Another multibagger small gold stock ? - Matsa Resources (MAT)

Why am I looking at gold stocks ? Look around the world, most governments are spending money like drunken sailors. No one is even trying to balance their budgets anymore. Inflation is kicking in. Maybe the new Fed governor (Warsh) will be under pressure to keep rates capped despite inflation pressure. I read somewhere he may be planning to change the standard inflation measure within the Fed as well.....  There are enough going on in the world to support gold prices. Gold prices have pulled back from $5200 to around $4500. Many Aussie gold miners have pulled back sharply as a result. In this context, I am looking through the smaller Aussie gold miners.

Matsa is a little gold mining stock. MV is only around  A$70M. Stock was cut in half from its high in early 2026. It is trading around $0.07 at the moment. It has around net cash of $13M.

Its main gold project (Lake Carey) is in Western Australia. The resource has 949K oz @ 2.5g/t. Under 1M oz is a bit small vs. other miners but its MV is smaller as a result. 2.5g/t is decent vs. other miners actually. See Pic 2 & 3.

So of all the gold miners out there, why am I interested in Matsa ? Being a value investor, it is trading at discount to most gold miners in Australia (in terms of EV/ounce). BUT feels like the story is more than valuation alone.

There are a few things going on. It already has a small mine (Devon) up and running. So far, Devon has yield 6000 oz. It plans to resume campaign 3/4 in mid 26. The latest drilling is expected to yield 7000 oz.  If all goes according to plan, Matsa will bring in $40-45M in the next 12 months. In my mind, it is a big deal as it already has its crew in the area and is building up its operational capabilities.

Another key development to watch is its exploration program. Its key area in Lake Carey is called Fortitude. It is drilling to prove out the resource in Fortitude North (6km away from Fortitude). Management expectation is Fortitude North should yield another 1M oz. Or if it is really lucky, Fortitude North can add as many as 1.5M oz to its resource. If its drilling campaign is successful, suddenly it will have 2M oz (or hopefully more) in gold, in line with its larger peers (vs. its existing small MV). Maybe then it will be able to draw more interests from investors.

The next step is for Matsa to build out its mill and infrastructure to start mining Fortitude. Of note, Fortitude is already permitted (so one less hurdle to worry about). It still needs to apply permit for Fortitude North (but given the close distance, should be predictable enough). Just like other junior miners, Matsa has to figure out how to fund the capX. Devon will hopefully bring in $40-50M (as long as gold price holds together). Its capX plan is going to cost $100-150M. Say middle of the range, it needs to raise another $80-90M.

Management is apparently talking to outside investors (including Chinese investors) to raise the shortfall.  Potential external investor may invest to build the mill as part of the placement. If all goes smoothly, Matsa will have MV of $150-160M (fully funded to production of Lake Carey with resource of 2M oz or so). Still trading at discount to other bigger peers.. Difference is it will have covered the capX to start mining.

Also there is another embedded option within Matsa. By the end of 2026, we will know if AngloGold will exercise its option on a plot of land owned by Matsa. Anglo has been drilling on its side of the tenement. It will exercise its option if it finds a worthwhile ore that runs from its side of the land into land owned by Matsa. We will see if it will pan out for Matsa. If AngloGold exercises this option. Matsa will receive >$100M (then it will have its total capX budget covered without outside investor).

At the earliest (and assuming things go smoothly), it will commence operation in 2028 (1.5M tons milling capacity). So roughly 1.5-2 years away.

Let's play around with the numbers... 1.5M tons @ 2g/t = 3M grams = 106K oz... 80% recovery... We are looking at roughly 80-85K oz per year. All in sustainable cost = $2500. We are looking at profit of $3500-4000 per ounce. Net profit of $200M or so p.a. ($280M - 30% tax).

MV is $70M @ $0.07. After future capital raising of say $80-90M, stock is 1-2X PE once it is in full production. Upside if Anglo exercises its option, in which case, the project is fully funded internally.

Or another way to consider its potential... Say resource of 2M oz... Assume it can mine only 1.5M oz, its extracted gold will be worth $9bn. Not bad for an option with value of only $70M.

PS... Usual disclaimer => do your own research. Not financial advice. I may own the stock.