JORC 2012 Resources at Lake Carey – Portfolio Stock (coverage initiated @ $0.16 in Aug 2015)
Matsa Resources (ASX: MAT, Share Price: $0.25, Market Cap: $36m) is generating strong exploration interest on various fronts: firstly, the emergence of a potential new gold corridor at Killaloe (next door to S2 Resources); ground EM surveying at Mt Day near Forrestania; the commencement of drilling at its Dunnsville gold project and the definition of a new copper target at Paisali in Thailand.
Matsa has also recently acquired the Lake Carey gold project in WA, which adjoins its existing Mt Weld project and results in a combined project area of 277 sq km. It includes the Fortitude gold deposit, where it has just confirmed a JORC 2012-compliant gold resource totalling 6.289Mt @ 1.9g/t for 385,300 oz Au.
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Market Significance
Matsa’s share price has firmed solidly from a recent 12-month low around $0.12 to a recent high of $0.32 on the back of the company’s Lake Carey gold project acquisition. The company already maintains has a diversified portfolio of gold and nickel exploration project interests within Western Australia, combined with high-grade copper potential via its 2015 project acquisition in Thailand. Interest is currently focused on Killaloe, where five prospects are undergoing IP surveying and where gold has been previously intersected by shallow drilling. The Lake Carey deal provides near-term gold production potential.
Announcement Detail – Lake Carey Acquisition
In our most recent coverage during July, we discussed the company’s recent deal to acquire the Lake Carey gold project in Western Australia. The project package comprises 12 tenements and includes the Lake Carey, Phantom Well and Wilga projects, which incorporates the Fortitude gold deposit. Importantly, all studies and development capital can be funded from existing cash and liquid reserves.
Matsa Resources has just announced that a detailed audit of the Fortitude mineral resource estimate has now confirmed the resource – meaning it can now be reported under the JORC 2012 Code. The gold resource comprises 6.289Mt @ 1.9g/t for 385,300 oz Au.
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The projects are located approximately 220km northeast of Kalgoorlie-Boulder and 70km south of Laverton within the north-eastern goldfields of Western Australia. The project area covers 102 sq km and is located within the highly productive Laverton Tectonic Zone (LTZ) – respectively 25km south of AngloGold Ashanti’s Sunrise Dam gold mine, 60km south of the Granny Smith gold mine and 12 km south of the Red October gold mine.
Matsa acquire the Lake Carey project (including all exploration and mining data) for a total cash consideration of $1,750,000 (ex GST), representing a modest acquisition cost of $4.54/ounce of gold, comprising:
- $250,000 on signing of agreement (paid), refundable if any tenements are forfeited
- $1,500,000 upon settlement of the transaction, transfer of tenements
Technical Significance
Strategically, the Lake Carey gold project is an excellent geographical fit with Matsa’s existing Mt Weld gold project, which adjoins the northern boundary of the Lake Carey gold project. The combined project area amounts to a total of 277 sq km.
The Fortitude gold deposit hosts a gold resource totalling 6.289Mt @ 1.9g/t for 385,300 oz. I understand that Matsa’s intention is to develop and mine the Fortitude deposit utilising a local third-party processing facility as quickly as possible, in order to take advantage of the current high gold prices. Preliminary discussions have already commenced and indicative offers received with nearby processing facilities.
Exploration potential within the combined project area is considered excellent by the company. Initial high-priority targets exist at Bindah and Galant, which could increase short-term production potential. Historically, regional exploration along the Fortitude and Bindah Shears has been superficial and carried out by wide-spaced shallow air-core drilling.
Matsa plans to target the regional extents of the Fortitude and Bindah Shears using modern geophysical techniques and drilling. Matsa announced on Tuesday that the first of 10 diamond drill-holes in a planned 1,500-metre program have commenced. The drill-holes have been designed to provide additional geotechnical and resource definition data and material for metallurgical test-work.
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Summary
We initiated coverage of Matsa Resources around $0.16 during August 2015 – representing a current gain of 56%.
The company’s success in acquiring the Lake Carey gold project at a modest per-ounce price is an extremely significant development. Whilst it has to this point maintained a solid portfolio of gold and nickel exploration properties, the Lake Carey deal offers the potential to vault the company into the gold production ranks – and rapidly. Matsa says it is feasible that it could be producing at a rate of 40,000 ounces of gold per annum by early 2017 – allowing it to take full advantage of strong gold prices.
