Earth Heat signed a Heads of Agreement to farm-in to the Copahue Geothermal Development Project in Argentina in May 2010, which comprises an identified initial 30 MW geothermal development with the potential for significant expansion. Development of Copahue is anticipated to provide first power production and revenue within four years and Earth Heat has the right to earn up to 87.5% of the Project by funding various stages of development.

In May 2011, Earth Heat released a significant resource update for the Copahue deposit. The summary table below shows the new Canadian Geothermal Code (CanGEA) classified resource estimates for the Copahue concession area, in terms of electricity generating capacity and stored heat in place (based on P50 probability):

This represents an increase of over 150% in total resources interpreted to be at Copahue versus historical estimates and provides for significant additional scope of developments to meet the needs of power consumers in the Neuquen Province of Argentina.

Of particular significance is the ‘behind pipe’ verification which provides a boost to the certainty of the stage 1 plant size and reduces the immediacy of resource extension drilling.

The above resource estimates have been prepared by Jun Seastres and Zim Aunzo under the direction of Brian Lovelock (Practice Leader and Senior Geochemist), full-time employee of Sinclair Knight Merz Limited (SKM), who takes responsibility and is accountable for the report as a Qualified Person in terms of the Canadian Geothermal Code.  Brian has 32 years’ experience in the geothermal industry and is a member of the International Geothermal Association. SKM is a corporate member in good standing with the Canadian Geothermal Energy Association and has a Code of Ethics. SKM has been engaged as Consultant by Earth Heat but holds no financial interest in the project or in Earth Heat.

Geography

The Copahue project area is located in the western part of Neuquén Province, approximately 300 km from the provincial capital and just a few kilometres from the Chilean border. The geothermal resource on which the project is based occurs on the North-East flank of the Copahue volcanoa young, historically active stratovolcano whose summit is on the international border. It is also situated within a broad caldera that is inferred to have formed by activity that pre-dates that of the Copahue volcano.
The caldera retains its expression as a valley with steep walls on several sides, breached in several places by gaps formed by erosion, which provide access into the Caviahue-Copahue area from more populated areas of Argentina to the east. The principal activities in the area are tourism (including skiing at Caviahue and general recreation) and low-intensity agriculture. One of the zones of thermal manifestations related to the geothermal resource, Termas de Copahue, has been developed for seasonal use as a therapeutic spa.

Work to date

The project area has been the site of geothermal exploration and development activities since the 1970s. This work has included a number of superficial and shallow exploratory surveys (geology, geochemistry, geophysics and temperature gradient drilling).

Four deep wells, reaching depths of as much as 1,414m have also been drilled in the area. These wells have demonstrated the presence of a commercially exploitable, vapor-dominated geothermal reservoir within at least a part of the project area.

In July 2011, Earth Heat completed a stage 1 Environmental Impact Assessment (EIA). The EIA is instrumental in determining the presence of major issues and indicating mechanisms for minimising the impact of the proposed activities on the environment.

Resource Characteristics

The Copahue geothermal system occurs within a volcanic terrane formed by several stages of volcanic activity, the ages of which have been inferred to range from Pliocene time (five million years ago or less) to considerably earlier. It is likely, based on the position of the geothermal field and the temperatures observed in wells, that the heat source for the system is related to the same magmatic/volcanic activity that formed the present-day Copahue volcano heat is most supplied to the system from magma located beneath or close to the centre of the volcanic edifice.

The geology of the project area has been studied by several investigators and is discussed in detail (along with other aspects of the geothermal project) in a project feasibility report prepared by JICA and more recently by the Company.