Medusa maintains reserves, lowers costs

Vancouver – Medusa Mining (MLL-T, MML-L, MML-A) has released an updated reserve estimate for its Filipino Co-O mine that lowers the gold grade while keeping total ounces roughly constant.

The reserve estimate comes soon after the company released an upgraded resource estimate that increased indicated resources by 4% and inferred resources by 36% at the high-grade underground gold mine.

Probable reserves now stand at 1.47 million tonnes grading 10.7 grams gold per tonne for 505,000 contained ounces. Reserves were based on US$900 per oz. gold, a minimum stope width of 1.2 metres and a stope cut-off grade of 2.62 grams gold. The reserve estimate released a year ago contained 5,000 fewer oz. but had a grade of 14.9 grams gold in 1.04 million tonnes.

Indicated resources currently stand at 1.42 million tonnes grading 13.2 grams gold and inferred resources contain 2.9 million tonnes grading 9.6 grams gold.

The current reserves support a five year mine life at a production rate of 100,000 oz. per year. Medusa produced 25,000 oz. at an average grade of 13.65 grams gold in the last quarter, bringing annual production to a record 89,700 oz. gold.

“We expect to be able to annually maintain a mine life of approximately five years based on reserves,” said Medusa’s managing director Geoff Davis in a statement. “Narrow vein mines are well known to operate in this manner and continually extend reserves and mines lives, in some cases for decades. We are optimistic Co-O will repeat this pattern.”

The company reports the grade decrease was largely due to the addition of veins to the resource estimate, including narrower and lower-grade veins, and a reinterpretation of the 3-D model. More lower-grade material was included after the cutoff grade was reduced from 3.3 grams gold to 2.62 grams gold because of lowered mining costs.

The Co-O mine is an especially low-cost producer. Medusa produced gold at an average cash cost of US$182 per oz. in the last quarter. The average cost-per-oz. for the fiscal year ending June 30, 2009 was US$213 while the average cost for the recently closed fiscal year was US$184. The company forecasts average production costs of US$190 per oz. for the upcoming year.

In late June the company released a number of short, high-grade surface drill results from the mine that were included in the resource estimate. Hole 241 cut 2 metres grading 23.35 grams gold per tonne from 278 metres, hole 244 hit 1 metre averaging 22.13 grams gold from 380 metres and hole 252 intersected 1.2 metres grading 28.74 grams gold.

Medusa’s stock price was down 9¢ or 2.4% on the latest news to close at $3.68 on 25,000 shares traded. The stock briefly hit a high of $6.25 when it was listed on the Toronto Stock Exchange in late November and hit a low of $2.75 in February. The company has 187.5 million shares outstanding.