7th Mar 2016 12:00
LONDON (Alliance News) - Herencia Resources PLC shares soared on Monday after its chairman agreed to provide a short term loan to the company as it continues to search for a resolution to its fragile financial position.
Herencia shares were trading up 60% to 0.0200 pence on Monday.
Chairman John Moore has agreed to supply Herencia with a USD300,000 loan, with USD90,000 being made available immediately.
The remaining USD210,000 to be supplied by Moore, however, is reliant on Herencia's "major shareholders" supplying an additional USD250,000 loan to the company.
Herencia said if it cannot strike a deal with its shareholders and secure additional loans, the USD90,000 will only keep the company going until March 18, which is less than two weeks away.
"Although the directors remain confident that a deal with the major shareholders will be agreed, there can be no guarantee at this stage that this will happen. If no further source of funds can be identified, the directors believe that the company will no longer be able to trade after 18 March 2016," said Herencia on Monday.
It was only last month that Lind Partners, one of its major shareholders, forked out a USD50,000 short term loan to keep the company ticking over for a matter of weeks, with that money already being swallowed up and spent since then.
That USD50,000 loan from Lind only kept the company going until Monday, but the shareholder previously "indicated" it was willing to provide another loan of up to USD200,000 before today Monday March 7. However, that financing does not seem to have materialised.
That USD50,000 loan from Lind was also in addition to a USD100,000 loan from the company's directors in early February.
One of the reasons Herencia is struggling financially is because of its deal with Chilean mining company Next Minerals, its partner on the Picachos and Pasitzal copper projects.
Herencia struck a deal which was set to lead to Next Minerals potentially acquiring Herencia's stake in both projects by purchasing the company's Chilean subsidiary, but that deal has faced issues after some of Herencia's shareholders said they would not support the deal in its current form.
The new loan secured Monday carries an interest rate of 15% per year, and Herencia will have to pay back the outstanding amount to Moore before the end of May this year.
However, if Herencia manages to progress the Next Minerals deal and secure some funds from that transaction, to receive an unconditional takeover offer or conclude a reverse takeover, then it will need to pay that money back before the end of May.
If Moore leaves the company he will also be entitled to call that loan in.
By Joshua Warner; [email protected]; @JoshAlliance
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