QUARTERLY REPORT

PERIOD ENDING 30 JUNE 2014

power from the earth


Review of the Quarter

HIGHLIGHTS

Activities for the quarter were concentrated on progression of key agreements with Beach Energy regarding the Habanero Project and progression of the Pacific Islands projects.

Following is a summary oF highlights From the quarter:

• Signing of an Exclusivity Agreement with Beach Energy Limited, for the right to negotiate a farm-in to Geodynamics geothermal exploration tenements in the Cooper Basin.

• Receipt of development consent from the Solomon Islands Department of Environment in relation to exploration activities for the Savo Island Geothermal Power Project.

• Commencement of Environmental and Social Impact Assessment and community engagement program for Takara Geothermal Power Project in Vanuatu.

The Company's cash position at the end of the quarter stood at

$ 33.8 million.


Cover: Shallow soil sampling using a geotechnical rig at the Takara airstrip as part of the ESIA.

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Letter to Shareholders

Dear Shareholders,
Geodynamics finished off the financial year with a quarter of continued steady progress in our geothermal portfolio.
In May we announced the signing of an Exclusivity Agreement with Beach Energy Limited, with regards to our exploration tenements in the Cooper Basin, a vital first step in securing a potential customer for our geothermal resource. The results from our Habanero Pilot Plant trial and Field Development Plan have already demonstrated the potential to realise significant energy efficiency improvements, cost benefits and carbon emission reductions through the integration of our geothermal resource at Habanero with a future gas development in the Nappamerri Trough. These results will now be further investigated as part of a research program outlined in the exclusivity agreement. The program will focus on assessing the potential of the Habanero resources to supply heat and/or power to Beach's potential gas developments in the area. During the Quarter we also completed the sale of the Habanero operations base to Beach realising $1.5 million for our Company and reducing our future remediation liabilities.
As we commence this research program we look forward to working with Beach and strengthening our engagement with them as a potential customer and future joint venture partner.
The signing of an Exclusivity Agreement with Beach Energy comes at a critical point for Geodynamics enabling our flagship project to progress in the face of the continued uncertainty in the regulatory and political landscape and its ongoing impact on the deployment and investment in renewable energy in Australia. This domestic uncertainty however reinforces the importance of the diversification value of our Pacific geothermal projects.

Mr Geoff Ward, Managing Director and Chief Executive Officer


Our Pacific Islands projects have achieved important milestones. In May we received notification from the Solomon Islands Department of Environment that development consent for exploration drilling on Savo Islands had been issued, completing all regulatory requirements for drilling. The granting of the consent is pleasing news and follows the Department's review of the Savo Island Geothermal Project Environmental and Social Impact Assessment (ESIA) along with the Environmental Management Plan (EMP). Both documents form an integral part of drilling planning and are the basis for designing a program that will ensure minimal impact and disruption to the environment and the communities of Savo Island.
Our engagement with the Solomon Islands Government in particular the Large Scale Renewable Energy Taskforce continued during the Quarter. The Taskforce, which has been assessing the merits of the Savo Island Geothermal Power Project and the proposed Tina River Hydro Project, has handed down a preliminary finding detailing, that it would be in the best interest for the Solomon Islands from an economic and energy security perspective for both the geothermal and hydro projects to be progressed. As a result, we have assessed and re-scoped the Savo project to a staged development commencing with 10MW and expanding with additional phases aligned with demand growth in Honiara and surrounding areas on Guadalcanal Island.
In Vanuatu the ESIA for the Takara Geothermal Power Project which commenced early this quarter is now nearing completion. A shallow soil sampling and temperature measurement program undertaken as part of the baseline studies, has identified an area suitable for exploration drilling activities. We are now progressing with community consultations in relation to the Draft ESIA and EMP before submitting this to the Department for review and approval in late August.
Our focus for the coming quarter now lies with the progression of negotiations with the Solomon Islands Electricity Authority and UNELCO in Vanuatu on the key terms of power purchase agreements, to enable commencement of exploration drilling.
Recent months have seen continued policy and regulatory uncertainty negatively impact the renewable energy and clean- tech sectors. This was highlighted, and heightened, with the tabling in May of the proposed Federal Budget including measures that would shut-down ARENA (Australian Renewable Energy Agency), a key funding partner of our Cooper Basin projects, as well as the much signalled repeal of the CEFC (Clean Energy Finance Corporation). This preceded the repeal of Clean Energy Futures legislation bills earlier this month, in parallel with the review of the Renewable Energy Target (RET) by a panel widely believed to be unfavourable towards renewable energy.

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Shareholder Letter Continued.


This level of policy and regulatory uncertainty, combined with continued falling demand in the National Electricity Market, is creating difficult investment and trading conditions for all participants. Irrespective of the policy uncertainty at the heart of this energy markets disruption is the continued improvement in cost and availability of a range of low emission technologies, principally solar PV and wind energy but also improved energy efficiency and smart energy products. This is accelerating the transformation to a de-centralised, customer based energy system. Interestingly many analyses of the current situation (whether for or against renewable) come to the same conclusion; that there is an unstoppable momentum for change in our energy system primarily driven by relative technology costs and customer benefits as well as concerns about the impacts of long term emissions.
We firmly believe that there has indeed been a tipping point and that this will create enormous opportunities for market participants who are focussed on better meeting customer needs through valuable energy products and services with lower environmental impact.
For further information, please check our website (www.geodynamics.com.au) or contact Mr Geoff Ward on

+ 61 7 3721 7500. Media and investor inquiries may also be directed to Friederike Graser, on +61 7 3721 7588. Regards

Geoff Ward


Managing Director and Chief Executive Officer

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Operations Update

Cooper Basin

GeodynamIcS SIGnS excLuSIvITy aGreemenT wITH BeacH enerGy

In March Geodynamics announced the signing of an Exclusivity Agreement with Beach Energy Limited, in relation to
Geodynamics geothermal exploration tenements in the Cooper Basin near Innamincka, South Australia.
Under the terms of the agreement Geodynamics has granted Beach an exclusive 18 month period in which they have the right to negotiate a joint venture with respect to Geodynamics' geothermal licences and project in the Cooper Basin.
During this exclusivity period which commenced on 23 May 2014 Geodynamics will undertake a 12 month research program to investigate the use of our geothermal resources to supply heat and/or power to potential gas developments in the area. Beach Energy will contribute $200,000 towards the cost of the research program, with this amount fully refundable if a farm-in agreement is not agreed between the companies by the end of the Exclusivity Period.
The research project will examine some new and innovative ways of achieving these benefits building on the work already undertaken during the Habanero Pilot Plant trial and drilling program at Habanero. This is an important first step in strengthening our engagement with Beach as potential customer and partner.

About Beach

Beach Energy is a long established oil and gas Exploration and Production Company. Based in Adelaide, South Australia, the Company has:
• Oil and gas reserves of 92.7 million barrels of oil equivalent and contingent resources of 466.6 million barrels of oil equivalent (at 30 June 2013).
• Annual production in FY13 of 8.0 million barrels of oil equivalent.
• An active drilling program focused on the Cooper Basin.

Beach Energy holds a 70% interest in Petroleum Retention Licences which cover the area of PEL 218 ("PRLs") and is the operator of the Nappamerri Trough Natural Gas Project partly comprising of those PRLs. Beach, as Operator, has drilled, completed and tested a number of exploration wells within the permits.

Handover of operaTInG BaSe

The end of June saw the official handover of the Habanero operating base to Beach Energy. As reported last Quarter the Company sold the operating base to Beach for a consideration of $1.5 million. As of 23 June operatorship of the accommodation camp and the outlying buildings including operating support facilities for drilling has been transferred to Beach.
Geodynamics retains ownership and responsibility for all geothermal permits, wells, brine pipelines and geothermal facilities including the 1 MWe Habanero Pilot Plant.
The Habanero operating base is an excellent remote site facility which will fit well with Beach Energy's shale and tight gas exploration program in the Nappamerri. We look forward to working closely with Beach on operational support as part of our ongoing monitoring and maintenance of our geothermal assets.

remedIaTIon and aBandonInG of weLLS


Geodynamics has successfully completed the plugging of Habanero 2 in early June. The well is now undergoing a 3 month monitoring period in line with the South Australian regulators specifications. Following the monitoring period the well head and cellar will be removed and environmental remediation of the well site will commence. Planning for the P&A program for Habanero 3 is continuing with operations scheduled to commence later this year.

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Exploration Projects

Savo Island Geothermal Power Project

deveLopmenT conSenT for expLoraTIon drILLInG receIved

During the Quarter Geodynamics was pleased to report that it had received development consent for exploration activities relating to the Savo Island Geothermal Power Project. The consent was approved by the Solomon Islands Department of Environment and follows the review and public consultation process of the Environmental and Social Impact Assessment (ESIA) and Environmental Management Plan (EMP).
The ESIA and EMP provide a comprehensive guide to the monitoring, mitigation and remediation measures that will be implemented by Geodynamics for exploration drilling activities. With the granting of the approval, Geodynamics now has all the necessary regulatory approvals to commence geothermal drilling activities on Savo Island.

Over the coming quarter our focus will be on the conclusion of negotiations with the Solomon Islands Electricity Authority and Solomon Islands Government on the key terms of the power purchase agreement necessary to underwrite the project.
The ESIA and technical reports can be accessed from the link on our home page or via the following URL:
http://www.geodynamics.com.au/Savo_ESIA.aspx

SoLomon ISLandS GovernmenT enGaGemenT

Through the quarter Geodynamics has continued our engagement with the Solomon Islands Government, in particular via the Large Scale Renewable Energy Taskforce chaired by the Prime Minister. The Taskforce had been appointed to review the merits of the Savo Island Geothermal Power Project and the proposed Tina River Hydro Project and advise the Government on a course of action. Both projects offer significant benefits to the Solomon Islands in providing renewable power to the Honiara grid.
In assessing the projects the Taskforce considered that it is in the Solomon Islands economic and energy security interests if both the geothermal and hydro projects can be progressed. As a result, Geodynamics in conjunction with the Solomon Islands Electricity Authority have been investigating a staged development of the Savo Geothermal Project to align with the requirements of the Honiara grid given the presence of a second power generation source, the Tina River Project. The staged development of the project will see the phased development of the Savo resource, with a first phase of 10MW and subsequent phases to be constructed post 2020 in line with demand growth of the Honiara grid.
On the basis of the staged development of the Savo Geothermal Project, negotiations with the Solomon Islands

Electricity Authority on the key terms of the power purchase agreement continue to progress positively.

Long lead items arrive at storage yard in Brisbane.

The wellheads and valve assemblies which will be used on the exploration wells at Savo and Vanuatu have now arrived in Brisbane. These items were manufactured in Japan and are specifically designed for the hot temperatures that are produced from a geothermal reservoir.

Images: Geothermal well heads in shipping crates as they arrive at the Company's Brisbane storage yard.

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Exploration Projects

Takara Geothermal Power Project

updaTe on Takara GeoTHermaL projecT eSIa

The beginning of April saw the commencement of the Environmental and Social Impact Assessment (ESIA) for the Takara Geothermal Power Project. The ESIA is vital in ensuring the impacts to environment and disruption to the local community at Takara are minimised and managed to best practice standards.
SLR Consulting who are engaged to carry out the ESIA have completed the baseline studies and subsequent impact assessments. The baselines studies incorporated into the ESIA are:
1. Soils and Land Capability 2. Surface and Ground Water
3. Air Quality and Greenhouse Gas Emissions 4. Noise
5. Landscape and Visual Amenity 6. Ecology (Terrestrial and Marine)
7. Social and Cultural Heritage 8. Stakeholder and Community Consultation
A series of stakeholder and community consultation sessions have been undertaken throughout the ESIA process, with a further consultation to present the findings of the ESIA and baselines studies planned for August 2014.
The consultations held to date have focused on:
• An introduction to the ESIA process to key stakeholders and the local communities prior to the commencement of
ESIA technical fieldwork.
• Undertaking of an initial cultural assessment and mapping to gain an insight into cultural characteristics and confirm any cultural sensitivities prior to the ESIA field work commencing.
• Household surveys to collect social data in the key impacted communities.
• Meetings with key community service providers (education, health, and police), local tourism operators, and government agencies responsible for facilities and services in the ESIA study area to understand issues and collect secondary data.
• Additional consultation with general community and special interest groups to increase their understanding of the geothermal project its potential impacts and benefits.
The Draft ESIA is currently being finalised on completion in August the ESIA will be made available for a four week public consultation period, which will include meetings and consultation with Government and the local community. During the consultation period community and Government will also have the opportunity to make submissions on the Draft ESIA.

Following the public consultation period, Geodynamics and SLR Consulting will produce a Final ESIA incorporating the feedback from any submissions made. The Final ESIA will be submitted to the Vanuatu Government for consideration. Once reviewed and approved the Vanuatu Government will issue an approval for exploration activities, which will outline any prescribed conditions.

(Below) SLR Consulting engaging with local community

at Takara Landing as part of the Social Impact Assessment Survey. (Right) The survey also covered community on Marow (Emao Island) who travel back to the mainland and use the area around Takara for agricultureal purposes.

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Exploration Projects

`

caSe STudy Soil sampling for drilling program

A shallow soil sampling drilling and temperature measurement program was conducted as part of the ESIA baseline studies to determine the nature of underground aquifer which is known to exist in the area as well as determining the typical structure of the limestone platforms found at surface. This information is vital when assessing ground suitability for an exploration drilling campaign. From the temperature logs and cuttings taken, an area located near the airfield has been identified as a geologically suitable location for initial exploration drilling. The site is also environmentally low impact due to the avoidance of gardens and plantations.

(Top Left) Shallow drilling using a geotechnical rig (Top Right) At each hole soil samples were collected at regular depth intervals for analysis (Right) Down hole temperature recordings were also conducted at each site once drilling was complete.

Investor Relations

2014 annuaL GeneraL meeTInG

The Annual General Meeting for 2014 will be held on Thursday 27 November. Further details on venue location and starting time will be provided closer to the date

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Corporate Directory

Board of dIrecTorS

Mr Keith Spence

(Non-executive Chairman)

Mr Geoff Ward

(Managing Director and CEO)

Mr Bob Davies

(Non-executive Director)

Dr Jack Hamilton

(Non-executive Director)

Mr Michel Marier

(Non-executive Director)

Mr Andrew Stock

(Non-executive Director)

Mr George Miltenyi

(Non-executive Director)

company SecreTary

Mr Tim Pritchard CPA CSA (CERT)

prIncIpaL and reGISTered offIce

Level 3, 19 Lang Parade, MILTON QLD 4064

Telephone: +61 7 3721 7500

Facsimile: +61 7 3721 7599

poSTaL addreSS

PO Box 2046, MILTON QLD 4064

InTerneT

www.geodynamics.com.au

emaIL

info@geodynamics.com.au

aBn

55 095 006 090

Banker

Westpac Banking Corporation

audITor

Ernst & Young

SoLIcITor

Thomsons Lawyers

SHare reGISTry

Link Market Services Limited

Locked Bag A14, Sydney South NSW 1235

Phone: +61 1300 554 474

Fax: 02 9287 0303

Website: www.linkmarketservices.com.au
Email: registrars@linkmarketservices.com.au

SecurITIeS excHanGe LISTInG

Geodynamics Limited shares are listed on the

Australian Securities Exchange, Ticker: GDY

compeTenT perSonS STaTemenT

The information in this report to which this statement is attached that relates to Exploration Results, Geothermal Resources or Geothermal Reserves is based on information compiled by Dr Graeme Wheller and Mr Robert Hogarth, who appear on the Register of Practicing Geothermal Professionals maintained by the Australian Geothermal Energy Group Incorporated at the time of the publication of this announcement.

Dr Graeme Wheller is employed by Volcanex International. Robert Hogarth is a is a full-time employee of the Company. Dr Wheller and Mr Hogarth have sufficient experience which is relevant to the style and type of geothermal play under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the Second Edition (2010) of the 'Australian Code for Reporting Exploration Results, Geothermal Resources and Geothermal Reserves'. Dr Wheller and Mr Hogarth have consented in writing to the inclusion in the report of the matters based on their information in the form and context in which it appears.

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