Herencia Resources

Zinc bulls should consider Herencia Resources, which expects a formal resource estimate for its Paguanta project in Chile in August or September.

The Western Australia-based AIM concern, steered by managing director and experienced mining engineer Mike Bohm, has been finding high grade intersections at the project, including 7.6 metres showing 4.3% zinc, with useful lead, silver and gold deposits as well.

Herencia, which previously had problems with a financially distressed major corporate shareholder, now has backers including resources royalties company Anglo Pacific and Belgian metals heavyweight NyrStar. The company holds 70% of the Paguanta project, on which it has so far spent some £5m, and observers expect the new resource estimate to show a significant improvement on the most recent estimate of three million tonnes of ore at 3.9% zinc.

According to Bohm, Herencia, which raised £1.4m last autumn at a lowly 0.55p through broker WH Ireland, hopes to start a feasibility study on Paguanta later this year at a likely cost of another £5m, which the company could seek to fund from key backers, potential output buyers or the market in general. If the results match expectations, he sees the project going into production in 2012, at a cost of around £37m, to be met through project finance.

Bohm is clear that Herencia is 'an option on the price of zinc', which has a range of industrial applications. Herencia is thus strictly not for widows and orphans, but at 0.74p could repay a brave speculation.