Saugon Expands High-Grade Gold-Silver Potential

ANNOUNCEMENT

1 December 2010

SAUGON DRILLING EXPANDS HIGH-GRADE GOLD-SILVER POTENTIAL

Medusa Mining Limited (ASX and LSE - MML; TSX - MLL) ("Medusa" or the "Company") through its Philippines operating company Philsaga Mining Corporation ("Philsaga"), advises that drilling at the Saugon Project's First Hit Vein Prospect has confirmed previous results from 2004 and extended the mineralised gold-silver zones to approximately 200 metres of strike and open along strike and at depth.

Highlights include:

Geoff Davis, Managing Director of Medusa, commented:

"These new high-grade gold-silver drilling results, whilst confirming and extending significantly the 2004 results, have the hallmarks of a substantial mineralised structure. The mineralisation is hosted by epithermal quartz breccias, stockworks and veins which may be linked to a porphyry copper system as indicated by the large coincident argillic alteration area and aeromagnetic low or demagnetised zone.

The deepest high grade intersection of 3.35 metres at 11.71 g/t gold and 154 g/t silver at approximately 180 metres vertically below outcrop and the robust new northern zone intersections indicate scope for substantial increases to this mineralisation. Work is on-going to further evaluate its potential to develop as a new deposit".

FIRST HIT VEIN

Background

Figure 1 (please see the link at the end of this announcement) shows the location of the Saugon Project approximately 28 kilometres by road from the Co-O Mill, and Figure 2 (please see the link at the end of this announcement) shows the regional geology, the location of the First Hit Vein and the Paradise & Mabas Prospects. Figure 3 (please see the link at the end of this announcement) shows the location of the First Hit Vein drill holes.

Figures 4 and 5 (please see the link at the end of this announcement) show interpreted cross-sections through the First Hit Vein and Figure 6 (please see the link at the end of this announcement) shows gram per metre contours projected onto a vertical plane looking northwest.

Work in 2004 involved drilling at the First Hit Vein (holes SDDH 1 to 35) in conjunction with underground development via a 30 metre deep inclined winze down the vein-breccia to assist in understanding the mineralisation.

The 2004 drilling indicated a well developed central zone (First Hit Vein) with two possible splays partly developed as footwall and hanging wall zones. Further details are contained in the announcement dated 20 April 2010.

Drilling

Drilling of 34 new drill holes totalling 7,493 metres (SDDH 36 to 68 inclusive) has been completed at the First Hit Vein. Assay results for holes SDDH 55, 57, 60, 62, 63, 65 and 68 are awaited.

The aim of the drilling was to repeat the 2004 un-surveyed holes in order to establish the geometry of the mineralised system and to gain a better understanding of the mineralisation. Drilling is continuing.

The results broadly confirm the 2004 drill holes with some wider intersections with mid-range grades as well as narrow zones of high grades. The style of mineralisation appears to be quite variable, from some well formed veins to hydrothermal breccias to stockworks. Strong silver values and base metals, particularly lead and zinc appear to correlate reasonably consistently with the main vein.

Table I. First Hit Vein drill hole results >1 g/t gold and >0.2 metres downhole

Notes:

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

(ii) All assays are by McPhar Geoservices Inc laboratory in Manila except for SDDH 47, 50-53, 59 and 64A which are by the Philsaga laboratory;

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

(iv) NA means assays not yet available.

DISCUSSION

The drilling completed to date indicates that the mineralisation intersected in the exploration winze in 2004 and the 2004 drilling may be the "neck" of a hydrothermal system where it vented towards surface above more substantial zones of mineralisation at depth and along strike. Whilst the distribution of the gold-silver mineralisation is not yet fully understood, it is now apparent that the controlling structure has potential to host zones of high-grade gold-silver mineralisation with some areas of significant copper-lead-zinc mineralisation.

Drilling will continue with the purpose of exploring the structure along strike and at depth.

DRILL HOLE SAMPLING AND ASSAYING PROCEDURES

Samples were taken from mainly HQ sized (hole outside diameter 96 mm, hole inside diameter 63.5 mm) and NQ sized (hole outside diameter 75.8 mm, hold inside diameter 47.6 mm) drill core. The selected sample intervals were halved by diamond saw and half the core was bagged, numbered, and sent to Philsaga Mining Company (PSMC) Laboratory. The laboratory prepared each drill core sample into 4 pulp (200 gram, -200 mesh) splits. One pulp split was utilized for gold assaying by fire assay on a 30 gram sample with an Atomic Absorption Spectrometry ("AAS") finish while copper, lead, zinc, and silver assaying were conducted by AAS in the latter stages following a concentrated acid leach on a 1 gram sample. The second pulp splits of all those samples were repacked and retagged and sent to McPhar Geoservices Inc. ("McPhar"), a NATA and ISO 9001/2000 accredited laboratory in Manila, for arsenic assaying by ICP assay method.

The third pulp splits of samples with above 1.00 g/t Au from PSMC Laboratory were sent to McPhar Laboratory for re-assaying of gold, silver, copper, lead, and zinc by assaying methods mentioned above.

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 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 "Australian 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.

Refer to the Technical Report which was filed on sedar 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.

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