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Herencia Resources could become a “mid-tier Chilean copper producer”

SP Angel analyst thoughs on Herencia Resources (LON:HER)

  • The company has announced that it is in discussion with an established Chilean copper mining company, the Errazuniz Group, with a view to merging Herencia’s Picachos open pit copper project with the nearby underground mining and processing operations of Errazuniz’ Tambillos copper mine.
  • The Tambillos operations comprise two underground mines and a 1mtpa capacity processing plant approximately 10km north of Picachos.
  • At this stage, the two companies have signed a non-binding memorandum of understanding and although there is no assurance that a deal will be concluded, Herencia’s Managing Director, Graeme Sloan, commented that “both parties clearly see the opportunity for immediate value-add, and if the spirit and co-operation we have seen in recent discussions and due diligence is anything to go by, we are optimistic that an agreement can be achieved prior to the end of 2015.”
  • The Picachos project has yielded some high grade near surface intersections of copper and silver and the announcement indicates that the current proposals originated from discussions between the two companies over the possibility of using surplus treatment capacity at Tambillos to treat ore from Pichaos. Herencia announced an MoU for toll treating ore at Tambillos in September 2014.
  • Previous reports by Herencia indicated that they were proposing to complete a mining feasibility study in mid 2015 with a view to fast-tracking mine development at Picachos –
  • Conclusion: There appears to be a convincing operating logic to a combination of Tambillos with Picachos to create a mid-tier Chilean copper producer, however, at this stage there is no indication of the potential terms though no doubt these matters are under detailed discussion. We will await further news with interest.

 

Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.