Ann: Quarterly Report March 2015, page-26

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Medusa Mining (MML LN) A$0.89, Mkt Cap A$184.9m – Quarterly update in line
Buy – Target price under review

 For the quarter the company produced 23,940 oz based on 135,725 dry tonnes milled.
 Head grades were 5.84 g/t gold against 5.56 g/t in the previous quarter with recoveries of 94%.
 Cash costs were US$391/oz with all in sustaining costs of US$1,073/oz including discretionary exploration of US$3.1m.
 Operational upgrades during the quarter resulted in higher costs.
 Year to date the company have produced 71,817 oz in line with full year guidance of 95-100,000 oz.
 The upgrade to the L8 shaft which is key to the debottlenecking for ore availability, is operating well since completion in January.
 For March average haulage from the shaft was running at 1,184 tpd up from 700 tpd with a target of 1,400 tpd.
 Following the commissioning of the upgraded shaft, 40 new headings and 20 new stopes have started to increase capacity to 1,400 tpd.
 Further operational upgrades include a development of a tramming loop at the base of the L8 shaft improving unloading of locomotives.
 New stoping protocols have been introduced to better understand dilution issues of splits and pinch zones.
 Contract remuneration has been changed to payment for volume blasted rather previous payment for tonne drawn and trammed.
 The latter removes the incentive for overdrawing on stopes leading to unplanned dilution.
 The mill is close to optimal recoveries but greater efficiencies are being sought.
 Drilling continues to convert resource into reserves with the efficiency of the drill programme to improve as the company starts drilling more from Level 8 drill chambers.
 For the full year the company is guiding to 95 – 100,000 oz at a cash cost of between US$400-$450/0z.

Conclusion: These results show an improving trend in operations at the Co-O mine. After an extended period of disappointment, the new management team are turning things around. The build up in availability of ore from Level 8 shaft and the initiatives to mitigate dilution are all likely to lead to better throughput and grades. This should enable costs to come down from here. Guidance for this year should be met and we look forward to the guidance set for next year with some scope to upgrade production oz from here.