Annual Report 2016

2016

2016 ANNUAL REPORT · PAGE 1

MATSA RESOURCES LIMITED

CONTENTS

CORPORATE DIRECTORY Inside Cover

CHAIRMAN'S REPORT 3

OPERATIONS REVIEW 4

DIRECTORS' REPORT 26

AUDITOR'S INDEPENDENCE DECLARATION 40

FINANCIAL STATEMENTS

• Consolidated Statement of Profit or Loss and Other Comprehensive Income 41

• Consolidated Statement of Financial Position 42

• Consolidated Statement of Changes in Equity 43

• Consolidated Statement of Cash Flows 44

• Notes to and Forming Part of the Consolidated Financial Statements 45

DIRECTORS' DECLARATION 91

INDEPENDENT AUDIT REPORT 92

ADDITIONAL ASX INFORMATION 94

INTERESTS IN MINING TENEMENTS 98

CORPORATE GOVERNANCE STATEMENT 100

MATSA RESOURCES LIMITED · CHAIRMAN'S REPORT

2016 ANNUAL REPORT · PAGE 3

Dear Shareholder,

An interesting year that was, 30 June 2016. I am of the opinion that green shoots in the resource industry has appeared and I believe that we have turned the corner and that a recovery is occurring. Whilst progress may be slow and bumpy, I can feel some confidence when talking to investors. I hope that this this upbeat atmosphere continues.

I am forever proud that we have been most fortunate in that our hardworking team at Matsa has continually stuck together. We have worked hard and diligently and made in my opinion, substantial progress.

Importantly, we have advanced our exploration prospects and are now focusing on the opportunities that can bring results to hand. Recently, Thailand is showing strong prospects with our copper opportunities and our Western Australian projects have been substantially enhanced by the acquisition of the Lake Carey Project. Difficult times have continued, but we have been able to further increase our cash and liquid assets position over the last 12 months, and that is after substantial exploration and company expenditure. It is an achievement that I am particularly proud to boast.

The next 12 months will bring changes to our Company. We will continue with our high level of exploration but change is in the air with the Lake Carey acquisition. This gold project will enable Matsa to finally become a producer and current work plans and departmental/local authority approvals are expected to come to hand, which could enable Matsa to commence mining towards the latter part of the 1st quarter of next year. It's an ambitious plan, but it is achievable and we will target that achievement. Matsa expects a company re-rating to occur with that event, which should deliver a strong positive outcome for all shareholders.

I am continually indebted to our team of highly dedicated, professional and tireless people in Australia and Thailand. These people are simply marvellous and make our Company what it is today, a respected and committed company with strong prospects for success. With the recent acquisition, our team numbers have increased with new professionals coming on board. I welcome these new comers into the Matsa family and trust that they too, will become strong contributors to the team whilst gaining self-satisfaction from their efforts.

I am always indebted to our shareholders who in the vast majority are extremely loyal and faithful to Matsa and the board, even when sometimes things look bleak. The encouragement that the Matsa board continually receives from a vast range of shareholders is invigorating and pleasing. We cannot thank you enough, sincerely.

Last year we were primed for take-off, this year we will take-off commencing with Lake Carey. As always the board sincerely thanks you all.

PAUL POLI

EXECUTIVE CHAIRMAN

MATSA RESOURCES LIMITED · OPERATIONS REVIEW

2016 ANNUAL REPORT · PAGE 4

INTRODUCTION

The year saw the following:

• Matsa's 30% share in the Mt Henry gold project was sold to Metals X Limited for 6.6M MLX shares valued at $8.1M.

• High power fixed loop EM survey coverage was completed over the Symons Hill Project together with diamond drilling of key targets for Nova Bollinger Ni-Cu mineralisation located 6km north of the project boundary

• IP surveys and RC drilling were carried out at Killaloe project over possible extensions of the "Polar Bear gold corridor" which was highlighted by recent announcements by S2R Resources Limited.

• Ground IP geophysical surveys, sampling and diamond drilling at the 100% owned Siam Copper and Phaisali projects in Thailand.

• A number of gold and base metal projects in Australia and overseas were evaluated which culminated in acquisition of the 385,000 ounce Lake Carey gold project in July 2016

• Matsa maintained its interest in Bulletin Resources Limited (BNR) at around 27% through to commencement of production in the Nicolsons Gold project (BNR 20%) and subsequent sale of the asset to Bulletin's joint venture partner Pantoro Limited (PNR)

Matsa has continued to accumulate a pipeline of quality assets and projects in Western Australia and Thailand. Further, with the sale of its interest in the Mt Henry Gold project, Matsa continues to be well funded.

A combination of strategic partnerships on favourable terms to shareholders and its strong level of funding will enable Matsa to continue to develop projects in Australia and Thailand with the potential to deliver significant value for shareholders and greater strategic outcomes for the Company.

A snapshot of Matsa's projects in Western Australia and Thailand is presented in Figure 1.

FIGURE 1: Matsa's Western Australian and Thailand Projects