Medusa expands, hunts for more gold

Medusa Mining’s (MML-L) vein system at its Co-O underground gold mine in the Philippines — which remains open at depth, in all directions — produced 15,557 oz. 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 and cash costs of US$261 per oz. gold.

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 contained oz. gold, and the 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 metre.)

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 grams 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 ounces, and the current global resource of 2.02 million ounces 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 stepout drilling along strike and at depth to explore for upside, the company says. Notable drill results include: 2.2 metres of 52.06 grams gold; 1.2 metres of 21.40 grams gold; 1.4 metres of 185.21 grams gold and 2.9 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 be 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 half of 2012. It has high-grade vein and disseminated bulk-gold targets, as well as nine copper targets on the property.

In early August the company reported that stepout drilling had increased the strike length by 400 metres to 2,000 metres, and that it remains open to the east, west and at depth. The company said the number of veins in the Co-O system is expanding, and that because of the increasing diversity of type and grade variability between veins, it has introduced a 3 gram gold per tonne cut-off grade, compared to the zero-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 oz. gold a year based on processing up to 750,000 tonnes a year. And it’s 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 eight” — 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 year’s second half, and the company expects to produce a total between 100,000 oz. and 120,000 oz. gold. By 2015, the company anticipates reaching 400,000 oz. gold annually.

The gold mine is located along the Diwata Ranges, which form part of the east Mindanao Ridge, a mineralized region with a mining history dating before the Second World War. The Diwata Ranges are east of the region’s main structural feature — the Philippine Rift fault — which stretches 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. And the mine area is underlain by a probable Eocene- (56 to 34 million years) to Oligocene-age (34 to 23 million years), gently north-dipping sequence of basaltic-andesitic to andesitic volcanic  flows, and minor volcaniclastics.

The Co-O diatreme flares in all directions towards the surface, measuring 1.5 km in diameter and narrowing down at depth like a funnel, with unknown dimensions. The company infers that the diatreme could easily reach 1 km 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 contained oz. gold. 

The Bananghilig gold deposit is a large diatreme breccia system where Medusa hopes for initial reserves of 1 million oz. for a five-year mine life producing 200,000 oz. a year. Highlights from drill results released early this year included 6.1 metres grading 17.09 grams gold; 28.6 metres of 1.54 grams gold; 12.7 metres of 2.44 grams gold; 14.1 metres of 1.20 grams gold; 10.7 metres of 1.88 grams gold; and 7.5 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.