Drilling of New Lake Carey Targets – Portfolio Stock (coverage initiated @ $0.16 in Aug 2015)
Matsa Resources (ASX: MAT, Share Price: $0.21, Market Cap: $30m) is generating strong exploration interest on various fronts in Western Australia and also in Thailand. Attention is currently focused on its recently acquired the Lake Carey gold project in WA, which hosts a JORC 2012-compliant resource of 6.289Mt @ 1.9g/t for 385,300 oz Au. Matsa aims to commence production during early 2017.
Matsa has advised that a drilling program comprising ~177 air-core drill holes for ~15,000 metres has commenced within its Lake Carey gold project to investigate previously-untested targets over a 8km section of the Bindah fault. These targets have previously been concealed by Lake Carey.
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Market Significance
Matsa’s share price has fluctuated between a recent 12-month low of $0.12 to a recent high of $0.32, followed by a subsequent retracement –on the back of variations in the overall level of exploration activity and subsequent results flow. All attention is focused on its Lake Carey air-core drilling program, which will cover exploration targets in and adjacent to Lake Carey that remain untested by previous drilling. It is Matsa’s strong belief that there is still significant potential for new discoveries in this highly prospective region, which contains the world-class Sunrise Dam, Granny Smith and Wallaby gold mines.
Announcement Detail – Lake Carey Project Update
In our coverage since July, we’ve discussed Matsa’s acquisition of the Lake Carey gold project in Western Australia, along with subsequent positive first-round drilling results.
The Lake Carey 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 will be funded from existing cash and liquid reserves.
Matsa announced during September that a detailed audit of the Fortitude deposit mineral resource estimate had confirmed the overall resource – allowing it to 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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Matsa subsequently announced during mid November that initial Fortitude diamond drilling results were highly positive, with assays received from 9 diamond drill-holes out of a 21 drill-hole/2,293-metre program completed during late October 2016. Assays from the remaining 12 drill-holes are awaited.
Highly encouraging results have been returned to date that includes (not true-widths):
- 2 metres @ 17.57g/t Au from 33 metres (Hole 16LCDD008) including 1 metre @ 30.2g/t Au
- 6.7 metres @ 6.66g/t Au from 24 metres (Hole 16LCDD011) including 0.7 metre @ 25.7g/t Au
- 4.7 metres @ 6.68g/t Au from 48.3 metres (Hole 16LCDD011)
The diamond drilling program was undertaken with the aim of providing metallurgical and geotechnical information, as well as to better outline the mineralisation towards the base of a likely open-pit mine, as well as defining Inferred mineralisation within the potential open pit. The work was also designed to infill past drilling by previous owners of the project in preparation for submission of a mining proposal.
The drilling results so far have led to an increased level of confidence with respect to the modelling work conducted so far, as they support the zones of high-grade mineralisation within the Fortitude Deposit interpreted from previous drilling. The resource definition work and mining studies have so far all proceeded smoothly, allowing Matsa to work towards commencement of mining as soon as possible.
New Drilling Program Underway
Matsa has now commenced a second ~177 drill-hole/~15,000-metre air-core program at Lake Carey over the Bindah Extended target area. The planned drill-holes are located entirely on the bed of Lake Carey and will be completed using drilling equipment that is specially designed to operate in salt lakes.
Technical Significance
The Bindah Extended target area is one of a number of targets identified and has been prioritised for immediate drilling. It is located over a highly-prospective 8km section of the Bindah Shear, with favourable rock types including Banded Iron Formation (BIF) and ultramafics – which are highly prospective as potential hosts for gold mineralisation. The target area represents an extension of the gold-bearing structural and stratigraphic corridor containing the Bindah, Galant and Intrepid gold deposits.
A review of available open-file reports indicates minimal previous exploration within the Bindah Extended target area. Limited air-core drilling at the southern end of the target returned highly anomalous gold intercepts in four drill-holes including 4 metres @ 0.87 g/t Au. This target is located only 8km southeast of Saracen Minerals’ (ASX: SAR) Red October gold mine.
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Lake Carey Project Overview
The company’s Lake Carey 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 acquired 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
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 to be excellent. 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.
Summary
We initiated coverage of Matsa Resources around $0.16 during August 2015 – representing a current gain of 31%.
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. What’s also significant is that the company has been able to secure the deal without dilution to shareholders.
