Matsa Resources Ltd (ASX:MAT) will acquire the advanced Lake Carey gold project within the north-eastern goldfields of Western Australia, a project with near term production potential, for an upfront fee of $250,000.
A later payment of $1.5 million is due on closure. The project has a JORC 2004 resource of 385,400 ounces and will need to be upgraded to 2012 JORC status at some stage.
The project is well located in the Laverton Tectonic Zone within the north-eastern goldfields, 25 kilometres south of AngloGold Ashanti’s (ASX:AGG) Sunrise Dam gold mine.
The project is situated 60 kilometres south of Gold Fields Ltd’s (JSE:JFI) Granny Smith gold mine and 12 kilometres south of Saracen Mineral Holdings Ltd’s Red October gold mine.
Due diligence by Matsa has determined that the project has near term production potential of 40,000 ounces gold per annum, with potentially healthy cash flows over the first 2 years of mine life given its location and likely operating costs scenarios.
The consideration payable works out at $4.54 per resource ounce which is relatively modest, given advanced nature of the project and exploration upside potential and proximity to infrastructure and near term production profile.
The purchase consideration and mine development costs can be funded from Matsa’s cash and current assets which stood at $9 million as at March 2016 quarter end.
In all, this appears a strong buy from Matsa adding new valuation accretive catalysts.
Matsa is planning 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.
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