Focused on production in the Philippines
Since completing a merger with the Philsaga Mining Corporation on December 4, 2006, Medusa Mining, an expanding gold producer listed on the Australian Stock Exchange (ASX;MML), London AIM (AIM: MML) and Toronto Stock Exchange (TSX: MLL), has continued a promising sole focus on operations in the Philippines. This merger brought about Medusa’s redevelopment of the Co-O Mine, a high grade, underground, narrow vein gold mine, with an initial production target of 40,000 ounces per year. Now four years on, the company forecasts production for the financial year 2009/2010 at a rate of approximately 90,000 ounces, and then 100,000 ounces annually. What’s more, the Co-O region comprising over 800 square kilometres of tenements offers fantastic exploration upside and opportunity for organic growth. So how did the company achieve this? This is Medusa’s story.

Co-O and Medusa’s wider portfolio

In brief, development began shortly after Medusa acquired the mine in the Philsaga merger. In September 2007, the company elected to commence Phase One expansion to increase production to 60,000 ounces by the end of Q3 2009. In fact, by June 30, 2009, the project reached annualised production of approximately 65,000 ounces. Phase Two, aimed at taking Co-O to 100,000 ounces in 2010, was completed by March 31, 2010. The company notes that the incremental benefits of the expansion work have been achieved on a quarterly basis, exemplified by a record gold production rate of 39,162 ounces for the past six months to December 31, 2009. Medusa is also working away on a number of other tenements as well as its Lingig copper discovery within the Das-Agan project.

In identifying those key characteristics which make Co-O stand out from the pack, its vein-mining mineralisation is clearly the place to start. The deposit is formed of a series of low sulphide, epithermal quartz veins which, to date; have been developed to approximately 370 metres below surface. As Medusa states, it is vital to understand that drilling these narrow epithermal veins likely provides indication of the gold mineralisation within, but not necessarily good quantitative data in terms of grades and volume estimations. Distribution of the gold within these vein systems is often erratic, rock brecciation can reduce drill core recovery and the veins are prone to pinching, swelling and displacement by faults. Medusa has dealt with this swiftly by making it policy to use initial drilling results as indicative-only, then using infill drilling to discover the extent of mineralisation. Following this up with level development has allowed the company to support its drilling results, ensure further accuracy in its vein grade and tonnage estimates and thus, aid resource estimations.

Resource estimations for Co-O were last completed in December, 2010, and are based on drilling and underground development. These indicate 580,000 ounces of gold at 12.3 grams per tonne, with an inferred resource estimate of 660,000 ounces of gold at 9.0 grams per tonne. Drilling is on-going to further expand the resources. Geoffrey John Davis, CEO at Medusa, notes that the Co-O mine contains probable reserves of 500,000 ounces of gold at 14.9 grams per tonne which is expected to be maintained on a yearly basis.

Bringing IRJ up to speed on how Co-O stands today, Davis says that long-term cash costs at the project stand at approximately US$190 per ounce, and its conceptual target size ranges from three to seven million ounces.

Work will also commence in July at Medusa’s Bananghilig gold deposit, also acquired through the merger with Philsaga. This project is located in the Tambis District, on the northern edge of a large aero-magnetically defined alteration zone measuring approximately 9.5 kilometres by 7.3 kilometres and which also contains the Kamarangan copper porphyry target (part of Medusa’s copper portfolio to come).  Current resource estimations for the Bananghilig project stand at an inferred 650,000 ounces of gold at 1.3 grams per tonne.

The company has a number of plans for future work at Bananghilig, including:

- Extension drilling to increase the deposit size and determine its boundaries
- Infill drilling to upgrade the resource categories, extend and define higher grade zones
- Detailed metallurgical studies
- Detailed geotechnical studies and Preliminary engineering studies

It is planned to have the Bananghilig feasibility study completed by the end of 2011 with the aim of justifying a 200,000 ounce production rate for a minimum of five years.

In addition to Medusa’s high grade vein and disseminated bulk gold targets, are its seven porphyry copper targets including Lingig, where 40 drill holes have been completed and further drilling is planned to test extensions of the mineralisation zone late in the coming year.

Medusa’s next move

The grades, expertise in handling vein systems and multi-resource portfolio speak for themselves, and Medusa’s latest move, as it prepares to move from the AIM market of the London Stock Exchange (LSE) to the Official List, signals promise, confidence and a wish to raise the company profile. This is still subject to final approval by the UKLA but a final decision is imminent.

“The directors believe that Medusa is now of a size and stature that justifies and qualifies its graduation from AIM to the Official List. The Company regards the Main Market as an ideal platform to raise the company’s profile on a larger scale,” Davis told press on April 15, 2010.

Graduating to the Main Market and opening Medusa up to a wealth of new investors, braced to recognise the company’s potential, is undoubtedly an exciting prospect. Of course, it is all the more welcome when it comes along as the company simultaneously surpassed its third quarter exploration target of 25,000 ounces.

A new Co-O Mine resource estimate is slated for July/August 2010 and the company is convinced the region has organic growth potential to produce 300,000 to 400,000 ounces per annum from both the Co-O Mine and potentially Bananghilig, thus elevating the company to mid-tier gold producer status. Medusa stands debt-free, unhedged, data and knowledge-rich and ready to escalate its role whilst remaining focused on operating in the Philippines. The company has dealt with the deposit-specific challenges it has encountered in a flexible, swift and expert manner. By the end of June, 2010, Medusa looks almost certain to have hit its 90,000 ounce year target at US$190 per ounce, and the coming years look equally promising.

medusamining.com.au