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24 Jan | Purchase – Herencia Resources

Our last purchase for 2010 was Herencia Resources – a mineral exploration and development company with a primary focus on developing its Paguanta zinc-silver-lead-gold Project in northern Chile.

Herencia’s Paguanta Project is made up of 14 licenses covering a 39 square kilometre area located in the northern section of the main Chilean porphyry copper belt. The area is home to a number of the world’s largest open-cut copper mines.

Herencia’s Paguanta Project comprises:

  • The JORC-compliant ‘Patricia’ zinc-silver-lead-gold Mineral Resource
  • The ‘Doris’ high grade copper-silver Prospect
  • The ‘La Rosa’ porphyry-copper Prospect

For a good overview of the history and potential of the Paguanta Project check out the projects page of their website.

Good news emerged from its maiden diamond drill program back in December ’06 and it just seems to get better and better with upgraded Mineral Resource Estimates, the granting of ‘all 14 exploitation tenements’, the raising of additional capital and then the signing of leading global zinc smelting group, Nyrstar International BV, who took a 10.4% stake in the Company back in April of last year. Though not mentioned on their projects page, UK investment group Anglo Pacific, in addition to some well known London institutional groups are also on board.

It’s a very positive read (but then again you’re not going to stumble across too many negatives on a company website, we’ll leave that to the bulletin boards).

And moving forward some more recent upgrades. This from Hererncia’s RNS from 7th October 2010, in which Managing Director Michael Bohm stated:

“To see such a positive uplift in both tonnage and grade, augers well for our goal of achieving an initial stage one mine life of 5 years at an anticipated 400,000 tpa ore throughput….

….the tonnage has increased by 33% and significantly the in-situ metal inventory has increased by 54% for zinc, 49% for lead and 102% for silver. These increases have been achieved in 2010 with only 5,728m of additional drilling.”

These increases were based on a scoping study carried out in 2008. For more information check out the RNS or for an overview, take a look at this article from Proactive Investor from October last year.

And most recently, in a Paguanta Project Update from Herencia on 23rd December 2010, this:

Herencia is pleased to announce that the Company’s 70% owned Joint Venture Company (“Compania Minera Paguanta” or “CMP”) has accepted a proposal from Major Drilling to undertake a diamond drilling program of up to 15,000m at CMP’s flagship Paguanta Project (the “Project”) located in northern Chile.

The planned program will involve drilling of the ‘Doris’ prospect (targeting the high copper and silver grades seen on surface), the ‘La Rosa’ prospect (where the porphyry-copper potential will be the target) and ‘in-fill’ drilling of the ‘Patricia’ Mineral Resource with the aim of upgrading the Inferred Mineral Resource Estimate and collecting metallurgical and geotechnical core samples.

A diamond drilling rig is currently scheduled to mobilise to site during the 4th week of February 2011 with drilling work set to commence at Doris by the end that month. Once operation of the first rig has been established, it is planned to mobilised a second drill rig to site, possibly in April 2011.

Major Drilling are very familiar with the Paguanta Project having previously carried out the majority of drilling activity for the project.

In relation to the Feasibility Study, the Company is pleased to advise that Golder Associates (“Golder”) will commence their Study work during 1Q2011, with selected study components kicking off in the new year.

Managing Director Michael Bohm stated “as seen in early 2010, our goal is to again hit the ground running at Paguanta. The Feasibility Study at Patricia and the Drilling Program, initially commencing at Doris, will mark a new chapter for the Project. Subject to meeting our planned mobilisation timetable we would anticipate first drill assay results from Doris sometime in April 2011.

That’s a jam-packed 2011, whatever way you cut it and with a busy program comes news and with news comes price movement.

Herencia was one of our 17 potential (speculative) investments for 2011, a company that first attracted our attention back in September and October 2010 following decent gains on the back of their significant upgrade to their underground mining inventory.

Here’s the chart for the past 12 months (courtesy of SharePrice.co.uk). Notice the spike in price and volume in September last year. And since then, there’s nothing wrong with that trajectory. Following Herencia’s most recent update on their ambitious plans for 2011, I’m hoping for a lot more of the same.

So based on the above we bought 22,679 shares at 3.75 pence a share for a total spend before costs of £850.46 on 30th December 2010. As I type shares are trading at 3.96 pence, a slight appreciation but we’re here for the long term with a company that are making all the right noises.

Remember, this should not be consider investment advice, I’m an amateur investor. What I don’t know about mining could fill a tome, so please do a ton of your own research and seek a number of opinions before departing with your hard earned.

If you’ve made a quid or two out of investing recently, why not give a leg up to a third world entrepreneur via a Kiva micro-loan – $25 will get you up and running.

Thanks again for dropping by.