Final Results and Annual Financial Report

Medusa Mining Limited

Annual Report and Financial Statements

27 August 2013

Medusa Mining Limited ("Medusa" or the "Company") advises that its annual report and financial statements for the year ended 30 June 2013 has been published. The document can be accessed through the link at the end of this announcement and is available on the Company's website (www.medusamining.com.au).

A copy of this report has been filed with the National Storage Mechanism and will be available for inspection shortly at www.hemscott.com/nsm.do.

Highlights of the Financial Year

• Earnings before interest, tax, depreciation and amortisation ("EBITDA") of US$63.2M (US$58.0M the previous year)

• Earnings per share ("EPS") of US$0.267 on a weighted average basis, based on net profit after tax ("NPAT") of US$50.2M (2012: EPS of US$0.261 based on NPAT of US$49.2M)

• Revenues of US$100.7M compared to US$81.2M. Medusa is an un-hedged gold producer and received an average gold price of US$1,610 per ounce from the sale of 77,488 ounces of gold for the year.

• No dividends were declared nor paid during the year.

• The Company had total cash and cash equivalent in gold on metal account US$7.45M at year end (2012: US$51.8M).

Operations

• The Company produced 62,243 ounces of gold for the year, compared to the previous year's gold production of 60,595 ounces, at an average recovered grade of 7.02 g/t gold (2012: 8.10 g/t gold);

• The average cash cost for the year of US$313 per ounce, was higher than the previous year's average cash costs of US$261 per ounce due primarily to the treatment of lower grade development ore, higher power costs and operating inefficiencies associated with increasing on-going maintenance associated with the old mill.

Production Guidance for September and December 2013 Quarters

The production guidance for the September and December 2013 quarters is approximately 17,000 ounces and 35,000 ounces respectively. Full year guidance for 2014 will be available once the new Co-O mill is fully commissioned and further development has been completed on Level 8.

New Co-O Mill and Mine Expansion

In November 2010, the Board approved a major expansion of the Co-O Mine and the construction of a new Mill with capacity to produce 200,000 ounces of gold per year based on processing up to 750,000 tonnes per year. The approved Capital Expenditure was estimated at approximately US$70M for the mine expansion and new mill.

The Environmental Clearance Certificate for 2,500 tonnes per day for the new mill has been granted.

The current status of activities is:

• L8 Shaft (formerly Saga Shaft) operational;

• Commissioning of New Mill nearing completion; and

• New electrical supply systems to the mine and mill operational.

Reserves and Resources

• Gold reserves at Co-O increased marginally to 570,000 ounces (after depletion);

• Co-O's gold resources comprised of 820,000 indicated and 1,375,000 inferred resource ounces, representing increases of 105,000 and 71,000 ounces within the indicated and inferred categories respectively and excludes mining depletion for the year;

• Bananghilig's total resources increased by 36,000 ounces to 1,136,000 ounces;

• The initial indicated and inferred resources for Saugon are 15,700 ounces.

(*) "as per JORC 2004"

Exploration

• Contiguous tenement package maintained at >800km2;

• The Company wrote off US$6.8 million in exploration expenditures primarily due to the relinquishment of the Anoling gold project;

• Budgeted exploration for fiscal year 2014 of US$15.0 million (2013 actual: US$24.0 million);

• Exploration highlights at Co-O include:

§ the global resources pass 2.1 million ounces and are still open at depth, to the east, north and to the west;

§ underground drilling continues to extend mineralisation; and

§ the Conceptual Exploration Target ** for the Co-O Mine of between 3 and 7 million ounces of gold continues to be validated with global resources and mined ounces now totalling in excess of 2.7 million ounces;

** The potential target size and grade of the Co-O Mine is conceptual in nature and there has been insufficient exploration to define a mineral resource. It is also uncertain if further exploration will result in the target being defined as a mineral resource.

• At the Bananghilig disseminated gold deposit, drilling has converted 766,000 ounces to the Indicated category and 370,000 ounces are in the Inferred category. During the year, the Company announced the discovery of a new zone of gold mineralisation, B2, proximal to the current Bananghilig gold deposit. There is potential for defining a new resource at B2 from continued drilling;

• At Saugon, Cube Consulting Pty Ltd completed a resource for the Saugon deposit. A cut-off of 2 g/t was used resulting in an Indicated Resource of 47,000 tonnes at 6.99 g/t gold containing 10,700 ounces and an Inferred Resource of 34,000 tonnes at 4.55 g/t gold containing 5,000 ounces; and

• Induced Polarisation, Resitivity and Ground Magnetics geophysical programme have been completed over Saugon and Lingig and in progress for the Co-O area.

Corporate

Dividend:

• No dividends were declared nor paid during the year.

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 as reported in the announcement on Quarterly Activities dated 31 July 2013, the Company has drawn down Php120 million (approximately US$3 million).

Managing Director's Review

Dear Shareholders,

This has been a difficult year as we strived to complete the new mill and the L8 Shaft (formerly Saga Shaft) whilst endeavouring to keep gold production on target. The old mill is 25 years old and its availability during the year has contributed to reduced gold production as breakdowns occurred more frequently and for longer periods.

The construction of the new mill was scheduled to be completed in July 2013, but due to the ECPM contractor, Arccon going in to administration, the commissioning of the new mill has been delayed.

A new contractor has been appointed and the new mill is now being commissioned. The ramp up to full production of 2,500 tpd will commence shortly. The power upgrade and tailings dams have been completed, together with the upgrading/replacement of existing infrastructure including new administration and accommodation buildings, new surface fleet maintenance workshops, new core farm, accommodation at the mine site and communications.

The L8 Shaft was completed in the March quarter and it is now completely operational, hauling development ore and waste from Level 8. Development ore along Level 8 has been hampered due to narrow veins and faulting around the L8 Shaft, but as the development has moved away from the shaft, the veins widths and grades have improved. Development and stoping is still occurring on Levels 1 to 6 and will continue for a number of years.

The Safety, Environmental and Community activities throughout the year have been very positive, with only one lost time accident during the year, no environmental breaches and a local community that is very supportive of our operations.

Exploration at the Co-O Mine and at Bananghilig has continued to be successful. The Resources at Co-O and Bananghilig has been increased again this year and at Bananghilig exploration has discovered a new area, called B2, proximal to the Bananghilig resource where drilling is continuing to delineate this deposit.

The Company is now positioned to move forward with increased gold production and to rebuild its cash balance.

The decision to suspend dividends was unfortunately necessary due to the cash being required for construction of the new plant as well as for working capital. We expect that once the milling rate has been achieved (2,500 tpd) and the cash balance has been sufficiently built up, the Company will be in a position to re-introduce dividend payments.

In closing, I wish to thank my fellow Directors, Perth office staff and the dedicated Filipino team who have strived to achieve our objectives under difficult circumstances during the year. We also very much appreciate the continued support of the local communities and the relevant Philippine government agencies which enable us to expand our activities and thereby provide benefits to an increasing number of people.

Contacts:

AUDITED FINANCIAL STATEMENTS EXTRACTED FROM THE 2012 ANNUAL REPORT 

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the year ended 30 June 2013

STATEMENT OF FINANCIAL POSITION

for the year ended 30 June 2013

STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2013

STATEMENT OF CASH FLOWS

for the year ended 30 June 2013

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 Messrs Geoff Davis and Gary Powell who are members of The Australian Institute of Geoscientists. Mr Davis is the Non-Executive Chairman of Medusa Mining Limited and Mr Powell is a Non-Executive Director and both have sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration and to the activity which they are 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". Messrs Davis and Powell consent to the inclusion in the report of the matters based on their 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 Mr Mark Zammit of Cube Consulting Pty Ltd of Perth, Western Australia. Mr Zammit is a member of The Australasian Institute of Geoscientists 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.

Carras Mining Pty Ltd

Information in this report relating to Ore Reserves is based on information compiled by Dr Spero Carras of Carras Mining Pty Ltd. Dr Carras is a Fellow of the Australasian Institute of Mining & Metallurgy and has 30 years of experience which 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". Dr Carras 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 report contains 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.

AVAILABILITY OF ANNUAL REPORT AND ACCOUNTS

The full annual report and financial statements for the year ended 30 June 2013 are available on the Company's website (www.medusamining.com.au) and can be accessed via the following link:

http://www.rns-pdf.londonstockexchange.com/rns/5104M_1-2013-8-27.pdf