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Epic & Msn data

Epic	MML
Time:	10:02:24
Mid Price:	219.50
Change Today:	0.50
Change % Today:	0.23
Fifty Two Week High:	224.78
Fifty Two Week Low:	57.02
Market Capital:	373.99

Period & price data

Period	Price
Now:	219.50
3 Months ago:
6 Months ago:
1 Year ago:

Additional information

Additional	Information
Market:	AIM / ASX / TSX
Sector:	General Mining - Gold
Epic:	MML
News:	Latest news
Web Site:	Medusa Mining
Other Articles:	16-03-201016-03-201016-03-2010

Geoff Davis, Managing Director of Medusa Mining talks to Proactive Investors

by Proactive Investors

If you would like to listen to this interview please click here

When we spoke this time last year Medusa Mining had a resource at the Co-O mine in the Philippines of 700,000 ounces of gold at ten grams per ounce.  What is the current resource at Co-O and what is planned in terms of resource development?

Well currently we have 1.2 million ounces at 13.3 grams and this large increase is mainly due to the discovery in December last year when we announced 12 drill holes into what’s called the Great Hamish Vein.  As I say we published 12 drill holes, they averaged 61 grams to the tonne and just over two metres wide.  In that new resource number of 1.2 million ounces the Great Hamish comprises about 300,000 ounces at 37 grams, so it’s a major discovery.  It’s open in all directions and it certainly contributed to that resource increase.
 
We currently have six rigs going at Co-O and they’ve been now working away for quite some time to increase that resource and we should have a new resource number out in July followed by a new reserve in August.

[Editor’s note:  a new resource of 1.38 million ounces at 10.8g/t gold was published on 1 July 2009]

What is Medusa’s current production rate and grade at Co-O and are you on track with your plan to start producing 60,000 ounces a year during the third quarter of this year?

Yes we are on track.  In the last quarter from January to March 30 we produced 12,700 ounces of gold at a cash cost of $211 per ounce and the grade during that quarter was just over 13 grams, I think it was 13.2 grams.  So at an annualised rate already of 50,000 ounces we are very comfortable with achieving the 60,000 ounce level on schedule.


Are you still targeting production at the rate of 100,000 ounces of gold a year at Co-O, starting in the first quarter of 2010?

Yes we are on track with our mine development.  Primarily it was a shaft at the west end of the mine that’s been nearing completion.  Also tied in with that is an expansion of our crushing circuit at the mill; work has started on that and it will be completed on time later in the year. Also with an expansion of our current tailings dam, that is in progress and should be completed middle of the year; that will give us another three years or so of tailings disposal.  At the same time we are doing all the permitting etc for a new tailings dam and all that is on track. So yes, we are certainly comfortable with getting to our 100,000 ounces early in 2010.


Is it still Medusa’s aim to be producing gold at a cost of $200 an ounce going forward?

Yes it certainly is and I think based on the last quarter’s results, where we produced 50 odd thousand ounces annualised at $211 per ounce, we think it’s very achievable to get down to the $200 per ounce level when we double our production up to the 100,000 ounce level.  So yes, we are very comfortable with that.


What’s the story with Medusa’s exploration portfolio?

Well most of our work is going into the Co-O mine at the moment.  We’ve got six drilling rigs working there full time.  There are a couple of underground rigs as well, but they are mainly from drilling ahead of mining.  We expect those rigs to be there for the foreseeable future to increase the resource. 

Elsewhere we have a disseminated gold deposit up in the northern end of our tenements called Bananghilig with a large amount of historical drilling and additional recent drilling of ours.  We hope to put together a resource in the near future.   That mineralisation is open, it’s also not far away from a whole lot of other outcropping mineralisation we have found also indicating disseminated style mineralisation.  Therefore in the northern area over time we think we will end up with a number of open pits with larger disseminated ore bodies, different to Co-O which is narrow vein but these are larger disseminated ore bodies could support another plant in that northern area.

On the copper front we are drilling the Lingig prospect which is across to the east of Co-O, about 30 kilometres across to the east, right on the coast.  We have published some very encouraging results in early April about some very good intersections with a couple of hundred metres or more at 0.6% to nearly 0.8% copper.  It’s a very good start there, we are still drilling away and hopefully we will have a new date out in about August.

We’ve also looked at another porphyry copper prospect called Kamarangan which is not far away from the Bananghilig gold project.  There is quite a bit of iron ore there as well in the form of magnetite.  We haven’t hit the bulls eye there in terms of copper but there’s a lot of encouragement.  Our first ten holes are completed and we are currently compiling all that information.  We should have an announcement out in the not too distant future and should have enough data to indicate where we are at with that and I would guess we will be in a position to start drilling again late this year early next year.


What is Medusa Mining’s financial situation?

At the end of last quarter we had AU$27 million in the bank and I should point out that we have no debt and we are also un-hedged.


What can investors expect from Medusa Mining over the next 12 to 18 months?

Well I guess the next major milestone will be the 60,000 ounces coming up in the next quarter.  We are very comfortable of achieving that followed by the 100,000 ounces of production in early 2010 and with our cash costs then being down around $200 per ounce.  As I mentioned earlier we’ve got resource increases coming out in July this year and we’ve got reserve increases coming out in August.  We have a whole lot of other exploration results, particularly coming out of copper with the Lingig project, and an update on results around August, all going well, and with a bit of luck I think we are probably drilling into the major new copper district over there.  What we are seeing in the drilling that’s already been published then we’ve probably got something very substantial on our hands over there.  So I guess it’s more gold and more copper over the next 18 months.


Who are Medusa Mining’s institutional investors and how supportive are they?

We really only have one large institutional investor on our register at the plus 5% level which is Sprott Asset Management, a gold fund out of Toronto, Canada.  They came on the register as a result of the fundraising we did in early March.  We have a number of other smaller institutions as a result of that fundraising as well and to date they have all been very, very supportive. We also have a number of sophisticated investors, in fact our largest shareholder is a sophisticated investor out of London with about 11%. There are a number of others as well and these guys have been with us for a long, long time and are very, very supportive. I would guess that the institutions will be very supportive as well because I think they can all see that there is a lot of upside left in Medusa.


Does Medusa intend to remain focused exclusively on the Philippines as a place to do business and if so why?

Yes we are and will be purely focused on the Philippines. I guess the main reasons are the prospectivity.  The bit of ground that we have in East Mindanao is regarded by commentators in United Nations and other organisations to be the best piece of mineralised ground in South East Asia, that’s the whole East Mindanao belt and of that East Mindanao belt I think we’ve got by far the best part of it.  So we see the opportunity there to develop a lot of mines  resulting from discoveries in the foreseeable future.  We operate in two provinces, we are very comfortable with the local political situation, our communities are very comfortable with us and we have a very big area so I think we’ve got enough to keep us going for quite some time yet.


Medusa Mining has a reputation for being very active in community relations.  What is the business rationale for this?

Well I think if you ask investors in general they do regard the Philippines as a reasonably high risk environment.  We don’t quite see it that way but I guess if you look at the national level, politicians are politicians anywhere in the world and they play their games, but so long as they don’t change the business settings we don’t think there’s a threat from the national level.  For instance the royalties of the government has been 2% since I first went to the Philippines in 1980.  There’s never been any indication that will change, and in particular the Government since about 2002 has gone out of its way to make mining investment much more attractive in the Philippines. So at a national level we don’t see any particular risks.  Really I think the risks are at the community level if you lose access to your site and you can’t do business.  That’s where the real problems can be and to this end, and to the credit of Philsaga a company that we bought in 2006, before we got involved, they had started community activities particularly in education through building schools.  We currently own two schools, we are building a third; we support another 11 schools in the wider community and well over 2,000 students benefit from our activities. As a consequence that works very well as every Filipino family wants their kids educated. 

Something else that we do that’s a little bit different to most mining companies is that  we’ve started a system of micro loans to rice farmers.  These are interest free and the aim is to hopefully support around about 100 hectares of rice farming this current year and to raise the rice farmers out of the grips of the loan sharks.  So I think there are two differentiating factors with us, one is the educational side of things and in particular the new initiative of interest free loans to the rice farmers.


What are your thoughts on the medium and long term prospects for gold and gold mining?

I think for us in the Philippines gold mining has a very good future by comparison with say more developed jurisdictions such as Canada and Australia where costs are always increasing.  In the Philippines we have a very high grade deposit but more importantly we have skilled labour.  We have hydro power at a cheap rate and we also have the Philippine peso on our side, so we don’t see the cost pressures that the Australian and Canadian jurisdictions and other well developed jurisdictions seem to have.  I think we are reasonably well protected from those, I see our mining activities in gold having a very, very good future.


What are your thoughts on the medium and long term prospects for copper and copper mining?

Medium and long term I think they are both very good.  People worry about copper prices but they are still a long way higher than they were in the early 2000’s when the metals boom started.  With developing countries like India and China and a number of others, copper is always going to be a major component of their development and I think copper mining has got a very strong future.  In our case we are optimistic that we can find deposits which are better than a lot of other deposits around the world, in particular these large porphyry copper deposits which provide most of the copper for the big mining companies. Lingig is only a couple of kilometres from the coast, it has very good logistics and if we can continue to produce the grades we have already published then obviously that deposit is going to end up as being one of the better copper deposits.  So if we can do that then I think for us copper mining is going to be a very good thing.

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