Australian company Matsa Resources has signed a five-year ore purchase agreement with AngloGold Ashanti Australia (AGAA) for the purchase of ore from the Red October gold mine in Western Australia.

The deal will provide Matsa with a long-term processing option for Red October ore, which will be treated at the AGAA-owned Sunrise Dam gold mine.

The costs and revenues of the ore purchase agreement are said to be consistent with the parameters applied in the previously published mining studies.

Matsa acquired Red October from Saracen Minerals for $2m in September 2017 when it was under care and maintenance.

Located around 60km from the Red October gold mine, the 3.8mtpa mill at the Sunrise Dam gold mine provides Matsa with access to a nearby milling solution for its stage one production ore and for an additional four and a half years thereafter.

Matsa has previously delivered ore from its Fortitude and Red Dog gold mines to Sunrise Dam.

The two gold producers also worked together to identify and develop gold deposits in 2018.

Under the terms of the agreement, Matsa will be responsible for mining and transporting the ore to Sunrise Dam.

The agreement is also expected to allow Matsa to continue to progress mining at the Red October gold mine at a relatively low capital cost.

“The execution of the agreement with AngloGold Ashanti continues our strong relationship.”

Matsa Resources executive chairman Paul Poli said: “The execution of the agreement with AngloGold Ashanti continues our strong relationship and builds on the MOU both parties entered into in mid-2018.

“Previous mining campaigns at Fortitude and Red Dog have been successfully processed at Sunrise Dam with minimal fuss and we expect this to be no different.

“The fact that AngloGold are prepared to potentially accept all ore from Red October for up to five years is testament to this as Matsa looks to develop a longer term mine plan in the future.”

The first delivery of ore to Sunrise Dam is expected by the end of June 2019.