Half-year Report

Herencia Resources plc

("Herencia" or the "Company")

HALF-YEARLY FINANCIAL REPORT

For the six months ended 30 June 2016

Herencia Resources plc is pleased to announce the unaudited half-yearly accounts of the Company and its subsidiaries (the "Group") for the six months ended 30 June 2016.

CHAIRMAN'S STATEMENT

I am pleased to advise that following the period under review, on 28 July 2016, the Company announced the execution of a formal purchase agreement with Golden Rim Resources Limited ("GMR") for the sale of its 70% ownership in the Paguanta zinc, silver and lead Project in northern Chile. The total consideration was US$1.5 million in cash and US$880k in GMR equity, and GMR agreeing to pay up to US$2.1 million (approximately £1.5 million) towards various contingent liabilities. As announced on 16 September 2016, the Company has used these funds to repay the majority of its creditors which places substantial constraints on the Company's current working capital position, however the Company is in funding discussions with interested parties and remains open to explore other funding options.

Other activities during the period include:

· The approval by shareholders at the Annual General Meeting held on 29 June 2016 to subdivide each Ordinary Share into 1 ordinary share of 0.01p and a deferred share of 0.09p.This will allow the issue of shares as a source of funding which has otherwise been unavailable since the last equity raise in September 2015;

· Securing funding arrangements by way of Secured Convertible Facilities totalling US$750,000 with two of our major shareholders, the Australian Special Opportunity Fund ("Lind Partners") and Oriental Darius Co. Ltd ("Oriental"). The shareholders have been very supportive and a total of US$350,000 has been drawn down under this facility to date with a further US$400,000 that can be advanced at the discretion of the Shareholders;

· Undergoing a process of restructure including the Board to re-establish Herencia as a viable junior exploration and development company; and

· Continue to actively pursue opportunities for the Picachos Project.

Finally, I would like thank my fellow directors and our small and dedicated team in Chile for their efforts in securing the successful sale of the Paguanta Project and also to our shareholders for their continued support.

Hon. John Moore AO

Chairman

29 September 2016

Please refer to the project announcements at the Company's website (www.herenciaresources.com) for further information on the Company operations.

For further information please contact:

Graeme Sloan, Herencia Resources plc +61 8 9481 4204 

Katy Mitchell/Nick Prowting WH Ireland Limited (NOMAD) +44 161 832 2174

Jon Belliss, Beaufort Securities Limited (UK) +44 207 382 8300

CONSOLIDATED STATEMENTS OF COMPRHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2016

The results shown above relate entirely to continuing operations.

STATEMENTS OF FINANCIAL POSITION

AT 30 JUNE 2016

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

CONSOLIDATED STATEMENTS OF CHANGES in EQUITY

NOTES TO THE UNAUDITED HALF-YEARLY ACCOUNTSFOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016

1. Accounting policies

The condensed half-year accounts have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board as adopted for use in the EU. The condensed half-year accounts have been prepared using the accounting policies which have been applied in the Group's statutory financial statements for the year ending 31 December 2015

1.1. Basis of preparation and going concern

Herencia Resources plc ('the Company') is incorporated in England and Wales. The half-yearly accounts for the six months ended 30 June 2016 is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The half-yearly accounts include unaudited comparative figures for the half year ended 30 June 2015. The comparatives for the year ended 31 December 2015 are not the Company's full statutory accounts for that period but have been extracted from the statutory accounts for that period which have been delivered to the Registrar of Companies. 

The financial reports have been prepared using the historical cost convention and are presented in UK pounds sterling. The half-yearly accounts for the six months ended 30 June 2016 has been prepared in accordance with IAS 34 'Interim financial reporting'.

The half-yearly accounts for the six months ended 30 June 2016 has been prepared pursuant to AIM Rule 18, which states "An AIM company must prepare a half-yearly report in respect of the six month period from the end of the financial period for which financial information has been disclosed in its admission document and at least every subsequent six months thereafter (apart from the final period of six months preceding its accounting reference date for its annual audited accounts)."

At 30 June 2016 the Group had cash balances of £55,236 and despite further proceeds from the sale of 70% equity in the Paguanta project of USD$1.26m, the Group will need to raise additional funds in 2016 in order to maintain sufficient cash resources for its working capital needs for the next twelve month and to this end, the following is noted:

· Due to the approval by shareholders at the Annual General Meeting held on 29 June 2016 to subdivide each Ordinary Share into 1 ordinary share of 0.01p and a deferred share of 0.09p, the issue of shares as a source of funding is a viable option which has otherwise been unavailable since the last equity raise in September 2015.

· As detailed in Note 8, the Company has entered into funding arrangements by way of Secured Convertible Facilities totalling US$750,000 with two of our major shareholders, the Australian Special Opportunity Fund and Oriental Darius Co. Ltd. The Shareholders have been very supportive and a total of US$350,000 has been drawn down under this facility to date with a further US$400,000 that can be advanced at the discretion of the Shareholders. 

· As with Paguanta, the Directors continue to actively seek new development opportunities for the other assets in La Serena, Guamanga and Picachos.

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. For this reason the Directors continue to adopt the going concern basis in preparing these financial statements.

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.

2. Income/(loss) per share

The basic income/(loss) per ordinary share of 0.06p (30 June 2015: (0.04)p; 31 December 2015: (0.36)p)for the Group has been calculated by dividing the income/(loss) for the period attributable to equity holders of £2,478,140 (30 June 2015: (£1,465,600); 31 December 2015: (£13,741,247) by the weighted average number of ordinary shares in issue of 3,770,137,684 (30 June 2015: 3,528,165,440; 31 December 2015: 3,770,137,684).

The diluted loss per share has been calculated using a weighted average number of shares in issue and to be issued of 3,815,137,684 (30 June 2015: 3,573,165,440; 31 December 2015: 3,815,137,684). The diluted loss per share has been kept the same as the conversion of share options decreases the basic loss per share, thus being anti-dilutive.

3. Segmental information 

The activities of the Group are broken down into the operating segments of Mineral Exploration and Central Costs. Segment information by operating segment and by region is as follows:

Segment information by region

At the end of the financial period, the Group had not commenced commercial production from its exploration sites and therefore had no turnover in the period.

On 28 July 2016, the Company announced that it had completed the sale with Golden Rim Resources Limited ("GMR") to acquire Herencia's wholly owned subsidiary Paguanta Resources (Chile) SA ("PRC") for a total of up to US$2.3 million in cash and GMR equity, and GMR agreeing to pay up to US$2.1m towards various contingent liabilities. PRC holds 70% of Compania Minera Paguanta S.A. which holds mineral concessions at the Paguanta silver-lead-zinc-copper project in northern Chile. As at 30 June 2016, an amount of £158,577 which represents part proceeds from this sale has been received and included within Trade and other payables.

Impairment losses relating to the disposal

An impairment charge of £10,908,123 was booked 31 December 2015 following a review of the carrying value of the project and cash consideration to be received. The impairment loss has been applied to reduce the carrying amount of the Paguanta Project deferred exploration & evaluation costs.

Director Loans and Related Party Transactions

During the six months ended 30 June 2016, the Directors advanced further loans of £270,735 to the Company for working capital purposes comprising of £240,735 advanced by John Moore and £30,000 advanced by John Russell. These loans are unsecured and non-interest bearing with the exception of £210,735 (USD$300,000) which has an interest rate of 15% pa. Initial repayment terms provide that the loans be repayable within 12 months, however this can be extended if required. In addition, the total loans advanced by John Russell and Graeme Sloan have agreed to be reduced by 50% resulting in reduction of £90,000.

No other related party transactions have occurred during the period.

Convertible Note

During the six months ended 30 June 2016, the Company entered into the following funding arrangements with two of its major shareholders, the Australian Special Opportunity Fund ("Lind Partners") and Oriental Darius Co. Ltd ("Oriental").

These funding arrangements are by way of Secured Convertible Facilities totalling US$750,000 of which US$350,000 has been drawn down with a further US$400,000 that can be advanced at the discretion of the Shareholders.

· On 26 February 2016 and 18 March 2016, the Company confirmed it had received US$50,000 loan from the Lind Partners and Oriental respectively. The loans are interest free and repayable after 6 months and, subject to shareholder approval, will be convertible into ordinary shares at 0.01p.

· On 5 April 2016, Herencia announced that it executed a legally binding term sheets with the Shareholders to advance the Company up to US$500,000 by way of a Secured Convertible Facility, subject to the satisfaction of certain conditions. The funds will be divided into two Tranches (Tranche 1 totalling US$200,000 and Tranche 2 totalling US$300,000). As at 30 June 2016, US$200,000 has been fully drawn under Tranche 1.

· On 7 June 2016, the Company announced that it has entered into a further Secured Convertible Facility with the Shareholders to advance the Company up to US$150,000. The funds will be divided into two Tranches (Tranche 1 totalling US$50,000 and Tranche 2 totalling US$100,000). As at 30 June 2016, US$50,000 has been fully drawn under Tranche 1.

Full details of the terms and conditions of the Secured Convertible Facilities including the conversion issue price and options are contained in the respective announcements.

As at 30 June 2016, the convertible note has a carrying value of £216,166 with £33,606 being classified as 'other reserve' in equity.

At the Annual General Meeting of the Company held on 29 June 2016, shareholders approved the subdivision of each ordinary share of 0.1p into 1 ordinary share of 0.01p and 1 deferred share of 0.09p.

No other matter or circumstances have arisen since the end of the reporting date and the date of this report which significantly affect the results of the operations of the Company.

13. Contingent liabilities and capital commitments

There have been no changes to the contingent liabilities capital commitments as disclosed in the most recent annual financial report.