
in accordance with Accounting Standard AASB 101 Presentation
of Financial Statements, that the financial statements comply
with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial
report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement
of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls
relevant to the entity’s preparation and fair presentation of the
financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal
controls. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit we have complied with the independence
requirements of the Corporations Act 2001. We have given to
the directors of the company a written Auditor’s Independence
Declaration, a copy of which is included in the directors’ report.
Opinion
In our opinion:
a. the financial report of Geodynamics Limited is in
accordance with the Corporations Act 2001, including:
i giving a true and fair view of the consolidated
entity’s financial position as at 30 June 2014 and of
its performance for the year ended on that date; and
ii complying with Australian Accounting Standards
and the Corporations Regulations 2001; and
b. the financial report also complies with International
Financial Reporting Standards as disclosed in Note 2B.
Report on the remuneration report
We have audited the Remuneration Report included in
the directors’ report for the year ended 30 June 2014. The
directors of the company are responsible for the preparation
and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Geodynamics
Limited for the year ended 30 June 2014, complies with
section 300A of the Corporations Act 2001.
Ernst & Young
Andrew Carrick
Partner
Brisbane
28 August 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
78 GEODYNAMICS LIMITED 2014 Annual Report
OF FTAK E AGREEMENT S
THE METASOURCE AGREEMENT (2002)
Metasource Pty Ltd (a wholly owned subsidiary of Woodside
Energy Limited) was at the time of listing in 2002 the Company’s
largest shareholder. Metasource committed by an Agreement to
subscribe for 10,443,392 fully paid ordinary shares as a pre-IPO
investor in the Company’s August 2002 Prospectus and was
therefore a substantial shareholder at the time the Company
was admitted to the official list of the Australian Stock Exchange
(ASX) on 11 September 2002. At that time, Metasource’s
shareholding represented 31.6% of the issued share capital of the
Company. Metasource subsequently subscribed for a further
1,111,111 fully paid ordinary shares at an issue price of 90¢ per share
on 31 March 2004 to support the Company’s working capital
requirement for the Cooper Basin Stage One project. In 2008,
Metasource sold all of its shares in Geodynamics.
The Metasource Agreement of 2002 contains the following
material conditions which remain current:
• Metasource or its nominee has the right to purchase
Environmental Credits from Geodynamics and the parties
agreed to negotiate and enter into a formal purchase
contract. Environmental Credits is defined broadly and
includes renewable energy certificates, carbon credits and any
other legal, commercial or other benefit (whether present or
future) from any use of renewable energy arising directly or
indirectly from the use of thermal energy or the generation
of power from power plants developed by Geodynamics. On
31 March 2004 the Company announced that in conjunction
with Metasource’s subscription for a further 1,111,111 fully
paid ordinary shares at 90 cents, that it had executed an
Environmental Credits Off-take Deed with Metasource which
formalises Metasource’s rights to Environmental Credits.
• Metasource or its nominee has the right to buy all of the
environmental credits which arise from 50% (capped at 1,300
GWh/year) of the power generated by Geodynamics’ power
plant(s). Metasource is, however, not entitled to purchase
Environmental Credits in the form of renewable energy
certificates, unless either renewable energy certificates
become an instrument which is used for purposes other
than those currently prescribed in the Renewable Energy
(Electricity) Act 2000 or Geodynamics does not claim the
benefit of the environmental credits which Metasource is
entitled to buy under the purchase contract other than by
reason of there being no legal framework within which such
benefits can reasonably be claimed.
• The price of environmental credits will be the lower of 75%
of the then market price in Australia or the then market price
minus $5/tonne. The purchase price of environmental credits
cannot be less than zero. Subsequently, this condition has
been varied following execution of an Environmental Credits
Off-take Deed with Metasource on 31 March 2004 such
that 12.5% of the Environmental Credits will be assigned to
Metasource without separate consideration and the balance
of 37.5% of credits can be sold to Metasource at full market
value (therefore the weighted average effective discount for
the credits remains unchanged at 25%).
ASX agreed to grant a waiver from ASX listing rule 10.1 to the
extent necessary to permit the Company to enter into an
agreement for the purchase of Environmental Credits which arise
from 50% of the power generated by power plants developed
by the Company for a period commencing on the date of
commissioning the first power station developed by the Company
and terminating 10 years after the commissioning of the first
commercial power plant with capacity exceeding 250 megawatts.
Subsequently, following execution of an Environmental Credits
Off-take Deed with Metasource on 31 March 2004, the Company
agreed that the term for the purchase of Environmental Credits
shall commence on 8 April 2004 and end on the earlier of:
a)
10 years after the commissioning of the first commercial
power plant with capacity exceeding 250 megawatts;
b) 20 years after the Company achieves commissioning of
HDR plants with a combined sales capacity exceeding 250
megawatts; or
c) 80 years after the date of the contract.
The waiver from ASX listing rule 10.1 was granted on the
following conditions:
• The Company makes full disclosure of the Environmental Credit
purchase agreement to any person who may subscribe for the
Company’s securities under a prospectus issued by the Company
during the life of the Environmental Credit purchase agreement;
• The Company includes the following information in each
annual report during the life of the Environmental Credit
purchase agreement:
• A statement that Metasource was a substantial holder of
the Company at the time that the Company was admitted
to the official list of ASX together with details as to
Metasource’s relevant interest in the total votes attaching
to the voting securities of the Company at the time that the
Company was admitted to the official list.
• An explanation of the circumstances under which Metasource
first became a substantial holder of the Company.
• A summary of the terms of the Environmental Credit
purchase agreement.
• The terms of the waiver.
THE ORIGIN AGREEMENT (2003)
Origin Energy Limited (Origin) is the Company’s third largest
shareholder and currently holds 18,388,688 fully paid ordinary
shares representing 4.5% of the issued capital of the Company.
Geodynamics executed an Investment Deed with Origin on
5 August 2003 wherein the parties agreed to enter into a
strategic alliance under which Origin would subscribe for
10,000,000 shares in Geodynamics for a subscription price of
$0.50 cents per share and also provide technical assistance and
Geodynamics would sell to Origin power generated from any
power plant that is or could be connected to a transmission
system and renewable energy certificates arising from the
generation of any power generated by Geodynamics.
Under the terms of the Investment Deed and following
shareholder approval, 10,000,000 fully paid ordinary shares
were issued and allotted to Origin on 30 September 2003.
Geodynamics was required to apply the subscription monies
towards the development of a two well HDR program in the
Cooper Basin to produce 20 MWt of thermal energy and for the
conduct a full bankable economic feasibility study in relation to
the generation of power using HDR geothermal energy from
Geodynamics Cooper Basin HDR resource.
2014 Annual Report GEODYNAMICS LIMITED 79
O FFTAK E AGREEMENT S (CONTINUED)
The Origin Investment Deed also contains the following
material conditions:
Origin will have the right to appoint a non-executive director to
the Board of Geodynamics;
• The parties will proceed to negotiate in good faith a heads of
agreement (subject to final contracts) under which as long
as Origin holds not less than 10,000,000 shares at the time
the final contracts are entered into, the parties will enter into
a power purchase agreement (PPA) and Renewable Energy
Certificate (REC) purchase agreement. Subsequently, on 4
May 2005, Geodynamics announced that it had executed a
Heads of Agreement with Origin;
• Under the terms of the PPA, Origin will have the right to
purchase 50% of the power generated by Geodynamics up
to a maximum of 1300 GWh per annum from any power
plant that is or could be connected to a transmission system
at a discount of 5% to the then market price. The term of
the PPA will commence on the first generation of power
by Geodynamics from any power plant that is or could be
connected to a transmission system and end 10 years after
the commissioning of Geodynamics’ first large commercial
power plant (being a power plant which has a nominal rated
capacity of 200 MW or more);
• Under the terms of the REC purchase agreement, Origin will
have the right to purchase any RECs and/or environmental
credits arising from 50% of all power generated by
Geodynamics (up to a maximum of the number of RECs and
environmental credits arising from the generation of 1300 GWh
of power which qualifies for the issue of RECs or environmental
credits in each year) at a discount of 5% to the then market
price. The REC purchase agreement will start on the first
generation of power by Geodynamics and will end 10 years after
the commissioning date of Geodynamics’ first large commercial
power plant. Subsequently as part of the Heads of Agreement
executed on 3 May 2005, the Company has agreed to vary
this condition such that 2.5% of the environmental credits will
be assigned to Origin without separate consideration and the
balance of 47.5% of credits can be sold to Origin at full market
value (therefore the weighted average effective discount for the
credits remains unchanged at 5%);
• Geodynamics can terminate either or both agreements if
at any time during those agreements Origin holds less than
10,000,000 shares in Geodynamics;
• Origin has a right of participation in future share issues pro
rata to its then percentage shareholding in Geodynamics;
• Origin can be involved in the exploration, development,
use or generation of HDR geothermal energy without the
consent of Geodynamics.
• Under the terms of a waiver granted by the ASX on 25
August 2003, ASX agreed to grant a waiver from listing rule
6.18 to the extent necessary to permit the Company to enter
into the above Investment Deed which would enable Origin
to maintain its shareholding in the event of further equity
issues by the Company (the ‘Top-Up Right’). The waiver was
granted by ASX on the following conditions:
• The Top-Up right lapses if the strategic relationship between
the Company and Origin ceases;
• The Top-Up Right may only be transferred to a wholly owned
subsidiary of Origin;
• Any securities issued under the Top-Up Right are issued on the
same terms and conditions as are offered to third parties; and
• The Company discloses in each annual report a summary of
the terms of the agreement with Origin.
SUMMARY OF THE METASOURCE AND ORIGIN OFF-TAKE RIGHTS
PARTY
Metasource
Metasource
Origin
Origin
ELECTRICITY OFF-TAKE RIGHTS
-
-
-
50% of export electricity produced
to a maximum amount of 1300GWh
per calendar year - 95% of forward
electricity contract market price.
RENEWABLE ENERGY CERTIFICATES (RECS) AND ENVIRONMENTAL CREDITS
(EC’S) OFF-TAKE RIGHTS
12.5% free to a maximum of those RECs or ECs arising from
325GWh per year.
37.5% market price – right but not obligation to a maximum
of those RECs or ECs arising from 975GWh per year.
2.5% free to a maximum of those RECs or ECs arising from
65GWh per year.
17.5% market price – right but not the obligation to a maximum
of those RECs or ECs arising from 455GWh per year.
Total off-take obligations
of Geodynamics based on
a generated capacity of
2,600 GWh per calendar year
80%
Origin
-
Tenure*
10 years after commissioning
of first plant.
‘* refer to specific detail in the agreements outlined above.
80 GEODYNAMICS LIMITED 2014 Annual Report
100%
For subsequent plants (defined as any other plant
other than the first plant), Origin has a right but not the
obligation to purchase up to 70% of the REC volume
generated from those plants but such quantity cannot
exceed more than 30% of the equivalents REC’s or EC’s
capable of being generated at the first plant.
10 years after commissioning of first plant.
S HAREHOLDER INFORMATION
The shareholder information set out below is applicable as at 30 September 2014.
DISTRIBUTION OF FULLY PAID ORDINARY SHARES
Analysis of number of equity security holders by size and holding:
RANGE
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
TOTAL
Unmarketable Parcels
TWENTY LARGEST HOLDERS -ORDINARY FULLY PAID SHARES
The names of the twenty holders of fully paid ordinary shares are listed below:
1
2
3
HSBC Custody Nominees (Australia) Limited
Sentient Executive
Tata Power International Pte Limited
4 Origin Energy Limited
5
6
7
J P Morgan Nominees Australia Limited
CS Fourth Nominees Pty Ltd
Geodynamics Share Plans Pty Ltd
8 Mr Paul Armand Darrouzet
9
Cooee Investments Pty Ltd
10 Pacific Custodians Pty Ltd (Geodynamics Plans Ctrl A/C)
11 Bullock Point Pty Ltd (Bishop Family Super Fund A/C)
12 Dr Gary Robert Lillicrap & Mr Damian Gary Lillicrap & Mrs Imelda Anne Lillicrap
(Lillicrap Super Fund A/C)
13 Miltout Pty Ltd (The Miltout A/C)
14 Mr Edward Joseph Gettingby & Mrs Margaret Mary Gettingby
15 Jetosea Pty Ltd
16 Invia Custodian Pty Limited (Franmart Super Fund A/C)
17 Mr Gary Alan Chalmers & Mrs Leanne Chalmers
18 Mr Paul Anthony Broad
19 Mr Richard Norman Gibson & Mrs Ingrid Margareta Gibson
(Wattle Hill Super Fund A/C)
20 Clodene Pty Ltd
TOTAL
SECURITIES
NO OF HOLDERS
277,624,997
45,894,370
79,264,143
18,385,285
13,233,126
1,478,209
435,880,130
36,502,364
31,496,871
30,284,592
29,400,000
15,454,119
10,439,032
4,095,728
3,846,183
2,723,500
2,650,000
2,557,997
2,355,996
2,079,499
1,840,478
1,675,373
1,459,725
1,400,000
1,360,313
1,327,571
1,300,000
1,219,178
148,966,155
547
634
3,497
2,418
4,662
2,448
14,206
9,845
7.23%
6.95%
6.74%
3.55%
2.39%
0.94%
0.88%
0.62%
0.61%
0.59%
0.54%
0.48%
0.42%
0.38%
0.33%
0.32%
0.31%
0.30%
0.30%
0.28%
34.160
SUBSTANTIAL SHAREHOLDERS
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2011 are:
ORDINARY SHARES
PERCENTAGE OF
ISSUED SHARES*
NUMBER HELD
1
2
3
The Tata Power Company
Sentient executive
Sunsuper Pty Ltd
*Represents holding percentage at the time of notification
29,400,000
30,284,592
29,999,999
6.74%
6.95%
6.88%
2014 Annual Report GEODYNAMICS LIMITED 81
SH AREHO LDER INFORMATION (CONT INUED)
NOTICE OF MEETING AND PROXY VOTING
The Company offers online voting and shareholders may elect
to receive the Company’s notice of meeting and proxy form
via email. The Company encourages this form of electronic
communication. Voting can be undertaken online, by loging
in to the Link website using the holding details as shown
on the proxy form. Shareholders who do not register for
online access will continue to receive these documents by
post. Shareholder who would like to opt in to receive these
documents by email should register their communication
preferences at the share registry’s web portal at www.
computershare.com.au.
CONSOLIDATION OF MULTIPLE SHAREHOLDINGS
If you have multiple shareholding accounts that you wish to
consolidate into a single account, please advise the Share
Registry in writing. If your holdings are broker sponsored,
please contact the sponsoring broker directly.
REGISTER FOR EMAIL ALERTS
Please note, that as a shareholder you can register through
the ‘Email Alerts’ section of our web site to receive electronic
communications from the Company. To do so, you should
select the ‘Shareholder Information’ tab on our web site at
www.geodynamics.com.au. Registration will provide you with
an email advice with a link to www.geodynamics.com.au each
time a relevant announcement is made by the company and
posted on this site.
At www.geodynamics.com.au shareholders can view:
• Annual and half-year Reports
• Quarterly Reports
• Securities Exchange Announcements
• Geodynamics Share Price Information
• General Shareholder Information
VOTING RIGHTS
The voting rights attaching to each class of equity securities
are set out below:
(a) Ordinary shares
On a show of hands every member present at a meeting
in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
(b) Options
No voting rights.
SECURITIES EXCHANGE LISTING
The shares of the Company are listed under the symbol GDY
on the Australian Securities Exchange Limited. The Company’s
home branch is Brisbane.
SHAREHOLDER ENQUIRIES
Shareholders with queries about their shareholdings should
contact the Company’s Share Registry as follows:
Link Market Services
Locked Bag A14
Sydney South NSW 1235
Telephone Australia: 1300 554 474
Telephone International: +61 1300 554 474
Fax: +61 2 9287 0303
Email: registrars@linkmarketservices.com.au
CHANGE OF ADDRESS
Issuer sponsored shareholders should notify the share registry
immediately upon any change in their address quoting their
Securityholder Reference Number (SRN). This can be done
by phoning the share registry, by writing to them, or through
their web portal at www.linkmarketservices.com.au. Changes
in addresses for broker sponsored holders should be directed
to the sponsoring brokers with the appropriate Holder
Identification Number (HIN).
ANNUAL REPORT
The Company’s Annual Report is posted on its web site
immediately upon release to ASX. Shareholders will not
be mailed a copy of the Annual Report unless they have
specifically opted in to request one.
82 GEODYNAMICS LIMITED 2014 Annual Report
DEFINITION
TERM
DEFINITION
In a borehole, the space between the
drill pipe and the borehole, between
tubing and casing, or between casing
and formation.
Heat exchanger
The end piece of the drill string that
cuts and penetrates the earth.
Hot Sedimentary
Aquifers (HSA)
U SEFU L TERM S
TERM
Annulus
Bit
Brine
Casing
Casing shoe
Christmas tree
Completion
Conventional
Geothermal
Drilling mud
Water containing dissolved inorganic
salts, mainly sodium chloride. Brine
from Innamincka granite has salinity
approximately two thirds that of sea
water.
Large-diameter steel pipe with
threaded connections lowered into an
open hole and cemented in place.
A bull nose shaped device, known as
a guide shoe or casing shoe, that is
attached to the bottom of the casing
string, including the cement around it.
A set of valves, spools and fittings
connected to the top of the well to
direct and control the flow of fluids
from the well.
The assembly of down hole tubular
and equipment required to enable
safe and efficient production from, or
injection into, a geothermal well.
Conventional geothermal resources
are hydrothermal systems that are
associated with active volcanic systems.
Provides lubrication and cooling at the
drill bit and carries the cuttings back
to surface. Its high density holds back
overpressures in fractures during drilling.
Enhanced
Geothermal Systems
(EGS)
A geothermal source which needs
stimulation measures to become
economically viable by improving
energy output.
Fingerprinting
Plotting the flow back of the well at
each connection to understand the
‘breathing’ of the well. It also requires
checking this behavior with a variety
of surface equipment turned on/off to
understand the impact of these actions
on the well.
Geotechnical drilling It involves drilling small holes to
shallow depths, to remove rock
and soil samples for soil stability
evaluation, to determine a sites
suitability for exploration drilling, and
construction of a drill pad and site.
The piece of equipment built for
efficient heat transfer from one
medium to another – geothermal brine
to de-mineralised water.
HSA systems are typically developed in
naturally occurring porous sandstones
containing water that is heated by
either crustal heat flow or proximate
hot rocks. Fracturing techniques may
still be used to enhance water flow
between wells and HSA systems have
been successfully operating in Australia
and internationally for decades.
In the sense of EGS development, a
treatment involving the action of fluid
pressure on existing natural fractures
to enhance fluid pathways in the
granite. It is achieved by pumping
water down a well at high pressure.
Special chemicals are not used.
An electromagnetic geophysical method
of imaging the earth’s subsurface by
measuring natural variations of electrical
and magnetic fields at the Earth’s
surface. Providing information about
the earth’s interior composition and
structure since naturally occurring rocks
and minerals exhibit a broad range of
electrical resistivity.
A measured resource for which
commercial production can be forecast
with some confidence with existing
technology and prevailing market
conditions.
Quantifies how strongly a given
material opposes the flow of electric
current. A low resistivity indicates
a material that readily allows the
movement of electric charge.
An area/volume of rock that
has demonstrated character or
dimensions to indicate that a body
of thermal energy can be extracted.
Commerciality not yet established.
A drill hole of the smallest practicable
size having a diameter of 5 inches
(12.7 centimeters) or less.
The surface termination of a well bore
that incorporates facilities for installing
casing hangers during the well
construction phase.
Hydraulic
stimulation
Magneto Telluric
Reserve
Resistivity
Resource
Slim hole drilling
Wellhead
2014 Annual Report GEODYNAMICS LIMITED 83
SHARE REGISTRY
Link Market Services Limited
Locked Bag A14, Sydney South NSW 1235
Phone: +61 1300 554 474
Fax: 02 9287 0303
Website: www.linkmarketservices.com.au
Email: registrars@linkmarketservices.com.au
SECURITIES EXCHANGE LISTING
Geodynamics Limited shares are listed on the Australian
Securities Exchange.
Ticker: GDY
CO RP ORATE D IRECTORY
BOARD OF DIRECTORS
Mr Keith Spence
(Non-executive Chairman)
Mr Geoff Ward
(Managing Director and CEO)
Mr Bob Davies
(Non-executive Director)
Dr Jack Hamilton
(Non-executive Director)
Mr Michel Marier
(Non-executive Director)
Mr Andrew Stock
(Non-executive Director)
Mr George Miltenyi
(Non-executive Director)
COMPANY SECRETARY
Mr Tim Pritchard CPA CSA (CERT)
PRINCIPAL AND REGISTERED OFFICE
Level 3, 19 Lang Parade, MILTON QLD 4064
Telephone: +61 7 3721 7500
Facsimile: +61 7 3721 7599
POSTAL ADDRESS
PO Box 2046, MILTON QLD 4064
INTERNET
www.geodynamics.com.au
EMAIL
info@geodynamics.com.au
ABN
55 095 006 090
BANKER
Westpac Banking Corporation
AUDITOR
Ernst & Young
SOLICITOR
Thomsons Lawyers
84 GEODYNAMICS LIMITED 2014 Annual Report
PRINCIPAL and REGISTERED OFFICE Level 3, 19 Lang Parade, MILTON QLD 4064 Telephone: +61 7 3721 7500 Facsimile: +61 7 3721 7599
POSTAL ADDRESS PO Box 2046, MILTON QLD 4064 Internet www.geodynamics.com.au Email info@geodynamics.com.au