Matsa Resources Limited Annual Report 2015

KALGOORLIE-BOULDER RESOURCES LTD

MATSA RESOURCES LIMITED‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌

ABN 48 106 732 487

ANNUAL REPORT‌‌‌‌‌‌‌‌‌‌‌‌‌

For the Year Ended 30 June 2015

CHAIRMAN'S REPORT

Dear Shareholder,

Well another year has passed, and we have continued to see ever increasing pessimism and hardship in the ASX junior resource sector. I fear many investors have found difficult times and this is most unfortunate for those families and companies. I continue to hope that change is near and that as confidence returns, which it will, lost positions can be restored and wealth recreated.

We at Matsa have been most fortunate in that our hardworking team stuck together. They have buckled down and worked through the ups and downs and stuck to the core principle of trying to add value to the Company, as efficiently and determinedly as possible. In my opinion, we have succeeded!

During the year we focussed on Symons Hill and revelled in the historic granting of our Thailand tenements. During exceptionally tough times, we have been able to remain cash strong and even built on the Company's cash and liquid asset position, and to become respected amongst our peers.

Our strategically located Symons Hill project has seen an enormous effort during the year, with drilling and high powered EM surveys still ongoing as I write. The project remains a challenge but is very worthwhile as any potential prizes in the area having the capacity to be extremely rewarding. Several interesting targets have been produced.

The Thailand adventure has finally been given birth, and we have stepped into the role in a big way. We have developed a talented team and already discovered outstanding high grade copper with silver, which we hope is only a taste of things to come. The country has its issues, but also presents a huge opportunity for Matsa. Current exploration over a huge area is ramping up significantly with all at Matsa very enthused.

Of market interest, a significant feature of Matsa is our share portfolio and liquid asset position. We have a built a sizable portfolio of shares in Panoramic Resources Ltd and Bulletin Resources Ltd and with the post year end sale of the Mt Henry Gold Project we can also proudly boast equity in significant gold and tin producer Metals X Ltd. Matsa's investments at time of this report is over $9m and with cash and receivables over $4m, we truly are in a sound positon financially. We can undertake all the exploration that our projects demand whilst having the capacity to seek alternative developed projects to complement our project pipeline.

As is always the case, we must thank our team of highly dedicated and highly committed staff in Australia and Thailand, without whom, the Company would simply not exist. The amount of highly professional work completed by our tireless team is inspiring.

Last but not least, our shareholders who have continually, year on year supported the board and demonstrated their support at shareholders' meetings with their emphatic yes vote on all occasions. The positivity echoed by the loyal and visionary group heavily outshines the rare naysayer who simply seeks a moment's attention.

We are primed for take-off whenever the opportunity presents! The board sincerely thanks you all.

PAUL POLI

EXECUTIVE CHAIRMAN

INTRODUCTION

During the 2014-15 financial year, Matsa focussed on advancing its portfolio of projects through targeted exploration and assessment. Matsa has continued to utilise its capabilities to further shareholder satisfaction by building up its exploration development portfolio.

The year saw Matsa continue to explore its Symons Hill Project, located just south of Independence Groups' Nova/Bollinger nickel project, as well as advance its Killaloe project. In a historic event Matsa was granted a number of Special Prospecting Licences (SPL's) in Thailand in March 2015, the first such granting of SPL's in a number of years.

Matsa's joint venture partner in the Mt Henry Gold Project, Panoramic Resources Limited, continued to advance a feasibility study with the announcement of a maiden reserve and the results of the feasibility study announced in May 2015. Subsequent to year end both Panoramic and Matsa agreed to sell the Mt Henry Project to Metals X Limited (MLX) for 22 million MLX shares of which Matsa's share is 6.6M MLX shares.

Matsa has maintained its interest in Bulletin Resources Limited at around 24.4% and Bulletin's 20% interest in the Nicholsons Gold project has started to bear fruit with production commencing in September 2015.

Matsa has accumulated a quality pipeline of 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

COMPANY ACTIVITIES

The primary focus of exploration by Matsa during the year under review has been:

Working with JV partner Panoramic Resources, to monetise the Mt Henry gold project;
Prospecting, Mapping and sampling in the Siam Copper project in Thailand after historic granting of 37 SPL's for 520km2 in March 2015;
High powered ground EM surveys and Diamond drilling targeting Nova/Bollinger type Ni-Cu sulphides at Symons Hill;
EM surveys and Diamond drilling targeting Kambalda style Ni sulphides at Killaloe;
Auger sampling and drill testing of Ni and Au exploration targets at Minigwal;
Completion and interpretation of high resolution aeromagnetic survey at Dunnsville to produce high quality gold targets for immediate follow up; and
Farm in to the Point Kidman gold project east of Laverton with drilling set to commence shortly.

MT HENRY GOLD JOINT VENTURE (PANORAMIC RESOURCES 70% MATSA 30%)

The Mt Henry JV tenements cover 77km2 and are located south of Norseman in Western Australia. This is a joint venture between Matsa Resources Ltd 30% and Panoramic Resources Ltd 70%.

Panoramic completed the Bankable Feasibility Study (BFS) on the Mt Henry Gold Project during the year, which included environmental baseline studies, metallurgical testwork and site planning.

The outcomes of the BFS show that on a 100% Project basis, a mining inventory of 21.1Mt @1.41g/t Au (contained gold 961,000oz). The Mining Inventory is based on the Probable Ore Reserve estimate of 20.2Mt @ 1.42g/t Au (contained gold 922,900oz). Key Feasibility Study outcomes are given in Table 1 below.

Key Risks:

A number of key risks were identified by PAN that may impact (either positively or negatively) on the economics of the Mt Henry Project. These risks include, but are not limited to:
- US$ Gold price and A$:US$ FX rate;
- Capital and operating costs;
- Processing optimisation and recoveries;
- Project financing; and
- Regulatory approvals.

Matsa and Panoramic commenced discussions and plans with a view to monetisation of the substantial value in the Mt Henry Gold project.

To this end and subsequent to the end of the financial year Matsa and Panoramic entered into an Asset Sale and Purchase agreement to dispose of their respective interests in the Mt Henry Gold Project to Metals X Limited (MLX). The consideration for the disposal (100%) is the issue of 22 million fully paid ordinary shares in MLX, freely tradeable with no restriction provisions.

Matsa received 6.6 million fully paid ordinary shares in MLX on settlement which, based on current market price, values Matsas' MLX shares at $8.1 million.

Item	Base Case (A$1,500/oz)
Mineral Resources	1.7Moz contained gold at a 0.4g/t cut-off
Mining inventory	21.1Mt @ 1.41g/t Au for 0.96Moz contained gold
Mine life (processing)	7.3 years (at 3Mtpa)
Life of Mine production	865,000oz Au (average ~120,000ozpa)
Total capital costs	A$186M (A$161M pre-production)
Average LOM cash costs (C1)	A$1,024/oz Au
Average LOM 'all-in sustaining costs'	A$1,106/oz Au
LOM processing recovery	90%
LOM strip ratio	4.2:1
Revenue	A$1,297M over LOM
EBITDA	A$366M over LOM
Post-tax cash flow	A$120M over LOM
Post-tax NPV (8%, real)	A$39.6M
Payback period	4.6 years from first production
Construction period	16 months; first gold production in Month 17
Mineral Resources	1.7Moz contained gold at a 0.4g/t cut-off

Table 1: Key Outcomes from Feasibility Base Case on 100% project basis, (Matsa Interest 30%) Competent Persons Statement

Information in this release relating to MHGP Ore Reserves has been completed by or reviewed by Christopher Williams (MAusIMM). Mr Williams is a full-time employee of Panoramic Resources Limited and is an indirect shareholder of Panoramic and Matsa Resources. Mr Williams also holds performance rights in relation to Panoramic Resources Limited. Mr Williams has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the JORC Code. Mr Williams consents to the inclusion in the release of the matters based on his information in the form and context in which it appears.

KILLALOE (MATSA 80% CULLEN RESOURCES 20%)

The Killaloe project comprising 94km2 is located 35km NE of Norseman in Western Australia. The greater part of the project is subject to a JV with Cullen Resources (ASX: CUL).

Figure 2: Killaloe Project on background Total Magnetic Intensity Image

A summary of the 8EL's, 3PL's and 1 ML making up the project is presented in Table 2 and locations and exploration summary is shown in Figure 2. Exploration is managed by Matsa.

Tenement	Tenement Holders
E 63/1018	Matsa Resources (80%), Cullen Resources (20%)
E 63/1199	Matsa Resources (80%), Cullen Resources (20%)
P 63/1331	Matsa Resources (80%), Cullen Resources (20%)
P 63/1672	Matsa Resources (80%), Cullen Resources (20%)
E 63/1655	Yilun Pty Ltd (80%), Matsa Resources (20%)
E 63/1646	Matsa Resources (100%)
E 63/1660	Matsa Resources (100%)
E 63/1661	Matsa Resources (100%)
E 63/1662	Matsa Resources (100%)
E 63/1713	Matsa Resources (100%)
M 63/177	Matsa Resources (100%)
P 63/1503	Matsa Resources (100%)

Table 2: Killaloe Project Tenement Summary

Exploration during the financial year was mostly directed towards potential for Kambalda style Ni sulphide mineralisation in two strike extensive belts of Komatiite lavas and associated intrusions referred to as the Eastern and Western Ultramafic Belts (Figure 2).

Specific activities carried out at Killaloe during the year include:

Completion of 5 Diamond drill holes at Hanging Wall Gossan (HWG) Prospect for 1,814.8m;
Assays of sulphide bearing core and representative samples of all units for a total of 771 samples;
Downhole EM on all Diamond drill holes;
Petrographic analysis to confirm the presence of Ni sulphides at the HWG prospect; and
Field and drill core review by Consultant Dr MJ Gole.

Diamond Drilling

Further Diamond drilling was carried out to follow up the intercept of Ni bearing sulphides in drillhole KLDH01 completed at the HWG prospect as reported for the 2014 financial year.

A total of 5 Diamond drill holes were completed for 1,814.8m (Table 3):

Hole ID	East (GDA94)	North (GDA94)	Depth (m)	RL	Dip (deg)	Azimuth (deg)
Hole ID	(m)	(m)	Depth (m)	(m)	Dip (deg)	Azimuth (deg)
14KLDH02	395163	6460218	397.2	312	-57.3	63.3
14KLDH03	395552	6460086	349	307	-72.9	259.8
14KLDH04	395533	6460421	447.7	297	-66	231.1
14KLDH05	395557	6460082	341	297	-85	300
14KLDH06	395198	6460314	279.9	303	-65	128

Table 3: Diamond Drillholes Completed at HWG Prospect

Assays

Sampling was carried out to geological boundaries (typically Sampling procedures and sample preparation and assay protocols are described in earlier announcements to the ASX including MAT reports on 4th September 2014, 30th September 2014, 31st October 2014, 25th November 2014, 22nd January 2015, 31st January 2015, 30th and April 2015)

A summary of assays with maximum values of key elements for each hole are shown in Table 4.

Hole_ID	Base Metal Assays	Co (ppm)	Cr (ppm)	Cu (ppm)	Ni (ppm)	Precious Metal Assays	Au (ppm)	Pd (ppb)	Pt (ppb)
14KLDH02	161	822	7462	3573	9100	0
14KLDH03	144	489	3602	1318	4148	45	0.006	298	82
14KLDH04	162	187	3381	1700	3200	27	0.009	57	54
14KLDH05	94	349	6023	1748	5033	0
14KLDH06	100	748	7791	3913	5800	0
TOTAL	661	72

Table 4: Summary of Maximum values for key base and precious metals

Better assay intervals returned from this Diamond drilling programme are shown in Table 5.

Hole ID	m	m to	Ni_ppm	Cu_ppm	Co_ppm	Broader Intercept
14KLDH02	106.3	107	4043	592	249	1.6m @ 0.36% Ni
	107	107.9	3224	395	211	1.6m @ 0.36% Ni
	107.9	109.7	1.8m No Recovery, Lost Core.
	109.7	110.35	4744	1015	352	1.6m @ 0.55% Ni Including 0.55m @ 0.91% Ni
	110.35	110.75	1745	304	161
	110.75	111.3	9100	1536	1130
	230.75	231	4900	900	200
	232.9	233.2	5400	3600	400
14KLDH03	189	190	2027	214	136	3.5m @ 0.22% Ni
	190	191	2391	432	195
	191	192	2196	272	152
	192	192.5	2185	201	138
	194.7	195.75	2285	531	285
	197.8	198	3198	291	489
	209.1	209.3	2031	134	304
	210.5	211.5	2188	1001	276
	213.95	214.55	2070	415	198
	277.8	282	2283	108	124	9.8m @ 0.31% Ni
	282	286	4148	90	200
	286	287.6	2707	124	119
	319.2	321.05	2070	27	86
14KLDH04	172	174	2157	63	105
	176	180	2031	62	110
	200.8	203.85	3200	124	167
	205	207	2079	98	137	4m @ 0.22% Ni
	207	209	2234	104	152	4m @ 0.22% Ni
	213	215	2935	170	162	3.85m @ 0.26% Ni
	215	216.85	2285	112	134	3.85m @ 0.26% Ni
	422.65	423.2	2078	67	137
14KLDH06	111.3	111.5	5800	3700	748	0.2m @0.58% Ni, 0.37% Cu

Discussion

Table 5: HWG Diamond drilling 2015, key assay intervals

Diamond drill holes 14KLDH02 - 14KLDH05 were drilled to test strong well defined FLTEM conductors. The conductors were interpreted to reflect extensions to massive Ni sulphide mineralisation reported in Diamond drillhole 14KLDH01 (1.35m @ 0.54% Ni from 93.35m). Diamond drill hole KLDH06 was drilled to test a conceptual target based on 3D modelling of earlier holes and geological mapping. (Ground EM survey and drillhole 14KLDH01 were reported in the 2014 annual report).

14KLDH02 intersected highly anomalous Ni values including 0.55m @ 0.91% Ni from 110.75m, which occur in sheared cumulate textured komatiite lava and coincide with the modelled depth of the target EM conductor. Mineralisation is associated with strongly disseminated sulphide mineralisation dominated by pyrrhotite and pyrite that extends for 5m downhole from 106.3m. Drillhole 14KLDH02 was extended from the original depth of 230m to a final depth of 396m in order to test an off hole conductor target defined by downhole EM (DHEM) surveys. Two narrow zones of disseminated nickel sulphide mineralisation were intersected as shown in Table 5.

The presence in these intersections of elevated copper values, a high Ni-Cu ratio and high MgO-Cr ratio all provide strong support that they are located within a mineralised lava channel pathway. The sequence has been complicated by the presence of a number of faults and the presence of a fault is thought to be the reason that the drillhole passed from channel way rocks into unmineralised wall rocks.

14KLDH03 intersected a metasomatised, brecciated and strongly sulphidic contact between gabbro and ultramafic komatiites at 199.4m which corresponds to the modelled depth of the target EM Conductor. Highest nickel values (up to 0.41% Ni) were obtained below the target EM conductor in a sulphidic shale unit within the komatiite sequence at a depth of 274.8m.

14KLDH04 passed through gabbro with intermittent komatiite bands to a depth of 400m which coincides with the modelled depth of the target EM conductor. At this depth the drillhole passed into komatiites with minor sulphidic shales to a final depth of 447m. A brecciated variably sulphide rich komatiite unit containing disseminated pyrrhotite, sphalerite and chalcopyrite was intersected between 191.65m to 221.1m which coincides with significantly elevated Ni values up to 0.32% Ni.

14KLDH05 was collared in gabbro and overlies faulted blocks of basalt, ultramafic and graphitic shales, corresponding to the modelled location of the target DHEM conductor. No significant sulphide mineralisation was intersected.

14KLDH06: This drillhole was designed to test the interpreted position of a basal contact in channel facies komatiite lavas which is potentially an ore-bearing and focusing structure and considered to be the most prospective location for Kambalda style nickel mineralisation. The orientation of this drillhole was based on an analysis of bedding and fault directions in orientated Diamond drill core (14KLDH01-14KLDH05) and surface geological mapping. The analysis concluded that lithological contacts at HWG dip moderately towards the north and have been disrupted and offset by late stage northwest trending faults. This drillhole passed from prospective channel facies komatiites to unmineralised wall rocks because of disruption of the sequence across a north-west trending fault.

Petrography

Petrography was carried out on semi-massive sulphides intersected between 93.15m - 93.35m in Diamond hole 14KLDH01 which was drilled during the 2014 financial year. Analysis has shown sulphides to consist of pyrite marcasite, violarite (oxidised Ni sulphide) and chalcopyrite.

The Company's petrographic consultant, Townend Mineralogy, noted:

'The pyrite, marcasite and violarite are secondary sulphides from the supergene zone that are the alteration products of underlying primary pyrrhotite and pentlandite. The chalcopyrite remains as an unaltered primary sulphide. The iron nickel sulphide assemblage plus some primary chalcopyrite is typical of WA komatiite ores above 120m'.

This provides confirmation of classic Kambalda type sulphide mineralogy and the prospectivity of the HWG prospect (MAT announcement to the ASX 30th September 2014).

Downhole Surveys:

Downhole surveys were conducted on all Diamond drill holes completed with a number of conductors identified. Drill tests on these have confirmed a massive Ni rich sulphide source in drill hole 14KLDH01 and disseminated Ni rich sulphides in holes 14KLD02, 14KLD04 and 14KLD06. Conductors detected in drill holes 14KLDH03 and 14KLDH05 are related to unmineralised sulphides and graphitic and sulphide rich shales. A review of the results of these surveys is currently underway in order to determine whether there is potential to target untested DHEM conductors for massive Ni sulphide mineralisation.

Consultant Review

A detailed field inspection and review of Diamond drill core was carried out by Dr Martin Gole. The objective was to compare the Ni sulphide bearing komatiite sequence at HWG, with economic

deposits at Kambalda and elsewhere. Dr Gole was also engaged to develop new drill targets. The review consisted of:

Detailed core logging of all completed Diamond holes (14KLDH01 - 14KLDH05);
Field inspection of outcrops at HWG; and
Provide high level technical support to Matsa's geology team in understanding komatiite-hosted Ni sulphide deposits.

The review concluded that the rock types and geology intersected in the drilling are a close analogue to the Kambalda sequence although numerous faults and shears are present which complicate the process of reconstructing the local stratigraphic sequence. The presence of magmatic sulphide minerals (emphasised by coincident elevation of Ni, Cu and Co) was confirmed, in some cases at or close to contacts between ultramafics and underlying basalt.

A significant finding was that channel-way rocks, a key component in Kambalda style Ni sulphide systems are present in the ultramafic sequence. The thickest intersections of channel-way rocks are located in 14KLDH01, 14KLD02 and 14KLD04. Low order DHEM anomalies detected in the upper part of 14KLDH02 may correspond to faulted locations of the komatiite channel facies rocks between 171.3m-225.8m.

Diamond drilling has confirmed magmatic Ni sulphides in basal ultramafic/basalt contacts and channel facies rocks within komatiite sequence at the HWG prospect. Matsa is currently developing conceptual drill targets at the base of the ultramafic sequence which plunges towards the SE beneath overlying mafic gabbro.

SYMONS HILL PROJECT

This project comprises one exploration licence E69/3070 which is 96km2 in extent, located within the Fraser Range Tectonic zone and within 6kms SSW of Independence Groups' Nova Nickel Copper mine. The project is located in a soil covered area with only minimal outcrop. A comparison between regional aeromagnetic and gravity information at Symons Hill Project and the Nova/Bollinger discoveries indicates marked similarities in geological setting.

Activities during the financial year included:
- High power, deep sounding ground EM survey;
- Diamond and RC drilling;
- Downhole EM on two Diamond drillholes 15SHDD07 and 15SHDD08; and
- Aircore drilling along proposed Nova-Bollinger haul road. Aircore Drilling - Nova/Bollinger Haul Road

A mixed RAB and aircore programme was completed by Sirius Resources at no cost to Matsa, as part of the Sirius/Matsa access agreement. The programme was carried out within Matsa's Symons Hill project area along the proposed haul road to Nova. A total of 13 RAB and 50 aircore holes were drilled for 3,601m and 1,931m, respectively (Figure 3). Sampling and assay protocols described previously (MAT Announcement to ASX 30th September 2014).

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Matsa Resources

Matsa Resources Limited Annual Report 2015

Matsa Resources Limited Annual Report 2015

MATSA RESOURCES LIMITED‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌

DIRECTORY

CONTENTS

CHAIRMAN'S REPORT

MT HENRY GOLD JOINT VENTURE (PANORAMIC RESOURCES 70% MATSA 30%)

KILLALOE (MATSA 80% CULLEN RESOURCES 20%)

SYMONS HILL PROJECT

Matsa Resources