Market: AIM Think Medusa Mining, and most investors will think ?Aha! The Co-O mine!?. But there?s a bit more to Medusa than that?
Via their merger nine months ago with Philsaga, and a string of JVs and memorandums of understanding with other companies, the company now controls a jigsaw of tenements running north-south down the East Mindanao Ridge for over 70 kilometres, from Tambis in the north to Saugon in the south. The company has over a dozen different projects sited within a volcanic/subduction zone running parallel with the main Philippine Rift fault and richly endowed with porphyry structures, high grade epithermal gold in vein systems and disseminated gold in sedimentary systems.
Co-O is literally at the centre of operations, and is the company?s operating mine and processing plant, but with such a large regional holding ? which contains several small historic mining operations ? there is huge scope for new discovery.
Even at Co-O, now a well established mining project, this year has seen significant new discoveries to the east of the Oriental fault, which cuts the 1.5 km east-west strike of the Co-O narrow epithermal vein system. Original exploration at Co-O did not discover the mineralisation to the east of the fault, which has been displaced to approx 300m greater depth and by about 20-30 metres to the south. It wasn?t until 2004 that drilling first intersected sub-surface veining in the east, and initially outlined a further 250m of strike. This year, new eastern veins ? named Jereme and New Catto 1-5 ? have been revealed by the Co-O Deeps drilling campaign, designed to test the vein system below the existing mine bottom on both sides of the fault. The most recent assay results show consistent double-figure and occasional bonanza grades in the Jereme and New Catto Veins, with reported intersections in NCV3 of 5.2m at 107.51gt (which included 0.35 metres at 1,077.45 g/t!) and in NCV4 of 0.4m at 160.60gt. Jereme has turned up grades of 64.56gt and 198.4gt over narrow widths.
This ongoing drilling and discovery programme has allowed a significant upgrade of resources at Co-O, which now stand at 713,000 ounces, indicated & inferred at an average grade of 10.9gt, and include 256,000 ounces of Probable Reserve. The importance of the new high grade eastern veins ? which are still open in three directions - is shown by the contribution of Jereme and NCV1-3 (the high grade 4 and 5 are not yet included) of 267,000 ounces to the total. Drilling is ongoing to reach an initial target of 1 million ounces ? this would not seem a problem given the high grades being encountered and the fact that the entire deposit is still open to depth. Company thinking is that Co-O may be similar to the Diwalwal deposit some 60km to the south, which has produced over 7 million ounces of gold.
Operations at Co-O are now ramping up steadily to a target output of 100,000 ounces per annum by 2008/9. With a current head grade of 17.7gt and cash costs of around $200 an ounce, Medusa are confident of meeting their output targets, using ore from Co-O itself and from outlying deposits such as Anoling.
Meanwhile, elsewhere in the Medusa tenements, more new discoveries have been made. At the Anoling project ? a few km to the north of Co-O ? the award of mining permits in March triggered a very encouraging drilling programme. Anoling comprises many artisanal workings and old mines, and examination of existing workings shows that the veins are up to 2 metres wide in shoots of between 50 to >300 metres in length.
Two parallel veins have been identified, Hope and Alcorn, with strike lengths of 650 and 750 metres respectively. Drill core from the Hope vein returned potentially economic grades of gold ? ranging from 2gt up to 24gt - along 300m of strike, and is presently being infill drilled before a decision to commence underground exploration.
Eighty metres south, in the area of an existing mineshaft, the Alcorn vein has been tested by underground sampling and drilling with good grades being returned from the underground sampling and from drill hole ANL009. Underground exploration has now commenced through the refurbished Loring Shaft, previously dug by local prospectors, and further sampling has established 54 metres of strike length of mineralised vein.
Elsewhere, a regional mapping and sampling programme completed in July has identified a distinct mineralised corridor running south from Tambis for approximately 16 km along the Barobo Fault. The intersection of the northernmost part of the Barobo Fault and the Lianga Bay Fault is believed to be the centre of a truncated caldera which is the major focal point for the extensive Tambis alteration zone, where a sizeable elliptical-shaped diatreme breccia body, some 1,000 long and 750 metres wide suggests the presence of copper-gold porphyry system, as found elsewhere in the Philippines in similar geological settings.
This newly discovered corridor contains multiple features along its entire length, suggestive of a regional scale mineralisation system capable of hosting several different styles of gold deposits ? including sedimentary deposits, skarn-type deposits and epithermal vein systems - as well as porphyry copper-gold and related deposits. More detailed work to allow prioritising of targets for further exploration is in hand.
At Tambis itself, exploration surface and underground drilling to test earlier results from the Bananghilig area, where small scale mining has been carried for several hundred years, has delineated a large area of sub-horizontal mineralisation in a ?blanket? formation under a sedimentary limestone sequence which appears to act as a cap. True width of this semi-horizontal layer has been estimated from both underground horizontal and surface inclined drilling to be approximately 15-18 metres at grades averaging 1.5-2gt.
But all this is still only scratching the surface of the large land package that Medusa have amassed in an area where high grade gold is the norm ? the company rarely bother reporting less than 2gt ? and new targets are constantly being discovered. To quote Chairman Kevin Tomlinson, in his recent annual Overview: ?The exceptional Co-O Mine is located in a region which is now being demonstrated to have superb potential for many more gold deposits of various types, as well as a number of porphyry and related copper-gold deposits. In all my experience reviewing mines around the globe, this has to be one of the best mineralised 800 km² that I have seen anywhere.?
As a producing miner, Medusa made a profit of almost AU$9 million in a very difficult year on production of less than 17,000 ounces. If they meet their target of 40,000 ounces a year rising to 100,000 ounces, profits will improve significantly over the next two years. With an ever-growing portfolio of advanced projects which will provide additional feed for the CoO mill, AU$20 million in the bank and no debt, Medusa?s market cap of £83 million is still well short of the initial target placed on it by company broker Ambrian of 84p per share.
For those who like exploration, but enjoy the security of a concurrent and escalating mining operation, Medusa is worthy of close examination!
Highly recommended additional reading for detailed maps, drawings and cross sections:
www.medusamining.com.au/newsroom/index.html
www.medusamining.com.au/newsroom/presentations.html
www.medusamining.com.au/reports/docs/2007_annual.pdf
To receive these articles via email sign up for our weekly news letter here.