Magma Energy finalizes acquisition of additional stake in HS Orka

Alexander Richter 14 Dec 2009

According to a release “Magma Energy Corp. (TSX:MXY) announces that it has closed a previously announced agreement to acquire 32.32% of Iceland geothermal company HS Orka for 3.7 billion ISK (approximately $29.5 million) and three bonds totaling approximately $70 million repayable in a single installment in 7 years with interest at 1.52% per annum. Magma now holds a 40.94% direct interest in HS Orka and an option to acquire an additional stake in HS Orka by making a capital infusion of $15 million into HS Orka prior to November, 2011. A further agreement to purchase a 2.16% stake in HS Orka is expected to close in March, 2010.

Magma has received an independent report on HS Orka’s properties by Mannvit Engineering, a large Icelandic engineering firm specializing in geothermal energy engineering. The report estimates the following reserves and resources on HS Orka’s properties (100% basis): a Proven Reserve of 175 MW, an Indicated Resource of 140 MW and an Inferred Resource of 500 MW. The reserve and resource estimates have been prepared in accordance with the Code for Geothermal Resources and Reserves Reporting (the “Code”) 1st Edition: 2008, published by the Australian Geothermal Energy Association. The report was prepared by Mannvit Engineering’s Arnar Hjartarson and Dr. Johann Gardar Einarsson, who are responsible for its content and are “Competent Persons” under the Code.

Magma’s CEO Ross Beaty said, “I am really pleased we have completed this transaction, which will boost Magma’s direct and indirect geothermal power production to 86 MW and its geothermal resources to approximately 600 MW. We will now focus on helping HS Orka expand its power production by 230 MW by 2015. This will boost Magma’s attributable geothermal power production to 186 MW and provide a more robust tax and employment base for the Icelandic economy.”

Source: Company release