14th Mar 2007 07:01
Medusa Mining Limited14 March 2007 MEDUSA MINING LIMITED Interim Results Medusa Mining Limited ("Medusa" or "The Company"), the Australian based companyoperating and developing gold mines in the Philippines, announces its InterimResults for the six months to 31st December 2006, a period of significantprogress for the Company. Highlights: •Philsaga transaction completed •Supreme Court case resolved •Co-O mine production 7,169oz; on schedule to achieve 100,000oz p.a. target in 2008 •Other projects being progressed •Additional tenements under negotiation •Listing on AIM market: A$11 million raised •Profit for period A$7.22m (2005: loss A$0.597m) Geoffrey Davis, Managing Director of Medusa, commented: "The period has been one of sustained progress for the Company. The remaininglegal issues have been resolved, we are in the process of further expanding thenumber of tenements that we control, and the initial drilling results arepositive. "The additional funds that we raised in November will allow us to exploit fullythese opportunities." 14 March 2007 For further information, please contact: Medusa Mining Limited +61 8 9367 0601Geoffrey Davis, Managing DirectorRoy Daniel, Finance Director Ambrian Partners +44 (0)20 7776 6417Richard Brown / Richard Greenfield Bankside Consultants +44 (0)20 7367 8888Michael Padley / Daniela Hale Editors' Note Medusa Mining Limited (AIM:MML) is a rapidly expanding gold producer with agrowing number of mining operations in the Philippines. With listings on theASX, AIM and Frankfurt Stock Exchange, Medusa is focused on steadily increasingits production from 40,000oz pa (at an approximate cost of US$200/oz) to atargeted level of 100,000oz pa in early 2008 (from multiple mines). The companyis debt free and its gold production is unhedged. For further information please refer to the Company's website:www.medusamining.com.au REVIEW OF OPERATIONS A summary of activities for the period is presented below. PHILSAGA TRANSACTION The Philsaga acquisition was settled on 4 December 2006 whereby the Company paidthe vendors of Philsaga a consideration of A$12 million, via a combination ofcash and deferred payment terms, together with the issue of 25 million shares inthe Company (subject to an escrow arrangement for at least 12 months) and Medusaalso paid the contractors to the mining operation a final payment of A$1million. The full terms of settlement of the acquisition of Philsaga from the Philsagavendors are: • Final payment of A$1 million made to contractors; • Yandal Investments Pty Ltd was paid in full, the consideration being A$3.584 million and 6.4 million shares; • Secdea Philippines Holdings Corporation was paid in full, the amount being A$80,000 and 4 million shares; • Advanced Concept Holdings Limited was paid A$920,000 and issued with 14.6 million shares. In addition, Advanced Concept Holdings Limited also agreed to provide vendorfinance for the balance of the cash component of A$7.416 million on thefollowing terms: - A$2.416 million to be paid on or before 15 February 2007 (payment completed); - A$2.5 million to be paid on or before 15 July 2007; and - A$2.5 million to be paid on or before 15 January 2008. The above deferred payments do not include interest which has been set at 7.5%per annum. There will be no penalty for any early repayments. The deferredpayments and interest are to be secured by a charge or equivalent security overthe Co-O Mine assets. Picop Supreme Court Case On 6 December 2006, the Supreme Court ("SC") of the Republic of the Philippinesunanimously confirmed that the Department of Environment and Natural Resources("DENR") can now proceed, subject to regulatory compliance, with the issuance toPhilsaga Mining Corporation ("Philsaga") of Mineral Production Sharing Agreement("MPSA") application 084-XIII covering the Co-O Goldmine. As anticipated, on 6 January 2007, Picop lodged a Motion for Re-considerationchallenging the decision of the SC. The SC on 14 February 2007 dismissed withfinality Picop's Motion for Re-consideration, and the Company received formalconfirmation on 8 March 2007. Background The unanimous decision of the Supreme Court of the Philippines on the caselodged by Picop Resources Inc ("Picop"), a timber licence holder, arose whenPhilsaga's predecessor was required under the new mining code introduced in 1995to convert old style tenements to new tenements compliant with the new mininglaw. Picop lodged an adverse claim against the MPSA applications in 1997 on thegrounds that mining could not be undertaken in timber licences. Philsagaacquired these tenement applications in 2000 and proceeded to challenge theadverse claim. Philsaga won the case against Picop in two lower courts andsubsequently Picop lodged a case in the Supreme Court against the claim ownerand a division of the Department of Environment and Natural Resources. Co-O MINE Production from the Co-O Mine for the period is summarised in Table 1. Table I: Production July to December 2006Period Ore Recovered Cash Gold Comments mined grade ounces costs sales (wet (g/t (ozs) (US $ per (US $ tonnes) Au) oz) million)Jul to Sept 12,024 9.3 3,522 263 2.17 Development and some2006 stope oreOct to Dec 13,949 8.8 3,647 278 2.20 2006 TOTAL 25,973 9.02 7,169 270 4.37 Development Production ramp up was delayed in the September quarter by temporary winderproblems followed by difficult sinking conditions for the 3W shaft from 80metres depth to the final depth of 122 metres. This was finally completed inJanuary 2007. Development on the 3,117 metre level (the 10W shaft level) has now been advancedto approximately 450 metres west of the Oriental Fault and has continued todevelop on an ore grade vein approximately one metre wide, generally containingbetween 4 and 12 g/t gold. This development will continue to approximately 550metres west of the Oriental Fault to near the position where drill hole TIN 3intersected 3.80 metres at 21.15 g/t gold. Development at the 3,050 metre level (the 3W shaft level) involves driving alongveins as well as the sinking of two winzes 50 metres apart to 40 metres depth(to the 3010 metre level) on the east side of the Oriental Fault. A new subleveldevelopment is underway on the 3,010 metre level. A new ventilation rise near the 10W shaft using an Alimak platform has commencedand should be completed during Q2 2007. Landslide at Co-O adit entrance On 10 January 2007 the Company advised the ASX that torrential monsoonal rainover the previous two weeks at the Co-O Mine site caused a landslide in theearly morning of 9 January 2007 in the vicinity of the main Co-O adit. Thisresulted in approximately 60,000 to 70,000 tonnes of material slipping fromapproximately 70 metres above the adit. Some of the material temporarily blockedthe adit entrance and cut power lines and other services to the mine. Nopersonnel were affected by the slide as all were evacuated through the TinagoShaft at the western end of the mine. Round the clock work with three front end loaders and trucks allowed minedrainage at adit level to be re-established on Friday, 12 January 2007 and powerwas reconnected on Sunday night, 14 January 2007, enabling the pumps on both themain levels below the adit to be re-started. The water level in the bottom levelof the mine (3,050 metre level) had risen approximately one metre in the maindrive and has now been cleared, along with rock and silt accumulations resultingfrom uncontrolled water flow down through the workings while the power anddrainage were cut. Repairs to the current adit are complete and the mine is back in operation. Themine access road which was also cut has been returned to full operational use. Ore production from the Co-O Mine recommenced on 21 January 2007and has beenstockpiled. Milling recommenced on 1 February 2007. In order to reduce the risk of losing future access to the mine, the Company hascommenced excavating a new by-pass adit which will connect with the 3W shaftposition providing an improved loop rail system and improved safety. This workis progressing and is expected to be completed by (the end of March 2007). Deep drilling Drilling the Co-O Mine deeps on both sides of the Oriental Fault commenced inDecember 2006 utilising two diamond drill rigs, one on each side of the fault,drilling step out holes to the east and to the west towards the Tinago Shaftarea at the western end of the mine. The aim is to intersect the vein systemwhere possible (subject to topographic and other constraints) at approximatelythe 2,950m level which is approximately 100 metres below the current bottom ofthe mine (or approximately 200 metres below adit level) with possibly somedeeper holes being drilled depending on results. It is anticipated that thefirst batch of results will be available in late February. Re-estimation of the resources is expected to be completed during the thirdquarter 2007 following the deep drilling and the availability of moreunderground information. Sinug-ang Project The Sinug-ang Project is situated immediately north of the Co-O Mine andcomprises two prospects: the Banbanon Prospect in the area of current drillingwhich was explored in the 1980s by surface sampling and drilling; and theSinug-ang prospect located further to the north on the same vein system whichtrends in a NNW direction parallel to the Philippine Rift Fault trend. Somesmall scale mining activities of selected parts of the Banbanon Vein and withlimited lateral extent have been undertaken to a depth of approximately 130metres below surface. Following drilling during Q4 2006, interpretative work and compilation based onthe drill results is now identifying possible positions of dilation along theSinug-ang Fault system which are to be targeted in future work. Drilling of two holes has commenced around an existing shaft that has beenchosen as a possible development position for the Banbanon Prospect in which a+500 metre long zone of +5 g/t gold has been outlined from surface to depthsvarying between 100 and 250 metres. If the current drilling is successful, theexisting shaft will be refurbished to establish quick and cheap access to thevein system for underground investigation. TAMBIS BANANGHILIG MINE Background The Tambis Bananghilig Mine is located approximately 35 km by the NationalHighway to the north of the Co-O Plant. A large area of alteration hosts numerous veins near the northern edge of alarge aeromagnetic anomaly. An extensive drill hole database in this areasuggests the presence of multiple veins, which are currently being investigatedfrom underground. The area to the south of the drilling is covered by youngerlimestone and drilling clearly shows that mineralised veins continue below thelimestone. Development Work on the North-South Vein adit on the north side of the Bananghilig River hascontinued where sub-levels below the adit continue to be established. Driving atadit level to the north was discontinued due to the intersection of old (andpreviously unknown) workings on this level. Development ore is continuing to bestockpiled and at 31 December 2006, totalled 1,600 tonnes at 7.57 g/t gold. Ametallurgical test work programme is in progress to determine the optimumtreatment route for this ore. Underground drilling is in progress from the ends of the drives from the L170inclined shaft. Compilation of this work will be used to prioritise furtherdevelopment. OTHER PROJECTS • Abacus Project The Mines Operating Agreement ("MOA") with Abacus Consolidated Resources andHoldings Inc. covers Exploration Permit ("EP") application number 000028-XIIIsituated in Agusan del Sur province in east Mindanao to the north of the Co-Omine and mill site. The granting process for the Abacus EP is being pursued. • Anoling Project The MOA with Alcorn Gold Resources Inc. covers Mining Production SharingAgreement ("MPSA") application number 039-XIII situated in the Agusan del Surprovince in east Mindanao to the north of the Co-O mine and mill site as shownon Figure 2. The granting process for the Anoling MPSA is now being pursued. The granting oftwo Small Scale Mining Permits is expected to be completed during the nextquarter. • Das-agan Project The MOA covers MPSA application number 039-XIII situated in the Agusan del Surprovince in east Mindanao to the north of the Co-O Mine and mill site. Thegranting process for the Das-Agan MPSA is being pursued. • Saugon Gold-Silver Project (Medusa 100%) Application for renewal of the Exploration Permit is in progress. • Panaon Project (Medusa divesting 50%) Medusa is in discussions with joint venture partner GoldSearch Limited withrespect to the future of this project. RELINQUISHED PROJECTS The sale of the Anti Dam and Kurnalpi Projects to Fairstar Resources Limited (anASX listed entity) was completed in October 2006. The Company received A$50,000in cash and one million Fairstar shares at the issue price of A$0.25 per share. The Braemore Project was disbanded when sale of the project was not realised. Subsequent to 31 December 2006, the Company has relinquished the MasapelidProject. CORPORATE In November 2006, the Company raised A$11,143,990 (before expenses), via theplacement of 17,144,599 ordinary shares at A$0.65 per share. The funds wereraised to enable the Company to complete the acquisition of Philsaga MiningCorporation on 4 December 2006. Medusa commenced trading of its shares on the Frankfurt Stock Exchange inGermany on 14 September 2006. The Company completed a secondary listing and admission to the AIM Market of theLondon Stock Exchange on 21 November 2006. CONDENSED INCOME STATEMENT for the half-year ended 31 December 2006 Economic Entity ------------------------ 31 Dec 2006 31 Dec 2005 --------- --------- Note A$ A$ --------- ---------Revenues 5,692,089 1,603,816Net gain on acquisition of controlled entities 8,161,554 -Net gain on liquidation of controlled entities 76,469 - --------- ---------Total Revenue 13,930,112 1,603,816 --------- ---------Cost of sales (2,560,914) (793,742)Depreciation & amortisation expense (334,285) (255,372)Employee benefits expense (207,281) (357,440)Exploration expenditure written off (1,073,058) (119,718)Foreign exchange gain/(loss) - 242,370Administration expense (239,384) (423,338)Other expenses (1,814,694) (222,965)Share of net loss of joint venture accountedfor using the equity method - (47,069)Recognition of share based payments expense (477,600) (223,250) --------- ---------Profit/(loss) before income tax expense 7,222,896 (596,708)Income tax expense - - --------- ---------Profit/(loss) for the period 7,222,896 (596,708) --------- ---------Overall operations:Basic earnings per share $0.107 ($0.013) --------- ---------Diluted earnings per share $0.076 ($0.007) --------- --------- The accompanying condensed notes form part of these financial statements. CONDENSED BALANCE SHEET as at 31 December 2006 Economic Entity -------------------------- 31 Dec 2006 30 Jun 2006 ---------- --------- Note A$ A$ ---------- ---------CURRENT ASSETS Cash & cash equivalents 2,679,958 3,494,291 Trade & other receivables 1,853,281 199,043 Inventories 347,692 390,778 Prepayments 150,628 127,883 ---------- ---------TOTAL CURRENT ASSETS 5,031,559 4,211,995 ---------- ---------NON-CURRENT ASSETS Investments 282,225 - Property, plant & equipment 41,405,738 6,745,014 Exploration, evaluation & developmentexpenditure 11,810,794 3,506,635 ---------- ---------TOTAL NON-CURRENT ASSETS 53,498,757 10,251,649 ---------- ---------TOTAL ASSETS 58,530,316 14,463,644 ---------- ---------CURRENT LIABILITIES Trade & other payables 11,611,280 1,522,904 Short term provisions 222,797 - ---------- ---------TOTAL CURRENT LIABILITIES 11,834,077 1,522,904 ---------- ---------NON CURRENT LIABILITIES Trade & other payables 374,647 30,538 ---------- ---------TOTAL NON CURRENT LIABILITIES 374,647 30,538 ---------- ---------TOTAL LIABILITIES 12,208,724 1,533,442 ---------- -----------NET ASSETS 46,321,592 12,910,202 ---------- -----------EQUITY Issued capital 41,427,797 16,075,833 Reserves 2,721,810 1,885,280 Retained profits 2,171,985 (5,050,911) ---------- -----------TOTAL SHAREHOLDERS' EQUITY 46,321,592 12,910,202 ---------- ----------- The accompanying condensed notes form part of these financial statements. CONDENSED STATEMENT OF CHANGES IN EQUITY for the half-year ended 31 DECEMBER 2006 Share capital Retained Option Foreign Total Profits / Reserve Currency Ordinary (Accumulated Translation Losses) Reserve A$ A$ A$ A$ A$ -------- -------- -------- -------- -------- Balance at01.07.2005 5,260,273 (2,493,053) 652,891 - 3,420,111 Sharesissuedduring the 7,285,356 - - - 7,285,356period Shareoptionsissuedduringthe periodin accordance - - 223,250 - 223,250with AASB 2- Share BasedPayments Lossattributableto membersof parent - (596,708) - - (596,708)entity -------- -------- -------- -------- --------Sub-total 12,545,629 (3,089,761) 876,141 - 10,332,009 Dividends - - - - -paid or provided for Balance at -------- -------- -------- -------- --------31.12.2005 12,545,629 (3,089,761) 876,141 - 10,332,009 -------- -------- -------- -------- -------- Balance at01.07.2006 16,075,833 (5,050,911) 1,412,416 472,864 12,910,202 Sharesissuedduring the 25,351,964 - - - 25,351,964period Shareoptionsissuedduringthe periodin accordance - - 477,600 - 477,600with AASB 2- Share basedpayments Profitattributableto membersof parent - 7,222,896 - 7,222,896entity Exchangedifferencesarising ontranslation - - - 358,930 358,930 -------- -------- -------- -------- --------Sub-total 41,427,797 2,171,985 1,890,016 831,794 46,321,592 Dividends - - - - -paid or -------- -------- -------- -------- --------provided for Balance at31.12.2006 41,427,797 2,171,985 1,890,016 831,794 46,321,592 -------- -------- -------- -------- -------- The accompanying condensed notes form part of these financial statements. CONDENSED CASH FLOW STATEMENT for the half-year ended 31 DECEMBER 2006 Economic Entity ---------------------------- 31 Dec 2006 31 Dec 2005 ---------- ---------- Note A$ A$ ---------- ----------CASH FLOWS FROM OPERATING ACTIVITIESReceipts from customers (a) 5,409,278 1,307,448Payments to suppliers and employees (a) (4,914,744) (1,828,336)Interest received 57,289 44,544 ---------- ----------Net cash provided by / (used in) operatingactivities 551,823 (476,344) ---------- ----------CASH FLOWS FROM INVESTING ACTIVITIESPurchase of non-current assets (1,086,127) (39,143)Payments for exploration expenditure andtenements (5,572,660) (2,050,428)Payments for lease of plant - (3,000,000)Payments relating to acquisition of Philsaga (5,584,000) -Payments relating to Philsaga transactions - (50,539) ---------- ----------Net cash (used in) investing activities (12,242,787) (5,140,110) ---------- ----------CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of shares 11,518,164 7,653,580Transaction costs from issue of shares (721,957) (411,861) ---------- ----------Net cash provided by financing activities 10,796,207 7,241,719 ---------- ----------Net increase/(decrease) in cash held (894,757) 1,625,265Cash at beginning of period 3,494,291 330,585Exchange rate adjustments 80,424 18,117 ---------- ----------Cash at end of period 2,679,958 1,973,967 ---------- ---------- Note (a) Included in payments to suppliers and employees are funds advanced by theeconomic entity to a third party mining contractor to cover the costs of miningoperations in the Philippines. Receipts from the sale of product from the mining operations are received bythis third party and also treated as advances to cover the costs of miningoperations. The accompanying condensed notes form part of these financial statements CONDENSED NOTES TO THE FINANCIAL STATEMENTS for the half-year ended 31 DECEMBER 2006 Note 1: Basis of preparation Medusa Mining Limited (the "Company") is a company domiciled in Australia. The consolidated interim financial report of the Company as at and for the sixmonths ended 31 December 2006 comprises the Company and its subsidiaries(together referred to as (the "Consolidated Entity") and the consolidatedentity's interests in associates and jointly controlled entities. The consolidated annual financial report of the consolidated entity as at andfor the year ended 30 June 2006 is available on the company's website. (a) Statement of compliance The consolidated interim financial report is a general purpose financial reportwhich has been prepared in accordance with AASB 134: Interim Financial Reportingand the Corporations Act 2001. The consolidated interim financial report does not include all of theinformation required for a full annual financial report, and should be read inconjunction with the consolidated annual financial report of the consolidatedentity as at and for the year ended 30 June 2006. This consolidated interim financial report was approved by the Board ofDirectors on 12 March 2007. (b) Significant accounting policies The accounting policies applied by the consolidated entity in this consolidatedinterim financial report are the same as those applied by the consolidatedentity in its consolidated financial report as at and for the year ended 30 June2006. (c) Estimates The preparation of the interim financial report requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income and expense.Actual results may differ from these estimates. In preparing this consolidated interim financial report, the significantjudgements made by management in applying the consolidated entity's accountingpolicies and the key sources of estimation uncertainty were the same as thosethat applied to the consolidated financial report as at and for the year ended30 June 2006. (d) Financial Risk Management The consolidated entity's financial risk management objectives and policies areconsistent with that disclosed in the consolidated financial report as at andfor the year ended 30 June 2006. Note 2: Changes in accounting policyThere has been no change in accounting policy since the last annual reportingdate. Economic Entity ------------------------ 31 Dec 2006 31 Dec 2005 --------- -------- A$ A$ --------- --------Note 3: Profit/(loss) for the periodThe following revenue and expense items arerelevant in explaining the financial performancefor the interim period: - Interest revenue 67,775 45,591 - Net foreign exchange gain - 197,901 - Exploration expenses written off (1,073,058) (119,718) - Gold sales 5,621,313 1,553,788 - Other income 3,000 5,500 Economic Entity ------------------------ 31 Dec 2006 31 Dec 2005 --------- -------- A$ A$ --------- --------Note 4: Segment Information Primary reporting - geographical segment Segment revenue:------------------- Australia 3,911,506 49,438- Philippines 10,018,606 1,554,378 --------- --------Total Revenue 13,930,112 1,603,816 --------- -------- Segment results - Profit/(loss):----------------------------------- Australia 875,668 (870,510)- Philippines 6,347,228 273,802 --------- --------Profit/(loss) from ordinary activities 7,222,896 (596,708) --------- -------- The information in the above announcement was compiled by Geoff Davis, who hassufficient experience which is relevant to the style of mineralisation and typeof deposit under consideration and to the activity which he is undertaking toqualify as a Competent Person as defined in the 2004 Edition of the"Australasian Code for Reporting of Exploration Results, Mineral Resources andOre Reserves". Geoff Davis consents to the inclusion in the report of thematters based on his information in the form and context in which it appears. Copies of this report will to be sent to all shareholders and are available fromthe Company's registered office at Unit 7, 11 Preston Street, Como 6152 WesternAustralia and the website www.medusamining.com.au This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MML.L