A Code for Reporting Geothermal Resources and Reserves Adrian Williams, Jim Lawless, Malcolm Ward, Fiona Holgate and Adrian Larking Adrian Williams | March 2010

Background and status Australian Geothermal Energy Association (AGEA) and Australian Geothermal Energy Group (AGEG)  lead role in defining a Geothermal Reporting Code covering Exploration results Resources Reserves Launched in 2008 Rapid acceptance by companies and finance community extending outside Australia The Code is mandatory for AGEA members i.e. for all leading geothermal companies in Australia Second edition early 2010

Some key engagements and positions Australian companies and regulators, international consultants development driven by operating companies Decision to build on what exists - established terminology/frameworks  JORC (Joint Ore Reserves Committee) one of the keys to Australia’s successful mining industry compliant with international CRISCO template  SPE Code Committee Australian Securities Exchange seeking to include in listing rules (as for JORC) IGA and IEA for international awareness and support

Parallel activities IGA:Established committee, agreed to support Code and put on website CANGEA :Have now released their own Code very closely based on the Australian example, expected to be ratified by the TSX NZGA: Supportive, want to apply agreed methodology to new national assessment USGS: Have just done new national inventory, are discussing possibility of their own Code

Why high quality reporting is important Understanding and confidence are key building blocks Terminology and meaning Integrity and consistency Critical for investors and lenders (banks) Equity funding critical in early stages (exploration, proof of concept) Company values (and ability to raise equity funds) depend on understanding and confidence in + Exploration results and + Estimates of resources and reserves Debt financing is increasingly critical for later stages (project dev) + Major focus on proven reserves New technologies and resources emerging HDR, HFR, EGS, low temperature Widely differing project types

All forms of geothermal energy – hydrothermal and hot rock, natural and engineered All end uses - focus on electricity generation, but applicable to direct use High and low temperatures Projects in other countries carried out by Australian companies Existing projects as well as green-fields Not geothermal heat pumps Scope

Key Principles Transparency: The basis for the estimate should be clear Materiality: All relevant issues disclosed Competency: Relies on the professional judgement of an accountable “Competent Person”, who has relevant experience

“Competent Persons” Must be: Affiliated to an appropriate professional organisation Register is being established for the 2 nd Ed. Membership includes agreement to conform to the Code of Ethics Qualified and experienced Minimum criteria defined Must describe their background Accountable A complaints procedure is being established for the 2 nd Ed. And: Must sign off on all Public Reports where Exploration Results or Resources or Reserves are referred to Declare their corporate affiliation

Two dimensional categorisation “Geological” Knowledge and Confidence The resource characteristics How reliably they are defined Typically: “Proven – Probable – Possible” Commercial Extractability What can be commercially extracted - now What may be extracted under more favourable conditions Typically: Reserve = commercial Resource = commerciality not yet demonstrated, but reasonable prospects for eventual extraction

Classification Increasing geological knowledge and confidence Exploration Results Geothermal ResourcesGeothermal Reserves Inferred Indicated Measured Probable Proven Consideration of energy recovery and conversion, economic, marketing, environmental social, legal, and regulatory factors (the “Modifying Factors”)

Note The Code: Provides for how exploration results and estimates of resources and reserves are reported It does not prescribe how the estimates are to be made It is up to the Competent Person to be satisfied that an appropriate method has been used Requires a certain level of definition of the methodology and assumptions e.g. Relate cut-off “grade” to a specific assumed power price and / or technology

Alignment The Code has drawn on other established work To promote consistency and understanding JORC (mining industry and CRISCO) for implementation and reporting The Code Principles, terminology, framework, layout The SPE and other sources for principles & guidelines The Lexicon

Reporting requirements versus guidelines The Code contains: Mandatory paragraphs Explanatory paragraphs (in italics) The Guidelines (Lexicon) contain: Discussion on methodology: a comprehensive outline of preferred methodology and default parameters, but not mandatory Considerable scope left for individual judgement in how guidelines are applied

Certainty classifications: resources Exploration Results Can be less formally reported but will not define resources Still need a Competent Person Statement Inferred Resources Less direct indications of area, depth and character Sound reason for indicating resource e.g. Geochemistry Indicated Resources Sampled by wells Temperature indicated by geochemistry or nearby wells Are defined by geophysics / temperature gradient mapping Measured Resources Sampled by wells Deliverability demonstrated Area defined by geophysics / temperature gradient mapping

Certainty classifications: reserves Probable Sampled by wells Temperature indicated by geochemistry or nearby wells Area defined by geophysics / temperature gradient mapping Proven Sampled by wells Deliverability demonstrated Area interpolated between wells “No surprises” expected in future drilling Clear prospects / no barriers to commercialisation

Units for reporting: 1st Edition Exploration results Should not include any definitive assessment of the quantum of contained or recoverable energy Resources Should be reported as thermal energy in place (PJ)* For higher certainty categories, can optionally report recoverable and/or converted energy (e.g. MW-years or GWh)* To do so the assumptions and the technology pathway must be defined Reserves Should be reported as thermal energy in place (PJ)* Should also be reported as recoverable thermal energy (PJ) and/or converted energy e.g. GWh or MW for x years And the basis, development plan and technology pathway must be defined * Items changed in 2nd. Edition

Conclusions The Australian Code is a good step towards a formal definition of geothermal Reserves and Resources It is uniquely suitable for reporting on both “conventional” and “unconventional” geothermal projects It is already starting to serve as a basis for international standardisation Experience gained in the first 18 months of operation is being applied to a revised 2 nd Edition The Code, Lexicon, Practice Notes and example reports for various types of projects can be downloaded from: AGEG or AGEA websites or Google “Australian Geothermal Code”