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Medusa Mining retains 'buy' rating at Seymour Pierce after gold resource upgrade at Co-O

Published: 08:59 07 Aug 2012 BST

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Seymour Pierce this morning said Medusa Mining's (LON:MML, ASX:MML) latest drill results have added to the scale and quality of the resource at its flagship Co-O mine in the Philippines.

Analyst Matthew McDonald repeated his ‘buy’ recommendation on the stock with a target price of 416 pence per share compared with Monday’s closing price of 346.5 pence.

The note from the broker followed yesterday's upgrade of the Co-O resources by 16 percent to 715,000 in the indicated category. The total resource increased three percent to 2.02 million ounces at an average grade of 10.1 grammes per tonne (g/t).

Importantly, the company used a cut-off grade of 3 g/t compared with nothing in the previous estimate with ounces below the new cut-off totalling 60,000 ounces.

McDonald noted that both surface and underground drilling have also shown upside to the vein system at the eastern end of the mine, at depth and also now to the west of the Tinago Fault at the western end of the mine.

In addition, the strike length has been extended by 400 metres to 2,000 metres with mineralisation open at west, east as well as at depth.

The new indicated resource estimate will now be used to calculated the new probable reserve.

The company will continue drilling with six surface and three underground rigs during the 2012/13 financial year, aiming to raise the resource to 2.5 million ounces.

After that, Medusa’ drilling programmes will be design to replace mined ounces each year to maintain the resource base.

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