Kentor Gold (ASX: KGL) has entered into a two stage earn-in and joint operating agreement with Geodynamics(ASX: GDY) for the acquisition of an up to 70% interest in Kentor's conventional geothermal power supply project in the Solomon Islands.
Geodynamics can earn an initial 25% interest in the Savo Island Geothermal Power Project by spending $350,000 to conduct initial exploration activities including geothermal mapping and a geophysical analysis.
Stage one activities will produce a geothermal resource and a Scoping Study for the development of the geothermal project, and is required to be completed before September 2013.
Geodynamics will assume operatorship of the project at the completion of stage one.
The company can earn a further 45% interest spending an additional $4.65 million to undertake exploration drilling and completion of a Feasibility Study for the development of a first stage geothermal power plant.
Simon Milroy, managing director of Kentor Gold, commented: "Geodynamics is a leading geothermal exploration company with the resources and expertise to explore and develop this project, making the company an ideal partner for Kentor. We look forward to building a strong partnership."
The Geothermal Power Project is located on the island of Savo, 14 kilometres off the north coast of Guadalcanal where a volcanic based geothermal resource has been identified.
Preliminary exploration studies indicate that the island could host a substantial geothermal reservoir at temperatures in excess of 260 degrees Celsius and at depths of 500 to 1,500 metres.
Honiara, the capital city of the Solomon Islands, has a current maximum demand of 14 megawatts.
Local electricity supply is high cost diesel based resulting in consumers having to pay among the world's highest prices for power, currently around A$0.80 per kilowatt hour.
Additional customer demand for the geothermal project is possible through supply to the Gold Ridge Mine, recently acquired by St Barbara.
Geoff Ward, managing director and chief executive officer of Geodynamics, said: "The Savo Island Geothermal Power Project presents a high quality conventional geothermal development option for Geodynamics.
"The preliminary exploration work gives us significant confidence that a high temperature resource can be proven at Savo which will be an economically attractive option for Honiara.
"The provision of reliable renewable energy in place of more expensive, unreliable diesel supply will bring many benefits to the Solomon Islands through lowered costs to business and consumers and the opportunity to provide access to power to more people in the Honiara area."
The project has strong support from the local community on Savo Island, as well as the Central Province Assembly and the Solomon Islands Government.
A Surface Access Agreement has been signed and is in place with customary landowners on Savo to undertake initial fieldwork and surveying.
A 3D magneto-telluric survey was completed in October by Fugro Ground Geophysics.
Geodynamics is targeting the release of a maiden Inferred resource and Scoping Study by the end of June 2013.
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