Herencia Resources sells 70% of Paguanta project to GMR for $2.3m

The total consideration of $2.3m in a formal purchase agreement will be made up of $1.5m in cash and $800,000 in fully paid ordinary shares. GMR also agreed to pay $2.1m towards contingent liabilities.

So far GMR has paid Herencia Resources $227,000. About $127,000 will be paid upon execution of the initial conditional term sheet and $100,000 on formal documentation.

The AIM listed company will also sell all of the issued shares in its wholly owned subsidiary, Paguanta Resources to GMR.

Paguanta Resources holds 70% of the shares in Compania Minera Paguanta, which holds mineral concessions at the Paguanta silver, lead, zinc and copper project in northern Chile.

Managing director Graeme Sloan said: "The sale of Paguanta is an important step forward for the company given our requirements for funds and our need to focus 100% on our Picachos copper project in central Chile. Even though the board believes the Paguanta project has a great deal of upside, they also believed that the decision to divest Paguanta at this time is the right one for shareholders.

“Over the past few weeks, the price of copper has improved and markets in general appear a little more open to investing in resource stocks, although still very challenging at the moment. The Picachos project has enormous potential as demonstrated in our two drilling campaigns and surface and underground geological work completed to date. Given this, our aim is to continue negotiations with parties around our Picachos project whilst developing a feasible production strategy to meet current market conditions and commodity prices".

Shares in Herencia Resources were down 17.5% to 0.330p at 1503 BST.