Philippines-focused Medusa Mining (ASX:MML, LON:MM) has reiterated its upbeat forecasts for the next few years at a meeting with broker Seymour Pierce.
Chairman Geoff Davis and chief executive Peter Hepburn-Brown confirmed a forecast of 90-100,000 ounces gold production this year to June, rising to 120,000 ounces in 2012/13 and 200,000 ounces the year after, Seymour Pierce said.
Costs were also forecast to remain at an extraordinarily low US$220 an ounce or less, while Medusa’s team reaffirmed their commitment to a 10 US cents a share dividend, according to the broker.
Medusa is currently producing gold at the Co-O mine in the Philippines and developing a second deposit in the country at Bananghilig.
Cash and equivalents now stand at US$81 million and the company is starting to build up its reserves to put towards the development of Bananghilig.
This is slated to become the company's second 200,000 ounce a year operation with very early estimates of capex at around US$200 million and operating costs around US$500 per ounce.
Medusa’s ambition is to become a mid-tier producer of 400,000 ounces of gold by late 2015.
To achieve that, it wants to expand Co-O mill capacity to 200,000 ounces per year and also to develop the deposit at Bananghilig to produce 200,000 ounces annually.
Drilling is underway at Bananghilig to expand the existing 650,000 ounces resource to one million ounces, which could be developed into an open pit.
Assuming the assessment work continues on track the plan is to have the feasibility study finished by the end of next year, Seymour Pierce said.
At Co-O, a permit is expected to come through to expand mill capacity “in the coming weeks”, while a new shaft at the mine is expected to reach level 6 by January, with a three month fit-out to be followed by a further extension down to level 8.
The new shaft will provide capacity to support the production increase over the next two years.
Another potential underground deposit, Anoling, located approximately 8km from Co-O and currently under evaluation, could provide additional feed of 500-1,000 tonnes a day to the Co-O mill, Seymour Pierce reported.
Medusa has earmarked at least US$22million this year for gold exploration and a further US$5 million on copper exploration, where there are 9 lead targets.
For the copper exploration, the plan is to establish a resource quickly before bringing in a joint venture partner to push on with the copper assessment work.
“Medusa does not see itself as a copper developer (wisely so based on the potential capital required to develop such porphyry-style targets) so would seek to list or sell its stake in the planned joint venture,” Seymour Pierce added.
Shares in the group have fallen back from a high of over 550p this year as the gold price has eased lower after record highs.
The broker’s target price for Medusa shares is 526p, compared to a current market price of 345p that values the group at about £651 million.