Medusa Mining
Medusa Mining is an expanding gold producer in the Philippines, listed on the London AIM and the Australian ASX. Medusa's gold production operations are very robust due to its high grades and low production costs, and over the next 12 to 18 months should expand considerably from an initial annualised 40,000oz as new multiple mines are brought into production to feed a central milling facility. Medusa is focused on expanding its resource base and production profile to benefit not only shareholders but also its employees and local communities. The Company’s exploration upside is rated as excellent for the discovery of new gold and copper-gold deposits.
Medusa Mining – Interview Transcript
So Geoff, why the Philippines?
The Philippines - I’ve got a long experience in the Philippines. I first worked there in 1980 and during that period the mineral potential of the Philippines was pretty obvious to me. When Medusa was formed we had the objective of eventually getting to the Philippines because of its high mineral potential and some very high-grade deposits there. It’s got a long history of mining, it’s got a mining culture and I felt reasonably comfortable.
So, what is Medusa Mining’s business model and what makes Medusa stand out from the crowd?
Our business model is based around high-grade narrow vein deposits. We have the Co-O mine with a current resource of just over 700,000 ounces, at just over 10.9 grams; probably one of the world’s higher grade deposits. That’s expanding, so our business model is built around production and, obviously, we can maintain a fairly low cash cost over the long term. We are aiming for US$200 cash cost – obviously, that is quite exceptional, that makes us stand out. But also, on the exploration front, we have over 820 square kilometres of tenements in East Mindanao, one of the most richly mineralized districts in South East Asia, and our exploration potential there, I think, is second to none with more high-grade gold deposits, disseminated gold deposits of lower grade and also copper gold porphyries.
So Geoff, talk us through Medusa Mining’s activities over the last 6 months.
Well, perhaps I should go back just a little more than that, to the June quarter of last year when we almost achieved our initial production objective of 40,000 ounces, on an annualised basis. But, at the same time our exploration was being very successful, and in August we announced an increase in our resources at the Co-O mine to the 700,000 ounces that I mentioned earlier. Obviously, to do justice to the mine it was apparent that we should increase our production rate and we should do the expansion to do that, sooner rather than later. So, in the September quarter of last year we made the decision to cut back our production, while we expanded the mine. Being an underground mine, there’s a limit as to how much you can do at any one time and that necessitated the cut back to approximately 5,000 ounces per month. At that level we thought that we would probably almost break even and that’s what we’ve been doing. We’ve been putting a little bit of cash into the mine as well, but essentially breaking even over that period. At the end of that expansion we will be producing 60,000 ounces per year, from the middle of next year onwards. But, from July this year we’ll get some benefits from that expansion and our production will move back up to that 40,000-ounce level on an annualised basis. Recently, we’ve announced another expansion, independent of the first one, which will take our production to 100,000 ounces per year in the first quarter of 2010.
Has Medusa Mining been doing any exploration off-site of Co-O, in the last 6 months?
Most of our exploration has been around Co-O, but we’ve also been doing some exploration at our Anoling project, which is another narrow vein mine, which is still in the exploration phase. We are doing some underground development there to test our drilling and we’ve also been doing a bit of drilling up at the northern end of our tenements, the Tambis Bananghilig area, looking for narrow, high-grade veins to add to our mill feed. So those are the three areas, but most of our work is concentrated on the Co-O mine and its surrounds.
So Geoff, what is Medusa’s financial situation?
Our financial situation is quite strong; at the end of the last quarter, March 31st, we reported a cash balance of AU$7.4 million.
Medusa Mining is ASX listed. Has Medusa Mining been effected by the Opes Prime and Lift Capital affairs?
No, it hasn’t at all. None of our shareholders that we’re aware of have been affected by it. None of the directors have been affected by it. I should also mention that we are AIM listed. But no, we haven’t had any effects at all from those situations.
Do you have any thoughts on the ASX and AIM markets that you’d like to share?
Yes I do actually, I think investors in the UK and in Europe are much more used to investing in companies which are probably operating in higher risk environments than Australian companies, in Australia. The Australian investor is generally spoilt by having a large choice of Australian mining companies operating at home and there’s generally an aversion to be involved in companies offshore. So, we’ve had a very beneficial experience working with UK and European investors, its done us very well and at this time more than 60 per cent of our shares are actually owned outside Australia.
So Geoff, what can investors expect from Medusa Mining over the next six months?
Well, over the next 6 months our phase 1 expansion starts to kick in - from July onwards our production starts to move up - and in the middle of next year we get up to 60,000 ounces, which will be the completion of phase 1. In addition, sometime in July we’ll be commencing phase 2 expansion, which takes our production up to 100,000 ounces in early 2010. The Co-O mine; we will be putting out a new resource statement in August and, optimistically, that will be significantly more than the current 700,000 ounces. So we’ll continue to drill there, at the Co-O mine, and there will obviously be results coming out irregularly. Today we actually published some very high-grade results - a very wide intersection of 15.9 metres at 34 grams. Hopefully we’ll get some more of those in the future, but, the Co-O deposit is obviously still expanding quite significantly. On other fronts, we hope to be drilling our first porphyry copper-gold target in the next few months. We’re in the final stages of getting permits in place. This was a discovery made back in 1974 as an aid programme, and the first hole of a five-hole programme hit commercial grade copper; 150 metres at 0.4 per cent copper, ending in high grade. So, we’re going back to re-drill that and hopefully to find a significant porphyry copper deposit. We’ll be doing other regional exploration and firming-up other drill targets.
Where do you hope to see Medusa Mining in five years’ time, Geoff?
Well in five years’ time, based on our current understanding of the Co-O mine, we should be processing approximately 1,000 tonnes of high-grade narrow vein ore, per day. At our current reserve grade that would give us in excess of 100,000 ounces per year; the current reserve grade is 11 grams per tonne. We think that should be relatively easy to achieve and maintain, so we’ve got that strong production. I also see that we’ll be in pre-feasibility, or feasibility work on at least the Lingig porphyry copper deposit. We have other porphyry copper targets as well, which we should be in the process of drilling up and also - I think in the Northern end of our tenements - we’ll probably end up with a number of disseminated gold deposits, open pit-able, and probably be in the process of constructing a new gold processing plant in that area, to treat the open pit ores, if it’s not already going within the five year period.
While you’re on the line Geoff, I just want to ask you just a couple of other questions. What would you like better understood about the Philippines and about doing business in the Philippines?
Well, I think we are a good example that it does work, it can be done. There are other companies that are now progressing there quite well - there are projects under construction, there are companies in production. There are also some very big investments coming into the Philippines; Xstrata, in joint venture with an Australian company called Indophil, are looking at spending US$2 billion on a porphyry copper deposit, down to the south of us. I think that in combination with a big deposit that Anglo’s drilling up to the north of us - which is likely to be a plus US$1 billion development. - all goes well from an investor’s view of the Philippines because here’s two major companies looking at investing major amounts of money. It has a long mining history, and successful mining history, so I think the Philippines should be viewed a lot better than some investors do at the moment.
Other Medusa Mining articles
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24/10/08 Medusa Mining has a lot going for it as a low cost gold producer
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25/07/08 Medusa Mining reaffirms target of 100,000 ounces of gold production by 2010
Other Medusa Mining news
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01/12/08 Medusa discovers new high grade vein at Co-O gold mine in Philippines
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31/10/08 Medusa Mining increases gold production by 35%
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24/09/08 Medusa Mining says Crosby Capital offer "inadequate and opportunistic"
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19/09/08 Medusa Mining leaps on approach from Crosby Capital
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26/08/08 Medusa Mining updates JORC reserve estimate for Co-O Mine
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15/08/08 Medusa Mining announces discovery of magnetite-copper-gold porphyry
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12/08/08 Medusa Mining increases gold resource to 0.862 million ounces
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11/06/08 Medusa Mining to drill at Kamarangan in two weeks
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04/06/08 Medusa Mining firms on discovery of more gold veins
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07/05/08 Medusa Mining hits wide, high grade gold vein