Exploration results near Co-O Mine suggest Medusa Mining has plenty of upside discovery potential


The last few months have seen buoyant times for Australian based, Philippines focused gold producer Medusa Mining (ASX:MML, AIM:MML, TSX:MLL), with several new mineral discoveries and upgraded resource estimates from their Philippine based mining properties.

With solid levels of production, low costs and excellent upside potential to expand both production and exploration, Medusa’s strong operational and exploration performance over the past 12 months has the makings to be just a start of a long and prosperous road.

For some background, Medusa Mining corporate strategy is to become a mid tier, 300 – 400,000 ounce per year, low cost, gold producer.  The company is currently investing heavily in expanding the output of its flagship, Co-O gold mine, which is a high grade, underground mine. During the third quarter ended 31 March 2010, the company produced 25,505 ounces of gold, and also confirmed the completion of the Phase II expansion of the Co-O mine which is now operating at a production rate that supports its target for 2010 of 100,000 ounces of gold production. 

Although primarily focused on gold production, the company also holds a number of high value copper properties. The Company has witnessed an upsurge of government facilitation of mining investments for foreign companies in the Philippines, and as such, has continued to focus its activities in the country.

Though the company holds numerous properties in the region, many recent updates have emanated from the Co-O gold mine which is situated along the Oriental Fault in the Philippines, and the Lingig Copper project, located in the Surigao Del Sur province in east Mindanao, Philippines.

The news from the Lingig site was a positive move in the company’s progress to unravel mineralization at the site, with Medusa reporting that drilling at Lingig has continued to intersect copper mineralisation in two geological settings. The company specifically highlighted the most northerly drill hole, which showed an intersection of 154.6 metres, grading 0.45% copper. The last 45.9 metres of the hole averaged 0.65% copper (at a 0.3% copper cut off), with the hole ending in strong mineralisation.

Geoff Davis, Managing Director of Medusa, explained "Whilst the basalt-hosted mineralisation appears to be open down-plunge and with the potential to develop into a larger body of mineralisation, at the breccia-hosted mineralisation we are now demonstrating copper mineralisation within a large breccia body with porphyry copper associations and which is open to the south”.

While the copper business and the Lingig mine are valuable assets for Medusa, the main driver of the business over the past year or so has been the high grade Co-O gold mine, and it is here that recent results offer some potential assessment of what may be to come over the next few months.

May saw the discovery of a new porphyry copper and gold target, named Usa. The target was defined by reconnaissance outcrop sampling over an area of approximately 500 x 500 metres, with rock chip values range up to 0.59% copper and 0.42 grams per tonne (g/t) of gold. Geoff Davis said "The discovery of new mineralised outcropping copper-gold porphyry at Usa highlights the unquestioned prospectively of our large tenement area".

He also reiterated at the time, that the company has no doubt that ongoing exploration will uncover other targets based on their aggressive drilling programmes, which will of course add additional value to the asset base.

This upbeat outlook was confirmed last week when the company announced further updates from the property, with results from underground drilling and an update on regional drilling in the surrounding areas. The results suggested several drill holes on the north side of the vein system, indicated the possible discovery of one or more new veins. Specifically, the company highlighted several high grade intersections, with 0.4 metres at 17.3g/t of gold, 0.25 metres at 16.87g/t, 0.2 metres at 16.11g/t, 0.35 metres at 10.59g/t and 3.1 metres at 15.37g/t of gold.

The company noted that veins at the surface rarely exceed 0.5 metres in width, and generally assay around 1 to 5g/t of gold. They did note however that gold values begin to increase significantly around 80 meters below the surface, and suggested an increasing amount of resource drilling will be undertaken using four underground drill rigs, as drill stations and positions are opened up.

Geoff Davis used the opportunity to give some guidance for upcoming resource estimates, saying “these excellent surface and underground drilling results are being incorporated into a new resource estimate expected to be completed and announced in the latter part of July 2010". Saying in addition “As an increasing amount of resource drilling will be undertaken from underground at the Co-O Mine and some of the surface rigs will be allocated to other projects, an updated reserve estimate is expected to be announced in August 2010”. One could certainly come to the conclusion therefore, that over the next month or two we may again be seeing some positive newsflow coming from Medusa.

While Medusa Mining’s value is undoubtedly driven by its low cost god production, investors may just see additional boosts from a new resource update at Co-O, expected this summer, and the company’s continual aggressive exploration of other nearby projects.  All in all, the outlook continues to look bright for this emerging mid-tier gold play.

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