www.herenciaresources.com
Herencia Resources plc is a multi-commodity development company listed on the Alternative Investment Market (‘AIM’) of the London Stock Exchange with a primary focus on developing its Paguanta Project in northern Chile. Herencia is progressing a Feasibility Study into the proposed Patricia Mine (zinc, silver, lead) within the Paguanta Project, with the goal of bringing the mine into production. Herencia is also focused on advancing exploration work on the Doris copper-silver prospect and the La Rosa porphyry-copper target in 2012. Herencia is also earning a 51% interest of the exciting Guamanga Copper-Gold Project in Chile. The Project has two components: a shallow, high grade copper-gold oxide target; and deeper, potential porphyry targets. Herencia has the backing of the global zinc group Nyrstar.
Herencia Resources' Guamanga could be 'company making' asset, says WH Ireland
WH Ireland analyst Richard Smith said Herencia Resources’ (LON:HER) 70 percent stake in the Patricia project alone could be worth more than the company’s current market cap.
Apart from Patricia, Herencia is currently preparing to drill targets at its Guamanga copper-gold project in Chile, which, according to Smith, could be a “company making” asset.
Smith, who currently rates Herencia as a 'buy', estimates that the company’s flagship project Patricia is worth between US$45.2 million and US$60.4 million, noting that it is sensitive to both commodity prices and tonnage.
In addition, the analyst has derived a hypothetical upside tonnage scenario valuation estimate at current spot prices of £101.3 million.
According to Smith, while the upside scenario is not justified by the current resource, it is not unrealistic given that the ore body is open at depth and along strike.
The broker currently values Herencia at between £36.4 million on a “conservative” basis and £44.2 million based on spot prices at the end of January this year.
The valuation includes other properties owned by the company worth a combined US$2 million and its cash reserves of US$7.5 million, representing a premium to the company’s current market cap of nearly £33 million.
This estimate, however, does not account for the potential of another asset owned by Herencia, the Guamanga copper-gold project in Chile, which is located just 15 kilometres south of Anglo American’s (LON:AAL) large Mantoverde mine.
Last month, Herencia confirmed the existence of deeper drill targets at Guamanga, which are to be tested during the current quarter.
“Given that Guamanga is within a proven iron oxide copper gold (IOCG) belt, likely analogue analysis would suggest there is a prospect of a significant and company making discovery,” said Smith.
“However quantifying the chance of achieving significant exploration success is clearly speculative.”
The company, said Smith, should also benefit from the experience in zinc and Chile of two of its significant shareholders, the world's largest zinc smelting company Nyrstar and Chilean investment fund Megeve.
