Herencia Resources Regulatory News (HER)

29 Mar 2007 07:00

Herencia Resources PLC29 March 2007 For release - 29 March 2007 Herencia Resources Plc ("Herencia" or the "Company") Interim Financial Information For the six months ended 31 December 2006 DIRECTORS, SECRETARY AND ADVISERS Directors Michael Bohm (Executive) John Moore (Non-Executive Chairman) John Russell (Non-Executive) Company Secretary John Bottomley Registered Office 30 Farringdon Street London EC4A 4HJ Principal Operating Office Level 22 Allendale Square 77 St Georges Terrace Perth 6000, Western Australia Company Number 5345029 Nominated Adviser WH Ireland Limitedand Broker 11 St James's Square Manchester M2 6WH Auditors UHY Hacker Young Chartered Accountants St Alphage House 2 Fore Street London EC2Y 5DH Solicitors Watson, Farley & Williams LLP 15 Appold Street London EC2A 2HB Registrars Computershare Investor Services PLC PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH Principal Bankers ANZ Bank 77 Georges Terrace Perth WA 6000 Barclays Bank plc 7th Floor United Kingdom House 180 Oxford Street London W1D 1EA Website www.herenciaresources.com DIRECTORS' REPORT The Directors present their Directors' report together with the un-auditedaccounts of the Group ("Herencia Resources Plc and its subsidiary undertakings")for the half year ended 31 December 2006. Directors The names of the Directors who held office during or since the end of thehalf-year: Michael Bohm (Executive)John Moore (Non-ExecutiveChairman)John Russell (Non-Executive) Results and Review of operations The Company incurred an operating loss after income tax of $102,265 (31 December2005: $153,343) for the half-year ended 31 December 2006. Principal activity The Company is registered in England and Wales, having been incorporated on 27January 2005 under the Companies Act with registered number 5345029 as a publiccompany limited by shares. The principal activity of the Group is mineral exploration and it owns aportfolio of silver-zinc-copper-gold exploration properties in Chile, SouthAmerica. The Group operates through its parent and subsidiary undertakings,details of which are set out in note 5 to these interim accounts. Review of the business and future prospects Herencia Resources Plc holds an interest in two highly prospective properties,the Paguanta and Iquique Projects, in Northern Chile. Herencia has a right toearn a 70% interest in these projects. The Paguanta Project, located on the northern end of the Chilean Porphyry CopperBelt, is approximately 150km east of the port of Iquique and 20 km south of anational highway. An eleven hole diamond drill program for 1,174 metres wascompleted in December 2006 confirming the existence of a significant,multi-veined mineralised zone. Eight out of ten holes drilled into the 'Patricia' target intersect mineralisation, with four of these holes returninghighest individual grades (over 1m) of 15.75% Zn, 447pm Ag and 5.58% Pb.Surface rock chip sampling extended the zone of anomalous mineralisation to theeast by approximately 300m with best results of 504 and 498 g/t Ag. The significant drill results demonstrate that the Patricia zone has multiplemineralised veins which remain open in most directions. Following on fromfurther high grade results announced in January 2007, the Company is planning asubstantial follow-up campaign at Paguanta, which is due to start in April 2007,with drilling likely to commence mid-year. At Iquique, the results of a 3,887 metre drill program were announced in August2006. The drilling confirmed the grade of veins and surrounding alteration andsupported the association of silver and copper in the system. Geologicalmapping, rock chip, dump, stream sediment and colluvium sampling will continuein 2007 to help define drill targets for follow-up. In July 2006, Herencia completed a private placement to sophisticated investorsto raise £571,000 from the issue of 38,066,667 ordinary shares at a price of1.5p per share. In October 2006, Herencia completed a private placement tosophisticated investors to raise £900,000 from the issue of 90,000,000 ordinaryshares at a price of 1.0p per share. The funds raised during the period were used to undertake the work on the Chileprojects (mentioned above); to pursue new project development opportunities inChile, and to provide working capital. The remainder of the funds will beutilised in 2007 to advance and expand the Company's activities in Chile,particularly at the Paguanta project given the results achieved by the Companyto date. On 5 October 2006, the Company entered into an Alliance Agreement with MineralSecurities Limited ("Minsec"). Under the Alliance Agreement Minsec has agreedto help identify and advise the Company on potential mineral resourceopportunities within South America. Minsec will provide Herencia with accessto its experienced team of geological, mining and commercial personnel to assistHerencia in both the evaluation and potential future development of any newresource opportunities on a cost basis. The Group's primary business is mineral exploration which is subject to risksincluding discovery of economic mineral resources, delays in work programmeplans and schedules, changes in market conditions affecting the resourcesindustry or commodity price levels, the outcome of commercial negotiations andtechnical or operating factors, political, environmental and regulatory controlsand approvals, and availability and retention of suitable employees andconsultants. Any one or more of these risk factors could have a materiallyadverse impact on the value of the Company. Events Subsequent to Reporting Date On 15 March 2007, the Company completed a capital raising to raise £700,000 fromthe issue of 56,000,000 ordinary shares at a price of 1.25p per share. Further information on the Projects and the Company can be found atwww.herenciaresources.com. Michael BohmDirector29 March 2007 The following consolidated results for Herencia Resources plc have been preparedbased on International Financial Reporting Standards (IFRS). CONSOLIDATED INCOME STATEMENT For the half year ended 31 December 2006 Note 31 December 2006 31 December 2005 (un-audited) (audited) £ £Administrative expenses (113,930) (163,189) Operating loss (113,930) (163,189) Finance revenue 11,665 9,846 Loss before taxation (102,265) (153,343) Taxation - - Loss for the period (102,265) (153,343) Loss per ordinary share - basic and diluted 2 (0.04)p (0.13)p All of the above amounts are in respect of continuing operations. There are no recognised gains and losses other than those passing through the income statement. The accompanying notes form part of this financial report. CONSOLIDATED BALANCE SHEET As at 31 December 2006 Note 31 December 2006 31 December 2005 (un-audited) (audited) £ £ASSETSNon current assetsIntangible assets 4 1,160,448 660,005Property, plant and equipment 42,767 - 1,203,215 660,005 Current assetsCash and cash equivalents 1,073,095 693,654Trade and other receivables 67,094 1,140,189 693,654 Total assets 2,343,404 1,353,659 EQUITY AND LIABILITIES EQUITYCapital and reserves attributable to equity holdersCalled up share capital 6 347,100 200,000Share premium reserve 6 2,558,825 1,350,000Translation reserve 3,401 -Accumulated losses (594,083) (252,488)Total equity 2,315,243 1,297,512 Current liabilitiesTrade and other payables 28,161 56,147Total Liabilities 28,161 56,147 Total equity and liabilities 2,343,404 1,353,659 The accompanying notes form part of this financial report. CONSOLIDATED CASH FLOW STATEMENT For the half year ended 31 December 2006 31 December 2006 31 December 2006 (un-audited) (audited) £ £ Net cash outflows from operating activities (166,226) (108,117) Cash flows from investing activitiesInterest received 11,665 9,846Purchase of property, plant and equipment (5,318) -Cash acquired with subsidiary undertakings - 500,000Net funds used for investing in exploration (274,319) (160,005)Net cash (utilised by)/ generated from investing (267,972) 349,841activities Cash flows from financing activitiesProceeds from issue of shares 1,389,000 -Issue costs (42,000) -Net cash generated from financing activities 1,347,000 - Net increase in cash and cash equivalents 912,802 241,724 Cash and cash equivalents at beginning of the period 160,293 451,930Cash and cash equivalents as at 31 December 2006 1,073,095 693,654 The accompanying notes form part of this financial report. STATEMENT OF CHANGES IN EQUITY For the half year ended 31 December 2006 Share Share Reserve for Translation Accumulated Total capital premium own shares reserve losses £ £ £ £ £ £Balance at 1 July 2006 200,000 1,276,925 82,000 10,893 (491,818) 1,078,000Issue of shares 65,100 1,323,900 - - - 1,389,000Issue costs - (42,000) - - - (42,000)Transfer from reserve 82,000 (82,000) - -Exchange differences on - - - (7,492) - (7,492)retranslation of foreignoperations Net loss for the period - - - - (102,265) (102,265) Balance at 31 December 2006 347,100 2,558,825 - 3,401 (594,083) 2,315,243 The accompanying notes form part of this financial report. NOTES TO THE FINANCIAL INFORMATION For the period ended 31 December 2006 1. Accounting Policies A summary of the principal accounting policies, all of which have been appliedconsistently throughout the period, is set out below. Basis of Preparation The interim financial information for the six months ended 31 December 2006 isun-audited and does not constitute statutory accounts within the meaning ofsection 240 of the Companies Act 1985. The interim financial statements wereapproved by the Board of Directors on 29 March 2007. The financial information has been prepared under the historical cost conventionand in accordance with International Financial Reporting Standards ("IFRS") asadopted by the European Union (including IFRS 6 "Exploration for and Evaluationof Mineral Resources"). The financial information has been prepared on the basisof a going concern. The interim financial information for the six months ended 31 December 2006 hasbeen prepared pursuant to AIM rule 18 and represents the half yearly report forthe six months then ended. AIM rule 18 states "An AIM company must prepare ahalf-yearly report in respect of the six month period from the end of thefinancial period for which financial information has been disclosed in itsadmission document and at least every subsequent six months thereafter (apartfrom the final period of six months preceding its accounting reference date forits annual audited accounts)." The Group financial statements are presented in UK pound sterling. Basis of Consolidation The interim financial information includes the results and financial position ofthe Company and its subsidiary undertakings made up to the 6 months ended 31December 2006. Details of the subsidiaries are given in note 5. Subsidiaries are fully consolidated from the date on which control istransferred to the Group. They are de-consolidated from the date that controlceases. The purchase method of accounting is used to account for the acquisitionof subsidiaries by the Group. The cost of an acquisition is measured as the fairvalue of the assets given, equity instruments issued and liabilities incurred orassumed at the date of exchange, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are measured initially at theirfair values at the acquisition date. The excess of the cost of acquisition overthe fair value of the Group's share of the identifiable net assets acquired isrecorded as goodwill. Goodwill arising on acquisitions is capitalised andsubject to impairment review, both annually and when there are indications thatthe carrying value may not be recoverable. Inter-company transactions, balances and unrealised gains on transactionsbetween group companies are eliminated. All the companies over which the Company has control apply, where appropriate,the same accounting policies as the Company. Cash and cash equivalents The company considers all highly liquid investments, with a maturity of 90 daysor less to be cash equivalents, carried at the lower of cost or market value. Foreign Currency Translation Transactions in foreign currencies are translated into sterling at the rate ofexchange ruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies are translated at the rate of exchange rulingat the balance sheet date. The resulting exchange gain or loss is dealt with inthe profit and loss account. The assets and liabilities of the foreign subsidiary undertakings are translatedinto Sterling at the rates of exchange ruling at the year end and their resultsare translated at the average exchange rate for the period. Exchange differencesresulting from the retranslation of net investments in subsidiary undertakingsare treated as movements of reserves. Exploration and Development Costs All costs associated with mineral exploration and investments are capitalised ona project by project basis, pending determination of the feasibility of theproject. Costs incurred include appropriate technical and administrativeexpenses but not general corporate overheads. If an exploration project issuccessful, the related expenditures will be transferred to mining assets andamortised over the estimated life of the commercial ore reserves on a unit ofproduction basis. Where a licence is relinquished or project abandoned, therelated costs are written off. Where the Group maintains an interest in aproject, but the value of the project is considered to be impaired, a provisionis made against the relevant capitalised cost. The recoverability of all exploration and development costs is dependent uponthe discovery of economically recoverable reserves, the ability of the Group toobtain necessary financing to complete the development of the reserves andfuture profitable production or proceeds from the disposition thereof. Amounts recorded for these assets represent costs and are not intended toreflect present or future values. Deferred Taxation Deferred tax is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the interim financial information. Deferred tax isdetermined using tax rates (and laws) that have been enacted or substantiallyenacted by the balance sheet date and expected to apply when the relateddeferred tax is realised or the deferred liability is settled. Deferred tax assets are recognised to the extent that it is probable that thefuture taxable profit will be available against which the temporary differencescan be utilised. Impairment of Exploration and Development Costs The carrying value of unevaluated areas is assessed on at least an annual basisor when there has been an indication that impairment in value may have occurred.The impairment of unevaluated prospects is assessed based on the Directors'intention with regard to future exploration and development of individualsignificant areas and the ability to obtain funds to finance such explorationand development. 2. Loss per share Period ended Period ended 31 December 2006 31 December 2005 £ £ Loss 102,265 153,343 Weighted average number of ordinary shares outstanding 265,684,057 113,586,957during the year used in calculating the basic loss per share Basic loss per share - pence (0.04) (0.13) The Company has no share warrants or options in issue. 3. Segmental information The primary segmental reporting is determined to be geographical segmentaccording to the location of the asset. The Directors do not believe that thereis a secondary segment that could be reported. There are two geographicalreporting segments as follows: Geographical segment Australia Chile Total £ £ £ 31 December 2006Administration expenses (136,617) 22,687 (113,930)Finance revenue 11,665 - 11,665Loss before taxation (124,952) 22,687 (102,265) 31 December 2005Administration expenses (163,189) - (163,189)Finance revenue 9,846 - 9,846Loss before taxation (153,343) - (153,343) At the end of the financial period, the Group had not commenced commercialproduction from its exploration sites and therefore had no turnover in theperiod. 4. Intangible Assets Goodwill Exploration and Total development costs £Cost 500,000 386,129 886,129Additions - 274,319 274,319As at 31 December 2006 500,000 660,448 1,160,448ImpairmentImpairment during the period - - - Carrying amountAs at 31 December 2006 500,000 660,448 1,160,448 The exploration and development costs relate to the Iquique and Paguantaprojects located in Chile, South America. In accordance with the accounting policy, the Directors have assessed the valueof goodwill and the exploration and development costs carried in the accounts asintangible fixed assets. In the opinion of the Directors, no impairmentprovision is considered necessary. 5. Subsidiaries Company name Country of registration or Class Shares incorporation held % DirectTarapaca Resources (Bermuda) Limited Bermuda Ordinary 100IndirectTarapaca Holdings (BVI) Ltd British Virgin Islands Ordinary 100Iquique Resources (Chile) SA Chile Ordinary 100Paguanta Resources (Chile) SA Chile Ordinary 100 The principal activity of Iquique Resources (Chile) SA and Paguanta Resources(Chile) SA was mineral exploration whereas Tarapaca Resources (Bermuda) Limitedand Tarapaca Holdings (BVI) Ltd are holding companies. 6. Called Up Share Capital Period ended 31 December 2006 £Authorised10,000,000,000 Ordinary shares of £0.001 each 10,000,000 Allotted, Issued and Fully Paid Number of sharesAs at 1 July 2006 200,000,000 200,000Issued on 10 July 2006 38,066,666 57,100Issued on 30 October 2006 90,000,000 90,000As at 31 December 2006 328,066,666 347,100 Share PremiumAs at 1 July 2006 1,276,925Issue of shares on 10 July 2006 513,900Issue of shares on 30 October 2006 810,000Issue costs (42,000)As at 31 December 2006 2,558,825 Pursuant to the Acquisition Agreement for the acquisition of the Tarapaca Groupof Companies in November 2005, there are a further 50,000,000 Ordinary Shares at£0.01 per share that may be allotted to Mineral securities Limited subject tocertain performance criteria. The performance criteria are the investment by theGroup of at least US$2,000,000 in the Projects within 36 months of the date ofthe Acquisition Agreement or the Group disposing of a majority interest ineither of the Projects. On 10 July 2006, the Company completed a private placement capital raising toraise £571,000 from the issue of 38,066,667 ordinary shares at a price of 1.5pper share. On 30 October 2006, the Company completed a capital raising to raise £900,000from the issue of 90,000,000 ordinary shares at a price of 1p per share. 7. Dividends No dividends were paid or proposed in respect of the period ended 31 December2006. 8. Loss before taxation The following expense items are relevant in explaining the financial performancefor the half-year: Period ended Period ended 31 December 2006 31 December 2005 £ £ Auditors remuneration -Audit 5,725 5,875 Foreign exchange loss/(gain) 25,665 (9,718) In view of the Group's loss position for the period, there is no requirement forreconciliation of prima facie tax payable on accounting profit to tax expense. 9. Contingent Liabilities and Capital Commitments The Group had no contracted capital commitments at 31 December 2006. The Group had no contingent liabilities at 31 December 2006. 10. Events Subsequent to Reporting Date No matter or circumstances have arisen since the end of the reporting date andthe date of this report which significantly affect or may significantly affectthe results of the operations of the Company except as follows:- On 15 March 2007, the Company completed a capital raising to raise £700,000 fromthe issue of 56,000,000 ordinary shares at a price of 1.25p per share. 11. Related Party Transactions During the period, the Company completed capital raisings totalling £1,471,000and Mineral Securities Limited ("Minsec") invested £450,000 in the capitalraisings. During the period, the Company entered into an Alliance Agreementwith Mineral Securities Limited. Michael Bohm is a senior executive and ashareholder of Minsec. In addition, John Moore is a director and shareholder ofMinsec. John Bottomley, the secretary of the Company is an employee of Sprecher GrierHalberstam LLP, a firm of solicitors. During the period this partnership waspaid a sum of £6,594 in respect of legal and secretarial services to theCompany. These related party transactions are based on independent third party commercialrates. The Directors who have interests in these transactions do not participatein the decision making process relating to these transactions. Authorised on behalf of the Board Michael BohmDirector29 March 2007 This information is provided by RNS The company news service from the London Stock Exchange