Matsa, Shandong in equity, project deal

Shares in Kalgoorlie-based Matsa Resources have closed 24 per cent higher after it struck an investment and project partnership deal with a Chinese entity.

Matsa said today it had received the initial $4.4 million investment from Shandong Provincial Bureau of Geology and Mineral Resources from the placement of 11.8 million shares priced between 33 cents and 50 cents.

Shandong will subscribe to a further $5.2 million worth of shares, subject to the completion of a joint venture agreement covering the Matsa iron ore project and the Norseman gold project.

Both placements are subject to approval from the Foreign Investment Review Board.

Shares in the company closed up 8.5 cents to 44c today.

The announcement is below:

The Directors of Matsa Resources Limited (ASX:MAT "Matsa" or "the Company") are extremely pleased to announce that Matsa and the Shandong Provincial Bureau of Geology and Mineral Resources through its partly owned vehicle HF Resources Pty Ltd ("SDGM") have agreed to commence negotiations in good faith to form a strategic project exploration and mine development partnership commencing with Matsa's Norseman Project. SDGM which was founded 50 years ago, is an active provincial state owned entity which has extensive technical expertise in mining and exploration and significant capital backing that is being applied to numerous Chinese investments worldwide.

This significant alliance between the two companies is a historical event for Matsa as it will endow the Company with a substantial cash injection whilst also bolstering its technical and financial capabilities in mineral project acquisition, exploration and development. Furthermore, through the strategic alliance it unlocks the doors to new opportunities for Matsa to participate in new projects currently difficult for a junior company in its own right to access. The sheer size and experience of SDGM and their willingness to join forces with Matsa will propel the Company into a strong position through the development of Matsa's current projects and future aspirations. It allows Matsa to benefit from its portfolio of projects whilst mitigating risks and preserving its cash position.

Through this alliance the Company could see its long awaited Norseman Gold project become a reality without the Company committing to onerous borrowings and at the same time achieving a significant exploration and development campaign on its Iron Ore prospect at no cost or risk to the Company. The benefits that can be realised by the Company today through this alliance is now considered immeasurably enhanced.

SDGM have indicated that they are committed to expanding their precious metal interests in Australia and have identified the 1.5 million ounce Norseman Gold Project as being of interest to them. In addition they have also indicated an interest in evaluating the potential for the production of Iron Ore from the Norseman Project, given the extensive Banded Iron Formation present and the significant infrastructure advantages of the project's location.

SHARE PLACEMENTS

An initial placement of 11,770,000 million shares in Matsa in three tranches subject to FIRB and any other regulatory approvals, to SDGM is expected to be the first step towards further investments and project agreements that will be negotiated over the coming months. These placements are made to incentivise and assist SDGM to complete its obligations under this umbrella agreement. The shares will be issued as follows:

- 5,000,000 shares at $0.33 per share
- 6,000,000 shares at $0.398 per share
- 770,000 shares at $0.50 per share

Furthermore, it is contemplated that, subject to entering into separate agreements, Matsa will issue to SDGM, subject to FIRB and other regulatory approvals:

1. 5,885,000 shares at $0.398 per share if and when the parties have completed a joint venture agreement in connection to the Matsa Iron Ore Project situated at the Norseman Gold Project area

2. 5,885,000 shares at $0.50 per share if and when the parties have completed a joint venture agreement in connection with the Norseman Gold Project

MEMORANDUM OF UNDERSTANDINGS

The parties have agreed to negotiate in good faith up to three further Memorandums of Understanding as follows:

Iron Ore

A conceptual terms sheet has been signed and discussions are advanced on a joint venture agreement in connection with the Iron Ore potential at the Norseman Gold Project. SDGM have conducted a site visit and reviewed previous work completed by Matsa and determined that there exists enough evidence of Haematite and Magnetite to justify further studies of the Banded Iron Formation occurring at the Norseman Gold Project. To this extent a preliminary term sheet has been agreed encompassing the following terms:

1. SDGM have a 6 month option to access land, samples and all data relevant to Iron Ore by completing further drilling, sampling and other work at no cost to Matsa, in order to determine whether they wish to exercise a farm-in arrangement;

2. SDGM via the payment of $250,000 can exercise their right to begin a 4 year farm in to acquire a 60% interest in the Iron Ore project at the Norseman Project. The interest is earned as follows:

a) Within 2 years SDGM to fund 100% and define a JORC compliant resource and complete a Scoping Level Study

b) During the subsequent 2 years SDGM to fund and complete a Bankable or Definitive Feasibility Study to Australian Standards

c) Matsa may elect to request SDGM after the completion of a Bankable Feasibility Study to fund 100% of the project development capital costs and dilute to a 20% interest contributing only at the commencement of mining;

3. Matsa will receive a 1% gross royalty for all Haematite ore sold and 0.5% gross revenue royalty for all Magnetite ore sold;

4. A joint venture company will be formed and will manage the exploration and development activities, with all costs of Matsa to be reimbursed by SDGM during the earn-in stage;

5. The joint venture company will have exclusive rights to all iron ore exploration, mining and processing opportunities within a 100km radius of the Norseman Gold Project in respect of tenements owned or acquired by either party, and similar terms will apply;

6. SDGM through their network within China have also agreed to work towards an off-take agreement for all Iron Ore produced at the Norseman Gold Project.

Gold

A detailed review of all samples, data and Company records has been commenced by SDGM under a Confidentiality Agreement, for the purpose of determining a valuation and the most appropriate way forward for a joint venture agreement. SDGM may acquire an option to access land, samples and all data relevant to the gold deposit with the view to negotiating in good faith a joint venture agreement to develop the Norseman Gold Project. As such, discussions are well advanced subsequent to a site visit by SDGM in connection with the Norseman Gold Project which may lead to SDGM acquiring an interest in the Norseman Gold Project and its potential development, including a definitive bankable feasibility study and the possibility of funding all capital requirements for the construction of a gold treatment plant.
Strategic Co-operation and Future Projects

SDGM and Matsa have agreed to develop a strategy for encompassing the further development of Matsa's other projects in Australia and Thailand and to consider the acquisition of other projects of interest to both parties. A joint venture entity will be established.