Matsa Resources has set its sights on building a million ounce plus resource at its Lake Carey gold project, after banking $20 million from the sale of its Red October and Devon gold projects.

Matsa (ASX:MAT) will receive $11 million in cash and a major 19.6% stake in the acquirer Linden Gold – a private company planning to list on the ASX.

The gold junior paid just $2m in cash and shares to snare Red October from Saracen Mineral Holdings four years ago and $100,000 cash and shares for Devon in 2018.

The deal will provide Matsa with non-dilutive funding to ramp up the pace of exploration at its priority Fortitude deposit and Fortitude North prospect at Lake Carey.

It will also give Matsa upside through its stake in Linden, which will provide liquidity once that company lists. Linden owns the Second Fortune gold mine and is currently processing gold through St Barbara’s Gwalia mill.

 

Deal reveals value of Matsa’s Fortitude gold project

Matsa is hiding in the shadows of giants in the Lake Carey gold district near Laverton in WA, located just 5km from AngloGold Ashanti’s 12Moz Sunrise Dam gold mine.

It is also only kilometres from Gold Fields’ Granny Smith operation and multi-million-ounce Wallaby mine.

Red October and Linden contained a gold resource of 329,000oz, around 37% of Matsa’s wider inventory at Lake Carey.

By placing a $20 million value on those deposits, the sale reveals the underlying value of Matsa’s other deposits and the yawning gap to its valuation as a company.

That values the 553,000oz Matsa will still control, including 489,000oz at its Fortitude mine at $33.6m.

Matsa has an EV (enterprise value) of just $4m, making it one of the most conservatively valued gold companies on the ASX.

At Fortitude North, Matsa boasts an exploration target of 379,000-600,000oz. And with the funding from the transaction, the company plans to use its cash boost to back drilling programs to grow its resource beyond the magic million-ounce mark.

On top of that, a recent review of the Fortitude gold project showed that mine alone could generate an operating surplus of $95 million.

Matsa will also retain a 72-bed exploration camp at Red October to support staff at its projects.

 

Sale to support exploration ramp up

Matsa chairman Paul Poli said the cash from the deal would support a big ramp up in exploration activities at Lake Carey.

“This sale of the Red October and Devon gold projects for $20M unlocks real value for Matsa’s assets and, in turn, its shareholders,” he said.

“It’s a big deal and a game changer for Matsa because it provides $20m in funding to enable the company to maintain a systematic exploration effort to build a 1Moz resource at (the) Lake Carey Gold Project.”

Poli said another key point to note is that the deal supports his “long-held belief that there is great value in the Lake Carey Gold Project where Matsa still retains the Fortitude, Fortitude North, Gallant and Bindah projects, as well as a host of other prospects that have yet to be fully drill tested.”

“In addition, Matsa retains ownership of the Red October village which will provide support infrastructure for ongoing exploration and our proposed future developments,” Poli said.

This article was developed in collaboration with Fresh Equities, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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