Herencia Resources (LON:HER) shares advanced around 10 percent in afternoon trade, after it announced that the Paguanta project is now worth US$90.4 million.
The company has updated the economic model for the Paguanta project in northern Chile after last month’s upgrade to the mining inventory.
Paguanta comprises three prospects: Patricia (zinc-lead-silver-gold), Doris (high grade copper-silver) and La Rosa (porphyry-copper).
Neither Doris nor La Rosa were included in the economic assessment because they are early stage prospects.
The recent upgrade increased the inventory by around a third, to 1.66 million tonnes. Consequently Herencia now gives Paguanta a net present value of US$90.4 million.
"This is a great result for the company,” managing director Michael Bohm said.
“This significant increase to Project NPV is a function of increased tonnage, increased grade and improved commodity prices.”
“What is also significant is the sensitivity to tonnage upside, particularly given the mineralisation remains open at depth, along strike, and with new high grade veins awaiting potential expansion.”
“It is worth noting that we added significantly to both the resource base and the NPV in 2010, with only 5,700m of drilling."
The latest economic assessment also highlights the project’s potential to increase its value. Herencia reported to 'sensitivity' cases that estimated Paguanta’s value in the future.
The ‘Post-Feasibility’ case assumed that a further 740,000 tonnes are added to the mining inventory in 2011, in this scenario Herencia believes Paguanta could be worth US$139.5 million.
Meanwhile, the ‘Upside Case’ assumes that Herencia can double the current 1.66 million inventory, this gives Paguanta an estimated value of US$184.9 million.