Matsa Resources : Positive Concept Study 600,000tpa Gold-Ore Treatment Plant

Matsa Resources Limited

ASX Announcement

22nd January 2021

Positive Concept Study 600,000tpa Gold-Ore Treatment Plant

Lake Carey Project

Highlights

• Matsa appointed CPC Project Design (CPC) to undertake an Engineering Concept Study ("Study") on a 600,000 tonnes per annum gold-ore treatment plant to be constructed at the Lake Carey Gold project
• The Study's results demonstrate a Matsa owned and operated treatment plant located centrally to the existing Fortitude gold mine to significantly and positively impact the financial results of Matsa's mining opportunities
• Key results of the Study (accuracy level +/- 40%) show:

1. Capital cost of a 600,000tpa gold-ore treatment plant to be A$35.4M, plus a contingency of A$7.1M

1. Additional capital cost of associated Infrastructure to be A$13.6M, plus a contingency of A$2.7M

1. Ore processing costs to be A$32.26/t, plus a contingency of A$5.54/t

1. Overall project duration of 18 months from decision to proceed with a construction time of 12 months

1. Potential to increase ore treatment capacity to 1,000,000tpa

Impact on Fortitude Stage 2

• A review of the Fortitude Stage 2 mine study shows a clearer pathway to production with a Matsa owned and operated treatment plant which would eliminate existing delays due to a lack of suitable gold-ore treatment options
• The projected positive cashflow from mining operations substantially increases to A$55.4M compared to A$21.8M (at A$2,500/oz Au)
• Potential exists to increase recoverable ounces through re-optimisation of existing pit shells using the Study's lower haulage and processing cost profiles

CORPORATE SUMMARY

Executive Chairman

Paul Poli

Director

Frank Sibbel

Director & Company Secretary

Andrew Chapman

Shares on Issue

271.14 million

Unlisted Options

77.78 million @ $0.17 - $0.35

Top 20 shareholders

Hold 56.86%

Share Price on 21st January 2021

10 cents

Market Capitalisation

$27.11 million

Matsa Resources Limited | www.matsa.com.au | ABN 48 106 732 487

Head office: 11/139 Newcastle Street, Perth Western Australia 6000 | T 08 9230 3555 | [e-mail]

Matsa Resources Limited

Impact on Red October

• The Study's results highlight the potential for a dramatic positive impact on the economics of the Red October underground gold mine by reducing production costs and increasing ounces produced
• Applying the Study's new costs to the actual costs incurred at the Red October underground operation for the 30 September 2020 quarter production of 28,278t1 cost savings of A$1.6M would have been realised. This represents a A$641/oz reduction in AISC to A$2,180/oz for that quarter
• Potential exists to increase recoverable ounces as the reduction in production costs would enable lower grade ore to be treated rather than classified as waste

Impacts on Lake Carey Gold project

• A Matsa treatment plant has the potential to unlock a number of other mining opportunities (Gallant and Devon GMP) and potentially recover gold from several low grade stockpiles which are currently uneconomic within the Lake Carey Gold project area due to dramatic savings in operational expenses and higher potential for economically viable projects

					Month Surplus and Cash Flow
$12,000,000																							$60,000,000
$10,000,000																							$50,000,000
$8,000,000																							$40,000,000
$6,000,000																							$30,000,000
$4,000,000																							$20,000,000
$2,000,000																							$10,000,000
$0																							$-
1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22
-$2,000,000																							$(10,000,000)
-$4,000,000																							$(20,000,000)

Revised Fortitude Stage 2 Mining Study Projected Cash Flow,

cumulative A$55.4M cashflow demonstrated in red

1 30 September 2020 Quarterly Report

Matsa Resources Limited | www.matsa.com.au | ABN 48 106 732 487

Head office: 11/139 Newcastle Street, Perth Western Australia 6000 | T 08 9230 3555 | [e-mail]

Matsa Resources Limited

Matsa Resources Limited ("Matsa" or "the Company" ASX: MAT) is pleased to announce the results of an Engineering Concept Study ("Study") commissioned by Matsa and completed by CPC Project Design ("CPC") for a proposed Matsa owned 600,000tpa gold-ore treatment plant for the Lake Carey Gold project.

While the location of the plant has not been finalised, the likely position of the plant would be suited to the Red October, Devon and Fortitude mines and be well located centrally to any potential future resources such as Fortitude North (Figure 1).

Figure 1: Lake Carey Gold Project

CPC Study Outcomes

Plant Description and Design Criteria

CPC undertook the Study on the basis of requirements and information supplied by Matsa. The full study document is included as Appendix 2.

Matsa Resources Limited | www.matsa.com.au | ABN 48 106 732 487

Head office: 11/139 Newcastle Street, Perth Western Australia 6000 | T 08 9230 3555 | [e-mail]

Matsa Resources Limited

Battery limits to estimating the Capital Cost were defined as ore feed into the primary crusher feed bin and discharge of tailings to an approved tailings storage facility. Additionally other non-process infrastructure such as offices, workshop, store buildings, power station, construction of the TSF, water supply etc were excluded from the CPC scope.

The 600,000tpa gold-ore treatment plant will consist of a primary and secondary crushing circuit, stockpile reclaim ahead of a single stage ball mill which will grind to a target size of P80 125µm. The ball mill will be arranged in a standard configuration with a cyclone cluster and associated pumps. A single stage closed circuit ball mill has been selected for the grinding process. The ball mill has a diameter of 4.2 metres (m), and effective grinding length of 5.4m fitted with a 1,300 kW motor. The availability is expected to be 91.3%. Process water will be added to the mill to maintain the mill discharge slurry density at 70-75% solids. It is anticipated that the design criteria will cater for a range of feed types from oxide to fresh rock. Targeted metallurgical recovery was anticipated between 90 and 95% based on an average feed grade of 2 to 2.5g/t.

Power would be provided by a power supply contractor under a power purchase agreement. The contractor would build, own and operate a power station of the appropriate size (with diesel generators considered as the base case) and sell the power to Matsa. This is a typical contractual arrangement found throughout the Goldfields and other remote areas in WA.

Limited metallurgical data was available to CPC, so it is acknowledged that the cost estimates have been prepared at a Study accuracy level of ± 40%. Whilst the overall estimate is based on all available test work and information collected so far, a number of additional assumptions have been made based on industry norms and CPC's experience. Risks to CAPEX are limited as the design is fairly robust, considered a standard CIL (carbon in leach) plant design throughout the industry and indicative parameters are in most cases adequate to make informed equipment selections.

Gold recovery will include a gravity circuit where gold will be recovered via a centrifugal concentrator combined with an intensive leach reactor. The cyclone underflow will be split 50/50 and directed to regrind and the gravity circuit via a screen. The gold collected from the gravity circuit will be processed using a drying oven and smelting furnace to allow for separate metallurgical accounting of the gravity circuit. The final doré gold bars will be stored in the gold room safe.

Cyclone overflow slurry will be directed to the CIL circuit where it will be cyanide leached and gold adsorbed on to activated carbon. Loaded carbon will be recovered periodically to recover the gold using acid washing and hot solution elution, before being regenerated. Regenerated carbon will be returned to the last CIL tank.

The leach and CIL circuit consist of a single agitated leach tank followed by six agitated CIL tanks all connected, in series, by launders with bypass capability. The total combined retention time in the leach/CIL circuit is 24 hours. To avoid short circuiting within the leach tank, feed slurry will enter opposite to the submerged outflow position. Slurry leaves the tank by an overflow launder. Each CIL tank will be equipped with an interstage screen and a recessed impellor slurry pump. The interstage screen will allow the carbon to be retained in the respective CIL tank while permitting the pulp to flow through the screen to the next CIL tank in the circuit.

Loaded carbon from the CIL circuit is transferred to the elution circuit to start each elution cycle (once per day). The carbon is acid washed prior to desorbing the gold back into solution, electrowinning and smelting into gold doré.

Matsa Resources Limited | www.matsa.com.au | ABN 48 106 732 487

Head office: 11/139 Newcastle Street, Perth Western Australia 6000 | T 08 9230 3555 | [e-mail]