Medusa Mining achieves record gold production at Co-O mine

Philippines focused gold producer Medusa Mining (ASX:MML, AIM:MML, TSX:MLL) reported a production of 25,012 oz (ounces) in the fourth quarter to end-June 2010, helping it to a yearly record of 89,679 oz with further exploration planned for this year to further increase the resources and boost output.

The production at its Co-O mine in the Philippines of 25,012 oz was achieved at a grade of 13.65 g/t (grammes per tonne) at cash cost of US$182/oz. The increase in production was achieved in tandem with an increase in resources as indicated resources at the mine rose by 4% to 603,000 oz and inferred resources jumped 36% to 989,000 to further improve the outlook for the achievement of the targeted annual output of 100,000 oz.

The company pledged to focus on stabilizing operations at 25,000 oz per quarter during the first half and look edto increase it in the second half as well as continue seeking extensional mineralisation outside of the current mine limits with further step-out drilling.

The exploration budget for the year amounts to US$20 million, which Medusa said would ensure a “very active programme.”

“I am pleased with this quarter's production...surface stockpiles and broken ore underground augur well for achieving our production targets. Drilling has commenced on schedule at the extensive Bananghilig deposit and is underway at Saugon, highlighting both the short and long term potential of the company,” said managing director of Medusa Mining Geoff Davis.

The company had cash reserves of US$62 million at end-June.

Earlier this month, broker Fairfax said dthere was further upside to Co-O and that the production base could surpass its own model.

Earlier this month, Fairfax commented that further exploration could continue to expand the resource, which could lead to an expanded production base beyond its currently modelled 130,000 ozpa (ounces per annum) by 2012 and potentially to 200,000 ozpa. Exploration has now identified a total of 45 veins that have been modelled, many of which could become larger as they remain open along strike and at depth, said Fairfax.

The broker’s estimate put Co-O’s NPV (net present value) at US$513 million and forecasted the company’s cash position to reach US$62.8m at the end of June, which includes 25,000oz of gold on account worth US$31 million.

In response to today’s news, Fairfax noted that it had used a production figure of 120,000 oz at a cash cost of US$200/oz compared to the company’s target of 100,000 oz at US$190/oz, stating it was hoping to see exploration and development work identify additional ore feed to feed the mill to full capacity. Improvements at the mill, which include the completion of a thickener unit and a power line, which is expected in December, should enable the mill to achieve its 1,000 tpd (tonnes per day) capacity to enable the company live up to Fairfax’s production forecast of 130,000 ozpa by 2012.

“These results demonstrate another solid quarter with a robust business at Co-O achieving the company’s announced targets that should re-assure investors that Medusa is an established gold miner with solid foundations. The company has major upside potential and indicates organic growth potential to become a 300,000-400,000ozpa producer,” said Fairfax.