MATSA RE­SOURCES

The Australian Mining Review - - FRONT PAGE -

With the com­mence­ment of min­ing op­er­a­tions at its Red Dog gold mine in Septem­ber, ju­nior min­ing com­pany Matsa Re­sources has am­bi­tions to be­come a large gold pro­duc­ing com­pany. Jes­si­cia Cum­mins spoke with Matsa Re­sources’ ex­ec­u­tive chair­man Paul Poli about the miner’s plans for the near-term and its part­ner­ship with AngloGold Ashanti. Q. How does it feel to now be min­ing at Red Dog, and how do you re­spond to those that may “scoff” at some­thing this size?

Last year we mined the For­ti­tude trial pit which was the pre­cur­sor for us to go to the full scale of stage two min­ing at For­ti­tude, which we hope to kick off early next year.

We be­lieve the Red Dog mine is ex­tremely valu­able for a com­pany like us and very sig­nif­i­cant – it feels great.

When you pro­duce, and you are not ex­plor­ing but ac­tu­ally mak­ing money, for a small com­pany that is fan­tas­tic – it means we do not need to raise cap­i­tal from share­hold­ers or in­vestors, it means we do not have to in­crease our is­sued share cap­i­tal so to us it’s very im­por­tant.

To those that claim that it is small and ir­rel­e­vant my an­swer is quite sim­ple – we will make in ex­cess of $5 mil­lion in 12 weeks – I can’t think of any small com­pany that is able to make a net profit of $5 mil­lion in such a short time pe­riod.

A lot of our col­leagues with large mines aren’t mak­ing that kind of money.

I have had some peo­ple crit­i­cise say­ing “you are only a small mine why are you wast­ing your time” well if I wanted to raise $5 mil­lion dol­lars, I would have to is­sue 40 mil­lion shares – we got it at 170 mil­lion shares this year, for us to raise $5 mil­lion dol­lars I would have to di­lute the com­pany on a 1 to 5 ba­sis or is­sue 20 per cent of our com­pany’s stock out.

Now to me that is sig­nif­i­cant, that is a lot of shares on a ra­tio ba­sis.

If I’m sav­ing that di­lu­tion it is a won­der­ful event.

If I could have three or four of th­ese mines in a row, that would be won­der­ful.

The other very im­por­tant thing is that this ore de­posit has been only ex­plored very shal­low, we do not know what is un­der­neath, we do not know if there are ex­ten­sions – this mine will pro­vide us with money to ex­plore un­der­neath.

Q. Take us through your agree­ment with AngloGold Ashanti, and how this has ben­e­fited you so far?

I am un­der con­fi­den­tial­ity with AngloGold Ashanti, but what I can say is a sim­i­lar for­mula oc­curs this time as we had with the For­ti­tude mine trial pit; in that we de­liver ore to AngloGold Ashanti and all risks of that ore trans­fers to AngloGold Ashanti at the time that we de­liver that ore.

We get the full ben­e­fit of the daily gold fluc­tu­a­tions in price, so we have not locked in the gold price – and we get the disad­van­tages of a fall­ing gold price.

But the gold price is go­ing our way in Aus­tralia at the mo­ment.

We have al­ready pre agreed our grade – we have al­ready done all the grade con­trol drilling for the en­tire ore de­liv­ery vol­ume.

That is be­ing done on a 10 me­tre by 10 me­tre ba­sis, so we have got very high con­fi­dence.

It is a very for­tu­nate cir­cum­stance for Matsa to have such a great re­la­tion­ship with AngloGold.

We have an enor­mous amount of trust in them and they are dis­play­ing a lot of trust in us – that is sig­nif­i­cantly shown in the MOU that Matsa re­sources and AngloGold have.

We share tech­nol­ogy, share dis­cov­ery, share know-how, share ac­cess roads, share in­fra­struc­ture, share emer­gency re­sponse and share re­search and de­vel­op­ment tech­nol­ogy.

The re­la­tion­ship prob­a­bly ad­van­tages us more than it ad­van­tages them.

They have a mas­sive plant, their Sun­rise Dam plant is huge – near­ing 4 mil­lion tonnes per an­num – so if they can source feed from a re­li­able and trusted out­sider like Matsa that pre­serves their stock­piles and their ore in ground.

It is a win-win sce­nario for both com­pa­nies and that is a good way to be.

Q. Do you think more ju­niors should part­ner up with big­ger play­ers in sim­i­lar ar­range­ments?

Each cir­cum­stance is dif­fer­ent, each project has its own unique re­quire­ments. We are very for­tu­nate that the whole team at AngloGold are good peo­ple.

Ob­vi­ously Matsa have done things right by them; we have proved to them that we can be trusted; we have proved to them that we can de­liver on what we prom­ise; we have proven to them that our ore and gold re­source is qual­ity; and we have proven to them that we won’t let them down.

I en­cour­age any ju­nior to get mar­ried with a larger cor­po­ra­tion where that re­la­tion­ship can be founded on mu­tual trust and mu­tual ben­e­fit, and the par­ties pro­duce a win-win sce­nario for all in­volved and it is not one sided.

Q. You’ve had some drilling suc­cess across other ar­eas at Lake Carey re­cently. Can you de­scribe the sig­nif­i­cance of re­cent re­sults?

We de­sire to have a large gold pro­duc­ing com­pany as quickly as pos­si­ble. Matsa cur­rently has just un­der half a mil­lion ounces of good qual­ity gold in re­source. We have got the Red Oc­to­ber gold mine and we are work­ing very hard to get that into pro­duc­tion, which we hope we will be able to do in the near term.

We have got the For­ti­tude gold mine that has ap­prox­i­mately 340,000 ounces of gold in re­source that we hope to get into pro­duc­tion by early next year, and of course we have Red Dog.

To make Matsa a con­vinc­ing long term gold play we need to find more gold, and we think that we are on the cusp of a sig­nif­i­cant dis­cov­ery just north of the For­ti­tude gold mine.

We are cur­rently drilling 4km north of For­ti­tude at our prospect called For­ti­tude North, and are hop­ing to get re­sults next month.

I note that a lot of our ground is part of Lake Carey — any ground in the Lake Carey re­gion that is on the lake has been very poorly ex­plored in the past. Drilling on a lake his­tor­i­cally has been very dif­fi­cult and very ex­pen­sive.

In fact, AngloGold Ashanti vice pres­i­dent WA Mike Eric­son in said at Dig­gers and Deal­ers that in his opin­ion Lake Carey is one of the hottest ex­plo­ration ar­eas in Aus­tralia and we to­tally agree with that con­cept be­cause it has been poorly ex­plored.

Q. What is your plan after the three month min­ing cam­paign at Red Dog?

We ex­pect to make more than $5 mil­lion profit in this three month pe­riod and we will im­me­di­ately turn our hand at get­ting Red Oc­to­ber into pro­duc­tion.

We think Red Oc­to­ber will be a sig­nif­i­cant high value gold mine for the com­pany..

We will then also turn our hands si­mul­ta­ne­ously to get For­ti­tude into pro­duc­tion, and of course we will con­tinue ex­plo­ration and hope­fully by then be onto some­thing that is al­ready sig­nif­i­cantly dis­cov­ered.

Q. How do you see the re­sources sec­tor evolv­ing in the next few years, and how will that af­fect the way Matsa Re­sources does busi­ness?

I think that the re­sources sec­tor is a very good place to be.

I know right now and the last cou­ple of months has been a dif­fi­cult area of the mar­ket. It has been quite neg­a­tive.

But it is my opin­ion this fall in metal prices is over­done, not sus­tain­able and I be­lieve that the metal prices will re­cover.

The im­pact on Matsa will be sig­nif­i­cant. Our re­sources, es­pe­cially For­ti­tude Gold, are di­rectly cor­re­lated to the gold price.

If that price goes up For­ti­tude re­ally comes in to play.

Red Oc­to­ber is prof­itable now if we can get enough re­serve be­hind us, which we think we can.

But For­ti­tude, which is very sen­si­tive to the gold price, if that can go to pro­duc­tion Matsa can be quite a good gold pro­ducer. It could be ap­proach­ing 50,000 to 60,000 ounces per an­num.

For a com­pany that only has a $25 mil­lion dol­lar mar­ket cap that we speak of to­day with quite a small num­ber of shares with lit­tle debt of $3 mil­lion — an in­crease in gold price would be a sig­nif­i­cant pos­i­tive ef­fect on our pro­duc­tion ca­pac­ity and will have a sig­nif­i­cant ef­fect on our share price.

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