661610d0-d673-49ba-88bb-2dfc39d3de49.pdf
Matsa Resources (MAT)
Prospective Diversified Portfolio
December 2015
Grant Craighead |Research Manager
Key Points
Recommendation: Speculative BUY
[email protected]
Mark Gordon |Senior Research Analyst
[email protected] www.breakawayresearch.com
Company Information
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ASX Code
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MAT
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Share Price (2 Dec 2015)
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A$0.18
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Ordinary Shares
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144.2m
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Options
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7.51m
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Market Cap - undiluted
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A$26.0
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Cash and Receivables (2 Dec 2015)
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A$3.4m
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Liquid Investments
(2 Dec 2015)
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A$6.7m
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Enterprise Value
Directors and Managem
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A$15.9m
ent
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Executive Chairman Paul Poli Non-Executive Director Frank Sibbel
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Highly prospective base and precious metals exploration portfolio
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Includes newly granted, underexplored Thai tenements, prospective for porphyry and skarn copper mineralisation
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Western Australian tenements prospective for both Nova-Bollinger and komatiite nickel mineralisation
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Additional packages of gold prospective tenements
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Well-funded, with ~$10 million in cash and liquid investments
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Active exploration underway with ongoing news flow
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Highly leveraged to exploration success
Matsa Resources has assembled a portfolio of highly prospective base and precious metals exploration tenements in Western Australia and Thailand.
The Company has had a significant boost in Thailand, with the recent granting of a large package of copper prospective licences, located over areas of significant copper geochemical anomalism within the highly prospective Loei-
Non-Executive Director
& Company Secretary Managing Director - Thailand
Group Exploration
Andrew Chapman
Ratha Kheowkhamsaeng
Dave Fielding
Luang Prabang Fold Belt. The belt is host to a number of major deposits including Phu Kham and Chatree - the Company is now commencing advanced exploration activities, including drilling, on these properties.
Manager
Company Details
Suite 11, 139 Newcastle Street
Ongoing work has returned results demonstrating the prospectivity of the
Western Australian nickel projects, including Symons Range in the Fraser Zone, where the target is Nova-Bollinger style mineralisation and Killaloe, where
Address
Perth WA 6000
Archaean komatiite-hosted mineralisation is the target. Although earlier
Phone +618 9230 3555
Web www.matsa.com.au
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Top Shareholders
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JP Morgan Nominees
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10.52%
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HF Resources Pty. Ltd.
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8.16%
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Mr. Paul Poli
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7.35%
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RASL AU LLC
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5.88%
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Top 20
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51.88%
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Directors and Management
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7.63%
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1 Year Price Chart
Volume (m) Price ($)
stage, the Western Australian gold projects also have potential.
Given the above, and with ongoing news flow, we rate Matsa as a SPECULATIVE BUY, with price movers being positive exploration results.
Company Overview
Matsa Resources Limited is an Australian based diversified junior explorer focussing activities on base and precious metals, both in Thailand and Western Australia. The Company has a strategy of funding itself through the advancement of, and then selling, interests in projects.
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In addition it has a direct equity interest in the Hall's Creek Gold Project, located near Hall's Creek in the Kimberley region of Western Australia, through its investment in Bulletin Resources Ltd. Hall's Creek includes the Nicolson's Mine, an underground operation, which commenced production of gold in September and is forecast to produce around 106,000oz of gold over a
4.5 year mine life.
Source: IRESS
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Diverse tenement portfolio
Recently granted highly prospective but underexplored Thai tenement
Encouraging results to date from Thailand, with a comprehensive work programme underway
WA nickel tenements are in the right addresses, and have returned positive results
Cash and liquid investment position will allow Matsa to concentrate on effective exploration
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Investment Thesis
Diverse Tenement Portfolio
Matsa Resources Limited (ASX: MAT, 'Matsa' or 'the Company') has a diverse portfolio of tenements in Western Australia and Thailand, prospective for base and precious metals.
Thai Tenements Recently Granted
In Thailand the Company was granted in March this year a large block of its copper tenement applications, which is a noteworthy move given that this is first time in many years that such a large group of tenements has been granted at one time to any company.
Highly Prospective but Underexplored Belt
These tenements are located over the highly prospective Loei-Luang Prabang Fold Belt in central Thailand, a belt that hosts world class deposits including Chatree and Phu Kham (in Laos) - the Company's tenements are considered prospective for porphyry and skarn copper mineralisation.
Highly Encouraging Results to Date
This prospectivity is borne out by the results of Matsa's work to date, including work carried out by the Department of Mineral Resources, Thailand ('DMR'). This work has outlined large areas of significant copper anomalism, including float and outcrop with visible copper mineralisation.
Comprehensive Work Programme Now Commenced
Following the grant, Matsa has now commenced a more comprehensive programme, including drilling, over two key prospects, with initial work including induced polarisation ('IP') surveying which has defined possible porphyry copper drill targets at the Siam 1 prospect, and defining drill targets for skarn mineralisation at Siam 2.
Western Australian Nickel - in the Right Addresses…
The Western Australian nickel projects are in the right addresses - Symons Hill is located over the key Fraser Zone of the Albany-Fraser Orogen, within 6km of Nova-Bollinger, and Killaloe is located over Archean mafic/ultramafic greenstones; the right host for the komatiitic mineralisation being targeted.
…and Have Returned Promising Results
Ongoing work over both nickel projects has returned encouraging results, with these reinforcing the prospectivity for mineralisation, and providing the impetus for ongoing activities, including further drilling which has recently commenced at Symon's Hill.
Don't Forget the Gold
The Company's portfolio of gold projects, which are mainly early stage, are also prospective, with ongoing work, including RAB drilling, currently underway.
Cashed Up
One key with Matsa is that they have good access to capital, with around $10 million in cash, receivables and listed investments, with, in our view, the majority of the listed investments being readily convertible to cash.
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Member of the Breakaway Investment Group. ABN 84 127 962387 AFSL 290093 Suite 505, 35 Lime Street Sydney 2000, PO Box H116, Australia Square NSW 1215, Australia
t +61 2 9392 8010 f +61 2 9279 2727
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Experienced personnel with skin in the game
Matsa is one of a number of ASX-listed junior diversified explorers
The Company is well leveraged to exploration success
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Can Concentrate on Exploration
The cash and liquid investment position allows the Company to concentrate on the job at hand - finding orebodies - without being distracted by having to constantly rattle the tin. This will also allow them to plan the most effective exploration, without having to compromise activities due to a restricted cash position.
Strong, Committed and Incentivised Team
The Board and Management have extensive experience in Western Australia and Thailand. In addition Directors and Management have holdings in the Company, and thus will be motivated to produce strong returns for shareholders.
Peer Comparison
Matsa is one of a number of diversified junior explorers listed on the ASX. In the table below we have compared a mix of companies, including diversified explorers, nickel only (including Legend), nickel-gold (St. George) and one, Geopacific, operating in Cambodia which has had recent exploration success - while this is not reflected in its share price, it has recently been able to raise $14 million.
We have considered cash as that held on June 30, 2015, and added or subtracted significant movements as subsequently announced. We have generally not taken into account depletion due to subsequent normal expenditure. Investments are those as highlighted by companies in presentations and releases, and largely include holdings in listed companies.
Matsa peer comparison by market capitalisation
$45m
$40m Cash and Investments
$35m EV Undiluted ($m)
$30m
$25m
$20m
$15m
$10m
$5m
$0m
Source: IRESS, company reports
The Company is well leveraged to exploration success. Recent discoveries in Australia that have led to large price moves include the Nova-Bollinger discovery by Sirius in 2012 ($0.05 to a peak of $5.00/share) and the Doolgunna discovery by Sandfire in 2009, which had an initial run from $0.05 to $4.08/share, with subsequent movements to over
$8.00/share.
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Exploration risk is the key risk
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Risks
As in any resources stock there are a number of risks involved - the ones pertinent to Matsa's current situation are given below.
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Exploration - This is the key risk for any junior explorer. However this is partly mitigated given the prospectivity of the tenements as demonstrated by work thus far.
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Funding - The Company is not hampered by lack of funding, with current cash, receivables and liquid investments in the order of $10 million, more than sufficient to fund activities for a few years.
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Permitting and Sovereign Risk - This may be of particular concern in Thailand, although is partially mitigated by the recent tenement grant and the in-country experience that company personnel have. However Thai politics can be volatile and the bureaucracy and processes sometimes opaque. Also dealing with a number of small landholders can be an issue, however judging by work to date it would appear that Matsa is managing things well. Given the known mining jurisdiction, we consider these as low risk in the case of the Western Australia projects.
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