Magma Energy looks to founder's roots

VANCOUVER, British Columbia (Reuters) - For many people the mining and renewable energy sectors are poles apart but for Ross Beaty, a well-known Canadian mining entrepreneur, it's been only a small step from his roots to renewables.

Beaty's latest company, Magma Energy Corp, a small producer of electricity from geothermal energy, will start to trade on the Toronto Stock Exchange next Tuesday, fresh from raising C$100 million ($87 million) in an initial public offering.

The IPO generated double the C$50 million the company had set out to raise, and it marks the first big financing in Canada this year, breaking a long dry spell as the recession shut down the market.

"The more I looked at geothermal, the more I thought it was perfect for my background and interest," said Beaty, the founder of Pan American Silver Corp, one of the world's leading silver producers.

"It is a business where exploration management or resource management is important in defining success," Beaty said in an interview.

The various stages in developing a geothermal resource are similar to those of the mining industry, including exploration, feasibility studies, permitting, financing, construction and finally operation, he said.

The success of the IPO is in a large part due to Beaty, who has created an investor following over the years by starting up mining companies and then selling them at a premium. Last year he sold two copper companies for $1 billion.

"In a nutshell his reputation has sold the deal and has attracted so much interest. He has created a tremendous amount of wealth for people," said Matt Gowing, an analyst with Research Capital in Toronto.

Geothermal energy comes from hot water and steam produced deep below the earth's surface. They are piped up to the surface and used to drive turbines to generate electricity.

Geothermal energy is renewable because water is replaced by rainfall and heat continuously produced inside the earth.

The most active geothermal resources are usually found along geological fault lines where earthquakes and volcanoes occur. As such, in North America, the geologically active western United States is the center of geothermal activity.

Magma's only operating power generation plant is in Soda Lake, Nevada. The company also has four advanced-stage exploration properties and 14 early-stage exploration properties in the western United States, Chile, Argentina and Peru.

In addition to the lure of its natural geothermal resources, the United States has also offered incentives and grants to producers of geothermal energy.

"There is a wonderful tailwind blowing for renewables business in the western United States at the moment, including geothermal," Beaty said.

"We are fully interested in exploiting the opportunities that exist in the western U.S., and we will aggressively be pursuing opportunities there," he said.

Magma will use the C$100 million raised to double capacity at the Soda Lake power plant from 8 megawatts to 16 MW, push its advanced properties to feasibility and develop its early stage portfolio. Beaty is also looking for acquisitions.

Geothermal power is expensive as a start-up business, with each megawatt costing some $4 million to develop, Beaty said.

"We're going to try to extend (the money we raised) as far as we can but most certainly in the next four to five years we will be coming back to the market for more equity or debt or a combination," Beaty said.

Currently, geothermal power represents only a fraction of global electricity consumption.

"At this stage it is niche, but I believe in the future it will be a core part of our global electricity generation," Beaty said.

($1=$1.16 Canadian)

(Editing by Frank McGurty)