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Laconia Resources (ASX: LCR) has catapulted into becoming a near term gold and silver producer in a period where cash is king, while also being an emerging precious and base metals company.

The transition into production comes after finalising the acquisition of the advanced stage Rasuhuilca project in Peru.

Laconia will look to derive early revenues created to unlock the project's major exploration upside and add additional resources to the project.

The Rasuhuilca project is located in a region where major mining companies such as Xstrata and BHP Billiton are operating, with Xstrata planning to start production at the nearby Las Bambas project in 2013.

Rasuhuilca is located in the same region as Hochschild Mining Plc's (LON: HOC) major silver and gold operations. Hochschild has Reserves and Resources exceeding 186 million silver ounces and 1.1 million gold ounces, and has a company value over $1.6 billion.

Rasuhuilca currently hosts a JORC Inferred Resource of 360,000 tonnes at 1.97 grams per tonne (g/t) gold and 179g/t silver, with a 2.5g/t gold equivalent cut-off grade.

Rasuhuilca has exploration potential and is situated on the collapsed rim of the Rasuhuilca strato-volcano within a highly visible zone of secondary potassic alteration.

A Feasibility Study was completed at the Rasuhuilca project in June 2008 which Laconia is now planning to update, which will re-affirm the Feasibility Study results with a view to bringing the project into production as a high grade, small tonnage mining operation.

Laconia will undertake a full review of the Feasibility Study to update and validate its findings.

The reliance on historical data used in the estimate and the lack of independent QAQC data resulted in reporting of the Rasuhuilca zone as an Inferred Resource, Independent sampling has been completed confirming the tenor of the historic data. It is envisaged that the confidence in the resource will be upgraded so that it can be used as the basis for mine planning activities.

A drilling program by Laconia in the September quarter of 2012 is expected to increase the confidence category of the resource

Low acquisition price a boon for shareholders

Consideration for the deal is just $120,000 over 6 months to a third party, along with $500,000 from production revenue only if production revenue is reached within 5 years, and a scrip component of 42.055 million ordinary Laconia shares and 14.5 million performance shares.

Rasuhuilca has favourable infrastructure with access via sealed highways through Nasca and Puquio, then minor roads. Grid power is nearby, and water is available for project.

Target mineralisation includes high-grade bonanza gold veins

The orebody is known and is readily identifiable in underground faces and is bound by sharp contacts with the host andesite.

The geology and alteration of the project area is consistent with high sulphidation epithermal gold silver mineralisation style.

Laconia then has the opportunity to target mineralisation styles, which include the network of outcropping gold-silver veins in lower temperature acidic outflow zones (silica alunite-sulphide alteration).

Highlighting the potential targets, other mineralisation includes large-scale, sub-horizontal disseminated gold-silver mineralisation within outflow zones; High-grade bonanza gold veins beneath the acidic outflow zones; and copper-gold mineralisation within buried intrusive stocks, or gold-silver-zinc mineralisation in skarns surrounding buried intrusive stocks.

There is also potential for gold-dominant epithermal and copper / gold porphyry mineralisation within the tenement package.

Analysis

The Peru project Resource has around 50,000 to 60,000 ounces of Gold Equivalent, at a 2.5g/t gold cut-off, with the potential to increase the resource at a lower 1.5g/t gold cut-off.

The breakdown of these figures highlights the very strong economics for Laconia.

An Inferred Resource in Australia would have a value of around $100/ounce, so simply based on the lower end of the resource this equates to $5 million for Laconia.

Then there is the blue sky. If Laconia drill to upgrade to Reserve in 2012, and with a reserve having a value of around $250/ounce - the gold equivalent would then be worth an impressive $12.5 million to the company.

Now with these figures pitted against Laconia's current market cap. of just $4 million, the undervaluation of the company emerges.

With production in 12 to 18 months, and an opportunity for a major resource upgrade from new drilling, Laconia's current valuation is unlikely to last.

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