Are you looking for an open pit or an underground goldmine?

Paul Poli:

The initial concept with the project is open pit and we expect many years of mining within an open pit environment. However, we have already indentified further opportunities which will definitely extend the mine life with higher grade ore which will be mined via several underground mines. 

GOLDREPORT:

What is the current resource of the project and the average grade? You also did a scoping study for the project in April 2008. What price of Gold do you need to bring the project profitable into production?

Paul Poli:

The resource presently stands at 1,470,000 ounces of gold at an average grade of 1.7grams/tonne.

Obviously with any mining company further exploration goes hand in hand with mining a resource we are confident that we should be able to discover at least another 500,000 ounces of higher grade ore.

The scoping study was completed in 2008 and it demonstrated that if gold was at AUD$1,200 the project was profitable and viable to proceed. It is very important to note however that since the completion of the scoping study, costs have significantly decreased particularly fuel and wages. Whilst at the same time our new metallurgical tests have improved recovery rates, so we are confident that when a feasibility study is completed, the profitability will be substantially improved.   

GOLDREPORT:

Mid of August you announced an exclusive ore treatment agreement with FOCUS MINERALS (ASX:FML). Please give our subscribers an overview about this agreement and your production plans?

Paul Poli:

We have entered into a confidential exclusive right to negotiate an ore treatment agreement with Focus Minerals so unfortunately I cannot provide details with regard to that at this stage. I can tell you however, that Focus are keen to receive as much gold ore as possible to ensure their own production tonnage. In essence this agreement will allow Matsa to treat their high grade North Scotia Ore at Focus on a continual basis throughout the life of that deposit. We would expect production of at least 15,000 ounces of gold within the first 6 months from the North Scotia pit alone, it is important for your readers to understand that we have the Mount Henry high Grade pits as well which we also intend to bring into production at the same time as North Scotia which will significantly increase Matsa’s gold production.

GOLDREPORT:

FOCUS MINERALS also started the production by treating their ore in another plant. Do you think this is a good start for a junior company to generate cash flow and profits for the shareholders?  What are the advantages compared to build an own plant?

Paul Poli:

At Matsa, we have an objective of keeping the issued shares of the company as low as possible, by making the company cash flow positive and profitable, this enables the company to stand on its own two feet and not issue further shares just to survive. We think this is good business and shareholders will appreciate the fact that their shareholding will not be continually diluted. We are fortunate to have several good size high grade deposits that are profitable enough to withstand the higher cost when ore is treated at an external plant. However, the higher cost of external treatment is counter balanced by the low upfront capital cost. This is significant. We are currently examining the construction process of a new plant and we understand that a new plant will take up to 44 weeks to construct after all drawings and approvals have been finalised, we feel that it is important to be profitable during this time and to develop a cash position to contribute to the cost of the mill which reduces overall borrowings. This is why we feel that external toll treating is an important strategy for a junior miner. As I said previously, you need to be blessed with high grade ore to be able to achieve this in first instance and fortunately Matsa has that high grade ore.

What do you think will be the profit out of this ore treatment with Focus Minerals?

Paul Poli:

Our present estimations show at least an amount of AUD$7 million from the initial starter pit at North Scotia, but overall we are budgeting for a profit of some AUD$13 million for the calendar year 2010 which would include some Mount Henry ore and growing after that until we develop our own mill.

GOLDREPORT:

As we understand, you are looking first to mine your high grade material. What are your plans in the future for your other ore? (Built an own plant?)

Paul Poli:

As I have already suggested the external milling arrangement is viewed by the company as a stepping stone on our pathway to building our own mill. This is certainly on our agenda but prior to formalising this plan we do need to undertake a feasibility study of which some aspects of this study are currently underway.

GOLDREPORT:

Let us take a look in the future. Where do you see MATSA RESOURCES three years from now?

Paul Poli:

I see Matsa as a gold miner within the Norseman area producing 60,000 ounces of gold per annum, I also predict that we will have at least two other projects underway (albeit possibly grass-roots) with one of those projects being in South East Asia and the other in Australia. Furthermore, I also believe that we will have completed a corporate deal of some sort which will enhance Matsa’s presence in the mining industry.

Please let us talk about some numbers. How many shares do you have outstanding and how many cash do you have in the company? Do you need more capital to bring the North Scotia project into production?

Paul Poli:

The company has 94,000,000 shares out on issue and is currently contemplating a further small issue of 9,500,000 shares, so the total issued number of shares in the foreseeable future will be 104,000,000. We envisage that after this issue there will not be any further issues in the near future as the company expects to be able to bring North Scotia into production with its existing cash reserves. After completion of the new issue the company will have approximately AUD$2,300,000 in liquid cash reserves.

GOLDREPORT:

Who are the largest shareholders in your company?

Paul Poli:

I am the single largest shareholder in the company with approximately 12% of the issued capital or approximately 16% diluted with options. It is interesting to note that the top 20 shareholders control some 55% of the company.

GOLDREPORT:

MATSA owns also a few other exploration properties in Australia. Are you doing exploration work on them at the moment and what are the plans with these projects?

Paul Poli:

We have a number of projects in the Kalgoorlie area that are prospective for gold. In particular we have an exciting project called Mount Vetters where limited drilling has encountered a new prospect. We are about to start a new drill program on this, with a shallow open pit exploration target of 200,000 ounces at grades of 5-10 g/t.

What are your personal thoughts about the gold market for the next 5 years? Do you think all the current printing of money will drive the price of gold higher or do you think the economy will have a quick recovery and the people will sell gold because they do not need the “save heaven” anymore?

Paul Poli:

I believe that the current world consensus on the future of the gold price is correct and that the price of gold will increase. I think that the bet is each way in that I mean there can only be two scenarios for the world economy, it will improve or it will worsen. If the world economy worsens it will be lead by the US and I think that there will be a substantial demand for long term safe haven investments and that can only mean the acquisition of gold on a large scale not only by institutions but by governments as well, particularly in Asia where they are somewhat insulated from the western world.

If the world economy improves which is my bet, I think that inflation is a real threat and that with increasing interest rates around the world except for the US, there will be demand for gold as a store of wealth against inflation as well as a haven against the falling US dollar which will be caused by the relatively low interest rates in the US. It would appear that the price of gold must go up and this is interesting as we are seeing the price of gold strengthen in the last few days and let us not forget we are very near all time highs for the metal.

My prediction will be that the price of gold will be between US$1,200 and US$1,400 and the US to Australian dollar will be between 95c to $1.05. the middle of the road is AUD$1,300 and higher.

GOLDREPORT:

Is the management looking for new projects or acquisitions at the moment?

Paul Poli:

Yes we are actively searching for new opportunities and as I alluded to before we are excited with our work so far in South East Asia, Thailand in particular. Furthermore we can confirm that discussions are ongoing as we speak on some interesting acquisitions, I wish I could expand but confidentiality is always at the foremost.

GOLDREPORT:

Do you think MATSA RESOURCES is undervalued at the moment and do you think MATSA is a takeover target?

Paul Poli:

Of course I think Matsa is undervalued and if something is undervalued you are always open to takeover and a worthwhile prize to anyone. To put it simply if we were to examine our resource and only our gold resource in Norsemen, you can come to the following conclusion:

It has been stated by many commentators that the enterprise value of an ounce of gold in ground classified as a resource to be up to AUD$48 an ounce. Matsa has at least 1,470,000 this gives a total enterprise value of AUD$70,560,000 or 75 cents per share. This enterprise value does not include the exploration value of all the other exploration ground, cash and equipment or place any value on the management expertise, which I hope you find to your satisfaction.

Last but not least! Why do you think, MATSA RESOURCES is a good investment at the moment?

Paul Poli:

In summary if the outlook in gold is increasing in value, and Matsa is an undervalued emerging gold junior making the transition from explorer to producer and having no debt with substantial gold resources, combine that with an experienced and dynamic management team with ambition, you must have potential.

GOLDREPORT:

Dear Paul, thank you very much for this very interesting interview about your company MATSA RESOURCES. We wish you all the best for the future! Please keep us updated!

-- Posted Wednesday, 16 September 2009 | Digg This Article