18th Mar 2016 13:04
LONDON (Alliance News) - Herencia Resources PLC shares rose on Friday after it said it has secured a USD50,000 convertible loan from one of its shareholders, and said that will lead to an additional USD200,000 loan being made available to the company early next month.
Herencia shares were up 25% to 0.0250 pence per share on Friday afternoon.
The company said Oriental Darius Co Ltd, which holds a 4.69% stake in the company, has supplied the USD50,000 loan, which is interest free with a six month term. Subject to shareholder approval, the loan is convertible into shares at an exercise price of 0.001 pence each.
The loan is part of a larger funding facility which is currently being finalised with Oriental Darius and fellow shareholder Australian Special Opportunity Fund. Both those shareholders have indicated they will provide an additional USD200,000 loan to Herencia before April 6.
The funding is crucial to Herencia as it said earlier this month that it only had funding to keep the company going until Friday after the company's Chairman John Moore supplied the company with a USD90,000 loan.
Moore said he would make a further USD210,000 available to the company, but had said that would be reliant on the USD50,000 loan made by Oriental Darious and the subsequent USD200,000 loan expected to come next month.
However, Moore Friday removed those restrictions and has allowed Herencia to draw down the other USD210,000, which will be used to pay the option payment on the Piccachos project which is due next week, it said.
Although Herencia will survive for the next few weeks, a long term solution still needs to be found.
"After the payment of the Piccachos option payment, the remaining monies, including the loan from Darius set out above, gives the company approximately three weeks of working capital and if no additional funds are identified before early April 2016, the directors do not believe the company will be able to continue trading after that date," said Herencia.
Without the funding secured Friday, Herencia would have had to shut up shop. However, shareholders will remain wary as other shareholders including Lind Partners have made several short term loans to keep the company going, with no sign of a long term solution to the company's financing woes materialising.
Lind Partners made a short term USD50,000 loan in February that funded the business for a matter of weeks, and was set to supply another USD200,000 loan to the company, but that never materialised. Some of the company's directors also supplied a USD100,000 loan earlier in February as well.
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.
On Friday, Herencia said the new loan from Oriental Darius and the follow up loan should allow it to complete the deal with Next Minerals, which when completed will lead to Herencia receiving a USD2.0 million cash payment. That payment is expected to be made no later than April 30 if it materialises, but the company stressed once again on Friday that there is no guarantee that the transaction will be completed - leaving the company clouded in uncertainty.
By Joshua Warner; [email protected]; @JoshAlliance
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