Medusa Mining (MML AU) A$0.945, A$196.4m – Geology and Mine...

Medusa Mining (MML AU) A$0.945, A$196.4m – Geology and Mine update at Co-O Mine
SP Angel. Buy – Target Price Under Review

• The company set out the results of re-interpretations and re-modelling of the geology at the Co-O Mine.
• The work is being done to give a better understanding of the large vein system at Co-O and set the basis for better long term planning.
• The mine as at 30 June 2014 has produced 630,000 oz and had 1.4m oz of total resources.

• The analysis considers the three main veins at Co-O – Central, Jeremy and GHV which are continuous over a strike length of 1.5 km and open to the East.
• The horizontal length of the best mineralised core is around 800m and plunges to the East at an angle of 30o .
• A consistent shatter zone has been identified which is around 50-100m wide next to the Co-O diatreme breccia.
• Within this zone the continuity of the veins is disrupted and the characteristics make it uneconomic to mine.

• The company’s announcement provides a useful schematic of the geology with the positioning of the current shafts and drives.
• From the cross section schematic it would appear that the GHV drive at Level 8 is now mainly through this uneconomic zone.
• A new service shaft has been approved for around US$10m with a construction time of 17 months.
• The shaft with a rope-guided cage is being sunk to improve the efficiency of mine workings from Level 3 to Level 8.

• The new shaft will help to improve the hoisting capacity at L8 to 1,700 tpd from the current capacity of 1,400 tpd.
• The total mine capacity will then be increased to 2,700 tpd which will enable them to match mining output with the expanded mill capacity.

Conclusion: The mine development has been a bottleneck to the utilisation of the new mill capacity which was to take Medusa from a 100,000 oz to 200,000 oz. This update provides a clearer picture of how the company plan to address this issue as well give a better understanding of the complex geology of the vein system at the Co-O mine. We currently have 2,000 tpd of mine capacity built into our model for the next two years rising to 2,500 tpd in 2017.

SP Angel are organising a series of investor meetings with Geoff Davis and Rob Gregory in London next week.