Overview: Medusa Mining Limited (“Medusa”, “the Company”) is an Australian-based resources company focused on gold mining projects in the Philippines. Medusa’s flagship project is the 100% owned Co-O Mine located in the Philippines. Total Ore Reserves of the Co-O Mine are estimated at 1.8million tonnes at a grading of 7.3 g/t which equates to 427,000 ounces of gold.
Catalysts: After operating profitably amid a four-year contraction in gold prices, Medusa’s is positioned to deliver improving earnings on the back of recent gold price strength. The Company is on target to produce 120,000-130,000 ounces of gold at its Co-O mine at All-in-Sustaining- Costs (AISC) of US$900 – US$1000. The company has a strong balance sheet with cash and cash equivalents totalling US13.6million and no debt.
Hurdles: There is a risk that the company won’t be able to extend the mining operations beyond the current mine life, which is approximately three years. Apart from the Co-O mine, Medusa’s expansion projects are characterised by lower grade resource operations with economics that has yet to be established. In addition, there is a sovereign risk as Medusa is operating in the Philippines
Investment View: Medusa Mining offers profitable exposure to the gold mining industry. We are attracted to its high-grade underground mine operations and strong balance sheet. While sovereign risks and my life are principal hurdles, Medusa is well-positioned to benefit from any cyclical recovery in the gold price. We initiate coverage with a ‘buy’ recommendation.
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