Northbridge-based Matsa Resources has signed an agreement to acquire Saracen Mineral Holdings’ Red October gold mine near Laverton for about $2 million in cash and shares.
Matsa will pay $1 million in cash and 4.5 million shares at a deemed issue price of 22 cents each to acquire Red October, which includes a 68-person accommodation camp.
The project covers 64 square kilometres and holds a mineral resource estimate of about 99,000 ounces of gold.
Following completion of the acquisition, Matsa intends to immediately assess a recommencement of mining at Red October, and undertake drilling programs to increase the mine’s potential life.
“Not only has Matsa acquired an excellent production opportunity but the use of the Red October camp and facilities will allow us to reduce our operating expenses and be considerably more efficient at the Fortitude gold mine,” Matsa chairman Paul Poli said.
“This is particularly relevant as it may assist the Fortitude gold mine to be expanded beyond the trial stage.
“An added benefit is the Saracen shareholding provides quality exposure to the astute shareholders of Saracen themselves.”
Saracen will emerge with a 3 per cent stake in Matsa post-acquisition.
The gold miner’s managing director, Raleigh Finlayson, said the sale of Red October was an opportunity to crystallise value from an asset which had become non-core for Saracen.
“While Red October is a high quality asset, its potential as a source of ore is being displaced by the abundance of higher margin ore closer to milling infrastructure,” Mr Finlayson said.
“Saracen will retain ongoing exposure to the asset through its shareholding in Matsa, making this an excellent outcome for both parties.”
PCF Capital Group conducted the sale process for Saracen.
Matsa shares gained 10.8 per cent to close at 20.5 cents each, while Saracen shares were 2.4 per cent higher to $1.35 each.