Gold minnow Matsa Resources has acquired the recently mothballed Red October mine from Saracen Mineral Holdings for around $2 million in cash and scrip.

Saracen originally flagged the potential sale of Red October back in June when the project was placed on care and maintenance while Saracen completed a strategic review of the asset.

The Red October underground mine, which lies in Western Australia, produced 3.55 grams of gold per tonne for a total of 13,044 contained ounces in FY2017.

Diamond drilling at Red October tested several target areas, resulting in underground mining activities re-starting in September 2016. Due to reduced ore body widths at Red October, a narrow vein mining method was adopted.

Saracen will focus on higher-margin assets at Carosue Dam and Thunderbox, located close to existing processing facilities.

Matsa is transitioning to a gold producer with mining underway at the Fortitude gold project, 12 km south west of Red October. Ore will be processed at AngloGold’s Sunrise Dam treatment facility, 32 km from Fortitude.

Saracen managing director Raleigh Finlayson said the sale was an opportunity to crystallise value from an asset which had become non-core at a time when it had recorded production and reserve growth.

“While Red October is a high-quality asset, its potential as a source of ore is being displaced by the abundance of higher margin ore closer to milling infrastructure,” he said.

“Saracen will retain ongoing exposure to the asset through its shareholding in Matsa, making this an excellent outcome for both parties.”

Matsa will pay $1 million cash and 4.54 million Matsa shares at 22c per share issue price for Red October.

Saracen will hold 3 per cent stake in Matsa.

Stockhead has contacted Matsa for comment.

Shares in Matsa remain unchanged at 18c while Saracen gained 2 per cent to $1.35 in morning trade.