TIDMMML
RNS Number : 7773I
Medusa Mining Limited
08 July 2013
MEDUSA MINING LIMITED
ABN: 60 099 377 849
Unit 7, 11 Preston Street
Como WA 6152
PO Box 860
Canning Bridge WA 6153
Telephone: +618-9367 0601
Facsimile: +618-9367 0602
Email: admin@medusamining.com.au
Internet: www.medusamining.com.au
08 July 2013
Co-O OPERATIONS UPDATE
(ASX & LSE: MML)
Medusa Mining Limited ("Medusa" or the "Company") wishes to
provide an update for the Co-O Operations following the previous
announcement of 21 June 2013 regarding the Co-O Mill construction
managers.
OVERVIEW
-- CPC Engineering ("CPC") appointed as the new Co-O Mill
expansion managers with immediate effect.
-- Commissioning of the new Co-O Mill is commencing with the
mobilisation of CPC Engineering commissioning personnel to
site.
-- Commissioning of the Co-O Mill delayed by approximately four
to five weeks and likely to be completed in August 2013. Arccon
administration has had no other effect on the Company's
operations.
-- With the current subdued gold price and the delay to the
commissioning of the new Co-O Mill Medusa has been reviewing the
efficiency of its operations and its costs.
-- Overdraft facilities arranged with two Philippine banks totalling US$14 million.
-- Exploration drilling reduced to two surface and two
underground drill rigs, reducing the exploration expenditure from
approximately US$25 million in FY2013 to approximately US$12
million in FY2014.
-- L8 shaft (formerly the Saga shaft) production reduced during
June quarter as a result of narrower veins than expected near the
shaft.
-- Production and cash cost forecasts under review pending
completion of commissioning and additional Level 8 development.
-- Bananghilig feasibility study status being reviewed in light
of lower gold price and in recognition of the newly discovered high
grade zone, B2.
Peter Hepburn-Brown, Managing Director of Medusa, commented:
"We are very pleased with the appointment of a replacement
manager to complete the final stages of the plant construction and
commence commissioning with minimum disruption and minor delays. We
are all looking forward to operating a new plant which we
anticipate will have a high availability.
Production has been hampered by the underperformance of Level 8
to date in the immediate vicinity of the shaft due to thinner veins
which are more faulted than anticipated. We have prioritised
development headings to reach more productive areas.
The discovery of the new high grade B2 zone adjacent to the
Bananghilig 1 million ounce deposit provides various options for
future development. We are continuing to drill at B2 so these
options can be evaluated, including possibly treating high grade
material at the Co-O Mill, and in this way, be able to increase
production while postponing the need to build a new stand-alone
milling facility."
1. Co-O Mill
Following the announcement of 21 June 2013 regarding the
appointment of administrators to Allmine Group Limited, the parent
company of Arccon (WA) Pty Ltd, who were the managers for the Co-O
Mill expansion, the Company has appointed new managers CPC
Engineering. CPC is an engineering design, construction and
maintenance group of companies that has gained industry-wide
recognition for providing professional services to the resources
and infrastructure sectors over the past 30 years.
CPC are currently starting to mobilise commissioning personnel
to site. It is estimated that the commissioning will be delayed by
approximately 4 to 5 weeks with completion expected in August
2013.
Medusa can confirm that the situation with Arccon administration
has had no other effect on the Co-O Mill as all of the equipment
required is already on site and construction is being undertaken by
a local Philippine company which is not affected by Arccon's
situation.
2. Co-O Mine
(a) L8 Shaft
The L8 Shaft to Level 8 is operating normally and during July
when the first ore pass becomes operational, will be hauling in
excess of 1,000 tonnes per day. Its capacity is approximately 1,500
tonnes per day.
(b) Level 8
Approximately 350 metres of cross-cut development have been
completed and 300 metres of on-vein development have been
completed.
The first Alimak ore-pass from Level 6 to Level 8 is newly
completed and in July will start supplying ore to the L8 Shaft.
The second Alimak ore pass from Level 6 to Level 8 is underway
and will be completed at the end of August.
The ore pass developed by winzing from Level 6 to Level 8 has
reached Level 8 and will be connected to the Level 8 development by
around the end of July.
Diamond drilling commenced in May on Level 8 to provide
additional definition of the veins ahead of development and mining.
On-going model review has identified areas for priority development
headings.
(c) Level 8 resource model and geological discussion
Recent recognition of different rock types (rheological effects)
possibly influencing the intensity and width of the vein
mineralisation are thought to be a factor in the poor model
correlation in the immediate L8 Shaft area, in addition to a higher
than normal amount of faulting. Many of the faults are parallel to
the drill direction hence cannot be recognised from drilling alone.
Work is underway to better understand these effects and to upgrade
the modelling of the possibly more favourable rock units. The
updated resource model is expected to be finalised in August.
(d) Baguio Shaft
The timbering of the Baguio Shaft extension from Level 3 to
Level 5 will be completed in August. In the meantime haulage from
Level 3 is continuing.
3. Production
Production for Level 8 has so far underperformed due to narrower
vein width and grade than that predicted by the resource model.
As frequently highlighted by the Company, drilling of narrow
epithermal veins generally provides an indication of the presence
of the gold mineralised vein but may not always provide good
quantitative data with respect to accurate grade and volume
estimations. Veins commonly pinch and swell and may be brecciated
or displaced by faults.
The Company regards the initial drilling as indicative only and
operates the policy of using drilling to locate the position and
extent of the mineralised veins. This is then followed by on-vein
development to support the drilling results, and to provide a more
accurate estimate of vein grades which results in the upgrading of
the resource category from Inferred to Indicated. The development
supports the estimation of resources and facilitates the conversion
of resources to reserves.
The veins on the Level 8 in the vicinity of the shaft, 100
metres below the current mining levels, were expected to be 1.4
metres to 5.5 metres wide according to the resource model, but on
three veins developed to date in the immediate vicinity of the
shaft, the widths have been less than 1 metre in conjunction with
extensive faulting, thus reducing the Level 8 budgeted production
during this June quarter. Priority headings are focusing on
reaching more productive zones as soon as possible
The poor performance of Level 8 in the immediate shaft area
compared to the resource model to date has affected the production
for the June quarter. The anticipated production for the June
quarter will be around 15,600 ounces of gold and for FY2013, 62,200
ounces of gold.
Due to this underperformance of Level 8 and the delay in the new
mill commissioning, the revised production forecast for FY2014
September quarter is approximately 17,000 ounces and for FY2014
December quarter is approximately 35,000 ounces. Full FY2014
forecast production will be estimated once the mill is fully
commissioned and further development has been completed on Level
8.
4. Funding
With the current subdued gold price and the delay to the
commissioning of the new Co-O Mill caused by the situation with
Arccon, Medusa has been reviewing the efficiency of its operations
and also its costs. As a result of this review, the Company has
deemed it prudent to arrange funding facilities with two Philippine
banks. The overdraft facilities available to the Group total Php600
million (approximately US$14 million) and to date the Company has
drawn down Php120 million (approximately US$3 million).
A new contract payment system that has been introduced for the
underground operations is being evaluated with the aim of improving
the efficiency and costs of underground development and stoping
In addition, the exploration drilling that has been a major part
of Medusa's resource growth has been reduced to two surface and two
underground drill rigs, reducing the exploration expenditure from
approximately US$25 million in FY2013 to approximately US$12
million in FY2014. The Company has also re-organised its on-site
operations departments to improve operational efficiencies.
5. Bananghilig Project
The feasibility study initiated under Arccon's management is
being reviewed, particularly as a consequence of the discovery of
significant high grade mineralisation east of the current
Bananghilig resource of 1,080,000 ounces of gold (see announcement
of 29 January 2013).
Drilling has re-commenced in the high grade area (see
announcement 2 April 2013), known as B2, approximately 160 meters
further northwest of TDH 284 (31.60 metres at 7.33 g/t gold, 13.05
metres at 2.24 g/t gold, 43.70 metres at 2.48 g/t gold, 13.30
metres at 2.30 g/t gold), with hole TDH 303 intersecting additional
high grade mineralisation as shown in Table 1 and on Figure 1
(please see the link to Figure 1 below). At this stage the high
grade zone is interpreted to be approximately 300 metres wide.
The Company will evaluate the high grade area and the options it
provides to the project economics and alternatives over the next
several months as drilling to an Inferred Resource status is
progressed by the two surface rigs. One possible option includes
separate mining of B2 and treatment at the Co-O Mill at a much
lower Capex than a new large stand-alone operation at Bananghilig.
If this initiative is successful and gold prices remain subdued, it
would mean a saving of approximately $220 million in Capex over the
next 3 years for the planned new stand-alone mill.
Table 1. Bananghilig B2 drill results >=1g/t gold.
Hole Number East North Depth Dip Azimuth From Width Gold
(metres) (deg) (deg) (metres) (metres) Grade
(uncut)
(g/t
Au)
------------- -------- -------- ---------- ------- -------- ---------- ---------- ---------
TDH303 613,502 945,188 321.60 60 130 155.10 21.15 0.94
------------- -------- -------- ---------- ------- -------- ---------- ---------- ---------
190.85 7.45 1.51
------------- -------- -------- ---------- ------- -------- ---------- ---------- ---------
207.30 13.90 5.15
------------- -------- -------- ---------- ------- -------- ---------- ---------- ---------
229.90 10.70 19.28
------------- -------- -------- ---------- ------- -------- ---------- ---------- ---------
309.00 2.10 3.28
------------- -------- -------- ---------- ------- -------- ---------- ---------- ---------
Notes:
1. Composited intercepts' 'weighted average grades' calculated
by using the following parameters
(i) no upper gold grade cut-off applied, and
(ii) lower cut-off grade of 0.5 g/t gold, and
(iii) >= 5 metres down hole intercept width at >= 0.5 g/t
gold, or
(iv) <= 5 metres down hole intercept width at >= 5 gram
per metres, and
(v) maximum of 3 metres of down hole internal dilution at
<=0.5 g/t gold.
2. Intersection widths are downhole drill widths not true
widths;
3. Assays are by Intertek McPhar Mineral Services Inc. in
Manila;
4. Grid coordinates based on the Philippine Reference System
92.
Figure 1. Bananghilig geology map showing the B2 drill hole
locations.
To view Figure 1 please click on or paste the following link in
your browser:
http://www.rns-pdf.londonstockexchange.com/rns/7773I_-2013-7-8.pdf]
JORC COMPLIANCE - CONSENT OF COMPETENT PERSONS
Medusa Mining Limited
Information in this report relating to Exploration Results has
been reviewed and is based on information compiled by Mr Geoff
Davis, who is a member of The Australian Institute of
Geoscientists. Mr Davis is the Non-Executive Chairman of Medusa
Mining Limited and has sufficient experience which is relevant to
the style of mineralisation and type of deposits under
consideration and to the activity which he is undertaking to
qualify as a "Competent Person" as defined in the 2004 Edition of
the "Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves". Mr Davis consents to the
inclusion in the report of the matters based on his information in
the form and context in which it appears.
Cube Consulting Pty Ltd
Information in this report relating to Mineral Resources has
been estimated and compiled by Mark Zammit of Cube Consulting Pty
Ltd of Perth, Western Australia. Mr Zammit is a member of The
Australasian Institute of Mining & Metallurgy and has
sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person
as defined in the 2004 Edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves". Mr Zammit consents to the inclusion in the report of the
matters based on his information in the form and context in which
it appears.
For further information please contact:
Australia
Medusa Mining Limited +61 8 9367 0601
Peter Hepburn-Brown, Managing
Director
United Kingdom
SP Angel Corporate Finance
LLP (Financial Adviser & Broker) +44 (0)20 3463 2260
Ewan Leggat/Laura Littley
DISCLAIMER
This announcement may contain certain forward-looking
statements. The words 'anticipate', 'believe', 'expect', 'project',
'forecast', 'estimate', 'likely', 'intend', 'should', 'could',
'may', 'target', 'plan' and other similar expressions are intended
to identify forward-looking statements. Indications of, and
guidance on, future earnings and financial position and performance
are also forward-looking statements.
Such forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and
other factors, many of which are beyond the control of Medusa, and
its officers, employees, agents and associates, that may cause
actual results to differ materially from those expressed or implied
in such statements.
Actual results, performance or outcomes may differ materially
from any projections and forward-looking statements and the
assumptions on which those assumptions are based.
You should not place undue reliance on forward-looking
statements and neither Medusa nor any of its directors, employees,
servants or agents assume any obligation to update such
information.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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