Matsa Resources : Mining Study Results Fortitude Gold Project Stage 2

Matsa Resources Limited

LIMITED

ABN 48 106 732 487

ASX Announcement

21st August 2019

Mining Study for Fortitude Gold Mine Stage 2

Delivers Excellent Results

Highlights

• Mining Study delivers highly positive results - indicates potential for immediate commencement of Fortitude Stage 2 mining operation

1. Total cash surplus A$21.8M over 22 months

1. Total production of 54,400 oz gold at 93% recovery

1. Capital outlay A$6.6M which includes pre-stripping

1. Operating cash cost of A$1,628/oz gold

1. Assumed average gold price of A$2,150

• 1. Total material movement 5.85M bank cubic metres
     (bcm's) at a waste to ore ratio of 14.4
• All statutory and regulatory approvals are in place for the immediate commencement of mining
• Total Indicated and Inferred Mineral Resources at Fortitude stand at 5,449,000 tonnes @ 2.0g/t Au (342,600 oz Au)
• Maiden ore reserve declared of 1,029,000 tonnes at 1.8 g/t for 58,100 oz gold. Potential exists for a substantial increase of gold ore reserves in the near term
• Discussions with respect to ore purchase arrangements with AngloGold Ashanti are in progress
• Project financing discussions and options for gold hedging underway

CORPORATE SUMMARY

Executive Chairman

Paul Poli

Director

Frank Sibbel

Director & Company Secretary

Andrew Chapman

Shares on Issue

176.93 million

Unlisted Options

~22 million @ $0.17 - $0.30

Top 20 shareholders

Hold 53.42%

Share Price on 20th August 2019

16 cents

Market Capitalisation

$28.31 million

Head Office:	Suite 11, 139 Newcastle Street, Perth Western Australia 6000	Tel: [phone] Fax: [phone]
Bangkok Office:	Unit 1801, Pacific Place 2, 142 Sukhumvit Road, Klongtoey, Bangkok 10110	Tel: [phone] Fax: [phone]
[e-mail]	www.matsa.com.au

Matsa Resources Limited

Matsa Resources Limited ("Matsa" or "the Company" ASX: MAT) is pleased to report highly positive results from its recently completed Mining Study for the proposed Stage 2 mining operations at the Company's Fortitude gold deposit within the 100%-owned Lake Carey Gold Project in the Eastern Goldfields of Western Australia.

The study shows that the Stage 2 mining is attractive with a potential cash surplus of A$21.8M over a period of 22 months with a modest capital investment of only A$6.6M. A sensitivity analysis indicates that the project is robust with potential for improvement to the financial model as new optimisations come to hand. Finalisation of discussions with key parties and completion of the tender process may deliver further improvements.

Metallurgical test work indicates that Fortitude ore is amenable for treatment at any of the nearby processing facilities, and will deliver very good-to-excellent gold recoveries with no deleterious elements. Matsa is currently assessing processing options for the treatment of ore from Fortitude, and is in discussions with AngloGold Ashanti Australia Limited (AGAA), which is currently treating gold ore from Matsa's nearby Red October underground gold mine under a five-year Ore Purchase Agreement between Matsa and AGAA.

Matsa Executive Chairman Mr Paul Poli said:

"Based on the positive outcomes of the Stage 2 Mining Study, we will now immediately move ahead with plans to tender for the mining contract, finalise ore purchase and treatment options and secure project financing to facilitate the commencement of the Stage 2 mining operations at Fortitude. In conjunction with our ongoing mining operations at the Red October underground gold mine, the proposed Stage 2 mining of Fortitude has the potential to deliver significant cash flows for the Company and value for our shareholders."

Summary Details of the Stage 2 Mining Study are included in this announcement

Fortitude Stage 2 Mining Study Summary

Matsa has completed a study into a Stage 2 mining operation at the Fortitude gold deposit. The Stage 2 gold mining operation becomes cash flow positive after month 7 (Refer Figure 1), and has the following positive financial summary:

• Capital outlay A$6.6M which includes A$5.1M for pre-stripping of overburden
• Maximum cash outlay exposure A$9.1M
• Cash surplus A$21.8M after 22 months
• Assumed gold price of A$2,150
• Production 1.029M t @ 1.8g/t (58,080 oz contained) with 54,400 recovered ounces of gold
• Total movement of 5.85M bcm's
• Waste to ore ratio 14.4
• Operating cash cost per ounce A$1,628

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Matsa Resources Limited

Month surplus and cash flow

$7,000,000		$25,000,000

$6,000,000

$5,000,000

$4,000,000

$20,000,000

$15,000,000

SURPLUS

$3,000,000

$10,000,000

FLOW

MONTH

$2,000,000				$5,000,000
$1,000,000				$0
$0				-$5,000,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
-$1,000,000				-$10,000,000
-$2,000,000
-$3,000,000				-$15,000,000
MONTH
	SURPLUS		CASH FLOW

CASH

Figure 1: Mining Study Projected Cash Flow ($AUD)

Importantly, all regulatory and statutory approvals are already in place which permits immediate commencement of mining activities. Tenders for the mining are to be called as well as finalisation of ore purchase/treatment options, which are well advanced.

Upon completion of drilling in 2016 and subsequent modelling and depletion of the resource due to the Stage 1 Trial Mining, the Indicated Mineral Resource at Fortitude is 2,945,000t @ 1.8g/t (170,400 oz). The total Indicated and Inferred Mineral Resource estimate for Fortitude now stands at 5,449,000

• 2.0g/t (342,600 oz). Cut-Offgrade

The Mineral Resource has been reported at a cut-off grade of 1 g/t. This is reasonable considering the style of the deposit, the proximity to process facilities and to the selection of open cut mining equipment and methods used.

Fortitude Project Background

Matsa's Fortitude deposit is located in the southern portion of the prolific Laverton Tectonic Zone (LTZ). The deposit is located just 25km south of AngloGold Ashanti Australia Ltd's Sunrise Dam Gold Mine (10Moz), 60km south of Gold Fields Ltd's Granny Smith Gold Mine (11.6Moz) and 12 km southeast of Matsa's Red October Gold Mine (0.342Moz).

The Fortitude deposit was discovered in 1998 during regional exploration by Aurora Gold Ltd. The project was acquired by Midas Resources Ltd in 2002 who divested it to Fortitude Gold Pty Ltd in 2014.

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Matsa Resources Limited

The bulk of historic work was completed by Aurora and Midas who drilled 523 RC, AC and diamond drill holes into the deposit area. Also completed was a number of prefeasibility and feasibility studies into a heap-leach/dump leach operation and the viability of constructing a 600tpa CIL treatment plant.

Matsa purchased the Fortitude project from the receivers of Fortitude Gold Pty Ltd in 2016 (refer to the ASX announcement of 21st July 2016). Matsa subsequently completed an audit of the Resource figures and the Mineral Resource estimate was confirmed as a JORC 2012 compliant Mineral Resource (refer to the ASX announcement of 1st September 2016). Matsa subsequently commenced a diamond drilling program to provide drill core for metallurgical, geotechnical and resource definition purposes (refer to the ASX announcements of 15th November 2016 and 14th December 2016).

Matsa has also previously completed the required heritage, hydrogeological, flora, fauna, community consultation and geotechnical studies which were included in the mining proposal at the trial mining stage which was approved by DMIR's in 2017. Matsa successfully conducted the Stage 1 trial mine during the 2017/2018 years which was completed in May 2018 (refer to the ASX announcement of 19th June 2018).

Study Scope

A mining study at Fortitude gold deposit commenced in July 2016 to evaluate the technical and financial viability of mining the Fortitude deposit. Trial mining was successfully undertaken in 2017/2018 with ore from the trial mine taken to AGAA's Sunrise Dam Gold Mine processing plant and this current study evaluates the financial and technical viability of mining the remainder and larger part of the gold deposit (Stage 2) using a conventional open pit operation.

The Ore Reserve Estimate data, economic evaluation and Stage 2 Mining Study has been comprehensively reviewed by Matsa senior management.

The study is classified as a Scoping study with a confidence level of +/-20%.

Geology and Mineralisation

Gold mineralisation at Fortitude is associated with the Fortitude Shear Zone, a north-northwest striking shear which extends the length of the project. Ductile shearing and mineralisation is focussed within an intermediate volcanic unit adjacent to relatively undeformed mafic rocks.

Gold mineralisation forms continuous steeply dipping quartz lodes along the Fortitude Shear and is accompanied by pervasive wallrock siderite-sericite-silica alteration and vein quartz (locally +/- carbonate) with pyrite +/- arsenopyrite in the deeper sulphide zones.

Vein intensity, siderite/sericite alteration and sulphide minerals are indicative of better Au grade.

Mineral Resource Update

Matsa has updated the Mineral Resource estimate to allow for depletion due to the Stage 1 trial mining.

Total Indicated and Inferred Mineral Resources for the Fortitude gold project now stands at 5,449,000 @ 2.0g/t for 342,600 oz (Refer Table 1).

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Matsa Resources Limited

Fortitude Deposit 2019 Mineral Resource Estimate (1 g/t Au cut off)

	Indicated		Inferred			Total Resource
Type	Tonnes	Au	Tonnes	Au	Tonnes		Au	Au
	kt	g/t	kt	g/t	kt		g/t	Oz
Oxide	222		1.9	51		2.1	273		1.9	16,900
Transition	377		1.8	125		2.0	502		1.8	29,700
Saprock	227		1.9	1		2.1	228		1.9	14,100
Fresh	2,119		1.8	2,326		2.1	4,445		2.0	282,000
Total	2,945		1.8	2,503		2.1	5,449		2.0	342,600

Table 1: Fortitude Gold Project Mineral Resource Estimate

• Figures have been rounded in compliance with the JORC code. Rounding errors may cause the column not to add up precisely.
• Mineral Resources are reported in situ (undiluted).
• Mineral Resources are reported to a cut-off grade of 1g/t Au.

Sections 1, 2 and 3 JORC tables for the Mineral Resource estimate are presented in Appendix 1.

Competent Persons Statement

The information in this report that relates to Mineral Resources has been compiled by Matthew Cobb, who is a full-time employee of CSA Global Pty Ltd, and Richard Breyley who is a full time employee of Matsa Resources Limited. Dr Cobb is a Member of both the Australian Institute of Geoscientists and the Australian Institute of Mining and Metallurgy. Mr Breyley is a member of the Australian Institute of Mining and Metallurgy. Both Dr Cobb and Mr Breyley have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activities which they are undertaking to qualify as a Competent Persons as defined in the JORC Code (2012). Dr Cobb and Mr Breyley consent to the disclosure of this information in this report in the form and context in which it appears.

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