MEDUSA MINING 
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Company Medusa Mining Limited
TIDM MML Headline Quarterly Activities Report Released 07:00 30-Jan-2012 Number 3474W07RNS Number : 3474W Medusa Mining Limited
30 January 2012
Medusa Mining Limited ("Medusa" or "the Company") QUARTERLY ACTIVITIES REPORT PERIOD ENDED 31 DECEMBER 2011 30 January 2012 Snapshot of Medusa:
- Un-hedged, low cost, dividend paying gold producer focused on organic growth in the Philippines
- Growth path to production of 400,000 ozs per year by end 2015/early 2016
- Growth underpinned by strong cashflow from Co-O Mine (narrow vein underground)
- FY 2011/12: revised production guidance of 75,000 ozs at cash costs circa US$230/oz
- Current Mineral Resources comprise
- Co-O Mine: Indicated 616k ozs at 12.0 g/t gold; Inferred 1,344k ozs at 8.8 g/t gold
- Bananghilig: Inferred 650k ozs at 1.3 g/t gold
- Current Probable Reserves: Co-O Mine 502k ozs @ 10.1 g/t gold
- Co-O Mine Resources and Reserves to be maintained at current levels
- Conceptual exploration target size ** of Co-O Mine of 3 to 7 million ozs
- Excellent exploration upside: high grade vein and disseminated bulk gold targets, plus seven copper targets
- 820 km2 of tenements and exploration budget for FY 2011/12 of US$27M
** The potential target size and grade is conceptual in nature, and there has been insufficient exploration to define a mineral resource, and it is uncertain if further exploration will result in the target being defined as a mineral resource. Refer to Stock Exchange announcement dated 24 August 2011.
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Quarterly Activities Report - London Stock Exchange
Board of Directors:Geoffrey Davis (Non-executive Chairman) Peter Hepburn-Brown (Managing Director) Ciceron Angeles (Non-executive Director) Robert Weinberg (Non-executive Director) Andrew Teo (Non-executive Director)
Capital Structure:
Ordinary shares: 188,903,911
Unlisted options: 715,000
Performance rights: 250,000
ASX and LSE (Code: MML) Address and Contact Details: PO Box 860
Canning Bridge WA 6153
Telephone: +618 9367 0601
Facsimile: +618 9367 0602
Email: admin@medusamining.com.au
Website: www.medusamining.com.au
- New Mill: Construction commencing on new large leach tank, detoxification circuit, thickener upgrade.
- Production: 16,270 ounces at a recovered grade of 8.00 g/t gold and cash costs of US$242 per ounce. Production influenced by accelerated development and operational disruptions by tropical storm Sendong (mid December 2011) and continued torrential rainfall over the Christmas and New Year period.
- Saga Shaft: currently at 210 metres. Re-optimisation of development plan recommends sinking directly to Level 8 (350 metres below surface) to install loading facilities. Completion estimated Q4 in CY12. Production revised due to high percentage of development ore produced to support Level 8 development.
- Emergency assistance: two mines rescue teams assisted at the Pantukan landslide site 50km from the Company's operations.
- Drilling is continuing with six surface and five underground rigs. Exploratory drilling for new deep vertical shaft is underway to the east of the Agsao Shaft.
- Drilling update planned for the next quarter and regional IP survey planned.
- Primarily infill resource drilling in progress with seven rigs with the aim of upgrading a majority of resources to Indicated category.
- Drill results announced on 17 January 2012 include 6.05 metres at 17.09 g/t gold, 28.55 metres at
1.54 g/t gold, 12.70 metres at 2.44 g/t gold, 14.05 metres at 1.20 g/t gold, 10.70 metres at 1.88 g/t gold, 11.95 metres at 1.19 g/t gold and 7.45 metres at 3.55 g/t gold.
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Quarterly Activities Report - London Stock Exchange
SAUGON PROJECT- Drilling completed, IP survey nearing completion.
ANOLING- Drilling with four rigs is underway.
CORPORATE & FINANCIALS(unaudited)
- Total cash, cash equivalent in gold on metal account and bullion at end of quarter of approximately
US$80.2 million
The locations of the Company's projects are shown on Figures 1 and 2 (please see link at the end of this announcement).
Co-O MINE Gold Production
The production statistics for the December 2011 half-year and quarter with comparatives for the previous three quarters are summarised in Table I below.
Table I. Gold production statistics
Unit | Qtr | Qtr | Qtr | Qtr | HY | |
ended | ended | ended | ended | ended | ||
31 Dec 11 | 30 Sep 11 | 30 Jun 11 | 31 Mar 11 | 31 Dec 11 | ||
Tonnes | WMT | 71,872 | 41,596 | 69,562 | 71,060 | 113,468 |
mined | ||||||
Ore milled | DMT | 68,008 | 42,152 | 76,365 | 71,747 | 110,160 |
Recovered | gpt | 8.00 | 8.33 | 11.05 | 11.58 | 8.10 |
grade | ||||||
Recovery | % | 93% | 93% | 93% | 94% | 93% |
Gold | ozs | 16,270 | 10,510 | 25,233 | 25,114 | 25,780 |
produced | ||||||
Cash | US$/oz | $242 | $291 | $194 | $191 | $261 |
costs (1) | ||||||
Gold sold | ozs | 10,000 | 15,446 | 21,423 | 25,911 | 25,446 |
Average | US$ | $1,761 | $1,587 | $1,518 | $1,401 | $1,655 |
gold price | ||||||
received |
Note:
(1) Net of development costs and includes royalties and local business taxes
Gold production for the quarter was 16,270 ounces, at an average recovered grade of 8.00 g/t gold and cash costs of US$242 per ounce, inclusive of royalties and local business taxes.
As previously advised to the market, the mine continues to operate predominantly in development mode to prepare for the future production increase and all development ore mined to date has been treated through the mill. The increased amount of development ore treated is the primary reason for the lower recovered grade for the past two quarters, compared to quarters from the previous years.
Disruption to production during the quarter was experienced following the passing of tropical storm Sendong (see announcement 19 December 2011) followed by continued torrential rain over the Christmas and New Year period. As a consequence of this disruption over several weeks, in
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Quarterly Activities Report - London Stock Exchange
combination with the accelerated development program currently undertaken to prepare for the future production increase and the decision to sink the Saga Shaft to Level 8 (previous target Level 6), the Company has revised its production guidance to 75,000 ounces for the financial year.
Whilst cash costs per ounce for the quarter is relatively high at US$242 per ounce (YTD: US$261 per ounce), primarily as a result of a drop in gold production, the Company anticipates, that the unit costs will average circa US$230 per ounce for the year as production increases in the second half of the financial year.
Medusa, an un-hedged gold producer, sold 10,000 ounces of gold at an average price of US$1,761 per ounce during the quarter.
Graph 1 (please see link at the end of this announcement) is the updated Preliminary Development
Timetable and Production Guidance for the new Co-O Mill followed by the Bananghilig Project.
The total estimated Capex (inclusive of mine development and shaft sinking) for the Phase 3 expansion of Co-O is US$70 million which will funded entirely from the Company's cash flow.
In November 2010, the Board approved the construction of a new mill with capacity to produce 200,000 ounces of gold per year based on processing up to 750,000 tonnes per year at the current reserve grade of the Co-O Mine.
The application to upgrade the Environmental Clearance Certificate for the current Co-O Mill to 2,500 tonnes per day awaits signing in Manila pending completion of a mining industry policy review.
Major renovations are continuing at the Co-O Mine to modernise the mine for its expected long life. Acceleration of the lateral development is ongoing to ensure the underground infrastructure and on-vein
development will be in place for the Saga Shaft. This accelerated development reached a record during the quarter and consequently increased the proportion of development ore supplied to the mill which is expected comprise the majority of the mill feed during this accelerated development period.
Sinking of the Saga Shaft progressed smoothly, except for interruptions in December during the passing of tropical storm Sendong and subsequent torrential rainfall, and is currently at 210 metres depth.
A re-optimisation of the development programme has determined that the best outcome is to sink the Saga Shaft directly to Level 8 (approximately 350 metres below surface) and by-pass Level 6 as envisaged in the earlier design. The re-optimisation is based on
- 70% of the resources (approximately 1.3 million ounces) are above Level 8;
- The successful up-grading of the Agsao Shaft during the September quarter;
- Continuing good underground exploration results; and
- The increasing rate of development.
The successful upgrading of the Agsao Shaft means the mine can now haul approximately 1,000 tonnes per day to feed the mill at its current capacity. Minor fine tuning is continuing at the Agsao Shaft.
Development on Level 6 is continuing mainly to the east from the Sabor Shaft. A second internal shaft between Levels 5 and 6 has been completed to increase production from Level 6. Preparations are
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Quarterly Activities Report - London Stock Exchange
underway to sink ore passes from Level 5 to Level 8.
Mine Production
Production was disrupted by the passing of tropical storm Sendong (Washi) on 16th and 17th of December 2011 (as announced on 19 December 2011). Torrential rain disrupted transport of ore from the mine to the mill due to haul road damage. Torrential rain continued over the Christmas and New Year period triggering landslides and overflowing the Agsao River bridge immediately adjacent to the mine resulting in erosion around the bridge abutments, and also, separately, of some embankments within close proximity of the Saga Shaft.
The continual rain has severely hampered the haul road repairs and forced reduction of ore haulage to avoid damaging the road. Repairs are continuing but are dependent on weather conditions.
Ore trucked to the mill during the quarter was predominantly development ore, low grade stockpiles and some stope ore.
The re-optimisation of the sinking of the Saga Shaft to Level 8 will mean that the high rate of development will continue until this shaft is completed, continuing the high percentage of development ore in the mill feed. Once the Saga Shaft is completed with an estimated haulage capacity to 1,500 tonnes per day, then it will be possible to increase the amount of stope ore that is hauled and processed.
It is estimated that the Saga Shaft will be completed and hauling from Level 8 commenced during the
December quarter 2012.
The Company provided two of its mine rescue teams to local authorities in the Compostella Valley region approximately 50 kilometres to the south of the Company's operations to assist with rescue activities at the isolated Pantukan landslide disaster area. The landslide hit the village of Pantukan during the same period of torrential rain that the Co-O Mine site experienced in early January 2012.
The current status of activities is:
- Construction of a new large leach tank and a detoxification plant, and planned re-furbishment of four small leach tanks to commence in February;
- Site works for the construction of new crushing and grinding sections (separate from the current crushing and grinding sections) to commence in February 2012;
- Upgrading of the thickener and the elution circuit to commence in March 2012;
- 80% completion of tailings dam number 5, which was interrupted during November and December by rain. Approximately 2 weeks of work remain to be completed.
Drilling with six surface rigs and five underground drilling rigs is continuing. Drilling of two vertical holes located east of the Agsao River to approximately 1,000 metres is underway to test for suitable positions for a new deep shaft, likely to target 750 metres depth initially.
The Company plans to announce drilling results during April 2012.
Planning has commenced of an extensive regional Induced Polarisation/Resistivity ("IP/Res") and ground magnetics programme around the Co-O Mine.
Lost time accident frequency rate (LTAFR) for the six months to 31 December 2012 is 1.10 including exploration. By comparison, the latest West Australian gold mining industry figure available to 30
September 2011 was 3.10, excluding exploration statistics of 6.70.
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Quarterly Activities Report - London Stock Exchange
As reported on 31 October 2011, an underground miner on afternoon shift was involved in a fatal accident in a shrinkage stope at the mine. The broken ore that the miner was standing on collapsed due to an undetectable cavity caused by bridging above the full ore chute.
There were no breaches of any of the project's operating regulations during the quarter.
The Tambis project comprising the Bananghilig Gold Deposit (Figure 2 - please see link at the end of this announcement) is operated under a Mining Agreement with Philex Gold Philippines Inc. over Mineral Production Sharing Agreement ("MPSA") 344-2010-XIII which covers 6,262 hectares.
Figure 3 (please see link at the end of this announcement) shows the Interpreted geological map showing drill hole locations for TDH 103-130 & 135-141.
In July 2010, new regional and detailed mapping and drilling programmes were commenced with the aim of validating the current resource of 650,000 ounces of gold and extending it to provide a reserve of approximately 1,000,000 ounces. This reserve would form the basis for a feasibility study which would target production of 200,000 ounces of gold per year from a new milling facility.
The announcement of 12 September 2011 summarises the Tambis regional geological setting, local geological setting, deposit description and mineralisation, shows a typical cross -section through the deposit and the drill hole intersections obtained for the period 24 July 2010 to 31 August 2011. Additional information is contained in the September 2011 quarterly report dated 24 October 2011.
On 17 January 2012 a drilling update contained continuing good results. Drilling is now focused on infill to upgrade as much of the resources as possible to the Indicated category. A new resource estimate is planned for the September quarter 2012.
During the period 31 August 2011 to 31 December 2011, 8,568.95 metres of diamond drilling in 21 holes has been completed. The drilling continues with 7 rigs in the area.
Figure 3 (please see link at the end of this announcement) shows only the drill holes with new assays, being holes TDH 103 to 141 excluding TDH 131 to 134 which have been drilled outside the Bananghilig area.
First pass assaying for gold has been undertaken on all samples submitted to the laboratory. Additional assaying is ongoing from selected intervals for base metals, silver and other elements. The announcement dated 17 January 2012 contains additional detailed information and drill hole intersections are reported down to 0.5 g/t gold. The results are summarised in Table II where
significant intercepts are defined on the following basis:
(i) lower cut off grade of 0.5 g/t Au, and
(ii)
