Cradle Resources Limited (“Cradle” or the “Company”) has entered into a binding agreement to acquire Volt
Geothermal Pty Ltd (“Volt”) and Within Energy Pty Ltd (“Within”), with geothermal assets in Queensland and
South Australia (the Projects).
Geothermal energy is widely used throughout the world and is one of the only renewable energy solutions
capable of operating continuously irrespective of the weather conditions. The proposed Managing Director
of the Company will be Matt Kay, an equity holder in both Volt and Within and the former Managing Director
of ASX 200 company Beach Energy Limited (ASX:BPT).
Highlights
• The Company is transitioning into the renewable energy sectors, by signing a binding agreement
to acquire 84% of all the issued shares in Volt Geothermal Pty Ltd (“Volt”) and Within Energy Pty
Ltd (“Within”)
o Consideration for the acquisition is 220,360,329 Cradle shares
• Geothermal energy is a renewable energy solution that creates energy from heat sourced from
within the earth. Unlike other renewable energy sources, geothermal energy is available 24 hours
per day
• The Australian Government has set a renewable energy target of 82% by 2030. Renewable energy
accounted for 35.9% of country’s total electricity generation in 2022
• The Projects comprise of prospective geothermal exploration licences in South Australia and
Queensland. These areas are surrounded by key existing infrastructure for electricity generation,
including powerlines and sub power stations
• Cradle plans to undertake a capital raise of $6 million to fund the Projects work programme and
for working capital purposes, subject to shareholder approval for the transaction
o Prior to the re-listing, the Company has succussfully rasied $850,000 at $0.02 per share.
These funds will be used to complete the transaction
• As part of the transition into the energy sector, the Company will appoint Mr Matt Kay as Managing
Director and Dr Trey Meckel as Head of Subsurface
o Mr Kay is a seasoned energy industry executive with more than 30 years of experience, most
recently as Managing Director of Beach Energy, an AX 200 company
o Dr Meckel is a senior geologist with more than 30? years of experience in the global energy
sector. He is Secretary of the Australian Geothermal Association and a Global Ambassador
for the Geothermal Energy Advancement Association
• The Company’s securities will remain suspended until after shareholder approval has been
obtained and the Company re-complies with Chapters 1 and 2 of the ASX Listing Rules as an energy
company
Overview
Cradle plans to focus on systematically exploring early-stage geothermal targets and developing geothermal
resources. This will involve a fit-for-purpose exploration programme analysing subsurface geology to identify
thermal resource potential at different well depths, undertaking preliminary survey and resource
assessments based on offset well data, exploration location definition and exploration drilling. This will
determine priority targets for exploration drilling for geothermal resources.
The Company’s strategy is to follow a typical path for the maturation of an exploration play through the
following stages:
1. Exploration and appraisal activities to confirm existence of the resource and demonstrate the
commercial viability;
2. Study work such as pre-feasibility and definitive feasibility as part of the commercialisation of the
resource; and
3. Project development which involves drilling of production wells and installation of surface facilities for
delivery of energy to market.
Success with the strategy outlined above will determine future exploration and funding programsto advance
the projects being acquired.
The proposed acquisition will be the platform on which the Company grows its resource base, with the
strategy to participate in the significant growth opportunities in the renewable energy industry via a focus
on geothermal opportunities, given its unique ability to provide a base-load alternative that produces energy
24/7. Geothermal energy therefore plays an important role in the future energy transition towards zero
carbon emissions given its ability to provide system’s security and reliability.
The Company is proposing to acquire geothermal projects in South Australia and Queensland (collectively
the “Projects”).
Cradle intends to explore and exploit geothermal energy for the purpose of generating renewable energy to
be connected to regional electricity grids or supporting standalone developments.
The Projects comprise highly prospective geothermal exploration licences with significant discovered
resources in South Australia at G1 + G2 (P50) of 5.2PJth and potential future developments in the discovered
area of G1 + G2 of 842 PJth. Prospective Resources in exploration areas U50 (G4.1 + G4.2) is estimated at
235,102 PJth classified in accordance with UNFC Geothermal Specifications1
. For reference, a 10MW plant
would require approximately 1.5 PJth of geothermal resource per annum.
Geothermal energy is a carbon neutral renewable energy from the natural source of heat contained within
the earth. It can be extracted for uses including heating, drying and electrical generation. Unlike other
renewable energy sources, geothermal energy is available 24 hours per day. The geothermal energy industry
has a more than 100-year history and is used for electricity generation across 30 countries.
Given Australia’s historical abundant supply of fossil fuels, there have been limited attempts to develop a
geothermal energy industry in Australia.
Cradle will apply proven technology which has become widely adopted over the last few years with the
use of binary cycle systems which can use lower temperature reservoir water of between 80-180°C via a
heat exchanger process to operate a turbine in a closed loop. Binary cycle geothermal plants have been
operating for over 70 years. Binary cycle power plants are most suited to Australia’s low fluid temperature.
Geothermal overview
About Geothermal Energy
The geothermal energy industry has been active globally for over 100 years and geothermal power plants
have been installed in 30 countries2
. While well developed in other countries, the Australian geothermal
industry is in infancy, given Australia’s historic abundance and acceptance of fossil fuels.
Geothermal energy has seen a strong increase in demand over the past decade as the world moves towards
zero carbon emission targets. Compared to other renewable energy solutions, geothermal energy is unique
given it provides a base-load alternative that produces energy 24/7, which is the major challenge for
alternative renewable energy solutions, such as solar and wind. Geothermal energy therefore plays an
important role in the future energy transition towards zero carbon emissions given its ability to provide
network security and reliability.
Geothermal energy is estimated to contribute more than 8% of the world’s electricity generation capacity.
As of January 2023, global geothermal power generation capacity stood at 16,127 MWe with 154 MWe
capacity installed during 2022.
Geothermal energy background and use
Geothermal energy is a renewable energy from the natural source of heat contained within the earth. It can
be extracted for uses including heating, drying and electrical generation. Geothermal has become established
as a reliable and environmentally benign source of power.
Given Australia’s historical abundant supply and acceptance of fossil fuels, there have been limited attempts
to develop a geothermal energy industry in Australia. Most notably, the Cooper Basin had a project circa 15
years ago with targeted drilling at deep depths of greater than 4,000 m and targeting rock temperatures
greater than 250°C. The Target’s projects are positively differentiated by proven technological improvements
resulting in potential developments at lower temperatures and lower depths, along with their location closer
to existing infrastructure.
There is an increasing number of countries not seen as “traditional geothermal countries” with access to lowenthalpy resources and with lower temperature that are also generating geothermal electricity today. The
predominant example is Turkey with an installed power generation capacity of around 1,663 MW (as of
August 2021).
Today, there are roughly 400 geothermal power plants (often consisting of several units/ plants) and they
can be found all around the world.
The largest producer of geothermal energy is the USA, with power generation capacity of approximately
3,700Mwe as at the beginning of 2022.
Geothermal energy is becoming a major part of multiple countries total power solution.
Advantages of geothermal energy in Australia
As Australia transitions to a net zero economy and reduces its reliance on fossil fuels, there are significant
advantages from the use of geothermal energy, including:
• reliable and dispatchable source of energy - available 24 hours per day
• clean energy with low environmental impact
• small acreage area required for geothermal plant and facilities
• no storage or transportation requirements
• energy extraction without the use of fossil fuels
• broad public support in countries in which it operates
• the highest renewable energy capacity and generation of all renewable energies
Technology which has become widely adopted
over the last few years is the Binary Cycle System,
which uses much lower reservoir temperature
water of between 80-180°C via a heat exchanger
process to operate a turbine in a closed loop.
Binary cycle geothermal plants have been
operating for over 70 years5
, with the first plant
constructed in Italy in 1940.
There are more than 150 binary cycle plants
operating worldwide. The major developers
include Turkey, Europe and the US. The US has 93
binary plants in operation, and this represents
>90% of geothermal capacity added since 2010.
Volt/Within have had discussions with contractors
from these regions to bring developed knowledge,
skills and experience to Australia. The Company is
also assessing closed loop systems that circulate
fluids within the well bore rather than extracting
reservoir fluids.
In the binary cycle system, warm geothermal
water is pumped to the surface and passed
through a heat exchanger that contains a fluid
such as a butane or pentane hydrocarbon with a
much lower boiling point than water. The heat
from the geothermal water causes this secondary or 'binary' fluid to flash into vapor.
The vapor created by heating the pentane is what spins the turbine powering the generator, while the cooled
steam from the geothermal source is injected back into the formation where it heats up again and is available
to eventually re-circulate through the heat exchanger.
Resource temperatures required for binary geothermal power plants
Binary geothermal power plants are suitable for low temperatures ranging from approximately 80° Celsius
to 180° Celsius. There are many applications for geothermal use in Australia.
Geothermal energy can be found all over
the world. Its feasibility as an energy
source however depends on the depth of
the resource, the temperature found, the
geological settings, the resource type and
closeness to energy demand.
Geothermal energy can be harnessed
from underground reservoirs, containing
hot rocks saturated with water and/or
steam. Boreholes of between a few
hundred metres to several kilometres are
drilled into the reservoirs.
The temperature of the geothermal
resource then dictates the most
appropriate use. Historically
temperatures of more than 150° Celsius
were required to produce electricity.
However, technological advancements
can now see power being generated from
temperatures as low as 70° Celsius.
Lower temperatures (less than
70° Celsius) are still useful for a range of
applications such as for heat in industrial
applications, district heating systems or
for heating houses, for aquaculture, food
dehydration and many more.
Project overview
Cradle is proposing to acquire geothermal projects in South Australia and Queensland, led and supported by
proven leaders in the resources and energy industries. The strategy is supportive of Federal and State
government policies to reach Australia’s climate targets and reduce the East Coast energy challenges.
Initial work will focus on preliminary survey and resource assessments based on offset well data, exploration
location definition and exploration drilling. Subject to exploration success, the focus will shift to resource
estimates, field development and production drilling.
It is expected that the future development plans will focus on multiple 10 MWh facilities with scalability and
regional diversification to manage risks. The “cookie cutter” approach to these projects will manage financing
risks by staggering capital requirements. For reference, a 10 MWh development can power approximately
7,000 homes.
The Company will release further details on the Projects and work programs in the notice of meeting and
prospectus to be sent to all Shareholders - refer to the indicative timetable on page 9.
Commercialisation pathway
Advantages of geothermal energy in Australia
As Australia transitions to a Net Zero economy and reduces its reliance on fossil fuels, there are significant
advantages from the use of geothermal energy, including:
• reliable and dispatchable source of energy - available 24 hours per day
• clean energy with low environmental impact
• small acreage area required for geothermal plant and facilities
• no storage or transportation requirements
• energy extraction without the use of fossil fuels
• broad public support in countries in which it operates
• the highest renewable energy capacity and generation of all renewable energies
The pathway for the maturation and potential commercialisation of geothermal assets are not dissimilar to
an onshore oil and gas project, with total project risks diminishing through each phase:
1. preliminary survey and inferred resource assessments based on offset well data;
2. exploration location definition and basic design;
3. verification drilling to feed into detailed design;
4. project review and planning;
5. field development and production drilling;
6. construction; and
7. start-up and commissioning.
As an example, in a 10 Mwh development scenario with a circa A$50 million total spend, only approximately
15% of that spend is prior to Final Investment Decision and development/construction, i.e. during the highest
risk phase.
Acquisition structure
The Company is seeking to acquire 84% of all the issued shares in the target companies with the consideration
to be paid being 220,360,329 Cradle shares.
Cradle will also have the right to acquire, and require each Seller to sell, their respective proportions ofshares
retained by them ("Retained Shares”) at any time from the third anniversary of Completion.
The Shareholders Agreement will contain a ‘drag-along’ mechanism whereby if a Seller or Sellers holding
more than 50% of the Retained Shares wish to exercise this option, the holders of the other Retained Shares
will be required to sell to the Buyer on the same terms. Any exercise of this option must be in respect of all
of the Retained Shares.
The Shareholders Agreement to be entered into to reflect these matters will also provide a mechanism for
cash-calls to the Sellers to fund the work programme on the basis that:
(a) Cradle will contribute the first $15,000,000 towards the work programsfollowing Completion before
cash calls are made in respect of the Retained Shares (such that the Retained Shares will be free
carried during this period); and
(b) from the time Cradle has contributed the amount of $15,000,000, the cost of the work programs and
all other activities shall be borne by the Sellers on a proportionate basis.
Capital raising
The Company will undertake a 2 tranche capital raising as follows:
1. Tranche 1: Placement to raise up to $850,000 to fund the costs associated with the re-compliance
process and working capital purposes, by way of the issue of 42,500,000 new shares at $0.02 plus a
free attaching option with an exercise price of $0.05 and expiry of three years from date of issue.
The issue of these options is subject to shareholder approval. This placement has been successfully
completed; and
2. Tranche 2: Prepare and lodge a notice of meeting to seek, amongst other things, shareholder
approval for the transaction and a capital raise of $6 million to fund the work programme for the
Projects and for working capital purposes.
The Company intends to undertake the Tranche 2 capital raising (“Public Offer”) under a prospectus to raise
A$6 million. The Company does not expect that the Public Offer will be underwritten. Shareholder approval
will be sought for the issue of shares pursuant to the Public Offer.
Detailed information on the offer of securities under the Public Offer, the capital structure and an indicative
timetable will be included in a prospectus that will be made available after lodgement with the Australian
Securities and Investments Commission (“ASIC”). Investors should consider the prospectus (when available)
in deciding whether to acquire securities in the Company. Applications for securities can only be made by
completing the application form which will accompany the prospectus.
If the conditions of the Public Offer are not satisfied, or the Company does not receive conditional approval
for re-quotation on the ASX on terms which the board of the Company reasonably believes are capable of
satisfaction, then the Company will not proceed with the Public Offer and will repay all application monies
received (without interest).
