Quarterly Report

 
TIDMMML 
 
MEDUSA MINING LIMITED 
                                                             ABN: 60 099 377 849 
                                                       Unit 7, 11 Preston Street 
                                                                  Como  WA  6152 
 
                                                                      PO Box 860 
                                                        Canning Bridge  WA  6153 
 
                                                      Telephone:  [phone] 
                                                      Facsimile:  [phone] 
 
                                               Email:  [e-mail] 
                                                Internet:www.medusamining.com.au 
 
                             MEDUSA MINING LIMITED 
                                   (LSE: MML) 
 
 
                          QUARTERLY ACTIVITIES REPORT 
                         PERIOD ENDED 30 SEPTEMBER 2010 
 
 
Medusa  Mining  Limited  ("Medusa"  or  the  "Company"), through its Philippines 
operating  company  Philsaga  Mining  Corporation  ("Philsaga"),  announces  its 
Quarterly Activities Report for the period ending 30 September 2010. 
 
Highlights for the September 2010 quarter: 
 
  * Co-O Mine Quarterly production of 25,004 ounces at an average grade of 
    15.77 g/t at cash cost of US$187 per ounce 
 
 
  * Commenced the new vertical, 3-compartment Saga Shaft (previously Mid-Royal 
    Ventilation Shaft)  to Level 5 (200 metres below surface) 
 
 
  * Total cash  and gold on metal account at end of quarter of approximately 
    US$69.4 million (unaudited) 
 
 
  * A maiden unfranked dividend of A$0.05 per share declared by the Board, will 
    be paid to all shareholders on 8 November 2010 
 
 
  * The  Company commenced trading of its ordinary  shares on the Main Market of 
    the London Stock Exchange on 28 October 2010 
 
 
Managing Director Geoff Davis commented: 
 
 "I am pleased to report on an operational level a steady level of production in 
line  with advice to  the market of  25,004 ounces for the  first quarter of the 
financial  year. Completion of  a thickener at  the mill, commencement  of a new 
water  storage tank, site works for  two additional leach tanks and commencement 
of  work for the new three-compartment Saga Shaft attest to the on-going capital 
works  programme to  improve the  operational efficiencies  and capacity  of the 
operation. 
 
 Subsequent  to quarter  end, shareholders  of the  Company at a General Meeting 
approved amendments to the Company's Constitution, allowing Directors to declare 
an  unfranked maiden  dividend of  A$0.05 per  share, which  will be paid to all 
shareholders on 8 November 2010. 
 
 In  addition, the Company  earlier today achieved  its listing and admission to 
the Main Market of the London Stock Exchange, successfully graduating from AIM." 
 
                                                                 28 October 2010 
 
For further information please contact: 
 Australia 
 
 Medusa Mining Limited                      [phone] 
 
 Geoffrey Davis, Managing Director 
 
 Roy Daniel, Finance Director 
 
 
 United Kingdom 
 
 Fairfax I.S. PLC                           [phone] 
 
 Financial Adviser and Broker 
 
 Ewan Leggat/Laura Littley 
 
 
 Lothbury Financial Services                [phone] 
 
 Michael Padley/Libby Moss 
 
 
 Canada 
 
 Nicholas Sayce, Investor Relations         [phone] 
 
 
 
      QUARTERLY ACTIVITIES REPORT 
 
                     PERIOD ENDED 
 
                30 SEPTEMBER 2010 
 
 
=-------------------------------------------+----------------------------------- 
                                            | 
Snapshot of Medusa:                         |OVERVIEW: 
                                            | 
  * Un-hedged, low cost, dividend paying    |          Co-O  MINE  PRODUCTION  & 
    gold producer focused on organic growth |DEVELOPMENT 
    in the Philippines                      | 
                                            |  * Quarterly production of 25,004 
                                            |    ounces at an average grade of 
  * 3 to 5 years growth path to production  |    15.77 g/t at cash cost of 
    of 300,000 to 400,000 ozs per year      |    US$187 per ounce 
                                            | 
                                            | 
  * Growth underpinned by strong cashflow   |  * Commenced the new vertical, 3- 
    from Co-O Mine (narrow vein             |    compartment Saga Shaft 
    underground)                            |    (previously Mid-Royal 
                                            |    Ventilation Shaft) to Level 5 
  * FY 2010/11:  targeted production of     |    (200 metres below surface) 
    100,000 ozs at cash costs circa US$190  | 
    per oz                                  | 
  * FY 2011/12: targeted production of      |      Co-O MINE & REGIONAL DRILLING 
    120,000 to 130,000 ozs at cash costs    | 
    circa US$190 per oz                     |  * Drilling is continuing  with 
                                            |    six surface rigs and four 
                                            |    underground rigs for resource 
  * Current Mineral Resources comprise      |    definition, delineation of new 
      * Co-O Mine: Indicated 603k ozs at    |    veins to the north of the 
        13.2 g/t gold; Inferrred  898k ozs  |    current resources and 
        at 9.6 g/t gold                     |    extensions of known veins 
      * Bananghilig: Inferred 650k ozs at   | 
        1.3 g/t gold                        | 
                                            |  * A drilling update is expected 
                                            |    during the next quarter 
  * Current Probable Reserves : Co-O Mine   | 
    505k ozs @ 10.7 g/t gold                | 
                                            |      BANANGHILIG DEPOSIT 
                                            | 
  * Co-O Mine Resources and Reserves to be  |      * Drilling is underway with 
    maintained at current levels            |        two rigs and with up to 
                                            |        four more rigs to be added 
                                            |        during the next quarter 
  * Conceptual exploration target size ** of| 
    Co-O Mine of 3 to 7 million ozs         | 
                                            |     SAUGON PROJECT 
                                            | 
  * Excellent exploration upside: high grade|  * Drilling with three rigs has 
    vein and disseminated bulk gold targets,|    continued with a drilling 
    plus seven copper targets               |    update planned during the next 
                                            |    quarter 
                                            | 
  * 820 km2 of tenements and exploration    | 
    budget for FY 2010/11 of US$21M         |      FINANCIALS & CORPORATE 
                                            | 
                                            |  * Total cash and gold on metal 
Board of Directors:                         |    account at end of quarter of 
                                            |    approximately US$69.4 million 
Peter R. Jones (Non-executive Chairman)     |    (unaudited) 
Geoffrey Davis (CEO)                        | 
Peter Hepburn-Brown (COO)                   | 
Roy Daniel (CFO)                            |  * A maiden unfranked dividend of 
Robert Weinberg (Non-executive Director)    |    A$0.05 per share declared by 
Andrew Teo (Non-executive Director)         |    the Board, will be paid to all 
                                            |    shareholders on 8 November 
Capital Structure:                          |    2010. 
                                            | 
Ordinary shares:    187,584,911             | 
Unlisted options:           1,190,000       |  * The Company admitted to the 
                                            |    standard listing segment of the 
Listings:                                   |    Official List of the UK Listing 
                                            |    Authority and commenced trading 
ASX and LSE (Code: MML), TSX (Code: MLL)    |    of its ordinary shares on the 
                                            |    Main Market of London Stock 
Address and Contact Details:                |    Exchange plc on 28 October 
PO Box 860                                  |    2010. 
Canning Bridge  WA  6153                    | 
Telephone  : [phone]                 | 
Facsimile   : [phone]                | 
Email          : [e-mail]  | 
Website      :www.medusamining.com.au       | 
                                            | **  The potential  target size and 
                                            |grade  is conceptual in nature, and 
                                            |there    has    been   insufficient 
                                            |exploration  to  define  a  mineral 
                                            |resource,  and  it  is uncertain if 
                                            |further  exploration will result in 
                                            |the   target  being  defined  as  a 
                                            |mineral  resource.  Refer  to Stock 
                                            |Exchange   announcement  dated  18 
                                            |January 2010. 
                                            | 
                                            | 
                                            +----------------------------------- 
 
PROJECT OVERVIEW 
 
The locations of the Company's projects are shown on Figures 1 and 2 (please see 
the link at the end of this announcement). 
 
Co-O MINE 
 
Gold Production 
 
The  production statistics for the  September 2010 quarter with comparatives for 
the previous four quarters are summarised in Table I. 
 
Table I. Gold production statistics 
+-----------------------+----+---------+---------+---------+---------+---------+ 
|                       |    |Qtr ended|Qtr ended|Qtr ended|Qtr ended|Qtr ended| 
|Period                 |Unit|30 Sep 10|30 Jun 10|31 Mar 10|31 Dec 09|30 Sep 09| 
+-----------------------+----+---------+---------+---------+---------+---------+ 
|Tonnes mined (1)       |WMT |   60,367|   53,872|   51,512|   54,222|   43,287| 
+-----------------------+----+---------+---------+---------+---------+---------+ 
|Ore milled             |DMT |   52,463|   60,611|   40,943|   37,588|   40,467| 
+-----------------------+----+---------+---------+---------+---------+---------+ 
|Recovered grade        |gpt |    15.77|    13.65|    20.61|    18.68|    14.78| 
+-----------------------+----+---------+---------+---------+---------+---------+ 
|Recovery               | %  |      94%|      94%|      94%|      94%|      94%| 
+-----------------------+----+---------+---------+---------+---------+---------+ 
|Gold produced (2)      |ozs |   25,004|   25,012|   25,505|   21,108|   18,054| 
+-----------------------+----+---------+---------+---------+---------+---------+ 
|Cash costs (3)         |US$ |     $187|     $182|     $180|     $184|     $193| 
+-----------------------+----+---------+---------+---------+---------+---------+ 
|Gold sold              |ozs |   25,659|   24,858|        -|   21,108|   18,054| 
+-----------------------+----+---------+---------+---------+---------+---------+ 
|Average    gold   price|    |         |         |         |         |         | 
|received               |US$ |   $1,208|   $1,182|        -|   $1,111|     $975| 
+-----------------------+----+---------+---------+---------+---------+---------+ 
 
Note: 
 1. The moisture content in wet tonnes ranges between 6 to 7% 
 2. Gold  production is actual gold poured  (and requires no further processing) 
    during  the period and  does not reflect  changes in the  balance of gold in 
    circuit. It includes any gold awaiting shipment 
 3. Cash  costs refers  to the  cost of  gold mined  (net of development costs), 
    produced  but not necessarily sold and includes royalties and local business 
    taxes  of US$50 per ounce for the  Sep 2010 qtr (Jun 2010 qtr: US$46/oz, Mar 
    10 qtr:  US$48/oz,  Dec  2009 qtr:  US$48/oz,  Sep  2009 qtr: US$34/oz, YTD: 
    US$46/oz) 
 
 
Gold  production for the quarter was in-line with budget at 25,004 ounces, at an 
average grade of 15.77 g/t gold and cash costs of US$187 per ounce, inclusive of 
royalties  and local business taxes of US$50 per ounce. The marginal increase in 
cash  costs is a direct result of an increase in royalty payments which is based 
on gold sales. 
 
Medusa,  an un-hedged  gold producer,  sold 25,659 ounces  of gold at an average 
price of US$1,208 per ounce during the quarter. 
 
A  breakdown of actual  and forecasted production  ounces and cost  per ounce by 
quarters  for the last  five quarters and  the remaining three  quarters of this 
fiscal  year is highlighted in  graph 1 (please see the  link at the end of this 
announcement). 
 
Co-O Mine 
 
Mine Development 
The new 60 metre inclined Sabor Shaft (previously 6W) to the Level 6 (250 metres 
below  surface)  has  been  completed  and  development  on Level 6 commenced in 
August. The development is focused mainly to the east from the shaft. 
 
Construction  has commenced of a vertical 3-compartment shaft with a double drum 
winder  named the Saga  Shaft (previously the  Mid-Royal Ventilation Shaft) with 
site  works well advanced and emplacement of the collar underway. It is intended 
that  this shaft will initially  be sunk to Level  5 and will result in improved 
transport  of men and materials and ore haulage. Completion to Level 5 is likely 
in the 3rd quarter 2011. 
 
The  Alimak rise to link Level 3 to  the Tinago Shaft is approximately 20 metres 
excavated.  A new power line is being  installed to the Tinago Shaft followed by 
additional exhaust fans. 
 
Mine Production 
Production  has  continued  uninterrupted  at  the  mine. Surface stockpiles are 
approximately 24,000 tonnes of ore. 
 
Mill Expansion 
The new thickener been completed and commissioning is in progress. 
 
Construction of a new water storage tank for mill water has commenced. 
 
Excavation  of footings is underway for the  installation of two new leach tanks 
to raise the leaching capacity to approximately 1,000 tonnes per day. 
 
Power 
Construction  of the dedicated power line  from the San Francisco sub-station to 
the mill is progressing well and is expected to be energised on schedule in late 
November 2010. 
 
Drilling 
Surface drilling with four rigs has continued at the Co-O Mine, mainly along the 
north  side of the  deposit on the  Royal Veins. Underground  drilling with four 
rigs is on-going for resource drilling and pre-development drilling. 
 
Regional surface drilling around the Co-O Mine with two rigs is continuing, with 
a drilling update expected in the next quarter. 
 
TAMBIS-BAROBO REGION 
 
The  Tambis project, currently  comprising the Bananghilig  Gold Deposit and the 
Kamarangan  copper-molybdenum porphyry prospect (Fig. 2) (please see the link at 
the  end of this announcement), is operated under a Mining Agreement with Philex 
Gold  Philippines  Inc.  over  Mineral  Production  Sharing  Agreement  ("MPSA") 
application   XIII-000022 which   covers   6,262 hectares.   Processing  of  the 
application is well advanced. 
 
Bananghilig Gold Project 
 
Figure  2 (please  see  the  link  at  the  end  of this announcement) shows the 
location  of the Bananghilig  Deposit. Drilling commenced  in July 2010 with two 
rigs  now operating and additional rigs to be added. There have been delays with 
respect  to rigs  completing other  programmes and  on the  delivery of two man- 
portable  rigs are expected  to arrive during  the next quarter  for drilling on 
some of the steeper slopes. 
 
Detailed geological re-mapping of the diatreme breccia and surrounds, re-logging 
of   old  drill  core  and  other  activities,  including  initiating  base-line 
environmental studies, are underway as a precursor to scoping studies. 
 
The  aim is to  increase the resources  to a level  which could provide a 5 year 
minimum  mining life  at a  production rate  of approximately 200,000 ounces per 
year. 
 
Usa Porphyry Copper-Gold Prospect 
 
The  Usa prospect located within MPSA  application XIII-00077. The Company has a 
Memorandum of Agreement with Corplex Resources Inc. 
 
A programme of soil sampling over the favourable geology is in progress. 
 
ANOLING 
 
The  Mines  Operating  Agreement  with  Alcorn  Gold  Resources Inc. covers MPSA 
application  number XIII-039 situated approximately  8 kilometres north from the 
millsite  as  shown  on  Figure  2 (please  see  the  link  at  the  end of this 
announcement).  Processing  of  the  Mineral  Production  Sharing  Agreement  is 
progressing. 
 
Mapping  and sampling is  continuing. Drilling will  recommence when the Mineral 
Production Sharing Agreement is granted. 
 
 
SAUGON PROJECT 
 
A  detailed summary of  previous exploration conducted  in 2004 was published on 
20 April 2010. 
Drilling  with three rigs continued during the  quarter. One rig will shortly be 
transferred to Bananghilig. A drilling update is expected to be published in the 
next quarter. 
 
FINANCIALS (unaudited) 
 
As at 30 September 2010, the Company which is debt free, had total cash and cash 
equivalent  in gold  on metal  account of  approximately US$69.4 million (30 Jun 
2010: US$55.8 million). 
 
During the quarter: 
  * the  Company sold 25,659 ounces of gold at  an average price of US$1,208 per 
    ounce  (Jun 2010 qtr: 24,858 ounces of gold  at an average price of US$1,182 
    per ounce); 
 
 
  * incurred  exploration expenditure  of US$4.9  million (Jun  2010 qtr: US$5.4 
    million); 
 
 
  * expended US$2.2 million on capital works associated with the dedicated power 
    line/sub-station and sustaining capital (Jun 2010 qtr: US$1.8 million);  and 
 
 
 
  * spent  US$3.1 million  in capitalised  mine development  (inclusive of shaft 
    sinking) costs (Jun 2010 qtr: US$3.0 million). 
 
 
In   addition,   the   Company   reduced  its  June  2010 creditors  balance  by 
approximately US$3 million. 
 
CORPORATE 
 
Maiden Dividend 
 
Following a General Meeting of members on 6 October 2010, whereby the resolution 
was  unanimously  passed  to  amend  the  Company's  Constitution  to remove the 
restriction  that dividends can only be paid out of profits, the Board confirmed 
an  unfranked  maiden  dividend  payment  of  A$0.05  per share. Payment of this 
dividend will be on 8 November 2010. 
 
Admission to Official List of the LSE and Cancellation on AIM 
 
The  Company's  entire  issued  ordinary  share  capital of 187,584,911 ordinary 
shares  of nil par  value (the "Ordinary  Shares") was admitted  to the standard 
listing  segment of the Official List of  the UK Listing Authority and to London 
Stock  Exchange plc's  main market  for listed  securities ("Admission")  on 28 
October  2010. Cancellation of trading in the  Ordinary Shares on AIM took place 
simultaneously with Admission to the main market. 
 
Managing Director, Geoff Davis commented: 
  "I  am pleased to report on an  operational level a steady level of production 
in  line with advice to the market of 25,004 ounces for the first quarter of the 
financial  year. Completion of  a thickener at  the mill, commencement  of a new 
water  storage tank, site works for  two additional leach tanks and commencement 
of  work for the new three-compartment Saga Shaft attest to the on-going capital 
works  programme to  improve the  operational efficiencies  and capacity  of the 
operation. 
 
 Subsequent  to quarter  end, shareholders  of the  Company at a General Meeting 
approved amendments to the Company's Constitution, allowing Directors to declare 
an  unfranked maiden  dividend of  A$0.05 per  share, which  will be paid to all 
shareholders on 8 November 2010. 
 
In  addition, the  Company earlier  today achieved  its listing and admission to 
trading on the Main Market of the London Stock Exchange, successfully graduating 
from AIM." 
 
For further information please contact: 
 Australia 
 
 Medusa Mining Limited                       [phone] 
 
 Geoffrey Davis, Managing Director 
 
 Roy Daniel, Finance Director 
 
 United Kingdom 
 
 Fairfax I.S. PLC                            [phone] 
 
 Financial Adviser and Broker 
 
 Ewan Leggat/Laura Littley 
 
 Lothbury Financial Services Limited          [phone] 
 
 Michael Padley/Libby Moss 
 
 Canada 
 
 Nicholas Sayce, Investor Relations          [phone] 
 
 
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 Managing  Director 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" and  is a  "Qualified Person" as 
defined   in   "National   Instrument   43-101" of   the   Canadian   Securities 
Administrators.  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. 
 
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" and  is a  "Qualified Person"  as defined in "National Instrument 
43-101" of  the Canadian  Securities Administrators.  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. 
 
Information  in this  report relating  to Ore  Reserves is  based on information 
compiled  by Declan Franzmann, B Eng (Mining), MAusIMM.  Mr Franzmann is a full- 
time  employee  of  Crosscut  Consulting.  Mr Franzman has sufficient experience 
which  is relevant  to the  style of  mineralisation and  type of  deposit under 
consideration  and  to  the  activity  which  they are undertaking to qualify as 
Competent  Persons as defined in the  2004 Edition of the "Australasian Code for 
Reporting  of Exploration Results, Mineral Resources  and Ore Reserves" and is a 
"Qualified  Person" as defined  in "National Instrument  43-101" of the Canadian 
Securities  Administrators. Mr Franzmann consents to the inclusion in the report 
of  the matters  based on  his information  in the  form and context in which it 
appears. 
 
Refer  to the revised Technical Report  which was filed onwww.sedar.com in March 
2010 for  further discussion of the Co-O Deposit's geology, structural controls, 
drilling,   sampling   and   assaying   information,   and  any  known  material 
environmental, permitting, legal, title, taxation, socio-political, marketing or 
other relevant issue. 
 
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. 
 
 
 
[HUG#1456154] 
 
 
 
 
 
Quarterly Report Images: 
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(ii) they are solely responsible for the content, accuracy and 
     originality of the information contained therein. 
 
Source: Medusa Mining Ltd via Thomson Reuters ONE