Project Description and Location
The Casita Project is located in northwest Nicaragua in the Department of Chinandega. The Casita Project currently consists of an exploration concession (the “Casita Project Exploration Concession”) with an area of 100 km2. In 2008, through an international bid, Cerro Colorado Power, S.A., a subsidiary of the Company, was awarded the Casita Project Exploration Concession. The Company has certain investment obligations under the Casita Project Exploration Concession. Non-compliance with these obligations may cause the Casita Project Exploration Agreement to be terminated prior to the issuance of an exploitation concession. The Company is in compliance with these obligations.
MARENA has granted the required environmental permit for the Casita Project and the Company believes that it has all the required permits to conduct exploration on the Casita Project.
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The Department of Chinandega has a population of 470,000 inhabitants, of which 38% live in rural areas and the rest in the municipalities of Posoltega, Chichigalpa, and Chinandega. The access to the Casita Project is through the Chinandega main highway. The nearby cities of Leon and Chinandega are in close proximity to the project site. The temperatures at the Casita Project range from 22°C to 38°C during the year. The estimated precipitation is above 1800 mm annually. The potential resource at the Casita Project is accessible along roads that are currently being constructed by the Company. Water for drilling will need to be sourced from special purpose water wells. Potential locations for these wells include the lower slopes of the Casita Mountain or within La Pelona Caldera.
History of the Property
The geothermal potential of the Casita Project was initially recognized following regional geothermal surveys undertaken by Texas Instruments, GeothermEx and Unocal.
MEM commissioned GeothermEx to review the Casita Project as part of the development of the Plan Maestro Geotérmico de Nicaragua.
As a whole, Volcan Casita (“V. Casita”) forms an east-west ridge of andesitic volcanic products. A set of prominent northeast-trending normal faults cut the summit area bounding the central crater at the top of the mountain. The central crater (Ollade crater) may be an eruption crater, but given its size and the degree of dissection of the mountain flanks, it is unlikely that the original crater morphology would be so well preserved. Hence, it is possible that this feature is a summit caldera. A further older crater is transected by one of the northeast trending structures.
Volcan San Cristobal (“V. San Cristobal”) is the most prominent part of the chain in the immediate vicinity and it has been more recently active than V. Casita. It forms a composite cone complex with four other eruptive centers, most notable in this case with V. Casita to the east-southeast, where V. San Cristobal has grown on its northwest flank. V. San Cristobal is historically active, with eruptions recorded from 1522 to 1997.
Both V. San Cristobal and V. Casita have asymmetric distributions of pyroclastics and lavas within their volcanic piles because the prevailing winds are northeasterlies (Van Wyk de Vries and Borgia, 1996). Pyroclastics have therefore been concentrated on the southwest slopes and lava flows predominate on the northeast slopes. This is likely to be a contributory factor in the slope instability on the southern side of Casita and would favor a predominance of groundwater flow down to the northeastern slopes. The latter is a result of a greater amount of precipitation on that side and the greater permeability of fresh lavas in comparison to pyroclastics
The tectonic environment in Nicaragua favors there being many potential heat sources for geothermal fields; however they may not necessarily be large fields. The importance of this is that a number of fields with deep central upflows may be present in close proximity.
A geophysical survey was undertaken and has been supplemented by sampling and analysis of steam and gas from the Casita Project, along with mapping of geothermal surface activity. The combined assessment of geochemistry from the natural fumarole discharges, geophysical structures, and overall heat discharge distribution provided evidence that a geothermal resource potentially lies beneath the Casita Project.
As the system is centered on the relatively high mountain of Casita and its eastern ridge, the terrain and geological structures will present some challenges for access to drilling sites, however much of the resource may be accessible from lower elevations on the flank of the mountain. The geochemistry data present no indications of acid fluids or similar development constraints within this resource.
Estimates of energy potential for the Casita Project have been developed using indications of resource area derived from modeling the geophysics surveys and indications of resource temperature derived from the interpretation of the steam discharge at the Casita Project. Probabilistic modeling using estimated ranges of parameters indicates that the resource has a 50% probability of supporting over 132 MW for 20 years and a 90% probability of supporting 85 MWe for 20 years. These estimates are for gross generation capacity of the indicated resource and were developed by SKM in an updated Casita San Cristobal Geothermal Projected-Updated Resource Assessment completed in February 2012. These estimates are subject to the useful productivity of the resource being proven by exploration drilling.
Exploration and Development
The Nicaragua National Expansion Plan for electricity generation contemplates up to 140 MW from the Casita Project, starting in 2014-2015. The Company’s access to the Casita Project site is dependent upon proving the viability of the resource, and the Company is continuing work under its 24 month overall development plan for the Casita Project in 2012. In October 2011, the Company obtained approval from MEM to extend the deadline ten months to January 6, 2013, and the Company is in the process of formalizing the extension.
Under the development plan required by the Casita Project Exploration Concession, two deep exploration wells were planned to be drilled into a large low-resistivity anomaly detected using the magnetotelluric geophysical exploration method. The location of the exploration wells was further refined by an aeromagnetic survey of the concession area. In July 2011, the Company commenced drilling of its first slim hole at the Casita Project, which was drilled to a depth of 842 meters with a total loss of circulation. A temperature survey conducted in the well has indicated temperature readings exceeding 230°C (446°F). The temperature results obtained and the permeability found indicate that the location has the characteristics of a commercial resource. The drilling of the slim holes and the interpretation of geoscientific data is being carried out with the technical support of SKM. As a result of the first slim hole testing, the Company plans to approach MEM to obtain an exploitation license for the Casita Project without drilling any further exploration wells and without making the full investment required by the Casita Project Exploration Concession.