We had a chance to talk with Geoffrey Davis and Roy Daniel of Medusa Mining Limited which is listed on the ASX and AIM markets. With a primary focus on gold mining in east Mindanao in the Philippines, Medusa has proven to be a low-cost fast growing gold producer.
The Beginning of a Compelling Story
Managing Director Geoffrey Davis started with BHP in 1973, and seven years later, found himself playing regional manager for the company in the Philippines. In the early eighties, he left the company to become a consultant. The early part of this century found Davis in Perth as the founding Managing Director of Medusa, which IPO’d in December 2003 with a few properties in Australia, and a joint venture in the Philippines, a property which quickly became a wholly owned subsidiary of Medusa.
“That gave us access to the high grade, underground Co-O Mine,” said Davis, “and a large tenement area, and importantly, a milling complex, because this mine
Location of the Company's Tenements
had been put into production initially back in the late ‘80s by an Australian company, but
they mechanized a high grade, narrow vein mine and diluted the ore, and closed down after producing 60,000 ounces of gold.”
When a private company began processing there at up to 150 tonnes per day in 2000, the very new Medusa Mining Limited had an idea for a joint venture with the private company. By the end of 2006, they had purchased the private company, and a short time later, received the necessary permits from the government to expand the mining operation. The initial production target was just 40,000 ounces of gold, but as exploration progressed, the first resource estimate upgrade moved from 270,000 to 700,000 ounces of gold, and a second wave of expansion began. The global resource at Co-O has now expanded to 1.38 million ounces at 10.8g/t gold (and is expected to continue increasing). Numbers like those have really started to pay off for Medusa.
The Co-O Treatment Plant
Davis said, “In the last financial year, we produced just under 48,000 ounces of gold; average cash cost in U.S. dollars of $213 per ounce for the year.”
The company is more than confident that low cash costs will continue well into the future.
“In the last quarter of this last financial year, which ended in June, we produced 16,000 at $198, including royalties and local business taxes. We’re now on our way to being a 100,000 ounce producer from early 2010 onwards, and we’re looking to build a company over the next few years that is a 300,000 to 400,000 ounce producer,” commented Davis.
Co-O Minesite Facilities under Construction (Warehouses, Workshops, Power House, etc)
Most companies have one to two other projects they’re working on at any given time, but that’s hardly the case with Medusa. Despite their tiny size, they have one of the most aggressive exploration programs of any like-sized mining company in the world with a budget of approximately US$14 million. At the Co-O Mine, they have identified twelve different veins and a long mine life, but they’re not content to stop at this point.
“We have 12 rigs full time; 9 of those are drilling around Co-O, 6 of them to extend the mineralization along strike to see if we can put in more mining infrastructure and increase that production so we can fill the mill. The other 3 rigs are drilling around Co-O looking at new vein systems to see if we can find other mineable mineralization. And then, as I said, there are 3 rigs over at the Lingig copper project, and there are 3 underground rigs at Co-O as well,” mentioned Davis.
What’s more, though, is that the company recently announced the low grade deposit Bananghlig. At 850 metres long and 550 metres wide (and open), it’s a big target area. The estimates indicate there are currently 650,000 ounces of gold in there, and Medusa expects that number to get larger. In addition other potentially open pit targets have been identified near-by. The aim is to drill up sufficient resources to support a new 200,000 ounce per year milling facility in this area.
Part of the anticipation surrounding this company, though, is the area it’s in.
Davis said, “East Mindanao is probably the best I’ve seen in Southeast Asia. I’ve seen most of Indonesia, I’ve seen most of the Philippines, and from a structural point of view, this is the best prepared piece of ground I’ve ever seen, and it’s reflected in the topography. . . The topography is quite subdued, and the reason for that is it’s a high concentration of structures, a lot more alteration; the rocks have eroded more rapidly, and we end up with a gentle topography, which is great for getting around as well. So, we’re very confident that over time we’re going to find a lot more deposits besides the ones that we actually already know about.”
Their confidence is reflected in their work, too. They’re currently engaged in quite a bit of work on some porphyry targets. One of their projects, Kamarangan which is not far from their Bananghlig deposit, turned up some copper molybdenum mineralization on the edge of a diorite intrusive, which they plan to return to in the hope of finding a viable deposit. They’re also in the process of drilling at Lignig, a stand-alone tenement east of the Co-O mine. The potential at Lingig for large copper deposit(s) is rated very highly.
Davis commented, “There are another four potential copper targets within the tenements that we know of, and there’ll probably be more found as time goes by, because as you’re probably aware, the Philippines has a large number of porphyry copper systems.”
It’s literally the level of success any mining company hopes to achieve, and with the promise of more to come as well as the security of their existing mine, they have a combination that’s hard to resist.
For more information:
Australian Business Number (ABN)
60 099 377 849
Registered & Principal Office
11 Preston Street
PO Box 860
Western Australia 6153
Telephone: +618 9367 0601
Facsimile: +618 9367 0602
MEDUSA TO LIST ON TORONTO STOCK EXCHANGE