Half Yearly Report

Herencia Resources plc

("Herencia" or the "Company")

HALF-YEARLY FINANCIAL REPORT

For the six months ended 30 June 2013

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 2013.

CHAIRMAN'S STATEMENT

The six months ended 30 June 2013 was an exciting period for Herencia, a highlight of which was the successful completion of a Feasibility Study at the Paguanta Project on the Patricia deposit announced by RNS on 31 May 2013. In summary, it is proposed that a total of 3.75 million tonnes at 3.2% zinc, 78g/t silver and 1.2% lead will be mined over an eight year mine life commencing with an open pit operation (three years), followed by an underground operation (at least five years) with excellent potential to expand both production rate and mine life.

Open pit mining is proposed to commence with an initial Run of Mine (ROM) production rate of 400,000tpa with throughput increasing to 460,000tpa with the introduction of underground mining in year four. The Company is targeting first mine production in 2015 subject to Board and JV approvals, funding and the receipt of mining permits. The timing of this would potentially coincide with a forecast shortfall in global zinc supply, as noted recently by industry heavyweight Glencore who are predicting solid growth demand for zinc.

Preparations for the lodgement of a Mine Permit Application also commenced during the period with a view for submission later in the second half of 2013. Herencia was also pleased to announce the signing of a Community Relations Agreement on 29 April 2013 with the Cultane community in relation to the Paguanta Project which will see the Company expand on its existing relationship to develop long term cooperation in the areas of employment, education and the environment. The Agreement will see the Cultane community support ongoing development of the Paguanta Project, future exploration activities and active participation in the development of the Environmental Impact Study. It is anticipated that the Project's entire workforce will be sourced from Chile due to the highly experienced mining personnel readily available in that country.

Early in 2013, the potential for resource expansion at Paguanta was highlighted following a comprehensive review of all geophysical data and correlating geological data sets by an independent geophysical consultant. The review supported the potential extension of the Patricia mineralisation to over 1,600 metres, identified the potential for a deeper porphyry style mineralising system and identified six targets, three of which are yet to be tested. The Paguanta mineralisation (Patricia deposit) remains open along strike and down dip and high priority areas for potential resource expansion are the focus of further exploration programs in 2H2013.

On 5 March 2013, the Company announced a Board change with Mr Greg McMillan, a Director of the Company and the nominated Board representative for Nyrstar NV, resigning from his position and being replaced by Mr Chris James, Group Manager, Corporate Development for Nyrstar.

Also in March 2013, the Company successfully secured up to US$15 million in funds to progress the development, permitting and resource/reserve expansion related to the Paguanta Project by the execution of Funding Agreement with The Australian Special Opportunity Fund, a New York-based institutional Investor managed by The Lind Partners.

Herencia also announced that a wholly owned subsidiary of Australia's OZ Minerals, OZ Exploration Chile Limitada, had commenced a due diligence process on its Guamanga Project with a view to executing a joint venture agreement with the Company. We believe the interest shown in Herencia's projects by companies such as OZ demonstrates the potential of our projects and the quality of the work undertaken by our first class technical team in Chile.

Subsequent to 30 June 2013, the Company's 100% owned subsidiary Herencia Resources (Chile) SA entered into an Option Agreement to acquire the advanced Picachos Copper Project in central Chile. This option will add to Herencia's portfolio of first class mining projects in Chile. Small scale mining is presently being undertaken by private miners via open pit and underground mining methods. A review of available data and recent site visits have identified up to five separate zones of mineralisation with a combined strike length of over 8km contained within the Project area. In some areas the close relationship of these zones coupled with multiple occurrences of out-cropping wide zones of mineralisation, highlights the excellent potential for large scale open pit mining to take place.

Also subsequent to this reporting period, and following completion of their due diligence work, OZ Minerals have confirmed that they wish to commence the Phase 1 site work program in the short term. In addition, they have advised that the Guamanga target area may be larger than first anticipated and had commenced acquiring additional exploration leases not currently owned by Herencia. This will expand the Guamanga Project foot-print and OZ have confirmed to Herencia that these additional leases will form part of the future joint-venture area.

Herencia also announced the acquisition of a large and highly prospective tenement package, totalling 16 square kilometres, located immediately south-west of, and adjoining the Paguanta Project. A large surface colour anomaly measuring approximately three kilometres by two kilometres exists on the tenement package and is located only two kilometre from the Patricia Deposit.

The Company regrettably advised of the resignation of Michael Bohm from the Board of Herencia due to his increased external work commitments, effective as of 31 August 2013.

In summary, Herencia has successfully progressed the Paguanta Project along the development pipeline and has also demonstrated the potential to extend the proposed mine life through resource expansion. Herencia has also been proactive in seeking opportunities to deliver shareholder value through the advancement of the Guamanga Project via a potential JV agreement with OZ Minerals, and entering into an option agreement to acquire 100% of the exciting Picachos copper project. We look forward to updating investors on progress on all fronts in the coming months.

Hon. John Moore AO

Chairman

25 September 2013

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 Tel: +61 8 9481 4204

Katy Mitchell, WH Ireland Limited Tel: +44 161 832 2174

Simon Courtenay, Broker Profile Tel: +44 207 448 3244

The information in this report that relates to the 2012 Mineral Resource estimate is based on information compiled by Dr Marcelo Godoy. Dr Godoy is a full time employee of Golder Associates, a Member of the Australasian Institute of Mining and Metallurgy and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for the Reporting of Mineral Resources and Ore Reserves. The Mineral Resource estimate complies with recommendations in the Australasian Code for Reporting of Mineral Resources and Ore Reserves (2004) by the Joint Ore Reserves Committee (JORC). Dr Godoy consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

References in this announcement to exploration results and potential have been approved for release by Mr. Graeme Sloan (BAppSc Mining Engineering WASM) and Mr. Antonio Valverde (Bsc Geology Universidad Complutense de Madrid), both with more than 15 years relevant experience in the field of activity concerned. Mr. Sloan is a Member of the Australasian Institute of Mining and Metallurgy. Both Mr. Sloan and Mr. Valverde have consented to the inclusion of the material in the form and context in which it appears.

CONSOLIDATED STATEMENTS OF COMPRHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2013

The results shown above relate entirely to continuing operations.

STATEMENTS OF FINANCIAL POSITION

AT 30 JUNE 2013

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2013

CONSOLIDATED STATEMENTS OF CHANGES in EQUITY

NOTES TO THE UNAUDITED HALF-YEARLY ACCOUNTSFOR THE SIX MONTH PERIOD ENDED 30 JUNE 2013

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 are expected to be applied in the Group's statutory financial statements for the year ending 31 December 2013.

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 2013 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 2012. The comparatives for the year ended 31 December 2012 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 2013 has been prepared in accordance with IAS 34 'Interim financial reporting'.

The half-yearly accounts for the six months ended 30 June 2013 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)."

The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

On 8 March 2013, the Company executed a Funding Agreement for up to US$14.25 million investment and issued a Convertible Security Instrument of US$0.75 million to the Australian Special Opportunity Fund, a New York-based institutional investor managed by The Lind Partners. 

As at 30 June 2013, the Company received a total of US$1.99 million (£1.3 million) represented by a US$0.75 million (£0.5 million) convertible security note and US$1.24 million (£0.8 million) towards the purchase of ordinary shares in the Company. Refer to Note 7 for further details.

This Funding Agreement provides the Group with access of up to US$15.0 million in funding in regular tranches and importantly, does not restrict the Company's future ability to raise additional capital from private and public placings nor the ability to enter into strategic industry partnerships or off-take agreements.

The Directors have reviewed the Group's overall position and outlook and are of the opinion that the Group will be able to raise the required funding to carry out the planned activities and provide working capital to enable it to meet its liabilities as they fall due, for the foreseeable future, and for at least the next twelve months from the date of approval of these financial statements. The directors therefore believe that the use of the going concern basis is appropriate.

2. Loss per share

The basic loss per ordinary share of (0.08)p (30 June 2012: (0.07)p; 31 December 2012: (0.13)p)for the Group has been calculated by dividing the loss for the period attributable to equity holders of £1,300,043 (30 June 2012: £1,127,976; 31 December 2012; £2,047,566) by the weighted average number of ordinary shares in issue of 1,712,963,094 (30 June 2012: 1,521,971,393; 31 December 2012: 1,593,354,687).

The diluted loss per share has been calculated using a weighted average number of shares in issue and to be issued of 1,801,208,950 (30 June 2012: 1,577,614,250; 31 December 2012: 1,651,185,288). 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 8 March 2013, the Company executed a Funding Agreement for up to US$14.25 million investment and issued a convertible security instrument of US$0.75 million to the Australian Special Opportunity Fund, a New York-based institutional investor managed by The Lind Partners ("Lind"). Under the Agreement, the Company paid an execution fee of US$0.35 million which has been satisfied by the issue of 24,071,407 ordinary shares in the Company in March 2013 at a price of 0.96p. Furthermore, 25,000,000 options were issued and details are contained in Note 10.

Under the Agreement, the Company initially received US$0.45 million and thereafter can draw down monthly investments of up to US$0.3 million (which may be increased to US$0.6 million by mutual consent) for a maximum of 24 months, subject to the terms of the agreement. The initial and all subsequent monthly drawdowns, will be issued at 91.5% of the average three consecutive daily volume weighted average share price (VWAP), chosen by Lind during a specified period prior to the issuance of shares. However, for one draw down, the VWAP will be at 130%.

The Share to be issued at 30 June 2013 of £147,910 was satisfied by the issue of 36,977,386 ordinary shares in the Company on 23 July 2013 at a price of 0.40p (refer Note 10).

The convertible note issued by the Company has a face value of US$0.75 million and a term of 24 months at a 0.0 % interest rate. The note may be converted in whole or in increments of no less than US$50,000 at a conversion price of 100% of the average three consecutive daily VWAP, during the 20 trading days prior to conversion.

As at 30 June 2013, the convertible note has a carrying amount of £388,750 with £112,048 being classified as equity.

i Shares issued in accordance with the Funding Agreement entered into on 8 March 2013 to The Australian Special Opportunity Fund, a New York-based institutional investor managed by The Lind Partners as satisfaction of the execution fee of USD$0.35 million. Refer Note 7 for further details.

ii Shares issued in accordance with the Funding Agreement entered into on 8 March 2013 to The Australian Special Opportunity Fund, a New York-based institutional investor managed by The Lind Partners as satisfaction of the initial and subsequent monthly draw downs. Refer Note 7 for further details.

iii Shares issued in accordance with Nyrstar International B.V. original investment agreement with the Company dated 16 April 2010 to subscribe for sufficient shares to maintain their percentage shareholding in the Company.

iv Shares issued to Inversions Santa Patricia Limitada as part consideration of the 100% acquisition of the Guamanaga Project.

v Shares issue costs represent the execution fee of USD$0.35 million (refer above) and the fair value of 25.0 million options issued (refer Note 10) as part of the Funding Agreement entered into on 8 March 2013 to The Australian Special Opportunity Fund, a New York-based institutional investor managed by The Lind Partners.

13. Contingent liabilities and capital commitments

On 5 June 2013 the Company announced that a wholly owned subsidiary of Australia's OZ Minerals, OZ Exploration Chile Limitada , had commenced a due diligence process on the Guamanga Project with a view to executing a joint venture agreement with the Company. The key terms of the agreement are as follows:

§ Phase 1 - OZ Minerals will sole fund an initial US$3 million over 20 months to earn a 51% stake in the Guamanga Project.

§ Phase 2 - OZ Minerals will sole fund an additional US$5 million over 24 months to increase their stake to 80%.

§ Phase 3 - at the completion of Phase 2, Herencia can either remain at 20% (by co-contributing 20% of funds spent) or may opt for OZ Minerals to fund a further US$5M to increase the OZ Minerals equity to 90%.

§ At the completion of Phase 3, Herencia can then elect to fund its share of project development costs or OZ Minerals, at their election, may consider the provision of providing debt funding to Herencia with the funding to be repaid to OZ Minerals from Herencia's share of profits.

To facilitate this process, Herencia acquired 100% of the Guamanga Project from Inversiones Santa Patricia Limitada. The consideration outstanding at 30 June 2013 is US$175,100 which will be settled in the next six months.

On 23 September 2013, the Company announced that OZ Minerals had completed their due diligence work and will seek to commence the Phase 1 work in late September 2013.

Other than the above , there have been no changes to the capital commitments as disclosed in the most recent annual financial report.

The Group had no contingent liabilities at 30 June 2013.

14. Decommissioning expenditure

The Directors have considered the environmental issues and the need for any necessary provision for the cost of rectifying any environmental damage, as might be required under local legislation. A provision of £63,101 has been made for any future costs of decommissioning or environmental damage.