Touted by South Australia Premier Mike Rann as the most advanced hot sedimentary aquifer project in the country ever, Panax Geothermal Ltd (ASX: PAX) said on Tuesday that its Penola project saw a breakthrough as the company revealed that the Salamander-1 well in Otway Basin could shortly become a geothermal energy production well.

Panax also said that negotiations are underway with numerous entities which were interested in joining the company's Penola project despite earlier pronouncements of glitches that prompted the company then to air pessimism on the project's outlook.

Back in July, Panax said that productivity testing returned discouraging data that baffled the company on whether signs shown then were reflective of insufficient reservoir indications or mere indicators of huge reservoir damage brought about by drilling and testing activities in the Penola site.

The company did not abandon the project though, citing insufficient grounds to halt its exploration and eventually came out now more upbeat on the project's prospects as it declared in statement that "by adopting appropriate well completion techniques/methods, we are optimistic that the Salamander-1 well can still be developed into a production well."

Panax emphasised that all its production/discharge tests and injection test yielded results which were similar from previously announced but it added that "it now appears likely that the test results reflect the status of the well itself, rather than the quality of the intersected target reservoir rocks."

The company called into attention the case of Queensland's coal bed methane (CBM), which eventually achieved ideal operational status today following its own share of similar well completion problems back in the 1980s and 1990s.

Panax said that the issues that hounded the Queensland CBM was resolved by employing new well completion techniques as it added that the company has decided to enlist the services of "experienced reservoir engineers who were instrumental in resolving the Queensland CBM well completion problems and who played a major role in making the CBM industry a multi-billion dollar industry."

As of 1441 AEDT on Tuesday, Panax Geothermal shares were trading at 4.7 cents, gaining by 0.3 cents or 6.82 percent from values seen in previous trading sessions.