18th Jul 2016 09:06
LONDON (Alliance News) - Herencia Resources PLC Monday reported a significantly wider loss in 2015 and said it still believes it can complete the sale of the Paguanta project before the end of the month when it looks set to run out of funds.
Herencia struck a deal to sell Paguanta in Chile earlier this year but has been hit by delays, severely hitting the company's financial position. Herencia has come close to running out of cash on numerous occasions this year but has managed to survive whilst it rushes to complete the sale.
The miner is not generating any revenue and a tiny fall in administrative costs in the year was nowhere near enough to offset the GBP10.9 million impairment booked against the Paguanta project that contains lead, zinc and silver and is 70%-owned by the London-listed company.
A foreign exchange loss totalling GBP896,004 also helped widen the loss for the year after swinging from a GBP625,408 gain last year.
The pretax loss for 2015 came in at GBP14.0 million and can be compared to the loss in the previous year of GBP1.9 million.
Herencia has struck a deal to sell Paguanta to Golden Rim Resources since the start of 2016 but warned earlier this month that it there is no guarantee that it will be able to last past the end of July because the deal had been delayed.
On Monday, Herencia said it still expects to complete the sale before the end of this month. Legal and technical due diligence has been completed but there are still a number of conditions that remain to be finalised to the satisfaction of Golden Rim.
At the end of 2015, Herencia had cash of GBP207,183 and the miner stressed on Monday that it would need to raise more funds this year in order to survive for another year.
The company's share price fell below the nominal value in September and the company was forced to restructure its capital last month in order to be able to raise equity. In the meantime, Herencia was forced to enter into secured convertible loan facilities worth USD750,000 with its two largest shareholders, of which USD350,000 has been drawn down.
Although Paguanta is the closest asset to being sold, Herencia's financial woes have also caused Herencia to look at introducing partners or selling its other assets in La Serena, Guamanga and the flagship Picachos project in Chile.
"The directors have a reasonable expectation that the group has adequate access to resources to continue in operational existence for the foreseeable future and continue to meet, as and when they fall due, its planned exploration and development activities and other liabilities for at least the next twelve months from the date of approval of these financial statements," said Herencia.
"However, there can be no guarantee that the required funds will be raised within the necessary timeframe, consequently a material uncertainty exists that may cast doubt on the group's ability to continue to operate as planned and to be able to meet its commitments and discharge its liabilities in the normal course of business for a period not less than twelve months from the date of this report," it added.
Although Herencia secured a maiden mineral resource estimate for Picachos in 2015, the company said it has progressed a number of negotiations with potential partners or buyers of the project, adding it is yet to be successful.
Unsurprisingly, completing the Paguanta sale and finding new funding are the two key priorities for Herencia moving forward.
Herencia shares were suspended at the end of June after failing to report its financial results for 2015 on time, but were reinstated on Monday after publishing its accounts.
Herencia shares were trading down 4.6% to 0.0310 pence per share on Monday, over 47% lower than at the start of 2016 and over 82% lower than one year ago.
By Joshua Warner; [email protected]; @JoshAlliance
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