PERTH (miningweekly.com) – ASX-listed gold miner Saracen Mineral Holdings has inked an agreement with fellow listed Matsa Resources to divest of its Red October gold mine, in Western Australia.

Saracen MD Raleigh Finlayson told shareholders on Tuesday that the sale of the Red October mine was an opportunity for the company to crystalise value from an asset which had become noncore for the company, at a time when it had recorded substantial production and reserve growth.

“We are experiencing outstanding growth at the Karari and Thunderbox mines, located immediately adjacent to the Carosue Dam and Thunderbox mills respectively.

“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. Saracen will retain ongoing exposure to the asset through its shareholding in Matsa, making this an excellent outcome for both parties,” Finlayson said.

Under the terms of the agreement, Matsa would acquire the Red October project for A$1-million in cash and 4.545-million in shares, giving Saracen a 3.04% stake in Matsa.

“The acquisition of Red October represents an outstanding value opportunity for Matsa to increase both its footprint in the high-quality Lake Carey project area and expand our production ability beyond the Fortitude trial mine currently in production,” said Matsa executive chairperson Paul Poli.

“In addition, there is a number of exploration targets that we believe will yield strong results in due course.”

Poli added that the use of the Red October camp and facilities would allow Matsa to reduce its operating expenses and be more efficient at the Fortitude gold mine.

“This is particularly relevant as it may assist the Fortitude gold mine to be expanded beyond the trial stage. Furthermore, the fact that Saracen was keen to acquire a strategic holding in Matsa is a vote of confidence in our future plans. And the added benefit is the Saracen shareholding provides quality exposure to the astute shareholders of Saracen themselves.”

The Red October mine has an historical production of 342 000 oz gold at an average grade of 6.1 g/t, and includes 64 km² of granted mining tenements and a Joint Ore Reserves Committee-compliant resource of 99 000 oz, which would result in Matsa gold resource increasing to 453 000 oz.