Bananghilig Deposit Drilling Update

Medusa Mining Limited

("Medusa" or the "Company")

BANANGHILIG DEPOSIT DRILLING UPDATE

8 August 2012

Medusa Mining Limited ("Medusa" or the "Company"), through its Philippines operating company Philsaga Mining Corporation, advises that infill drilling is continuing to the upgrade the resource to the Indicated category at the Bananghilig Gold Deposit. Drilling since the 17 January 2012 announcement continues to confirm continuity of mineralisation.

Drilling highlights include:

Peter Hepburn-Brown, Managing Director of Medusa commented:

"The end of the drilling campaign is approaching which is aiming to achieve a 1 million ounce resource target. The drilling results to 31 July 2012 are currently being incorporated into an Inferred Resource estimate. Following completion of the infill drilling program around the end of August, the receipt of all outstanding assays and completion of all updated interpretations, we will commence estimation of an Indicated Resource which will form the basis for pit optimisations and estimation of reserves followed by feasibility studies.

Some excellent results from well below practical open pit depths indicate the potential for extending high grade mineralisation to depth."

BACKGROUND

The Tambis Project, containing the Bananghilig Gold Deposit is operated under a Mining Agreement with Philex Gold Philippines Inc. over Mineral Production Sharing Agreement ("MPSA") 344-2010-XIII which covers 6,262 hectares.

Additional regional geological and mineralisation information and drilling results are contained in the announcements released on 10 May 2011, 12 September 2011 and 17 January 2012.

AIM OF PROGRAMME

In July 2010, new regional and detailed mapping and drilling programmes were commenced with the aim of validating the existing resource and extending it to provide a reserve of approximately 1,000,000 ounces of gold. This reserve would form the basis for feasibility studies which would target production of 200,000 ounces of gold per year from a new milling facility.

REGIONAL GEOLOGICAL SETTING

The Tambis regional geology (Fig 1), termed the Tambis intrusive-breccia complex, typifies a structurally complex intermediate-sulphidation, epithermal gold, breccia-type system, including disseminated gold overprinting the host Tertiary-age igneous package which had been emplaced into an andesitic volcanic basement. The fertile igneous suite comprises a multi-phase calc-alkaline, high level, sub-volcanic intrusive package cut by extensive bodies of phreatomagmatic diatremes and hydrothermal breccias.

BANANGHILIG DEPOSIT

Geological summary

The Bananghilig Deposit currently consists of three zones, each approximately 1 kilometre long and open in all directions, locally termed the Sorex, Garden and Malinao zones. These zones are broadly defined on the basis of the projection in plan of ≥0.5 g/t gold drill hole intersections.

The mineralisation is located partly within the Bananghilig diatreme breccia which measures at least 1,000 metres west to east and still open to the south beneath the younger sediments, and also around the diatreme margins and in the country rocks along structural corridors.

The diatreme breccias contain unsorted fragments of the andesitic basement as well as fragments of the later intrusive rocks predating the diatreme events in a matrix of comminuted rock flour and magmatic crystals. Fragment sizes range from granule-sized to building-sized mega-blocks which have been torn off the walls of the diatreme during the multi-episodal explosive activity. The explosive activity also fractured the mega-blocks and wall rocks, preparing them for subsequent mineralisation deposition.

Please see the link at the end of this announcement for Figure 1, Geological interpretation map showing drill hole locations.

DRILL RESULTS

During the period 31 December 2011 to 31 July 2012, 26,578 metres of diamond drilling in 105 holes have been completed. Holes TDH150, TDH170, TDH191, TDH220 and TDH250 have been drilled outside the Bananghilig area.

Figure 1 shows the drill holes completed. Assays are awaited for TDH245, TDH248, TDH249 and TDH251 to TDH255.

First pass assaying for gold has been undertaken on all samples submitted to the laboratory. Additional assaying is on-going from selected intervals for base metals, silver and other elements.

The results are summarised in Table I where significant intercepts are defined on the following basis:

(i) lower cut-off grade of 0.5 g/t Au, and

(ii) ≥ 5 metres downhole intercept width at ≥ 0.5 g/t Au, or

(iii) ≤ 5 metres downhole intercept width at ≥ 5 gram*metres, and

(iv) maximum of 3 metres of downhole internal dilution at ≤0.5 g/t Au.

Table I. Bananghilig surface drill hole results ≥1g/t gold. Results not previously reported are marked †.

Notes:

(i) Intersection widths are downhole drill widths not true widths;

(ii) Assays are by Intertek McPhar Mineral Services Inc. in Manila;

(iii) Grid coordinates based on the Philippine Reference System 92.

DRILL HOLE SAMPLING AND ASSAYING PROCEDURES

Drilling Procedures

Drilling, sampling and analytical methodologies are of internationally acceptable standards. Drilling and analyses are carried out by independent contractors, SBF Philippines Drilling Resources Corp. ("SBF") and Intertek McPhar Mineral Services Inc. ("Intertek") respectively.

Drilling is carried out by SBF using wireline diamond coring techniques, with the core being predominantly HQ triple-tube (HQ3) diameter (OD 61 mm). The holes are initially collared using PQ drillbits (OD 123 mm) to recover PQ3 core (OD 83 mm) until the drillbit encounters competent ground, then the coring bit is reduced to HQ3 for the remainder of the drill hole. If difficult conditions are encountered, then the drill bit is changed to NQ3 (core OD 45 mm) and the hole continued until the planned depth or bad ground conditions prevent further drilling, whichever occurs first. Core recovery is generally better than 95% and is considered to be good.

Drill Core Sampling

Drill core is recovered from the inner tube and handled carefully to preserve the integrity of the drill core. Structural measurements are taken including Rock Quality Determinations ("RQD") and Fracture Densities. The core is then placed in plastic core trays, aligned, photographed and marked up for sampling.

The drill core is then cut in half by diamond core saw and sampled at one metre intervals or at lithological boundaries. The samples are placed in individually labelled plastic sample bags, a sample number ticket included, and then sealed for despatch to Intertek's Sample Preparation laboratory in Surigao City. The integrity of the core samples is supervised at all times by the geologists until despatch to the laboratory where they are accompanied by company personnel until receipt by Intertek.

One Certified Reference Material ("CRM"), one Blank and if possible, one Duplicate is included within each successive group of twenty samples that are submitted to the laboratory. QA/QC monitoring of the drilling program and the results is ongoing.

Analytical Procedure

Sample preparation is undertaken by Intertek at their Surigao City laboratory, where each sample is registered, dried at 105ºC for 6 to 8 hours and crushed to 95% passing 2 mm by jaw crusher, before a 1kg split is taken for fine pulverising, using a riffle splitter or rotary sample divider. Pulverised sample is nominally pulverised to 95% passing 75μm (200 mesh).

Quality control procedures include a 1 in 15 resplit after crushing for partial preparation and after pulverising for total preparation. These resplits are also analysed and included in the analysis report. Sizing tests are carried out on 1 in 20 assay pulps at 75μm (200 mesh) to monitor the pulverising stage. Four 250 gram splits are obtained, one for sample analyses and the remaining three for storage for future reference.

Standard laboratory procedure is to clean the crusher and pulveriser after each sample treatment with barren material and/or bowl wash, to minimise carry-over contamination.

Pulverised samples are analysed by classical fire assay techniques on a 50 gram charge with Atomic Absorption Spectrometer ("AAS") finish. All assays over 5 g/t gold and other selected samples are re-assayed using gravimetric fire assay techniques on a 50 gram sample.

For further information please contact:

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 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" and is a "Qualified Person". 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.

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.

Please click on or paste the following link in your browser to view Figure 1:

http://www.rns-pdf.londonstockexchange.com/rns/5598J_-2012-8-8.pdf