Magma Energy Corp Announces Second Quarter Results


(All amounts in US dollars unless otherwise stated and all production figures are approximate)

Vancouver, B.C., Canada, February 15, 2010 - Magma Energy Corp. (TSX:MXY) today reported its financial and operating results for the second quarter ended December 31, 2009. The Company also provided an update on its operations. This earnings release should be read in conjunction with the Company's MD&A, unaudited Financial Statements and Notes to Financial Statements for the corresponding period along with the audited consolidated Financial Statements, the related MD&A, and the Annual Information Form for the year ended June 30, 2009. This information is available on the Company's website at and has been posted on SEDAR at

Commenting on today's announcement, Ross Beaty, Chairman and CEO, said "Magma Energy continued to grow rapidly in the second quarter of fiscal 2010. We completed a private placement in October which raised $20 million net of costs and closed our previously announced acquisition of a 40.94% interest in HS Orka. A further 2.16% interest is expected to close in March, 2010. These transactions add 75 MW to our producing reserves and add 276 MW to our resource base. Magma was also awarded $10 million in US Department of Energy grants for our Soda Lake and McCoy properties. We ended the quarter with a successful flow test at Soda Lake which enabled us to confirm half of our 8 MW net expansion program, and we expect to confirm the balance in early 2010."

Financial Results
(expressed in thousands of dollars, except for per share amounts)
  For the Three Months Ended December 31, 2009 For the Three Months Ended December 31, 2008 For the Six Months Ended December 31, 2009 For the Year Ended June 30, 2009
Total revenue $ 1,409 $ 1,302 $ 2,414 $ 4,485
Direct cost of energy production 820 946 1,660 3,003
Gross profit 589 356 754 1,482
Expenses 2,025 1,359 4,126 4,966
Other income (expenses) (3,527)  (67) (4,257)  (976)
Future income tax expense (286) - (286) -
Net loss (5,249) (1,070) (7,915) (4,460)
Loss per share (basic and diluted) (0.02) (0.01) (0.03)  (0.03)
Total assets 206,454 31,036 206,454 43,780
Total liabilities 51,077 12,369 51,077 2,600
Cash and cash equivalents 53,681 1,527 53,681 4,483
Working capital (deficiency) 52,337 (10,262) 52,337 2,748

For the second quarter ended December 31, 2009, Magma reported a net loss of $5.25 million or (0.02) per share. The Soda Lake operation earned revenues of $1.41 million, gross profit of $589,000, and net income of $203,000 after deducting non-cash and other related expenses.

Magma's share of the operating results in Iceland power company HS Orka are for the period December 14 to 31, 2009. The Company's share of HS Orka's net loss was $1.93 million, due to a loss in the value of embedded derivatives in certain of its sales contracts. These contracts are indexed to the market price of aluminum, which declined during the month of December after increasing during most of 2009. HS Orka's financial condition improved significantly during 2009 due to higher aluminum prices and more stable currency conditions.

On a cash basis for the quarter ended December 31, 2009, the Company spent $3.59 million on operating activities and $53.60 million on investing activities, including investments of $48.71 million of payments for the acquisition of HS Orka, $2.46 million to acquire and explore the Company's portfolio of exploration projects and $2.57 million on the Soda Lake expansion. In October 2009, the Company raised net proceeds of $19.77 million by way of private placement. At December 31, 2009, Magma had cash and cash equivalents of $53.68 million, working capital of $52.34 million, and long-term debt of $48.32 million.

Soda Lake Operation

The Soda Lake operation produced as expected during the quarter with occasional interruptions due to the Phase 1 expansion program, which is designed to boost production from 11 MW gross to 23 MW gross. As part of the field optimization program, well 45A-33 was successfully flow tested in December and demonstrated the well to be capable of 3 MW of net power. The flow test, along with an additional 1 MW net resulting from plant refurbishments, confirmed half of the Phase 1 expansion program. Magma expects to confirm the remaining capacity increase by the end of March, 2010.


During the second quarter Magma completed the acquisition of a 40.94% interest in HS Orka. The purchase was financed by the proceeds of a $20 million private placement that closed in October 2009, from cash on hand and by long-term debt of $48 million secured by a 32% interest in HS Orka. A further 2.16% interest is expected to close in March 2010.

HS Orka is the largest privately owned energy company in Iceland with installed net capacity of 175 MW from its two power plants. Expansion plans for an additional 230 MW are in place and construction has already begun at the aluminum smelter where the power will be sold. Power contracts are currently being negotiated and the transmission line has been approved. HS Orka has 175 MW of Reserves and 640 MW of Resources as defined by the Geothermal Reporting Code.

Magma's investment in HS Orka and, consequently, in Iceland's energy industry, is a significant part of the Company's strategic plans for growth. To support these plans and other global projects, Magma recently opened a new Iceland office staffed with an exceptionally experienced team of geothermal experts.

Exploration Activities

Subsequent to the quarter end, Magma was awarded the 100,000 hectare Pellado property, which adjoins the Maule property. The drilling and magnetotelluric geophysical program carried out by Magma in 2009 at Maule resulted in the discovery of a large heat anomaly, the Mariposa Geothermal Resource ("Mariposa"). This resource straddles the Pellado and Maule properties and is estimated to contain an Inferred Resource of 320 MW of electrical generation capacity, as defined by the Geothermal Reporting Code.

Road construction was completed in late January, 2010 and a planned $15 million exploration program is now underway. The program currently anticipates two wells being drilled on each of the Pellado and, when granted, the Maule properties.

Exploration work on Magma's US properties during the quarter consisted primarily of environmental assessments, reflection seismology and other geophysical work. A slim hole drilling program is scheduled to commence at Desert Queen in the fourth quarter. In late October, 2009 the US Department of Energy awarded $10 million to the Company for innovative exploration activities at Soda Lake and McCoy. Early stage exploration work occurred at its other Latin American properties and, in October 2009, Magma won two geothermal concessions in Nicaragua.

Mr. Beaty concluded, "Since our IPO in early July 2009, Magma Energy has increased its geothermal power production more than ten fold to 86 MW, and its in-ground geothermal resources by nearly four times to 784 MW. I look forward to this rapid growth continuing in 2010."

About Magma Energy Corp.

Magma Energy Corp. is a geothermal power company which operates, develops, explores and acquires geothermal energy projects. We have an extensive portfolio of properties throughout the western United States, Iceland and Latin America, including one operating power plant in Nevada and an interest in two other operating power plants in Iceland.

Magma Energy will host a conference call to discuss financial and operating results on Tuesday, February 16, 2010 at 11:30 am ET (8:30 am PT). North American participants dial 1-877-240-9772, International participants dial 1-416-340-8527, and Switzerland and United Kingdom participants dial 00-800-2787-2090. For participants from the UAE, please contact for instructions. The call will also be broadcast live on the Internet at Listeners may also gain access by logging on at The call will be available for replay for one week after the call by dialing 1-416-695-5800/1-800-408-3053 (for International and North American callers) and entering replay pin number 5174721.

For further information please contact:
Alison Thompson, Vice President, Corporate Relations
Magma Energy Corp.
Phone: 604.646.1882

Cautionary Note regarding Forward-Looking Statements and Information

This news release contains certain "forward-looking information" within the meaning of Canadian securities laws, which may include, but is not limited to, statements with respect to future events or future performance, management's expectations regarding our growth, results of operations, revenues, requirements for capital, future demand for and prices of electricity, business prospects and opportunities, exploration and development, geothermal resources, recoverable geothermal energy or energy generation capacities. Such forward-looking information reflects management's current beliefs and is based on information currently available to management.

In addition, it is worthy of note that the financial results of HS Orka represent the first operating year of the company in its present form. As such, future results could differ materially from those reported or anticipated. Accordingly, prospective investors should not place undue reliance on the current reported financial results. Other than as required by applicable securities laws, we assume no obligation to update or revise such forward-looking information to reflect new events or circumstances.

A number of known and unknown risks, uncertainties and other factors, may cause our actual results or performance to materially differ from any future results or performance expressed or implied by the forward-looking information. The forward-looking information is based upon what management believes to be reasonable assumptions, including, but not limited to, assumptions about: the success and timely completion of planned exploration and expansion programs, the growth rate in net electricity consumption; support and demand for non-hydroelectric renewables; government initiatives to support the development of renewable energy generation; the accuracy of reserve estimation methodology and analysis used to estimate the quantity of potentially recoverable thermal energy; geological, geophysical, geochemical and other conditions at our properties; the reliability of technical data, including extrapolated temperature gradient, geophysical and geochemical surveys and geothermometer calculations; capital expenditure estimates; availability of capital to fund exploration, development and expansion programs; and general economic conditions. Forward-looking information and statements are also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from the forward-looking information and statements will occur.

There can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, prospective investors should not place undue reliance on forward-looking information. Other than as required by applicable securities laws, we assume no obligation to update or revise such forward-looking information to reflect new events or circumstances.