The Company _ EXPLORATION & DEVELOPMENT STRATEGY

The long term vision of Panax is to become a major participant in the geothermal industry, both nationally and internationally.
Panax Geothermal exploration and assets
VISION
The long term vision of Panax is to become a major participant in the geothermal industry, both nationally and internationally. The scope of its geothermal interests will be broad, including both conventional geothermal resources (volcanic related) as well as enhanced geothermal systems (EGS) such as hot fractured rock (HFR) geothermal systems. Panax’s key asset is the advanced and ready to drill-test Limestone Coast Geothermal Project in South Australia, which has an estimated generating potential*) of approximately 1,500 MWe, i.e. the equivalent of two coal fired power stations or enough power for more than one million homes.

The Company will not only focus on clean power generation but will also embrace direct use of geothermal heat for use in e.g. industry, district heating (or cooling), and desalination.

SHORT TERM OBJECTIVES
In the short term, the Company will focus its efforts on:
Progressing the unique (as recognised by the Federal Government) and well researched Limestone Coast Geothermal Project in South Australia. This project, which targets hot aquifers in buried sedimentary basins can be classified as a sediment hosted conventional geothermal project, has an estimated generating potential of 1,500 MWe from three delineated sub-basins, with up to 10 MWe per production well, and has an excellent infrastructure location, including access to the national transmission grid;
Completing detailed evaluations of options that the Company has acquired to enter into joint ventures on a number of highly prospective geothermal resources in India and Kyrgyzstan, including the advanced Puga project in the Himalayan Geothermal Province in India;
Furthering our search to acquire an advanced commercial geothermal project which is ready for development. This international search is being conducted on our behalf by a group of highly experienced geothermal consultants.
The Company has adopted a policy to offset sovereign risk in developing economies through seeking partnerships e.g. with international development banks.

To realise our ambitious plans, the Company has commenced a recruitment drive for the appointment of a high calibre exploration and development team. In the interim, to start our momentum, Panax has entered into long term agreements with a number of national and international geothermal consultants including Mr William Cumming (US based, ex-Unocal) and GeothermEx (US based) as well as Dr Graeme Beardsmore of Hot Dry Rocks Pty Ltd.

The nature of our business is the identification and exploration of prospective geothermal resources and to convert these into geothermal reserves for the production of commercial geothermal energy. Geothermal power generation is not dependent on new technology (i.e. no new technology risk). The risks of our endeavours are directly related to the conversion of geothermal resources to economic geothermal reserves, i.e. the economic extraction and utilisation of geothermal energy. In that sense it is very similar to risks associated with mineral or oil/gas exploration.

Since Australia's first listing of a geothermal company in 2002, a large number of geothermal exploration companies have listed on the ASX. The main focus of many of these is directed to deep HFR prospective areas, lacking known geothermal resources (i.e. long development time lines). In contrast, Panax has a strategy to develop a balanced exploration portfolio ranging from:
The advanced and ready to drill test Limestone Coast Geothermal Project in South Australia;
Securing HFR prospects/resources in regions of exceptionally high heat flow (e.g. Kyrgyzstan and India where temperatures of more than say 250oC are likely to exist at relatively shallow levels;
To the acquisition of conventional geothermal projects ready for development.
The advanced Limestone Coast geothermal project is a unique exploration project, targeting conventional geothermal energy in sedimentary rocks. Unlike HFR or EGS projects and prospects, its risks are not related to the development of deep underground reservoirs as it targets existing hot geothermal brines in buried sandstone reservoirs in an area of high heat flow. As such, the timeframe from drill testing to development is estimated at three years, i.e. much shorter than that of the 'classic' HFR targets. In addition, drilling costs are substantially lower in this geological environment. As a consequence, the Limestone Coast Geothermal Project has the potential to be Australia's first, non-seasonal, large scale renewable base-load electricity generator.

Current Quarter
The objectives for the first quarter of this calendar year are set out below:
Advance the Limestone Coast project:
Apply for the re-instatement of the $4m REDI grant (in progress);
Initiate activities leading to the definition of a deep test well location(in progress);
The securing of a joint venture partner.
Further the evaluation of the international prospects/projects in India and Kyrgyzstan and initiate discussions with development banks and Governments;
Identification of an advanced commercial geothermal project for acquisition; and
Recruitment of a management and exploration team.
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