Medusa expands; hunts for more gold

Medusa Mining’s (MML-L, MML-Z) vein system at its Co-O underground mine in the Philippines — which remains open at depth and in all directions — produced 15,557 ounces of gold in the quarter ended June 30 at cash costs of US$283 per oz. gold, including royalties and local business taxes. For the full year to the end of June, Co-O produced 60,595 oz. gold at a recovered grade of 8.1 grams gold and cash costs of US$261 per oz.

Six surface and five underground drill rigs continue to turn at the mine in southeastern Mindanao, the second-largest island in the Philippines. The company believes it can enlarge its resource base from the current indicated resource of 1.89 million tonnes grading 11.8 grams gold per tonne for 715,000 oz. of contained gold and inferred resource of 4.33 million tonnes grading 9.4 grams gold for 1.30 million oz. gold. Total resources add up to 6.22 million tonnes grading 10.1 grams gold for 2.02 million oz. gold. (The current resource model does not include 979 drill-hole intersections greater than 2 grams gold per tonne over more than 0.2 metres.)

In an update on Aug. 14 the company said it believes its exploration target “remains well supported” at between 3 million oz. gold in 9.8 million tonnes and 7 million oz. gold in 23.5 million tonnes using a grade range of 9 to 11 grams gold per tonne with a preferred average grade of 10 grams gold per tonne.

“The combination of past production of approximately 510,000 oz. and the current global resource of 2.02 million oz. indicates the deposit size is approaching the lower end of the Conceptual Exploration Target size range,” it outlined in a press release.

Drilling so far in fiscal 2012 has focused on infill drilling to boost confidence levels in key mining areas and step-out drilling along strike and at depth to explore for upside, the company says. Notable drill results include 2.15 metres of 52.06 grams gold; 1.20 metres at 21.40 grams gold; 1.35 metres at 185.21 grams gold, and 2.90 metres of 78.94 grams gold.

Next year the company intends to drill with the same number of rigs in an effort to bring total resources at the project up to 2.5 million oz. Subsequent drill programs will de tailored to replace, at a minimum, mined ounces each year to maintain the resource base, Medusa says.

Management spent US$35.1 million on exploration in the first six months of 2012. It has high-grade vein and disseminated bulk gold targets as well as nine copper targets on the property.

Earlier this month the company reported that step-out drilling had increased the strike length by 400 metres to 2,000 metres and it remains open to the east and west and at depth. The company said the number of veins in the Co-O system was expanding and because of the increasing diversity of type and grade variability between veins, it has introduced a 3.0 gram gold per tonne cut-off grade compared to the 0 gram gold per tonne cut-off grade it used in fiscal 2011. This has boosted Co-O’s global resource grade to 10.1 grams gold from 9.6 grams gold.

The company is building a new mill for the narrow-vein underground mine that will have the capacity to produce 200,000 ounces of gold a year based on processing up to 750,000 tonnes a year. And it is in the process of sinking the Saga Shaft, which will have a haulage capacity of 1,500 tonnes per day. The shaft is expected to reach Level 8 — or the 350-metre level — by the end of August with haulage starting in the December quarter.  

Medusa’s production guidance for fiscal 2012 is weighted toward the second half of the year and the company expects to produce a total of between 100,000 and 120,000 oz. gold.  By 2015 the company anticipates it can reach about 400,000 oz. gold annually.

The gold mine is situated along the Diwata Ranges, which form part of the east Mindanao Ridge, a mineralized region with a mining history dating to before the Second World War. The Diwata Ranges are to the east of the region’s main structural feature — the Philippine Rift Fault — which stretches about 1,200 km in a northwesterly direction from southern Mindanao to northern Luzon and provides the region’s main source of volcanism and mineralization.

Medusa’s tenements lie between the gold and copper districts of north Davao in the south and Surigao in the north. The mine lies on the west bank of the Agsao River, about 20 km east of the Philippine Fault and 140 km north of Davao. The mine area is underlain by a probable Eocene (56-34 million years) to Oligocene (34 to 23 million years) of age, gently north-dipping sequence of basaltic andesitic to andesitic volcanic flows and minor volcaniclastics.

The Co-O diatreme flares upward in all directions towards the surface, measuring about 1.5 kilometres in diameter and narrows down at depth like a funnel of unknown dimensions. The company infers that the diatreme could easily reach 1 kilometre or more in depth given its surface dimension (the vertical extent is more than its lateral extent).

Medusa has a 25-year mine licence for Co-O that is renewable for a second 25-year period.

In addition to Co-O, Medusa’s most advanced project, Bananghilig, has an inferred resource of 15 million tonnes grading 1.3 grams gold for 650,000 oz. contained gold.  

The Bananghilig gold deposit is a large diatreme breccia system where Medusa hopes initially for reserves of 1 million oz. for a five-year mine life producing 200,000 oz. per year. Highlights from drill results released early this year included 6.05 metres grading 17.09 grams gold; 28.55 metres of 1.54 grams gold; 12.70 metres of 2.44 grams gold 14.05 metres of 1.20 grams gold; 10.70 metres of 1.88 grams gold and 7.45 metres of 3.55 grams gold.

At the end of June Medusa was debt-free and sitting on cash and equivalents including gold bullion of US$53.5 million.