MATSA RESOURCES LIMITED — Interim / Quarterly Report 2011

Oct 30, 2011

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Matsa Resources Limited – October 2011
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LIMITED

ABN 48 106 732 487

ASX Announcement

31 October 2011

Quarterly Activities Report – 30 September 2011

CORPORATE SUMMARY

HIGHLIGHTS OF SEPTEMBER QUARTER

Executive Chairman

Negotiations and final discussions:

• Continue with potential Chinese Investors regarding the Norseman Gold Project;

• Significantly advanced with potential Chinese Investors regarding the Dundas Iron Ore Project;

• Significantly advanced with large Thai company for the Paisali Iron Ore project.

Divestment of non-core Mt Vetters and Broad Arrow Projects.

Exceptional new 7.5km gold anomaly discovered at Norseman Gold Project.

Norseman soil sampling programme expanded with preliminary field work commenced.

Substantial new soil anomalies discovered at Matsa's Siam Copper Project.

Paul Poli

Director

Frank Sibbel

Director & Company Secretary Andrew Chapman

Shares on Issue

127.24 million Unlisted Options 19.35 million @ 27.3c + Top 20 shareholders Hold 57%

Share Price on 31 October 2011

21.5 cents

Market Capitalisation

$27.35 million

Head Office: Suite 11, 139 Newcastle Street, Perth Western Australia 6000 Tel : +61 8 9230 3555 Fax: +61 8 9227 0370 Kalgoorlie Office: Suite 10, Vosper House, 31-33 Dugan Street, Kalgoorlie 6430 Tel: +61 8 9021 7200 Fax: +61 8 9021 7277 Bangkok Office: Unit 1808, Pacific Place 2, 142 Sukhumvit Road, Klongtoey, Bangkok Tel : +66 0 2653 0258 Fax : +66 0 2653 0258 reception@matsa.com.au www.matsa.com.au

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Matsa Resources Limited – October 2011
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INTRODUCTION

Mt Vetters and Broad Arrow Projects Divestment

Matsa Resources Limited, (ASX: MAT, the “Company” or “Matsa”) is pleased to report on its exploration and corporate activities for the Quarter ended 30 September 2011.

Despite on-going turmoil and instability on international and local markets, Matsa has continued making sustained progress towards finding potential investors to help fast track development of its gold, iron ore and copper projects in Australia and Thailand and further develop its portfolio of resource projects.

Matsa's board remains committed to transitioning its projects to production.

COMPANY ACTIVITIES

The Mt Vetters and Broad Arrow Projects have been sold to a private but proposed ASX listed company, Yulleba Prospecting Pty Ltd, for a total of $375,000.

The proceeds comprise $225,000 in cash and $150,000 in shares issued at $0.20 per share at listing.

These projects were considered non-core to Matsa’s main activities and their sale will allow Matsa personnel and management to maintain focus on the main projects.

Share Placement

During the quarter the Company raised $624,000 via the issue of 3.12 million shares at an issue price of $0.20 each to sophisticated investors.

Norseman Gold Project - Corporate

Discussions and further negotiations were ongoing during the quarter. These have continued to advance the project with Chinese and other investors interested in forming a joint venture with Matsa to develop the Norseman Gold Project.

The proceeds from the raising were used to further the Company’s Thailand projects, in particular for costs incurred to apply for new applications for Special Prospecting Licences with regard to the Siam Copper Project and working capital in Thailand.

Further information and data was submitted to the

interested parties during the quarter. The Company is awaiting the outcome from the new analysis and work completed.

Dundas Iron Ore Project - Corporate

Approaches were received from new potential Chinese investors with an offer being put forward by an Iron Ore trading company from Shandong, China.

Matsa has received an incomplete offer for a joint venture from this Chinese company that would see the Chinese company invest directly in Matsa and take a direct interest in the Dundas Iron Ore Project.

Norseman Gold Project - Exploration

During the second and third quarters of 2011, Matsa undertook a regional soil and auger sampling program within the Company’s Norseman Gold Project. A total of 878 Soil samples were collected and assayed for a suite of 34 elements including gold. (Table 1)

All results have now been received which include gold values to 928ppb and a number of new gold exploration targets have been defined. While other assay results of interest were also received (e.g., up to 0.4 g/t Pd and Pt) the emphasis will be on identifying any new gold mineralisation in close proximity to Matsa’s Norseman / Mt Henry project.

Discussions subsequent to the end of the quarter progressed meaningfully. Contract negotiations are advancing and Matsa will advise the market as matters are finalised.

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Element/Unit	Count	Max	Median	75th Percentile	95th Percentile
Au_ppb	878	928	5	8	19.15
Ag_ppm	878	0.17	0.03	0.04	0.06
Al_pct	878	5.55	2.765	3.4	4.343
As_ppm	878	319	6.1	12.575	48.32
Ba_ppm	878	210	60	70	90
Bi_ppm	878	0.86	0.12	0.17	0.23
Ca_pct	878	16.75	4.87	7	10.915
Cd_ppm	878	0.19	0.04	0.06	0.08
Co_ppm	878	125.5	17.95	26.275	49.675
Cr_ppm	878	7450	155	368	1320
Cu_ppm	878	615	57.3	74.8	104.15
Fe_pct	878	18.65	3.22	5.5225	8.7045
Ga_ppm	878	22	6.745	8.885	11.5075
Hg_ppm	878	0.15	0.02	0.03	0.05
K_pct	878	1.19	0.49	0.67	0.87
Li_ppm	878	46.6	11.5	14.675	21.115
Mg_pct	878	5.88	1.31	2.05	3.3
Mn_ppm	878	4410	549	816.75	1371.5
Mo_ppm	878	4.04	0.23	0.33	0.59
Na_pct	878	1.35	0.16	0.34	0.57
Ni_ppm	878	1345	67.6	114	383.05
P_ppm	878	300	110	140	200
Pb_ppm	878	23.2	6.75	10.4	14.915
Pd_ppb	878	448	3	11	35.15
Pt_ppb	878	442	5	11	23
S_pct	878	1.05	0.04	0.07	0.1315
Sb_ppm	878	4.07	0.18	0.38	1.103
Se_ppm	878	2.6	0.7	1	1.4
Sn_ppm	878	12.9	0.6	0.9	1.3
Te_ppm	878	3.66	0.08	0.2	0.84
Th_ppm	878	18.7	4.2	6.175	9.3
Tl_ppm	878	1.08	0.115	0.15	0.22
U_ppm	878	9.36	0.46	0.73	1.8215
Zn_ppm	878	124	34	48	72.15

Table 1: Norseman Regional Soil Assay Summary.

Abbotshall South Soil Gold Anomalies: Results have identified a significant anomaly extending at least 7.5km along strike south of the historic Abbotshall open pit. The results are based on a reconnaissance sampling pattern of around 200 metres x 200 metres. This anomaly was defined by a soil gold value of 7.5ppb (80[th] percentile) which divides the Abbotshall South anomaly into three distinct targets: (Figure 1)

• Target 1 – Gold, arsenic, copper, silver, molybdenum, antimony and tellurium.

• Target 2 – Gold, arsenic and copper,

• Target 3 – Gold only.

Targets 1, 2 and 3 are aligned along the identical mapped shear zone and stratigraphy that hosts the Abbotshall deposit.

The Abbotshall mine has an endowment of 42,000oz and is stratigraphically situated in an intensely sheared package of mixed mafic and felsic volcanic rocks and termed the Abbotshall Beds. The Abbotshall deposit is a shear hosted deposit with the thickest and highest grade gold mineralisation associated with steeply plunging shoots within the shear zone. A total of 5,600t of ore @ 8g/t was mined from Abbotshall prior to 1984. A further 136,000t @ 2.5g/t was mined in 1997. The mineralisation at Abbotshall remains open at depth and down plunge.

Based on field inspection, the three targets have been further refined into six discrete anomalies and another, seventh anomaly has been included west of the Abbotshall South shear zone. (Figure 2)

Anomalies 1-6 are clearly defined by anomalous soil gold values between 20ppb and 43ppb Au and occur in a background of highly sheared basalt and felsic schist with minor chert along the Abbotshall shear zone. In the case of anomaly 3, soil gold values coincide with a conductivity zone as interpreted from airborne electromagnetic data.

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Figure 1: Abbotshall South Soil Gold Anomalies.

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Anomaly 7 is defined by a 15.4ppb Au regional anomaly measuring 1.2km x 350m located west of the Abbotshall shear zone in an area of no outcrop or float.

Anomalies are elongated in a SSE direction and can be seen to show good continuity, even at the current very wide sample spacing of 200m. This strongly supports the potential for structurally controlled Abbotshall style gold mineralisation as the source of the anomalies.

Matsa has commenced infill soil sampling and detailed geological mapping. It is expected that Matsa will be able to drill test these targets by the second quarter in 2012 after environmental and heritage permitting is complete.

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Killaloe Project Exploration

The Killaloe Project area overlies prospective stratigraphy located between the Boulder-Lefroy Fault and the Zuleika Shear. Most modern mineral exploration within the Killaloe project has concentrated on nickel and consequently many gold prospects are under-explored.

In the second quarter, a review of all available geochemical data by consultants IOGlobal identified nine high priority targets from a total of 54 anomalies (Figure 3).

Field inspection of the nine priority targets was carried out to make a selection of the highest ranked of these for sampling, ground geophysical surveys and drilling. This reconnaissance work has ranked four of the nine targets as highest priority for further work. These targets are; Duke, Cashel, Anchor and Target 28. Proposed exploration on these targets includes:

• Review of existing geophysical data;

• Geological mapping;

• Infill soil geochemical sampling using the Mobile Metal Ion (MMI) technique.

It is planned to carry out these activities during the fourth quarter of 2011.

Figure 2 Abbotshall South Target and Anomaly Locations

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Figure 3 Killaloe Project Priority Targets Location

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Figure 4: Quartz Sampling Results

Cashel Sampling Program

Dundas Iron Ore Project Exploration

Cashel is a high level soil anomaly with results up to 3,000ppb Au. The best drilling result to date is 2m @ 5.83g/t in KCR023 from 23 metres in a quartz vein. Quartz–lag sampling was carried out by Matsa in an attempt to determine the orientation of the resource.

Results show a well defined SE orientation as compared with ambiguous results from earlier sampling (Figure 4). It is planned to test this target with trenching and RC drilling in the fourth quarter of 2011.

Metallurgical Testwork Results

Results have been received on two key metallurgical testwork programmes as described below.

Grind establishment testwork on Type 1 (Low

silica) BIF : The testwork was intended to develop a standard laboratory protocol for processing any further drill samples from Dundas. Testwork using standard pulverising equipment achieved an excellent match with the target size distribution.

The protocol was completed significantly faster than the process which was used on drill samples from the 2010 programme because fewer screening and pulverising steps were needed. DTR silica levels will increase slightly with this optimised pulverising process and it will be necessary to level existing DTR results in order to take this into account.

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Furthermore, results indicate that depending on the final silica target, an acceptable concentrate can be produced at a coarser grind size up to 40 microns. In this case there is potential for significant savings on power costs.

Silica removal from High Silica (Type 2) BIF: Reverse flotation testwork on Type 2 BIF was carried out on magnetic concentrates in four grind sizes, namely 32 (normal), 28, 25 and 20 (ultrafine) microns.

A”normal” 32 micron grind achieved silica reduction from 13.7% to 10% silica in the concentrate with recovery of 85% of the magnetite entering the process.

At a 20 micron grind size silica was reduced from 10.2 % to 7.5% silica for the same mass recovery.

Dunnsville Gold Project

A review of RAB and RC drilling undertaken on the Big Red soil anomaly was carried out during the quarter.

RAB drilling had identified six zones of gold anomalism including high level gold values (up to 7.85g/t Au) over narrow intervals at the base of the regolith profile which is up to 50 metres thick. A ground Sub-Audio Magnetic (SAM) geophysical survey in 2010 confirmed the presence of a discrete magnetic anomaly underlying the Big Red Prospect. This anomaly is thought to reflect a mafic intrusive (dolerite or gabbro) which acted as a host rock to mineralisation.

The Big Red SAM survey also provided information on structural trends in basement. RAB drilling and sub – audio magnetic survey data has been integrated into an exploration model targeting gold mineralisation in a shear controlled (Riedel) fracture system at Big Red between the Bullabulling and Reptile shear zones.

Matsa proposes to carry out a programme of four diamond drill holes to test conceptual targets based on this model. The expectation is that detailed structural and lithological data from this program can unlock the controls on high grade gold mineralisation at Big Red. This drilling is planned for early 2012.

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Figure 5: Big Red Prospect Exploration Summary

Thailand Corporate

The strategy of accumulating a large strategic high value land holding, despite some challenging and stringent regulatory conditions, is beginning to produce substantial benefit to the Company. A handful of Australian mining companies have been extremely successful over the past decade in Thailand and Matsa is committed to emulating their success through innovation and persistence.

Matsa has a total of 124 Special Prospecting Licence Applications (SPLAs) amassing an area of 1,765km[2] prospective for gold, iron ore and copper in Thailand (Figure 6). The Company has conducted several early stage exploration surveys involving sampling and prospecting activities which are permitted under SPLA terms and conditions.

The Company is pleased to report that tenement applications where early stage exploration has commenced are already well advanced. These are moving towards final regulatory approval and will enable second stage exploration, including follow up sampling, trenching and drilling.

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Paisali Iron Ore Corporate

Matsa has entered into talks with a large partly state-owned Thai enterprise as part of its strategy to develop the Paisali Iron Ore Project with a view to the Thai company acquiring a direct interest in Paisali. While the terms of any agreement are yet to be finalised, discussions are ongoing

The Board is confident any potential agreement with a large Thai investor, such as the one Matsa is negotiating with, will provide substantial benefits.

Not only would it provide considerable project and working capital, but the potential investor has the know-how and expertise to assist Matsa with a range of Thai issues.

While Matsa's aim is to quickly get its projects into production, the Company must work within the timetables set by potential investors.

The Company will advise the market on the progress of discussions.

Matsa is also pleased to report it has received interest from a substantial steel maker keen to lock in ore supply once the Paisali Iron Ore Project enters production.

Siam Copper Exploration

The project area was selected on the basis of anomalous copper values in a regional stream sediment survey carried out by the DMR in 2006. These anomalous catchments cover an area of >100km[2] .

Follow up stream sediment sampling and prospecting by Matsa identified widespread copper mineralised float within one anomalous catchment (Siam 1). This has also highlighted several more anomalies for detailed follow up. Matsa believes these very encouraging early results are indicative of a number of copper - mineralised systems within the anomalous catchments and has consequently increased the project area to 49 SPLA’s for a total of 732.4km[2] (Figure 6). The additional areas have extended coverage to include virtually all of the copper anomalous catchments.

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Figure 6: Current SPL Applications Thailand

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Figure 7: Siam Copper Project Stream Sediment Copper.

Exploration activities during the quarter have included collection of 54 additional stream sediment samples, 807 residual soil samples and 157 rock grab samples. Work has focused in the Siam 1 and Siam 2 catchment anomalies as defined by a combination of DMR and Matsa stream sediment data (Figure 7).

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Reconnaissance soil sampling was carried out within the Siam 1 and Siam 2 anomalies and comprised samples spaced between 100 metres and 200 metres apart assayed for a full ICP suite of 33 elements. Rock samples were collected as an adjunct to the soil programme and mostly comprised surface float because of the paucity of outcrop in this mostly soil covered cultivated area. Rock samples were collected for detailed examination as the basis of a geological map. A total of 157 rock samples were submitted for assay.

Siam 1 Anomaly

A total of 509 soil samples were collected within the Siam 1 anomaly area. Summary statistics of the ICP assay suite are presented in Table 2 and it can be seen that copper values up to 1,936 ppm Cu were returned.

An interpretation of soil copper values in the Siam 1 prospect is presented in Figure 8.

Element /Unit	Count	Max	Median	75th Percentile	95th Percentile
Cu	509	1936	78	100	142
Ag	509	<0.3	<0.3	<0.3	<0.3
Al_%	509	5.89	3.5	4.05	4.798
As	509	70	6	7	12
Ba_ppm	509	1000	108	174	436.2
Bi_ppm	509	5	<1	2	4
Ca_%	509	5.62	0.71	0.99	2.484
Cd_ppm	509	1	<0.5	<0.5	<0.5
Co_ppm	509	240	33	45	91
Cr_ppm	509	416	42	107	210
K_%	509	0.23	0.03	0.05	0.096
Fe_%	509	9.04	6.39	6.93	7.83
Hg_ppm	509	<2	<2	<2	<2
Mg_%	509	3.2	0.79	1.09	1.74
Mn_ppm	509	10000	1650	2389	5079.2
Mo_ppm	509	3.6	<0.5	<0.5	1.2
Na_%	509	0.34	0.02	0.02	0.05
Ni_ppm	509	168	26	50	92.6
Pb_ppm	509	22	<3	4	9
Sb_ppm	509	2	<1	<1	<1
Ti_%	509	0.29	0.04	0.08	0.136
V_ppm	509	420	187	230	286.6
Zn_ppm	509	137	60	68	79

Table 2: Siam 1 Soil Assay Summary

It can be seen that there are a number of discrete soil anomalies defined by values > 142 ppm Cu (95[th] Percentile). The extent and overall linear/curvilinear shape of these anomalies, which are up to 1 kilometre long, suggests underlying structural control of mineralisation, probably by faults.

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Figure 8: Siam 1 Soil Copper Values and Preliminary Interpretation.

A total of 152 grab samples representing float over the Siam 1 anomaly, were submitted for a 23 element ICP assay suite. Summary statistics are presented in Table 3.

A total of 27 samples exceeded 0.3% Cu with 10 of these samples exceeding 1% Cu as mostly visible native copper with lesser chalcocite and cuprite. Four samples containing visible copper mineralisation (P140, P170, Y55 and Y143) were submitted for petrographic examination (Figure 8).

Petrography confirmed that copper mineralisation is associated with quartz veining and silicification of intensively altered basaltic andesite host rocks. The current working hypothesis is that copper is associated with hydrothermal fluids originating from shallow subvolcanic intrusives which have been focused by fault - controlled fracture systems in the basaltic andesite lava host rocks.

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Element / Unit	Count	Min	Max	Median	95th Percentile
Ag_ppm	152	-0.3	6.2	-0.3	2.38
Al%	152	0	5.95	3.02	5.0445
As_ppm	152	-2	37	6	20.9
Ba_ppm	152	0	132	16	49.9
Bi_ppm	152	-1	1	-1	-1
Ca%	152	0	31.6	4.735	10.545
Cd_ppm	152	-0.5	0.8	-0.5	-0.275
Co_ppm	152	-1	28	8	18.45
Cr_ppm	152	0	236	17	36
Cu_ppm	152	2	>1%	243.5	8290
Fe%	152	0	6.13	2.93	5.088
Hg_ppm	152	-2	0	-2	-1.1
K%	152	-	0.12	-0.01	0.08
Mg%	152	0	3.3	0.515	2.6145
Mn_ppm	152	0	2028	362.5	915.7
Mo_ppm	152	-0.5	5.2	-0.5	1.935
Na%	152	-	0.44	0.01	0.1845
Ni_ppm	152	0	118	19	65
Pb_ppm	152	-3	57	-3	14.45
Sb_ppm	152	-1	0	-1	-1
Ti%	152	-	0.34	0.09	0.2
V_ppm	152	0	213	110	194
Zn_ppm	152	0	105	31	65

Table 3: Siam 1 Rock Assays, Summary Statistics.

Infill soil sampling, trenching and drilling are proposed when the SPLA’s are granted.

Siam 2 Anomaly

A total of 298 soil samples were collected in the Siam 2 anomaly area, which is aligned E-W and extends over more than 20km[2] . Samples were assayed by ICP for the same 23 element suite of elements as samples for Siam 1.

Soil values up to 467ppm Cu define a major, eight kilometre long EW trending anomaly (Figure 9). The soil anomaly corresponds closely with an E-W trending fault which is evident in airborne resistivity data.

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Figure 9: Siam 2 Soil Copper Values and preliminary interpretation

Element / Units	Coun t	Maximu m	Media n	75th Percentil e	95th Percentil e
Ag ppm	298	0.4	-0.3	-0.3	-0.3
Al_%	298	5.59	3.09	3.7075	4.6725
As ppm	298	26	5.5	8	12
Ba_ppm	298	952	107.5	174	347.25
Bi_ppm	298	-1	-1	-1	-1
Ca_%	298	3.52	0.475	0.71	1.9815
Cd_ppm	298	1.6	-0.5	-0.5	-0.5
Co_ppm	298	118	28	39.75	70
Cr_ppm	298	216	21	35.75	101.5
Cu_ppm	298	467	64	98	194.15
K_%	298	0.31	0.05	0.08	0.17
Fe_%	298	16.7	6.66	8.18	11.015
Hg_ppm	298	-2	-2	-2	-2
Mg_%	298	2.14	0.625	0.88	1.2815
Mn_ppm	298	10000	1667	2574.25	5035.6
Mo_ppm	298	4.7	-0.5	0.7	1.215
Na_%	298	0.27	0.03	0.04	0.08
Ni_ppm	298	151	18	28.75	63.45
Pb_ppm	298	39	8	12.75	21
Sb_ppm	298	-1	-1	-1	-1
Ti_%	298	0.58	0.09	0.15	0.26
V_ppm	298	717	190.5	263.25	404
Zn_ppm	298	158	60	71	95.15

There are several lower order elongated anomalies which likewise appear to reflect underlying fault controlled mineralisation.

Summary statistics of soil assays are presented in Table 4.

Table 4: Siam 2 Soil Assays, Summary Statistics

A total of 10 rock samples were submitted for assay and three of these samples contain >1% Cu (Table 5).

These samples represent visually interesting altered and mineralised float in an area of minimal outcrop.

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Nevertheless, these results are considered very encouraging for the presence of concealed economic copper mineralisation.

Matsa is seeking to expedite the approval and granting of SPLA’s underlying these targets in order to carry out planned follow up activities including detailed soil sampling, ground geophysical surveys, trenching and drilling to identify and delineate the mineralisation underlying the anomalies.

Element / Unit	Count	Min	Max	Median	95th Percentile
Ag_ppm	10	-0.3	7.8	-0.3	5.235
Al%	10	0.73	4.06	1.855	3.3895
As_ppm	10	-2	8	3	7.55
Ba_ppm	10	10	91	21.5	70.3
Bi_ppm	10	-1	-1	-1	-1
Ca%	10	0.28	10.2	2.88	7.6395
Cd_ppm	10	-0.5	-0.5	-0.5	-0.5
Co_ppm	10	4	18	8.5	16.2
Cr_ppm	10	9	26	18	23.75
Cu_ppm	10	27	>1%	439	9737.2
Fe%	10	1.72	5.19	3.27	4.974
Hg_ppm	10	-2	0	-2	-0.9
K%	10	-	0.07	0.035	0.07
Mg%	10	0.15	1.67	0.615	1.382
Mn_ppm	10	200	923	560.5	853.7
Mo_ppm	10	-0.5	3.5	0.9	2.735
Na%	10	-	0.21	0.035	0.174
Ni_ppm	10	7	25	13.5	24.1
Pb_ppm	10	-3	27	4.5	22.95
Sb_ppm	10	-1	6	-1	2.85
Ti%	10	0.05	0.27	0.13	0.234
V_ppm	10	38	192	108	181.65
Zn_ppm	10	17	78	36.5	69.9

Table 5: Siam 2 Rock Assays, Summary Statistics

BACKGROUND

About Matsa:

Matsa is an ASX listed exploration and development company based in Western Australia. The Corporate office is located in Perth with offices in Kalgoorlie and Bangkok, Thailand.

The Company aims to increase shareholder wealth through the discovery and development of mineral properties within Australia and South East Asia.

It is committed to developing its Norseman Gold Project and associated magnetite by-product to generate cash flow for shareholder benefit.

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For further Information please contact:

Paul Poli Frank Sibbel Executive Chairman Non-Executive Director

Phone +61 8 9230 3555 Fax +61 8 9227 0370 Email reception@matsa.com.au Web www.matsa.com.au

The Exploration Target described in this announcement is conceptual in nature as defined under Section 18 of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves' as stated below. The potential quantity and grade is conceptual in nature as there has been insufficient exploration by the Company at this stage to define a Mineral Resource and that there is no certainty that further exploration will result in the determination of a Mineral Resource or a Mineral Reserve. Estimates of tonnages and grade have been made by geologists who are familiar with the style and type of magnetite and hematite mineralisation and who have conducted field mapping and limited sampling of the mineralisation and completed aeromagnetic interpretation of the units hosting the mineralisation.

'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'

Exploration Target[*1]

Under Clause 18 of the JORC Code the exploration targets (excluding the portion already classified into JORC resource) outlined in this report are conceptual in nature as there has been insufficient exploration to define additional mineral resources; it is uncertain if further exploration will result in the determination of any additional mineral resources.

Exploration results

The information in this report that relates to Exploration results, is based on information compiled by David Fielding, who is a Fellow of the Australasian Institute of Mining and Metallurgy. David Fielding is a full time employee of Matsa Resources Limited. David Fielding has sufficient experience which is relevant to the style of mineralisation and the type of ore deposit under consideration and the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. David Fielding consents to the inclusion in the report of the matters based on his information in the form and context in which it appears .

Mineral resources and reserves

The information in this report that relates to mineral resources and reserves is based on information compiled by Richard Breyley, who is a member of the Australasian Institute of Mining and Metallurgy. Richard Breyley is a full time employee of Matsa Resources Limited. Richard Breyley has sufficient experience which is relevant to the style of mineralisation and the type of ore deposit under consideration and the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Richard Breyley consents to the inclusion in the report of the matters based on his information in the form and context in which it appears .

Page 11

Appendix 5B Mining exploration entity quarterly report

Appendix 5B

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001, 01/06/10.

Name of entity

MATSA RESOURCES LIMITED

ABN 48 106 732 487

Quarter ended (“current quarter”) 30 September 2011

Consolidated statement of cash flows

Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) – R&D Refund - Other Net Operating Cash Flows	Current quarter $A’000	Year to date (3 months) $A’000
	- (476) - - (564) - 11 - - -	- (476) - - (564) - 11 - - -
	(1,029)	(1,029)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other - Deposits received/(paid) for Thai licences Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)	- - (4) 110 - - - - (202)	- - (4) 110 - - - - (202)
	(96)	(96)
	(1,125)	(1,125)

• See chapter 19 for defined terms.

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1.13 Total operating and investing cash flows (brought forward)	(1,125)	(1,125)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other - costs of capital raising Net financing cash flows	824 - - (33) - -	824 - - (33) - -
	791	791
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end ofquarter	(334) 1,522 -	(334) 1,522 -
	1,188	1,188

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

1.23 Aggregate amount of payments to the parties included in item 1.2 1.24 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
	173
	-

• 1.25 Explanation necessary for an understanding of the transactions

Non-cash financing and investing activities

• 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

On 12 July 2011 the Company advised it had entered into a Share Purchase Agreement (SPA) with SpringTree Special Opportunities Fund LP. On execution of the SPA SpringTree were issued 500,000 fully paid ordinary shares for nil consideration as Collateral Shares and 748,877 fully paid ordinary shares were issued in lieu of a Commencement Fee of $150,000.

• 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

N/A

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

Financing facilities available Add notes as necessary for an understanding of the position.
3.1 Loan facilities 3.2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
	-	-
	-	-

Estimated cash outflows for next quarter

4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration	$A'000
	571
	-
	-
	401
Total	972

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows. 5.1 Cash on hand and at bank 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details)	Current quarter $A’000	Previous quarter $A’000
	367	612
	821	910
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	1,188	1,522

Changes in interests in mining tenements

Tenement reference	Nature of interest (note(2))	Interest at beginning of quarter	Interest at end of quarter
P24/4514 E16/409	Direct Direct	0% 0%	100% 100%

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

7.1 Preference+securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs, redemptions 7.3 +Ordinary securities 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs 7.5 +Convertible debt securities(description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted 7.7 Options (description and conversion factor) 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter 7.11 Debentures (totals only) 7.12 Unsecured notes(totals only)	Total number	Number quoted	Issue price per security (see note3) (cents)	Amount paid up per security (see note3) (cents)
	Nil
	127,242,831	127,242,831
	748,877 500,000 522,739 3,120,000	748,877 500,000 522,739 3,120,000	20.03 Nil 19.33 20	20.03 Nil 19.33 20
	Nil
	9,000,000 1,000,000 1,200,000 2,050,000 4,250,000 1,250,000	Unlisted Unlisted Unlisted Unlisted Unlisted Unlisted	Exercise price $0.50 $0.273 $0.273 $0.40 $0.45 $0.266	Expiry date 1 July 2012 26 November 2012 31 December 2012 31 August 2013 30 November 2013 13 July2014
	1,250,000	Unlisted	$0.266	13 July 2014
	7,800,000	Unlisted	$0.35 1 July 2011
	Nil
	Nil

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).

• 2 This statement does give a true and fair view of the matters disclosed.

Sign here: (Company secretary) Print name: Andrew Chapman

Date: 31 October 2011

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

• 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

== == == == ==

• See chapter 19 for defined terms.

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