This document, which comprises a prospectus relating to Medusa Mining Limited (Medusa or the Company), has been prepared

in accordance with the Prospectus Rules of the Financial Services Authority (FSA) (the Prospectus Rules) made under
section 73A of the Financial Services and Markets Act 2000, as amended (FSMA). This document has been approved as a
prospectus by the FSA under section 87A of the FSMA and relates to all of the ordinary shares in the capital of the Company
(Ordinary Shares). This document does not constitute a prospectus for the purposes of the Australian Corporations Act 2001.
Application has been made to the FSA and to London Stock Exchange plc (London Stock Exchange) respectively for admission of III 6.1
all of the issued Ordinary Shares to: (i) the standard listing segment of the Official List of the UKLA (Official List); and (ii) the
London Stock Exchanges main market for listed securities (Main Market) (together Admission). The Ordinary Shares are already
listed and/or posted for trading on the Toronto Stock Exchange (TSX), the Australian Securities Exchange (ASX) and the
AIM market of the London Stock Exchange (AIM). No application has been made or is currently intended to be made for the
Ordinary Shares to be admitted to listing or dealt with on any other exchange. Admission to trading on the Main Market constitutes
admission to trading on a regulated market. It is expected that Admission will become effective and that dealings in the Ordinary
Shares on the Main Market will commence at 8.00 a.m. (London time) on 28 October 2010 (International Security Identification
Number: AU000000MML0). Trading of the Ordinary Shares on AIM will be cancelled on Admission.
This prospectus has been prepared solely in respect of the Admission and no Ordinary Shares or other securities are being
offered for subscription or sale pursuant to this document. This prospectus is being made publicly available for information
purposes only and does not require any action to be taken by Shareholders. This prospectus does not constitute an offer or invitation
to any person to subscribe for or purchase any securities in the Company or any other entity.
The Company and the Directors, whose names appear on page 23 of this document, accept responsibility for the information contained I 1.1
in this document. Having taken all reasonable care to ensure that such is the case, the information contained in this document is, to I 1.2
the best of the knowledge of the Company and the Directors, in accordance with the facts and contains no omission likely to affect its III 1.1
import.
III 1.2

Prospective investors should read the entire document and, in particular, the Risk Factors set out on pages 9 to 18 when
considering an investment in the Company.

MEDUSA MINING LIMITED

I 5 1.1

(incorporated and registered in Western Australia with Australian company number 099 377 849)
Admission to the standard listing segment of the Official List of the UK Listing Authority and to
trading on the London Stock Exchanges Main Market for listed securities

FAIRFAX I.S. PLC

Financial Adviser and Broker
Fairfax I.S. PLC (Fairfax), which is authorised and regulated in the United Kingdom by the FSA, is acting exclusively for the III 10.1
Company as its financial adviser and broker and no-one else in connection with Admission and will not regard any other person as its
client or be responsible to any person other than the Company for providing the protections afforded to its clients or for advising any
other person on the contents of this document.
Investors should rely only on the information in this document. No person has been authorised to give any information or make any
representations other than those contained in this document and, if given or made, such information or representations must not be
relied on as having been authorised by the Company. Without prejudice to any obligation of the Company to publish a supplementary
prospectus pursuant to section 87G of FSMA or paragraph 3.4 of the Prospectus Rules, the publication of this document does not,
under any circumstances, create any implication that there has been no change in the affairs of the Group since, or that the information
contained herein is correct at any time subsequent to, the date of this document.
Apart from any responsibilities and liabilities which may be imposed on Fairfax by the FSMA or the regulatory regime established
thereunder, Fairfax accepts no responsibility whatsoever and makes no representation or warranty, express or implied, for or in respect
of the contents of this document, including its accuracy, completeness or verification or for any other statement made or purported to
be made by it, or on its behalf, in connection with the Company or Admission. Fairfax accordingly disclaims to the fullest extent
permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which
it might otherwise have in respect of this document or any such statement.
The contents of this document are not to be construed as legal, business or tax advice. Each prospective investor should consult his,
her or its own solicitor, independent financial adviser or tax adviser for legal, financial or tax advice.
Restrictions
This document does not constitute an offer to sell or a solicitation of an offer to purchase or subscribe for Ordinary Shares in any
jurisdiction. The distribution of this document and the sale of Ordinary Shares in certain jurisdictions may be restricted by law and
therefore persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any
failure to comply with these restrictions may constitute a violation of the securities laws or the laws of any such jurisdiction.
The Ordinary Shares have not been approved or disapproved by the U.S. Securities and Exchange Commission, any State Securities
Commission in the United States or any other U.S. Regulatory Authority, nor have any of the foregoing authorities passed upon or
endorsed the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offence in the United States.

TABLE OF CONTENTS
Page
SUMMARY

RISK FACTORS

CONSEQUENCES OF A STANDARD LISTING

19

IMPORTANT INFORMATION

21

EXPECTED TIMETABLE

22

NO ACTION TO BE TAKEN BY SHAREHOLDERS

22

DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS

23

PART I

INFORMATION ON THE GROUP

25

PART II

DIRECTORS, SENIOR MANAGERS, CORPORATE

GOVERNANCE AND EMPLOYEES

46

PART III

OVERVIEW OF THE GOLD MARKET

53

PART IV

INFORMATION ON THE PHILIPPINES

59

PART V

OPERATING AND FINANCIAL REVIEW

63

PART VI

ADDITIONAL INFORMATION

79

PART VII

DEFINITIONS

105

GLOSSARY OF ABBREVIATIONS AND TECHNICAL TERMS

109

NOTES

115

PART VIII

HISTORIC FINANCIAL INFORMATION

116

PART IX

MINERAL EXPERTS REPORT

173

SUMMARY
This summary should be read as an introduction only to this document and any decision to invest in the
Company should be based on consideration of this document as a whole by the investor and not solely on
this summarised information. Investors should note that if a claim relating to the information contained
in this document is brought by an investor before a court, the investor bringing the claim might, under
the national legislation of the EEA States, have to bear the costs of translating the document before legal
proceedings are initiated. Civil liability attaches to those persons who are responsible for this summary,
including any translation of this summary, but only if the summary is misleading, inaccurate or
inconsistent when read together with other parts of this document.
1.

Summary description of the business

Group Information
Medusa is a mineral exploration, development and mining company that was established to acquire gold and
copper assets in the Philippines. The Group acquired the Co-O Mine in December 2006. In September 2007,
the Company commenced Phase I expansion to raise production to 60,000 ounces of gold per year and,
independently, Phase II expansion to raise production to 100,000 ounces of gold per year. Phase I was
completed ahead of schedule in June 2009 and Phase II was completed, including commissioning, on
schedule in the quarter ending 31 March 2010. Phase II expansion involved mill expansion to enable it to
process approximately 1,000 tonnes of ore per day which was completed in December 2009 and
commissioning has progressed well during 2010. If additional exploration success is achieved at the
Co-O Mine or surrounds, the mill has capacity to produce up to approximately 120,000 to 130,000 ounces
of gold per year.
Growth Strategy
With current mineral resources comprising an Indicated Mineral Resource of 603,000 ounces of gold and an
Inferred Mineral Resource of 1,548,000 ounces of gold in the Co-O and Bananghilig deposits, Medusas
corporate strategy is to become a mid-tier 300,000 to 400,000 ounce per year, low cost gold producer.
The Groups high grade Co-O Mine (Indicated Mineral Resource of 603,000 ounces of gold inclusive of a
Probable Ore Reserve of 505,000 ounces of gold, and additionally an Inferred Mineral Resource of
898,000 ounces of gold) is currently producing at a rate of 100,000 ounces of gold per year. Average cash
costs at the Co-O Mine were US$184 per ounce in the year to 30 June 2010 and the Company intends to
maintain the average cash cost at this level. The Company intends to replace mined ounces through the
conversion of Indicated Mineral Resources to Probable Ore Reserves, primarily through underground
development at the Co-O Mine. The Company expects to be able to maintain a mine life of approximately
five years based on Probable Ore Reserves.
The Company is also continuing to conduct near mine exploration to assess the possibilities of further
expanding production to 200,000 ounces per year. The existing mill at the Co-O Mine currently has the
capacity to produce up to approximately 120,000 to 130,000 ounces of gold per year and the capacity of the
mill could be increased at the appropriate time.
The Group is also continuing exploration of its other projects with the intention of establishing a pipeline of
potential mineral resources in order to maintain and increase gold production volumes in the longer term.
The maiden Inferred Mineral Resource at the Bananghilig potential open pit project of 650,000 ounces of
gold, and the recognised potential for extensions and additional nearby mineralisation, has the potential to
lift Medusas production profile to approximately 300,000 to 400,000 ounces of gold per year. A drilling
programme and scoping study commenced in July 2010 in order to determine the feasibility of developing
the Bananghilig Deposit.
In addition, Medusa is conducting copper exploration on porphyry targets with the objective of monetising
these projects at an early stage if exploration is successful in establishing a potentially economic resource.

2.

Key strengths

Large prospective tenement area

High grade deposit at the Co-O Mine with growth potential

Infrastructure

Regulated mining environment

Strong community relationships

3.

Ore Reserves and Mineral Resources

The Co-O Gold Project Probable Ore Reserve estimate as at the date of this prospectus is detailed below:
Deposit

Category

Tonnes
(t)

Co-O Mine

Probable Ore Reserve

1,465,000

Grade
(g/t Au)
10.7

Contained
Gold
(oz)
505,000

Source: Mineral Experts Report

The Probable Ore Reserves that have been declared are based on a gold price of US$900 per ounce,
a minimum stope width of 1.2 metres and a stope cut-off grade of 2.62 g/t Au for all mineralised material.
The work satisfies the reporting requirements of the JORC Code (2004) and is reconciled to the CIMM Code
for reporting Mineral Resources. The Co-O Gold Project has a current estimated mine life of five years based
only on Probable Ore Reserves.
The Co-O Gold Project Mineral Resource estimate as at the date of this prospectus, based on a 0g/t cut off
and various upper cuts, is detailed below:
Deposit

Category

Tonnes
(t)

Co-O Mine
Co-O Mine

Indicated Mineral Resource

Inferred Mineral Resource

1,418,000
2,905,000

Grade
(g/t Au)
13.2
9.6

Contained
Gold
(oz)
603,000
898,000

Source: Mineral Experts Report

The Indicated Mineral Resource amount includes the Probable Ore Reserves.
The Bananghilig Mineral Resource estimate as at the date of this prospectus, based on a 0.6g/t cut off, is
detailed below:
Deposit

Category

Tonnes
(t)

Bananghilig Project

Inferred Mineral Resource

15,000,000

Grade
(g/t Au)
1.3

Contained
Gold
(oz)
650,000

Source: Mineral Experts Report

4.

Reasons for moving to the Official List

The Board believes that the Company has now reached a size and stage of maturity at which the Official List
will be the most appropriate platform for future growth. The Directors believe that the move will result in
the Company benefiting from the increased potential investor base, a higher profile and an increase in the
liquidity of its Ordinary Shares.

5.

Summary Financial Information

The tables below set out selected summary financial information for the periods indicated. The summary
financial information has been extracted without material adjustment from the historical financial
information in Part VIII of this document. Investors are reminded that the tables below are only a summary
and investors should read the whole of this document and not rely on the key or summarised information.
During the year ended 30 June 2010, the Group changed its presentational currency from Australian Dollars
to US Dollars to account for the increase in the Groups trading and revenues which resulted in the majority
of the Groups business being transacted in US Dollars.
For the purpose of item 20.1 of Annex I to the Prospectus Rules, and only for that purpose, the historical
financial information for the year ended 30 June 2009 has been restated from Australian Dollars to
US Dollars.
2010
US$000
Key income statement data
Revenue
Profit before income tax
Net profit/(loss) for the period
Basic earnings/(loss) per share
Key balance sheet data
Total assets
Total liabilities
Net assets/equity
Key cash flow data
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Net increase/(decrease) in cash and
cash equivalents
Forex adjustment
Cash at end of period
6.

For the year ended 30 June

2009
2009
(restated)
US$000
A$000

2008
A$000

94,508
65,854
65,812
0.378

42,825
26,793
28,507
0.187

57,252
35,820
38,111
0.250

18,074
1,019
(1,347)
(0.009)

183,977
8,551
175,426

115,422
9,506
105,916

144,445
11,813
132,633

80,380
12,063
68,317

38,719
(34,572)
1,130

30,592
(20,892)
17,776

39,719
(35,745)
26,841

7,200
(17,044)
(5,069)

5,277
670
32,457

27,476
(5,614)
26,510

30,815
(2,710)
32,939

(14,913)
(421)
4,834

Current Trading and Prospects

During the year to 30 June 2010, the Group generated revenues of US$94.5 million. Medusa is an un-hedged
gold producer and received an average gold price of US$1,100 per ounce from the sale of 64,020 ounces of
gold for the twelve month period to 30 June 2010.
Following completion of the Groups Phase II expansion in the quarter to 31 December 2009 and the
successful commissioning of the Co-O Mine expanded mill in the quarter to March 2010, the Group is now
in the position to produce 100,000 ounces of gold on an annualised basis. The Group produced a record
89,679 ounces of gold for the year to 30 June 2010, an increase of 41,810 ounces or 87 per cent. from the
previous years production of 47,869 ounces, at an average recovered grade of 16.52 g/t gold
(2009: 13.30 g/t gold).
Average cash costs (net of development costs, but inclusive of royalties and local taxes) for the year to
30 June 2010 were US$184 per ounce, compared to the average cash cost in the year to 30 June 2009 of
US$213 per ounce.
Subject to successful near mine exploration, the expanded Co-O Mine mill has spare capacity to treat excess
ore and could produce between 20,000 to 30,000 additional ounces of gold per annum with minimal capital
investment required by the Group.

With current mineral resources comprising an Indicated Mineral Resource of 603,000 ounces of gold and an
Inferred Mineral Resource of 1,548,000 ounces of gold in the Co-O Gold Project and Bananghilig deposits,
Medusas corporate strategy is to become a mid-tier 300,000 to 400,000 ounce per year, low cost gold
producer.
Medusa has aggressive exploration programmes in place, having spent US$19 million on exploration in the
12 months to 30 June 2010, and has budgeted US$21 million for exploration in the forthcoming year. There
are 12 surface rigs currently operating and the Directors plan to split them between the Co-O Mine and
surrounds, the Saugon Project, the Bananghilig Project and they also expect initial exploratory drilling to
take place at the Usa copper-gold porphyry prospect during the period to 30 June 2011.
7.

Significant Change

There has been no significant change in the financial or trading position of the Group since 30 June 2010,
the date to which the Groups last financial information was published.
8.

Working capital

The Company is of the opinion that the working capital available to the Group is sufficient for its present
requirements, that is, for at least the next 12 months following the date of this prospectus.
9.

Directors

Name

Position

Peter Rhys Jones

Geoffrey John Davis
Peter Gordon Hepburn-Brown
Roy Philip Daniel
Robert Maurice Weinberg
Andrew Boon San Teo

Non-Executive Chairman
Managing Director
Operations Director
Finance Director and Joint Company Secretary
Non-Executive Director
Non-Executive Director

10.

I.4

Risk Factors

Group Risks

The Group may not achieve its production estimates.

The figures for the Groups Ore Reserves and Mineral Resources are estimates based on interpretation
and assumptions and may yield less mineral production under actual conditions than is currently
estimated.

Inferred Mineral Resources are uncertain and their economic viability cannot be assured.

There is no assurance as to Medusas ability to sustain and expand Ore Reserves and Mineral
Resources.

The tenements or licences in which the Group has or may earn an interest in, may be subject to
applications for renewal or grant (as the case may be).

Under the exploration permits and licences and certain other contractual arrangements to which the
Group is or may in the future become party to, the Group is or may become subject to payment and
other obligations.

The Group may experience regulatory, consent or permit delays.

Medusa relies on its Directors and management team and the loss of one or more of these persons may
adversely affect Medusa.

The Group competes with other companies, including major international mineral exploration and
mining companies, some of which have greater financial and other resources than the Group.

The Group currently has joint venture partners in the Philippines and there is a possibility that their
interests may not align with the Groups.

The Group relies on a small number of outside contractors and subcontractors, and the loss or lack of
availability, or failure to properly perform services, of one or more of these contractors or
sub-contractors may adversely affect the Group.

There can be no assurance that a work slowdown, stoppage, strike or other industrial or labour dispute
will not occur at any of the Groups development or exploration prospects.

Medusas properties and operations are subject to inherent environmental risks and liabilities
associated with pollution of the environment and the disposal of waste products occurring as a result
of mineral exploration and production.

The Groups insurance coverage does not cover all of its potential losses, liabilities and damages
related to its business and certain risks are uninsured or uninsurable.

Currency fluctuations may affect the costs that the Group incurs in its operations.

The Group has been and may in the future again be subject to disputes with regulatory authorities
and/or litigation from time to time during the course of its business.

Country Risks

The Groups current and proposed exploration and mining activities are situated entirely in a single
country.

Investments and operations in the Philippines are subject to numerous risks associated with operating
in a foreign jurisdiction.

Risks relating to Philippines taxes which are subject to changes which may adversely affect the
Groups financial position and profitability.

The Group currently holds interests only in the Republic of the Philippines, which may be considered
to have high political and sovereign risk.

Whilst the Group has received advice that its corporate structure complies with all Philippine
regulations, there is a risk that it could be questioned or challenged given limited precedents to date
in country.

Industry Risks

Mining sector enterprises face many operating risks.

Gold price volatility may affect the future production, profitability, financial position and financial
condition of Medusa.

The Group cannot be assured of securing the permits necessary to continue its work on reasonable or
commercial terms.

Mining, processing, development and exploration activities depend on adequate infrastructure.

Certain of the operations of the Group are carried out under potentially hazardous conditions.

Changes in mining or investment policies, laws and regulations or shifts in political attitude may
adversely affect the Groups business.

Risks Relating to the Ordinary Shares

The Ordinary Shares are expected to be admitted to the standard listing segment of the Official List
and accordingly certain aspects of the Listing Rules will not, on Admission, apply to the Company as
they would if it were classified within the premium listing segment.

Risks associated with equity securities may lead to investors not realising their investment.

Future share issuances, including exercise of the Options, may dilute existing Shareholders. The
Company amended its Constitution at its general meeting, on 6 October 2010, to incorporate
pre-emption rights for Shareholders on the issue of new Ordinary Shares and other equity securities.
However, Shareholders may nevertheless be diluted by further issues of Ordinary Shares to the extent
that Shareholders disapply such pre-emption rights, the Company issues Ordinary Shares for non-cash
consideration or the Company issues Ordinary Shares pursuant to an Employee Share Scheme
(as defined in the Australian Corporations Act).

The sales of a substantial number of Ordinary Shares could affect their market price.

Risk of lack of liquidity in Ordinary Shares.

General economic conditions may affect the performance of Ordinary Shares.

The ability of a Shareholder to bring an action against the Company may be limited by law.

Shareholders may be subject to risks arising from adverse movements in the value of their local
currency against the Australian Dollar.

RISK FACTORS

I4
III 2

The exploration for and development of metals and Mineral Resources is a speculative activity that involves
a high degree of risk. The Directors believe that, in particular, prospective investors should carefully
consider the following risks which represent the material risks known to the Directors as at the date of this
prospectus relating to the Company and to an investment in the Ordinary Shares. The Ordinary Shares carry
no guarantee in respect of profitability, dividends, return of capital or the price at which they may trade and
investors could lose all or part of their investment.
Group Risks
The Group may not achieve its production estimates
The Group prepares estimates of future gold production for its existing and future mines. The Group cannot
give any assurance that it will achieve its production estimates. The failure of the Group to achieve its
production estimates could have a material and adverse affect on any or all of its future revenues and
profitability. The realisation of production estimates are dependent on, among other things, the accuracy of
Ore Reserve and Mineral Resource estimates, the accuracy of assumptions regarding ore grades and recovery
rates, ground conditions (including hydrology), physical characteristics of ores, the presence or absence of
particular metallurgical characteristics, and the accuracy of estimated rates and costs of mining, ore haulage
and processing.
Actual production may vary from estimates for a variety of reasons, including the availability of certain types
of ores; actual ore mined varying from estimates of grade or tonnage; dilution and metallurgical and other
characteristics (whether based on representative samples of ore or not); short-term operating factors such as
the need for sequential development of ore bodies and the processing of new or adjacent ore grades from
those planned; mine failures, slope failures or equipment failures; industrial accidents; natural phenomena
such as inclement weather conditions, floods, droughts, rock slides and earthquakes; encountering unusual
or unexpected geological conditions; changes in power costs and potential power shortages; shortages of
principal supplies needed for mining operations, including explosives, fuels, chemical reagents, water,
equipment parts and lubricants; plant and equipment failure; the inability to process certain types of ores;
labour shortages or strikes; lack of required labour; civil disobedience and protests; and restrictions or
regulations imposed by government agencies or other changes in the legal and regulatory environment. Such
occurrences could also result in damage to mineral properties or mines, interruptions in production, injury
or death to persons, damage to property of the Group or others, monetary losses and legal liabilities in
addition to adversely affecting mineral production. These factors may cause a mineral deposit to become
unprofitable, forcing the Group to cease production.
The figures for the Groups Ore Reserves and Mineral Resources are estimates based on interpretation
and assumptions and may yield less mineral production under actual conditions than is currently
estimated
The Mineral Resources and Ore Reserve figures presented herein are prepared by Group personnel and
independent geologists. These estimates are imprecise and depend upon geological interpretation and
statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. There can
be no assurance that these estimates will be accurate, or this mineralisation could be mined or processed
profitably. If the Group encounters mineralisation or formations different from those predicted by past
drilling, sampling and similar examinations, Ore Reserve estimates may have to be adjusted in a way that
could materially and adversely affect the Groups operations. The Ore Reserve estimates of the Group have
been determined based on assumed gold prices, cutoff grades and costs that may prove to be inaccurate.
An extended period of operational underperformance, including increased production costs or reduced
recovery rates, may render Ore Reserves uneconomic to recover and may ultimately result in the restatement
of Ore Reserves and/or Mineral Resources. Any material reductions in estimates of Ore Reserves and
Mineral Resources, or of the Groups ability to extract these Ore Reserves, could have a material adverse
effect on the Groups results of operations and financial condition. Also, a reduction in estimated Ore
Reserves could require material write-downs in investment in the affected mining property and increased
amortisation, reclamation and closure changes.

The inclusion of Mineral Resource estimates should not be regarded as a representation that these amounts
can be economically exploited and no assurances can be given that such resource estimates will be converted
into Ore Reserves.
Inferred Mineral Resources are uncertain and their economic viability cannot be assured
Inferred Mineral Resources cannot be converted into Ore Reserves because the ability to assess geological
continuity is not sufficient to demonstrate economic viability. Due to the uncertainty which may attach to
Inferred Mineral Resources, there is no assurance that Inferred Mineral Resources will be upgraded to
resources with sufficient geological continuity to constitute Proved and Probable Ore Reserves as a result of
continued exploration.
There is no assurance as to Medusas ability to sustain and expand Ore Reserves and Mineral Resources
The life of a mining operation is limited to its Proved and Probable Ore Reserves and as such the Group will
need to continually replace its Ore Reserves as its current Ore Reserves are mined if it is to sustain its
business. The life-of-mine estimates included in this prospectus may not be correct. The Groups ability to
maintain or increase its annual production of gold in the future will be dependent in significant part on its
ability to bring new mines into production and to expand Ore Reserves at existing mines.
Feasibility studies may be used to determine the economic viability of a deposit. Many factors are involved
in the determination of the economic viability of a deposit including the achievement of satisfactory Ore
Reserve estimates, the level of estimated metallurgical recoveries, capital and operating cost estimates and
the estimate of future gold prices. Capital and operating cost estimates are based upon many factors,
including anticipated tonnage and grades of ore to be mined and processed, the configuration of the ore body,
ground and mining conditions, expected recovery rates of the gold from the ore and anticipated
environmental and regulatory compliance costs. Each of these factors involves uncertainties and as a result
Medusa cannot give assurance that the Groups development or exploration projects will become operating
mines. If a mine is developed, actual operating results may differ from those anticipated, thereby impacting
on the economic viability of the project.
Title
The tenements or licences in which the Group has or may earn an interest may be subject to applications for
renewal or grant (as the case may be). In particular, the Group is due to renew Exploration
Permit (XIII) 000017 on 11 March 2011. Although the Directors expect the permit to be renewed at such
time, the renewal or grant of the term of each tenement or licence is usually at the discretion of the relevant
government authority and there is no assurance such renewal will be granted. If a tenement or licence is not
renewed or granted, the Group may suffer damage through loss of the opportunity to develop and discover
any Mineral Resources on that tenement or licence.
Payment Obligations
Under the exploration permits and licences and certain other contractual agreements to which the Group is
or may in the future become party to, the Group is or may become subject to payment and other obligations.
In particular, the licence holders are required to expend the funds necessary to meet the minimum work
commitments attaching to the permits and licences.
Failure to meet these work commitments may cause the licence to be cancelled. Further, if any contractual
obligations are not complied with when due, in addition to any other remedies which may be available to
other parties, this could result in dilution or forfeiture of interests held by the Group.
The Group may experience regulatory, consent or permitting delays
The business of mineral exploration, project development, mining and processing is subject to various
national and local laws and plans relating to: permitting and maintenance of title; environmental consents;
taxation; employee relations; heritage or historic matters; health and safety; royalties; land acquisition; and
other matters.

10

Although the Group currently has all permits in place in relation to its material assets, should the Group
identify future operations at its exploration tenements there is a risk that the necessary permits, consents,
titles, authorisations and agreements to implement planned exploration, project development, or mining may
not be obtained or renewed under conditions or within time frames that make such plans economic, that
applicable laws, regulations or the governing authorities will change or that such changes will result in
additional material expenditures or time delays.
Medusa relies on its Directors and management team and the loss of one or more of these persons may
adversely affect Medusa
The success of Medusas operations and activities is dependent to a significant extent on the efforts and
abilities of its Directors and management team, including to develop and maintain important relationships
with governmental and regulatory authorities in the Philippines. Medusas ability to continue to retain,
motivate and attract qualified and experienced management personnel is vital to the Groups business.
Medusa does not hold key person insurance in respect of any members of its management team. There can
be no assurance that Medusa will be able to successfully recruit and retain the necessary qualified personnel.
The loss or diminution in the services of a member of its management team or an inability to recruit, train
and/or retain necessary personnel could have a material and adverse effect on Medusas business, results of
operations, financial condition and prospects.
Competition

I 6.5

The Company competes with other companies, including major international mineral exploration and mining
companies. Some of these companies have greater financial and other resources than the Company and, as a
result, may be in a better position to compete for future business opportunities. Many of the Companys
competitors not only explore for and produce minerals, but also carry out refining operations and other
products on a worldwide basis. There can be no assurance that the Company can compete effectively with
these companies.
Joint Venture Parties
The Group currently has one joint venture partner in the Philippines namely, MRL Gold Corporation in
respect of the Apical Gold Project. While the Directors believe that the Group enjoys a good relationship
with MRL Gold Corporation, there is a possibility that its interest may not align with the Groups at any point
in time which could result in joint venture disputes, which may have an adverse effect on the value of the
Groups interest in the properties.
Medusa relies on a small number of outside contractors and sub-contractors and the loss or lack of
availability, or failure to properly perform services, of one or more of these contractors or sub-contractors
may adversely affect Medusa
When the world mining industry is buoyant there is increased competition for the services of suitably
qualified and/or experienced sub-contractors, such as drilling contractors, assay laboratories, metallurgical
testwork facilities and other providers of engineering, project management and mineral processing services.
As a result, Medusa may experience difficulties in sourcing and retaining the services of suitably qualified
and/or experienced sub-contractors. The loss or diminution in the services of suitably qualified and/or
experienced sub-contractors or an inability to source or retain necessary sub-contractors or their failure to
properly perform their services could have a material and adverse effect on Medusas business, results of
operations, financial condition and prospects.
Risks relating to employment and labour
Although management believes its labour relations, with both employees and contractors, are good, there can
be no assurance that a work slowdown, a work stoppage or strike will not occur at any of the Groups
operating, development or exploration prospects. Work slowdowns, stoppages, disputes with employees
or other labour-related developments or disputes could result in a decrease in the Groups production levels
which could have a material and adverse effect on the Groups results of operations and financial condition.

11

Medusas properties and operations are subject to environmental risks

Mining operations have inherent risks and liabilities associated with pollution of the environment and the
disposal of waste products occurring as a result of mineral exploration and production. Laws and regulations
involving the protection and remediation of the environment and the governmental policies for
implementation of such laws and regulations are constantly changing and are generally becoming more
restrictive. Although the Directors believe that the Group is in compliance in all material respects with
applicable environmental laws and regulations and holds all necessary approvals, licences and permits under
those laws and regulations, there are certain risks inherent in the Groups activities and those which it
anticipates undertaking in the future, such as, but not limited to, risks of accidental spills, leakages or other
unforeseen circumstances, that could subject the Group to potential liability. Medusa therefore cannot give
any assurance that, notwithstanding its precautions, breaches of environmental laws (whether inadvertent or
not) or environmental pollution will not materially and adversely affect its financial condition and its results
from operations.
There is no assurance that future changes in environmental regulation, if any, will not adversely affect the
Groups operations. Environmental hazards may exist on the properties on which the Group holds interests
which are unknown to the Group at present and which have been caused by previous or existing owners or
operators of the properties. Reclamation costs are uncertain and planned expenditures may differ from the
actual expenditures required.
Past mining was conducted at the Co-O Mine. This is evidenced by the presence of the original tailings
storage facilities, the milling facility, structures and buildings. All structures have been rehabilitated and are
in good working condition.
Small scale mines have been operated at and around the Co-O Mine before the mine was opened in the late
1980s and in the period from closure until around 2001. The small scale mines operated and processed ore
on a small scale using rudimentary processing plants and sometimes using mercury.
Whilst many of the tailings from these operations have been reprocessed by the Group and are now stored
in the Groups licensed tailing storage facility, and although Philsaga Mining Corporation (PMC) is not
the originator of the tailings, and therefore under Philippine environmental legislation is not liable, and
although PMC has been diligent in attempting to limit the activities of these miners and informing the public
about the risk of contamination, there can be no assurance that PMC will not become obligated to undertake
remediation work on its property.
The Groups insurance coverage does not cover all of its potential losses, liabilities and damages related
to its business and certain risks are uninsured or uninsurable
The Groups business is subject to a number of risks and hazards generally, including adverse environmental
conditions, industrial accidents, labour disputes or slowdowns, unusual or unexpected geological formations
or other geological or grade problems, ground or slope failures, cave-ins, flooding, rock bursts, changes in
the regulatory environment or laws, and natural phenomena such as inclement or hazardous weather
conditions, floods and earthquakes. Such occurrences could result in damage to mineral properties or
production facilities, personal injury or death, environmental damage to the Groups properties or the
properties of others, delays in development or mining, monetary losses and possible legal liability.
Although the Group maintains insurance to protect against certain risks in such amounts as it considers to
be reasonable, its insurance will not cover all the potential risks associated with its operations. The Group
may also be unable to maintain insurance to cover these risks at economically acceptable premiums.
Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability.
Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration
and production is not generally available to the Group or to other companies in the mining industry on
acceptable terms. The Group might also become subject to liability for pollution or other hazards which may
not be insured against or which the Group may elect not to insure against because of premium costs or other
reasons. Losses from these events may cause the Group to incur significant costs that could have a material
and adverse effect upon the Groups financial performance and results of operations.

12

I 8.2

Currency fluctuations may affect the costs that Medusa incurs in its operations
A significant portion of the Groups operating expenses will be incurred in US Dollars, Australian Dollars,
Philippine Peso and other foreign currencies. From time to time, the Group may borrow funds and may incur
expenditures that are denominated in a foreign currency. Gold is sold throughout the world, based principally
on a US Dollar price but, as stated above, a portion of the Groups operating expenses are incurred in
non-US Dollar currencies. The appreciation of such non-US Dollar currencies in those countries where the
Group has mining, development or exploration activities against the US Dollar would increase the costs of
gold production at such operations which could materially and adversely affect the Groups profitability,
results of operation and financial position. The depreciation of non-US Dollar currencies against the
US Dollar would impact the value of the Groups non US-Dollar holdings, and could materially impact its
ability to satisfy US Dollar denominated liabilities. The Group does not currently hedge either its currencies
or gold price exposure and accordingly has no protection from currency fluctuations or declines in gold
prices.
Risks associated with disputes and litigation
The Group may in the future be subject to disputes with regulatory authorities and/or litigation from time to
time during the course of its business. The Directors believe that any circumstances that may have given rise
to previous litigation and disputes with regulatory authorities have now all been resolved and settled.
However, the Group cannot preclude the possibility that litigation or disputes may arise, and if and when
litigation or disputes do arise, the Group will assess the merits of each lawsuit or dispute and defend itself
accordingly. Claims under such litigation or disputes may be material or may be indeterminate and the
outcome of such litigation may materially and adversely impact the Groups business, results of operations
or financial condition.
Country Risks
The Groups current and proposed exploration and mining activities are situated entirely in a single
country
The Group is conducting its exploration and mining activities entirely in the Philippines. Medusa believes
that the Government of the Philippines supports the development of natural resources. There is no assurance
that future political and economic conditions in the Philippines will not result in the Government of
Philippines adopting different policies respecting foreign development and ownership of Mineral Resources.
Any such change in policy may result in changes in laws affecting ownership of assets, land tenure and
mineral concessions, taxation, royalties, rates of exchange, environmental protection, labour relations,
repatriation of income and return of capital, which may affect both the Groups ability to undertake
exploration, development and operational activities in respect of future properties as well as its ability to
continue to explore, develop and operate those properties in respect of which it has obtained mineral
exploration and exploitation rights to date.
Investments and operations in the Philippines are subject to numerous risks associated with operating in
foreign jurisdictions
Operations in countries like the Philippines may involve an exposure to security related issues such as rebel
activity (including groups like the New Peoples Army) who may cause physical property or other damage to
assets of the Group or employees and others. The basis for this activity may be personally motivated, by
ideology or for commercial gain and the Group may have limited control over or warning (if any) of such
actions. Such actions could have an adverse effect on the Company or perceptions.
Philippine Taxes
Philippine taxes, including corporate income tax, value added tax (VAT), import duties, property tax,
excise tax and withholding tax are subject to change. In addition certain tax credits on VAT, relief from
import duties and tax incentives may be modified, withdrawn or may not be granted to the operations. Any
increase in taxes or removal of credits and incentives may have a material adverse effect on the Companys
financial position and profitability.

13

Political Risk
The Group currently holds interests only in the Republic of the Philippines, which may be considered to have
high political and sovereign risk. The Company intends to continue the commitment of resources to this
region. The Groups investment in these projects may be exposed to adverse political developments that
could affect the economics of the project. The Groups investment in these operations may be exposed to
adverse political developments that could affect each operation.
Regulations in the Philippines
The Philippines Constitution provides that all natural resources are owned by the State which may enter into
a co-production, joint venture or production sharing agreement with citizens of the Philippines or
corporations or associations at least 60 per cent. of whose capital is owned by Philippine citizens.
However, Filipino laws recognise the use of the control test in computing equity ownership between
corporations. Under the control test method a corporation will be considered a Filipino corporation if the
Filipino ownership of its capital stock is at least 60 per cent. The shareholdings of any subsidiary of any
corporation that is considered a Filipino corporation will be regarded as 100 per cent. of Filipino
nationality (Philippines SEC Opinion for Mrs. Francis How, 23 March 1993). Thus, in the case of Medusa,
although its effective interests in certain of its subsidiaries exceeds 60 per cent., they are treated under
Filipino law as being no more than 40 per cent. because MEDCs direct and indirect interests in those
subsidiaries are treated as being 100 per cent. of Filipino nationality.
Commonwealth Act No. 108, of 1936 as amended (otherwise known as the Anti-Dummy Act), provides
penalties for, amongst others: (a) Filipinos who permit aliens to use them as nominees or dummies so that
the aliens could enjoy privileges otherwise reserved for Filipinos or Filipino corporations, and (b) aliens or
foreigners who profit from the adoption of these dummy relationships. It also penalises the act of falsely
simulating the existence of minimum stock or capital as owned by citizens of the Philippines or any other
country in cases in which a constitutional or legal provision requires that before a corporation or association
may exercise or enjoy a right, franchise or privilege, not less than a certain percentage of its capital must be
owned by such citizens.
The Anti-Dummy Act likewise prohibits aliens from intervening in the management, operation,
administration or control of nationalised business or enterprises, whether as officers, employees or labourers,
with or without remuneration, except that aliens may take part in technical aspects only, provided
(a) no Filipino can do such technical work, and (b) it is with express authority from the Secretary of Justice.
The Anti-Dummy Act allows the election of aliens as members of the boards of directors or the governing
bodies of corporations or association engaged in partially nationalised activities in proportion to their
allowable participation or share in the capital of such entities.
Whilst the Group has received advice that its structure complies with all Philippine regulations, there is a
risk that it could be questioned or challenged, although the Directors consider this to be a remote possibility.
If such a complaint was made against the Group there would be an investigation by prosecutors and Medusa
would have the chance to defend itself and resolve the issue. The Directors consider the prospects of being
unable satisfactorily to resolve such an investigation as unlikely. However, if the Group was unable to do so,
and if the prosecutor believed there was sufficient evidence to indict the Group, a charge could be filed and
the matter would proceed to trial, a process which could take several years. Breach of the Anti-Dummy Act
is a criminal offence punishable by imprisonment of not less than five nor more than 15 years and a fine of
not less than the value of the right, franchise or privilege enjoyed or acquired in violation of the law.
In addition, if there was a successful prosecution, the Group would forfeit its rights to all of its Mineral
Production Sharing Agreements and the property or business acquired in violation of the Anti-Dummy Act,
which would mean that the Group would no longer be able to operate its business.

14

Industry Risks
Mining sector enterprises face many operating risks
In common with other enterprises undertaking business in the mining sector, the Groups mineral
exploration, project development, mining and related activities are subject to conditions beyond the Groups
control that can reduce, halt or limit production or increase the costs of production.
The success of the Groups mining operations is dependent on many factors, including: the discovery and/or
acquisition of Ore Reserves and Mineral Resources; the successful conclusions to feasibility and other
mining studies; access to adequate capital for project development and sustaining capital; design and
construction of efficient mining and processing facilities within capital expenditure budgets; the securing and
maintaining of title to tenements; obtaining permits, consents and approvals necessary for the conduct of
exploration and mining; complying with the terms and conditions of all permits, consents and approvals
during the course of mining activities; access to competent operational management and prudent financial
administration, including the availability and reliability of appropriately qualified employees, contractors
and consultants; the ability to procure major equipment items and key consumables in a timely and
cost-effective manner; the ability to access full power supply; and the ability to access road and port
networks for the shipment of gold dore.
Increases in fuel prices and/or the removal of subsidies, particularly regarding diesel fuel and heavy fuel oil,
would add to operating costs at the Group. These are all beyond the control of the Group. The Group has no
diesel fuel or oil price protection in place to offset future price rises.
An inability to secure an ongoing supply of such goods and services at prices assumed within the short and
long term mine plans and assumed within feasibility studies could have a material and adverse effect on the
results of the Groups costs, results of operations and financial condition and could render a previously
profitable project unprofitable.
Costs can also be affected by factors such as changes in market conditions, government policies and
exchange rates, all of which are unpredictable and outside the control of the Group. The operations are also
exposed to industrial disruption, which can be beyond the Groups control.
Gold price volatility may affect the future production, profitability, financial position and financial
condition of Medusa
Gold prices are subject to significant fluctuation and are affected by a number of factors which are beyond
the control of the Group. The price of gold and other base and precious metals has fluctuated widely in recent
years, and future serious price declines could cause continued development of, and commercial production
from, the Groups properties to be impracticable or uneconomic. Depending on the price of gold and other
metals, projected cash flow from planned mining operations may not be sufficient and the Group could be
forced to discontinue development and may lose its interest in, or may be forced to sell, some of its
properties.
Furthermore, Ore Reserve calculations and life-of-mine plans using significantly lower gold prices could
result in material write-downs of the Groups investment in mining properties and increased amortisation,
reclamation and closure charges. In addition to adversely affecting the Groups Ore Reserve estimates and
its financial condition, declining commodity prices can impact operations by requiring a reassessment of the
feasibility of a particular project. Such a reassessment may be the result of a management decision or may
be required under financing arrangements related to a particular project. Even if the project is ultimately
determined to be economically viable, the need to conduct such a reassessment may cause substantial delays
or may interrupt operations until the reassessment can be completed.
Risks relating to the legal and regulatory environment
The current or future operations of the Group, including development activities and, if warranted,
commencement of production on properties in which it has an interest, require permits from various
governmental authorities, and such operations are and will be governed by laws and regulations governing
prospecting, development, mining, production, exports, taxes, labour standards, occupational health and

15

safety, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters.
The Group believes it is in substantial compliance with all material laws and regulations that currently apply
to its activities. However, there can be no assurance that all permits which the Group may require for the
conduct of mineral exploration and development can be obtained or renewed on reasonable terms or that
such laws and regulations would not have a material and adverse effect on any such mineral exploration or
development which the Group might undertake.
Mining, processing, development and exploration activities depend on adequate infrastructure
Mining, processing, development and exploration activities depend on adequate infrastructure. Unreliable
roads, bridges and port facilities can negatively impact mining capital and operating costs. Unusual or
infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision
of such infrastructure could materially adversely affect the Groups activities and profitability.
Certain of the operations of the Group are carried out under potentially hazardous conditions
Certain of the operations of the Group are carried out under potentially hazardous conditions. Whilst the
Directors intend to continue to operate in accordance with relevant health and safety regulations and
requirements, the Group remains susceptible to the possibility that liabilities might arise as a result of
breaches of these requirements, accidents, fatalities or other workforce-related misfortunes, some of which
may be beyond the Groups control. The occurrence of any accidents or any of these situations could delay
production, increase production costs and/or result in material liability for the Group.
Changes in mining or investment policies, laws and regulations or shifts in political attitude may
adversely affect the Groups business
Changes in mining or investment policies, laws and regulations or shifts in political attitude may adversely
affect the Groups business. Operations may be affected in varying degrees by government regulations with
respect to restrictions on production, price controls, export controls, income taxes, expropriation of property,
maintenance of claims, environmental legislation, land use, land claims of local people, water use and safety
regulations. The effect of these factors cannot be accurately predicted.
Risks Relating to the Ordinary Shares
Consequences of a standard listing
The Ordinary Shares are expected to be admitted to the standard listing segment of the Official List and as
a consequence additional ongoing requirements and protections applicable under the Listing Rules to a
company admitted to the premium listing segment of the Official List will not apply to the Company.
The Company will be listed under Chapter 14 of the Listing Rules on the basis of European Directive
requirements and as a consequence a significant number of the Listing Rules will not apply to the Company.
Shareholders will therefore not receive the full protections of the Listing Rules. For further details, please
refer to the section, Consequences of a Standard Listing on page 19.
Risks associated with equity securities may lead to investors not realising their investment
There are risks associated with any investment in equity securities. Investors should recognise that the
trading price of Ordinary Shares may fall as well as rise with movements in the equity capital markets in the
United Kingdom and internationally. The trading price of Ordinary Shares could also be adversely affected
as a result of the sale or issue of substantial numbers of the Ordinary Shares in the public market, or by the
perception that this could occur. These factors could also make it more difficult to raise capital through
equity or equity linked offerings. It should be noted that no such further issuances are required in order for
the Company to meet its working capital requirements for the 12 month period from the date of this
prospectus.
In addition, there can be no certainty that the market price of an investment in Ordinary Shares will fully
reflect the underlying value of the Company. The price at which investors may dispose of their Ordinary
Shares may be influenced by a number of factors, some of which may be related to the Company and some
not. Investors may realise less than the original amount invested.
16

Future issuances, including exercise of the Options, may dilute existing Shareholders and sales of a
substantial number of Ordinary Shares could affect their market price
Any increase in the number of Ordinary Shares in the market arising from future issuances by the Group or
the exercise of any of the Options, or even the perception that such increase in the number of Ordinary Shares
might occur, could adversely affect the market price of the Ordinary Shares. Sales of a substantial number
of Ordinary Shares in the public markets, or the perception that these sales may occur, could have a material
and adverse effect on the price of the Ordinary Shares or could impair the Groups ability to obtain further
capital in the longer term through an offering of equity securities.
The Directors may issue or otherwise dispose of Ordinary Shares on such terms and conditions as they see
fit although the Constitution does give Shareholders pre-emptive rights in respect of any new issue of
Ordinary Shares or other equity securities for cash. The pre-emption rights contained in the Constitution
reflect the rights applicable to English companies under the Companies Act. However, such rights may not
be made available to Shareholders in certain jurisdictions under certain circumstances, including where it is
not lawful or reasonably practicable for the Company to make those rights available. The Company cannot
assure Shareholders that they will be able to exercise any pre-emptive rights. To the extent that shareholders
disapply such pre-emptive rights, the Company issues Ordinary Shares for non-cash consideration, the
Company issues Ordinary Shares pursuant to an Employee Share Scheme (as defined in the Australian
Corporations Act), future issuances of Ordinary Shares by Medusa will reduce an investors percentage
ownership interest in Medusa if that investor does not buy, in proportion to the aggregate amount of Ordinary
Shares it already holds, further Ordinary Shares. The Company intends to ask Shareholders to pass a special
resolution to disapply these pre-emptive rights at the upcoming annual general meeting (further details of
which are set out under the heading Pre-emption Rights in paragraph 5 of Part VI of this document).
Risk of lack of liquidity in Ordinary Shares
There can be no guarantee that there will be a liquid market in the Ordinary Shares. An investment in the
Ordinary Shares may, therefore, in certain circumstances be difficult to realise.
The Company is subject to requirements for takeovers under Australian and Canadian law which may affect
a bidders ability to freely acquire Ordinary Shares. In particular, the Australian Foreign Acquisitions and
Takeovers Act generally prohibits a foreign person (generally, any person or entity that is not an Australian
resident but including any Australian company in which a foreign person has voting power of more than
15 per cent.), together with its associates, from either directly or indirectly acquiring an interest in
15 per cent. or more of the Companys issued shares, without first giving notice to the Australian Treasurer
through the Foreign Investment Review Board, and complying with certain other requirements, and either
the Australian Treasurer having stated that there is no objection to the acquisition or a statutory period having
expired without the Australian Treasurer objecting. Please see paragraph 6 of Part VI of this document for
further information about the restrictions imposed under these laws.
In addition, the Constitution contains provisions in relation to proportional takeover bids designed to
protect Shareholders in the event that a bidder makes a bid for a proportion, but not all, of the Ordinary
Shares. Such provisions may affect a bidders ability to freely acquire Ordinary Shares. In particular, the
Constitution provides that a majority of Shareholders in general meeting must approve a proportional
takeover bid in order for it to proceed. Please see paragraph 4 of Part VI of this document for further details
of the restrictions imposed under the Constitution.
General economic conditions may affect the performance of Ordinary Shares
A number of factors outside the control of the Company may impact significantly on the Company, its
operating and financial performance and the price of the Ordinary Shares, including:

economic conditions in the United Kingdom and internationally;

general movements in local and international stock markets;

investor sentiment;

changes in interest rates, exchange rates and the rate of inflation;

17

changes in fiscal, monetary or regulatory policies; and/or

international hostilities.

The current global recessionary environment and the volatility of the international financial and capital
markets have caused governments and central banks to undertake unprecedented intervention designed to
stabilise the global and domestic financial systems, to stimulate new lending and to support systemically
important institutions at risk of failing. Many developed economies have entered recession and growth has
slowed in many emerging economies, with serious adverse consequences for asset values, employment
levels, consumer confidence and levels of economic activity. Commodity prices have significantly
retrenched, in many cases from recent historical highs; interest rates have fallen in absolute terms in many
markets, and trade flows have contracted. Global equity markets have experienced severe declines and
various currencies have depreciated significantly against the US Dollar. Numerous governments and central
banks have responded by proposing programmes to make substantial funds and guarantees available to boost
liquidity and confidence in their financial systems, as well as cutting taxes and lowering interest rates. It is
not known whether these responses will be effective in addressing the severe economic and market
conditions that exist at present, or whether recently proposed measures will be implemented as initially
proposed.
A worsening of these economic conditions or a prolonged deterioration of economic conditions could have
an adverse effect on the Companys business, financial condition, results of operations and prospects. The
impact of these economic conditions on the Company may not be immediate.
The ability of a Shareholder to bring or enforce an action against the Company may be limited under law
The Company is incorporated under the laws of Western Australia and its assets are located in the
Philippines. The majority of the Directors and officers reside outside the United Kingdom and all or a
substantial portion of the Companys assets and the assets of the Directors and officers are located outside
the United Kingdom. As a result, it may not be possible for investors to effect service of process within the
United Kingdom upon the Company or the Directors and officers or to enforce against them in Western
Australia or the Philippines any judgments of the courts of England and Wales including judgments
predicated upon the civil liability provisions of the UK or European securities laws. The ability of a
Shareholder to bring an action against the Company may be limited under law. The rights of Shareholders
are governed by the laws of Australia and the Constitution. These rights may differ from the rights of
shareholders in a typical company incorporated in England and Wales.
Shareholders may be subject to risks arising from adverse movements in the value of their local currency
against the Australian Dollar
The Ordinary Shares have no nominal value, and will be quoted and traded:
(i)

in pounds sterling on the London Stock Exchange;

(ii)

in Australian Dollars on the Australian Securities Exchange; and

(iii)

in Canadian Dollars on the Toronto Stock Exchange.

In addition, any dividends the Company may pay will be declared in Australian Dollars and paid:
(i)

in pounds sterling to Shareholders on the UK branch register of members domiciled in the UK;

(ii)

in Australian Dollars to Shareholders on the UK branch register of members not domiciled in the UK;

(iii)

in Australian Dollars to Shareholders on the Australian branch register of members; and

(iv)

in Canadian Dollars to Shareholders on the Canadian branch register of members.

Accordingly, Shareholders may be subject to risks arising from adverse movements in the value of their local
currency against the Australian Dollar which may reduce the value of the Ordinary Shares, as well as that of
any dividends paid.

18

CONSEQUENCES OF A STANDARD LISTING

The Ordinary Shares are expected to be admitted to the standard listing segment of the Official List
and, as a consequence, additional on-going requirements and protections applicable to a company
admitted to the premium listing segment under the Listing Rules will not apply to the Company.
The Company will be listed under Chapter 14 of the Listing Rules on the basis of European Directive
requirements and, as a consequence, a significant number of the Listing Rules will not apply to the Company.
The Ordinary Shares will be admitted to the standard listing segment of the Official List under the Listing
Rules. Shareholders will therefore not receive the full protections of the Listing Rules otherwise applicable
to a company whose shares are admitted to the premium listing segment.
An applicant that is applying for a standard listing of equity securities must comply with all the requirements
listed in Chapter 2 of the Listing Rules, which specifies the requirements for listing for all securities.
Listing Rule 14.3 sets out the continuing obligations applicable to the Company and requires that the
Companys listed securities must be admitted to trading on a regulated market at all times. The applicant
must have a minimum number of shares of any listed class (25 per cent.) in public hands at all times and
must notify the FSA as soon as possible if these holdings fall below the stated level. There are a number of
other continuing obligations set out in Chapter 14 of the Listing Rules that will be applicable to the
Company.
These include requirements as to:

the forwarding of circulars and other documentation to the FSA for publication through the document
viewing facility, and related notification to a Regulatory Information Service (RIS);

the provision of contact details of appropriate persons nominated to act as a first point of contact with
the FSA in relation to compliance with the Listing Rules and Disclosure and Transparency Rules;

the form and content of temporary and definitive documents of title;

the appointment of a registrar;

RIS notification obligations in relation to a range of debt and equity capital issues; and

compliance with, in particular, Chapters 4, 5 and 6 of the Disclosure Rules and Transparency Rules.

Chapter 14 of the Listing Rules, which sets out the requirements for standard listings, does not require the
Company to comply with, inter alia, the provisions of Chapters 6 to 13 of the Listing Rules being additional
requirements for listing of equity securities (listing principles, sponsors, continuing obligations, significant
transactions, related party transactions, dealing in owned securities and treasury shares and contents of
circulars).
Chapter 6 of the Listing Rules contains additional requirements for listing for equity securities, which are
only applicable for companies with a premium listing. Consequently, the Company does not intend to
comply with such provisions.
The Company is not subject to the Listing Principles set out in Chapter 7 of the Listing Rules and will not
be required to comply with them. The Directors intend to ensure that Shareholders are provided with
sufficient information in order for them to make an informed decision on any matter which they need to
approve, and the Directors will also take independent financial advice where appropriate.
The Company is not required, and does not intend, to appoint a listing sponsor under Chapter 8 of the Listing
Rules to guide the Company in understanding and meeting its responsibilities under the Listing Rules.
The provisions of Chapter 9 of the Listing Rules (continuing obligations) will not apply to the Company.
Chapter 9 includes provisions relating to transactions, including, inter alia, requirements relating to further
issues of shares, the ability to issue shares at a discount in excess of 10 per cent. of market value,
notifications, contents of financial information.
19

The Company is not required to comply with the Model Code on directors dealings in shares of the
Company set out in Chapter 9 of the Listing Rules. However, the Company adopted a Share Transfer Policy
at the time of its admission to AIM that is broadly consistent with the provisions of the Model Code and will
continue to follow such dealing code following Admission.
The Company is not required to comply with Chapters 10, 11 and 12 under the Listing Rules (significant
transactions, related party transactions, dealing in own securities and treasury shares). The Company does
however currently comply with the requirements of the AIM Rules in relation to substantial transactions,
related party transactions, reverse takeovers and fundamental change of business (AIM Rules 12 to 16) and
intends that it will continue to conduct its activities as if such requirements continued to apply to it following
Admission (in so far as reasonably practicable). It should be noted that the London Stock Exchange will not
have the authority to monitor the Companys voluntary compliance with, nor impose sanctions in the event
of a breach of, any such provisions.
Chapter 13 of the Listing Rules contains provisions relating to the content of circulars and is only applicable
to companies with a premium listing. Consequently, the Company does not intend to comply with such
provisions.
Upon Admission, neither Listing Rule 5.2.5 (cancellation of listing) nor the equivalent protection currently
provided under the AIM Rules will be applicable, and accordingly in the event a cancellation of its listing
were to be proposed, it would not be required to seek shareholder approval.

20

IMPORTANT INFORMATION
Presentation of financial and other information
The financial information on the Company set out in this document has, unless otherwise indicated, been
extracted from the Companys audited consolidated balance sheets and consolidated statements of
operations, cash flows and changes in equity as of and for the years ended 30 June 2008, 2009, 2009 restated
in US Dollars and 2010 (Financial Statements) set forth elsewhere in this prospectus, beginning on
page 116. The Financial Statements were prepared in accordance with Australian International Financial
Reporting Standards (A-IFRS). The Financial Statements as of and for the years ended 30 June 2008,
2009, 2009 restated in US Dollars and 2010 were audited by the Companys independent auditors, Grant
Thornton Audit Pty Ltd.
Certain figures contained in this document, including financial information, have been subject to rounding
adjustments. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables
contained in this document may not be the precise arithmetic sum of the figures that precede them.
Forward-looking statements
Certain statements contained in this document, as well as in written and oral statements that the Company,
its Directors and/or its management make from time to time in reports, filings, news releases, conferences,
teleconferences, web postings or otherwise, are or may constitute forward-looking statements. Forwardlooking statements include, but are not limited to, statements concerning the Companys plans, expectations,
projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital
expenditure, financing needs, plans or intentions relating to acquisitions, competitive strengths and
weaknesses, plans or goals relating to financial position and future operations and development, business
strategy and trends the Company anticipates in the industry and the political and legal environment in which
it operates and other information that is not historical information.
Words such as believe, anticipate, estimate, target, potential, expect, intend, predict,
project, could, should, may, will, plan, aim, seek and similar expressions are intended to
identify forward-looking statements but are not the exhaustive means of identifying such statements.
Such forward-looking statements involve inherent risks, uncertainties and other factors which may cause the
actual results, achievements or performance of the Group, or the industry in which the Group operates, to be
materially different from any future results, achievements, predictions, forecasts or performance expressed
or implied by such forward-looking statements. Investors should be aware that a number of important factors
could cause actual results to differ materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward-looking statements. Accordingly, investors should not place undue
reliance on forward-looking statements and, when looking at forward-looking statements, should carefully
consider the foregoing factors and other uncertainties and events, especially in light of the political,
economic, social and legal environment in which the Group operates.
These forward-looking statements are stated as at the date of this document. Except as required by the
Prospectus Rules, the Disclosure and Transparency Rules, the Listing Rules or any other applicable law or
regulation, the Company expressly disclaims any obligation or undertaking to release publicly any updates
or revisions to any forward-looking statements contained herein to reflect any change in the Companys
expectations with regard thereto or any change in events, conditions or circumstances on which any such
statement is based.
Investors should note that the contents of these paragraphs relating to forward-looking statements do not
qualify the statement made as to sufficiency of working capital in paragraph 15 of Part VI of this document.
References to defined terms
Certain terms used in this document, including certain capitalised terms and certain technical and other
terms, are defined in Part VII of this document.

21

I 2.1
I 20.4.1

EXPECTED TIMETABLE
Each of the times and dates is subject to change without further notice. References to time and day
are to time in London, United Kingdom.
Publication of prospectus

21 October 2010

Cancellation of Ordinary Shares from trading on AIM

8.00 a.m. on 28 October 2010

Admission

8.00 a.m. on 28 October 2010

NO ACTION TO BE TAKEN BY SHAREHOLDERS

Shareholders are not required to take any action upon receipt of this document, which is being made
available publicly for information purposes only.
This document has been published solely to enable the Company to obtain Admission of the Ordinary Shares
to the standard listing segment of the Official List and to trading on the London Stock Exchanges Main
Market.

22

DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS

I 14.1
III 10.1

Board of Directors

Peter Rhys Jones (Non-Executive Chairman)

Geoffrey John Davis (Managing Director)
Peter Gordon Hepburn-Brown (Operations Director)
Roy Philip Daniel (Finance Director and Joint Company Secretary)
Robert Maurice Weinberg (Non-Executive Director)
Andrew Boon San Teo (Non-Executive Director)

Each of the Directors business address is the Companys office address at Unit 7, 11 Preston Street, Como,
Western Australia, 6152, Australia.
Company Secretary (Joint)

Peter Stanley Alphonso and Roy Philip Daniel

Registered Office

Medusa Mining Limited

Unit 7
11 Preston Street
Como
Western Australia, 6152
Australia

Telephone:

+61 8 9367 0601

Financial Adviser and Broker

Fairfax I.S. PLC

46 Berkeley Square
London
W1J 5AT

Reporting Accountants to the

Company

Baker Tilly Corporate Finance LLP

2 Bloomsbury Street
London
WC1B 3ST

Auditors to the Company

Grant Thornton Audit Pty Ltd

10 Kings Park Road
West Perth WA 6005
Australia

Legal advisers to the Company as

to English law

Hunton & Williams

30 St. Mary Axe
London
EC3A 8EP

Legal advisers to the Company as

to Australian law

Blake Dawson
2 The Esplanade
Perth WA 6000
Australia

Legal advisers to the Company as

to Canadian law

Kutkevicius Kirsh, LLP

67 Yonge Street
Suite 1200
Toronto, ON M5E 1J8
Canada

Legal advisers to the Company as

to Philippine law

Carag Jamora Somera & Villareal Law Offices

2nd Floor, The Plaza Royal
120 L.P. Leviste Street
Salcedo Village
Makati City
1227 Metro Manila
Philippines
23

I 5.1.4

I 2.1

Legal advisers to the Financial

Adviser

Field Fisher Waterhouse LLP

35 Vine Street
London
EC3N 2AA

Registrars

Australia
Computershare Investor Services Pty Limited
Level 2
45 St. Georges Terrace
Perth 6000
Western Australia
Canada
Computershare Investor Services Inc
8th Floor
100 University Avenue
Toronto ON M5J 2Y1
UK
Computershare Investor Services Plc
The Pavilions
Bridgewater Road
Bristol
BS13 8AE

24

PART I
INFORMATION ON THE GROUP
1.

Introduction

Medusa is a mineral exploration, development and mining company that was established to acquire gold and
copper assets in the Philippines. The Group acquired the Co-O Mine in December 2006. In September 2007,
the Company commenced Phase I expansion to raise production to 60,000 ounces of gold per year and,
independently, Phase II expansion to raise production to 100,000 ounces per year. Phase I was completed
ahead of schedule in June 2009, and Phase II was completed on schedule in the quarter ended 31 March
2010. Phase II development involved mill expansion to enable it to process approximately 1,000 tonnes of
ore per day which was completed in December 2009 and commissioning was completed by 31 March 2010.
If additional exploration success is achieved at the Co-O Mine or surrounds, the mill has capacity to produce
up to approximately 120,000 to 130,000 ounces of gold per year.
The Co-O Mine produced 89,679 ounces of gold in the 12 months to 30 June 2010 at an average cash cost of
US$184 per ounce and over the same period, generated revenues from the sales of gold of US$93.9 million.
The Companys revenue generated from sales is from the sale of gold (and a negligible amount of silver)
which is produced from its Co-O Mine in the Philippines and sold by its wholly owned subsidiary MMPRC.

I 6.2

PMC owns the mineral tenement covering the Co-O Gold Mine with an area of approximately 2,538
hectares. MMPRC owns and operates the process plant and is responsible for the sale of all gold. MMPRC
and PMC have a contractual relationship, which includes an Ore Supply Agreement (further details of this
agreement are set out in paragraph 13.9 of Part VI of this document), whilst maintaining joint financial and
legal liability for the social and environmental obligations under Philippine law.
The maiden Inferred Mineral Resource at the Bananghilig Prospect of 650,000 ounces of gold and the
recognised potential for extensions and additional nearby mineralisation has established a project pipe-line
which has the potential to lift Medusas production profile to approximately 300,000 to 400,000 ounces of
gold per year.
Medusa is also conducting copper exploration on porphyry targets with the objective of monetising these
projects at an early stage if exploration is successful in establishing a potentially economic resource.
2.

I 7.1

Medusa Group Structure

Medusa was incorporated on 5 February 2002 pursuant to the Australian Corporations Act. The Companys
corporate head office and registered office is located at Unit 7, 11 Preston Street, Como, Western Australia,
6152, Australia.
MEDUSA MINING LIMITED

40 %

100 %

MMPRC

3 x Filipino
Directors

60 %

MEDC

100 %
Phsamed

25

40 %

60 %

MOHC

40 %

60 %

PMC

I 7.2
I 25.1
III 3.3

Philippines entities:

Mindanao Mineral Processing & Refining Corporation (MMPRC) Processing Company

Medusa Overseas Holding Corporation (MOHC) Holding Company

Medusa Exploration & Development Corporation (MEDC) Company providing geological services

Phsamed Mining Corporation (Phsamed) Mining and Exploration Company

INVESTMENT IN CONTROLLED ENTITIES

The following companies are controlled entities of Medusa as at the date of this document:
Controlled Entities

Date of
incorporation

Country of
incorporation

Per cent. of
interest held

MEDC (Note 1)
Phsamed (Note 2)
MOHC (Note 3)
PMC (Note 4)
MMPRC (Note 5)

29 May 2003
23 April 2003
08 May 2003
17 May 2001
03 Nov 2005

Philippines
Philippines
Philippines
Philippines
Philippines

40 per cent.
40 per cent.
64 per cent.
78 per cent.
100 per cent.

Note 1
MEDC is 40 per cent. owned by Medusa and 60 per cent. owned by Filipino nationals in accordance with the provisions of the AntiDummy Act. There is an option agreement in place which deals with the relationship between Medusa and the other shareholders in
MEDC, which gives Medusa the right to acquire the other shares in MEDC. Although Medusa could not directly acquire the remaining
60 per cent. shareholding under current Philippines legislation, it could nominate another Filipino person to acquire the shares, thereby
protecting Medusas investment in the event of a dispute with the existing Filipino shareholders. Further details of this agreement are
set out in paragraph 13.5 of Part VI of this document.
Note 2
Phsamed is 100 per cent. owned by MEDC.
Note 3
MOHC is 60 per cent. owned by MEDC and 40 per cent. owned by Medusa. There is an option agreement in place which deals with
the relationship between Medusa and MEDC which gives Medusa the right to acquire the other shares in MOHC. Although Medusa
could not directly acquire the remaining 60 per cent. shareholding under current Philippines legislation, it could nominate another
Filipino person to acquire the shares, thereby protecting Medusas investment in the event of a dispute with MEDC. Further details of
this agreement are set out in paragraph 13.6 of Part VI of this document.
Note 4
PMC is 60 per cent. owned by MOHC and 40 per cent. owned by Medusa. There is an agreement in place which deals with the
relationship between Medusa and MOHC, as described in Note 3 above, effectively limiting those outside shareholders rights to an
insignificant notional return of share capital. In such circumstances, the assets and liabilities of PMC and its subsidiaries have been
attributed 100 per cent. to the consolidated entity and no minority interests are therefore brought to account in the consolidated
financial report.
Medusas is a common structure employed with variations in most mining and exploration companies where the project mining
tenement is a Mineral Production Sharing Agreement (MPSA) and the investor is foreign. The fact that Medusa ultimately
effectively controls the assets of its subsidiaries does not run counter to the regulations of the Anti-Dummy Act (see page 14 of the
Risk Factors section). In particular, Filipino laws recognise the use of the control test in computing equity ownership between
corporations. Under the control test method a corporation will be considered a Filipino corporation if the Filipino ownership of its
capital stock is at least 60 per cent. The shareholdings of any subsidiary of any corporation that is considered a Filipino corporation
will be regarded as 100 per cent. of Filipino nationality. Thus, in the case of Medusa, although its effective interests in certain of its
I 5.1.5
subsidiaries exceeds 60 per cent., Medusa does not violate the Anti-Dummy Act as they are treated under Filipino law as being no
more than 40 per cent. because MEDCs direct and indirect interests in those subsidiaries are treated as being of 100 per cent. Filipino
nationality.
Note 5
MMPRC is 100 per cent. owned by Medusa. It owns and operates the process plant and is responsible for the sale of all gold, the major
source of the Groups revenues.

Corporate History
Medusa is incorporated and domiciled in Australia with Australian company number 099 377 849. Medusa
was incorporated on 5 February 2002 and admitted to the ASX on 19 December 2003, with official quotation
of its Ordinary Shares commencing on 23 December 2003. This followed the raising of A$2.5 million

26

through the issue of 12,500,000 Ordinary Shares. At that stage the Group owned various Australian
properties and held an interest in a joint venture in the Philippines with PMC.
Following the Companys listing on the ASX, the Group divested itself of a number of exploration properties
held in Australia and concentrated its efforts on acquiring, exploring and developing the Co-O Mine and
surrounding exploration tenements on the island of Mindanao in the southern part of the Republic of the
Philippines.
On 21 November 2006 Medusa completed a fast track admission to trading on AIM in the UK.
In December 2006 Medusa and its subsidiaries acquired control of PMCs interests in the Philippine
tenements by purchasing all the shares in PMC. PMC is now a controlled subsidiary of Medusa and is the
operating company for Medusa in the Philippines.
The full terms of settlement of the acquisition of PMC from the PMC vendors were:

final payment of A$1,000,000 to contractors;

Yandal Investments Pty Ltd was paid in full, being A$3,584,000, and issued with 6.4 million Ordinary
Shares;

Secdea Philippines Holdings Corporation was paid in full, being A$80,000, and issued with 4 million
Ordinary Shares; and

Advanced Concept Holdings Limited was paid A$920,000, and issued with 14.6 million shares.

Advanced Concept Holdings Limited agreed to provide vendor finance for the balance of the cash payment
of A$7.416 million on the following terms:

A$2.416 million to be paid on or before 15 February 2007;

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 was set at 7.5 per cent. per annum. There was no
penalty for any early repayments. The acquisition was completed in December 2006.
Production from the Co-O Mine remained subject to a 1.32 per cent. uncapped gross royalty payable to
Central Mindanao Mining Corporation. PMC purchased this royalty outright at a cost of PhP44.0 million,
equivalent to approximately A$1.12 million, on 11 June 2007.
Medusa and its subsidiaries now hold 100 per cent. of the beneficial interest in the Co-O Mine and treatment
plant and other projects and beneficial interests in the Anoling, Das-Agan, Tambis, Sursur and Corplex and
other projects as described in the following sections.
On 27 November 2009, the Ordinary Shares of Medusa were listed and commenced trading on the TSX in
Canada.
3.

I 6.1.1

Business of the Group

Medusa, via its controlled entities in the Philippines, has focused on the development of the underground
Co-O Mine.
The Group acquired the Co-O Mine in December 2006. Prior to Medusa acquiring the shares in PMC, it had,
via its wholly owned subsidiary MMPRC, entered into a Lease and Option Agreement (LOA) with PMC
to acquire PMCs treatment plant and associated facilities. Under the terms and conditions of the LOA, PMC
entered into an Ore Supply Agreement with MMPRC to supply feed for the plant for a three year period.

27

I 6.1.2

During the period from 31 July 2006 to the date that PMC was acquired by Medusa in December 2006 the
Co-O Mine produced approximately 6,056 ounces of gold. The ore was supplied by PMC to MMPRC which
processed the ore and sold the gold that was produced.
In September 2007 following the acquisition of the Co-O Mine, the Group commenced Phase I expansion to
raise production to 60,000 ounces per year and, independently, Phase II expansion to raise production to
100,000 ounces per year. Phase I was completed ahead of schedule in June 2009 and Phase II was completed
on schedule in the quarter ended 31 March 2010. Phase II development involved mill expansion to enable it
to process approximately 1,000 tonnes of ore per day which was completed in December 2009 and
commissioning has progressed well during 2010. If additional exploration success is achieved at the Co-O
Mine or surrounds, the mill has capacity to produce up to approximately 120,000 to 130,000 ounces of gold
per year.
The Co-O Mine produced 89,679 ounces of gold in the 12 months to 30 June 2010 at an average cash cost
of US$184 per ounce and, over the same period, generated revenues from the sales of gold of
US$93.9 million. The Companys revenue generated from sales is from the sale of gold (and a negligible
amount of silver) which is produced from its Co-O Mine in the Philippines and sold by its wholly-owned
subsidiary MMPRC.
PMC owns the mineral tenement covering the Co-O Mine with an area of approximately 2,538 hectares.
MMPRC owns and operates the process plant and is responsible for the sale of all gold, which includes an
Ore Supply Agreement with PMC, whilst maintaining joint financial and legal liability for the social and
environmental obligations under Philippine law.
4.

I 5.2.2

Group Funding

All financing has been funded by equity and cash flow from operations. The Company has no debt and is
not hedged. The Company intends to fund investments in its current projects (as set out in paragraph 5 of
this Part I) through its cash flow from operations.
5.

Current Projects

I 5.2.1

5.1

The Co-O Gold Project

I 6.1.1

In December 2006, Medusa and its subsidiaries acquired all of PMCs interests in the Philippine
tenements by purchasing all the shares in PMC. PMC owns the granted mineral tenements that cover
the Co-O Mine and extensions to the east. It also holds other tenement applications, operating
agreements with claim holders and an interest in a joint venture.
MMPRC owns the process plant and is responsible for the sale of all gold. MMPRC and PMC have
a contractual relationship, which includes an Ore Supply Agreement, whilst maintaining joint
financial and legal liability for the social and environmental obligations under Philippine law.
Progress
The Phase I expansion to an annualised production rate of 60,000 ounces was completed in the June
quarter of 2009.
The Phase II expansion at the mine and mill was also completed on schedule and the Group is now in
the position to produce 100,000 ounces of gold on an annualised basis.
History
The Co-O Mine and plant was originally developed in 1989 at a capital cost of US$22 million by
Banahaw Mining and Development Corporation (BMDC), a wholly owned subsidiary of
Musselbrook Energy and Mines Pty Ltd.
BMDC developed mine access via an adit at the 3,150m level (mL) (now termed Level 1) which
was driven to the west some 400m to reach the vein system and extended another 600m along the
system within waste to facilitate access using trackless equipment. Drives were then mined along

28

several sub-parallel veins in order to develop shrink stopes above the level at 3,185mL, 3,200mL and
3,225mL. It had been expected that the mechanised mining method adopted would recover ore with
grades of 10g/t Au to 14.0 g/t Au, but records indicate the mill feed grades ranged between 5.0 g/t Au
and 8.0 g/t Au. During this period BMDC mined at an average rate of 413 tonnes per day at an average
head grade of 5.6g/t Au and produced approximately 60,000 ounces of gold before the mine was
closed in 1991.
Tenure
All key permits for operating the Co-O Mine and mill have been secured including the Mineral
Production and Sharing Agreement (MPSA) (issued in March 2008 for 25 years and renewable for
a further 25 years thereafter), Environmental Clearance Certificate (ECC) and the Mineral
Processing Permit (MPP) issued by the central and regional authorities in the Philippines.
Environment
The Co-O Gold Project remains in compliance with all material environmental laws and regulations.
The operations are subject to regular Mines and Geosciences Bureau inspections and monitoring to
ensure the operations are within the allowable regulated limits. The Group has adopted Mining Forest,
Green Philippines and Tree for Life Programmes as prescribed by the Government.
Power Supply
The Group uses grid-supplied hydro-power and owns its own back-up power plants at both the mine
and the mill for use when required.
Tailings Storage Facilities (TSF)
The original TSF from the late 1980s has reached its capacity and has been stabilised for long-term
storage. A second TSF has been completed with a two year life and a third facility with an eight year
life has been completed and is in use.
Mining and Geology
The Co-O Mine mineralisation occurs as auriferous vein sets trending easterly in andesitic volcanics.
Within the current workings to the west of the Oriental Fault, a number of mainly northerly dipping
quartz vein structures are mined to various depths down to 200m below adit level (or Level 1 which
is 160m below the surface highest point) over a length of more than 600m. The largest of these vein
structures include the Central Vein, Jereme Vein and Great Hamish Vein (as well as smaller veins).
They are cut by north northwesterly trending reverse faults of limited displacement. The veins are now
being developed on the eastern side of the Oriental Fault with total development now over a strike
length of approximately 900m in the mine and the vein system is known to extend to over 1,500m.
Mineralisation is accompanied by minor argillic alteration comprising silica, pyrite, marcasite, with
minor galena and sphalerite. Gangue minerals may include barite and quartz crystals in open vugs.
Ore is typically grey to white quartz containing fresh sulphides occurring as disseminated grains and
cavity fillings and with colloform textures.
Assays may range from 20 to 1,000 g/t Au for high grade mineralisation on vein contacts and when
higher concentrations of galena and sphalerite are present. On a local scale, higher grades are found
where veins coalesce or where there are structural jogs in individual veins.
Operations
(a)

Co-O Underground Mine

The Co-O Mine works on a three-shift, 24-hour, 26-day per month basis with up to
approximately 600 persons in the workforce. The other four or five days, being Sundays, are
used primarily for repairs and maintenance with limited ore production taking place. The
mining team consists of airleg miners, timbermen, bogger drivers, locomotive drivers, hoist

29

drivers, surveyors, samplers, mappers, mine geologists, mining engineers, shift managers,
maintenance crews, electricians and other support tradesmen. All new mining data is recorded
in the Groups data base on a daily and weekly basis.
Since 2000, the Co-O Mine has been re-developed as a tracked mine and currently has six
levels spaced 50m apart vertically. The sixth level commenced development in August 2010.
The re-development has involved the initial sinking of two inclined 60 internal shafts (shaft
10W has been sunk to 60m inclined depth to the west, and shafts 3W and 8E have been sunk
to depths of 120m inclined depth) in addition to the existing 74m deep vertical Tinago Shaft.
Two external shafts, Agsao in the east, 240m to an inclined depth of 240m and Baguio in the
west to an inclined depth of 240m, as well as an approximate 74m deep vertical ventilation
shaft, have been completed.
The inclined shafts each have two compartments comprising a ladder way and a haulage way
and are fully timbered. Each shaft is equipped with an electric winder. Each shaft has a sump
and an ore chute installed above the bottom of the sump. The shafts are rock bolted throughout
and meshed in the critical areas top and bottom.
Each shaft is equipped with a steel head frame. Rails have been installed on the lower side of
the shaft along which 1.2 to 1.5 tonne skips are hauled by the winder. During haulage, the ore
skip is automatically tipped into the railed ore truck (which once heaped contains 1.3 to 1.5
tonnes) on mounting the head frame. Battery driven electric locomotives are used for level
hauling. Once the ore exits from the adit or from external shafts it is tipped into a concrete lined
ore pit from where it is loaded by front end loader into 15 tonne dump trucks for haulage to the
mill.
All haulage ways are developed by drill and blast to a minimum 2.2m by 1.8m size. Bogging
is undertaken using 12B boggers and occasionally by hand bogging. Power cables, compressed
air and water pipes are installed along the main drives. Fluorescent lighting is installed in main
work areas such as the chute and shaft areas. Rock bolting is used regularly along all main
drives and heavy 200mm by 200mm sawn, close spaced, square set timbering is installed in any
areas requiring additional support. Drinking water is supplied to the main shift change areas
around the shafts and drilling water is piped to the faces for airleg drilling.
Mining is conducted using conventional airleg (jack leg) mining in conventional narrow-vein
shrink stopes, gallery stopes or open stopes. Most of the mine production is achieved in this
manner, however some Alimak long-hole stoping areas are now being developed. Mining
dilution is generally low.
The Phase I mine expansion, now completed, involved:
Agsao Shaft
Completion of the new external Agsao Shaft to an inclined depth of 240m (200m vertical).
8E Shaft
The 60 inclined 8E Shaft to an inclined depth of 120m (100m vertical) was completed and
connected to the Agsao Shaft.
Phase II mine expansion, now completed, involved:
Baguio Shaft
The 60 inclined Baguio Shaft was completed to approximately 240m and connected to the
Level 3 workings via an on-vein drive along the Great Hamish vein.

30

Vertical Ventilation Shaft

The approximate 74m vertical compartment shaft allowed improved ventilation at the western
end of the mine.
Production
The table below shows the Co-O Mine production statistics by calendar year (CY) and financial
year (FY).

Item

Unit

CY2002

CY2003

CY2004

Tonne
17,032
g/t Au
32.0
Plant feed
Tonne
18,772
g/t Au
29.9
Tails grade
g/t Au
2.57
Recovered gold
oz Au
16,709
Unit cash cost Mining
US$/t
67
Unit cash cost Processing
US$/t
20
Unit cash cost Administration US$/t
16
Total unit cash costs:
US$/t
103
Total cash costs
US$/oz*

22,580
27.54
22,901
23.4
1.89
17,590
78
27
22
127

21,416
26.3
21,736
22.3
1.18
15,530
96
28
37
160

Mine production

FY2007 FY2008
July06- July07CY2005 CY2006 June07 June08
14,083
11.61
12,978
12.1
0.67
4,965
112
30
67
209

40,924
8.60
40,658
9.0
0.74
11,285
26
44
5
75

43,316
10.28
43,316
11.90
0.72
16,616
50
49
5
103
269

69,834
10.13
69,834
10.42
0.75
19,009
11
53
3
67
248

FY2009 FY 2010
July08- July09June09 June10
119,700 202,893
12.98
14.59
118,076 179,609
13.30
16.52
0.92
1.00
47,869 89,679
37
39
47
27
3
3
87
69
213
184

Note:
(i)

* includes royalties and local business taxes, but not development costs.

(ii) Medusa acquired the project in December 2006. Financial year 2007 includes July to December 2006 data from preMedusa ownership and procedures.
(iii) Medusa introduced international standard record keeping procedures and accounting treatment of costs from December
2006. Costs are measured on a per ounce basis since December 2006.

(b)

Co-O Mill
The plant employs conventional carbon-in-pulp (CIP) technology, Anglo-American research
laboratory (AARL) elution followed by electro-winning and smelting to produce gold and
silver dore. The plant as designed and constructed had a nameplate capacity to treat
550 tonnes per day of ore at the grade anticipated by BMDC. Ore is transported from the mine
to the treatment plant by conventional road dump 15 tonne dump trucks using the direct all
weather gravel road linking the two sites.
Concurrent with the initial underground mine development, PMC completed a programme of
refurbishment of the large ball mill in the plant, which provided capacity of 550 tonnes per day
with the existing crushing set-up.
Subsequently, two additional leach tanks were installed in February 2009.
Replacement of the existing crushing circuit commenced in June 2009 to lift the mill capacity
to approximately 1,000 tonnes per day. A second ball mill has been installed. The new crushing
circuit includes primary, secondary and tertiary crushers and a washing and screening circuit.
This work was completed in December 2009 and commissioning was completed by 31 March
2010.

(c)

Co-O Reserves
As described in Part IX of this document, the Company has estimated Probable Mineral
Reserves at the Co-O Mine as follows:
Deposit

Category

Tonnes
(t)

Co-O Mine

Probable Ore Reserve

Source: Mineral Experts Report

31

1,465,000

Grade
(g/t Au)
10.7

Contained
Gold
(oz)
505,000

The Probable Ore Reserves that have been declared are based on a gold price of US$900 per
ounce, a minimum stope width of 1.2 metres and a stope cut-off grade of 2.62 g/t Au for all
mineralised material. The work satisfies the reporting requirements of the JORC Code (2004)
and is reconciled to the CIMM Code for reporting Mineral Resources. The Co-O Gold Project
has a current estimated mine life of over five years based only on Probable Ore Reserves.
(d)

Co-O Resources
As described in Part IX of this document, the Company has estimated Mineral Resources at the
Co-O Mine as follows, based on a 0g/t gold cut-off and various upper cuts:
Deposit

Category

Tonnes
(t)

Co-O Mine
Co-O Mine

Indicated Mineral Resource

Inferred Mineral Resource

1,418,000
2,905,000

Grade
(g/t Au)
13.2
9.6

Contained
Gold
(oz)
603,000
898,000

Source: Mineral Experts Report

The Indicated Mineral Resource amount includes the Probable Ore Reserves.
(e)

Co-O exploration
The Group operates an active exploration department with a staff of up to 100 persons. The
department operated on a budget for the 1 July 2009 to 30 June 2010 financial year of
US$19 million. A total of 12 surface diamond drilling rigs and four underground rigs operate
year round.
Approximately 80 per cent. of the expenditure was focused on extensional drilling at the CoO Mine.
As of 30 June 2010, the Group had spent a total of US$24.05 million on the development of
the Co-O Gold Project and had total cash reserves of US$32.5 million.

5.2

Tambis-Barobo Region
The Tambis Project, currently comprising the Bananghilig and Kamarangan prospects, is operated
under a mining agreement with Philex over Mineral Production Sharing Agreement (MPSA)
application APSA-000022-XIII which covers approximately 6,262 hectares. This tenement has not
yet been granted.
The key terms of the mining agreement, which was signed on 30 August 2004, are:

the Group has the right to explore on the property for an initial two-year period from granting,
extendable by a further four years in two-year periods;

the Group has the right to develop the property into commercial production for the life of the
mine; and

the Group will pay a total 7 per cent. royalty to Philex and the underlying claim holders
together.

(a)

Bananghilig Gold Deposit

In the 1980s and 1990s diamond and reverse circulation drilling totalling 29,477m in 344 holes
was undertaken at the Bananghiling Deposit by various explorers to investigate a large area of
known mineralisation.
In 2005 to 2007, Philsaga undertook underground exploration through a 50m deep shaft and
development, adits, and underground and surface drilling totalling 7,715.50m in 31 holes.

32

The table below summarises some of the more significant drill hole intersections from the
Bananghilig drilling:
Hole
DD34-3
DD34 -46A
DDH-G1
DDH-G3
RC38-35
RC40-16
TDH 10
TDH 11
TDH 12
TDH 18
TUG 05

East

North

612486
612515
612541
612541
612680
612515
612827
612808
612848
612765
612748

945509
945493
945476
945476
945409
945493
945226
945224
945259
945263
945247

Dip
()
45
45
80
80
60
45
50
55
50
45
1

Azimuth
()
130
130
90
30
130
130
135
320
327
324
153

From
(metres)
0.00
0.00
0.00
0.00
0.00
0.00
10.50
0.00
0.00
0.00
0.00

Length Gold (uncut)

(metres)
(g/t gold)
170.10
182.00
116.50
108.81
64.00
55.00
106.00
569.90
137.80
256.20
205.90

2.09
2.13
3.96
2.03
8.40
4.14
1.60
0.64
0.94
1.30
2.42

Notes:
(i) Holes pre-fixed TDH and TUG are Philsaga surface and underground diamond drill holes.
(ii) All other holes pre-date Philsagas involvement with the project.
(iii) All intersection widths are downhole widths, not true widths.

Bananghilig Mineral Resources estimation

An Inferred Mineral Resource estimation was undertaken by Cube Consulting Pty Ltd of West Perth,
Western Australia, in August 2009, based on historical and more recent PMC drillhole data at the
Bananghilig Deposit. The Bananghilig Mineral Resource estimate as at the date of this prospectus,
based on a 0.6g/t cut off and as described in Part IX of this document, is detailed below:
Deposit

Category

Tonnes
(t)

Bananghilig Project

Inferred Mineral Resource

Grade
(g/t Au)

15,000,000

1.3

Contained
Gold
(oz)
650,000

Source: Mineral Experts Report

The majority of the resource is contained within a 0.2 g/t gold domain (Domain 1) which measures
850m east to west and 550m north to south, with the mineralisation defined to variable depths of 100m
to 150m due to drill hole density constraints. The mineralisation is also open in all other directions.
A smaller domain (Domain 2) to the north-east is approximately 375m long in a north-easterly
direction, approximately 100m wide and open beyond 75m depth and has increasing grades towards
the north-east.
The Bananghilig advanced exploration project Mineral Resource estimate is based on a number of
factors and assumptions, some of which are listed below:

All available drilling data was used for the Mineral Resource estimate.

There is no available QA/QC information (sample duplicates, blanks and certified reference
materials) for the historical drilling data. Drilling completed by PMC undergoes internal
QA/QC and assays greater than 1 g/t gold are checked by an independent laboratory (McPhar
Geosevices (Phil.), Inc.). The average grade for drilling completed by PMC supports the
average grade for the historical drilling data within the mineralised domains.

A theoretical bulk density of 2.6 t/m3 was used throughout the model, based on average bulk
densities for the modelled lithologies.

The mineralisation has been defined using gold-only assay data at a plus 0.2 g/t gold lower cut
off. This interpretation has resulted in two broad domains, the principal one, Domain 1, and a
smaller Domain 2 to the north-west. High grade assay cuts (30 g/t gold in Domain 1 and 2 g/t
gold in Domain 2) have been applied to 2.5 metre downhole composite data.

33

The Mineral Resource has been estimated using Ordinary Block Kriging and Uniform
Conditioning (UC). UC is a mathematical method that allows the discrimination of ore and
waste at an assumed selective mining unit size within an estimated panel of significantly larger
size. In theory, this provides a more correct prediction of estimated resource grade and tonnes
above a cut off than an Ordinary Block Kriging alone. The method draws information from the
composite data variogram model and Kriges Relationship.

The application of the UC technique at the Bananghilig Prospect is based on the premise that
mining would be by open pit extraction. A Selective Mining Unit (SMU) of 5m by 5m by
2.5m was evaluated within Ordinary Kriged panels Y = 25m; X = 25m and Z = 5m for the
purposes of reporting recoverable resources.

(b)

Kamarangan Porphyry Target

The Kamarangan Prospect is centrally located in a large aeromagnetic anomaly approximately
10km in diameter.
The area is underlain by a well-banded calcareous sequence that appears to be at least 1,600m
wide. The calcareous sequence has been intruded by a complex of fine to coarser-grained
diorites and some andesite bodies. The intrusives have changed the calcareous rocks to skarn
rocks over an approximate area of 1,600m by 1,400m. The skarn area is open to the east under
the younger overlying limestone.
The table below contains a summary of the significant drill hole results. The intersection of a
fertile diorite and other vectors from the drilling indicate a possible porphyry copper source
to the east-north-east of the drilling conducted to date. Further assessment is expected to be
undertaken including additional field work.
Hole
KAM 1

KAM 2

East

North

612304

942837

612307

Azimuth
()

Dip
()

From
(metres)

Width
(metres)

Gold
Copper
(g/t) (per cent.)

Lithology

60

26.00

16.30

0.43

0.59

29.00

4.30

1.21

1.44

147.90
173.70
457.70
495.70
2.00

11.80
14.00
30.00
22.00
49.20

0.03
0.06
0.05
0.03
0.16

0.10
0.16
0.15
0.11
0.16

including

40.00

4.20

1.17

0.43

12.00
18.00
10.60
10.00

0.03
0.06
0.17
0.06

0.14
0.11
0.13
0.14

Magnetite
skarn
Magnetite
skarn
Hornfels
Diorite
Diorite
Diorite
Diorite with
magnetite
lense
Magnetite
skarn
Diorite
Diorite
Diorite
Andesite
porphyry
Andesite
Andesite
Calcareous
sediments
Skarn
Skarn with
magnetite
239.10
241.10
Skarn with
magnetite
410.80
418.80
Skarn
Skarn
Diorite
Diorite
Andesite

including

942736

90

90

60

KAM 3
KAM 4

612304
612305

942837
942597

270
87

60
60

210.00
282.00
239.90
31.00

KAM 5
KAM 7

611936
612215

942847
943161

110
90

90
50

110.00
360.75
0

14.00
11.00
19.50

0.07
0.11
0.12

0.20
0.02
0.01

157.10
211.10

16.00
56.00

0.18
0.26

0.09
0.09

410.80

16.00

0.22

0.27

446.85
452.85
50.00
132.15
397.50

24.00
2.00
18.00
13.05
10.30

0.64
7.21
0.17
0.09
0.13

0.12
0.01
0.06
0.01
0.24

KAM 8
KAM 10

612308
611724

including
942561
942581

273
156

58
50

34

Notes:
(i)
(ii)
(iii)
(iv)

5.3

Assaying by McPhar Geoservices Phils Inc.; Au by fire assay with AAS finish; Ag, Cu, Pb, Zn and Mo by AAS.
Magnetite contents not yet determined.
Grid co-ordinates based on the Philippine Reference System 92.
Intersection widths are downhole widths, not true widths.

Lingig Copper Project

The Lingig prospect is covered by a Mines Operating Agreement (MOA) over MPSA application
number APSA 024-XIII comprising two parcels situated to the north and to the east of the Co-O Mine
and millsite.
The key terms of the MOA, entered into on 20 February 2006, are:

the vendors are to be re-imbursed for past expenses totalling PhP12 million (approximately
A$318,000) with the issue of 601,367 Ordinary Shares based on an average price of A$0.53
(being a 10 per cent. discount to the average market price of the Ordinary Shares on the ASX
for the five days preceding 20 February 2006), and issued in four tranches of Ordinary Shares,
with the first tranche to be issued within 30 days of signing the MOA, the second tranche on
granting of the tenement and the third and fourth tranches on the 1st and 2nd anniversaries,
respectively, after granting of the tenement;

the Group agreed that it would pay to the vendors a 3 per cent. gross royalty on all production
from the tenement; and

the Group is responsible for all costs incurred to progress the APSA to granting.

Mineralisation has now been located in two distinct geological settings:

Thrust-hosted mineralisation (Zone 1) drilled to date is hosted within basaltic rocks. This
mineralisation is open along the projected strike in both directions basaltic and doleritic rocks
centred around the northern discovery area previously reported in holes LIN 2 and 3. The
geometry of this mineralisation is still to be confirmed, appearing at this stage to be controlled
by north-east-trending structures.

Porphyry associated mineralisation (Zone 2) centred around holes LIN 14 and 17 and
associated with potassic (biotite and variable magnetite) alteration of dioritic rocks below the
thrust where consistent copper mineralisation has been located in association with intensely
altered, dioritic hydrothermal breccias.

Drilling results are summarised in the table below:

35

36

896918

896844

896844

897150
897150

896908

895926
895648

896565
894756

896366

896845

896364

652072

652075

652075

651994
651994

652073

651865
651828

652272
651466.

652469

652236

652681

LIN 1

LIN 2

LIN 3

LIN 5
LIN 6

JDH 1

JDH 3
JDH 5

LIN 10
LIN 13

LIN 17

LIN 19

LIN 20

270

242

270

270
180

0
0

0
166

180

Azimuth

60

60

60

60
50

90
90

90

90
62

60

90

90

Dip

Gold by fire assay on 30g samples with AAS finish.

280.10

12.00
18.00
224.00
175.75
3.00
232.10
144.75
230.80
148.10

389.40
94.10
280.40
362.20
52.00

0.00

2.00

71.00

From
(metres)

318.10

100.00
100.00
242.00
212.30
212.10
242.10
170.70
275.30
307.80

408.70
114.10
294.40
421.60
250.00

224.00

269.30

38.00

88.00
82.00
18.00
36.55
209.10
10.00
25.95
44.50
159.70

19.30
20.00
14.00
59.40
198.00

224.00

267.30

(iii) Intersection widths are downhole intersection widths, not true widths.

0.20

0.14
0.18
0.15
0.12
0.25
0.11
0.33
0.34
0.40

0.10
0.13
0.14
0.31
0.34

0.77

0.62

Cut-off 0.1 per cent. copper

Width
Grade
(metres) (per cent.
Cu)
196.10
125.10
0.26

To
(metres)

(ii) Cu by AAS following concentrated HCI and HCI/HNO3/HCIO4 leach in latter stages on 1g sample.

(i)

Assaying undertaken by McPhar Geoservices Inc. in Manila using:

Notes:

North

East

Hole

0.02

0.00
0.00
0.00
0.07
0.07
0.01
0.03
0.09
0.04

0.01
0.01
0.01
0.02
0.01

0.11

0.06

0.03

Gold
(g/t)

27.95
94.60
150.70
234.80
206.10
including
260.10
282.10

100.00
134.00
200.00

364.20

118.50
161.50
26.00
including
132.00
172.00
10.00
including
68.00
180.00
206.00

From
(metres)

55.90
29.95
20.00
38.50
78.00
20.00
12.00

278.10
294.10

12.00
12.00
50.00

36.00

83.85
124.55
170.70
273.30
284.10

112.00
146.00
250.00

400.20

78.00
10.00
12.00

146.00
190.00
218.00

1.23
0.36

0.44
0.36
0.37
0.37
0.66

0.43
0.40
0.67

0.37

1.16
1.02
0.98

0.10
0.05

0.10
0.03
0.03
0.10
0.06

0.00
0.00
0.04

0.03

0.21
0.06
0.20

0.27
0.08
0.07

10.00
68.65
212.00

142.65
240.65
222.00

1.00
1.03
0.80

0.02
0.04
0.07

Gold
(g/t)

Cut-off 0.3 per cent. copper

To
Width
Grade
(metres)
(metres) (per cent.
Cu)
153.50
35.00
0.32
196.10
34.60
0.35
240.65
214.65
0.72

5.4

Anoling Project
On 14 November 2005 Phsamed entered into a MOA with Alcorn Gold Resources Inc. (Alcorn)
which was assigned to PMC on 21 January 2007. The MOA covers MPSA application number 039XIII situated in the Agusan del Sur province in east Mindanao to the north of the Co-O Mine and eight
kilometres from the mill site. The MPSA comprises approximately 405 hectares (4.05km2) and covers
mineralised extensions of the favourable geology found further south. The key terms of the MOA are
set out below:

PMC will pay Alcorn a 5 per cent. gross royalty on all production from the tenement to be shared with
other parties to the MOA;

PMC has issued Alcorn or its nominee the equivalent of PhP3M (approximately A$75,000) in
Ordinary Shares converted at a discount rate of 10 per cent. to market, to reimburse Alcorn for past
expenses;

in addition, PMC will pay Alcorn a 10 per cent. net profit interest (NPI), capped at PhP11 million
(approximately A$27,000) as further reimbursement of exploration expenses;

PMC was required to spend a minimum of US$50,000 in year 1 and US$100,000 in year 2;

PMC will pay the underlying claim owner a gross royalty of 3 per cent. on all production from the
tenement; and

PMC was responsible for all costs incurred to progress the MPSA to granting.
The Anoling Prospect area consists of a large number of artisanal workings and old mines on narrow
veins dating back to pre-World War II. The veins generally consist of banded quartz-carbonate
material within clay-chlorite-pyrite gouge zones with both types of material carrying gold values.
Drilling has been discontinued until the MPSA is granted, however mapping and sampling are
continuing.

5.5

Apical Gold Project

The Apical Gold Project is a joint venture between Medusa (through its wholly owned subsidiary,
Phsamed), MRL Gold Corporation (MRL) (the Philippine subsidiary of Mindoro Resources
Limited, a public company listed on the TSX Venture Exchange in Canada) and an underlying claim
owner. The joint venture covers MPSA application 0028-XIII located to the north of the Co-O Mine
and mill site. The MPSA application comprises approximately 2,084 hectares (20.84km2) and covers
extensions of the favourable geology to the south of the Tambis Project.
The agreement, entered into in May 2006, gives PMC, through Phsamed, the right to acquire a
70 per cent. interest in the tenement under the following terms:
(a)

Phsamed has the right to earn a 70 per cent. interest:

in narrow vein deposits, by commencing narrow vein development and producing the
first 500 tonnes of ore after which MRL has the option to contribute to ongoing
expenditure or reduce to a 3 per cent. NSR; and

in large bulk tonnage deposits such as porphyry copper-gold deposits or disseminated

gold deposits, by completion of a bankable feasibility study after which MRL has the
right to contribute to ongoing expenditure or dilute to a 3 per cent. NSR.

(b)

Phsamed is required to spend US$300,000 within three years of grant of the MPSA and spend
a minimum of US$150,000 per year subsequently.

(c)

Medusa has issued to the underlying claim holder, Ordinary Shares to the value of US$50,000
as the project has been assigned to the joint venture company and registered with the Mines and
Geosciences Bureau.

(d)

Phsamed is incurring all costs to progress the MPSA to granting.

37

5.6

Sur-Sur Project
PMC signed an MOA with Sur-Sur Mining Corporation on 16 February 2009 over Exploration Permit
Applications (EPAs) XIII-0000176, 0000180 and 0000181 whereby:

5.7

PMC will be responsible for all costs incurred to progress the EPAs to granting; and

PMC will pay the underlying claim owner a gross royalty of 3 per cent. on all production from
the tenement.

Other Areas and Prospects

The Group has additional MOAs with smaller claim holdings including the Corplex Agreements and
the Mindanao Philcord Agreement. These tenement holdings are still at the application stage. Mineral
Production Sharing Agreement application (XIII)-000077 of the Corplex Agreements contains the
Usa prospect where outcropping porphyry copper-gold mineralisation has been located. Work is
underway to prepare this prospect for drilling in 2011.
At the Saugon prospect, drilling of the first hit vein is underway to test for extensions to the know
vein-style mineralisation. This area was last drilled in 2004 and the current drill programme is
anticipated to finish before the end of 2010.
The Group has identified a number of additional prospects including gold veins at Trento which have
yet to be tested. There is also potential for porphyry copper mineralisation at four other targets,
including Saugon (where the Company has been granted Exploration Permit (XIII)-000017, although
no mining is currently being conducted there), Gamuton, Co-O and Lasang, where alteration and/or
aeromagnetic signatures possibly associated with porphyry copper styles of mineralisation have been
identified.

6.

I 5.2.3

Growth Strategy

With current mineral resources comprising an Indicated Mineral Resource of 603,000 ounces of gold and
Inferred Mineral Resource of 1,548,000 ounces of gold in two deposits, Medusas corporate strategy is to
become a mid-tier 300,000 to 400,000 ounce per year, low cost gold producer.
The Groups high grade Co-O Mine (Indicated Mineral Resource of 603,000 ounces of gold inclusive of a
Probable Ore Reserve of 505,000 ounces of gold, and Inferred Mineral Resource of 898,000 ounces of gold)
is currently producing at a rate of 100,000 ounces of gold per year. Average cash costs at the Co-O Mine
were US$184 per ounce in the year to 30 June 2010 and the Company intends to maintain the average cash
cost at this level. The Company intends to replace mined ounces through the conversion of Indicated Mineral
Resources to Probable Ore Reserves, primarily through underground development at the Co-O Mine. The
Company expects to be able to maintain a mine life of approximately five years based on Probable Ore
Reserves.
The Company is also continuing to conduct near mine exploration to assess the possibilities of further
expanding production to 200,000 ounces per year. The existing mill at the Co-O Mine currently has the
capacity to produce up to approximately 120,000 to 130,000 ounces of gold per year and the capacity of the
mill could be increased at the appropriate time.
The Group is also continuing exploration of its other advanced exploration projects with the intention of
establishing a pipeline of projects with potential Mineral Resources in order to increase gold production in
the longer term. The maiden Inferred Mineral Resource at Bananghilig of 650,000 ounces of gold and
recognised potential for extensions and additional nearby mineralisation has the potential to lift Medusas
production profile to approximately 300,000 to 400,000 ounces of gold per year. Drilling commenced in July
2010 which is anticipated to form the basis for a feasibility study on the development of the Bananghilig
Deposit.
In addition, Medusa is conducting copper exploration on porphyry targets with the objective of monetising
these projects at an early stage if exploration is successful in establishing a potentially economic resource.

38

7.

Key Strengths

Large prospective tenement area

The tenement area under the control of the Group totals approximately 820 km2 over a strike length
of approximately 70km. These tenements cover a sequence of andesitic volcanic rocks with minor
interbedded sediments which have been intruded by various diorite, andesite and other intrusive rocks.
This sequence is cut by a number of structures which are known to contain gold mineralisation, for
example the Co-O Mine is situated on a major east-west structure. Other structures have been
identified from remote sensing interpretation and will be investigated in the future.

High grade deposit at the Co-O Mine with growth potential

The Co-O Mine Indicated Resources have a grade of 13.2g/t gold and the Inferred Resources have a
grade of 9.6 g/t gold. The veins are, in general, consistently mineralised along strike and to depth. The
vein system at present is limited only by the extent of the drilling and development undertaken to date.

Infrastructure
The Co-O Mine operations are approximately 1km from the Philippines National Highway and is
connected to grid power. It has a milling complex capable of processing up to 1,000 tonnes per day
ore with the necessary support facilities, including laboratory, workshops, administration and back-up
power. The mine is separate (11km distant from the mill) and has a self-sufficient infrastructure in the
form of shafts, underground development, surface facilities such as workshops, administration
buildings, compressed air and back-up power.

Regulated mining environment

The new Philippine Mining Act that was introduced in 1995 modernised the tenement system and the
operating rules and regulations. The Group operates under the MPSA tenement regime which
provides for an initial 25-year mining life renewable for another 25 years. The MPSA is operated
under a contract between the tenement holder and the Republic of the Philippines. The contract
regulates the operating environment of the MPSA for the life of the tenement.

Strong community relationships

With a workforce of approximately 1,800 people, using a multiplier effect of approximately eight
times indicates that around 14,000 people are benefitting directly and indirectly from the Groups
mining activities, through direct and indirect employment and provision of services to the project.
The Group is deeply involved in education in its neighbouring communities, through the construction
of school classrooms, repairs of existing schools, provision of schooling materials, support for
teachers and through supporting a system of scholarships and educational assistance. In total, over
4,400 students benefit from the Groups activities.
The payment of local business taxes to host municipalities and the sharing of the royalties paid to the
Central Government with the Provincial Government allows these authorities to upgrade the services
they in turn provide to their communities.

8.

Ore Reserves and Mineral Resources

The Co-O Gold Project Probable Ore Reserve estimate as at the date of this prospectus is detailed below:
Deposit

Category

Tonnes
(t)

Co-O Mine

Probable Ore Reserve

Source: Mineral Experts Report

39

1,465,000

Grade
(g/t Au)
10.7

Contained
Gold
(oz)
505,000

The Probable Ore Reserves that have been declared are based on a gold price of US$900 per ounce, a
minimum stope width of 1.2 metres and a stope cut-off grade of 2.62 g/t Au for all mineralised material. The
work satisfies the reporting requirements of the JORC Code (2004) and reconciled to the CIMM Code for
reporting Mineral Resources. The Co-O Gold Project has a current estimated mine life of over five years
based only on Probable Ore Reserves.
The Co-O Gold Project Mineral Resource estimate as at the date of this prospectus is detailed below:
Deposit

Category

Tonnes
(t)

Co-O Mine
Co-O Mine

Indicated Mineral Resource

Inferred Mineral Resource

1,418,000
2,905,000

Grade
(g/t Au)
13.2
9.6

Contained
Gold
(oz)
603,000
898,000

Source: Mineral Experts Report

The Indicated Mineral Resource amount includes the Probable Ore Reserves.
The Bananghilig Mineral Resource estimate as at the date of this prospectus, based on a 0.6g/t cut off, is
detailed below:
Deposit

Category

Tonnes
(t)

Bananghilig Project

Inferred Mineral Resource

15,000,000

Grade
(g/t Au)
1.3

Contained
Gold
(oz)
650,000

Source: Mineral Experts Report

9.

I 6.1.1

Operations Overview

Geological Setting
The mining and exploration tenements are located in the Diwata Range which forms part of the Eastern
Mindanao Highlands. Regional geology comprises an Early Tertiary ophiolitic basement overlain by
andesitic lavas and pyroclastic beds, sandstone, shale, conglomerate and limestone. The volcanosedimentary sequence is intruded by Late Tertiary dacite and quartz diorite plutons. This geological setting
is host to epithermal gold and copper-gold porphyry mineralisation.
Gold mineralisation in the Philippines shows very strong structural control. The dominant structural feature
is the Philippine Rift Fault, a major regional structure that extends for 1,200km in a north-north-westerly
direction over the length of the Philippines from southern Mindanao to northern Luzon. The fault is located
approximately 200km west of the Philippine Subduction System which dips west under the Philippines
landmass and provides the main source of tertiary volcanism and mineralisation.
Mineralisation
The Co-O narrow vein underground gold mine consists of dominantly westerly trending, sub-vertical and
lesser 30-50 dipping quartz vein sets within andesitic volcanics. The vein system is cut by north-northwesterly trending reverse faults of limited displacement.
Drilling has now defined high grade mineralisation in multiple veins over a strike length of approximately
1.4km within a potential strike length of approximately 2km.
Quartz vein ore is typically grey to white quartz, colloform banded chalcedony and calcite vuggy in places
and containing rare pyrite, galena and sphalerite as disseminated grains and cavity fillings. Gangue minerals
may include calcite, barite and quartz crystals in open vugs. All gold is sub-microscopic.

40

Alteration of the wall rocks is generally argillic with fine grained pyrite and, in some areas, silicic alteration.
Other important features are:

the Co-O Gold Project veins are comprised of two gold bearing phases, the first being a quartzchalcedony calcite phase deposited at a temperature of approximately 180C, and a second phase
comprising blocky calcite-quartz barite likely deposited from boiling fluids in a temperature range
of 200 to 250C; and

the top of the Co-O Gold Project mineralisation formed most probably within 300m of the surface and
therefore the veins are essentially fully preserved (meaning the veins have been subjected to minimal
erosion only). This implies that to date the drilling is in the upper parts of the vein system and that the
vein system is still open at depth.

A new high grade vein named the Great Hamish Vein was discovered on the south side of the known vein
system, as well as other veins further to the south past the Great Hamish Vein. Also the top of a new vein
located approximately 70m to the north of the Central Vein and approximately 350m below adit level has
been intersected and will subjected to further drilling.
Metallurgy
The Co-O Mine ore is free milling with mill recoveries of approximately 94 per cent. using a cyanidation
process.
Mining
The Co-O Mine is a rail or tracked mine utilising battery driven electric locomotives and 1.2 tonne mine cars.
The mine now operates using two adits, three inclined 60 internal shafts (8E, 10W and 3W) and two inclined
external shafts (Agsao and Baguio). Total haulage capacity for all shafts is approximately 1,100 to 1,200
tonnes per day.
Each fully timbered shaft has two compartments comprising a ladder way and a haulage way. Each shaft is
equipped with a steel head frame and an electric winder with a back-up air winder. Rails have been installed
on the lower side of each shaft up which 1.2 tonne and 1.5 tonne skips are hauled by the electric winder.
Mining is conducted as follows. For level development and when hard vein material is present, conventional
airleg mining is used in conventional narrow vein shrink stopes and some open stopes (which may be
backfilled with waste where possible). As the mine develops and strike lengths of vein material are located,
Alimak long hole stoping will be considered. Dilution is generally low.
The mine now runs on grid power following completion of a new power line from the mill to the mine in
late 2008. Electric compressors have been installed at both the western and eastern ends of the mine. Backup diesel generators have been retained.
Processing
Historically, the bond ball mill work index for the quartz ores was reported to be 18.8kWh/t to a maximum
of 25kWh/t. There is little data with respect to the nature and occurrence of the gold and silver minerals in
the ore but milling of ore to date has indicated the following metallurgical response of the ore:

The ore is characterised as free-milling requiring a grind of P80 70 microns.

The process route is primary ball milling and CIP cyanidation.

The operating conditions established for the CIP circuit are as shown in the table below.

Alkalinity is maintained using locally sourced quicklime added to the grinding circuit.

41

CIP Operating Conditions

Parameter

Co-O

Residence Time
Pulp density (per cent. solids)
Cyanide consumption
pH
Lime addition
Carbon Concentration

48 hours
45 per cent.
1.0-1.2 kg/t
10
6.7 kg/t of CaO
40 g/l

Environmental
The Co-O Mine operates under the terms of an Environmental Compliance Certificate (ECC) originally
issued by the Environmental Management Bureau (EMB) to Banahaw Mining and Development
Corporation on 17 July 1990. The ECC was transferred to PMC in January 2006 with additional conditions.
The ECC was renewed to facilitate increased production to 750 tonnes per day or 273,750 tonnes per year
on 15 July 2009. Conditions of the renewed ECC are:
Environmental Management
All commitments, mitigating measures and monitoring requirements, especially those contained in the
Environmental Protection and Rehabilitation Management Plan (EPRMP) and the EIS, particularly in the
Environmental Management and Monitoring Plans (EMMPs), including all their modifications and
additional information as approved by the EMB, shall be instituted to minimise any adverse impact of the
project to the environment throughout its implementation, including the following:
1.

Observance of good vegetative practices, proper land use and sound soil management such as:
(a)

proper stockpiling and disposal of the materials generated from the mining site, silt materials
scooped-out from the sediment/silt ponds, and other solid waste in permanent, stabilised areas
to avoid pollution of any water body and drainage systems, and maintaining them in safe and
non-polluting conditions;

(b)

strict implementation of stabilisation and erosion control measures of the affected side slopes
of the roads and nearby gullies, creeks, rivers and sediment/silt ponds within the project site,
as well as nearby irrigated ricelands;

(c)

using the recovered topsoil for soil cover on waste dumps, for landscaping or stockpiling on
designated suitable areas, maintained at not more than three metres high and stabilised by
temporary vegetation to protect it from erosion; and

(d)

limiting the clearing of vegetation within the planned areas to be mined and/or to be utilised
for development including re-vegetating of idle land areas in the site with appropriate plant
species.

2.

Conduct of an effective Information, Education and Communication (IEC) Programme to inform

and educate all stakeholders, especially its local residents, on the projects mitigating measures
embodied in its EIS and EPRMP, the conditions stipulated in this ECC and measures in mining
operations and processing for greater awareness, understanding and sustained acceptance of the
project. The proponent shall implement an annual detailed IEC programme in co-ordination with the
Mines and Geosciences Bureau (MGB) Regional Office No. XIII and EMB Regional Office No,
XIII. The proponent in coordination with EMB and MGB Regional Offices shall also conduct an
annual Knowledge, Attitude, Practice evaluation to determine the effectiveness of the IEC
programme.

3.

Rehabilitation of roads shall be implemented with minimal land and ecological disturbance and with
adequate drainage. It shall continuously maintain access roads and other public/private roads within
the project site to offset impact of heavy vehicle traffic and nuisances/damages to the people and

42

properties, as well as conduct regular water spraying and require vehicles to maintain low speed in
dusty roads.
4.

Establishment of a reforestation and carbon sink programme to mitigate greenhouse gas emissions of
the project in line with the Department of Environmental and Natural Resources (DENR) thrust for
Occupational Health and Safety (OHS) emission reduction programmes. The programme shall be
submitted to EMS within 60 days of the Environmental Compliance Certificate being issued.

General Conditions
5.

The mining and milling processing operations shall conform with the provisions of R.A. No, 6969
(Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990), R.A. No. 9003
(Ecological Solid Waste Management Act of 2000), R.A. No. 9275 (Philippine Clean Water Act of
2004), and R.A. No. 8749 (Philippine Clean Air Act of 1999).

6.

The proponent shall comply with the environmental management and protection requirements of the
pertinent provisions of the Philippine Mining Act of 1995 (RA. No. 7942) and its Revised
Implementing Rules and Regulations (D A,O. No, 96-40, as amended), as well as the pertinent
provisions of the Memorandum of Agreement between the EMB and MGB executed on 16 April
1998, such as, but not limited to, the following:
(a)

submission of Environmental Protection and Enhancement Programme with the Final Mine
Rehabilitation and/or Decommissioning Plan integrated thereto, to the MGB, for approval;

(b)

setting up of a Contingent Liability and Rehabilitation Fund and Environmental Trust Fund;

(c)

the existing Mine Environmental Protection and Enhancement Office (MEPEO) be

maintained to competently handle the environment-related aspect of the project. In addition to
the monitoring requirements as specified in the EMP/EMoP, the MEPEO shall also monitor the
actual project impacts vis-a-vis the predicted impacts and management measures in the
EPRMP;

(d)

establishment of Mine Rehabilitation Fund Committee and Multipartite Monitoring Team;

(e)

submission of a Social Development and Management Programme, within thirty (30) days
from receipt of the ECC, to the MGB Regional Office No. XIII for approval. The EMB shall
be furnished with the Submarine Tailings Disposal Management Plan (STDMP) within thirty
(30) days from its approval; and

(f)

designation of a Community Relations Officer.

7.

The proponent shall ensure that its contractors and subcontractors properly comply with the relevant
conditions of the ECC.

8.

The proponent shall protect the headwaters and natural springs/wells within the project site that are
being utilised as sources of potable water by the community. Should the development activities affect
the headwaters and natural springs/wells, the proponent shall immediately provide alternative source
of potable water to the affected community.

Restrictions
9.

Transfer of ownership of the project carries the same conditions and restrictions for which written
notification must be made by the grantee to EMB within 15 days from such transfer.

Source: Environmental Compliance Certificate issued by the Republic of the Philippines, Department of Environment and Natural
Resources, 9 July 2009.

10.

Reasons for Moving to the Official List

The Board of Medusa believes that the Company has now reached a size and stage of maturity at which the
Official List will be the most appropriate platform for future growth. The Directors believe that the move

43

will result in the Company benefiting from the increased potential investor base, a higher profile and an
increase in the liquidity of its Ordinary Shares.
11.

I 3.1

Summary Key Financial Information

The table below sets out selected summary financial information for the periods indicated. The summary
financial information has been extracted without material adjustment from the historical financial
information in Part VIII of this document. Investors are reminded that the table below is only a summary and
investors should read the whole of this document and not rely on the key or summarised information.

CESR 20-26

During the year ended 30 June 2010, the Group changed its presentational currency from Australian Dollars
to US Dollars to account for the increase in the Groups trading and revenues which resulted in the majority
of the Groups business being transacted in US Dollars.
For the purpose of item 20.1 of Annex I to the Prospectus Rules, and only for that purpose, the historical
financial information for the year ended 30 June 2009 has been restated from Australian Dollars to US
Dollars.
2010
US$000
Key income statement data
Revenue
Profit before income tax
Net profit/(loss) for the period
Basic earnings/(loss) per share
Key balance sheet data
Total assets
Total liabilities
Net assets/equity
Key cash flow data
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Net increase/(decrease) in cash and
cash equivalents
Forex adjustment
Cash at end of period
12.

For the year ended 30 June

2009
2009
(restated)
US$000
A$000

94,508
65,854
65,812
0.378

42,825
26,793
28,507
0.187

57,252
35,820
38,111
0.250

183,977
8,551

175,426

115,422
9,506

105,916

144,445
11,813

132,633

38,719
(34,572)
1,130

5,277
670

32,457

2008
A$000
18,074
1,019
(1,347)
(0.009)
80,380
12,063

68,317

30,592
(20,892)
17,776

39,719
(35,745)
26,841

7,200
(17,044)
(5,069)

27,476
(5,614)

26,510

30,815
(2,710)

32,939

(14,913)
(421)

4,834

I 3.2

Group Financing

The Company is currently debt free and had US$32.5 million in cash and cash equivalents as at 30 June
2010. The Board expects to build on its current cash reserve from the expected positive cash flow generated
from its gold mining operation. It is the Directors intention that such cash resources available to the Group
will be used to fund the continued development of the Co-O Mine and the continuing exploration of the
Groups other mineral projects.

CESR 20-26

13.

I 12.1

Current Trading and Future Prospects

During the year to 30 June 2010, the Group generated revenues of US$94.5 million. Medusa is an un-hedged
gold producer and received an average gold price of US$1,100 per ounce from the sale of 64,020 ounces of
gold for the 12 month period to 30 June 2010.

44

I 12.2

Following completion of the Groups Phase II expansion in the quarter to December 2009 and the successful
commissioning of the expanded Co-O Mine mill in the quarter to 31 March 2010, the Group is now in the
position to produce 100,000 ounces of gold on an annualised basis. The Company produced a record 89,679
ounces of gold for the year to 30 June 2010, an increase of 41,810 ounces or 87 per cent. from the previous
years production of 47,869 ounces, at an average recovered grade of 16.52 g/t gold (2009: 13.30 g/t gold).
Average cash costs (net of development costs, but inclusive of royalties and local taxes) for the year to
30 June 2010 were US$184 per ounce, compared to the average cash cost in the year to 30 June 2009 of
US$213 per ounce.
Subject to successful near mine exploration, the expanded Co-O Mine mill has spare capacity to treat
additional ore and could produce approximately 20,000 to 30,000 additional ounces of gold per annum with
minimal capital investment.
With current mineral resources comprising Indicated 603,000 ounces of gold and Inferred 1,548,000 ounces
of gold in the Co-O Gold Project and Bananghilig deposits, Medusas corporate strategy is to become a midtier 300,000 to 400,000 ounce per year, low cost gold producer.
Medusa has aggressive exploration programmes in place, having spent US$19 million on exploration in the
12 months to 30 June 2010 and has budgeted US$21 million for exploration in the forthcoming year. There
are 12 surface rigs currently operating and the intention is to split them between the Co-O Mine and
surrounds, the Saugon Project, the Bananghilig Project and also to conduct initial exploratory drilling at the
Usa copper-gold porphyry prospect during the period to 30 June 2011.
14.

Taxation

The attention of investors and Shareholders is drawn to the information contained in section 16 of Part VI of
this document.
15.

I 20.7

Dividend Policy

The Company announced a maiden unfranked dividend of A$0.05 per share on 1 September 2010. The
Company was able to propose a dividend following recent changes to the Corporations Act that replaced the
former profits test with a new three-tiered test which permits payment of dividends in circumstances other
than out of profits.
The Board acknowledges that Medusa is in a fortuitous position with its Co-O Mine generating strong and
positive cash flow and is aware that it needs to strike a balance between returns to Shareholders and the
future capital requirements of the Companys planned organic growth.
On the proviso that the strong cash flow generated from the Co-O Mine is sustainable, it is the Companys
intent to reward Shareholders with dividend payments after taking into account the Companys future cash
requirements and position.
16.

Trading in Ordinary Shares

The Constitution permits the Company to issue Ordinary Shares in uncertificated form.
The Company, through its Registrar, Computershare, has established a depository facility whereby
depository interests, representing Ordinary Shares, are issued to Shareholders who wish to hold their
Ordinary Shares in electronic form in CREST. Accordingly, settlement of transactions in Ordinary Shares
following Admission may continue to take place within the CREST system, if the relevant Shareholders so
wish. Similarly, current arrangements for the settlement of transactions in Ordinary Shares on the ASX and
the TSX will continue whilst the Company remains listed on ASX and TSX respectively.
The existing Ordinary Shares are currently traded on AIM as well as the ASX and the TSX. The Company
has submitted a request to the London Stock Exchange for the cancellation of its AIM Admission and it is
anticipated that this will occur simultaneously with Admission.

45

PART II
DIRECTORS, SENIOR MANAGERS, CORPORATE GOVERNANCE
AND EMPLOYEES
1.

The Directors

The Directors of the Company are:

Name

Age

Peter Rhys Jones

Geoffrey John Davis
Peter Gordon Hepburn-Brown
Roy Philip Daniel

63
59
53
55

Robert Maurice Weinberg

Andrew Boon San Teo

63
57

Position
Non-Executive Chairman
Managing Director
Operations Director
Finance Director and
Joint Company Secretary
Non-Executive Director
Non-Executive Director

Date of
appointment to
the Board
8 July 2010
5 February 2002
15 September 2009
13 April 2006
1 July 2006
15 February 2010

The business address of each of the Directors is Unit 7, 11 Preston Street, Como, Western Australia, 6152,
Australia.
The management expertise and experience of each of the Directors is set out below:
Mr. Peter Rhys Jones, Non-Executive Chairman
ACSM, P. Eng.
Mr. Peter R. Jones is a retired Canadian mining engineer with over 40 years of experience in a variety of
mining executive positions including operational, consulting and project management. More recently in
2004, as chief executive officer of Hudson Bay Mining and Smelting Co., Limited (HBMS), a wholly
owned subsidiary of Anglo American plc, Mr. Jones was instrumental in the purchase of HBMS by HudBay
Minerals Inc.
Mr. Jones is a former Chairman of the Mining Association of Canada and in 2006 was named Canadian
Prairie Region Entrepreneur of the Year by Ernst & Young LLP. He has been actively involved with the
Canadian Mining Association in investigating and understanding worldwide issues facing mining companies
and is a proponent of good corporate governance practice.
Mr. Jones is a graduate of the Camborne School of Mines, UK and the Banff School of Advanced
Management, Canada. He is a Professional Engineer registered in British Columbia, Canada.
Mr. Geoffrey Davis, Managing Director
M.Sc, Mining and Exploration Geology, B. Sc (Hons), Geology, Member, Australian Institute of
Geoscientists.
Mr. Geoff Davis worked initially with BHP Billiton Limited (BHP) for 10 years following his graduation
in 1972, before becoming a consultant in 1980 firstly to BHP for two years and then to numerous mining
and exploration companies in Australia, Asia and South America. This work specialised in epithermal
precious metal and porphyry copper-gold opportunities, and included project acquisition, assessment and
exploration. Since 1990, most of his work has been with junior explorers where he has been exploration
manager to a number of these companies.

46

I 14.1

More recently he has also held directorships and senior executive positions in a number of listed and unlisted
Australian, Asian and London-based exploration and mining companies. Mr. Davis has been Managing
Director of Medusa since its establishment on 5 February 2002.
Mr. Davis first started work in the Philippines in 1980 until late 1981 as the regional manager for BHP based
in Manila, focused on exploring for epithermal gold deposits under the guidance of a consultant who
specialised in epithermal gold deposits. Subsequently he has consulted in the Philippines, including from
1999-2000 managing the restructure and financial recovery of a group of companies which included the sale
of the Co-O Gold Project to PMC in August 2000. Over his 30 years of experience in the Philippines, he has
developed a network of contacts in the mining, exploration, legal and tenement management sectors of the
industry, which are highly valuable in developing the Companys business interests in the Philippines.
Mr. Peter Hepburn-Brown, Operations Director
BAppSc Mining Engineering (1980) Graduate Diploma (1996); Member of Institute of Engineers,
Australia.
Mr. Peter Hepburn-Brown was appointed to the Board on 15 September 2009 as a non-executive director and
became Operations Director on 27 July 2010.
Mr. Hepburn-Brown is a mining engineer with 28 years of experience in a wide range of mining situations,
commodities and overseas jurisdictions. He has held senior management positions such as Executive
Director operations for Harmony Gold Australia, general manager operations for Great Central Mines as
well as other executive, operational and consulting positions.
Mr. Hepburn-Browns experience includes hands-on shaft sinking and airleg mining in narrow vein mines,
experience that is well suited to the Companys current operations in the Philippines, as well as mining large
open pit, disseminated ore bodies. Mr. Hepburn-Brown has a proven track record at operational levels and
his skills and experience complement those of his fellow Board members. He is currently also a director of
Alloy Resources Limited and Genesis Resources Limited.
Mr. Roy Daniel, Finance Director and Joint Company Secretary
B.Com, UWA.
Mr. Roy Daniel, who has also been joint Company Secretary since 6 December 2004, was appointed Finance
Director of the Company on 13 April 2006. He has been associated with the resource and mining industry
for over 28 years and has held various senior management and accounting positions with overseas and
Australian companies.
Mr. Daniel has considerable experience in accounting matters, business development, financial evaluations
and modelling, feasibility studies, project funding, treasury management and company secretarial functions
and brings his expertise in these matters to the Company.
In his capacities as Finance Director and joint Company Secretary, Mr. Daniel is responsible for the day-today financial, administrative and corporate functions of the Company.
Mr. Daniel also possesses work experience in the Philippines having streamlined the finance, administration
and corporate activities of Filipino operations for an AIM-listed entity.
Dr. Robert Weinberg, Non-Executive Director
BA (Hons) Geology, MA, DPhil, FGS, FIMMM.
London-based Dr. Robert Weinberg, who gained his doctorate in geology from Oxford University in 1973,
has more than 30 years experience in the international mining industry and is an independent mining
research analyst and consultant. He is a Fellow of the Geological Society of London and also a Fellow of the
Institute of Materials, Minerals and Mining.

47

Dr. Weinberg brings a wealth of gold marketing and investment banking experience to the Company, having
held executive positions that include being Managing Director of Institutional Investments at the World Gold
Council, Director of Gold Bullion Securities, Director of the Investment Banking & Equities Division at
Deutsche Bank in London and Head of the Global Mining Research team at SG Warburg Securities.
Dr. Weinberg has also held senior positions within Socit Gnrale, and was head of the mining team at
James Cape & Co. He was also formerly Marketing Manager of the gold and uranium division of Anglo
American Corporation of South Africa Ltd.
Dr. Weinberg is currently a Non-Executive Director of Solomon Gold plc, a company listed on AIM. He is
also a Non-Executive Director of ASX-listed entity Kasbah Resources Limited, having been appointed on
15 November 2006.
Mr. Andrew Teo, Non-Executive Director
B.Com, UWA (CPA), Taxation Institute of Australia (Fellow).
Mr. Andrew Teo is an accountant with 33 years of extensive and diversified experience in accounting,
treasury, corporate, legal and business administration across several industries. He is currently the Chief
Financial Officer and Executive Director of BGC (Australia) Pty Ltd, one of Australias largest privately
owned companies, with annual turnover in excess of $2 billion and 7,000 plus staff (including
sub-contractors).
Mr. Teo is the chairman of the Audit Committee and serves as a member of the Remuneration Committee.
2.

Senior Management

In addition to the executive management on the Board of the Company, the following Senior Managers are
considered relevant to establishing that the Company has the appropriate expertise and experience for the
management of its business:
Name

Age

Position

Employed Since

Peter Stanley Alphonso

53

Joint Company Secretary

November 2006

Samuel Afdal

63

President, PMC

December 2006

The business address of the Company Secretaries and Senior Managers is Unit 7, 11 Preston Street, Como,
Western Australia, 6152, Australia.
The management expertise and experience of each of the Senior Managers is set out below:
Mr. Peter Alphonso, Joint Company Secretary
B.Com, UWA (CPA).
Mr. Peter Alphonso was appointed joint Company Secretary on 11 December 2007.
Mr. Alphonsos 29 years of experience has included working for the auditing, engineering and
communications industries, with the majority of his experience centred on the gold and nickel sectors of the
mining industry. Mr. Alphonsos experience has included working for Coopers and Lybrand, Western Mining
Corporation, Great Central Mines and Tiwest Joint Venture and he has also consulted to government
departments on research projects.
In his capacity as Joint Company Secretary, Peter is responsible for the secretarial functions of the Company.
His responsibility extends to assisting the Finance Director with all financial and statutory reporting of the
Company and the directing and monitoring of the financial aspects of the Companys overseas operations.

48

Mr. Samuel Afdal, President, PMC.

Mr. Samuel Afdal, who is an agriculturist by profession, served most of his career in the Philippines army.
He retired as Colonel from the armed services in 1990 to take charge of the security of the Co-O Mine when
it was operational during the 1989 to 1991 period.
Mr. Afdal assumed responsibility for the care and maintenance of the Co-O mine, milling facilities and
associated infrastructure (when the decision was made to cease operations in the early 1990s) until it was
sold to PMC in August 2000.
As the Executive President of PMC, Mr. Afdal is responsible for all administrative matters, local affairs and
local and regional government relationships.
3.

Remuneration

Details of service agreements and letters of appointment with Directors and Senior Managers are set out in
paragraph 9 of Part VI of this document. Details for the financial year ended 30 June 2010, of the
remuneration paid (including contingent or deferred compensation) and benefits in kind granted (under any
description whatsoever) to each of the Directors and Senior Managers by members of the Group are set out
in paragraph 10 of Part VI of this document.
4.

Corporate Governance

(a)

The Board

I 16.4

The Board is responsible for the corporate governance of the Group. The Board guides and monitors
the business and affairs of the Company on behalf of the Shareholders by whom they are elected and
to whom they are accountable.
The Board comprises the Non-Executive Chairman, two Non-Executive Directors, the Managing
Director, the Operations Director and the Finance Director.
The Board has adopted a Board Charter that sets out, among other things, its specific powers and
responsibilities and the matters delegated to the Managing Director and those specifically reserved for
the Board. The Board Charter provides that the Boards primary role is to guide and monitor the
business and affairs of the Group on behalf of the Shareholders by whom the Board is elected and to
whom it is accountable.
In addition to the matters required by law to be approved by the Board, the following key duties and
responsibilities are reserved for the Board:

oversight of the Company, including its control and accountability systems;

appointing and removing the Chief Executive Officer or Managing Director (as applicable) in
respect of his or her executive role;

ratifying the appointment and removal of the Company Secretary;

providing input into and final approval of the corporate strategy of the Company;

providing input into and final approval of the annual operating and capital budget of the
Company;

approving and monitoring the progress of acquisitions and divestments (as applicable);

reviewing and ratifying systems of risk management and internal compliance and controls,
codes of conduct, continuous disclosure, legal compliance and other significant corporate
policies;

monitoring senior managements performance and implementation of strategy and policies,

and ensuring appropriate resources are available to senior management; and

49

approving and monitoring financial and other reporting to the market, shareholders, employees
and other stakeholders.

The Board has delegated responsibilities for the day-to-day operational, corporate, financial and
administrative activities of the Group to the Managing Director, the Operations Director and the
Finance Director.
Details of the skills, experience and expertise relevant to the position of each Director who is in office
at the date of this report, and their terms of office, are included in paragraph 1 of this Part II.
In assessing the composition of the Board, the Directors have regard to the following principles:

the Chairperson should be a non-executive independent director;

the role of the Chairperson and the Managing Director should not be exercised by the same
person;

the Board should comprise at least three directors, increasing where additional expertise is
considered desirable in certain areas, when an outstanding candidate is identified, or to ensure
a smooth transition between outgoing and incoming non-executive directors; and

the Board should comprise directors with an appropriate range of qualifications and expertise.

The Board will review its composition from time to time to ensure that it has the appropriate mix of
expertise and experience. Where a vacancy exists, for whatever reason, or where it is considered that
the Board would benefit from the services of a new director with particular skills, the Board will
endeavour to select appropriate candidates with the relevant qualifications, skills and experience.
Directors appointed by the Board are subject to election by Shareholders at the following Annual
General Meeting of the Company and thereafter are subject to re-election in accordance with the
Constitution.
(b)

ASX Corporate Governance Councils Corporate Governance Principles and Recommendations

The Company currently seeks and, following Admission will, to the extent practicable for a company
of its size and nature, continue to seek to follow the ASX Corporate Governance Councils Corporate
Governance Principles and Recommendations (ASXCGCs), the best practice guidelines set out in
National Policy 58-201 Corporate Governance Guidelines (NP 58-201) and the Financial
Reporting Councils Corporate Governance Code to the extent practicable for a company of its size
and nature.
As at the date of this prospectus, the Company complies, except as disclosed below, with Australian
corporate governance requirements applicable to a company listed on the ASX. The ASX Listing
Rules require companies to either adopt the ASXCGCs or explain why they have not adopted a
recommendation if they consider it inappropriate in the companys circumstances:
Provision of the ASXCGC

Company Position

2.4

The Board believes that the Group is not of a

size to warrant the establishment of a
Nomination Committee. Nevertheless, the
Board has approved a formal Nomination
Committee Charter that sets out the
Nomination
Committees
role
and
responsibilities. The entire Board undertakes
this role and these responsibilities.

The Board should establish a

nomination committee.

Save for the above departure, the Company complies with the ASXCGCs in full.

50

I.16.4

(c)

Remuneration Committee

I.16.3

A Remuneration Committee, currently comprising Messrs Robert Weinberg, Peter Jones and Andrew
Boon San Teo, was formed on 7 October 2009 and operates under a Remuneration Committee Charter
approved by the Board. A copy of the Remuneration Committee Charter is available on the
Companys website at www.medusamining.com.au.
The role of the Remuneration Committee is to assist the Board in fulfilling its corporate governance
responsibilities with respect to remuneration by reviewing and making appropriate recommendations
on:

remuneration packages of executive directors, non-executive directors and senior executives;

employee incentive plans and benefit programs, including the appropriateness of performance
hurdles and total payments proposed;

recruitment, retention and termination policies and procedures;

superannuation arrangements; and

employee equity based plans and schemes.

The Boards policy is that reviews of remuneration packages and policies applicable to executive
directors, non-executive directors and senior executives be conducted on an annual basis by the
Remuneration Committee.
Details on the Companys remuneration policies, including how the structure of the remuneration of
non-executive directors is distinguished from that of executive directors and senior executives, are
included in the Remuneration Report within the Directors Report in the Companys 2010 Annual
Report.
(d)

Audit Committee

I.16.3

The Board established an Audit Committee on 12 August 2009, which operates under an Audit
Committee Charter approved by the Board. A copy of the Audit Committee Charter is available on the
Companys website at www.medusamining.com.au.
The role of the Audit Committee is to assist the Board to meet its oversight responsibilities in relation
to the Companys financial reporting, compliance with legal and regulatory requirements, internal
control framework and audit functions.
The Audit Committee consists of Messrs Andrew Boon San Teo (as Chairman), Peter Jones and
Robert Weinberg, who have been determined to be independent Non-Executive Directors.
The Audit Committee Charter provides that the Audit Committee will meet at least twice per year.
5.

Model Code

The Company complies with a Share Trading Policy in relation to the Ordinary Shares which is no less
exacting than the Model Code published in Chapter 9 of the Listing Rules. The Share Trading Policy applies
to the Directors and other relevant employees of the Group. However, as, on Admission, the Ordinary Shares
will be listed on the standard listing segment of the Official List, the Company is not required to comply with
the Model Code set out in Chapter 9 of the Listing Rules. Accordingly, the FSA will not have authority to
monitor the Companys compliance with the Share Trading Policy.

51

6.

I 17.1

Employees

The table below sets out the number of people employed by the Group, during the financial periods stated.

Employees Philippines
Employees Australia
Total

As at
29 September 2010

Year to
30 June 2010

Year to
30 June 2009

Year to
30 June 2008

1,980
6

1,986

1,700
6

1,706

1,617
5

1,622

1,673
5

1,678

As at 30 June 2010, less than one per cent. of employees were employed in management activities;
approximately two per cent. in finance administration activities; 92 per cent. in operations; and six per cent.
in construction. The Company also uses contractors, primarily involving construction activities with some
involved in drilling and blasting activities. During the year to 30 June 2010 the Company employed, on
average, 740 temporary employees.
7.

I 15.2

Pensions

The Group does not operate either a defined benefit or defined contribution pension scheme for its
employees. Contributions are instead made to individuals personal pension/superannuation schemes if
required under the terms of their employment contracts or applicable laws.

52

PART III
OVERVIEW OF THE GOLD MARKET
1.

Introduction

Gold is a precious metal which has been a desirable and valuable commodity for centuries. Golds ability to
conduct heat and electricity and its resistance to tarnish mean that it is suitable for use in many industrial
applications. Its brilliance and great malleability means it is highly sought after as a precious metal for
jewellery, coins and art work.
Gold is a naturally occurring element that is found widely throughout the geological world. Its value is
recognised globally and it has served as a symbol of wealth and a store of value throughout history.
Even in todays developed and sophisticated financial markets gold remains a sought after commodity and
is seen as a safe haven in times of economic uncertainty. Figure 1 below shows the change in the market
value of gold over the last 25 years:

Figure 1
The price of gold is dependent on a number of different factors including movements in foreign exchange
rates, inflation, interest rates and political instability. The influence of these macro economic factors on the
price of gold can be very complex making it difficult to quantify and predict their effect on the gold market.
The price of gold reached a high of US$1,376.28/oz on the London p.m. fix on 14 October 2010 (Source:
Thomson Reuters Datastream) and the price of gold as at 20 October 2010, being the latest practicable date
prior to publication of this document, was US$1,340.50/oz (Source: Thomson Reuters Datastream).

53

2.

Applications and Demand

Golds practical and functional physical properties mean that it has many useful applications and hence the
demand for gold is derived from a number of different markets. Figure 2 below shows the end uses of the
gold produced in 2009:
Gold End Uses 2009
(excluding Central Banks)
13%

37%

Jewellery consumption
Industrial & dental

15%

Identifiable investment
Net retail investment
ETFs and similar

27%

8%

Figure 2
(Source: GFMS Ltd and World Gold Council)

Identifiable gold demand fell to 3,385.8t in 2009 from 3,805.7t in 2008, representing an 11 per cent. decrease
(Source: GFMS Ltd and World Gold Council). The main contributors to this decrease in demand were
jewellery consumption and retail investment. Despite the decrease in demand during 2009 the gold price
remained strong with an average price of US$972.35/oz in 2009, up 12 per cent. when compared to 2008
(Source: World Gold Council).
Jewellery
Golds bright yellow colour and lustre makes it an attractive precious metal. It does not rust or corrode, is
easy to clean and it is very durable and ductile. Its malleable properties enable it to be shaped into many
ornate patterns making it the ideal material from which to make jewellery. The key factors driving jewellery
demand in the main gold consuming countries are income growth and price volatility.
In general, jewellery demand increases with income growth and in periods of steady price increases, and
reduces in periods of price volatility or decline. A rising price reinforces the inherent value of gold jewellery,
which is an intrinsic part of its desirability. Consumer demand for gold jewellery is also positively associated
with incomes. As a result, economic growth in India, China and the Middle East is supportive of the gold
price because it results in increased demand for gold jewellery as more households move into higher income
categories.
Jewellery accounted for 51.6 per cent. of the identifiable gold demand in 2009 which was a 20.1 per cent.
decrease compared to 2008 (Source: GFMS Ltd and World Gold Council). This was mainly due to
significant reduction in Indian demand. Jewellery imports to India dropped 18 per cent. year on year in 2009.
However, jewellery demand recovered from 325t in the first quarter of 2009 to 470t in the third quarter
despite a 6 per cent. rise in the US$ price over that period. The prevailing high gold price that was seen in
the third quarter of 2009 is believed to have suppressed jewellery demand in almost all regions except for
China. In the third quarter of 2009 Chinas demand increased 8 per cent. over the corresponding period in
2008 (Source: World Gold Council).
Global jewellery demand recovered strongly in the first quarter of 2010, with the growth being driven
exclusively by non-western markets. The increase in demand is believed to have been encouraged by local
currency appreciation and the anticipation of higher future gold prices in the light of stonger economic
growth in certain emerging economies (Source: World Gold Council).

54

Gold as an Investment
Gold, as a tangible or real asset, is widely used to increase the diversification of an investment portfolio. In
times of economic uncertainty a higher level of diversification is recognised to provide protection to the total
value of an investment portfolio against fluctuations in the value of any one asset type. Therefore, when the
investment outlook is unpredictable, the demand for gold as an investment is expected to increase.
Exchange Traded Funds (ETFs)
Gold ETFs were among the first commodity ETFs that were established. ETFs made investment in gold more
accessible to investors who were concerned over the prospects of inflation, US Dollar weakness and equity
market volatility. Investments in ETFs increased in 2008 and 2009 and this increase in demand from ETFs
is believed to have contributed to the increase in gold prices during that time despite the significant decrease
in demand for jewellery. As at the end of 2009, the major gold ETFs were estimated to account for around
1,762t of the worlds gold, an increase of 48 per cent. over the previous year (Source: World Gold Council).
ETF demand during the first quarter of 2010 decreased and there was a net outflow of around 15t across the
major gold ETFs compared to a net inflow of 326t in just the first two months of 2009. However, as investors
sought cost effective ways to invest in gold, the second quarter of 2010 saw a net inflow of 273.8t, the second
largest quarterly inflow on record bringing total gold holdings to a new high of 2,041.8t (Source: World Gold
Council).
Coins, Medals & Bars
Retail demand for gold in the form of coins, small bars, medals and imitation coins, contributed to the
increased demand for gold in the first quarter of 2010. Investors around the globe looked to gold as a
currency alternative as the euro and British pound weakened due to concerns about the finances of certain
members of the EU. Bar and coin retail demand increased by 17.1 per cent. in the first quarter of 2010
compared to the fourth quarter of 2009 (Source: World Gold Council).
Central Banks
On 2 November 2009, it was announced that the Reserve Bank of India had bought 200t of gold at an average
price of approximately US$1,042/oz from the International Monetary Fund (IMF). This purchase
accounted to almost half of the 403t of gold that the IMF plans to sell in the next few years. (Source: The
Yellow Book produced by VM Group Research and Consulting).
In addition, Sri Lankas central bank purchased 10t of gold from the IMF and the Bank of Mauritius
purchased a further 2t in the final quarter of 2009. It was estimated by the World Gold Council that banks
and official sector institutions outside of the CBGA were net purchasers of gold during the fourth quarter of
2009. These recent purchases together with the ongoing programmes of gold purchases by the central banks
of China and Russia confirms the important role that gold plays as a monetary asset and as a protector of
wealth.
De-hedging
In times of decreasing gold prices, gold producers can hedge much of their output by selling gold forward.
However, in times of increasing gold prices and buoyant price expectations it is more likely that gold
producers will decide not to hedge their output and even de-hedge by buying back those hedges they entered
into previously.
Producer de-hedging accounted for around 257t of gold demand in 2009. The biggest contributor was
Barrick Gold which announced in September 2009 that it intended to eliminate its entire hedging position
over the next 12 months and its fixed price contracts amounted to 3 million ounces at that time. During the
third quarter of 2009 de-hedging by Barrick Gold alone accounted for the demand for 73t of gold in the
market. AngloGold Ashanti also bought back a further 15t gold in this period as it completed a hedge book
restructuring (Source: World Gold Council). This producer de-hedging is a strong indication that gold
producers expect the gold price to continue to rise.

55

Other Fabrications Electronics, Dentistry and Medical Uses

Golds high thermal and electrical conductivity, and its resistance to corrosion, explain why over half of all
industrial demand typically arises from its use in electrical components. Golds use in medical applications
has a long history and today various biomedical applications make use of its biocompatibility, resistance to
bacterial colonisation and corrosion, and other attributes.
Recent research has uncovered a number of new practical uses for gold, including its use in advanced
electronics, fuel cells, cancer treatments and chemical catalysts.
In 2009, gold usage in electronics decreased by approximately 6 per cent. compared to 2008. End user
demand for electronic goods was badly affected by the downturn in consumer spending. However, during the
first quarter of 2010 gold demand for industrial and dental applications increased by 31 per cent. when
compared to the first quarter of 2009. The increase in demand was driven by the electronics sector as
economies began to emerge from recession and consumers were expected to resume spending on items such
as laptops and mobile phones. Japan in particular experienced a 60 per cent. recovery in demand for this
sector (Source: World Gold Council).
3.

Supply and Market outlook

World Gold Supply 2009
38%

51%
Mine production
Official sector sales
Scrap recycling

11%

Figure 3
Source: GFMS Ltd and World Gold Council.

Mine supply
World mine supply of gold rose by 6 per cent. to 2,554t in 2009 (from 2,409t in 2008) after 3 years of
decline. Mine production in the first quarter of 2010 represented a 5 per cent. increase on the first quarter of
2009, but a decrease of 9 per cent. when compared to the fourth quarter of 2009. A significant reduction in
production from certain large-scale operators was experienced in the period and this outweighed increases
elsewhere (Source: World Gold Council).
During the third quarter of 2009 Indonesia, China and Russia in particular added to this increase in
production. China was the main producer of gold in 2008 followed by Australia and South Africa and
producing countries such as China, Australia, South Africa and the USA represented some 41 per cent. of
world gold supply in 2008 (Source: The Yellow Book produced by VM Group Research and Consulting).

56

Figure 4 shows Primary Mine Supply by region in 2008:

Primary Mine Supply by Region
Africa
0.3%

19.3%

14.1%

Asia
Australasia

20.0%

Eastern Europe
Western Europe
Indian sub-continent

0.1%

Latin America
1.2%

8.3%

23.8%
12.8%

Middle East
North America

Figure 4
Source: The Yellow Book produced by VM Group Research and Consulting.

The lack of significant gold discoveries in recent years teamed with ageing mines in the traditional mining
hubs and increasing lead times in bringing new projects on stream means the outlook for gold mining
production remains flat.
Scrap Recycling
The value of gold means that it is economically viable to recover it from most of its uses where it is capable
of being melted down, re-refined and reused. Recycled gold, or scrap, therefore plays an important part in
the dynamics of the gold market. Although gold mine production is relatively inelastic, scrap ensures there
is easily traded supply when needed, thereby helping to stabilise the gold price. Most recycled gold is derived
from jewellery and from electronics components. The supply of scrap depends largely on economic
circumstances and the price behaviour of gold. It is common practice in the Middle East and Asia for
customers to trade in one piece of jewellery in exchange for another, and the piece traded in may be melted
down rather than simply being resold. But gold can also be sold for cash if, for example, the owner has urgent
need of money or wants to cash in a profit following a rise in the gold price. Scrap supply typically rises in
times of economic distress or following a price rise. Scrap recycling accounted for over 30 per cent. of the
total supply of gold in 2008. This represented a 12 per cent. increase on 2007 which is understood to be in
response to higher gold prices and a need for further liquidity. Scrap and recycled gold was the main
contributor to the increase in gold supply in 2009 with the Middle East being the biggest contributor to the
fourth quarter increase in recycling activity and there was also some selling back of gold jewellery by
retailers to raise cash (Source: The Yellow Book produced by VM Group Research and Consulting).
In the first quarter of 2010 recycling activity fell sharply compared to the first quarter of 2009. This is
believed to be an indication of expected higher prices and improved economic conditions, in the Indian
market in particular. In the western markets recycling increased during the same period, but these increased
sales make a relatively small contribution to the global recycling supply (Source: World Gold Council).
Hedging
Hedging accounted for 33t gold supply in 2008 being a 54 per cent. decrease on 2007. During 2009 the
market saw more producers de-hedging which indicates that they expect the gold price to increase (Source:
The Yellow Book produced by VM Group Research and Consulting). Producer de-heding activity slowed
during the first quarter of 2010, but continued to restrict supply during the period (Source: World Gold
Council).

57

Central Bank Sales

Central banks and supranational organisations, like the IMF, are estimated to account for approximately a
fifth of the worlds gold therefore, any sales by such organisations can be unsettling to the market. The third
Central Bank Gold Agreement (CBGA) was entered into in August 2009, the purpose of which is to give
comfort to gold markets that any sales of gold by the 15 largest central banks that have entered into the
agreement will be at a rate that the market can absorb without undue disruption. The amount of gold sold by
central banks in 2007 and 2008 was well within the limits set by the CBGA and recently, sales by the
signatories of the CBGA have slowed to a negligible rate (Source: World Gold Council).
In September 2009 the IMF confirmed that it planned to sell 403t gold over the next three to five years.
However, the sales so far have taken place in off market transactions meaning that there was no impact on
the net supply or demand for gold in the market. Germany is the only other confirmed central bank seller
and it is only expected to be selling a token amount (believed to be 6.5t) for the manufacture of gold coins
(Source: The Yellow Book produced by VM Group Research and Consulting). During the first half of 2010
sales of gold by central banks remained subdued (Source: World Gold Council).

58

PART IV
INFORMATION ON THE PHILIPPINES

Figure 5 Location of the Co-O Gold Project

59

Location

The Philippine Archipelago, made up of 7,107 islands, is located in

South-East Asia, between the Philippine Sea and the South China
Sea, east of Vietnam. The major island groups are Luzon in the
north, the Visayas in the centre and Mindanao in the south.

History

Spain (15651898) and the United States (18981946), colonised

the country, before it attained full independence on 4 July 1946. The
Philippines is one of the most westernised nations in South-East
Asia, incorporating a unique blend of eastern and western culture.

Government

Republic.

Head of State

Benigno Simeon Cojuangco Aquino III, (President).

Capital

Manila, located on the island of Luzon.

Other Cities

Quezon City (Luzon), Davao City (Mindanao) and Cebu City

(Cebu).

Population

Approximately 99,900,177 (as at July 2010).

Religion

Roman Catholic (80.9 per cent.); Muslims (5 per cent.); and

Christian denominations.

Languages

English (official) and Filipino (official); Unlike its neighbouring

countries, English is widely used and is the medium of instruction
in higher education.

Natural Resources

Extensive mineral deposits of copper, gold, silver, nickel, limited

offshore petroleum and timber.

Industries

Electronics assembly, textiles, pharmaceuticals, chemicals, wood

products, food processing, petroleum refining and fishing.

Climate

The Philippines is a tropical country with an average temperature of

32 C. March to June are hot and dry (36 C); rains and typhoons
abound from July to October; November to February are pleasantly
cool (around 23 C) and dry.

Currency

The monetary unit is the Philippine Peso (PhP), divided into 100
centavos. The Central Bank supervises authorised foreign exchange
dealers (at airports, hotels, major commercial establishments and all
bank branches), and post official exchange rates for most
international currencies. Any person who brings into/out of the
Philippines foreign currency in excess of US$10,000 or its
equivalent is required by Philippine law to declare the amount upon
entry/departure.

Co-O Gold Project Location

The Co-O Gold Project is located approximately three hours drive along the Philippine National Highway
from Davao City, the capital city of the Province of Davao and location of an international airport. Davao
City has a current population of approximately two million people.
East Mindanao Regional Geology
This richly mineralised region with a long mining history measures approximately 400km in length and the
Group now controls about 20 per cent. of the strike length.

60

The Groups tenements are centrally located along the richly endowed Diwata Ranges which form the East
Mindanao Ridge (Figure 5). The regional geology comprises an Early Tertiary ophiolitic basement overlain
by andesitic lavas and pyroclastic beds, sandstone, shale, conglomerate and limestone. The volcanosedimentary sequence is intruded by Late Tertiary dacite and quartz diorite plutons.
The dominant structural feature is the Philippine Rift Fault, a major regional structure that extends for 1,200
km in a north-north-westerly direction over the length of the Philippines from southern Mindanao to northern
Luzon. The Diwata Ranges straddle the Philippine Rift Fault which provides the main source of Tertiary
volcanism and mineralisation.
Mineralisation associated with the Philippine Rift Fault and Subduction System occurs as copper-gold
porphyries, epithermal gold veins, and skarn and disseminated deposits associated with calcareous
sediments. Locally, gold mineralisation is controlled by strike-slip faults parallel to the Philippine Rift Fault
or splay structures off the Rift Fault and dilationary structures which develop orthogonally to the main
structures as a result of strike slip movements on structures parallel to the Philippine Rift Fault.
The Groups tenements are centrally located between the well known and exploited gold and copper districts
of North Davao in the south and Surigao in the north. The Diwalwal Gold Mine located some 60 kilometres
south of the Co-O Mine is reported to have contained seven million ounces of gold and represents a target
type of epithermal vein mineralisation while the Boyongan Deposit in the Surigao District and the Kingking
Deposit in the North Davao District represent porphyry copper-gold target types.
The Co-O Mine and the Tambis areas have been interpreted to be within truncated calderas which are
identifiable from volcanic features known to be favourable for gold and base metal mineralisation.
Regional Mineralisation Background
The East Mindanao Ridge has been a major mining region since before World War II. Previous mining has
essentially been divided into two areas, the Surigao District in the north and the North Davao District in the
south as shown on Figure 5.
Pre-World War II operations were mainly confined to the Surigao District with production from high grade
veins at the Mindanao Motherlode (or Mabuhay) Mine, Tapian and Mapaso Mines, from veins at the Siana
underground mine commencing in 1938, and from veins at the Placer Mine commencing in 1936. In later
years Siana became an open pit mine and numerous open pit mines were established in the Placer Mine area
where porphyry copper-gold bodies were found adjacent to and below the high grade vein systems. The most
notable recent discovery in the Surigao District is the large Boyongan porphyry copper-gold deposit which
is undergoing further work.
In the North Davao District, the Maco (previously Masara) copper-gold deposits were discovered in 1938
and subsequently mined. The Amacan porphyry copper deposits were mined in the 1980s, and the large
Kingking porphyry copper deposit was discovered as well as smaller porphyry copper deposits such as
Mapula. Epithermal veins such as Hijo were mined as part of the Amacan operation, and approximately 20
years ago the large Diwalwal epithermal vein system was discovered with high grade mineralisation
extending to approximately 600m from surface.
Mining Regime in the Philippines
The Filipino Governments attitude towards mining has been very positive since 2002 when a major effort
was commenced to re-establish the mining industry. The success of this effort is exemplified by the following
selected examples of foreign mining company projects:

CGA Mining has invested approximately US$200 million to establish production at the Masbate Gold
Deposit;

MetalsEx is finalising its feasibility studies for the Runruno Gold-Molybdenum Deposit;

61

Xstrata is finalising the feasibility study on the Tampakan Coper-Gold Deposit with an indicated
CAPEX of US$5.2 billion; and

Red 5 Limited has commenced construction at the Siana Gold Deposit.

For projects with a capital expenditure of over US$50 million, companies can use the Financial and
Technical Assistance (FTAA) style of contract with the government, and for projects less than
US$50 million in capital expenditure companies are required to use a MPSA style of contract with the
government.
With an FTAA, after the company has been operating for approximately six years and has recovered its
capital, the profits are shared with the government at a ratio determined on a project by project basis.
With an MPSA, the company is required to pay a 2 per cent. royalty on sales (excise tax) to the government
from the commencement of production.
For exploration purposes, the initial tenement is an Exploration Permit (EP) initially for two years,
extendable in two year periods. If exploration is successful, and a mining operation is contemplated,
depending on the capital expenditure of the proposed operation, the company is required to convert the EP
to either an MPSA or a FTAA which grants mining rights. Both the MPSA and the FTAA have initial terms
of 25 years, renewable for another 25 years.
Whilst the law provides a compulsory payment of a 1 per cent. royalty to registered groups of Indigenous
People (IP tax), all mining tenements require approval by the National Commission on Indigenous People
before tenements can progress through the approval process.

62

PART V
OPERATING AND FINANCIAL REVIEW
The following discussion of the Groups financial condition and results of operations (for the three year
period ending 30 June 2010) should be read in conjunction with the rest of this document, including the
historical financial information contained in Part VIII of this document and the information relating to the
business of the Group in Part I of this document and reliance should not be placed solely on the key or
summarised information contained within this Part V.
During the year ended 30 June 2010, the Group changed its presentational currency from Australian Dollars
to US Dollars to account for the increase in the Groups trading and revenues which resulted in the majority
of the Groups business being transacted in US Dollars.
For the purpose of item 20.1 of Annex I to the Prospectus Rules, and for no other purpose, the historical
financial information for the year ended 30 June 2009 has been restated from Australian Dollars to
US Dollars.
This discussion contains forward looking statements that involve risks and uncertainties which could cause
Medusas actual results to differ materially from those expressed or implied by such forward looking
statements as a result of the factors discussed below and elsewhere in this document, particularly in the
part entitled Risk Factors. Investors should read the whole of this document, including the historical
financial information set out in Part VIII of this document and not rely on summarised information.
1.

I 9.1

Overview

Medusa is a mineral exploration, development and mining company that was established to acquire gold and
copper assets in the Philippines. The Company acquired the Co-O Mine in December 2006.
The Group has recently completed an expansion to increase production to 100,000 oz per annum at its
Co-O Mine which has Indicated Mineral Resources of 603,000 ounces of gold inclusive of a Probable Ore
Reserve of 505,000 ounces of gold, and Inferred Mineral Resources 898,000 ounces of gold. The Group is
conducting near mine exploration to assess the possibility of further expansion. Current cash costs at the
CoO Mine are approximately US$190 per ounce.
The Company operates the underground narrow vein Co-O Mine. The mine and mill have been undergoing
expansion since September 2007 which is now completed. The mine and mill have the capacity to produce
100,000 ounces of gold per year, which requires the mining and processing of approximately 750 tonnes of
mineralised material per day at an average grade of 12 to 15 g/t gold.
The Co-O Mine operations are self sufficient in terms of the support services it requires, such as laboratory,
repairs and maintenance, fabrication, earth moving equipment and haulage. Skilled labour for its operations
is readily available and, in addition, the Company is continually involved in workforce training.
A pipe-line of deposits is now being established with the recently added Bananghilig Deposit (Inferred
Mineral Resource of 650,000 ounces of gold) which is expected to expand, potentially in conjunction with
nearby discoveries.
The Directors believe that the Company has well established relationships with its host communities at all
levels, through its community programmes, payment of local business and other taxes, and its policy of buy
local wherever possible.
2.

Summary of key financial risks

The Companys activities expose it to a variety of financial risks: market, commodity, credit, liquidity,
foreign exchange and interest rate. These financial risks, where applicable, are managed under Board
approved directives through the Audit Committee. The Companys principal financial instruments comprise
interest bearing cash and short term deposits. Other financial instruments include trade receivables and trade
payables, which arise directly from operations.

63

CESR
2732

3.

Significant factors affecting results of operations

The Directors believe that the following factors are those most likely to influence the Groups financial
condition and results from operations:
3.1

Gold price

I 9.2.1
I 9.2.2

CESR 35

The Group is an un-hedged gold producer and the Group sells its gold production at US Dollar spot
prices. The Companys revenues are derived almost entirely from the sale of gold, so the US Dollar
spot price greatly affects its revenues and financial position. Part III of this document sets out further
information on the gold market.
3.2

Production volumes
The Company produced 89,679 ounces of gold during the year ended 30 June 2010. Following
completion of the Phase II expansion programme and commissioning of the Co-O Mine expanded
mill in March 2010, the Company now has the capability to produce gold at a rate of 100,000 ounces
on an annualised basis.
The amount of gold produced over an operating period can be affected by a number of factors
including ore extraction rates, ore grades, recovery rates and processing delays. The volume of gold
produced will have a significant impact on the Companys financial condition and operating results.

3.3

Production costs
The average cash cost of production for the year ended 30 June 2010 was US$184 per ounce of gold
(net of development costs, but inclusive of royalties and local taxes). The Company intends to
continue to be a low cost gold producer but the cash costs can be influenced by a number of factors.
The main elements that contribute to Medusas cash costs are labour costs, utility costs and power,
taxes and royalties.

3.4

Capital costs and depreciation

The Companys accounting estimates for depreciation and amortisation are based on the estimated life
of the mine (taking into account the resource and not the proved and probable reserves as noted in the
Companys annual report of June 2010) and such estimates are reviewed annually to allow for both
increases in mining inventory and any impairment.

3.5

Interest rates
The Company is debt free and whilst it does not have any exposure to any volatility in interest rate
charges, any interest revenue received on funds on term deposits will be affected by interest rate
fluctuations.

3.6

Exchange rates

CESR 35

The Companys financial statements were prepared in Australian Dollars until 30 June 2009. From
1 July 2009 the Companys financial statements have been prepared in US Dollars. The Companys
revenue is almost exclusively derived from the sale of gold which is sold in US Dollars. However, the
sole revenue producing asset of the Company is the Co-O Mine which is located in the Philippines.
Therefore, a majority of the Companys operational costs are incurred in Philippine Pesos. Minor
costs are also incurred in US Dollars, Australian Dollars, Canadian Dollars and Sterling.
The financial position of the Company is directly affected by changes in foreign exchange rates.
The Company does not hedge with respect to currency exchange rate fluctuations.
3.7

Life of mine
The remaining life of the mine is taken into consideration for the purpose of amortisation and
depreciation calculations and is reviewed on a regular basis. When considering the remaining life of
the mine due regard is given not only to the amount of remaining recoverable gold ounces contained

64

in Proved and Probable Ore Reserves, but also to limitations which could arise from the potential for
changes in technology, demand and other issues which are inherently difficult to estimate over a
lengthy time frame.
Where a change in estimated recoverable gold ounces contained in Proved and Probable Ore Reserves
is made the estimated remaining life of the mine is adjusted accordingly.
The determination of Ore Reserves and remaining mine life affects the carrying value of a number of
the Groups assets and liabilities including deferred mining costs and the provision for rehabilitation.
The estimated remaining life of the mine, based on current Probable Ore Reserves, is five years.
4.

I 9.2.3

Policies and Factors

Government
The Republic of the Philippines system of government is a democracy based on the United States system,
as instituted during the American presence of 48 years commencing in 1898. The Central government is
based in Manila, under which a system of Provincial and Municipality governments operate. The country has
an American-style constitution which defines the political system, protects the rights of its citizens and deals
with the ownership of the countrys assets.
Economic
The primary exports of the Philippines are labour, agricultural products (coconut products and bananas),
mineral products, fish, manufactured electronics and jewellery products and garments. Tourism is also a
significant foreign exchange earner. The Philippines has a system of economic trade free zones where
companies are able to import raw materials tax free and re-export finished products such as electronics and
garments. The country is generally self-sufficient in rice although from time to time does import to satisfy
domestic demand.
Metalliferous mineral products exports are increasing with the main commodities being copper concentrates,
gold, chromite, lateritic nickel ores and nickel powder products. Non-metalliferous exports are dominated by
marble products.
Monetary
The monetary system of the Republic of the Philippines is the Philippine Peso (PhP).
Political
The Republic of the Philippines has a democratically elected centralised government where the President has
limited executive powers and is the Commander-in-Chief of the armed forces. The term of any one President
is currently limited to six years term without re-election. The current President is the Honourable Benigno
Simeon C. Aquino II, who won in the last general elections held on 10 May 2010.
The system of government is modelled after the American system with a Congress/Legislature composed of
two chambers which are the Upper House called the Senate and the Lower House called the House of
Representatives. Members of the Senate are elected at large/nationwide polls every six years while members
of the House of Representatives are elected every three years by district.
Fiscal
The corporate tax rate in the Philippines is currently 30 per cent. However, MMPRC, the Medusa subsidiary
which is responsible for the sale of gold, has been granted an income tax holiday of four years
commencing July 2009 which is then renewable for two separate one-year periods on expiration of the initial
term. However, the tax holiday is provided subject to compliance with certain criteria which include
employment of local labour and using local inputs for the production of gold.

65

5.

Critical accounting judgements in applying the entitys accounting policies

The Directors evaluate estimates and judgments incorporated into the financial statements based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of future
events and are based on current trends and economic data, obtained both externally and within the Group.
The following are the critical judgments that management has made in the process of applying the Groups
accounting policies that the Directors believe have the most significant effect on the amounts recognised in
the financial statements:
Key estimates Impairment of non-financial assets
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that
may lead to impairment of non-financial assets. Where an impairment trigger exists, the recoverable amount
of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate
a number of key estimates including, production volumes, mine life, average cash cost per ounce of gold
produced and gold sale price.
Key estimates Recoverability of long lived assets
Certain assumptions are required to be made in order to assess the recoverability of long-lived assets. Key
assumptions include the future price of gold, future cash flows, an estimated discount rate and estimates of
ore reserves. In addition, cash flows are projected over the life of mine, which is based on Proved and
Probable Ore Reserves. Estimates of Ore Reserves in themselves are dependent on various assumptions, in
addition to those described above, including cut-off grades. Changes in these estimates could materially
impact on Ore Reserves, and could therefore affect estimates of future cash flows used in the assessment of
recoverable amount.
Key estimates Determination of ore reserves and remaining mine life
The Company estimates its Ore Reserves and Mineral Resources based on information compiled by
Competent Persons (as defined in accordance with the JORC Code (2004)). Reserves determined in this way
are taken into account in the calculation of depreciation, amortisation, impairment, deferred mining costs,
rehabilitation and environmental expenditure.
In estimating the remaining life of the mine for the purpose of amortisation and depreciation calculations,
due regard is given not only to the amount of remaining recoverable gold ounces contained in Proved and
Probable Ore Reserves, but also to limitations which could arise from the potential for changes in
technology, demand, and other issues which are inherently difficult to estimate over a lengthy time frame.
Where a change in estimated recoverable gold ounces contained in Proved and Probable Ore Reserves is
made, depreciation and amortisation is accounted for prospectively.
The determination of Ore Reserves and remaining mine life affects the carrying value of a number of the
Groups assets and liabilities including deferred mining costs and the provision for rehabilitation.
Key estimates Exploration and evaluation expenditure
The Groups accounting policy for exploration and evaluation expenditure results in certain items of
expenditure being capitalised for an area of interest where it is considered likely to be recoverable by future
exploitation or sale where the activities have not reached a stage which permits a reasonable assessment of
the existence of reserves. This policy requires management to make certain estimates and assumptions as to
future events and circumstances, in particular whether an economically viable extraction operation can be
established. Any such estimates and assumptions may change as new information becomes available. If, after
having capitalised the expenditure under the policy, a judgement is made that recovery of the expenditure is
unlikely, the relevant capitalised amount will be written off to the income statement.
Key estimates Development expenditure
Development activities commence after project sanctioning by the appropriate level of management.
Judgement is applied by management in determining when a project is economically viable. In exercising
this judgement, management is required to make certain estimates and assumptions similar to those
described above for capitalised exploration and evaluation expenditure. Any such estimates and assumptions
66

may change as new information becomes available. If, after having commenced the development activity, a
judgement is made that a development asset is impaired, the appropriate amount will be written off to the
income statement.
6.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty
at each balance sheet date, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year:
Impairment of inter-company loans
The Company made interest free loans and advances to its Philippines subsidiaries. As there are no
immediate plans by the Company to require repayment of loans made until sufficient funds become
available, these loans are considered to be an investment in the Company. The outstanding loan balance at
30 June 2010 was US$40.9 million (30 June 2009: US$45.3 million).
The Directors review all outstanding inter-company loans annually and test for impairment and are
reasonably confident that the loans will be repaid in due course.
Recovery of capitalised exploration, evaluation and development expenditure
In summation, the Company policy is to capitalise all exploration, evaluation and development expenditure
incurred. The recoverability of this capitalised expenditure is entirely dependent upon returns from the
successful development of the mining operation or from the sale of any projects. If at any time, the Company
determines that a project is not viable, all expenditures previously capitalised to that particular project are
written off.
7.

Segment reporting

As described in the notes to the financial statements to 30 June 2010, the Group has identified its reportable
operating segments based on the internal management reports that are reviewed and used by the Managing
Director (the chief operating decision maker) and his management team in assessing performance and in
determining the allocation of resources.
The Group segments are structured as Mine, Exploration and Other. Currently the only operational mine is
the Co-O Mine.
8.

Results of operations

The following discussion and analysis of the Groups results of operations and financial condition is based on
the Groups historical results as extracted from financial information contained in Part VIII of this document.
Consolidated Income Statement

US$ 000

For the year ended 30 June

2009
2009
(restated)
US$ 000
A$ 000

94,508
81
(22,455)
(294)

(2,853)
(3,133)
65,854
(42)

65,812

42,825
4
(12,970)
(60)

(1,760)
(1,246)
26,793
1,714

28,507

2010

Revenue
Other income
Cost of sales
Exploration and evaluation expenses
Finance cost
Administration expenses
Other expenses
Profit/(loss) before income tax expense
Income tax (expense)/income
Net profit/(loss) for the period

67

57,252
6
(17,339)
(81)

(2,352)
(1,666)
35,820
2,291

38,111

2008
A$ 000
18,074

(10,067)
(572)
(376)
(3,306)
(2,734)
1,019
(2,366)

(1,347)

Year ended 30 June 2008 compared to year ended 30 June 2007

During the year to 30 June 2008 the Company achieved the granting of a 25-year mining licence over the
Co-O Mine and surrounds, which allowed the Company to focus its efforts on mine development to enable
the Company to extract ore from the Co-O Mine at significantly increased rates for the years ahead. This
focus on the development of the Co-O Mine for the future was at the expense of near term gold production
so the production targets for the period were reduced to account for the mine development plans. The
Company initiated Phase I of its expansion plan in September 2007 to take the annualised production rate to
60,000 ounces by July 2009 and additionally, the Company commenced Phase II expansion (independent of
Phase I) during the period which intended to take production to 100,000 ounces annualised in 2010. Both
Phases of expansion were progressed on schedule during the period to 30 June 2008.
The Group also increased the global resources of the Co-O Mine to 862,000 ounces at 10.7g/t gold during
2008 from 713,000 ounces at 10.9g/t gold during 2007.
Revenue (decrease of A$3.463 million)
During the year to 30 June 2008 gold sales increased by A$6.8 million due to an increase in production in
the year overall (2008: 19,009 oz; 2007: 16,616 oz) despite the focus on the expansion on the Co-O Mine.
However, the overall revenue for the Group decreased by A$3.5 million in comparison with the year to
30 June 2007. This was mainly due to a gain on the acquisition of PMC of A$10.4 million that contributed
to the Groups total revenues during the year to 30 June 2007.
Cost of Sales (increase of A$5.113 million)
During the year to 30 June 2008 the cost of sales increased by A$5.113 million due to the increase in the
volume of gold produced and the expenses associated with such an increase in production. The average cost
per ounce of gold produced was US$248 (including royalties and local business taxes) compared to US$269
for the period to 30 June 2007. The decrease in the average cost per ounce of gold produced was due to
economies of scale and the fact that fixed costs were attributed to increased production volumes.
Exploration, evaluation and development expense (decrease of A$0.557 million)
The decrease in exploration, evaluation and development expenses in 2008 compared to 2007 was
attributable to the fact that the Board considered more of its exploration and evaluation projects in 2008 to
be viable therefore less expenditure was written off during 2008 than 2007.
Administration expenses (decrease of A$0.443 million)
The decrease in general and administration expenditure seen during 2008 was due to a decrease in share
based payments and an overall general decrease in administration expenditure when compared with 2007.
During 2008 some expenses were reallocated to mining costs rather than overheads which resulted in a
decrease in administrative expenditure when compared to 2007.
Other expenses (increase of A$0.010 million)
The increase in other expenses during the 2008 period was attributable to assets written off and the
revaluation of investment.
Profit before income tax expense (decrease of A$7.961 million)
The profit before tax decreased by almost A$8 million during 2008. As explained above, the focus on the
development of the Co-O Mine for the future was at the expense of near term gold production so the
production targets for the period were reduced to account for the mine development plans. Foreign exchange,
depreciation and share based payments were also taken into consideration when calculating profit before
income tax expense.
Unfavourable movements in foreign exchange rates during the period meant an increase in the loss on
foreign exchange. The loss during the 2008 financial year was due to the weakening of the Philippines Peso
against the Australian Dollar.

68

Depreciation of evaluation and development costs relating to the Co-O Mine commenced in the year to
30 June 2008. In addition, as a consequence of business combination, namely the acquisition of PMC
in December 2006, a full years depreciation was reflected in the accounts for 2008. Both of these factors
accounted for the increase in depreciation in 2008 from 2007.
An increase in share based payments during the 2008 period was directly linked to the increase in the issue
of unlisted options. Unlisted options were issued to certain Directors, employees of the Group and
Shareholders during the year to 30 June 2008.
Income tax (expense)/credit (decrease of A$2,366 million)
The income tax expense for 2008 was A$2.4 million due to the initial recognition of temporary differences
on the tax treatment of exploration and evaluation expenditure incurred in the Philippines at a statutory tax
rate of 30 per cent. There was no tax charge for 2007 as the Group recouped prior year losses not previously
accounted for.
Financial Condition
The Group made a net loss of A$1.3 million for the period to 30 June 2008 compared to a net profit of
A$9.0 million for the period to 30 June 2007 which was a reflection of the Groups focus on the development
of the Co-O Mine rather than production and gold sales. The Groups cash position as at 30 June 2008 was
A$4.8 million, a decrease of 76 per cent. over 30 June 2007. A majority of funds were used to fund Phase I
and Phase II development programmes.
Year ended 30 June 2009 compared to year ended 30 June 2008
During the year to 30 June 2009 the Company continued to progress both its Phase I and Phase II
development programmes, with Phase I expansion being completed three months ahead of schedule in April
2009 and Phase II continuing on schedule.
During the period the Probable Ore Reserves at the Co-O Project increased by 251,000 ounces or
101 per cent. to 500,000 ounces excluding mine depletion for the year of 47,869. Additionally, Co-Os global
resource inventory at the 2009 year end of 1,380,000 contained ounces of gold represented an increase of
518,000 ounces or 60 per cent. (excluding any mine depletion for the year) over 2008.
The Group also made progress with the exploration of the Lingig Copper Prospect and at Kamarangan
during the year to 30 June 2009.
Revenue (increase of A$39.178 million)
The increase in revenue in the year to 30 June 2009 was directly attributable to the increase in gold sales as
a result of an increase in production from the Co-O Mine. Production for the year to 30 June 2009 increased
by 158 per cent. from 19,009 ounces in the year to 30 June 2008 to 47,689 ounces in 2009. The increase in
production in 2009 was as a result of the Companys strategy to increase annualised production rates to
60,000 ounces under Phase I expansion. The average gold price achieved in the period was US$880 per
ounce.
Cost of Sales (increase of A$7.272 million)
The increase in the cost of sales in the year to 30 June 2009, when compared to the full year to 30 June 2008,
was due to the increase in production from the Co-O Mine as noted above. The average sales cost per ounce
was US$213 (including royalties and local business taxes) in 2009 which was a significant decrease over the
sales cost of US$248 per ounce in 2008. Similarly to 2008, the decrease in the average cost per ounce of gold
produced during the year to 30 June 2009 was due to economies of scale and the fact that fixed costs were
attributed to increased production volumes.

69

Exploration and evaluation expense (decrease of A$0.491 million)

The decrease in exploration, evaluation and development expenses in 2009 compared to 2008 was
attributable to the fact that the Board considered more of its exploration and evaluation projects in 2009 to
be viable therefore less expenditure was written off during 2009 than 2008.
Administration Expenses (decrease of A$0.955 million)
The decrease in general and administration charges in the year to 30 June 2009 was due to an interest charge
and royalty charges that were incurred during 2008 and not in 2009 which related to the acquisition of PMC.
Other expenses (decrease of A$1.068 million)
The decrease in other expenses during the year to 30 June 2009 was attributable to a number of expenses that
were incurred during 2008 and not in 2009. These included: assets written off (2008: A$0.2 million),
revaluation and loss on investment (2008: A$0.6 million) and a general decrease in head office overheads
(2008: A$0.5 million). The assets written off were obsolete or worn pieces of equipment that could not be
repaired. The loss on investment related to the disposal of 1,000,000 shares held in Fairstar Resources
Limited on 16 April 2008. The reduction in overheads of A$0.5 million during the year to 30 June 2009 was
comprised of a number of expense types including a reallocation of overhead expenses to mining expenditure
during the year.
Profit before income tax expense (increase to A$35.820 million)
The profit before tax increased to over A$35.8 million during 2009. As explained above, the completion of
Phase I development meant that production for the period represented a significant increase over 2008.
Foreign exchange, depreciation and share based payments were also taken into consideration when
calculating profit before income tax expense.
Unfavourable movements in foreign exchange rates during the period meant an increase in the loss on
foreign exchange. The loss during the 2009 financial year was due to the weakening of the Philippines Peso
against the US Dollar.
The depreciation expense increase in 2009 was due to the increased production from the Co-O Mine. This
is as a result of the fact that the Companys depreciation policy with regards to Co-O mine and milling
equipment takes into account the amount of production from the mine.
The increase in share based payments during the 2009 period was directly linked to the increase in the issue
of unlisted options. Unlisted options were issued to certain employees of the Group during the year to
30 June 2009.
Income tax (expense)/income (income of A$2.291 million)
In the year to 30 June 2008, the income tax expense was A$2.37 million due to the initial recognition of
temporary differences on the tax treatment of exploration and evaluation expenditure incurred in the
Philippines at a statutory tax rate of 30 per cent. In the current period, the effective tax rate applied to
deferred taxes was reassessed and due to the various Philippine tax concessions obtained and utilised
(including MMPRC income tax holiday), income tax revenue (credit) of A$2.3 million was recognised.
Financial Condition
The Group made a net profit of A$38.1 million for the period to 30 June 2009 compared to a net loss of
A$1.3 million for the period to 30 June 2008. The Groups cash position as at 30 June 2009 was
A$33.0 million, an increase of 581 per cent. over 30 June 2008 which was a reflection of the significant
increase in gold production and sales during the period.
Year ended 30 June 2010 compared to year ended 30 June 2009
During the year to 30 June 2010 the Company completed its two phase expansion programme on schedule
in March 2010 and produced a record 89,679 ounces of gold for the year at an average cash cost of US$184
per ounce.
70

Exploration work at the Co-O Mine increased the Mineral Resources to approximately 1.5 million ounces
and maintained the mines reserves at around 500,000 ounces. The plan going forward is to maintain
resources and reserves at the Co-O Mine at these current levels.
Copper exploration continued during the year with drilling outlining a coherent body of mineralisation at
Lingig which has potential to grow. Regional exploration discovered the Usa prospect where indications of
a substantial copper-gold porphyry target have been identified.
Medusa continued to evolve corporately during the year to 30 June 2010 with listing on the TSX achieved
in late November 2009.
Revenue (increase of US$51.683 million)
The increase in revenue in the year to 30 June 2010 was directly attributable to the increase in gold sales as
a result of an increase in production from the Co-O Mine. Production for the year to 30 June 2010 increased
by 87 per cent. from 47,869 ounces in the year to 30 June 2009 to 89,679 ounces in 2010. The increase in
production in 2010 was as a result of the Companys strategy to increase annualised production rates to
100,000 ounces under its expansion programme which was completed on schedule in March 2010. In
addition to increased production, the average gold price achieved in the period was US$1,100, significantly
higher than the average price of US$880 per ounce received in the 2009 financial year.
The Company also received interest revenue of US$0.622 million on deposits held in interest bearing
accounts.
Cost of Sales (increase of US$9.485 million)
The increase in the cost of sales in the year to 30 June 2010, when compared to the full year to 30 June 2009,
was due to the increase in production from the Co-O Mine as noted above. The average sales cost per ounce
was US$184 (net of development costs, but inclusive of royalties and local business taxes) in 2010 which
was a significant decrease over the sales cost of US$213 per ounce in 2009. Similarly to 2009 and 2008, the
decrease in the average cost per ounce of gold produced during the year to 30 June 2010 was due to
economies of scale and the fact that fixed costs were attributed to increased production volumes.
Exploration and evaluation expense (increase of US$0.234 million)
The increase in exploration, evaluation and development expenses in 2010 compared to 2009 was
attributable to the fact that there was an increase in the exploration expenditure written off during 2010. This
was as a result of the increased exploration spend of US$18.9 million, 106.1 per cent. higher than the
US$9.2 million spent in 2009.
Administration Expenses (increase of US$1.093 million)
The increase in general and administration charges in the year to 30 June 2010 was due to increases in salary
packages and bonus payments to executive staff.
Share based payments accounted for US$0.26 million of the administration expenses, a similar amount to
2009.
Other expenses (increase of US$1.887 million)
The increase in other expenses during the year to 30 June 2010 was primarily attributable to costs associated
with the listing of the Companys securities on the TSX and also the Companys application to the Official
List and Main Market of the London Stock Exchange.
Profit before income tax expense (increase to US$39.061 million)
The profit before tax increased to over US$39 million during 2010. As explained above, the completion of
Phase II development meant that production for the period represented a significant increase over 2009 and
the average gold price received by the Company was significantly higher than in 2009. Depreciation was
taken into consideration when calculating profit before income tax expense.

71

The depreciation expense increase in 2010 was due to the increased production from the Co-O Mine. This
is as a result of the fact that the Companys depreciation policy with regards to the Co-O Mine and milling
equipment takes into account the amount of production from the mine.
Income tax (expense)/income (expense of US$0.042 million)
In the year to 30 June 2010 the income tax expense was US$0.042 million, which was comprised primarily
of minimum corporate income tax of 2 per cent., a mandatory charge.
Financial Condition
The Group made a net profit of US$65.812 million for the period to 30 June 2010 compared to a net profit
of US$28.507 million for the period to 30 June 2009. The Groups cash position as at 30 June 2010 was
US$ 32.457 million, an increase of 22.4 per cent. over 30 June 2009 which was a reflection of the significant
increase in gold production, increase in gold sales and a higher average gold price received during the period.
9.

I 10.1

Liquidity and Capital Resources

At 30 June 2010, the Company had cash and cash equivalents of approximately US$32.5 million. This
represents an increase of US$6.0 million from the previously reported 30 June 2009 balance of
US$26.5 million. The majority of cash and cash equivalents are placed on short term deposits and are held
in a combination of Australian Dollars, US Dollars and Philippines Pesos.
The Company has historically only raised funds via the issue of equity (by way of placement or exercise of
options) and the use of the funds has been to fund:

the cash component with respect to the acquisition of PMC;

the initial development of the Co-O Mine;

phase I and II expansion of the Co-O Mine and Mill;

exploration expenditures relating to Co-O Mine and surrounding areas;

general exploration expenditures on other defined targets; and

general working capital.

Outlined below, are details of funds raised by the Company since July 2006:

in November 2006, the Company raised A$10,645,630 before expenses via the issue of 16,377,892
fully paid Ordinary Shares at A$0.65 per share to sophisticated investors and investment funds from
the United Kingdom, Australia and New Zealand. The funds raised from the placement was managed
by Ambrian Partners Limited and Westwind Partners (UK) Limited;

in November 2006, the Company raised A$498,360 before expenses via the allocation of 766,707
fully paid Ordinary Shares at A$0.65 per share to a limited number of broking houses in London, who
were the Companys market makers on AIM;

in June 2007, the Company raised A$20,125,000 before expenses via the allocation of 17,500,000
fully paid Ordinary Shares at A$1.15 per share to Gallagher Holdings Limited;

a total of 225,000 unlisted options were converted to shares at A$0.6072 per share in January 2007
and raised A$136,620;

a total of 22,511,273 listed options were converted to shares at A$0.20 per share at various times
during the 2006/07 fiscal year and raised A$4,502,255;

a total of 3,000,000 unlisted options were converted to shares at A$0.5764 per share in December
2007 and raised A$1,729,200;

a total of 20,000 unlisted options were converted to shares at A$0.65 per share in December 2007 and
raised A$13,000;

a total of 250,000 unlisted options were converted to shares at A$0.72 per share in September 2008
and raised A$180,000;
72

CESR
33, 35, 36

a total of 1,000,000 unlisted options were converted to shares at A$0.90 per share in September 2008
and raised A$900,000;

a total of 2,000,000 unlisted options were converted to shares at A$1.25 per share in June 2009 and
raised A$2,500,000;

in March 2009, the Company issued 20.3 million fully paid ordinary shares at A$1.21 each to
institutional and sophisticated clients of Euroz Securities Limited to raise gross proceeds of
A$24,563,000;

a total of 2,000,000 unlisted options were converted to shares at A$1.25 per share on 29 May 2009
and raised A$2,500,000;

a total of 100,000 unlisted options were converted to shares at A$1.25 per share on 27 August 2009
and raised A$125,000;

a total of 50,000 unlisted options were converted to shares at A$0.7128 per share on 25 September
2009 and raised A$35,640;

a total of 750,000 unlisted options were converted to shares at A$0.7128 per share on 10 November
2009 and raised A$534,600;

a total of 190,000 unlisted options were converted to shares at A$1.25 per share on 10 November 2009
and raised A$237,500;

a total of 600,000 unlisted options were converted to shares at A$0.4334 per share on 18 December
2009 and raised A$260,040;

a total of 100,000 unlisted options were converted to shares at A$1.25 per share on 3 June 2010 and
raised A$125,000; and

a total of 50,000 unlisted options were converted to shares at A$1.25 per share on 25 June 2010 and
raised A$62,500.

The Company is currently debt free.

Whilst there is no immediate requirement for any expansionary growth, it is the Companys intention to fund
any future capital expansion initially out of existing cash reserves and internally generated cash flow.
9.1

Cash flows

I 10.2

The following table shows the Groups net cash outflows for the three years ended 30 June 2010.

CESR 31, 34

Consolidated Cash flow Statement

Net cash flow from operating activities

Net cash flow from investing activities
Net cash flow from financing activities
Net (decrease) increase in cash and
cash equivalents
Cash and cash equivalents at the
beginning of the financial year
Effects of exchange rate changes
Cash and cash equivalents at the end
of the financial year

2010
US$000

2009
US$000

38,719
(34,572)
1,130

30,592
(20,892)
17,776

39,719
(35,745)
26,841

7,200
(17,044)
(5,069)

5,277

27,476

30,815

(14,913)

26,510
670

4,648
(5,614)

4,834
(2,710)

20,168
(421)

32,457

26,510

2009
A$000

32,939

2008
A$000

4,834

73

Net cash flow from operating activities

The net cash flow from operating activities is primarily attributable to revenue from gold sales and to
a lesser degree, interest revenue less any payments to suppliers for operating expenses, payments to
employees and corporate/administration overheads.
The net cash flow from operating activities for the year ended 30 June 2008 increased by
approximately A$7.1 million, primarily due to an increase in revenue of approximately A$8.1 million.
Payments to suppliers for operating expenses, employee expenses and corporate/administration
charges increased collectively by approximately A$1.0 million. The increase in sales revenue is
directly linked to an increase in gold produced of around 14.4 per cent. or 2,393 additional ounces
when compared to the previous period.
Following record production of 47,869 ounces for the year to 30 June 2009 (an increase of 28,860
ounces or 152 per cent. when compared to the year to 30 June 2008), the Company generated sales
proceeds in excess of A$57.0 million and interest revenue of A$2.3 million. Operating expenses
included payments to suppliers of approximately A$12.6 million, employee expenses of
A$2.5 million and corporate/administration overheads of A$2.4 million. Net cash provided by
operating activities increased by A$32.5 million for the year to 30 June 2009.
During the year to 30 June 2010 the Company increased production to 89,679 ounces, generated gold
sales of US$93.9 million and interest revenue of US$0.6 million. This increase in gold production and
sales accounted for the increase in cash flow from operating activities in 2010. Likewise due to the
increase in the scale of production, increases were also experienced in operating expenses, which
include increased payments to suppliers of US$29.9 million (2009: US$2.9 million) and an increase
in inventory to US$4.3 million (2009: US$0.3).
Net cash flow from investing activities
The net cash flow from investing activities is generally attributable to payments for exploration
expenses, development costs and plant and equipment.
The net cash used for the year ended 30 June 2008 totalled A$17 million. Plant and equipment costs
increased by A$0.9 million to A$2.3 million. Likewise there were also increases in net cash outflow
for exploration and development activities. The Company outlaid A$8.3 million in exploration
expenses, an increase from the previous year of A$4.1 million. Development costs also increased for
the year by A$2.4 million to A$6.5 million.
Following the Companys decision to commit to a two-phase expansion programme of its
underground mine and associated milling facilities to lift production initially from 40,000 ounces per
annum to 60,000 ounces per annum (Phase 1) and then to 100,000 ounces per annum (Phase II), the
cash outlay for plant and equipment for the year ended 30 June 2009, increased by A$6.1 million to
A$8.4 million. Development costs were also considerably higher at A$23.2 million, an increase of
A$16.7 million when compared to the year to 30 June 2008. Payment for exploration activities
decreased to A$4.2 million.
During the year to 30 June 2010 the net cash used in investing activities was US$34.6 million, an
increase of US$13.7 million over the same period in 2009. The increase in spending was primarily
attributable to increased exploration spend of US$18.9 million in 2010 compared to US$9.2 million
in 2009. Spending on development activities also increased due to from US$4.2 million to
US$7.9 million due to the opening of new levels and drives.
Net cash flow from financing activities
Cash from financing activities is principally derived from the issue of shares and is recorded net of
direct transaction costs such as professional and advisory fees.
For the year ended 2008, the net cash used in financing activities was A$5.1 million. Proceeds of
A$1.7 million received for the issue of shares was offset by transaction costs of A$1.8 million which
related to a fund raising in the previous year. In addition there was a one off repayment of A$5 million
pertaining to the acquisition of PMC.
74

The Company for the year ended 30 June 2009 raised gross proceeds of A$28.1 million, primarily via
the issue of 20.3 million shares to institutional and sophisticated clients of Euroz Securities Limited
as an insurance policy to ensure it had sufficient funds to complete its Phase II expansion programme
and also to continue an intensive drilling programme designed to increase its resource base. The net
cash provided by financing activities for the year, after allowing for transaction costs of A$1.3 million
amounted to approximately A$26.8 million.
Net cash provided by financing activities was much lower in the year to 30 June 2010 than in 2009,
being US$1.1 million (2009: US$17.8 million). The Company did not need to issue shares in order to
raise cash during the period as the Group was generating sufficient funds from sale of gold. Therefore,
only a small number of shares in the Company were issued during the period and the proceeds
received from issuing such shares was minimal.
9.2

Short term and long term capital resources

I 10.1

As at 30 June 2010, the Company had cash and cash equivalents of US$32.5 million, an increase of
approximately US$6.0 million from the previously reported 30 June 2009 balance of
US$26.5 million. In addition the Company had bullion of US$23.3 million at the 2010 year end. Total
cash and bullion held by the Company at the year end was US$55.8 million.
The Company does not have any debt.
9.3

Borrowing requirements and funding structure

I 10.3

The Company has no requirement to borrow any funds at this point in time and in the immediate
future.
9.4

Restrictions on use of capital resources

I 10.4

As at the date of this document the Company had no outstanding financial commitments and there
were no restrictions on the use of the Companys capital resources that could materially effect its
operations.
9.5

Anticipated sources of funds for future investments and fixed assets

I 10.5

Whilst there is no immediate requirement for any expansionary growth, it is the Companys intent to
fund any future capital expansion, initially out of existing cash reserves and internally generated cash
flow.
10.

III 3.2

Capitalisation and indebtedness

CESR 127

As at 31 August 2010, the Company maintained the following cash liquidity position:
Description

US$s (millions)

Cash and cash equivalents

Financial indebtedness

47.9

47.9

Net financial indebtedness

As at 30 August 2010, the Company maintained the following equity reserve:

Description

US$s (millions)

Issued capital
Reserves
Retained profits

70.9
3.1
117.9

191.9

Total shareholders equity

75

11.

Significant accounting policies and estimates

The consolidated financial report of the Company is a general purpose financial report which has been
prepared in accordance with Australian Accounting Standards, including Australian Accounting
Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the
Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a
financial report containing relevant and reliable information about transactions, events and conditions to
which they apply. Compliance with Australian Accounting Standards ensures that the financial statements
and notes also comply with International Financial Reporting Standards.
A description of the Companys significant accounting policies is included in Note 1 to the audited financial
reports of the Company outlined in Part VIII of this document. The financial report covers the Group and
controlled entities and Medusa as an individual company. Medusa is a listed public company, incorporated
and domiciled in Australia.
Management is required to make various estimates and judgements in determining the reported amounts of
assets and liabilities, revenues and expenses for each period represented and in the disclosure of
commitments and contingences.
Management considers the following accounting policies to be those which best reflect its more significant
estimates and judgements used in the preparation of the financial reports:
Determination of Ore Reserves and remaining life
The Company estimates its Ore Reserves and Mineral Resources based on information compiled by
Competent Persons (as defined in accordance with the JORC Code 2004). Reserves determined in this way
are taken into account in the calculation of depreciation, amortisation, impairment, deferred mining costs,
rehabilitation and environmental expenditure.
In estimating the remaining life of the mine for the purpose of amortisation and depreciation calculations,
due regard is given not only to the amount of remaining recoverable gold ounces contained in Proved and
Probable Ore Reserves, but also to limitations which could arise from the potential for changes in
technology, demand, and other issues which are inherently difficult to estimate over a lengthy time frame.
Where a change in estimated recoverable gold ounces contained in Proved and Probable Ore Reserves is
made, depreciation and amortisation is accounted for prospectively.
The determination of Ore Reserves and remaining mine life affects the carrying value of a number of the
Groups assets and liabilities including deferred mining costs and the provision for rehabilitation.
Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for
each area of interest. Such expenditure comprises direct costs and does not include general overheads or
administrative expenditure not having a specific nexus with a particular area of interest.
Exploration expenditure for each area of interest is carried forward as an asset provided the rights to tenure
of the area of interest are current and one of the following conditions is met:

exploration and evaluation expenditures are expected to be recouped through successful development
and exploitation of the area of interest or, alternatively, by its sale; and

exploration and evaluation activities in the area of interest have not at the reporting date reached a
stage which permits a reasonable assessment of the existence or otherwise of economically
recoverable reserves and active and significant operations in, or in relation to, the area of interest are
continuing.

Exploration expenditure is written off when it fails to meet at least one of the conditions outlined above or
an area of interest is abandoned.
76

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the
carrying amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and
circumstances suggest that the carrying amount exceeds the recoverable amount the impairment loss will be
measured and disclosed in accordance with AASB 136 Impairment of Assets.
When a decision is made to develop an area of interest, all carried forward exploration expenditure in relation
to the area of interest is transferred to development expenditure.
Development expenditure
Development expenditure represents the accumulated exploration, evaluation, land and development
expenditure incurred by or on behalf of the Group in relation to areas of interest in which mining of a Mineral
Resource has commenced.
When further development expenditure is incurred in respect of a mine property after commencement of
production, such expenditure is carried forward as part of the mine property only when substantial future
economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of
production. All horizontal development drives which include permanent rail and associated infrastructure are
capitalised.
Amortisation of costs is provided on the unit-of-production method with separate calculations being made
for each Mineral Resource. The unit-of-production basis results in an amortisation charge proportional to the
depletion of the estimated recoverable Ore Reserves. In some circumstances, where conversion of Mineral
Resources into Ore Reserves is expected, some elements of Mineral Resources may be included.
Development and land expenditure still to be incurred in relation to the current Ore Reserves are included in
the amortisation calculation. Where the life of the assets are shorter than the mine life their costs are
amortised based on the useful life of the assets.
The estimated recoverable Ore Reserves and life of the mine and the remaining useful life of each class of
asset is reassessed at least annually. Where there is a change in the Ore Reserves/Mineral Resources
amortisation rates are correspondingly adjusted.
Foreign currency transactions and balances
Functional and presentation currency
The functional currency for a company is the currency of the primary economic environment in which the
company operates. The presentation currency for a company is the currency in which the company chooses
to present its financial report. Until June 2009, the presentation currency of the Group was Australian
Dollars.
AASB 121, The Effects of Changes in Foreign Exchange Rates, suggests that a primary factor in determining
the functional currency of an entity is the currency that mainly influences sales price for goods and services.
The Companys gold sales, which are in US Dollars, significantly outweigh all the expenses of the Group.
In order to better reflect the Companys and Groups financial position and operations the Company has
decided to change its presentation currency for financial reporting to US Dollars. The Company has
determined the date of transition of the presentation currency from Australian Dollars to US Dollars as 1 July
2009.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at
the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate.
Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the
transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when
fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the income statement.

77

Group companies
The financial results and position of foreign operations whose functional currency is different from the
Groups presentation currency are translated as follows:

assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

income and expenses are translated at average exchange rates for the period where this approximates
rate at the transaction date; and

retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the Groups
foreign currency translation reserve in the balance sheet. These differences are recognised in the income
statement in the period in which the operation is disposed.
Income tax
The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred
tax expense (income).
Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated
using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities
(assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation
authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability
balances during the year as well as unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity instead of the
profit or loss when the tax relates to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also
result where amounts have been fully expensed but future tax deductions are available. No deferred income
tax will be recognised from the initial recognition of an asset or liability, excluding a business combination,
where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when
the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting
date. Their measurement also reflects the manner in which management expects to recover or settle the
carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent
that it is probable that future taxable profit will be available against which the benefits of the deferred tax
asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint
ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the
temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable
future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended
that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur.
Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred
tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation
and settlement of the respective asset and liability will occur in future periods in which significant amounts
of deferred tax assets or liabilities are expected to be recovered or settled.

78

PART VI
ADDITIONAL INFORMATION
The Company and the Directors, whose names appear on page 23 of this document, accept responsibility for
the information contained in this document. Having taken all reasonable care to ensure that such is the case,
the information contained in this document is to the best of the knowledge of the Company and the Directors
in accordance with the facts and contains no omission likely to affect its import.
1.

I 1.1
I 1.2
III 1.1
III 1.2

The Company and its Subsidiaries

The Company was registered in Western Australia as a public company limited by shares on 5 February 2002
under the Australian Corporations Act with Australian Company Number 099 377 849. The Company listed
on the ASX on 19 December 2003.

I 5.1.2
I 5.1.3
I 5.1.4
III 4.2

The principal legislation under which the Company operates and under which its securities are created is the
Australian Corporations Act. The liability of Shareholders is limited. The Australian Securities and
Investments Commission is responsible for administering the Australian Corporations Act. The Company is
also obliged to comply with specific obligations arising from other laws that relate to its activities. The
registered office and principal place of business of the Company is Unit 7, 11 Preston Street, Como, Western
Australia, 6152 Australia. The telephone number of the Company is 61 8 9367 0601. The Companys
Philippines subsidiaries maintain an office in Davao City, the Philippines.
The Company is the ultimate parent company of the Group and has five subsidiaries. A chart, showing the
structure of the Group and the interests that the Company owns in such subsidiaries, is set out in paragraph 2
of Part I of this document.
2.

Share Capital

2.1

The issued share capital of the Company as at the date of this document is 187,584,911 Ordinary
Shares. The rights attaching to the Ordinary Shares are summarised in paragraph 4 of this Part VI. The
Ordinary Shares have no nominal or par value and are recorded in the accounts of the Company at
their issue price net of the costs of issuing the shares. There are no issued but not fully paid Ordinary
Shares. Ordinary Shares issued pursuant to the exercise of Options are recorded in the accounts at
their exercise price.

I 5.1.5
I 21.1.1

Under the Australian Corporations Act, the Company does not have an authorised share capital and
there is generally no limit under the Australian Corporations Act or the Constitution on the power of
the Directors to issue Ordinary Shares or other securities.
Application has been made for all the issued Ordinary Shares to be admitted to the standard segment
of the Official List and to trading on the London Stock Exchanges Main Market for listed securities.
The Companys ISIN number is AU000000MML0.

III 4.1

As at the date of this prospectus the Company:

(a)

has no listed or unlisted securities not representing share capital; and

(b)

does not hold any of its Ordinary Shares and none of the Companys subsidiaries hold any of
the Ordinary Shares.

I 21.1.2
I 21.1.3

The Ordinary Shares are not redeemable and, save as summarised in paragraph 3 of this Part VI, the
Company has not issued any convertible or exchangeable securities with warrants.

I 21.1.4

The Ordinary Shares are allotted in and issued registered form under the Australian Corporations Act.

III 4.3
III 4.4

79

The issued Ordinary Shares are currently admitted to trading on the ASX and AIM and listed and
posted for trading on the TSX. Trading on AIM will cease immediately upon Admission. Other than
as set out above, the Ordinary Shares are not listed on or traded and no application has been or is being
made for the admission of the Ordinary Shares to listing or trading on any other stock exchange or
securities market. It is expected that the Ordinary Shares will be traded in Sterling on the Main Market
of the London Stock Exchange.
Other than as set out in this Part VI, there have been no issues of share capital of the Company, fully
or partly paid, either in cash or for other consideration, since 30 June 2008 and (other than in
connection with the exercise of options) no such issues are proposed. Other than in relation to the
options disclosed in section 3 of this Part VI, no share capital of the Company or any of its subsidiaries
is under option nor agreed conditionally or unconditionally to be put under option and there are no
convertible securities, exchangeable securities or securities with warrants of the Company.
2.2

Since 30 June 2008 to the date of this document, there have been the following issues of Ordinary
Shares in the capital of the Company:
(a)

On 1 July 2010, the Company issued 55,000 Ordinary Shares to one employee, at a price of
A$1.25 per share. These shares were issued pursuant to the exercise of unquoted options
granted by the Company.

(b)

On 4 June 2010, the Company issued 110,000 Ordinary Shares to one employee, at a price of
A$1.25 per share. These shares were issued pursuant to the exercise of unquoted options
granted by the Company.

(c)

On 22 April 2010, the Company issued 10,106 Ordinary Shares for nil consideration in order
to complete bonus issue referred to in sub-paragraph (d) below.

(d)

On 31 March 2010, the Company conducted a bonus issue of Ordinary Shares pursuant to
which 17,027,845 Ordinary Shares (the Bonus Shares) were issued to existing Shareholders.
The Bonus Shares were issued for nil consideration and were distributed on a pro rata basis of
one new Bonus Share for every 10 Ordinary Shares held by Shareholders as at 7.00 p.m.
(AEDT) on 19 March 2010. Where a Shareholders entitlement included an entitlement to a
fraction of an Ordinary Share, that entitlement was rounded down to the nearest whole number
of Ordinary Shares.

(e)

On 24 December 2009, the Company issued 600,000 Ordinary Shares to Mr. Geoff Davis,
Managing Director of the Company, at a price of A$0.4334 per share. These shares were issued
pursuant to the exercise of unquoted options granted by the Company to Mr. Davis.

(f)

On 16 November 2009, the Company issued 750,000 Ordinary Shares to nine employees of the
Company at a price of A$0.7128 per share. These shares were issued pursuant to the exercise
of unquoted options granted by the Company.

(g)

On 16 November 2009, the Company issued 190,000 Ordinary Shares to eight employees of
the Company at a price of A$1.25 per share. These shares were issued pursuant to the exercise
of unquoted options granted by the Company.

(h)

On 1 October 2009, the Company issued 50,000 Ordinary Shares to one employee of the
Company at a price of A$0.7128 per share. These shares were issued pursuant to the exercise
of unquoted options granted by the Company.

(i)

On 27 August 2009, the Company issued 100,000 Ordinary Shares to one employee of the
Company at a price of A$1.25 per share. These shares were issued pursuant to the exercise of
unquoted options granted by the Company.

(j)

On 5 June 2009, the Company issued 84,412 Ordinary Shares to an unrelated corporation, at a
price of A$0.78 per share. These shares were issued pursuant to the terms of a joint venture
agreement dated 17 May 2006.

80

III 6.2

I 21.1.5

I 21.1.7

3.

(k)

On 29 May 2009, the Company issued 2,000,000 Ordinary Shares to two investors at a price
of A$1.25 per share. These shares were issued pursuant to the exercise of unquoted options
granted by the Company.

(l)

On 5 March 2009, the Company issued 20,300,000 Ordinary Shares to 16 investors at a price
of A$1.21 per share. These shares were issued as part of a placement to raise additional
working capital for the Company.

(m)

On 26 September 2008, the Company issued 1,000,000 Ordinary Shares at a price of A$0.90
per share. 500,000 of these Ordinary Shares were issued to Mr. Kevin Tomlinson, a former
Chairman and Director of the Company (who resigned 13 January 2010) and 500,000 of these
Ordinary Shares were issued to Mr. Roy Daniel, the Finance Director and Company Secretary
of the Company. These shares were issued pursuant to the exercise of unquoted options granted
by the Company to Mr. Tomlinson and Mr. Daniel and approved at the Companys Annual
General Meetings on 29 November 2005 and 27 November 2006, respectively.

(n)

On 10 September 2008, the Company issued 250,000 Ordinary Shares to Mr. Kevin Tomlinson,
a former Chairman and Director of the Company (who resigned 13 January 2010) at a price of
A$0.72 per share. These shares were issued pursuant to the exercise of unquoted options
granted by the Company and approved at the Companys Annual General Meeting on
29 November 2005.

Options

The Company also has the following Options outstanding which can be converted into Ordinary Shares:

I 17.3
I 21.1.6

190,000 Options, which have been granted to employees of the Group in the following categories,
which are exercisable at A$1.25 each. These Options expire on 31 March 2011:
Category

Number of Employees

Number of Options

1
1
5
2

25,000
12,500
52,500
100,000

Mine
Mill
Administration
Management

1,000,000 Options, which have been granted to employees of the Group in the following categories,
which are exercisable at A$1.25 each. These Options expire on 22 January 2012:
Category

Number of Employees

Number of Options

7
5
6
2
8

250,000
100,000
230,000
205,000
215,000

Mine
Mill
Administration
Management
Other

For details of the options held by the Directors and Senior Management please see paragraph 8 of this Part VI
below.
4.

I 21.2.3

Rights Attaching to the Ordinary Shares

The rights attaching to the Ordinary Shares are set out in the Constitution and, in certain circumstances,
regulated by the Australian Corporations Act, the ASX Listing Rules, the AIM Rules/Listing Rules, and the
ASX Settlement Operating Rules. The principal rights, liabilities and obligations attaching to the Ordinary
Shares are summarised below. This summary is not intended to be exhaustive.
Voting rights
Subject to any rights or restrictions for the time being attached to any class of shares, at a general meeting
of Shareholders, each Shareholder is entitled to attend and vote in person or by proxy or attorney, or, if a
81

III 4.5

corporation, by a duly authorised representative, and has one vote on a show of hands and one vote per
Ordinary Share on a poll. Where an Ordinary Share is held jointly and more than one Shareholder votes in
respect of that Ordinary Share, only the vote of the Shareholder whose name appears first in the Companys
register of members will be accepted. Voting at any meeting of Shareholders is by a show of hands unless a
poll is demanded. A poll may be demanded by at least five Shareholders present and entitled to vote on the
resolution, Shareholders with at least five per cent. of the votes that may be cast on the resolution, or the
chairperson of the meeting. If votes are equal on a proposed resolution, the chairperson of the meeting has
a casting vote on a show of hands or on a poll.
General Meetings

I 21.2.5

The Company must hold an Annual General Meeting in accordance with the Australian Corporations Act.
General meetings may otherwise be convened by the Board, or may be requisitioned by Shareholders
holding at least 5 per cent. of the votes that may be cast at the general meeting of the issued Ordinary Shares
or a Director, in accordance with the Constitution and the Australian Corporations Act.
Each Shareholder will be entitled to receive notice of and, subject to the Australian Corporations Act, the
ASX Listing Rules and the Listing Rules, vote at, general meetings of the Company and to receive all
notices, accounts and other documents required to be furnished to Shareholders under the Constitution or the
Australian Corporations Act. While the Company is listed on the ASX, at least 28 days notice of a general
meeting must be given to Shareholders.
Transfer of Ordinary Shares

I 21.2.4

The Ordinary Shares, while listed on the ASX, are transferable by:

III 4.8

(a)

a written transfer in the usual or common form or in any form the Board may from time to time
prescribe or in a particular case accept being delivered to the Company;

(b)

a proper ASTC transfer, which is to be in the form required or permitted by the Australian
Corporations Act or the ASX Settlement Operating Rules;

(c)

a transfer in the CREST system; or

(d)

a transfer effected by any other electronic system established or recognized by the ASX Listing Rules
in which the Company participates in accordance with the rules of that system.

The Board may, subject to the requirements of the Australian Corporations Act, the ASX Listing Rules and
the ASX Settlement Operating Rules, refuse to register any transfer of Ordinary Shares in the following
circumstances:
(a)

if the Company has a lien on the Ordinary Shares in accordance with the ASX Listing Rules;

(b)

where it is permitted to do so by the ASX Listing Rules;

(c)

where it is required to do so pursuant to a court order; or

(d)

if the registration of the transfer would result in a contravention of, or failure to observe the provisions
of, any applicable law or the ASX Listing Rules.

The Board may take any action it determines to comply with the ASX Settlement Operating Rules and may
request the ASX Settlement Pty Limited to apply a holding lock to prevent the transfer of securities the
subject of the ASX Settlement Operating Rules.
Change of control
The Constitution, which was adopted by Shareholders on 29 September 2006 and amended on 6 October
2010, contains proportional takeover bid restrictions that prohibit registration of transfers of shares resulting
from a proportional takeover bid (ie a bid for only a portion of each Shareholders shares) until Shareholders
have passed a resolution approving the bid.

82

I 21.2.6

The effects of the proportional takeover provisions are that:

(a)

if a bidder makes a proportional takeover bid for any class of shares in the Company, the Directors
must ensure that a meeting of members of that class is convened where a resolution to approve the
proportional takeover bid is voted on. The vote is decided on a simple majority. The bidder and its
associates are excluded from voting on that approving resolution;

(b)

the meeting and the vote on the approving resolution must take place more than 14 days before the
last day of the bid period;

(c)

if the approving resolution is rejected before the deadline, the bid cannot proceed and the offer will
be taken to have been withdrawn. Any transfers giving effect to takeover contracts for the bid will not
be registered and all offers under the takeover bid are taken to be withdrawn and all takeover contracts
must be rescinded;

(d)

if the approving resolution is not voted on, the bid will be taken to have been approved; and

(e)

if the approving resolution is passed (or taken to have been approved), the transfers must be registered
(subject to other provisions of the Corporations Act and the Companys Constitution).

The proportional takeover provisions apply for three years from 6 October 2010 but do not apply to full
takeover bids.
Save for the circumstances outlined in Transfer of Ordinary Shares above, there are no provisions in the
Constitution which would have the effect of delaying, deferring or preventing a change in control of the
Company.
Dividend rights
Any amounts that the Directors may from time to time determine to distribute by way of a dividend are
payable equally on all Ordinary Shares. Dividends are only declared and payable at the discretion of the
Directors and Ordinary Shares do not have any fixed or specified rate of entitlement to dividends.
Rights on winding up
If the Company is wound up, then, subject to the Constitution and any special resolution or preferential rights
attaching to any class or classes of shares, any surplus will be divided amongst Shareholders in proportion
to the number of Ordinary Shares held by Shareholders. The liquidator may, with the authority of a special
resolution, divide among the Shareholders the whole or any part of the property of the Company and may,
for that purpose, value the assets for distribution and determine how the division is to be carried out as
between the Shareholders.
Variation of rights
The rights attaching to the Ordinary Shares, or to any other class of shares which may be issued in the future,
can only be varied by a special resolution passed at a general meeting of the holders of shares of the relevant
class or with the written consent of the holders of at least three quarters of the votes in that class. The
Constitution can only be amended by a special resolution passed at a general meeting of Shareholders. In
either case, the holders of not less than 10 per cent. of the votes in the class of shares whose rights have been
varied or cancelled may apply to a court of competent jurisdiction to exercise its discretion to set aside such
variation or cancellation.
Unmarketable Parcels
The Company may give written notice to a Shareholder holding a number of Ordinary Shares which is less
than a marketable parcel advising them of the Companys intention, as agent for the Shareholder, to sell or
dispose of the Ordinary Shares unless instructed otherwise by the Shareholder within six weeks from the date
of the notice. The net proceeds of the sale will be paid to the Shareholder. A non-marketable parcel of
Ordinary Shares in accordance with the ASX Listing Rules is, generally, a holding of Ordinary Shares with
a market value of less than A$500.

83

Redemption or Conversion Rights

Except as specified below, the Constitution does not give Shareholders any right to have Ordinary Shares
redeemed or converted.
Subject to the ASX Listing Rules, the Company may, by ordinary resolution of Shareholders, convert all or
any of its Ordinary Shares into a larger or smaller number. Subject to the Australian Corporations Act and
the terms of issue of shares in a particular class, the Company may also, by special resolution, convert shares
from one class to another.
Share buybacks
The Company may buy Ordinary Shares in itself on the terms and the times determined by the Board and to
the extent and in the manner permitted by the Australian Corporations Act.
Redeemable and preference shares
The Company currently has no redeemable or preference shares on issue. The Company can only issue
preference shares if the rights attached to the preference shares have been approved by a special resolution
of Shareholders or are set out in its Constitution. Presently, there are no such rights set out in the
Constitution.
Shareholder disclosure requirements
Whilst the Company remains listed on the ASX, the Australian Corporations Act requires Shareholders to
notify the Company and ASX if they acquire voting power in 5 per cent. or more of the issued share capital
of the Company, of any changes of 1 per cent. or more in their holding, and if they cease to have voting power
of 5per cent. or more.
Variation of the Constitution
The Constitution may be amended only by a special resolution passed by at least three quarters of the votes
cast by Shareholders present and entitled to vote on the resolution.
5.

Rights and Powers of the Company and Directors

Company
The Company, being registered under the Australian Corporations Act, has the legal capacity and powers of
an individual both in and outside Australia. The Company also has all of the powers of a body corporate,
including the power to:
(a)

issue and cancel shares and other securities in the Company;

(b)

issue debentures;

(c)

grant Options over unissued shares in the Company;

(d)

distribute any of the Companys property among Shareholders, in kind or otherwise;

(e)

give security by charging uncalled capital;

(f)

grant a floating charge over the Companys property;

(g)

borrow money and give security in respect thereof; and

(h)

do anything that it is authorised to do by any other law (including the law of a foreign country).

Neither the Australian Corporations Act nor the Constitution impose any restrictions on the objects and
purposes of the Company.

84

I 21.2.1

Directors

I 21.2.2

The Company must have at least three directors. At least two of the directors must ordinarily reside in
Australia. Under the Constitution, the Company must not have more than ten directors.
Powers of Directors
The business of the Company is managed by, or under the direction of, the Directors, who may exercise all
powers of the Company that the Constitution, ASX Listing Rules and the Australian Corporations Act do not
require to be exercised by the Company in general meeting.
Without limiting the generality of the above, the Directors may at any time:
(a)

exercise all powers of the Company to acquire and dispose of its property;

(b)

exercise all powers of the Company to borrow money;

(c)

charge any property or business of the Company or all or any of its uncalled capital;

(d)

issue debentures or give any other security for a debt, liability or obligation of the Company or any
other person; and

(e)

guarantee or become liable for the payment of money or the performance of any obligation of any
other person.

Retirement and Re-election of Directors

At every Annual General Meeting of the Company, one third of the directors (rounded down to the nearest
whole number) must retire from office. The Board may also appoint a director to fill a casual vacancy on the
Board or in addition to the existing directors, who will then hold office until the next Annual General
Meeting of the Company (unless re-elected by Shareholders at an earlier general meeting).
Directors Indemnity and Insurance
In accordance with the Constitution and to the extent permitted by law:
(a)

the Company must indemnify each past and present director and Secretary of the Company (Relevant
Officer) for any liability incurred by that person as an officer of the Company or one of its
subsidiaries (Liability);

(b)

the Company must indemnify each Relevant Officer for legal costs incurred by that person in
defending an action for a Liability; and

(c)

the Company may pay, or agree to pay, a premium in respect of a contract insuring a Relevant Officer
against a Liability incurred by that person and for legal costs incurred by the person in defending an
action for a Liability.

Issue of shares
The Board may, subject to the restrictions in the Australian Corporations Act, the ASX Listing Rules, the
AIM Rules/Listing Rules and the TSX Listing Rules, cause the Company to issue, grant options in respect
of, or otherwise dispose of further shares on terms and conditions (including preferential, deferred or special
rights, privileges or conditions, or restrictions) as the Board sees fit.
Pre-emption rights
Although the Australian Corporations Act does not provide any statutory pre-emption rights, the
Constitution, pursuant to an amendment passed by the Shareholders at the Companys general meeting on
6 October 2010, provides that Ordinary Share and other equity securities allotted by the Company for cash
must first be offered to existing Shareholders in proportion to their respective holdings of Ordinary Shares.
Such pre-emption rights do not apply in relation to the issue of (i) bonus shares; (ii) equity securities wholly
or partly paid up otherwise than in cash; or (iii) equity securities issued in connection with an Employee

85

Share Scheme (as defined in the Australian Corporations Act). A special resolution can be passed by
shareholders to disapply the pre-emptive rights provisions.
The Company intends to propose a resolution to disapply the pre-emption rights in the Companys
Constitution at its upcoming annual general meeting to be held on 17 November 2010. The disapplication
resolution is expressed to apply to the issue of Ordinary Shares or other equity securities for cash: (i) on
exercise of the 1,190.000 options currently granted over shares; (ii) on exercise of the 150,000 options to
subscribe for Ordinary Shares to be issued to Mr. Nicholas Sayce as partial consideration for his services
(such issue is subject to a separate resolution seeking shareholder approval at the upcoming annual general
meeting); and (iii) otherwise than pursuant to subparagraphs (i) and (ii), up to an aggregate amount of
9,379,245 equity securities.
Share Repurchases
With the agreement of the holder of the relevant shares, the Company may repurchase its shares, subject to
the requirement that any share repurchases must, subject to certain exceptions provided for in the Australian
Corporations Act, be approved by a resolution of Shareholders. An exception applies where the proposed
repurchase would not exceed 10 per cent. of the smallest number, at any time during the previous 12 months,
of voting shares in the Company.
6.

The City Code, the Australian Corporations Act, the Australian Foreign Acquisitions and
Takeovers Act and Canadian takeover laws

United Kingdom
The Company is incorporated in, has its registered office and is resident in Australia, and has its place of
central management outside of the United Kingdom, the Channel Islands or the Isle of Man. Accordingly,
transactions involving the Ordinary Shares will not be subject to the provisions of the City Code which
regulates takeovers in the UK. However, Chapter 6 of the Australian Corporations Act contains provisions
that are similar or analogous to certain provisions of the City Code.
Upon Admission, the Company will be subject to the provisions of Chapter 5 of the Disclosure and
Transparency Rules.
Australia
The takeover provisions of the Australian Corporations Act apply to dealings in the Ordinary Shares and
other securities. Subject to certain exceptions, the Australian Corporations Act prohibits the acquisition of a
relevant interest in the voting shares of an Australia company that is either listed on a prescribed stock
exchange (including ASX) or has more than 50 shareholders if, as a result of the acquisition, the voting
power of the acquirer (or any other person) would increase from 20 per cent. or below to more than
20 per cent. Similarly, such an acquisition is forbidden if any person who already has more than 20 per cent.
but less than 90 per cent. of the voting power increases their voting power in the target company. However,
it is not mandatory for a person who exceeds these thresholds to make a takeover bid for all the Ordinary
Shares.
A persons voting power for these purposes is equal to the aggregate relevant interest of the person and their
associates in the voting shares of the relevant company. In relation to the Company, the Ordinary Shares are
the only class of voting shares in the Company.
A person has a relevant interest in a share if they have the power to control disposal of that share or to control
the exercise of the right to vote in respect of that share. A person also has a relevant interest in any share held
by a body corporate or managed investment scheme they control or in which they have voting power above
20 per cent. These concepts are broad and, for example, a person can have a relevant interest and voting
power in a share as a result of an agreement to purchase the share (even a conditional agreement) or a call
option to acquire the share.
There are several exceptions which allow acquisitions which would otherwise be prohibited from taking
place. These exceptions include acquisitions (provided certain requirements are met):

86

III 4.9

(a)

under a formal takeover offer in which all shareholders can participate;

(b)

with the approval of a majority of shareholders who are not parties to the transaction, given at a
general meeting of the company;

(c)

in 3 per cent. increments every six months (provided that the acquirer has had voting power of at least
19 per cent. in the company at all times during the six months prior to the acquisition);

(d)

pro rata offers of new shares in which all shareholders can participate; or

(e)

by an underwriter or sub-underwriter to offers of securities in the company in certain circumstances.

A person who has made a takeover bid which results in, at the end of the offer period, that person (and its
associates) having a relevant interest in at least 90 per cent. of the issued shares and having acquired
75 per cent. (by number) of the shares that the person offered to acquire under the bid, may compulsorily
acquire any remaining shares it does not hold at the same price offered under the bid, within one month after
the end of the offer period. In addition, and even if a takeover bid has not been made, a person who otherwise
lawfully acquires a relevant interest in at least 90 per cent. of the issued shares is able to acquire the
remaining shares for fair value (as determined by an independent expert).
Crosby Capital Limited (Crosby), a Hong Kong based merchant banking and asset management group
announced an intention to make a takeover bid for all of the Companys Ordinary Shares on 19 September
2008. On 3 November 2008, Crosby announced that it had decided not to proceed with its proposed takeover
offer, relying primarily on certain market related offer conditions, which were described in its offer
announcement.
Other than as set out above, there have never been any public takeover bids in respect of the Companys
shares.
Whilst the Company remains listed on the ASX, the Australian Corporations Act requires Shareholders to
notify the Company and ASX if they acquire voting power in 5 per cent. or more of the issued share capital
of the Company, of any changes of 1 per cent. or more in their holding, and if they cease to have voting power
of 5 per cent. or more.
The Australian Foreign Acquisitions and Takeovers Act generally prohibits a foreign person (generally,
any person or entity that is not an Australian resident but including any Australian company in which a
foreign person has voting power of more than 15 per cent.), together with its associates, from either
directly or indirectly acquiring an interest in 15 per cent. or more of the issued shares, or controlling
15 per cent. or more of the voting power, of an Australian company (or increasing its interest above that
level), without first giving notice to the Australian Treasurer through the Foreign Investment Review Board,
and complying with certain other requirements, and either the Australian Treasurer having stated that there
is no objection to the acquisition or a statutory period has expired without the Australian Treasurer objecting.
The Australian Foreign Acquisitions and Takeovers Act also applies to any acquisition by a foreign person
where two or more foreign persons (together with their associates), even if unrelated to each other, in
aggregate hold or control, or as a result of the acquisition would hold or control, 40 per cent. or more of the
issued shares or voting power in an Australian company. While a prior notification obligation generally does
not arise in respect of such an acquisition (provided that the 15 per cent. threshold described above is not
exceeded as a result of the acquisition), the Australian Treasurer may, if he considers that the acquisition is
contrary to Australias national interest, make orders, including to require the acquirer to divest its shares in
the company. It is possible, but not obligatory, to make a voluntary notification to the Australian Treasurer
of an acquisition of shares where this 40 per cent. threshold is exceeded that will compel consideration of
the proposed acquisition. If such a notification is made in the prescribed manner, and no objection is taken
by the Australian Treasurer within prescribed time periods, then the Australian Treasurer will not be
empowered to make a divestiture or other order in relation to the relevant acquisition.
The Australian Government has also published additional policies relating to foreign investment, including
a policy requiring notification to the Foreign Investment Review Board of any proposed direct investment by

87

a foreign government or its agency (including sovereign wealth funds and state owned enterprises), or by a
company in which a such an entity has an interest in 15 per cent. or more of the issued shares or voting
power.
Canada
The Company is a reporting issuer only in the Provinces of Ontario Canada, and, to the Companys
knowledge, a significant percentage of its Ordinary Shares are not held by Canadian residents. As such, the
Company believes that it can currently avail itself of an exemption under Canadian take-over bid laws.
In Canada, securities laws are generally a matter of provincial territorial jurisdiction and as a result, takeover bids are governed by the securities legislation in each province or territory. In February 2008, new rules
came into force which largely harmonized the provincial and territorial rules governing take-over bids across
Canada.
Under the Canadian rules, a take-over bid is an offer to acquire ownership, direction or control of 20 per cent.
or more of the issued voting shares or equity shares (essentially non-voting common shares) of any class
or series of the Company. Disclosure of the acquisition of 10 per cent. or more of the voting or equity shares
of the Company (or securities convertible into voting or equity securities), and subsequent acquisitions of
2 per cent. or more within the 10 per cent. 20 per cent. range, is required under the early warning rules
of Canadian securities legislation.
Unless an exemption applies, a person making a take-over bid (an Offeror) must make the bid to all
Shareholders pursuant to a take-over bid circular that contains prescribed information about the offer and the
parties, including shareholdings and past dealings by the Offeror and related parties in shares of the
company. If the Company has Quebec Shareholders, then unless a de minimis exemption applies, the circular
must also be prepared in the French language for the purposes of mailings to such Quebec Shareholders. The
circular must be delivered to the target Company and filed with the securities commissions in Canada. Where
the purchase price under a bid consists of or includes securities of the Offeror, the circular must contain
prospectus-level disclosure regarding the Offerors business and financial results.
A bid subject to full regulation under provincial legislation must be made in accordance with certain timing
and other procedural rules, including a mandatory minimum offer or deposit period of 35 days.
The directors of the target company must deliver their own circular to shareholders in response to the bid,
including a recommendation to security holders to accept or reject the bid and the reasons for the
recommendation or a statement that the directors are unable to make or are not making a recommendation
and the reasons why.
There are a number of securities commission policies which affect the ability of the Company to undertake
defensive measures in response to a bid.

88

7.

I 18.1

Substantial Shareholders

Other than the holdings of the Directors which are set out in paragraph 8 of this Part VI, the Directors are
aware that as at the date of this document the following persons are the persons who, as at 19 October 2010,
were registered holders of the issued share capital of the Company which, directly or indirectly, represent or
will on Admission represent three per cent. or more of the issued share capital of the Company:
Shareholder

No. of Ordinary Shares

HSBC Custody Nominees (Australia) Limited

Citicorp Nominees Pty Limited
JP Morgan Nominees Australia Limited
National Nominees Limited
JP Morgan Nominees Australia Limited <Cash Income A/C>

26,889,269
22,489,208
20,416,142
17,729,733
6,434,703

I 21.2.7

% of Ordinary Shares
in issue on Admission
14.33
11.99
10.88
9.45
3.43

The following persons have notified the Company that they have an interest (together with their associates)
in five per cent. or more of the voting power of the Company, and, therefore, hold a substantial shareholding
in the Company within the meaning of that term under the Australian Corporations Act. Five per cent. is the
threshold for disclosure of shareholdings under section 671B of the Australian Corporations Act, the law
under which the Ordinary Shares were created and under which the Company operates. See paragraph 6 of
this Part VI for further details regarding the obligation to notify details of substantial shareholdings.
Shareholder

No. of Ordinary Shares

% of issued share capital

at date of notice

20,775,638

12.31

9,471,605

5.05

Mr Rex Harbour1
BlackRock Investment Management Australia
Limited and associated entities2
1

Substantial shareholder notice dated 11 September 2009

Substantial shareholders notice dated 7 October 2010

To the extent known to the Company based on the above information, the Company is not directly or
indirectly owned or controlled by any person, nor is it aware of any arrangements which may at a subsequent
date result in a change in control of the Company.

I 18.3

No major holder of Ordinary Shares, as listed above, has voting rights different to other Shareholders.

I 18.2

8.

I 17.2

Directors and Senior Managers and Other Interests

Information regarding each of the Directors and Senior Managers, their functions within the Group and brief
biographies are set out in paragraph 1 of Part II of this document.

I 18.4

I 14.1

The interests of the Directors and Senior Managers as set out below have been determined by reference to
the Companies Act. It should be noted, however, that the Company, as a company incorporated in Australia,
is not subject to the Companies Act.
The interests of the Directors and Senior Managers and the persons connected with them (within the meaning
of section 252 of the Companies Act) in the issued share capital of the Company, which are known to the
Directors or could with reasonable due diligence be ascertained by them, all of which are beneficial, as at
the date of this document, and as they are expected to be following Admission, are as follows:
% of Ordinary Shares in
No. of Ordinary Shares
issue on Admission

Name of Director
Peter Jones
Geoffrey Davis
Peter Hepburn-Brown
Roy Daniel
Robert Weinberg
Andrew Boon San Teo
Peter Alphonso
Samuel Afdal

5,052,750

1,422,006
57,475
55,000
172,500
3,540,000
89

2.694

0.758
0.031
0.029
0.092
1.887

I 17.2

The interests of the Directors, Senior Managers and of the persons connected with them (within the meaning
of section 252 of the Companies Act) in Options, which are known to the Directors or which could with
reasonable due diligence be ascertained by them, all of which are beneficial, as at the date of this document,
and as they are expected to be following Admission, are as follows:
Director/Senior Manager

Options

Peter Jones
Geoffrey Davis
Peter Hepburn-Brown
Roy Daniel
Robert Weinberg
Andrew Boon San Teo
Peter Alphonso
Samuel Afdal

None
None
None
None
None
None
80,000
None

Geoff Davis and Roy Daniel each hold a single share in each of MEDC, MOHC and MMPRC. Geoff Davis
holds a single share in PMC.
Save as disclosed in this paragraph, none of the Directors or Senior Managers or any person connected with
them has any interest in the share capital or loan capital of the Company or any of its subsidiaries.
There are no restrictions agreed by any Director or Senior Manager on the disposal within a certain time of
their holdings in the Companys securities.
In addition to their directorships in the Company, the Directors and Senior Managers hold or have held the
following directorships or have been a partner in the following partnerships within the five years prior to the
date of this document:
Current directorships
and partnerships

Past directorships
and partnerships

Peter Rhys Jones

Mandalay Resources
Corporation

Geoffrey John Davis

None

Roy Philip Daniel

None

Adanac Molybdenum
Corporation*
HudBay Minerals Inc.
Integra Mining Limited
Montrose Minerals Pty Ltd
Newcoast Nominees Pty Ltd
Pan Pacific Gold Limited
None

Robert Maurice
Weinberg

Kasbah Resources
Limited
Solomon Gold plc

Falkland Gold and Minerals Ltd

Great Bear Resources plc
Platinum Mining Corporation of
India plc

Peter Gordon
Hepburn-Brown

Alloy Resources Limited

Eldoret Resources Pty Ltd
Genesis Resources Limited
Morning Star Gold NL

Gleneagle Gold Limited

Iberian Resources Limited
Kasbah Resources Limited

Andrew Boon San Teo

A.F. Wade Pty Ltd

Abella Holdings Pty Ltd
Arndale Holdings Pty Ltd
Bestcheck Nominees Pty Ltd
BGC (Australia) Pty Ltd
BGC Construction Pty Ltd
BGC Contracting Pty Ltd
BGC Insurance (L) Limited
BOCCE Pty Ltd

Korab Resources Limited

Name

90

Name

Current directorships
and partnerships

Past directorships
and partnerships

Andrew Boon San Teo

(continued)

Broadland Holdings Pty Ltd

Broadland Holdings (1994) Pty Ltd
Buckeridge & Associates Pty Ltd
Buckeridge Nominees Pty Ltd
Builders Supply Group Pty Ltd
Buxton Holdings Pty Ltd
Caprice Bay Pty Ltd
Commodore Homes (WA) Pty Ltd
Commodore Investments (WA) Pty
Ltd
Craneford Holdings Pty Ltd
Cromlech Pty Ltd
Edmonds Corporation Pty Ltd
Esther Investment Proprietary Limited
Glentham Pty Ltd
Harrisdale Pty Ltd
Hebat Pty Ltd
J-Corp Pty Ltd
Jaguh Pty Ltd
Jujur Pty Ltd
Kimpura Pty Ltd
Leon Enterprises Pty Ltd
Lisson Nominees Pty Ltd
Lodsworth Limited
Masan Pty Limited
Maxen Holdings Pty Ltd
Mount Risk Services Pty Ltd
National Electrical Services Pty Ltd
Pelabuhan Utama Pty Ltd
Port 1 Pty Ltd
Richard Buckeridge Investments Pty
Ltd
Sunspec Investments Pty Ltd
Swan View Holdings Pty Ltd
Tapestry Holdings Pty Ltd
The Australian Plasterboard Company
Holdings Pty Ltd
Tipsafe Pty Ltd
Twenty-Two Mount Street Pty Ltd
Uranium Australia Limited
Westswan Nominees Pty Ltd
Worlando Pty Ltd

Peter Stanley
Alphonso

None

None

Samuel Afdal

None

None

Adanac Molybdenum Corporation, an exploration and development company, entered voluntary Companies Creditors
Arrangement Act protection in December 2008. On 29 June 2010, Adanac Molybdenum Corporation advised it had entered into
a term sheet with substantially all its senior secured note holders to form the basis of a plan of compromise or arrangement.
Creditor voting and Court approval are pending. Mr. Jones was chairman and chief executive officer of Adanac Molybdenum
Corporation from August 2008 to March 2009.

91

Save as disclosed above, no Director or Senior Manager has within the previous five years:
(a)

any convictions in relation to fraudulent offences; or

(b)

in their capacity as a director or senior manager, been associated with any bankruptcies, receiverships
or liquidations; or

(c)

been the subject of any official public incriminations and/or sanctions by any statutory or regulatory
authorities (including designated professional bodies); or

(d)

been disqualified by a court from acting as a director of a company or from acting in the management
or conduct of the affairs of any company; or

(e)

been declared bankrupt or the subject of an individual voluntary arrangement, or has had a receiver
appointed to any of their assets; or

(f)

been a director or senior manager of any company which, while he was a director or senior manager,
had a receiver appointed or went into compulsory liquidation, creditors voluntary liquidation,
administration or company voluntary arrangement, or made any composition or arrangement with its
creditors generally or with any class of its creditors.

No other outstanding loans or guarantees made or granted by any member of the Group to or for the benefit
of any Director are outstanding.
There are no potential conflicts of interest between any duties owed by the Directors or Senior Managers to
the Company and their private interests and/or other duties, save for their interests as holders of securities in
the Company or as set out in this paragraph.

I 14.2

9.

Service Agreements and Letters of Appointment

I 16.1

9.1

In 2009, the Company entered into a consultancy agreement with Harvest Services Aust Pty Ltd
(Harvest) in respect of the provision of services to the Company by Geoffrey Davis. The fees to be
paid to Harvest are currently A$549,996 per annum plus a discretionary bonus. These fees are subject
to annual review by the Company. The agreement is for an initial fixed term ending on 31 December
2011 and is terminable thereafter by the Company by six months notice. Harvest may terminate the
agreement at any time on six months notice. Harvest may also terminate the agreement by two
weeks written notice where there is a change to Geoffrey Davis status as Managing Director of the
Company in which case the Company must make a payment to Harvest in lieu of a notice period equal
to either: (a) if the agreement is terminated within the initial fixed term, the number of months left in
the initial term or 6 months (whichever is greater) or (b) 12 months if the agreement is terminated after
the initial term.

I 16.2

9.2

In 2009, the Company entered into an employment contract with Roy Daniel pursuant to which he
agreed to act as Finance Director. His salary is A$357,000 per annum plus a discretionary bonus.
These fees are subject to annual review by the Company. The appointment is for an initial fixed term
ending on 30 September 2011 and is terminable thereafter by the Company by 12 months written
notice. Roy Daniel may terminate the agreement at any time on three months notice. Roy Daniel may
also terminate the employment contract by two weeks written notice where there is a change to his
status as Finance Director of the Company, in which case the Company must make a payment to Roy
Daniel in lieu of a notice period equal to either: (a) if the agreement is terminated within the initial
fixed term, the number of months left in the initial term or 12 months (whichever is greater) or (b) 12
months if the agreement is terminated after the initial term.

9.3

The Company agreed with Dr. Robert Weinberg that he would act as Non-Executive Director of the
Company from 1 July 2006. The fee payable, which includes the roles of chairman of the
Remuneration Committee, is A$50,000 per annum. The Company does not have a written agreement
in place that governs his appointment.

92

9.4

In 2010, the Company entered into an employment contract with Peter Hepburn-Brown pursuant to
which he agreed to act as Operations Director. His salary is A$450,000 per annum plus
superannuation contributions of A$50,000 per annum and a discretionary bonus. These fees are
subject to annual review by the Company. The appointment is for an initial fixed term ending on
31 July 2013 and is terminable thereafter by the Company by 12 months written notice. Peter
Hepburn-Brown may terminate the employment contract at any time on three months notice. Peter
Hepburn-Brown may also terminate the employment contract by two weeks written notice where
there is a change to his status as Operations Director of the Company, in which case the Company
must make a payment to Peter Hepburn-Brown in lieu of a notice period equal to either: (a) if the
agreement is terminated within the initial fixed term, the number of months left in the initial term or
12 months (whichever is greater) or (b) 12 months if the agreement is terminated after the initial term.

9.5

The Company agreed with Andrew Boon-San Teo that he would act as Non-Executive Director of the
Company from 15 February 2010. The fee payable, which includes the roles of chairman of the Audit
Committee, is A$50,000 per annum. The Company does not have a written agreement in place that
governs his appointment.

9.6

The Company agreed with Peter Rhys Jones that he would act as a Non-Executive Chaiman of the
Board from 8 July 2010. The fee payable is A$75,000 per annum. The Company does not have a
written agreement in place that governs his appointment.

10.

Directors and Senior Managers Remuneration

10.1 Details of the nature and amount of the annual emoluments of each current Director and Senior
Manager for the last full financial year ended 30 June 2010 are set out below:

Short-term employee benefits

Salary &
NonFees
Bonus
monetary
US$
US$
US$
Non-Executive Directors
Kevin Tomlinson(1)
Robert Weinberg
Peter Hepburn-Brown(2)
Andrew Teo(3)
Executive Directors
Geoffrey Davis
Roy Daniel
Executive Managers
Peter Alphonso
Samuel Afdal
William Phillips(4)
Total
(1)
(2)
(3)
(4)

Postemployment
benefits
Superannuation
US$

Share-based
payment
Options &
rights
US$

Total
US$

42,105
43,536
91,904
15,906

42,105
43,536
91,904
15,906

470,800
332,772

213,327
163,577

42,025

684,127
538,374

168,067
300,000
300,000

1,765,090

6,301

383,205

18,057

60,082

192,425
300,000
300,000

2,208,377

I 15.1
I 15.2

Resigned 13 January 2010

Appointed 15 September 2009
Appointed 15 February 2010
Resigned 30 June 2010

10.2 The aggregate remuneration (including any contingent or deferred compensation) and benefits in kind
paid or granted by the Company and its subsidiaries to the Directors for their services to the Group
during the year ended 30 June 2010 for services in all capacities was US$1,415,952.
10.3 The total amount set aside or accrued by the Company or its subsidiaries to provide pension,
retirement or similar benefits for the Directors for the year ended 30 June 2010 was US$nil.
10.4 Other than as set out in paragraphs 9 and 14 of this Part VI, none of the service contracts of the
members of the administrative, management or supervisory bodies of the Company or any of its
subsidiaries provide for benefits upon termination of employment.

93

I 15.3

11.

Property, plant and equipment

11.1 Except as set out in paragraph 11.2 below, the Group does not own any material tangible fixed assets
including properties.

I 8.1

11.2 Details of the material leased properties in the Group are set out below:
Rent

Rent
review date

Term

Areas
(approx sq m)

Unit 7,8,14
01-08-2008/
11 Preston
31-07-2011
Street, Como
Western
Australia

A$3,756.76 + GST

Annually

36 months

111 sq. mtrs

Office

Unit 10
11 Preston
Street,
Como
Western
Australia

A$1,742.00 + GST

Annually

19 months

24 sq. mtrs

Office

Location

Tenure

01-01-2010/
31/07/2011

Uses

11.3 There are currently no major encumbrances over any of the Groups property, plant and equipment.
11.4 There are currently no environmental, health and safety issues which will materially affect the
Groups use of its property, plant and equipment.
12.

I 8.2

Employee Incentives and Pension Arrangements

The Company does not currently operate any equity based employee incentive schemes or pension
arrangements.
13.

I 22

Material Contracts

The following contracts, not being contracts entered into in the ordinary course of business, have been
entered into by members of the Group during the two years preceding the date of this document (or where
relevant, earlier) and are or may be material or which have been entered into by any member of the Group
at any time and which contain a provision under which any member of the Group has any obligation or
entitlement which is, or may be, material to the Group as at the date of this prospectus:
13.1 Financial Advisers Engagement Letter
Under the engagement letter dated 18 February 2008 (the Initial Agreement), the Company
appointed Fairfax I.S. PLC (Fairfax) as its nominated adviser and joint broker.
Under the terms of the engagement letter dated 3 February 2010 pursuant to which the Company
appointed Fairfax as its financial adviser and broker in relation to Admission and the cancellation of
trading on AIM, which it is anticipated will occur simultaneously with Admission and which will
automatically trigger the termination of the Initial Agreement.
13.2 Royalty Agreement
On 4 December 2006, Philsaga executed a royalty agreement with the Secdea Philippines Holdings
Corp., Yandal Investments Pty Ltd and Advanced Concepts Holdings Limited in relation to certain
parts of the Co-O Mine. Further details of this royalty agreement are set out in paragraph 14(e) of this
Part VI below.
13.3 Drilling Services Agreement
On 4 December 2006, Philsaga entered into a drilling services agreement with SBF Philippines
Drilling Resources Corporation in relation to the Co-O Mine. Further details of this drilling services
agreement are set out in paragraph 14(f) of this Part VI below.

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13.4 Co-O MPSA 262-2008-XIII

Philsaga holds MPSA 262-2008-XIII (MPSA) which is granted in respect of the exploration and
mining of gold and other associated mineral deposits over a total surface area of 2,538.7919 hectares
in Bunawan and Rosario in the Province of Agusan del Sur in the Philippines. Philsaga does not, by
virtue of this MPSA, acquire any title over the area to which it relates.
MPSA was granted on 11 March 2008 for an initial period until 11 March 2033, renewable for a
further 25 years. If the Government chooses to allow mining operations thereafter, Philsaga shall have
the right to match the highest bid in a competitive tender process, subject to reimbursement of all
reasonable expenses of the highest bidder.
During the term of the MPSA, Philsaga must submit periodic work programmes to the Government
setting out the mining operations and proposed expenditures to be carried out for the relevant time
period. The Government may revise a work programme within 30 days of its receipt.
The total value of production and sale of minerals derived from the mining operations shall be
accounted for and divided between the Government and Philsaga in accordance with Section VIII of
the MPSA. Philsaga must also pay the Municipal/City Treasurer an occupation fee over the contract
area at the annual rate provided for in the existing rules and regulations. In addition, Philsaga is
obliged to spend not less than PhP 852,289,027 on the development of the site concerned within three
years from the date of the start of operations.
13.5 MEDC Option Agreement
On 25 April 2007, the Company entered into an option agreement with MEDC and the other
shareholders in MEDC (the Shareholders) pursuant to which the Shareholders granted the Company
an option to acquire their respective shares in MEDC at a price equal to that paid by the Shareholders
upon their subscription for such shares. This gives Medusa the right to acquire all of the shares held
by the Shareholders. Although Medusa could not directly acquire the remaining 60 per cent.
shareholding under current Philippines legislation, it could nominate another Filipino person to
acquire the shares, thereby protecting Medusas investment in the event of a dispute with the existing
Filipino shareholders.
13.6 MOHC Option Agreement
On 25 April 2007, MEDC, the Company and MOHC entered into an option agreement pursuant to
which MEDC granted the Company an option to acquire MEDCs shares in MOHC at a price equal
to that paid by MEDC upon its subscription for such shares. This gives Medusa the right to acquire
all of the shares held by MEDC holding. Although Medusa could not directly acquire the remaining
60 per cent. shareholding under current Philippines legislation, it could nominate another Filipino
person to acquire the shares, thereby protecting Medusas investment in the event of a dispute with
MEDC.
13.7 MEDC Shareholders Agreement
On 23 April 2007, the Company entered into a shareholders agreement with MEDC, Ernesto Apostol,
Rudy Obial and Roberto Doctura, Jr. which regulates the parties conduct in respect of their
shareholdings in MEDC.
The agreement provides that every shareholder shall be entitled to one seat on the board of directors
of MEDC for every 20 per cent. of MEDCs issued share capital that he holds. The agreement further
regulates the proceedings of meetings of MEDCs board of directors and shareholders.
The agreement provides for a list of reserved matters upon which shareholders holding at least
75 per cent. of the voting rights in MEDC must agree. These reserved matters relate primarily to (i)
changes to MEDCs constitution or share capital; (ii) changes to the status of all or substantially all
of MEDCs property or assets; (iii) the dissolution of MEDC; (iv) the removal of a director appointed
by the Company; or (v) MEDC entering into an onerous or unusual contract.

95

The agreement also contains rights of pre-emption in relation to transfers of MEDCs shares, whereby
the remaining shareholders have the right of first refusal to acquire such shares in proportion to their
existing shareholding. Such provisions do not apply were the Company to sell its shares in MEDC
pursuant to a sale of its interest in the Philsaga project.
The agreement is governed by the laws of the Republic of the Philippines and any disputes shall be
resolved by arbitration by the International Chamber of Commerce.
13.8 MOHC Shareholders Agreement
On 23 April 2007, the Company, MEDC and MOHC entered into a shareholders agreement which
regulates the parties conduct in respect of their shareholdings in MOHC.
The agreement provides that every shareholder shall be entitled to one seat on the board of directors
of MOHC for every 20 per cent. of MOHCs issued share capital that he holds. The agreement further
regulates the proceedings of meetings of MOHCs board of directors and shareholders.
The agreement provides for a list of reserved matters upon which shareholders holding at least
75 per cent. of the voting rights in MOHC must agree. These reserved matters relate primarily to (i)
changes to MOHCs constitution or share capital; (ii) changes to the status of all or substantially all
of MOHCs property or assets; (iii) the dissolution of MOHC; (iv) the removal of a director appointed
by the Company; or (v) MOHC entering into an onerous or unusual contract.
The agreement also contains rights of pre-emption in relation to transfers of MOHCs shares, whereby
the remaining shareholders have the right of first refusal to acquire such shares in proportion to their
existing shareholding. Such provisions do not apply were the Company to sell its shares in MOHC
pursuant to a sale of its interest in the Philsaga project.
The agreement is governed by the laws of the Republic of the Philippines and any disputes shall be
resolved by arbitration by the International Chamber of Commerce.
13.9 Ore Supply Agreement
On 2 January 2009, PMC and MMPRC entered into an ore supply agreement, which the parties
subsequently amended on 15 February 2010, pursuant to which PMC agreed to supply mineralised
ore containing precious metals (Broken Ore) for treatment at MMPRCs plant. PMC is required to
supply a minimum of 8,000 tonnes of Broken Ore per calendar month or such other amount as is
agreed between the parties.
The agreement is for a term of five years and is terminable on 90 days written notice by either party.
The agreement is governed by the laws of the Republic of the Philippines and is subject to the
jurisdiction of the courts of Davao City, Philippines.
14.

I 19

Related Party Transactions

Save as disclosed in: (i) this paragraph 14; and (ii) note 20 to the Historical Financial Information in Part VIII
of this prospectus, no member of the Group entered into a related party transaction during the period from
1 July 2007 to the date of this document (or, where relevant, earlier).
(a)

The Company entered into Director Protection Deeds (the Deeds) with each of Geoffrey Davis (in
2003), Roy Daniel (in 2006), Robert Weinberg (in 2006), Peter Hepburn-Brown (in 2009), Peter Rhys
Jones (in 2010) and Andrew Teo (in 2010). Under the Deeds, the Company indemnifies the Directors,
to the extent permitted by law, against any liability, which he may incur whilst carrying out his duties
as a Director and against any costs and expenses incurred in defending legal proceedings brought
against him as a director. The Deeds require the Company to maintain in force directors and officers
liability insurance, with an agreed cover level, for the duration of the Directors term of office and a
period of seven years thereafter. The Deeds also provide for the Directors to have access to the
Companys documents (including Board papers) for a period of seven years after he ceases to be a
Director, subject to certain confidentiality and other requirements being observed.

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(b)

The Company first entered into a lease of office premises with Cedardale Holdings Pty Ltd
(a company related to Geoffrey Davis) in April 2004. During the year ended 30 June 2010, Cedardale
Holdings Pty Ltd charged the Company A$56,153 (2009: A$45,381) for the lease of office premises.
No amounts were outstanding at year-end (2009: nil).

(c)

The Company first entered into a Consultancy Services Agreement with Harvest Services Aust Pty
Ltd (a company related to Geoffrey Davis) (Harvest Services) in November 2003. Under the terms
of the Consultancy Services Agreement, Harvest Services agrees to provide the services of Geoffrey
Davis to the Company, commensurate with that of a Managing Director, for a period of five years
from December 2003, the date the Companys shares were first quoted on the ASX. The Company
entered into a further consultancy agreement with Harvest Services in 2009, under which Harvest
Services agreed to provide the services of Mr. Davis for an initial fixed term ending on 31 December
2011. Harvest Services is entitled to receive a consultancy fee (subject to annual reviews) of A$45,833
(2009: A$40,417) per month (excluding GST) and the reimbursement of out of pocket expenses
incurred in the course of providing services to the Company. Either of the Company, Harvest Services
or Mr. Davis as the parties to the consultancy services contract may terminate the contract by
providing six months written notice to the other parties. During the year ended 30 June 2010, Harvest
Services charged the Company A$776,247 which included a bonus approved by the board of Directors
(2009: A$479,250) in fees. No amount remains outstanding at year end (2009: nil).

(d)

On 4 December 2006, the Company entered into a Management Consultancy Agreement with
Mindanao Philcord Holdings Corporation (a company related to William Phillips) (Mindanao
Philcord). Under the terms of this Management Consultancy Agreement, Mindanao Philcord agreed
to provide the services of William Phillips to Philsaga, a related entity of the Company, commensurate
with that of a Director Operations for a period of three years from December 2006. The Management
Consultancy Agreement was renewed on 1 January 2010, under which, Mindanao Philcord agreed to
provide the services of William Philips to Philsaga for a further one year to 31 December 2010.
Mindanao Philcord is entitled to receive a consultancy fee of US$25,000 per month and the
reimbursement of out of pocket expenses incurred in the course of providing services to the Company.
Philsaga may only terminate the agreement upon limited events akin to misconduct or incapacity.
During the year ended 30 June 2010, Mindanao Philcord charged Philsaga US$300,000 (2009
US$300,000) in fees. No fees remain outstanding at year end (2009: nil).

(e)

On 4 December 2006, Philsaga, a related entity of Medusa, executed a royalty agreement with the
Secdea Philippines Holdings Corporation (a company associated with Samuel Afdal), Yandal
Investments Pty Ltd and Advanced Concepts Holdings Limited (a company associated with William
Phillips) (collectively the Royalty Vendors). Under the terms of the royalty agreement, Philsaga has
agreed to pay the Royalty Vendors a royalty of US$20 per ounce of recovered gold obtained from
extensions of the Co-O Mine system mined on the eastern side of the Oriental Fault up to a limit of
US$10,000,000. The royalty will be payable on a quarterly basis. A royalty of US$409,636 (2009: nil)
was paid during the year ended 30 June 2010 and US$84,072 (2009: US$293,285) remained
outstanding at the end of that year.

(f)

On 4 December 2006, Philsaga, a related entity of Medusa, entered into a drilling services agreement
with SBF Philippines Drilling Resources Corporation (SBF Drilling), a company associated with
William Phillips and Samuel Afdal. Under the terms of the drilling services agreement, Philsaga has
engaged SBF Drilling to provide Philsaga or the Medusa group of companies, with drilling services
for the Co-O Mine and area and further provide equipment, labour and expertise with respect to
drilling services. The engagement of SBF Drilling by Philsaga is for an initial term of three years and
is renewable thereafter for one year periods by mutual agreement between the parties. In consideration
of SBF Drilling providing the services, Philsaga will pay SBF Drilling commercial rates for its
services. During the year ended 30 June 2010, SBF Drilling charged Philsaga US$15,298,335 (2009:
US$10,747,044) in fees. US$2,874,133 (2009: US$6,008,733) remains outstanding at the end of that
year.

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(g)

On completion of the Philsaga Share Sale Deed, Philsaga entered into a Mining Services Agreement
with Vibrant Earthmovers, Inc. (a company related to William Phillips and Samuel Afdal) (Vibrant).
The agreement was cancelled, however, and A$473,815 relating to an amount owing from Philsaga to
Vibrant at 30 June 2008 was paid during the year.

(h)

During the financial year ended 30 June 2010, the Company charged management fees of A$720,000
(2009: A$720,000) to each of Philsaga and MMPRC.

15.

Working Capital

III 3.1

The Company is of the opinion that the working capital available to the Group is sufficient for its present
requirements, that is, for at least the next 12 months following the date of this prospectus.
16.

III 4.11

Taxation

This section of the prospectus provides general information on the Australian and UK income tax and
stamp duty consequences that may arise for certain Shareholders in respect of holding and disposing
of Ordinary Shares in the Company. Shareholders should not rely on these comments as advice in
relation to their own particular tax affairs. It is strongly recommended that Shareholders supplement
this general information by obtaining specialist tax advice on the consequences of holding and
disposing of Ordinary Shares in their own particular circumstances.
This information is based on tax legislation, judicial interpretation and administrative practices of the
revenue authorities in Australia and the UK as at the date of this prospectus. The consequences of holding
and disposing of Ordinary Shares in the Company may therefore be different if the legislation is amended,
the courts change their interpretation or the relevant revenue authority changes its practice.
General
The Company is incorporated in Australia and currently conducts its affairs in such a way that it is regarded
as a resident of Australia for tax purposes. The summary below is prepared on the assumption that the
Company will remain resident in Australia for these purposes.
Australian Taxation
The following comments are based on the provisions of the Income Tax Assessment Act 1936 (Cth) and
the Income Tax Assessment Act 1997 (Cth), as applicable. Shareholders should be aware that the
taxation laws of Australia are complex and the comments provided in this summary are general in
nature. Australia is also in a period of ongoing tax reform, such that any changes to the tax legislation,
judicial interpretation or administrative practice of the Australian Taxation Office may affect the tax
implications of an investment by a Shareholder. Shareholders should therefore seek appropriate
independent professional advice that considers the taxation implications in respect of their own
specific circumstances.
Taxation of a Future Share Disposal
Australian Resident Shareholders
The Australian tax consequences of a future disposal of the Ordinary Shares will depend on whether a
Shareholder is an Australian resident. If a Shareholder is a temporary resident of Australia, then the tax
consequences of holding and disposing of the Ordinary Shares will be broadly similar to those for a nonAustralian Resident Shareholder. If a Shareholder is a non-Australian resident that uses the Ordinary Shares
in carrying on business through an Australian branch, then the tax consequences will be broadly similar to
those of an Australian resident Shareholder. In any of these situations, it will be especially important for the
Shareholder to seek independent professional advice on the tax consequences of holding and disposing of
the Ordinary Shares in their own specific circumstances.
For Australian resident Shareholders, the taxation treatment on the disposal of Ordinary Shares will firstly
depend upon whether the Shareholder holds their Ordinary Shares on revenue or capital account.

98

Australian resident Shareholders who trade in Ordinary Shares as part of the ordinary course of their
business, or who acquire the Ordinary Shares for resale at a profit, may hold their shares on revenue account.
If so, such Shareholders will be required to include the profit arising from any future disposal of their
Ordinary Shares in their assessable income. Conversely, a loss arising from the future disposal of Ordinary
Shares on revenue account would be allowed as a deduction from assessable income.
Generally, all other Australian resident Shareholders will hold their Ordinary Shares on capital account.
These Australian resident Shareholders must therefore consider the impact of the Australian capital gains tax
rules on the disposal of their Ordinary Shares.
Such an Australian resident Shareholder will derive a capital gain where the proceeds received on disposal
of their Ordinary Shares exceed the cost base of the Ordinary Shares. The cost base of an Ordinary Share
will generally be its cost of acquisition (or deemed cost of acquisition), plus certain other incidental costs,
such as brokerage and stamp duty. Conversely, an Australian resident Shareholder will make a capital loss
on the disposal of their Ordinary Shares where the disposal proceeds received are less than the reduced cost
base of the Ordinary Shares. The reduced cost base of a share is usually similar to the cost base, but may
exclude some non-capital costs of ownership. For these purposes, capital losses can only be used to offset
current year capital gains or carried forward to offset future capital gains (subject to certain loss utilisation
tests).
Capital gains and capital losses of a Shareholder in a year of income are aggregated to determine whether
there is a net capital gain. If so, the net capital gain is included in the assessable income of the Shareholder
and is subject to income tax. However, a capital gains tax discount may be available to reduce the taxable
gain for certain Shareholders (refer below).
Non-Australian Resident Shareholders
Where non-Australian resident Shareholders hold Ordinary Shares on revenue account, the profits on sale of
the Ordinary Shares may be required to be included in the Shareholders assessable income. This is subject
to the application of any double tax treaty which may exclude such profits from Australian taxation.
For non-Australian resident Shareholders who do not hold Ordinary Shares on revenue account the capital
gains tax rules may apply. However, non-Australian resident Shareholders should not be subject to Australian
capital gains tax in respect of a future sale of their Ordinary Shares unless:
(a)

the Shareholder (together with associates) directly or indirectly owns or owned 10 per cent. or more
of the issued share capital of the Company at the time of the disposal or throughout a 12-month period
during the two years prior to the time of disposal; and

(b)

at the time of disposal, more than 50 per cent. of the Companys assets (by market value) constitute
taxable Australian real property.

Where the capital gains tax rules apply, relief from Australian tax may nevertheless be available under an
applicable double tax treaty in certain circumstances.
Discount capital gains
As noted above, a capital gains tax discount may apply to reduce the amount of net capital gains that might
otherwise be included in a Shareholders assessable income.
For Shareholders that are individuals and trustees (other than trustees of complying superannuation funds),
a 50 per cent. capital gains tax discount is available if the Ordinary Shares are held for at least 12 months.
For Shareholders that are complying superannuation funds, a 33 1/3 per cent. capital gains discount is
available if the Ordinary Shares are held for at least 12 months.
The capital gains tax discount is not available to companies.

99

Dividends
Broadly, dividends paid on Ordinary Shares may be franked or unfranked. Franked dividends have
franking credits attached. These credits represent underlying Australian corporate tax that has been paid on
the profits distributed. To the extent a dividend is unfranked, no franking credits are attached.
Depending on the tax residency status of the Shareholder and whether a dividend is franked or unfranked
will have different income tax implications as set out below.
Australian Resident Shareholders
In broad terms, Australian resident Shareholders will include dividends together with any attached franking
credits in their assessable income. A tax offset will be allowed equal to the amount of franking credits
attached to the dividend.
Generally, to be eligible for the franking credit and tax offset, the Shareholder must have held the shares at
risk for 45 days (not counting the day of acquisition or disposal). However, this rule should not apply to
individual Shareholders where the tax offset entitlement does not exceed A$5,000 in respect of all dividends
received during the income year in which the dividend is paid.
Individual shareholders and complying superannuation funds may receive a tax refund if the franking credits
attached to the dividend exceed their tax liability for the income year.
Where the Shareholder is a corporate entity, the Shareholder will generally not be entitled to a refund for any
franking credits that exceed their tax liability for the income year but may be entitled to a tax loss for the
excess franking credits. The receipt of a franked dividend will also generally give rise to a credit in the
corporate entitys franking account to the extent the dividend is franked.
Non-Australian Resident Shareholders
Dividends paid to non-Australian resident Shareholders, to the extent they are fully franked dividends or
declared to be conduit foreign income, are generally not subject to withholding tax.
However, as the Company is an Australian resident for tax purposes, unfranked dividends (not paid out of
conduit foreign income), paid to non-Australian resident Shareholders (or other Shareholders whose
registered address is outside Australia, or who authorise or direct that their dividends be paid at a place
outside Australia), will be subject to dividend withholding tax at a rate of 30 per cent. on the unfranked
component of any dividend. The dividend withholding tax rate is generally reduced to 15 per cent. (lower
for certain other countries) where the recipient is resident in a jurisdiction with an applicable double tax
treaty with Australia. Where dividend withholding tax applies, the Company will be required to deduct the
appropriate amount of withholding tax prior to making the dividend payment.
Australian Stamp Duty
No Australian stamp duty should be payable by Shareholders on the acquisition or disposal of Ordinary
Shares on the basis that the Company and its subsidiaries do not hold any interests in land in Australia.
In the event that the Company or any of its subsidiaries acquire interests in land in Australia, stamp duty may
be payable if a person and its defined associates acquire an interest of 50 per cent. or more in the Company
or otherwise acquiring control of the Company.
Further stamp duty advice should be sought before an acquisition of Ordinary Shares which may result in a
person and its associates holding an interest of 50 per cent. or more in the Company.
Other Matters
Australian resident Shareholders will generally be required to notify the Company of their Tax File Number
(or Australian Business Number if carrying on an enterprise) in respect of Ordinary Shares held. Failure to
do so may result in the Company being required to withhold tax (at the top marginal individual rate including
Medicare levy of 46.5 per cent.), on any dividends paid on the Ordinary Shares. The Shareholder will
however be entitled to a credit or refund in their tax returns to the extent of the tax withheld.
100

UK taxation
The following paragraphs broadly outline the taxation position of UK Shareholders who are resident
or ordinarily resident in the UK for tax purposes and who are holding Ordinary Shares beneficially
as investments (other than under a personal equity plan or an individual savings account) and who
have not (and are not deemed to have) acquired their share by virtue of an office or employment. The
following paragraphs provide general advice only and may not apply to certain classes of investor who
may be subject to special rules (such as brokers, traders or dealers in securities, insurance companies,
charities, collective investment schemes or pension providers). Each Shareholders specific
circumstances will impact on their taxation position. All Shareholders are recommended to obtain
their own taxation advice. In particular, all Shareholders, including UK tax resident Shareholders are
advised to consider the potential impact of any relevant double tax agreements on their shareholding.
Taxation of Chargeable Gains
UK Resident Individual Shareholders
A disposal of Ordinary Shares by a Shareholder who is (at any time in the relevant UK tax year) resident or
ordinarily resident in the UK (and not otherwise covered by a specific concession) or (where the
circumstances apply) who resumes UK tax residence without achieving the appropriate number of
intervening years of non-residence, may give rise to a chargeable gain or allowable loss for the purpose of
UK taxation of chargeable gains. Chargeable gains are currently liable to tax at a flat rate of 28 per cent.,
other than in cases where the recipient is an individual no part of whose income is chargeable to income tax
at the higher rate or dividend upper rate. Such individuals are liable to capital gains tax at the reduced rate
of 18 per cent. in relation to that part of the gain which is covered by the unused part of the individuals basic
rate band.
Non-UK Resident Individual Shareholders
A Shareholder who is not resident in the UK for tax purposes but who carried on a trade, profession or
vocation in the UK through a branch or agency and has used, held or acquired the Ordinary Shares for the
purpose of such trade, profession or vocation may also be subject to UK taxation on chargeable gains on a
disposal of shares if the shares are deemed to be situated in the UK.
Special rules apply to tax gains on disposals made by individuals at a time when they are temporarily not
resident and not ordinarily resident in the UK.
Non-UK Domiciled Individual Shareholders
Special and complex rules apply for individuals who are resident or ordinarily resident but not domiciled for
UK purposes and these individuals should seek further advice.
UK Resident Company Shareholders
UK resident corporate Shareholders will, on first principles, be taxable to corporation tax on any gain made
on the sale of shares unless the Substantial Shareholdings Exemption applies to exempt the gain from charge.
Further advice should be sought.
Companies are due indexation allowance which may also reduce the chargeable gain.
Dividends
UK Resident Individual Shareholders
The Company will not be required to withhold UK tax from dividends paid on the Ordinary Shares.
The dividend may be subject to Australian dividend withholding tax. The terms of the UK-Australian double
tax treaty may reduce the dividend withholding tax rate to a range of between 0 per cent. and 15 per cent.
depending on the status of the UK resident Shareholder, and various conditions being met. The amount of
the dividend received plus the dividend withholding tax if any (note that Australian withholding tax will only
be applied to the extent the dividend is not declared to be conduit foreign income) will represent taxable

101

dividend income for the UK individual Shareholder. In these circumstances the Shareholder should be
entitled to credit the dividend withholding tax (if any) on unfranked dividends against any liability to UK
income tax. The credit would be limited to the lesser of the dividend withholding tax or the UK tax payable
on the combined amount of the dividend plus dividend withholding tax. If the dividend withholding tax
exceeds the UK tax payable on the dividend, the excess is neither creditable nor repayable. Any withholding
tax suffered on franked dividends would instead reduce the gross dividend chargeable to UK tax.
Individual Shareholders are entitled to a non-refundable 10 per cent. tax credit on dividends received from
the Company. This tax credit is set against the individuals UK tax liability on the dividend. Note, that in
certain limited circumstances and where the shareholder owns 10 per cent. or more of the Ordinary Shares
of the Company, the tax credit can be restricted. Further advice should be sought.
The amount of tax payable on dividends received by a UK resident individual will depend on the type and
extent of their other income for the relevant UK tax year. Different rates of tax may apply for certain
individuals in receipt of dividends with effect from 6 April 2010 following the changes to the top rate of tax
on dividends.
As noted above separate advice should be obtained by anyone who is UK Resident but either not ordinarily
resident or non-UK domiciled.
The UK tax treatment of any holder of Ordinary Shares who is resident in the UK, and carries on a trade,
profession or vocation in the UK in relation to these shares may be different from that described above and
such Shareholder should seek his own tax advice.
UK Resident Company Shareholder
Dividends paid to a UK resident corporate Shareholder will be assessable income of the UK Corporate
Shareholder unless the dividends fall within an exempt class and certain other conditions are met. It is
however expected that dividends paid by the Company to a UK resident corporate Shareholder would
generally be exempt.
To the extent that dividends are not exempt, UK resident corporate Shareholders may be able to obtain credit
for any withholding tax and any underlying tax paid by the Company, subject to certain conditions. The UK
has complex double tax relief and controlled foreign companies rules and therefore UK resident corporate
Shareholders should seek further advice on these issues.
UK stamp duty and stamp duty reserve tax (SDRT)
No stamp duty or SDRT is payable on the issue of Ordinary Shares by the Company, whether issued in
certificated form or in uncertificated form through CREST, unless they are issued into depositary or
clearance arrangements and at the time of issue the Ordinary Shares in question are registered on a
shareholders register maintained in the UK.
Provided the Ordinary Shares continue to be registered only on a shareholders register maintained outside
the UK, no SDRT is payable on any agreement to transfer Ordinary Shares. However, the purchaser will
normally be liable to pay SDRT at 0.5 per cent. of the consideration on any agreement to transfer Ordinary
Shares which are registered on a shareholders register which is maintained in the UK. The purchaser will
normally be liable to pay SDRT at the same rate on any agreement to transfer Crest Depositary Interests
(Cadis) representing the Ordinary Shares unless the Company is centrally managed and controlled outside
the UK, the underlying Ordinary Shares are registered only on a shareholders register which is maintained
outside the UK and Ordinary Shares are listed on a recognised stock exchange (which expression includes
the London Stock Exchange). Any liability to SDRT will normally be collected by a stockbroker or other
intermediary member of the London Stock Exchange acting in the transaction.
Any document of transfer which acts to transfer Ordinary Shares may be subject to stamp duty at
0.5 per cent. of the consideration for the transfer. Payment of any stamp duty and stamping of the relevant
document within 6 years of the related agreement to transfer will normally cancel any SDRT charge arising
on that agreement. Payment of stamp duty is not compulsory but documents may not be available for certain

102

official purposes unless they have been duly stamped. Reliefs may be available to remove these charges to
stamp duty or stamp duty reserve tax if appropriate conditions are satisfied.
17.

I 20.8

Litigation

There have been no governmental, legal or arbitration proceedings (including any such proceedings which
are pending or threatened of which the Company is aware), during the period of 12 months preceding the
date of this document which may have, or in the recent past have had, significant effects on the Company
and/or Groups financial position or profitability.
18.

General

(a)

As disclosed in Part V of this document, the Directors are not aware of any exceptional factors which
have influenced the Groups recent activities.

(b)

Other than as disclosed in Part I and paragraph 13 of this Part VI of this document, there are no patents
or other intellectual property rights, licences or particular contracts which are or may be of
fundamental importance to the Groups business.

(c)

The total costs, charges and expenses payable by the Company in connection with or incidental to the
Admission, including London Stock Exchange fees, are estimated to be approximately 740,000
(excluding any applicable VAT).

(d)

There has been no significant change in the financial or trading position of the Group since 30 June
2010, the date to which the Groups last financial information was published.

(e)

The financial information set out in this document does not constitute statutory accounts within the
meaning of section 434 of the Companies Act.

(f)

No payment (including commissions) or other benefit has been or is to be paid or given to any
promoter of the Company.

(g)

The Companys accounting reference date is 30 June.

(h)

Where information in this document has been sourced from a third party, it has been accurately
reproduced and so far as the Company is aware and able to ascertain from the information published
by that third party, no facts have been omitted which would render the reproduced information
inaccurate or misleading.

I 23.2

(i)

Save as disclosed in this prospectus, no public takeover bids have been made by third parties in respect
of the Companys issued share capital since incorporation.

III 4.10

19.

Advisers Consents

I 23.1

(a)

Fairfax I.S. PLC of 46 Berkeley Square, London W1J 5AT, which is regulated by the FSA has given
and has not withdrawn its written consent to the issue of this document with the inclusion of its name
in the form and context in which it appears.

III 10.3

(b)

Golder Associates Pty Ltd of Level 2, 1 Havelock Street, West Perth, WA 6872, Cube Consulting Pty
Ltd of Level 4, 1111 Hay Street, West Perth, WA 6 005 and Crosscut Consulting Pty Ltd of Unit 10,
22 Jane Street, Arana Hills, QLD 4054 have given and have not withdrawn their written consent to the
issue of this document with the inclusion of their names and the Mineral Experts Report, mineral
reserves and resource estimates and technical review in the form and context in which they appear for
the purpose of paragraph 5.5.3 R (2)(f) of the Prospectus Rules and for the purposes of paragraph 23.1
of Annex I of the Prospectus Rules.

(c)

Grant Thornton Audit Pty Ltd, Chartered Accountants consent to the inclusion of their reports in
Sections, B, C, D and E of Part VIII in this Prospectus for the purpose of complying with Prospectus
Rule 5.5.3R (2)(f) and for no other purpose.

103

I 6.4

I 20.9

III 10.4

20.

I 24

Inspection of Documents

Copies of the following documents may be inspected at the offices of Hunton & Williams at 30 St. Mary Axe,
London EC3A 8EP during normal business hours on any Business Day for a period of one year following
the date of this document:
(a)

the Constitution;

(b)

the audited accounts for the Company for the financial years ended 30 June 2010, 2009, 2009 restated
in US Dollars and 2008;

(c)

the Mineral Experts Report;

(d)

the consents of the advisers referred to in paragraph 19 of this Part VI; and

(e)

this document.

Dated: 21 October 2010

104

PART VII
DEFINITIONS
The following definitions apply throughout this document, unless the context otherwise requires:
A$ or Australian Dollar and
cents

Australian dollars, the lawful currency of Australia;

Admission

admission of the Ordinary Shares to the standard listing segment of

the Official List and to trading on the London Stock Exchanges
Main Market for listed securities becoming effective in accordance
with the Listing Rules;

A-IFRS

IFRS as applied in Australia;

AIM

the AIM market of the London Stock Exchange;

AIM Admission

the admission to trading on AIM of all of the issued Ordinary

Shares;

AIM Rules

the AIM Rules for Companies and the AIM Rules for Nominated
Advisers;

Anoling Project

gold project at Anoling;

Anti Dummy Act

the Philippines Commonwealth Act No. 108, of 1936 as amended;

APSA

Application for Production Sharing Agreement;

ASX

ASX Limited (ABN 98 008 624 691) or the financial market

conducted by it (the Australian Securities Exchange) as the context
requires;

ASX Listing Rules

the official listing rules of ASX as from time to time amended or

waived in their application to a party;

ASX Settlement Operating Rules

the rules of ASX Settlement Pty Limited (ABN 49 008 504 532);

Audit Committee

the Audit Committee of the Board;

Australian Corporations Act

Corporations Act 2001 (Cth);

Australian Foreign Acquisitions

and Takeovers Act

Foreign Acquisitions and Takeovers Act 1975 (Cth);

Australian Treasurer

the Treasurer of the Commonwealth of Australia;

Bananghilig Deposit or
Bananghilig Project or
Bananghilig Prospect

gold deposit at Tambis;

Board or Directors

the directors of the Company (save as stated otherwise);

Business Day

a day, other than a Saturday, Sunday or public holidays, on which

banks are generally open in London for the transaction of normal
business;

Canadian Dollar

Canadian dollars, the lawful currency of Canada;

105

Company or Medusa

Medusa Mining Limited, a company incorporated and registered in

Australia;

Co-O Gold Mine or Co-O Gold

Project or Co-O Mine

gold mine located at Co-O, Philippines;

CIM

Canadian Institute of Mining, Metallurgy and Petroleum;

CIM Standards (2005)

CIM Definitions Standards on Mineral Resources and Mineral

Reserves, 2005 version;

City Code

the UK City Code on Takeovers and Mergers;

Companies Act

the UK Companies Act 2006;

Constitution

the constitution of the Company;

Corporate Governance Code

the UK Corporate Governance Code published in June 2010 by the

Financial Reporting Council;

CREST

the computerised settlement system to facilitate the transfer of title

to or interests in securities in uncertificated form, operated by
Euroclear UK & Ireland Limited;

CREST Member

a person who has been admitted by Euroclear UK & Ireland

Limited as a system member (as defined in the CREST
Regulations);

CREST Participant

a person who is, in relation to CREST, a system participant (as

defined in the CREST Regulations);

CREST Regulations

the Uncertified Securities Regulations 2001 (as amended);

Disclosure and Transparency Rules

the Disclosure and Transparency Rules issued by the FSA;

Exchange Traded Funds or ETFs

Exchange Traded Funds. An investment vehicle traded on stock

exchanges. An ETF holds assets such as stocks, bonds or
commodities and trades at approximately the same price as the net
asset value of its underlying assets over the course of the trading
day;

Fairfax

Fairfax I.S. PLC;

Financial Services Authority

or FSA

the UK Financial Services Authority;

FSMA

the Financial Services and Markets Act 2000 (as amended);

Group

Medusa and its subsidiaries, from time to time;

IFRS

International Financial Reporting Standards;

Kamarangan Project

copper prospect located at Tambis, Philippines;

Listing Rules

the Listing Rules published by the Financial Services Authority

from time to time;

London Stock Exchange

London Stock Exchange plc;

MGB

the Mines and Geoscience Bureau in the Philippines;

Mineral Experts Report or MER

the report as prepared by Golder Associates Pty Ltd set out in

Part IX of this document;
106

Mines and Geosciences Bureau

the Department of Environmental and Natural Resources Mines

and Geosciences Bureau is the Philippine government agency
primarily responsible for the implementation of the Philippine
Mining Act of 1995;

MMPRC

Mindango Mineral Processing and Refining Corporation, a

subsidiary of the Company;

MPSA

mineral production sharing agreement;

National Policy 58-201

Policy Statement 58-201 to Canadian Corporate Governance

Guidelines;

Official List

the Official List of the UKLA;

Optionholders

the holders of Options;

Options

options to subscribe for Ordinary Shares, details of which are set

out in paragraph 3 of Part VI of this document;

Ordinary Shares

fully paid ordinary shares of nil par value each in the capital of the
Company;

Ore Supply Agreement

the sale of broken ore from the supplier to the processor or the buyer
for processing in its plant;

Phase I

first expansion phase of the Co-O Mine to produce 60,000 ounces

per annum of gold;

Phase II

second expansion phase of the Co-O Mine to produce

100,000 ounces of gold per annum;

Philsaga or PMC

Philsaga Mining Corporation, a subsidiary of the Company;

PhP

the Philippines Peso, the lawful currency of the Republic of the

Philippines;

Phsamed

Phsamed Mining Corporation, a subsidiary of the Company;

Pound Sterling or

British currency;

Prospectus Rules

the Prospectus Rules published by the Financial Services Authority

from time to time;

Relevant Officer

each past and present director and secretary of the Company;

Remuneration Committee

the remuneration committee of the Board;

Saugon Project

the Saugon exploration target where the Company has been granted
Exploration Permit (XIII)-000017;

Senior Managers

the senior managers of the Company whose details are set out in
paragraph 2 of Part II of this document;

Share Trading Policy

the policy governing the trading of shares in the Company by its

directors and employees as adopted by the Board;

Shareholders

holders of Ordinary Shares;

subsidiary or subsidiaries

a body corporate as defined by the Companies Act;

Tambis Project

Bananghilig Prospect and Kamarangan Project;

107

TSX

Toronto Stock Exchange;

TSX Listing Rules

the by-laws, rules and policies of the TSX;

UK

United Kingdom of Great Britain and Northern Ireland;

UKLA

the Financial Services Authority, acting in its capacity as the

competent authority for the purposes of Part VI of the FSMA;

US

the United States of America;

US$ or US Dollar

US dollars, the lawful currency of the US; and

VAT

value added tax.

108

GLOSSARY OF ABBREVIATIONS AND TECHNICAL TERMS

AAS

atomic absorption spectroscopy;

adit

a horizontal, or nearly horizontal passage of a mine from the ground

surface (commonly the side of a hill) for working the mine;

adsorb

to attract and retain other material on the surface; to conduct the

process of adsorption;

airleg mining

mining using hand held air driven drilling machines;

Alimak

a mechanical device on a track used as a drilling platform whilst

excavating vertical mine access ways;

alkali

a carbonate or hydroxide of an alkali metal, the aqueous solution of

which is bitter, slippery, caustic, and characteristically basic in
reactions;

alkalinity

the alkali concentration or alkaline quality of an alkali-containing

substance;

andesitic

a gray, fine-grained volcanic rock, chiefly plagioclase and feldspar;

argillic

a rock alteration in which certain minerals are converted to minerals

of the clay group;

assay

an analysis to determine the presence, absence, and quantity of one

or more metallic components;

Au

is the chemical symbol for gold;

ball milling

a type of grinder used to grind materials into extremely fine powder;

barite

a yellow, white, or colorless crystalline mineral of barium sulfate,

BaSO4;

bond ball mill work index

used to determine the power draw or energy consumption to ball

mill a test sample;

breccia

rock composed of angular fragments, commonly coarse grained

(grains over 5 mm across); may be sedimentary, igneous, tectonic,
or supergene;

calcite

A common crystalline form of natural calcium carbonate, CaCO3,

that is the basic constituent of limestone, marble, and chalk;

CaO

Calcium Oxide, a white, caustic, lumpy powder, used as a

refractory, as a flux, in manufacturing steel and paper, in
glassmaking, in waste treatment, in insecticides, and as an industrial
alkali. Also called lime;

chalcedony

a microcrystalline variety of quartz;

CIP

carbon-in-pulp; a process in which finely ground gold ore is leached

with weak alkaline solutions of sodium cyanide bubbled with air or
oxygen, and the slurry (pulp) has added to it tough porous carbon
particles about the size of wheat grains onto which gold cyanide
ions are adsorbed; following adsorption, the loaded carbon is
washed and stripped of gold cyanide ions by heated stronger
alkaline cyanide solutions from which metallic gold is recovered by
electro-winning;

109

concentrate

a product containing valuable metal from which most of the waste

material in the ore has been eliminated;

conglomerate

cemented, rounded fragments of water-worn rock or pebbles, bound

by a siliceous or argillaceous substance;

Cu

is the chemical symbol for copper;

cut-off

the grade above which mineralised material is considered to be ore;

cyanidation

the use of weak alkaline solutions of sodium cyanide to extract gold

and silver from ores;

cyanide

sodium cyanide (NaCN);

dacite

light gray volcanic rock containing a mixture of crystalline minerals

in glassy silica;

diamond drill

the machine for drilling holes in rocks to get cylindrical cores of

rock for examination and chemical analyses; the cutting face of the
drill bit is impregnated with diamonds which cut the rock when the
bit is rotated; the core of rock is caught in a core barrel behind the
bit; ground rock is flushed from the hole by water pumped down the
drill rods; the water also cools the bit which heats up during drilling;

diorite

dark, granite-textured, crystalline rocks rich in plagioclase and

having little quartz;

dip

the angle between the horizontal and a plane, measured at right

angles to the strike;

ductile

plastic deformation; not brittle;

duplicate

a sample that has been split from another to check the field
sampling or laboratorys precision;

Early Tertiary

the early part of the geologic period 65 million to 1.8 million years
ago;

elution

process of removing gold from the carbon by using a strong solution

of caustic soda and cyanide;

epithermal

mineral veins and ore deposits formed from warm waters at shallow
depth, at temperatures ranging from 50-200C, and generally at
some distance from the magmatic source;

fault

a tectonic break or fracture in a body of rock;

feasibility study

a comprehensive study of a deposit in which all geological,

engineering, operating, economic and other relevant factors are
considered in sufficient detail that it could reasonably serve as the
basis for a final decision by a financial institution to finance the
development of the deposit for mineral production;

flotation

a milling process by which some mineral particles are induced to

become attached to bubbles of froth and float, and others to sink, so
that the valuable minerals are concentrated and separated from the
remaining rock or mineral material;

gramme;

110

galena

a gray mineral, essentially lead sulphide, the principal ore of lead;

gangue minerals

minerals of economic value that can be extracted from a naturally

occuring ore for a profit;

gold dore

an alloy that is produced after the first stage of the purification

process, containing approximately 90 per cent. gold as well as
metals such as silver or copper. It must be refined in order to achieve
the levels of purity required to be traded on gold markets;

grade

the amount of mineral in each tonne of ore;

g/t

gramme/metric tonne;

igneous

refers to a rock formed by the cooling of molten material;

Indicated

is that part of a Mineral Resource for which tonnage, densities,

shape, physical characteristics, grade and mineral content can be
estimated with a reasonable level of confidence. It is based on
exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches,
pits, workings, and drill holes. The locations are too widely or
inappropriately spaced to confirm geological and/or grade
continuity but are spaced closely enough for continuity to be
assumed;

Inferred

is that part of a Mineral Resource for which tonnage, grade and

mineral content can be estimated with a low level of confidence. It
is inferred from geological evidence and assumed but not verified,
geological and/or grade continuity. It is based on information
gathered through appropriate techniques from locations such as
outcrops, trenches, pits, and workings and drill holes which may be
limited or of uncertain quality and reliability;

intrusive

rock which, while molten, penetrated into or between other rocks

but solidified before reaching the surface;

JORC Code (2004)

The Australasian Code for Reporting of Exploration Results,

Mineral Resources and Ore Reserves, 2004 version;

kg

kilogramme;

km

kilometre;

Kriges Relationship

statistical relationship between the estimation of grades and

volumes of mineralisation in certain mineralised bodies of rock;

kWh

kilo watt hour;

litre;

Late Tertiary

the late part of the geologic period 65 million to 1.8 million years
ago;

leach

to dissolve minerals or metals out of ore with chemicals;

level

in connection with a mine, means development workings at about

the same elevation; commonly numbered downwards from the
surface, eg Levels I, 2, 3, etc, or by their relative elevation, eg
1000m level, 1050m level etc;

111

lime or quicklime

See CaO;

limestone

a sedimentary rock consisting mainly of calcium carbonate,

deposited as the calcareous remains of marine animals or
chemically precipitated from the sea;

metre;

Measured

is that part of a Mineral Resource for which tonnage, densities,

shape, physical characteristics, grade and mineral content can be
estimated with a high level of confidence. It is based on detailed and
reliable exploration, sampling and testing information gathered
through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes. The locations are spaced
closely enough to confirm geological and grade continuity;

metallurgical or metallurgy

describing the science concerned with the production, purification

and properties of metals and their application;

Mineral Resource

a concentration or occurrence of material of intrinsic economic

interest in or on the Earths crust in such form, quality and quantity
that there are reasonable prospects for eventual economic
extraction. The location, quantity, grade, geological characteristics
and continuity of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge.
Mineral Resources are sub-divided, in order of increasing
geological confidence, into Inferred, Indicated and Measured
categories;

mineralisation

refers to the presence of a mineral of economic interest in a rock;

mm

millimetre;

Moz

million Troy ounces;

Mt

million metric tonnes;

Mtpa

million tonnes per annum;

Multiple Indicator Kriging

a method used to interpolate values (grades) from a sample data set

onto a grid. A commonly used method to compute resources;

NI 43-101

National Instrument 43-101 Standards of Disclosure for Mineral

Projects;

NSR

net smelter return;

open pit

mine workings for ores open to the surface, a pit; like a quarry for
stone;

ophiolitic

any group of igneous and metamorphic rocks found within the

continental crust, thought to be formed by the uplift of oceanic crust
and mantle into the continental crust;

Ordinary Block Kriging

a statistical method for estimating the grades and volumes of

mineralisation in certain bodies of mineralised rock;

Ore Reserve

is the economically mineable part of a Measured and/or Indicated

Mineral Resource. It includes diluting materials and allowances for
losses, which may occur when the material is mined. Appropriate
assessments and studies have been carried out, and include
112

consideration of and modification by realistically assumed mining,

metallurgical, economic, marketing, legal, environmental, social
and governmental factors. These assessments demonstrate at the
time of reporting that extraction could reasonably be justified. Ore
Reserves are sub-divided in order of increasing confidence into
Probable Ore Reserves and Proved Ore Reserves;
oz

Troy ounce (used for precious metals);

P80 70 microns

indicates 80 per cent. of particles have a size of less than

70 microns;

pH

a measure of the acidity or alkalinity of a solution, numerically

equal to 7 for neutral solutions, increasing with increasing alkalinity
and decreasing with increasing acidity. The pH scale commonly in
use ranges from 0 to 14;

pluton

a body of igneous rock formed beneath the surface of the earth by

consolidation of magma;

porphyritic

refers to the texture of an igneous rock in which there are larger

crystals (phenocrysts) set in a contrasting matrix or ground mass of
smaller crystals or glass;

porphyry

any porphyritic rock;

Probable

is the economically mineable part of an Indicated, and in some

circumstances, a Measured Mineral Resource. It includes diluting
materials and allowances for losses which may occur when the
material is mined. Appropriate assessments and studies have been
carried out, and include consideration of and modification by
realistically assumed mining, metallurgical, economic, marketing,
legal, environmental, social and governmental factors. These
assessments demonstrate at the time of reporting that extraction
could reasonably be justified;

Proved

is the economically mineable part of a Measured Mineral Resource.

It includes diluting materials and allowances for losses which may
occur when the material is mined. Appropriate assessments and
studies have been carried out, and include consideration of and
modification by realistically assumed mining, metallurgical,
economic, marketing, legal, environmental, social and
governmental factors. These assessments demonstrate at the time of
reporting that extraction could reasonably be justified;

pyrite

iron sulphide (FeS2) mineral;

pyroclastic

composed chiefly of rock fragments of volcanic origin;

QA/QC

quality assurance/quality control;

quartz

commonly referred to as Si02; silicon dioxide; and is very common

mineral in rocks; occurs also as veins, and stockworks;

reverse faults

a fault in which the hanging wall has moved upward relative to the
footwall;

sandstone

A sedimentary rock formed by the consolidation and compaction of

sand and held together by a natural cement, such as silica;

113

sedimentary

a rock formed from cemented or compacted sediments;

sediments

the debris resulting from the weathering and breakup of preexisting

rocks;

shale

a fissile rock composed of layers of claylike, fine-grained

sediments;

shear zone

a zone of shearing (intense foliation); shearing is the response of a

rock to deformation usually by compressive stress;

sheeted

a vein filling a shear zone;

silicic alteration

alteration of primary rocks to rocks consisting of silica;

silver dore

crude silver containing a small amount of gold, obtained after

removing lead in a cupelling furnace;

sphalerite

the primary ore of zinc, occurring in usually yellow-brown or

brownish-black crystals or cleavage masses, essentially ZnS with
some cadmium, iron, and manganese;

stockworks

refers to mineralised veining, multiple-veined, at first sight

irregularly, with many veins and vein lets in a host rock;

stope

refers to an opening in a mine from which ore has been mined,

usually near to vertical and of considerable length and depth, and of
lesser width;

strike

the bearing of a horizontal line in a planar geological feature;

sub-microscopic

too small to be seen through a microscope;

sulphide

a mineral compound in which one or more metals are found in

combination with sulfur;

metric tonne (1000 kg);

tailings

refers to finely ground effluent rock waste from ore treatment plant,
in aqueous suspension as it leaves the plant; pumped to large
containments where treatment water is recovered, and the tailings
dry out;

UC technique

uniform conditioning technique; and

vuggy or vugs

a small cavity in a rock or vein, often with a mineral lining of

different composition from that of the surrounding rock.

Conversions
1 inch

254 mm (exact); and

1 ounce Troy

31.103477 g.

114

NOTES
References in document to a particular time are, unless otherwise stated, references to the time applicable in
London, United Kingdom.
Words importing the singular shall include the plural and vice versa and words importing the masculine
gender shall include the feminine or neutral gender.
In this document, the symbols and p refer to pounds and pence sterling respectively, the symbol A$
refers to Australian Dollars and the symbol US$ refer to US Dollars.
Any reference to any provision of any legislation in any jurisdiction shall include any amendment,
modification, re-enactment or extension thereof.
Unless otherwise stated, all references to legislation refer to the laws of the United Kingdom.

115

PART VIII

I 20.1
I 20.3

HISTORIC FINANCIAL INFORMATION

I 20.4.1
I 20.4.3
I 20.5.1

This part provides the financial information of the Group for the three years ended 30 June 2010 in
accordance with paragraph 20.1 of Annex I of the Prospectus Rules (Historical Financial Information).
The financial information for the three years ended 30 June 2010 has been extracted from the audited
published consolidated financial statements of Medusa.
During the year ended 30 June 2010, the Group changed its presentation currency from Australian Dollars
to US Dollars to account for the increase in the Groups trading and revenues which resulted in the majority
of the Groups business being transacted in US Dollars.
In accordance with paragraph 20.1 of Annex I of the Prospectus Rules historical financial information for
the year ended 30 June 2009 restated from Australian Dollars to US Dollars has also been shown. A special
purpose audit report was provided by the Groups auditors in respect of these restated financial statements
as extracted and reproduced in Section C.
The auditors reports on the published audited financial statements for each of the three years ended 30 June
2010 have been extracted and reproduced in Sections B, D and E.
The auditors reports in Sections B through to E are extracted from the audited and special purpose financial
statements and should be read in conjunction with such financial statements which are available from the
registered office of Medusa.
The Directors are responsible for preparing the Historical Financial Information on the basis of preparation
set out in note 1 of this Part VIII.

116

Section A: Historical Financial Information for the three years ended 30 June 2010, 2009 and 2008
Consolidated Statement of Comprehensive Income (formerly referred to as the Income Statement
prior to a change in IFRS terminology)

Note

Revenue
Other income
Cost of sales
Exploration & evaluation expenses
Administration expenses
Finance costs
Other expenses
Profit before income tax expense
Income tax (expense)/income
Profit attributable to members
of the Company
Other comprehensive income:
Exchange differences on translation of
foreign operations
Total comprehensive income/(loss)
Overall operations:
Basic earnings per share
Diluted earnings per share

2
2
11

6,22

Year
ended
30 June
2010
US$000
Audited

The above results are all from continuing operations.

117

Year
ended
30 June
2009
A$000
Audited

Year
ended
30 June
2008
A$000
Audited
18,074

(10,067)
(572)
(3,306)
(376)
(2,734)

1,019
(2,366)

94,508
81
(22,455)
(294)
(2,853)

42,825
4
(12,970)
(60)
(1,760)

57,252
6
(17,339)
(81)
(2,352)

(3,133)

65,854
(42)

(1,246)

26,793
1,714

(1,666)

35,820
2,291

65,812

2,311

68,123
5
5

Year
ended
30 June
2009
US$000
Restated

0.378
0.377

28,507

(480)

28,027
0.187
0.186

38,111

(1,052)

37,059
0.250
0.249

(1,347)

(3,045)

(4,392)
(0.009)
(0.009)

Consolidated statement of financial position (formerly referred to as the Balance Sheet prior to a
change in IFRS terminology)

CURRENT ASSETS
Cash & cash equivalents
Trade & other receivables
Inventories
Other current assets
Total Current Assets
NON-CURRENT ASSETS
Property, plant & equipment
Exploration, evaluation & development
expenditure
Deferred tax assets

Note

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

23
7
8
9

32,457
34,895
5,511
468

73,331

26,510
5,006
1,164
128

32,808

32,939
6,198
1,446
160

40,743

4,834
2,185
936
333

8,288

10

34,595

29,823

37,818

28,500

11
13

75,978
73

52,722
69

65,798
86

40,740
2,852

110,646

82,614

103,702

72,092

183,977

115,422

144,445

80,380

Total Non-Current Assets

TOTAL ASSETS

CURRENT LIABILITIES
Trade & other payables

12

Total Current Liabilities

NON-CURRENT LIABILITIES
Deferred tax liability

8,272

8,272

9,193

9,193

11,424

11,424

6,846

6,846

13

279

313

389

5,217

279

313

389

5,217

8,551

9,506

11,813

12,063

175,426

105,916

132,632

68,317

70,906
6,878
97,642

175,426

69,776
4,310
31,830

105,916

Total Non-Current Liabilities

TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained profits

16
17
22

TOTAL EQUITY

92,774
(1,232)
41,090

132,632

65,866
(529)
2,980

68,317

118

Consolidated Statement of Changes in Equity

Note
CONSOLIDATED IN AUS
DOLLARS
Balance at 30 June 2007 as
audited
Exchange differences arising
on translation
(Loss) attributable to members
of Company
Total recognised income and
expenses during the year
Shares issued during the period
Share transaction costs
Share options issued during the
period in accordance with
AASB 2 share based payment

16
16

18

Transfer from option reserve

Balance at 30 June 2008 as
audited

Total recognised income and

expenses during the year

Balance at 30 June 2009 as

audited

Share
Capital
Ordinary
A$000

Retained
Profits
A$000

63,805

4,327

1,545

(1,347)

(1,347)

793

(3,045)

(3,045)

Total
A$000

70,470

(3,045)
(1,347)

(4,393)

1,742
(675)

1,172

(994)

1,743
(675)

994

1,172

65,866

2,980

1,723

(2,252)

68,317

(1,052)

(1,052)

38,111

38,111

349

92,774

41,090

2,072

Exchange differences arising on

translation
Profit attributable to members of
Company

Shares issued during the period

Share transaction costs
Share options issued during the
period in accordance with
AASB 2 share based payment

Foreign
Currency
Option Translation
Reserve
Reserve
A$000
A$000

16
16

18

(1,052)

38,111

37,059

28,209
(1,302)

(3,304)

28,209
(1,302)

349

132,633

119

Note
CONSOLIDATED IN US
DOLLARS
Balance at 30 June 2008 as
restated
Net profit after tax
Other comprehensive income
Total comprehensive income
for the year
Shares issued during the period
Share transaction costs
Share options issued during the
period in accordance with
AASB 2 share based payment

16
16

18

Balance at 30 June 2009 as

restated

Total comprehensive income for

the year

Balance at 30 June 2010 as

audited

Share
Capital
Ordinary
US$000

Retained
Profits
US$000

51,999

3,323

28,507

1,312

3,213

(480)

59,847

28,507
(480)

18,610
(833)

28,507

(480)

28,027

18,610
(833)

265

265

69,776

31,830

1,577

2,733

105,916

65,812

2,311

65,812
2,311

1,191
(61)

65,812

2,311

68,123

1,191
(61)

257

257

70,906

97,642

1,834

5,044

175,426

Total
US$000

Net profit after tax

Other comprehensive income

Shares issued during the period

Share transaction costs
Share options issued during the
period in accordance with
AASB 2 share based payment

Foreign
Currency
Option Translation
Reserve
Reserve
US$000
US$000

16
16

18

120

Statement of Cash Flows (formerly referred to as the Cash Flow Statement prior to a change in
IFRS terminology)

Note

CASH FLOWS FROM OPERATING

ACTIVITIES
Receipts from customers
Payments to suppliers & employees
Interest received
Net cash provided by operating activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Receipt from sale of investments
Payments for plant & equipment
Payments for exploration & evaluation
activities
Payment for development activities

22(b)

Net cash used in investing activities

CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issue of shares
Transaction costs from issue of shares
Repayment of vendor finance
Net cash provided by financing activities
Net increase in cash and cash equivalents held
Cash & cash equivalents at the beginning of
the financial year
Exchange rate adjustment
Cash & cash equivalents at the end of the
financial year

22(a)

121

Year
ended
30 June
2010
US$000
Audited

Year
ended
30 June
2009
US$000
Restated

Year
ended
30 June
2009
A$000
Audited

Year
ended
30 June
2008
A$000
Audited

78,220
(40,124)
623

38,719

42,651
(12,233)
174

30,592

57,019
(17,533)
233

39,719

17,540
(10,739)
399

7,200

(7,741)

(7,506)

(8,379)

110
(2,313)

(18,924)
(7,907)

(34,572)

(9,181)
(4,205)

(20,892)

(4,178)
(23,188)

(35,745)

(8,294)
(6,547)

(17,044)

1,187
(57)

18,610
(834)

1,742
(1,811)
(5,000)

(5,069)
(14,913)
20,168
(421)

1,130
5,277

17,776
27,476

28,143
(1,302)

26,841
30,815

26,510
670

4,648
(5,614)

4,834
(2,710)

32,457

26,510

32,939

4,834

Notes to the financial information

1.

Statement of significant accounting policies

The financial information has been prepared in accordance with Australian Accounting Standards, including
Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.

I 20.1
I 20.3
I 20.4.1

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in
the financial information containing relevant and reliable information about transactions, events and
conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial
information and notes also comply with International Financial Reporting Standards. Material accounting
policies adopted in the preparation of this financial information are presented below. They have been
consistently applied unless otherwise stated.
2009 restated:
Presentation currency During the year ended 30 June 2010, the Group changed its presentation currency
from Australian Dollars to US Dollars to account for the increase in the Groups trading and revenues which
resulted in the majority of the Groups business being transacted in US Dollars. Therefore, in accordance
with paragraph 20.1 of Annex I of the Prospectus Rules, historical financial information for the year ended
30 June 2009 has been restated in US Dollars.
The financial report covers the Group of Medusa Mining Limited (Medusa) and controlled entities.
Medusa is a listed public company, incorporated and domiciled in Australia.
Basis of preparation
Reporting Basis and Conventions
The financial information has been prepared on an accruals basis and is based on historical costs modified
by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair
value basis of accounting has been applied.
(a)

Principles of consolidation
A controlled entity is any entity over which Medusa has the power to govern the financial and
operating policies so as to obtain benefits from its activities. In assessing the power to govern, the
existence and effect of holdings of actual and potential voting rights are considered.
A list of controlled entities during the period is presented in note 19.
As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the
consolidated financial statements as well as their results for the year then ended. Where controlled
entities have entered/(left) the consolidated group during the year, their operating results have been
included/(excluded) from the date control was obtained/(ceased).
All intra-group balances and transactions between entities in the consolidated group, including any
unrealised profits or losses, have been eliminated on consolidation. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with those adopted by the
parent entity.

(b)

Comparative figures
Where required by Accounting Standards, comparative figures have been adjusted to conform with
changes in presentation.

(c)

Change in accounting policy

From 1 July 2009 the Group has adopted the following Standards for the reporting periods beginning
on or after 1 July 2009. Adoption of these standards did not have any effect on the financial position
or performance of the Group. However, the adoption of AASB 8 has caused the Group to revise its

122

I 20.4.3
I 20.5.1

segment reporting. See note 27 for details of the reportable segments and applicable accounting
policies.

AASB 8 Operating Segments

AASB 8 requires a management approach to the identification, measurement and disclosure of
operating segments.

AASB 101 Revised Presentation of Financial Statements

AASB 101 requires all changes in equity arising from transactions with owners, in their
capacity as owners, to be presented separately from non-owner changes in equity. Non-owner
changes in equity require presentation in the Statement of Comprehensive Income.
The revised AASB 101 requires all income and expenses to be presented in either one
Statement of Comprehensive Income or a separate Income Statement and a Statement of
Comprehensive Income. The Groups financial statements contain a Statement of
Comprehensive Income.

(d)

Change in functional and presentation currency

The functional currency for a company is the currency of the primary economic environment in which
the company operates. The presentation currency for a company is the currency in which the company
chooses to present its financial report. Until June 2009, the presentation currency of the Group was
Australian dollars.
AASB 121, The Effects of Changes in Foreign Exchange Rates, suggests that a primary factor in
determining the functional currency of an entity is the currency that mainly influences sales price for
goods and services.
The Groups gold sales, which are in US dollars, significantly outweigh all the expenses of the Group.
In order to better reflect the Companys and Groups financial position and operations the Group has
decided to change its presentation currency for financial reporting to US dollars. The Group has
determined the date of transition of the presentation currency from Australian dollars to US dollars as
1 July 2009.
In order to derive US dollar comparatives the Group has converted the Statement of Financial Position
at 30 June 2009 at US$/Philippine Peso of 48.369 for Philippine subsidiaries except Medusa Mineral
Processing and Refining Corporation (MMPRC) while the parent entity has been converted at
US$/A$ of 0.8931. The Statement of Comprehensive Income for the year ended 30 June 2009 have
been converted at an average rate of US$/Philippine Peso 47.594 for Philippine subsidiaries except
MMPRC and US$/A$ 0.8704 for the Parent Entity.
Equity Balances have been maintained at historical exchange rates relating to the date of transaction.
As described in the above mentioned reasons management have decided that MMPRC, a 100 per cent.
owned subsidiary of the Company, would change its functional and presentation currency from
Philippine Pesos to US dollars commencing 1 July 2009.

(e)

Revenue recognition
Revenue from the sale of goods is recognised in the relevant reporting period when there has been a
significant transfer of risks and rewards to the customer and no further processing is required by the
Groups operations. In addition, the quality and quantity of the goods must be determined with
reasonable accuracy, the price is known or determinable and collectability is probable. The point, at
which risk passes, for the Groups sales, is for the majority of the time, upon receipt of the bill of
lading or equivalent when the commodity is actually delivered for shipment.
Revenue is measured at the fair value of the consideration received or receivable.

123

Gold and silver sales

Revenue from the production of gold and silver is recognised when the group has passed control and
risk to the buyer.
Interest Revenue
Interest revenue is recognised using the effective interest rate method, which for floating rate financial
assets, is the rate inherent in the instrument.
(f)

Income tax
The income tax expense (revenue) for the year comprises current income tax expense (income) and
deferred tax expense (income).
Current income tax expense charged to the profit or loss is the tax payable on taxable income
calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date.
Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered
from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability
balances during the year as well as unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity instead of
the profit or loss when the tax relates to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax
assets also result where amounts have been fully expensed but future tax deductions are available. No
deferred income tax will be recognised from the initial recognition of an asset or liability, excluding
a business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted
at reporting date. Their measurement also reflects the manner in which management expects to
recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the
extent that it is probable that future taxable profit will be available against which the benefits of the
deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and
joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of
the temporary difference can be controlled and it is not probable that the reversal will occur in the
foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is
intended that net settlement or simultaneous realisation and settlement of the respective asset and
liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of
set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where it is intended that net
settlement or simultaneous realisation and settlement of the respective asset and liability will occur in
future periods in which significant amounts of deferred tax assets or liabilities are expected to be
recovered or settled.

(g)

Property, Plant and equipment

Each class of plant and equipment is carried at cost less, where applicable, any accumulated
depreciation and impairment losses.

124

Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to the income statement during the financial period in which they are incurred.
Depreciation
Plant and equipment (excluding Co-O mine and milling equipment) is depreciated applying the
straight line method over their estimated useful lives, commencing from the time the asset is held
ready for use.
Co-O mine and milling equipment s useful life is estimated to approximate the expected life of the
mine, the depreciation rate is based on a charge proportional to the depletion of estimated recoverable
gold ounces contained in indicated and inferred resources.
Depreciation rates and methods are reviewed annually for appropriateness. When changes are made,
adjustments are reflected prospectively in current and future periods only.
The depreciation rates used for each class of depreciable assets are:
Class of fixed asset

Depreciation
method

Depreciation
rate (%)

Plant and equipment (excluding Co-O mine & milling equipment)

Office furniture and fittings

Straight line
Straight line

20% to 33%
7.5% to 20%

An assets carrying amount is written down immediately to its recoverable amount if the assets
carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These
gains and losses are included in the Statement of Comprehensive Income.
(h)

Impairment of non-financial assets

At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to
determine whether there is any indication that those assets have been impaired. If such an indication
exists, the recoverable amount of the asset, being the higher of the assets fair value less costs to sell
and value in use i.e. discounted cash flows, is compared to the assets carrying value. Any excess of
the assets carrying value over its recoverable amount is expensed to the Statement of Comprehensive
Income.
Impairment testing is performed annually for intangible assets with indefinite lives.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs.

(i)

Operating leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the
lessor, are charged as expenses in the periods in which they are incurred.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line
basis over the life of the lease term.

(j)

Payables
Payables are initially recognised at fair value and due to their short term nature they are measured at
amortised cost and not discounted.

125

(k)

Receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost,
using the effective interest rate method, less any provision for impairment.

(l)

Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated
separately for each area of interest. Such expenditure comprises direct costs and does not include
general overheads or administrative expenditure not having a specific nexus with a particular area of
interest.
Exploration expenditure for each area of interest is carried forward as an asset provided the rights to
tenure of the area of interest are current and one of the following conditions is met:

The exploration and evaluation expenditures are expected to be recouped through successful
development and exploitation of the area of interest, or alternatively, by its sale; and

Exploration and evaluation activities in the area of interest have not at the reporting date
reached a stage which permits a reasonable assessment of the existence or otherwise of
economically recoverable reserves, and active and significant operations in, or in relation to,
the area of interest are continuing.

Exploration expenditure is written off when it fails to meet at least one of the conditions outlined
above or an area of interest is abandoned.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest
that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount.
When facts and circumstances suggest that the carrying amount exceeds the recoverable amount the
impairment loss will be measured and disclosed in accordance with AASB 136 Impairment of Assets.
When a decision is made to develop an area of interest, all carried forward exploration expenditure in
relation to the area of interest is transferred to development expenditure.
(m)

Development expenditure
Development expenditure represents the accumulated exploration, evaluation, land and development
expenditure incurred by or on behalf of the Group in relation to areas of interest in which mining of
a mineral resource has commenced.
When further development expenditure is incurred in respect of a mine property after commencement
of production, such expenditure is carried forward as part of the mine property only when substantial
future economic benefits are thereby established, otherwise such expenditure is classified as part of
the cost of production. All horizontal development drives which include permanent rail and associated
infrastructure are capitalised.
Amortisation of costs is provided on the unit-of-production method with separate calculations being
made-for each mineral resource. The unit-of-production basis results in an amortisation charge
proportional to the depletion of the estimated recoverable reserves. In some circumstances, where
conversion of resources into reserves is expected, some elements of resources may be included.
Development and land expenditure still to be incurred in relation to the current reserves are included
in the amortisation calculation. Where the life of the assets are shorter than the mine life their costs
are amortised based on the useful life of the assets.
The estimated recoverable reserves and life of the mine and the remaining useful life of each class of
asset is reassessed at least annually. Where there is a change in the reserves/resources amortisation
rates are correspondingly adjusted.

126

(n)

Rehabilitation costs
Rehabilitation costs that are expected to be incurred are provided for as part of the cost of the
exploration, evaluation, development, construction or production phases that give rise to the need for
restoration. Accordingly, these costs are recognised gradually over the life of the facility as these
phases occur. The costs include obligations relating to reclamation, waste site closure, plant closure
and other costs associated with the rehabilitation of the site.
These estimates of the rehabilitation obligation are based on anticipated technology and legal
requirements and future costs, which have been discounted to their present value. Any changes in the
estimates are adjusted on a progressive basis. In determining the rehabilitation obligations, the entity
has assumed no significant changes will occur in the relevant Federal, State or foreign legislation in
relation to rehabilitation of such minerals projects in the future. At balance date, the group does not
consider it has any significant unsatisfied obligations in respect to rehabilitation costs.

(o)

Employee benefits
Provision is made for the Group liability for employee benefits arising from services rendered by
employees to balance date. Employee benefits expected to be settled within 12 months together with
entitlements arising from wages, salaries and annual leave which will be settled after 12 months, have
been measured at the amounts expected to be paid when the liability is settled plus related on-costs.
Other employee benefits payable later than 12 months have been measured at the present value of the
estimated future cash outflows to be made for those benefits.
Contributions are made by the Group to several employee superannuation funds and are charged as
expenses when incurred.

(p)

Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST),
except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO).
In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of
an item of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST
recoverable from, or payable to, the ATO is included as a current asset or liability in the Statement of
Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST
components of cash flows arising from investing and financing activities which are recoverable from,
or payable to, the ATO are classified as operating cash flows.

(q)

Operating Segments
Operating Segments are identified on the basis of internal management reports that are regularly
reviewed by the entitys chief operating decision maker, for the purposes of allocating resources and
assessing performance.
Segment revenues and expenses are those directly attributable to the segments. Segment assets consist
principally of cash, receivables, other financial assets, property, plant and equipment, net of
allowances and accumulated depreciation and mineral properties. Segment liabilities consist
principally of accounts payable and provisions.

(r)

Earnings per share

Basic earnings per share (EPS) is calculated by dividing the net profit or loss attributable to
members of the Company for the reporting period, after excluding any costs of servicing equity (other
than ordinary shares and converting preference shares classified as ordinary shares for EPS
calculation purposes), by the weighted average number of ordinary shares of the Company, adjusted
for any bonus issue.

127

Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of
financing costs associated with potential ordinary shares and the effect on revenues and expenses of
conversion to ordinary shares associated with potential ordinary shares, by the weighted average
number of ordinary shares and potential ordinary shares adjusted for any bonus issue.
(s)

Foreign currency transactions and balances

Functional and presentation currency
The functional currency of each of the Groups entities is the currency of the primary economic
environment in which that entity operates. Though the Companys functional currency is Australian
dollars the presentation currency is US dollars. Refer note 1(d).
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates
prevailing at the date of the transaction. Foreign currency monetary items are translated at the yearend exchange rate. Non-monetary items measured at historical cost continue to be carried at the
exchange rate at the date of the transaction.
Non-monetary items measured at fair value are reported at the exchange rate at the date when fair
values were determined.
Exchange differences arising on the translation of monetary items are recognised in the profit before
income tax in the Statement of Comprehensive Income.
Group companies
The financial results and position of foreign operations whose functional currency is different from
the Groups presentation currency are translated as follows:

assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

Income and expenses are translated at average exchange rates for the period where this
approximates rate at the transaction date; and

retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the
Groups foreign currency translation reserve in the Statement of Financial Position. These differences
are recognised in the other comprehensive income within the Statement of Comprehensive Income in
the period in which the operation is disposed.
The functional currency of the parent entity, Medusa Mining Limited is Australian dollars, Mindanao
Mineral Processing and Refining Corporation is United States dollars and the remaining entities are
Philippine Pesos.
(t)

Cash and cash equivalents

For the purpose of the Statement of Cash Flows, cash and cash equivalents include:

cash on hand and at call deposits with bank or financial institutions, net of bank overdrafts; and

investments in money market instruments with less than 30 days to maturity.

These amounts are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.

128

(u)

Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the
contractual provisions to the instrument. For financial assets, this is equivalent to the date that the
company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is
adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the
instrument is classified at fair value through profit or loss, in which case transaction costs are
expensed to profit or loss immediately.
Classification and subsequent measurement
Finance instruments are subsequently measured at either of fair value or amortised cost using the
effective interest rate method. Fair value represents the amount for which an asset could be exchanged
or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an
active market are used to determine fair value. In other circumstances, valuation techniques are
adopted.
Amortised cost is calculated as:
(a)

the amount at which the financial asset or financial liability is measured at initial recognition;

(b)

less principal repayments;

(c)

plus or minus the cumulative amortisation of the difference, if any, between the amount initially
recognised and the maturity amount calculated using the effective interest method; and

(d)

less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevant
period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts
(including fees, transaction costs and other premiums or discounts) through the expected life (or when
this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying
amount of the financial asset or financial liability. Revisions to expected future net cash flows will
necessitate an adjustment to the carrying value with a consequential recognition of an income or
expense in profit or loss.
The Group does not designate any interests in subsidiaries, associates or joint venture entities as being
subject to the requirements of accounting standards specifically applicable to financial instruments.
(i)

Financial assets at fair value through profit or loss

Financial assets are classified at fair value through profit or loss when they are either held for
trading for the purpose of short-term profit taking, derivatives not held for hedging purposes,
or when they are designated as such to avoid an accounting mismatch or to enable performance
evaluation where a group of financial assets is managed by key management personnel on a fair
value basis in accordance with a documented risk management or investment strategy. Such
assets are subsequently measured at fair value with changes in carrying value being included
in profit or loss.

(ii)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market and are subsequently measured at amortised cost.

129

(iii)

Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured
at amortised cost.

Fair value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques
are applied to determine the fair value for all unlisted securities, including recent arms length
transactions, reference to similar instruments and option pricing models.
Impairment
At each reporting date, the Group assesses whether there is objective evidence that a financial
instrument has been impaired. Impairment losses are recognised in the Statement of Comprehensive
Income.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the
asset is transferred to another party whereby the entity no longer has any significant continuing
involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised
where the related obligations are either discharged, cancelled or expired. The difference between the
carrying value of the financial liability extinguished or transferred to another party and the fair value
of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in
profit or loss.
(v)

Inventories
Raw materials and stores, ore stockpiles and work in progress and finished gold stocks are physically
measured or estimated and valued at the lower of cost and net realisable value. Net realisable value
less costs to sell is assessed annually based on the amount estimated to be obtained from sale of the
item of inventory in the normal course of business, less any anticipated costs to be incurred prior to
its sale.
Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed
overhead expenditure and depreciation and amortisation relating to mining activities, the latter being
allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory
on the basis of weighted average costs. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and the estimated costs necessary
to make the sale.
Inventories of consumable supplies and spare parts expected to be used in production are valued at the
lower of weighted average cost, which includes the cost of purchase as well as transportation and
statutory charges, or net realisable value. Any provision for obsolescence is determined by reference
to specific stock items identified.
During the exploration and development phase, where the cost of extracting the ore exceeds the likely
recoverable amount, work in progress inventory is written down to net realisable value.

(w)

Share based payments

The fair value of the equity to which employees become entitled is measured at grant date and
recognised as an expense over the vesting period, with a corresponding increase to an equity account.
The fair value of shares is ascertained as the market bid price.
The fair value of options is ascertained using a Black-Scholes pricing model. The number of shares
and options expected to vest is reviewed and adjusted at each reporting date such that the amount
recognised for services received as consideration for the equity instruments granted shall be based on
the number of equity instruments that eventually vest.

130

(x)

Critical accounting estimates and judgments

The directors evaluate estimates and judgments incorporated into the financial report based on
historical knowledge and best available current information. Estimates assume a reasonable
expectation of future events and are based on current trends and economic data, obtained both
externally and within the group.
Key estimates Impairment of non-financial assets
The group assesses impairment at each reporting date by evaluating conditions specific to the group
that may lead to impairment of non-financial assets (refer note 1(i)). Where an impairment trigger
exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in
assessing recoverable amounts incorporate a number of key estimates. Refer to details of key elements
and carrying values of non-financial assets at note 10.
Key estimates Recoverability of long lived assets
Certain assumptions are required to be made in order to assess the recoverability of long-lived assets.
Key assumptions include the future price of gold, future cash flows, an estimated discount rate and
estimates of ore reserves. In addition, cash flows are projected over the life of mine, which is based
on proved and probable ore reserves. Estimates of ore reserves in themselves are dependent on various
assumptions, in addition to those described above, including cut-off grades. Changes in these
estimates could materially impact on ore reserves, and could therefore affect estimates of future cash
flows used in the assessment of recoverable amount.
Key estimates Determination of ore reserves and remaining mine life
The Company estimates its ore reserves and mineral resources based on information compiled by
Competent Persons (as defined in accordance with the Australian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves as revised December 2004 (the JORC code)). Reserves
determined in this way are taken into account in the calculation of depreciation, amortisation,
impairment, deferred mining costs, rehabilitation and environmental expenditure.
In estimating the remaining life of the mine for the purpose of amortisation and depreciation
calculations, due regard is given, not only to the amount of remaining recoverable gold ounces
contained in proved and probable ore reserves, but also to limitations which could arise from the
potential for changes in technology, demand, and other issues which are inherently difficult to
estimate over a lengthy time frame.
Where a change in estimated recoverable gold ounces contained in proved and probable ore reserves
is made, depreciation and amortisation is accounted for prospectively,
The determination of ore reserves and remaining mine life affects the carrying value of a number of
the consolidated entitys assets and liabilities including deferred mining costs and the provision for
rehabilitation.
Key estimates Exploration and evaluation expenditure
The consolidated entitys accounting policy for exploration and evaluation expenditure results in
certain items of expenditure being capitalised for an area of interest where it is considered likely to
be recoverable by future exploitation or sale where the activities have not reached a stage which
permits a reasonable assessment of the existence of reserves. This policy requires management to
make certain estimates and assumptions as to future events and circumstances, in particular whether
an economically viable extraction operation can be established. Any such estimates and assumptions
may change as new information becomes available. If, after having capitalised the expenditure under
the policy, a judgement is made that recovery of the expenditure is unlikely, the relevant capitalised
amount will be written off to the Statement of Comprehensive Income.

131

Key estimates Development expenditure

Development activities commence after project sanctioning by the appropriate level of management.
Judgement is applied by management in determining when a project is economically viable. In
exercising this judgment, management is required to make certain estimates and assumptions similar
to those described above for capitalised exploration and evaluation expenditure. Any such estimates
and assumptions may change as new information becomes available. If, after having commenced the
development activity, a judgement is made that a development asset is impaired, the appropriate
amount will be written off to the Statement of Comprehensive Income.
(y)

Rounding of amounts
The Company has applied the relief available to it under Class Order 98/100 and accordingly, amounts
in the financial report have been rounded to the nearest $1,000.

2.

REVENUE
Operating activities:
Gold and silver sales
Non-operating activities:
Interest revenue
Other
Total revenue
Other Income:
Gain on disposal of asset
3.

I 6.2

Revenue
Year
ended
30 June
2010
US$000
Audited

Year
ended
30 June
2009
US$000
Restated

Year
ended
30 June
2009
A$000
Audited

Year
ended
30 June
2008
A$000
Audited

93,882

42,649

57,018

17,630

622
4

94,508

174
2

42,825

233
1

57,252

389
55

18,074

81

Year
ended
30 June
2010
US$000
Audited

Year
ended
30 June
2009
US$000
Restated

Year
ended
30 June
2009
A$000
Audited

Year
ended
30 June
2008
A$000
Audited

3,594
4,256

7,850

1,906
1,676

3,582

2,548
2,241

4,789

2,449
1,187

3,636

Expenses

Profit/(loss) before income tax

expense/(income) has been determined after
charging/(crediting) the following items:
Depreciation of non-current assets (Note 10)
Amortisation expense (Note 11)
Total depreciation and amortisation

132

Foreign exchange loss

Loss on sale of investment
Decrease in fair value of investment
Employee benefits expense
Share based payments expense
Finance Cost:
Interest Key management personnel
related entities (Note 20)
Impairment losses:
Assets written off

Operating lease rental:

minimum lease payments
4.

Year
ended
30 June
2010
US$000
Audited

Year
ended
30 June
2009
US$000
Restated

Year
ended
30 June
2009
A$000
Audited

Year
ended
30 June
2008
A$000
Audited

24

3,870
257

195

1,856
261

261

2,476
349

124
240
380
2,735
296

376

225

225

301

301

175

175

49

34

349

43

Year
ended
30 June
2010
US$000
Audited

Year
ended
30 June
2009
US$000
Restated

Year
ended
30 June
2009
A$000
Audited

Year
ended
30 June
2008
A$000
Audited

89
(47)

42

(1,714)

(1,714)

(2,292)

(2,292)

Taxation

The components of tax expense comprise:

Current tax
Deferred tax (note 13)
Recoupment of prior year tax losses
Under provision in respect of prior years

The prima facie tax on loss before income tax

is reconciled to the income tax as follows:
Operating profit/(loss) before income tax
Prima facie income tax (expense)/credit
at 30% (2009 & 2008: 30%) on
operating profit/(loss)
less tax effect of:
Other non-deductible expenses
Difference of effective foreign income
tax rates
Non assessable fair value gain
Non deductible reserve share based payments
Deferred tax assets not brought to account
Deferred tax assets recognised
Recoupment of prior year losses not
previously brought to account
Income tax (expense)/income
The applicable weighted average effective tax
rates are as follows

2,366

2,366

65,854

26,793

35,820

1,019

19,756

8,038

10,746

306

788

302

299

265

(20,579)

77

42
0%

133

(10,132)

78

(13,441)

105

114
89

2,366

(1,714)

(2,291)

(774)
2,366

(6)%

(6)%

232%

The reason for the 0 per cent. weighted average effective tax rate for the year ended 30 June 2010 is due to
the impact of the tax free holiday in Mindanao Mineral Processing and Refining Corporation, a subsidiary
of the parent entity, through which sales of bullion are recorded. In the year ended 30 June 2009 the decrease
in the weighted average effective consolidated tax rate for 2010 was a result of utilising available tax losses
and the impacts of foreign tax concessions.
The decrease in the weighted average effective consolidated tax rate for 2009 is a result of utilising available
tax losses and the impacts of foreign tax concessions. In the previous year, the effective tax rate included the
impact of the initial recognition of certain deferred tax liabilities at higher estimated tax rates.
Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions for
deductibility set out in Note 1(f) occur:

temporary differences
Australian tax losses
Philippine tax losses

Year
ended
30 June
2010
US$000
Audited

Year
ended
30 June
2009
US$000
Restated

Year
ended
30 June
2009
A$000
Audited

Year
ended
30 June
2008
A$000
Audited

109
775
11

895

90
741
54

885

113
920
72

1,104

840
1,470
1,213

3,523

895

885

1,104

(5)

3,518

Deferred tax liabilities set off against

deferred tax assets

The benefit of tax losses will only be obtained if:

(i)

the Group derives future assessable income of a nature and of an amount sufficient to enable the
benefit to be realised; or the benefit can be utilised by another company in the Group in accordance
with Division 170 of the Income Tax Assessment Act 1997;

(ii)

the Company and/or Group continues to comply with the conditions for deductibility imposed by the
law; and

(iii)

no changes in tax legislation adversely affect the Company and/or the Group in realising the benefit.

5.

Earning/(Loss) per share

Earnings used to calculate basic and

diluted EPS
Weighted average number of ordinary
shares used in the calculation of the
basic earnings per share
Weighted average unlisted options
outstanding
Weighted average of ordinary shares
diluted as at 30 June 2010

Year
ended
30 June
2010
US$000
Audited

Year
ended
30 June
2009
US$000
Restated

Year
ended
30 June
2009
A$000
Audited

65,812

28,507

38,111

173,598,847

152,723,201

152,723,201

43,626,534

1,125,994

479,874

479,874

174,724,841

153,203,075

153,203,075

43,626,534

134

Year
ended
30 June
2008
A$000
Audited
(1,347)

Diluted earnings per share was not calculated for the year ended 30 June 2008 as the result was anti-dilutive
in nature.
6.

Adjusted underlying profit

Consolidated
2010
US$000

As at 30 June 2010, 6,368 gold ounces of current years production was not
dispatched and has been treated as inventory to comply with Australian
Accounting Standards. Subsequent to year end these gold ounces were
shipped in July 2010 and proceeds relating to the sale were received.
If the gold bullion was actually shipped before 30 June 2010,
the reported net profit for 2010 financial year would be as follows:
Profit attributable to members as per Statement of Comprehensive Income
Net profit attributable to bullion awaiting shipment to current years production
but not included in Statement of Comprehensive Income

65,812
5,893

71,705

Adjusted Underlying Profit

Earnings per share based on Adjusted Underlying Profit:
Basic earnings per share
Diluted earnings per share
7.

Trade & other receivables

Bullion awaiting settlement

GST/VAT receivables
Other receivables
Total trade & other receivables
8.

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

23,365
7,270
4,260

34,895

3,281
1,725

5,006

4,076
2,122

6,198

1,385
800

2,185

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

1,887
1,454
443
1,727

5,511

833
58
273

1,164

1,034
72
340

1,446

755

181

936

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

468

468

128

128

160

160

333

333

Inventories

Consumables at cost
Ore stockpile at cost
Gold in circuit at cost
Bullion awaiting shipment at cost
Total inventories
9.

US$ 0.412
US$ 0.410

Other Current Assets

Prepayments
Total prepayments

135

10.

Property, Plant and Equipment

Plant and equipment:

At cost as at
less accumulated depreciation
Total plant and equipment at net book value
Furniture and fittings:
At cost
less accumulated depreciation
Total furniture and fittings at net book value
Total carrying amount at end of year

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

43,342
(8,883)

34,459

34,971
(5,252)

29,719

44,219
(6,529)

37,690

32,406
(4,013)

28,393

269
(133)

136

34,595

192
(88)

104

29,823

238
(110)

129

37,819

162
(55)

107

28,500

29,719
7,668

620
(3,548)

34,459

22,948
8,747
(17)
(94)
(1,865)

29,719

28,393
10,868
(21)
942
(2,493)

37,690

29,430
1,893
(174)
(325)
(2,431)

28,393

104
73

4
(45)

136

102
61
(2)
(16)
(41)

104

106
75
(3)
5
(55)

129

95
43
(6)
(7)
(19)

106

Reconciliations:
Plant and equipment:
Carrying amount at beginning of year
plus additions
less disposal of assets
plus/(less) forex differences on translation
less depreciation
Carrying amount at end of year
Furniture and fittings:
Carrying amount at beginning of year
plus additions
less disposal of assets
plus/(less) forex differences on translation
less depreciation
Carrying amount at end of year
11.

Exploration, evaluation and development expenditure

Exploration and evaluation expenditure:

At cost
less accumulated amortisation
Net exploration and evaluation expenditure
Development expenditure:
At cost
less accumulated amortisation
Net development expenditure
Total carrying amount at end of year

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

17,904

17,904

12,288

12,288

14,763

14,763

9,886

9,886

64,837
(6,763)

58,074

75,978

42,940
(2,506)

40,434

52,722

54,150
(3,115)

51,035

65,798

32,075
(1,221)

30,855

40,740

136

Reconciliations:

Exploration and evaluation expenditure:

Carrying amount at beginning of year
plus costs incurred
less transferred to development
less expenditure written off
plus/(less) forex differences upon translation
Carrying amount at end of year
Development expenditure:
Carrying amount at beginning of year
plus costs incurred
plus transferred from exploration
less amortisation expense
plus/(less) forex differences upon translation
Carrying amount at end of year

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

12,288
5,060

(294)
850

17,904

10,449
3,391

(60)
(1,492)

12,288

9,886
4,213

(81)
745

14,763

23,119
6,716
(19,053)
(572)
(324)

9,886

40,434
21,769

(4,256)
127

58,074

26,539
16,618

(1,677)
(1,046)

40,434

30,854
20,649

(2,241)
1,773

51,035

7,230
6,360
19,053
(1,187)
(602)

30,854

During 2009 the Company increased its JORC compliant resources to 1,380,000 ounces (2008: 862,000
ounces) resulting in a reduction to amortisation expense for development of $1,335,000. As at 30 June 2009,
4.01 per cent. of total development expenditure has been amortised. The remaining amortisation period is
dependent upon future production levels and any revision to resources.
12.

Trade & other payables

Current:
Trade payables and accrued expenses
Accrued employee benefits
Total current trade & other payables
13.

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

8,003
269

8,272

9,013
180

9,193

11,200
223

11,424

6,685
161

6,846

Opening
Balance
US$000

Forex on
translation
US$000

Credit/
(charged) to
Income
US$000

Closing
Balance
US$000

313

14

(48)

279

69

73

Deferred tax

Consolidated Group
30 June 2010
Deferred tax liability
Capitalised exploration and
evaluation expenditure
Deferred tax assets
Carried forward tax losses

137

Opening
Balance
US$000
30 June 2009 as restated (US$)
Deferred tax liability
Capitalised exploration and evaluation
expenditure
Unrealised forex gains

Deferred tax assets

Carried forward tax losses

30 June 2009 as audited (AUS$)

Deferred tax liability
Capitalised exploration and evaluation
expenditure
Unrealised forex gains

Deferred tax assets

Carried forward tax losses

30 June 2008
Deferred tax liability
Capitalised exploration and evaluation
expenditure
Unrealised forex gains

Deferred tax assets

Carried forward tax losses

Forex on
translation
US$000

Credit/
(charged) to
Income
US$000

Closing
Balance
US$000

3,170
311

3,481

(226)
(22)

(248)

(2,631)
(289)

(2,920)

313

313

1,902

(627)

(1,206)

69

Opening
Balance
A$000

Forex on
translation
A$000

Credit/
(charged) to
Income
A$000

Closing
Balance
A$000

(4,857)
(361)

(5,218)

(469)
(35)

(504)

4,937
395

5,332

(389)

(389)

2,852

2,852

275

275

(3,041)

(3,041)

86

86

(4,857)
(361)

(5,218)

(4,857)
(361)

(5,218)

2,852

2,852

2,852

2,852

138

14.

Auditors remuneration

Remuneration received or due and receivable

by the Companys auditors, Grant Thornton
Audit Pty Ltd for:
auditing or reviewing the financial reports
other services:
Financial reporting advice
other services provided by related practice
of auditor taxation and compliance
Total auditors remuneration
Remuneration of other auditors of the
Companys Philippine subsidiaries for:
auditing or reviewing the financial reports
other services provided by related practice
of auditor
legal and taxation
Total auditors remuneration
15.

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

116

89

119

55

11

133

99

132

11

72

48

33

45

37

51

99

11

44

14

59

42

79

Issued capital

187,529,911 ordinary shares (30 June 2009:

168,691,960; 30 June 2008: 145,057,548)
less issue costs
Total issued capital

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

75,269
(4,363)

70,906

74,082
(4,306)

69,776

98,310
(5,536)

92,774

70,101
(4,235)

65,866

Ordinary shares
Balance at beginning of year
Transfer from option reserve
Ordinary shares issued during each year:
(i) 390,000 options converted @ A$1.25 each
(ii) 800,000 options converted @ A$0.7128 each
(iii) 600,000 options converted @ A0.4334 each
(iv) 250,000 options converted at $0.72 each
(v) 1,000,000 options converted @ A$0.90 each
(vi) 2,000,000 options converted @ $1.25 each
(vii) 20,300,000 shares issued @ A$1.21 each
(viii) 84,412 shares issued @ A$0.78 each
(ix) 3,000,000 options converted @ A0.5764
(x) 20,000 options converted @ A$0.6500 each
less issue costs

69,776

428
526
237

(61)

70,906

Balance at end of 2009

51,999

147
753
1,944
15,713
53

(833)

69,776

65,867

180
900
2,500
24,563
66

(1,302)

92,774

63,805
994

1,729
13
(675)

65,866

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to
proceeds on winding up of the parent entity in proportion to the number of shares. At shareholders meetings

139

each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on
a show of hands.
The Company has fully paid ordinary shares of no par value.

Ordinary shares
Balance at beginning of year
Ordinary shares issued during the year:
14 December 2007
21 December 2007
10 September 2008
26 September 2008
05 March 2009
27 March 2009
05 June 2009
01 September 2009
05 October 2009
18 November 2009
18 November 2009
30 December 2009
31 March 2010
28 April 2010
8 June 2010
Balance at end of year

2010
Audited
Number

2009
Restated
Number

2009
Audited
Number

2008
Audited
Number

168,691,960

145,057,548

145,057,548

142,037,548

100,000
50,000
750,000
190,000
600,000
17,027,845
10,106
110,000

187,529,911

250,000
1,000,000
20,300,000
2,000,000
84,412

168,691,960

250,000
1,000,000
20,300,000
2,000,000
84,412

168,691,960

20,000
3,000,000

145,057,548

Capital Management
Management controls the capital of the group by monitoring performance against budget to provide the
shareholders with adequate returns and ensure that the group can fund its operations and continue as a going
concern.
The groups debt and capital includes ordinary share capital, options and financial liabilities, supported by
financial assets.
There are no externally imposed capital requirements.
Management effectively manages the groups capital by assessing the groups financial risks and adjusting
its capital structure in response to changes in these risks and in the market. These responses include the
management of debt levels, distributions to shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the group during
the periods.
16.

Reserves

Option reserve
Foreign currency translation reserve
Total reserves

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

1,834
5,044

6,878

1,577
2,733

4,310

2,072
(3,304)

(1,232)

1,723
(2,252)

(529)

140

(a)

Option reserve
(a)

Unlisted options over ordinary shares at 30 June 2010

240,000 options expiring 31 March 2011 and exercisable at $1.25 cents each (All options are
vested at balance date) 1,000,000 options expiring 22 January 2012 and exercisable at $1.25
each (500,000 options are vested at balance date).

(b)

Unlisted options over ordinary shares at 30 June 2009

800,000 options expiring on 19 December 2009 and exercisable at 71.28 cents each;
600,000 options expiring 23 December 2009 and exercisable at 43.34 cents each;
630,000 options expiring 31 March 2011 and exercisable at $1.25 cents each; and
1,000,000 options expiring 22 January 2012 and exercisable at $1.25 each.

(c)

Unlisted options over ordinary shares at 30 June 2008

250,000 options expiring on 02 October 2008 and exercisable at 72.0 cents each;
1,500,000 options expiring on 02 October 2008 and exercisable at 90.0 cents each;
500,000 options expiring on 02 October 2008 and exercisable at $1.50 each;
151,446 options expiring on 13 November 2008 and exercisable at 65 cents each;
7,000,000 options expiring on 13 November 2008 and exercisable at $1.60 each;
2,000,000 options expiring 1 June 2009 and exercisable at $1.25 each;
800,000 options expiring on 19 December 2009 and exercisable at 71.28 cents each;
600,000 options expiring 23 December 2009 and exercisable at 43.34 cents each; and
630,000 options expiring 31 March 2011 and exercisable at $1.25 cents each.

The above unlisted options do not entitle the holders to participate in any share issue of the Company.
The option reserve records items recognised as expenses on valuation of share based payments.
(b)

Foreign Currency Translation Reserve

The foreign currency translation reserve for the group records exchange differences arising on
translation of foreign controlled subsidiaries.

17.

Share based payments

The following share based payment arrangements existed at 30 June 2010:

(i)

On 23 June 2004, Mr. Geoffrey Davis, Managing Director of the Company became entitled to 600,000
options exercisable at $0.4334 per option. The grant of options which was approved at the Companys
Annual General Meeting on 11 November 2004, hold no voting or dividend rights. At balance date,
all options were exercised.

(ii)

On 19 December 2006, the Company issued 800,000 unlisted options over the shares of the Company
to certain employees. The options which hold no voting or dividend rights have an expiry date of
19 December 2009 and are exercisable at $0.7128 per option.
Under the terms of the issue, the employees would be required to remain in the employment of the
Company at 19 December 2007 to achieve 50 per cent. vesting of the options, with full vesting if they
remain employees of the Company a year later on 19 December 2008. During the financial year all
options were exercised.

141

(iii)

On 18 April 2008, the Company issued 630,000 unlisted options over the shares of the Company to
certain employees. The options which hold no voting or dividend rights have an expiry date of
31 March 2011 and are exercisable at $1.25 per option.
Under the terms of the issue, the employees would be required to remain in the employment of the
Company at 31 March 2009 to achieve 50 per cent. vesting of the options, with full vesting if they
remain employees of the Company a year later on 31 March 2010. At balance date 240,000 options
remained unexercised.

(iv)

On 23 January 2009 the Company issued 1,000,000 unlisted options over the shares of the Company
to certain employees. The options which hold no voting or dividend rights have an expiry date of
22 January 2012 and are exercisable at $1.25 per option.
Under the terms of the issue, the employees would be required to remain in the employment of the
Company at 22 January 2010 to achieve 50 per cent. vesting of the options, with full vesting if they
remain employees of the Company a year later on 22 January 2011. At balance date all options
remained unexercised.

The following share based payment arrangements existed at 30 June 2009:

(i)

On 23 June 2004, Mr. Geoff Davis, Managing Director of the Company became entitled to 600,000
options exercisable at $0.4334 per option. The grant of options which was approved at the Companys
Annual General Meeting on 11 November 2004, hold no voting or dividend rights. The options which
are fully vested expire on 23 December 2009. At balance date, no options have been exercised.

(ii)

On 3 October 2005, Mr. Kevin Tomlinson, Non-Executive Chairman of the Company became entitled
to 1,000,000 unlisted options exercisable at the following prices:

250,000 options exercisable at $0.72 per option;

500,000 options exercisable at $0.90 per option; and

250,000 options exercisable at $1.50 per option.

The grant of option which was approved at the Companys Annual General Meeting on 29 November
2005, held no voting or dividend rights and was scheduled to expire on 2 October 2008. There were
no restrictions to prevent these options from being exercised over their life.
During the month of September 2008, 250,000 options were exercised at $0.72 per option (weighted
average market price $0.91) and 500,000 options were exercised at $0.90 per option (weighted
average market price $0.98). On 2 October 2008 the remaining 250,000 options remained unexercised
and expired.
At balance sheet date no options were held.
(iii)

Shareholders at the Companys Annual General Meeting on 27 November 2006 approved the issue of
500,000 unlisted options exercisable at $0.90 per option to the Companys Finance Director, Roy
Daniel.
The options which held no voting or dividend rights had an expiry date of 2 October 2008. There were
no restrictions to prevent these options from being exercised over their life.
During the month of September 2008, 500,000 options were exercised at $0.90 per option (weighted
average market price $0.98).
At balance sheet date no options were held.

142

(iv)

Shareholders at the Companys Annual General Meeting on 27 November 2006, approved the issue
of 750,000 unlisted options exercisable at the following prices to Dr. Robert Weinberg:

500,000 options exercisable at $0.90 per option; and

250,000 options exercisable at $1.50 per option.

The options which held no voting or dividend rights had an expiry date of 2 October 2008. There were
no restrictions to prevent these options from being exercised over their life.
The options were unexercised and expired on 2 October 2008.
At balance sheet date, no options were held.
(v)

On 30 April 2007, the Company issued 171,446 unlisted options over the shares of the Company as
part consideration for funds raised in a placement in November 2006:
The options which held no voting or dividend rights had an expiry date of 13 November 2008 and
were exercisable at $0.65 per option. There were no restrictions to prevent these options from being
exercised over their life. During the previous financial year, 20,000 options were exercised option
(weighted average market price $1.40). The 151,446 options that remained unexercised expired on
13 November 2008.

(vi)

On 19 December 2006, the Company issued 800,000 unlisted options over the shares of the Company
to certain employees. The options which hold no voting or dividend rights have an expiry date of
19 December 2009 and are exercisable at $0.7128 per option.
Under the terms of the issue, the employees would be required to remain in the employment of the
Company at 19 December 2007 to achieve 50 per cent. vesting of the options, with full vesting if they
remain employees of the Company a year later on 19 December 2008. During the financial year none
of the options were exercised.

(vii) On 21 December 2007, the Company issued 2,000,000 unlisted options over the shares of the
Company as part consideration for funds raised in a placement in June 2007:
The options which held no voting or dividend rights had an expiry date of 1 June 2009 and were
exercisable at $1.25 per option. There were no restrictions to prevent these options from being
exercised over their life. During the month of May all of the options were exercised (weighted average
market price $1.85).
(viii) On 18 April 2008, the Company issued 630,000 unlisted options over the shares of the Company to
certain employees. The options which hold no voting or dividend rights have an expiry date of
31 March 2011 and are exercisable at $1.25 per option.
Under the terms of the issue, the employees would be required to remain in the employment of the
Company at 31 March 2009 to achieve 50 per cent. vesting of the options, with full vesting if they
remain employees of the Company a year later on 31 March 2010.
(ix)

On 23 January 2009 the Company issued 1,000,000 unlisted options over the shares of the Company
to certain employees. The options which hold no voting or dividend rights have an expiry date of
22 January 2012 and are exercisable at $1.25 per option.
Under the terms of the issue, the employees would be required to remain in the employment of the
Company at 22 January 2010 to achieve 50 per cent. vesting of the options, with full vesting if they
remain employees of the Company a year later on 22 January 2011.

The following share based payment arrangements existed at 30 June 2008:

(i)

On 23 June 2004, Mr. Geoff Davis, Managing Director of the Company became entitled to 600,000
options exercisable at $0.4334 per option. The grant of options which was approved at the Companys

143

Annual General Meeting on 11 November 2004, hold no voting or dividend rights. The options which
are fully vested expire on 23 December 2009. At balance date, no options have been exercised.
(ii)

On 3 October 2005, Mr. Kevin Tomlinson, Non-Executive Chairman of the Company became entitled
to 1,000,000 unlisted options exercisable at the following prices:

250,000 options exercisable at $0.72 per option;

500,000 options exercisable at $0.90 per option; and

250,000 options exercisable at $1.50 per option.

The grant of option which was approved at the Companys Annual General Meeting on 29 November
2005, held no voting or dividend rights and was scheduled to expire on 2 October 2008. There were
no restrictions to prevent these options from being exercised over their life.
During the month of September 2008, 250,000 options were exercised at $0.72 per option (weighted
average market price $0.91) and 500,000 options were exercised at $0.90 per option (weighted
average market price $0.98). On 2 October 2008 the remaining 250,000 options remained unexercised
and expired.
At balance sheet date no options were held.
(iii)

Shareholders at the Companys Annual General Meeting on 27 November 2006 approved the issue of
500,000 unlisted options exercisable at $0.90 per option to the Companys Finance Director, Roy
Daniel.
The options which held no voting or dividend rights had an expiry date of 2 October 2008. There were
no restrictions to prevent these options from being exercised over their life.
During the month of September 2008, 500,000 options were exercised at $0.90 per option (weighted
average market price $0.98).
At balance sheet date no options were held.

(iv)

Shareholders at the Companys Annual General Meeting on 27 November 2006, approved the issue
of 750,000 unlisted options exercisable at the following prices to Dr. Robert Weinberg:

500,000 options exercisable at $0.90 per option; and

250,000 options exercisable at $1.50 per option.

The options which held no voting or dividend rights had an expiry date of 2 October 2008. There were
no restrictions to prevent these options from being exercised over their life.
The options were unexercised and expired on 2 October 2008.
At balance sheet date, no options were held.
(v)

On 30 April 2007, the Company issued 171,446 unlisted options over the shares of the Company as
part consideration for funds raised in a placement in November 2006:
The options which held no voting or dividend rights had an expiry date of 13 November 2008 and
were exercisable at $0.65 per option. There were no restrictions to prevent these options from being
exercised over their life. During the previous financial year, 20,000 options were exercised option
(weighted average market price $1.40). The 151,446 options that remained unexercised expired on
13 November 2008.

(vi)

On 19 December 2006, the Company issued 800,000 unlisted options over the shares of the Company
to certain employees. The options which hold no voting or dividend rights have an expiry date of
19 December 2009 and are exercisable at $0.7128 per option.

144

Under the terms of the issue, the employees would be required to remain in the employment of the
Company at 19 December 2007 to achieve 50 per cent. vesting of the options, with full vesting if they
remain employees of the Company a year later on 19 December 2008. During the financial year none
of the options were exercised.
(vii) On 21 December 2007, the Company issued 2,000,000 unlisted options over the shares of the
Company as part consideration for funds raised in a placement in June 2007:
The options which held no voting or dividend rights had an expiry date of 1 June 2009 and were
exercisable at $1.25 per option. There were no restrictions to prevent these options from being
exercised over their life. During the month of May all of the options were exercised (weighted average
market price $1.85).
(viii) On 18 April 2008, the Company issued 630,000 unlisted options over the shares of the Company to
certain employees. The options which hold no voting or dividend rights have an expiry date of
31 March 2011 and are exercisable at $1.25 per option.
Under the terms of the issue, the employees would be required to remain in the employment of the
Company at 31 March 2009 to achieve 50 per cent. vesting of the options, with full vesting if they
remain employees of the Company a year later on 31 March 2010.
Share based options
Consolidated
2010
2009
2008
Weighted
Weighted
Weighted
average
average
average
exercise
exercise
exercise
Number of
price Number of
price Number of
price
options
(A$)
options
(A$)
options
(A$)
Outstanding at start of year 3,030,000
Granted

Forfeited

Exercised
(1,790,000)
Outstanding at year end
1,240,000
Exercisable at year end
740,000

1.0538 6,431,446
1,000,000
(1,151,446)
(0.7362) (3,250,000)
1.2500 3,030,000
1.2500 1,715,000

1.0100 6,821,446
1.2500 2,630,000
1.1277

(1.1015) (3,020,000)
1.0538 6,431,446
0.9034 5,401,446

0.7258
1.2500

(0.5769)
1.0100
1.0041

A total of 1,790,000 options were exercised during the year ended 30 June 2010 (2009: 3,250,000; 2008:
3,020,000).
The options outstanding at 30 June 2010 (all of which are unlisted) had a weighted average exercise price of
A$1.25 (2009: A$1.0538; 2008: A$1.01) and a weighted average remaining contractual life of 17 months
(2009: 17.4 months; 2008: 11.09 months). The exercise price of all options outstanding at 30 June 2010 was
A$1.25 (2009: ranges from A$0.4334 to A$ 1.25; 2008: ranges from A$0.4334 to A$1.50).
Included under administration expense in the Statement of Comprehensive Income is U$256,797 (2009
restated: US$265,077; 2009 as audited: A$ 349,326; 2008: A$ 295,831)) and relates, in full, to equity-settled
share based payment transactions.

145

18.

Investment in controlled entities

The following companies are controlled entities of Medusa Mining Limited as at each balance sheet date:
Controlled Entities
Medusa Exploration & Development
Corporation (Note 1)
Phsamed Mining Corporation (Note 2)
Medusa Overseas Holding Corporation
(Note 3)
Philsaga Mining Corporation (Note 4)
Mindanao Mineral Processing and
Refining Corporation

Date of
incorporation

Country of
incorporation 2010

% interest held
2009

2008

29 May 2003
23 Apr 2003

Philippines
Philippines

40%
40%

40%
40%

40%
40%

08 May 2003
17 May 2001

Philippines
Philippines

64%
78%

64%
78%

64%
78%

03 Nov 2005

Philippines

100%

100%

100%

Note 1
Medusa Exploration and Development Corporation (MEDC) is 40 per cent. owned by Medusa Mining Limited (Medusa) There
are agreements in place which deal with the relationship between Medusa and the other shareholders in MEDC effectively limiting
those outside shareholders rights to an insignificant notional return of share capital. In such circumstances, the assets and liabilities
of MEDC and its subsidiaries have been attributed 100 per cent. to the Consolidated Entity and no minority interests are therefore
brought to account in the consolidated financial information.
Note 2
Phsamed Mining Corporation is 100 per cent. owned by MEDC.
Note 3
Medusa Overseas Holding Corporation (MOHC) is 60 per cent. owned by MEDC and 40 per cent. owned by Medusa. There are
agreements in place which deal with the relationship between Medusa Mining Limited (Medusa) and MEDC effectively limiting
those outside shareholders rights to an insignificant notional return of share capital. In such circumstances, the assets and liabilities
of MOHC and its subsidiaries have been attributed 100 per cent. to the Consolidated Entity and no minority interests are therefore
brought to account in the consolidated financial information.
Note 4
Philsaga Mining Corporation (PMC) is 60 per cent. owned by MOHC and 40 per cent. owned by Medusa. There are agreements in
place which deal with the relationship between Medusa Mining Limited (Medusa) and MOHC effectively limiting those outside
shareholders rights to an insignificant notional return of share capital. In such circumstances, the assets and liabilities of PMC and
its subsidiaries have been attributed 100 per cent. to the Consolidated Entity and no minority interests are therefore brought to account
in the consolidated financial information.

19.

Key management personnel remuneration

(a)

Remuneration
The totals of remuneration paid to Key Management Personnel of the group are as follows:
2010
US$000
Audited
Short-term benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share based payments

2,148
60

2,208

146

Consolidated
2009
2009
US$000
A$000
Restated
Audited
1,196
91

26

1,312

1,598
121

34

1,753

2008
A$000
Audited
1,400
116

1,516

(b)

Option holdings
The movement during the three years in the number of options over ordinary shares in Medusa Mining
Limited held directly, indirectly or beneficially, by each Director and Executive, including their
personally related entities is shown below.
(1)

Options vested and exercisable are all the options vested at the reporting date

(2)

Options that are not exercisable have not vested at the reporting date

(3)

Resigned 13 January 2010

(4)

Appointed 15 September 2009

(5)

Appointed 15 February 2010

(6)

Resigned 30 June 2010

2010

Name

Options
Balance granted as
01/07/09 remuneration

Directors
Kevin Tomlinson(3)

Geoffrey Davis
600,000
Peter Hepburn-Brown(4)

Roy Daniel

Robert Weinberg

Andrew Teo(5)

Executives
Peter Alphonso
280,000
Samuel Afdal

William Phillips(6)

Options
exercised

Options not
exercised
and lapsed

Balance
held
30/06/10

Vested &
Total not
exercisable exercisable
30/06/10(1) 30/06/10(2)

(600,000)

(200,000)

80,000

40,000

40,000

Options
lapsed

Balance
30/06/09

Vested &
exercisable
30/06/09

Total not
exercisable
30/06/09

(250,000)

(750,000)

600,000

600,000

280,000

200,000

80,000

Options Options sold,

Options
Balance granted as
acquired,
held at
01/07/07 remuneration
exercised appointment

Balance
30/06/09

Vested &
exercisable
30/06/08

Total not
exercisable
30/06/08

1,000,000
600,000
500,000
750,000

1,000,000
600,000
500,000
750,000

200,000

200,000

100,000

100,000

2009

Name
Directors
Kevin Tomlinson
Geoffrey Davis
Roy Daniel
Robert Weinberg
Executives
Peter Alphonso
Samuel Afdal
William Phillips

Options Options sold,

Balance granted as
acquired,
01/07/08 remuneration
exercised
1,000,000
600,000
500,000
750,000

200,000

80,000

(750,000)

(500,000)

2008

Name
Directors
Kevin Tomlinson
Geoffrey Davis
Roy Daniel
Robert Weinberg
Executives
Peter Alphonso
Samuel Afdal
William Phillips

1,000,000
2,600,000
1,000,000
750,000

(2,000,000)
(500,000)

147

(c)

Share holdings
The movement during the year in the number of ordinary shares in Medusa Mining Limited held
directly, indirectly or beneficially, by each Director, including their personally related entities is
shown below.
(1)

Resigned 13 January 2010

(2)

Appointed 15 September 2009

(3)

Appointed 15 February 2010

(4)

A one for 10 Bonus Issue of Shares declared by the Company on 8 March 2010

(5)

Resigned 30 June 2010

2010
Name

Shares
Balance
held at
01/07/09 appointment

Directors
Kevin Tomlinson(1)
782,950
Geoffrey Davis
4,902,500
Roy Daniel
1,270,007
Robert Weinberg
52,250
Peter
Hepburn-Brown(2)

Andrew Teo(3)
50,000
Executives
Peter Alphonso
5,000
Samuel Afdal
4,520,000
William Phillips(5) 13,915,271

Bonus
Issue(4)
of shares

Shares
purchased

Options
exercised

550,250
126,999
5,225

600,000

5,000

19,500
340,000

Shares
sold
(782,950)
(1,000,000)

200,000
(52,000)
(1,320,000)
(13,915,271)

Balance
30/06/10

5,052,750
1,397,006
57,475

55,000
172,500
3,540,000

2009

Name
Directors
Kevin Tomlinson
Geoffrey Davis
Roy Daniel
Robert Weinberg
Executives
Peter Alphonso
Samuel Afdal
William Phillips

Shares
Balance
held at
01/07/08 appointment

Shares
purchased

Options
exercised

Shares
sold

Balance
30/06/09

782,950
4,902,500
1,270,007
52,250

32,950
4,902,500
770,007
52,250

750,000

500,000

5,000
4,520,000
14,600,000

Shares
Balance
held at
01/07/07 appointment

Shares
purchased

Options
exercised

5,000
4,520,000
(684,729) 13,915,271

2008

Name
Directors
Kevin Tomlinson
Geoffrey Davis
Roy Daniel
Robert Weinberg
Executives
Peter Alphonso
Samuel Afdal
William Phillips

32,950
4,702,500
270,007
52,250

2,000,000
500,000

4,520,000
14,600,000

5,000

148

Shares
sold

(1,800,000)

Balance
30/06/08
32,950
4.902.500
770,007
52.250

5.000
4.520.000
14,600,000

20.

Related parties

Related parties transactions of Medusa Mining Limited fall into the following categories:
Key Management Personnel related parties
The following were key management personnel of the Group at any time during the reporting period and
unless otherwise indicated were key management personnel for the entire period.
Directors
Non-Executive Directors
Peter R Jones Chairman (appointed 8 July 1010)
Robert Weinberg Director
Mr. Andrew Teo Director (appointed 15 February 2010)
Kevin Tomlinson (resigned 13 January 2010)
Executive Directors
Geoffrey Davis Managing Director
Mr. Peter Hepburn-Brown Executive Director Operations (appointed 15 September 2009)
Roy Daniel Executive Director Finance and Joint Company Secretary
Executives
Peter Alphonso Joint Company Secretary, Medusa Mining Limited
Samuel Afdal President, Philsaga Mining Corporation
William Phillips Operations Director, Philsaga Mining Corporation (resigned 30 June 2010.)
Apart from the Key Management Personnel related transaction with the Company or its controlled entities
disclosed in this note, no Key Management Personnel has entered into a material contract with the Company
since the end of the financial year and there were no material contracts involving Management Personnels
interests subsisting at year end.
Related parties:

Peter R Jones, Geoffrey Davis, Roy Daniel, Robert Weinberg, Peter

Hepburn-Brown, Andrew Teo, Kevin Tomlinson

Type of transaction:

Director Protection Deed (Deed)

Transaction details:

The Deed entered into by the Company with each of the Directors of the
Company, indemnifies the Directors to the extent permitted by law, against
any liability, which he may incur whilst carrying out his duties as a
Director of the Company and against any costs and expenses incurred in
defending legal proceedings brought against him as a Director.
The Deed requires the Company to maintain in force Directors and
Officers Liability Insurance, with an agreed cover level, for the duration
of the Directors term of office and a period of 7 years thereafter.
The Deed also provides for the Directors to have access to the Companys
documents (including Board papers) for a period of 7 years after he ceases
to be a Director, subject to certain confidentiality and other requirements
being observed.

Related party:

Cedardale Holdings Pty Ltd

Nature of relationship:

Director related entity (Geoffrey Davis)

Type of transaction:

Lease of office premises

149

Transaction details:

The Company occupies and leases its office premises (inclusive of parking
bays) from Cedardale Holdings Pty Ltd at a rate of A$5,555; (2009:
A$4,132) per month.
During the year, Cedardale Holdings Pty Ltd charged the Company
A$56,153; (2009: A$45,381; 2008: A$43,279)) for the lease of office
premises. No amounts were outstanding at year-end (2009: nil; 2008: Nil).

Related party:

Harvest Services Aust Pty Ltd

Nature of relationship:

Director related entity (Geoffrey Davis)

Type of transaction:

Consultancy Services Agreement

Transaction details:

Under the terms of this Consultancy Services Agreement, Harvest Services

Aust Pty Ltd (Harvest Services), a Company associated with Geoffrey
Davis, agrees to provide the services of Geoffrey Davis to the Company,
commensurate with that of a Managing Director for a period of 3 years
from 1st January 2009.
Harvest is entitled to receive a consultancy fee (subject to annual reviews)
of A$45,833 (2009: A$40,417) per month (excluding GST) and the
reimbursement of out of pocket expenses incurred in the course of
providing services to the Company.
Either of the Company, Harvest Services or Mr. Davis as the parties to the
consultancy services contract may terminate the contract by providing 6
months written notice to the other parties.
During the year, Harvest Services charged the Company A$776,247 which
included a bonus approved by the Board of Directors (2009: A$479,250;
2008: 420,000) in fees. No amount remains outstanding at year end (2009:
nil; 2008: A$31,500).

Related party:

Mindanao Philcord Holdings Corporation

Nature of relationship:

Executive related entity (William Phillips)

Type of transaction:

Management Consultancy Agreement (renewed 1 January 2010)

Transaction details:

Under the terms of this Management Consultancy Agreement, Mindanao

Philcord Holdings Corporation (Mindanao Philcord), a Company
associated with William Phillips, agrees to provide the services of William
Phillips to Philsaga Mining Corporation (Philsaga), a related entity of
the Company, commensurate with that of a Director Operations for a
period of 1 years from January 2010.
Mindanao Philcord is entitled to receive a consultancy fee of US$25,000
per month and the reimbursement of out of pocket expenses incurred in the
course of providing services to the Company.
Philsaga may only terminate the agreement upon limited events akin to
misconduct or incapacity.
During the year, Mindanao Philcord charged Philsaga US$300,000 (2009:
US$300,000; 2008: US$300,000) in fees. No fees remain outstanding at
year end (2009: nil; 2008: US$285,000).

Related parties:

Secdea Philippines Holdings Corporation & Advanced Concepts Holdings

Limited

150

Nature of relationship:

Executive related entities (Samuel Afdal and William Phillips)

Type of transaction:

Royalty Deed of Agreement

Transaction details:

On 4 December 2006, Philsaga Mining Corporation (Philsaga), a related

entity of Medusa, executed a royalty agreement with the Secdea
Philippines Holdings Corporation (a company associated with Samuel
Afdal), Yandal Investments Pty Ltd and Advanced Concepts Holdings
Limited (a company associated with William Phillips) (collectively the
Royalty Vendors).
Under the terms of the royalty deed of agreement, Philsaga has agreed to
pay the Royalty Vendors a royalty of US$20 per ounce of recovered gold
obtained from extensions of the Co-O Mine system mined on the eastern
side of the Oriental Fault up to a limit of US$10 million. The royalty will
be payable on a quarterly basis.
During the year, US$409,636 (2009: nil; 2008 Nil) was paid. US$84,072
(2009: US$293,285; 2008: 625,297) remained outstanding at year end.

Related party:

SBF Philippines Drilling Resources Corporation

Nature of relationship:

Executive related entities (William Phillips and Samuel Afdal)

Type of transaction:

Drilling Services Agreement

Transaction details:

On 4 December 2006, Philsaga Mining Corporation (Philsaga), a related

entity of Medusa, entered into a drilling services agreement with SBF
Philippines Drilling Resources Corporation (SBF Drilling), a company
associated with William Phillips and Samuel Afdal.
Under the terms of the drilling services agreement, Philsaga has engaged
SBF Drilling to provide Philsaga or the Medusa group of companies, with
drilling services for the Co-O Mine and area and further provide
equipment, labour and expertise with respect to drilling services.
The engagement of SBF Drilling by Philsaga is for an initial term of 3
years and is renewable thereafter for 1 year periods by mutual agreement
between the parties. In consideration of SBF Drilling providing the
services, Philsaga will pay SBF Drilling commercial rates for its services.
During the year, SBF Drilling charged Philsaga US$15,298,335 (2009:
US$10,747,044; 2008: A$3,787,055) in fees. US$2,874,133 (2009:
US$6,008,733; 2008: 1,984,515) remains outstanding at year end.

Related party:

Vibrant Earthmovers, Inc

Nature of relationship:

Executive related entities (William Phillips and Samuel Afdall)

Type of transaction:

Mining Services Agreement (cancelled in 2009)

Transaction details:

Prior to the acquisition of Philsaga an agreement was entered into for the
supply of mining services. The agreement was cancelled however
A$473,815 was still owing as at 30 June 2008 and 30 June 2009. There
were no amounts outstanding at 30 June 2010.

Related party:

Advanced Concept Holdings

Nature of relationship:

Executive related entities (William Phillips and Samuel Afdall)

Type of transaction:

Purchase of Philsaga

151

Transaction details:

During 2008 A$5,000,000 was paid to Advanced Concept Holdings in

relation to the acquisition of Philsaga. No amounts were paid in 2009 or
2010. As at 30 June 2008 A$375,842 relating to interest was paid in 2009.
No amounts were therefore due as at 30 June 2009 or 30 June 2010.

Related party:

Philsaga Mining Corporation (Philsaga) and Mindanao Mineral

Processing and Refining Corporation (MMPRC)

Nature of relationship:

Subsidiaries of holding company

Type of transaction:

Management fees charged by Medusa Mining Limited

Transaction details:

During the financial year management fees of A$720,000 (2009:

A$720,000; 2008: A$720,000) was charged to each of Philsaga and
MMPRC.

21.

Retained profits

Retained profit /at start of year

Net profit/(loss) attributable to
members of Company
Retained profits at end of year
22.

Notes to the statement of cash flow

(a)

Reconciliation of cash

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

31,830

3,323

2,980

4,327

65,812

97,642

28,507

31,830

38,110

41,090

(1,347)

2,980

For the purposes of the Statement of Cash Flow, cash includes cash on hand and short term deposits
at call, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the
Statement of cash flow is reconciled to the related items in the Statement of financial position as
follows:

Cash at bank
Cash on hand
Total cash assets

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

32,456
1

32,457

26,509
1

26,510

32,937
2

32,939

4,834

4,834

152

(b)

Reconciliation of profit/(loss) after income tax to net cash provided by operating activities

Profit/(loss) after income tax

add/(less) non-cash items:
Depreciation/amortisation
Exploration expenses written off
Recognition of share based expenses
Income tax expense
Bad debts written off
Loss on sale of shares in listed entity
Loss on asset disposal/ write off
Receipt from sale of shares
Management fees accrued
Foreign exchange losses
add/(less) changes in assets
and liabilities:
(increase)/decrease in trade and
other receivables
(increase)/decrease in prepayments
(increase)/decrease in inventories

increase/(decrease) in trade &

other payables
increase/(decrease) in deferred
taxes payable
increase/(decrease) in employee
benefits
Net cash provided by/(used in)
operating activities
(c)

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

65,812

28,507

38,110

7,850
294
257

74,213

3,582
60
265

51

206

32,671

(29,890)
(340)
(4,347)
2010
US$000
Audited
(921)
4

2008
A$000
Audited
(1,347)

4,789
82
349
(2,291)
68

275

41,382

3,637
572
296

620
176
(111)

117

3,960

(4,013)
173
(510)
2009
A$000
Audited

(967)
(55)
695
2008
A$000
Audited

2,611

4,733

1,109

(1,714)

(2,063)

2,366

(2,904)
192
(264)
2009
US$000
Restated

17

92

38,719

30,592

39,719

7,200

Non cash financing activity:

A total of 84,412 shares were issued at $0.78 per share on 5 June 2009. The issue was made to an
underlying claim owner in accordance with the conditions of a potential Joint Venture between
Medusas Philippine subsidiary Philsaga Mining Corporation, MRL Gold Phils., Inc. and the claim
owner concerning the Apical Gold Project.

23.

Financial risk management

(a)

Financial Risk Management Policies

The groups financial instruments consist mainly of deposits with banks, local money market
instruments, short-term investments, accounts receivable and payable, and loans to and from
subsidiaries.
The main purpose of non-derivative financial instruments is to raise finance for group operations.
The group does not speculate in the trading of derivative instruments.

153

(i)

Treasury risk management

The Group is not of a size nor are its financial affairs of such complexity to justify the
establishment of a Finance Committee. However, senior executives of the group regularly
analyse financial risk exposure and evaluate treasury management strategies in the context of
the most recent economic conditions and forecasts.

(ii)

Financial risk exposures and management

The main risks the group is exposed to through its financial instruments are interest rate risk,
foreign currency risk, liquidity risk, credit risk and price risk.
Interest rate risk
Interest rate risk is managed by investing cash with major financial institutions in both cash on
deposit and term deposit accounts. Interest rates on major deposits are re-invested at a fixed
rate on a monthly basis.
Price risk
The group sells its gold produced at spot rate and no forward contracts or hedging is utilised.
Whilst the Company is cognisant of its exposure to fluctuations in the gold price, the current
policy of the Board is not to hedge primarily because the Company produces gold in the current
economic environment at a very low cash cost. The Boards risk management policy
acknowledges that as market factors are dynamic in nature all risk positions are monitored to
ensure that the Companys activities are consistent with the approach and strategy approved by
the Board. The Board therefore regularly reviews the spot price of gold to consider whether it
should adopt any measures to minimise risk.
Liquidity risk
The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate
unutilised borrowing facilities are maintained.
Credit risk
Credit risk refers to the risk that counterparty will default on, its contractual obligations
resulting in financial loss to the Group. The Group has adopted the policy of only dealing with
credit worthy counterparties and obtaining sufficient collateral or other security where
appropriate, as a means of mitigating the risk of financial loss from defaults.
The maximum credit risk on financial assets of the Group which have been recognised in the
balance sheet, other than investment in shares, is generally the carrying amount, net of any
provisions for doubtful debts.
There are no other material amounts of collateral held as security.
The consolidated group does not have any material credit risk exposure to any single receivable
or group of receivables under financial instruments entered into by the consolidated group.
Foreign currency risk
Foreign exchange risk arises from future commercial transactions and recognised assets and
liabilities denominated in a currency that is not the entitys functional currency. The risk can be
measured by performing a sensitivity analysis that quantifies the impact of different assumed
exchange rates on the Groups forecast cash flows.
Whilst the Group is aware of its exposure to fluctuations in foreign currency, the current policy
of the Board is not to hedge.

154

(b)

Financial instruments
(i)

Financial instrument composition and maturity analysis

The tables below reflect the undiscounted contractual settlement terms for financial
instruments of a fixed period of maturity, as well as managements expectations of the
settlement period for all other financial instruments. As such, the amounts may not reconcile to
the statement of financial position.
Weighted Average
Effective interest
2010
2009
Audited Restated
%
%

Floating Interest Rate

2010
2009
Audited Restated
US$000
US$000

Within 1 Year
2010
2009
Audited Restated
US$000
US$000

Non Interest Bearing

2010
2009
Audited Restated
US$000
US$000

Total
2010
Audited
US$000

2009
Audited
US$000

Consolidated Group
Financial Assets
Cash & cash equivalents
Loans and receivables

2.4

2.7

21,557
26,509

10,900
1
32,457
26,510

34,895
5,006
34,895
5,006

21,557
26,509

45,795
5,007
67,352
31,516

Financial Liabilities
Financial liabilities at
amortised cost
Trade & sundry payables

8,003
9,013
8,003
9,013

8,003
9,013
8,003
9,013

Weighted Average
Effective interest
2009
2008
Audited
Audited
%
%

Floating Interest Rate

2009
2008
Audited
Audited
A$000
A$000

Within 1 Year
2009
2008
Audited
Audited
A$000
A$000

Non Interest Bearing

2009
2008
Audited
Audited
A$000
A$000

Total
2009
Audited
A$000

2008
Audited
A$000

Consolidated Group
Financial Assets
Cash and cash equivalent
Loans and receivables

2.7

2.2

Financial Liabilities
Financial liabilities
at amortised cost
Trade & sundry payables

32,937
3,717

1,116
2
1
32,939
4,834

6,198
2,185
6,198
2,185

32,937
3,717

1,116
6,200
2,187
39,137
7,019

11,200
6,685
11,200
6,685

11,200
6,685
11,200
6,685

Receivables are expected to be

collected as follows:
Less than 6 months
6 months to 1 year
1 5 years
Over 5 years

As at each year end date, all

receivables were neither
past due nor impaired.
Trade and sundry payables are
expected to be paid as follows:
Less than 6 months
6 months to 1 year
1 5 years
Over 5 years

2010
US$000
Audited

2009
US$000
Restated

2009
US$000
Audited

2008
US$000
Audited

27,102
7,793

34,895

965
4,041

5,006

1,199
4,999

6,198

895
1,290

2,185

8,003

8,003

9,013

9,013

11,200

11,200

6,685

6,685

155

(ii)

Net fair values

The net fair value of cash and cash equivalents and non interest bearing monetary
financial assets and liabilities approximates their carrying value.
The net fair value of financial assets and financial liabilities is based upon market prices
where a market exists or by discounting the expected future cash flows by the current
interest rates for assets and liabilities with similar risk profiles.
Listed equity investments have been valued by reference to market prices prevailing at
balance date. For unlisted equity investments, the net fair value is an assessment by the
Directors based on the underlying net assets, future maintainable earnings and any
special circumstances pertaining to a particular investment.

(iii)

Sensitivity analysis
The group has performed sensitivity analysis relating to its exposure to interest rate risk,
foreign currency risk and price risk at balance date. This sensitivity analysis
demonstrates the effect on the current year results and equity which could result from a
change in these risks.
Interest Rate Sensitivity Analysis
The effect on profit and equity as a result of changes in the interest rate, with all other
variables remaining constant would be as follows:
2010
US$000
Audited

2009
US$000
Restated

2009
US$000
Audited

2008
US$000
Audited

214

265

329

48

(214)

(265)

(329)

(48)

Change in profit before

income tax /equity
increase in interest rate
by 100 basis points
decrease in interest rate
by 100 basis points

Foreign currency risk sensitivity analysis

Foreign exchange risk arises from future commercial transactions and recognised assets
and liabilities denominated in a currency that is not the consolidated entitys functional
currency. The consolidated entity operates internationally and is exposed to foreign
exchange risk arising from the United States dollar. No programs for hedging foreign
exchange risk were implemented by the consolidated entity in any of the years.
The effect on profit and equity as a result of changes in the value of the United States
currency to the Australian currency, with all other variables remaining constant would
be as follows:

156

2010
US$000
Audited
Change in profit before
income tax
Improvement in A$ to US$
by 15% (2008: 1%)
Decline in A$ to US$
by 15% (2008:1%)
Strengthening of Philippine
Peso to US$ by 15%
Change in equity
Improvement in A$ to US$
by 15% (2008:1%)
Improvement of A$ to US$
presentation by 15%
Decline in A$ to US$
by 15% (2008: 1%)
Weakening of Philippine
Peso to by 15%

2009
US$000
Restated

2009
US$000
Audited

2008
US$000
Audited

(1,397)

(1)

(1,545)

(21)

1,397

2,090

21

(186)

(272)

(231)

(10)

(1,545)

(21)

1,397

2,090

1,397

2,090

21

186

272

231

10

The percentages used considered the volatility of the exchange rate over the financial
year and the exchange rate at the time of preparation of the report.
Price risk sensitivity analysis
The policy of the Company is to sell gold at spot price and has not entered in hedging
contracts. The Companys revenues were exposed to fluctuations in the price of gold. If
the average selling price of gold of US$1,125 (2009: US$890; 2008: US$829) for the
financial year had increased/decreased by 10 per cent. the change in the profit before
income tax for the consolidated group would have been an increase/decrease of
US$9.375million (2009: US$2.383 million, A$3,185,840, 2008:A$1,413,530).
The above interest rate, foreign exchange rate and price risk sensitivity analysis has been
performed on the assumption that all other variables remain unchanged.
24.

Commitments

(a)

Exploration commitments
The Company has certain obligations to perform minimum exploration work to maintain rights of
tenure to its exploration tenements. These obligations may vary from time to time in accordance with
tenements held and are expected to be fulfilled in the normal course of operations of the Group so as
to avoid forfeiture of any tenement.

These obligations are not provided in the

financial report and are payable:
no later than 1 year
1 year or later and no later than 5 years
Total exploration commitments

157

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Restated

78
161

239

63
317

380

78
394

472

39
84

123

(b)

Operating lease expense commitments

Non-cancellable operating lease contracted for but not capitalised in the financial statements.
The Group leases office premises under an operating leases expiring in 31 July 2011. Under the terms
of the operating leases, the Group is provided with a right of renewal and the lessor has the right to
increments in lease payments on an annual basis based on movements in the Consumer Price Index.

These obligations are not provided in the

financial report and are payable:
no later than 1 year
1 year or later and no later than 5 years
Total operating lease expense commitments
(c)

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Restated

79
7

86

57
41

98

70
52

122

60
22

82

Other contractual commitments

(i)

There is a consultancy agreement with Harvest Services Aust Pty Ltd (Harvest), a Company
associated with a Director, whereby Harvest has agreed to provide the services of Geoffrey
Davis to act as Managing Director of the Company for a period of 3 years, terminating on
31 December 2011.
2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Audited

These commitments are not provided in

the financial report and are payable:
no later than 1 year
1 year or later and no later than 5 years

(ii)

471
390
485
231
236
585
728

Total other commitments
707
975
1,213
231

On 26 March 2008, Philsaga was granted Mineral Production Sharing Agreement (MPSA)
number 262-2008-XIII over the Co-O mine. Under the terms of the Agreement Philsaga is
committed to mine related expenditure in the Philippines as follows:

These commitments are not provided in

the financial report and are payable:
no later than 1 year
1 year or later and no later than 5 years
Total other commitments
25.

2010
US$000
Audited

2009
US$000
Restated

2009
A$000
Audited

2008
A$000
Restated

7,293
64,641

71,934

7,259
34,363

41,622

9,020
42,697

51,717

7,034
12,697

19,731

Events subsequent to balance date

On 8 July 2010 the Board of Directors of Medusa appointed Peter Rhys Jones as a Non Executive Chairman.
On 27 July 2010 the Board of Directors of Medusa appointed Peter Hepburn-Brown as Executive Director
of Operations.
Other than the matters described above, there has not arisen in the interval between the end of the financial
year and the date of this report any item, transaction or event of a material and/or unusual nature likely, in
the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results
of those operations, or the state of affairs of the Group in subsequent financial years.

158

26.

Contingent liabilities

Under a Heads of Agreement (HOA) between Sierra Mining Limited (SML) and Medusa signed
in August 2007, Medusa had agreed to take a 9.9 per cent. placement in Sierra of 4.85 million shares (at an
issue price of A$0.25, totalling A$1.21 million) with 2.425 million unlisted attaching options exercisable at
A$0.30 each with an expiry date of 4 years from the date of completion of due diligence.
On 8 April 2008 Sierra advised the ASX that Sierra would not be proceeding with the placement of 9.9 per
cent. of Sierra shares to Medusa under the HOA, and Medusa agreed not to take up the placement in an
announcement to the ASX and AIM markets.
Subsequently, on 23 June 2008, Sierra has made a claim against Medusa relating to the HOA and has
demanded that Medusa subscribes for the securities. Medusa denies it has any obligation to take up the
proposed placement and will defend any legal proceedings that may be commenced.
27.

Segment information

The Consolidated Group has identified its reportable operating segments based on the internal management
reports that are reviewed and used by the Managing Director (the chief operating decision maker) and his
management team in assessing performance and in determining the allocation of resources.
The Group segments are structured as Mine, Exploration and Other. Currently the only operational mine is
the Co-O mine.
Segment Result, Segment Assets and Segment Liabilities
The measurement of segment results is in line with the basis of information presented to management for
internal management reporting purposes.
Segment Result is based on the net of revenues and expenditure corresponding to the specific segment.
Segment Revenues represent gold and silver sales at spot prices.
Segments Assets are allocated to segments based on their nature and physical location.
Segment Liabilities are allocated to segments where there is a direct nexus between the incurrence of the
liability and the operations of the segment. Segment Liabilities include trade and other payables.
The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as
they are not considered part of the core operations of any segment:

income tax expense;

gain on disposal of assets;

deferred tax assets and liabilities;

interest revenue;

intercompany receivables and payables.

159

Audited 12 months to June 2010:

Segment revenue
Reconciliation of segment revenue to
Group revenue
add:
Interest income
Other

Mining
US$000
93,882

Exploration
US$000

Other
US$000

Group Revenue
Segment result
Reconciliation of segment result to
group result:
add back:
Gain on disposal of asset
Other revenue
Interest revenue
less:
Income tax expense

69,978

(18)

(4,813)

157,782

3,545

22,577

Total Group assets

Segment liabilities
Reconciliation of segment liabilities to
group
plus: Deferred liabilities

622
4

94,508

65,147

81
4
622

Group profit
Segment assets
Reconciliation of segment asset to
group assets:
plus: Deferred tax assets

Total
US$000
93,882

7,343

11

918

(42)

65,812

183,904

73

183,977

8,272

279

8,551

Total Group liabilities

160

Restated 12 months to June 2009:

Segment revenue
Reconciliation of segment revenue to
Group revenue
plus: Interest revenue
Other income

Mining
US$000
42,649

Exploration
US$000

Other
US$000

(2,240)

174
2

42,825

26,619

14,309

1,714
174

28,507

115,353

458

69

115,422

9,193

Group Revenue
Segment result
Reconciliation of segment result to
group result:
plus:
Income tax expense
Interest revenue

28,901

(42)

Group profit
Segment assets
Reconciliation of segment asset to
group assets:
Add: deferred tax assets

97,616

3,428

Total Group assets

Segment liabilities
Reconciliation of segment liabilities to
group liabilities:
Plus: Deferred liabilities

8,728

Total
US$000
42,649

313

9,506

Total Group liabilities

Audited 12 months to June 2009:

Segment revenue
Reconciliation of segment revenue to
Group revenue
add:
Interest income
Other

Mining
A$000

Exploration
A$000

Other
A$000

Total
A$000

57,018

57,018

Group Revenue
Segment result
Reconciliation of segment result to
group result:
add back:
Gain on disposal of asset
Other revenue
Interest revenue
less:
Income tax expense

43,216

(57)

(2,997)

233
1

57,252

40,162

6
1
233
(2,291)

38,111

Group profit

161

Segment assets
Reconciliation of segment asset to
group assets:
plus: Deferred tax assets

Mining
A$000
122,367

Exploration
A$000
4,212

Other
A$000
17,780

Total
A$000
144,359

569

86

144,445

11,424

Total Group assets

Segment liabilities
Reconciliation of segment liabilities to
group liabilities
plus: Deferred liabilities

10,846

389

11,813

Total Group liabilities

Audited 12 months to June 2008:

Segment revenue
Reconciliation of segment revenue to
Group revenue
plus: Interest revenue
Other income

Mining
US$000

Exploration
US$000

Other
US$000

Total
US$000

17,630

17,630

Group Revenue
Segment result
Reconciliation of segment result to
group result:
add back:
Gain on disposal of asset
Other revenue
Interest revenue
less:
Income tax expense

8,865

(4,267)

(4,023)

48
7
389

2,360

(2,366)

(1,347)

77,528

1,218

2,852

80,380

6,845

Group loss
Segment assets
Reconciliation of segment asset to
group assets:
Add: deferred tax assets

71,339

3,829

Total Group assets

Segment liabilities
Reconciliation of segment liabilities to
group liabilities:
Plus: Deferred liabilities

389
55

18,074

575

5,625

5,218

12,063

Total Group liabilities

162

Revenue and Non-current assets by geographical region

Australia
US$000

Philippines
US$000

Total
US$000

12 months to June 2010:

Segment revenue
Non Current Assets

39

93,882
110,534

93,882
110,573

Restated 12 months to June 2009:

Segment revenue
Non Current Assets

37

42,649
82,508

42,649
82,545

Australia
A$000

Philippines
A$000

Total
A$000

Audited 12 months to June 2009:

Segment revenue
Non Current Assets

45

57,018
103,657

57,018
103,702

Audited 12 months to June 2008:

Segment revenue
Non Current Assets

60

17,630
72,031

17,630
72,091

In accordance with AASB 8 disclosure requirements Non Current Assets shown in geographical information
include tangible and intangible assets but exclude financial instruments, deferred tax assets, post
employment benefit assets and rights arising under insurance contracts.
The Group sells it gold on the open market. Selection of a customer is at the Groups discretion and there is
no commitment to exclusive sales to a particular customer. During the financial year ended 30 June 2010,
US$ 51,901 million or 55 per cent. of the Groups revenues depended on a single customer (2009:
US$26,518 million or 73 per cent.).
28.

New standards and interpretations not yet adopted

The following standards, amendments to standards and interpretations have been identified as those which
may impact the entity in the period of initial application. They are available for early adoption at 30 June
2010, but have not been applied in preparing this financial information.
AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 introduces new
requirements for the classification and measurement of financial assets. AASB 9 uses a single approach to
determine whether a financial asset is measured at amortised cost or fair value, replacing the many different
rules in AASB 139 and removes the impairment requirement for financial assets held at fair value. AASB
2009-11 is applicable for annual reporting periods ending on or after 31 December 2013.
AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual
Improvements Project (AASB 5, 8, 101, 107, 117, 118, 136 & 139) makes various amendments to a number
of standards and interpretations in line with the IASB annual improvements project. The standard is
applicable for annual reporting periods ending on or after 31 December 2010.
AASB 2009-9 Amendments to Australian Accounting Standards Additional Exemptions for First-time
Adopters makes amendments to ensure that entities applying Australian Accounting Standards for the first
time will not face undue cost or effort in the transition process in particular situations. AASB 2009-9 is
applicable for annual reporting periods ending on or after 31 December 2010.
AASB 2009-10 Amendments to Australian Accounting Standards Classification of Rights Issues makes
amendments which clarify that rights, options or warrants to acquire a fixed number of an entitys own equity
instruments for a fixed amount in any currency are equity instruments if the entity offers the rights, options
or warrants pro rata to all existing owners of the same class of its non-derivative equity instruments. The
standard is applicable for annual reporting periods ending on or after 31 January 2011.

163

AASB 2009-13 Amendments to AASB 1 arising from Interpretation 19. This standard amends AASB 1 to
allow a first-time adopter to use the transitional provisions in Interpretation 19. The standard is applicable
for annual reporting periods ending on or after 30 June 2011.
AASB 2009-14 Prepayments of a Minimum Funding Requirement (Amendments to Interpretation 14).
This amendment to Interpretation 14 addresses the unintended consequences that can arise from the previous
requirements when an entity prepays future contributions into a defined benefit pension plan. The standard
is applicable for annual reporting periods ending on or after 31 December 2011.
AASB 2010-01 Limited exemption from comparative AASB 7 disclosures for first time adopters
(Amendments to AASB 1 and AASB 7). These amendments principally give effect to extending the
transition provisions of AASB 2009-2 Amendments to Australian Accounting Standards Improving
Disclosures about Financial Instruments to first-time adopters of Australian Accounting Standards. The
standard is applicable for annual reporting periods ending on or after 30 June 2011.
Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments. This interpretation addresses
the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity
issuing equity instruments to a creditor to extinguish all or part of the financial liability. These transactions
are sometimes referred to as debt for equity swaps. The Interpretation is applicable for annual reporting
periods ending on or after 31 December 2011.
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements
Project (AASB 3, AASB 7, AASB 121, AASB 128, AASB 131, AASB 132 & AASB 139). This amendment
limits the scope of the measurement choices of non-controlling interest at proportionate share of net assets
in the event of liquidation. Other components of NCI are measured at fair value; requires an entity (in a
business combination) to account for the replacement of the acquirees share-based payment transactions
(whether obliged or voluntarily), i.e. split between consideration and post combination expenses; clarifies
that contingent consideration from a business combination that occurred before the effective date of AASB
3 Revised is not restated; and eliminates the requirement to restate financial statements for a reporting period
when significant influence or joint control is lost and the reporting entity accounts for the remaining
investment under AASB 139. This includes the effect on accumulated foreign exchange differences on such
investments. This amendment is applicable for annual reporting periods ending on or after 30 June 2011.
AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual
Improvements Project (AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13). This amendment
emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature and
extent of risks associated with financial instruments; clarifies that an entity will present an analysis of other
comprehensive income for each component of equity, either in the statement of changes in equity or in the
notes to the financial statements; provides guidance to illustrate how to apply disclosure principles in AASB
134 for significant events and transactions; and clarifies that when the fair value of award credits is measured
based on the value of the awards for which they could be redeemed, the amount of discounts or incentives
otherwise granted to customers not participating in the award credit scheme, is to be taken in account. This
amendment is applicable for annual reporting periods ending on or after 31 December 2011.
29.

Franking account

The Company has no franking credits available.

30.

Company details

The registered office and principal place of business of the Company is:
Suite 7, 11 Preston Street
Como, Western Australia 6152

164

Section B: Statutory audit report on the financial information for the year ended 30 June 2010 as
previously issued (relating to accounts in US$)

Grant Thornton Audit Pty Ltd

ABN 94 269 609 023
10 Kings Park Road
West Perth WA 6005
PO Box 570
West Perth WA 6872
T +61 8 9480 2000
F +61 8 9322 7787
E [email protected]
W www.grantthornton.com.au
INDEPENDENT AUDITORS REPORT
To the Members of Medusa Mining Limited
Report on the financial report
We have audited the accompanying financial report of Medusa Mining Limited (the Company), which
comprises the statement of financial position as at 30 June 2010, and the statement of comprehensive
income, statement of changes in equity and statement cash flows for the year ended on that date, a summary
of significant accounting policies, other explanatory notes to the financial report and the directors
declaration of the consolidated entity comprising the Company and the entities it controlled at the years end
or from time to time during the financial year.
Directors responsibility for the financial report
The directors of the Company are responsible for the preparation and fair representation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining
internal controls relevant to the preparation and fair presentation of the financial report that are free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances. The directors also state, in the
notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that compliance with the Australian equivalents to International Financial Reporting Standards
ensures that the financial report, comprising the financial statements and notes, complies with International
Financial Reporting Standards.
Auditors responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards which require us to comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditors judgment, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entitys preparation
and fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the

165

reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation
of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Independence
In conducting our audit, we have compiled with the independence requirements of the Corporations Act
2001.
Auditors opinion
In our opinion:
(a)

(b)

the financial report of Medusa Mining Limited is in accordance with the Corporations Act 2001,
including:
(i)

giving a true and fair view of the consolidated entitys financial position as at 30 June 2010 and
of its performance for the year ended on that date; and

(ii)

complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001; and

the financial report also complies with International Financial Reporting Standards as disclosed in the
notes to the financial statements.

Report on the remuneration report

We have audited the Remuneration Report included in pages 45 to 53 of the Directors Report for the year
ended 30 June 2010. The directors of the Company are responsible for the preparation and presentation of
the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Auditors opinion on the remuneration report
In our opinion, the Remuneration Report of Medusa Mining Limited for the year ended 30 June 2010,
complies with section 300A of the Corporations Act 2001.

GRANT THORNTON AUDIT PTY LTD

Chartered Accountants

P W Warr
Director Audit & Assurance Services
Perth, 30 August 2010

166

Section C: Non-statutory audit report on the financial information for the year ended 30 June 2009 (as
restated in US$)

10 Kings Park Road

West Perth WA 6005
PO BOX 570
West Perth WA 6872
T +61 8 9480 2000
F +61 8 9322 7787
E [email protected]
W www.grantthornton.com.au
INDEPENDENT AUDITORS REPORT
To the Directors of Medusa Mining Limited
We have audited the accompanying financial report of Medusa Mining Limited, which comprises the
statement of financial position as at 30 June 2009, and the statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information. This financial information has been
prepared for inclusion in a prospectus (Prospectus) dated on 21 October 2010 of Medusa Mining Limited on
the basis of the accounting policies set out in the Note 1 to the Financial Statements. This report is required
by paragraph 20.1 of Annex 1 of Appendix 3.1.1 of the Prospectus Rules as published by the Financial
Services Authority in the UK (Prospectus Rules) and is given for the purpose of complying with that
paragraph and for no other purpose.
Other Matter
This US Dollar denominated financial information has been prepared for inclusion in the Prospectus dated
21 October 2010 of Medusa Mining Limited. This report is required by paragraph 20.1 of Annex 1 of
Appendix 3.1.1 of the Prospectus Rules due to a change in the presentational currency of Medusa Mining
Limiteds financial statements and is given for the purpose of complying with that paragraph and for no other
purpose.
Medusa Mining Limited has prepared a separate statutory financial report in Australian Dollars for the year
ended 30 June 2009 in accordance with Australian Accounting Standards on which we issued a separate
statutory auditors report to the shareholders of Medusa Mining Limited dated 4 September 2009.
Managements Responsibility for the Financial Report
Management is responsible for the preparation of the financial report in accordance with the basis of
preparation set out in the Note 1 to the Financial Statements and for such internal control as management
determines is necessary to enable the preparation of a financial report that is free from material misstatement,
whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard
AASB101 Presentation of Financial Statements, that compliance with Australian equivalents to International
Financial Reporting Standards ensures that the financial report, comprising the financial statements and
notes, complies with International Financials Reporting Standards.
Auditors Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. Those standards require that we comply with relevant
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
financial report is free from material misstatement.

167

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditors judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation
of the financial report in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Independence
In conducting our audit, we complied with the applicable independent requirements of the Australian
Professional Ethical and Standards Board.
Auditors Opinion
In our opinion, the financial report of Medusa Mining Limited, for the purposes of the Prospectus:
1.

gives a true and fair view of the companys and consolidated entitys financial position as at 30 June
2009, and of its financial performance, its changes in equity and its cash flows for the year then ended
in accordance with the basis of preparation set out in the Note 1 to the Financial Statements; and

2.

complies with International Financial Reporting Standards as disclosed in Note 1 to the Financial
Statements.

Declaration
For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus
and declare that we have taken all reasonable care to ensure that the information contained in this report is,
to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
This declaration is included in the Prospectus in compliance with paragraph 1.2 of Annex I of Appendix 3.1.1
of the Prospectus Rules and paragraph 1.2 of Annex III of Appendix 3.1.1 of the Prospectus Rules.

GRANT THORNTON AUDIT PTY LTD

Chartered Accountants

P W Warr
Director Audit and Assurance
Perth, 21 October 2010

168

Section D: Statutory audit report on the financial information for the year ended 30 June 2009
previously issued (relating to accounts in A$)

10 Kings Park Road

West Perth WA 6005
PO BOX 570
West Perth WA 6872
T +61 8 9480 2000
F +61 8 9322 7787
E [email protected]
W www.grantthornton.com.au
INDEPENDENT AUDITORS REPORT
To the Members of Medusa Mining Limited
Report on the Financial Report
We have audited the accompanying financial report of Medusa Mining Limited, (the company) which
comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity
and cash flow statement for the year ended on that date, a summary of significant accounting policies, other
explanatory notes and the directors declaration of the consolidated entity comprising the company and the
entities it controlled at the years end or from time to time during the financial year.
Directors responsibility for the financial report
The directors of the company are responsible for the preparation and fair presentation of the financial report
in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls
relevant to the preparation and fair presentation of the financial report that is free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in
accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with
the Australian equivalents to International Financial Reporting Standards ensures that the financial report,
comprising the financial statements and notes, complies with International Financial Reporting Standards.
Auditors responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. These auditing Standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit engagements and
plan and perform the audit to obtain reasonable assurance whether the financial report is free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about amounts and disclosures in the
financial report. The procedures selected depend on the auditors judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation
of the financial report in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.

169

Independence
In conducting our audit, we complied with applicable independence requirements of the Corporations Act
2001.
Auditors opinion
In our opinion:
(a)

(b)

the financial report of Medusa Mining Limited is in accordance with the Corporations Act 2001,
including:
(i)

giving a true and fair view of the companys and consolidated entitys financial position as at
30 June 2009 and of their performance for the year ended on that date; and

(ii)

complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001; and

the financial report also complies with the International Financial Reporting Standards as disclosed in
Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 43 to 49 of the directors report for the year
ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of
the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Auditors opinion
In our opinion the Remuneration Report of the Medusa Mining Limited for the year ended 30 June 2009,
complies with section 300A of the Corporations Act 2001.

GRANT THORNTON (WA) PARTNERSHIP

Chartered Accountants

Partner
Perth, 4 September 2009

170

Section E: Statutory audit report on the financial information for the year ended 30 June 2008 as
previously issued (relating to accounts in A$)

Grant Thornton (WA) Partnership

ABN: 17 735 344 518
Level 1
10 Kings Park Road
West Perth WA 6872
T +61 8 9480 2000
F +61 8 9322 7787
E [email protected]
W www.grantthornton.com.au
INDEPENDENT AUDITORS REPORT
To the members of Medusa Mining Limited
Report on the Financial Report
We have audited the accompanying financial report of Medusa Mining Limited, (the company) which
comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity
and cash flow statement for the year ended on that date, a summary of significant accounting policies, other
explanatory notes and the directors declaration of the consolidated entity comprising the company and the
entities it controlled at the years end or from time to time during the financial year.
Directors Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial report
in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls
relevant to the preparation and fair presentation of the financial report that is free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in
accordance with Accounting Standard AASB 101 Financial Reporting Standards ensures that the financial
report, comprising the financial statements and notes, complies with International Financial Reporting
Standards.
Auditors Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedure selected depend on the auditors judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation
of the financial report in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.

171

Electronic Presentation of Audited Financial Report

This auditors report relates to the financial report of Medusa Mining Limited for the year ended 30 June
2008 included on Medusa Mining Limiteds web site. The companys directors are responsible for the
integrity of the web site. We have not been engaged to report on the integrity of the Medusa Mining Limiteds
web site. The auditors report refers only to the statements named above. It does not provide an opinion on
any other information which may have been hyperlinked to/from these statements. If users of this report are
concerned with the inherent risks arising from electronic data communications they are advised to refer to
the hard copy of the audited financial report to confirm the information included in the audited financial
report presented on this web site.
Independence
In conducting out audit, we complied with applicable independence requirements of the Corporations Act
2001.
Auditors Opinion
In our opinion:
(a)

(b)

the financial report of Medusa Mining Limited is in accordance with the Corporations Act 2001,
including:
(i)

giving a true and fair view of the companys and consolidated entitys financial position as at
30 June 2008 and of their performance for the year ended on that date; and

(ii)

complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001; and

the financial report also complies with the International Financial Reporting Standards as disclosed in
Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in paragraphs 13(a) to (h) of the directors report for the
year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation
of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Auditors opinion
In our opinion the Remuneration Report of the Medusa Mining Limited for the year ended 30 June 2008,
complies with section 300A of the Corporations Act 2001.

GRANT THORNTON (WA) PARTNERSHIP

Chartered Accountants

J W VIBERT
Partner
Perth, WA
8 September 2008
172

PART IX
MINERAL EXPERTS REPORT

173

27 August 2010

MEDUSA MINING LIMITED

Technical Report Co-O

Project, Mindanao Island,
Republic of the Philippines

Submitted to:
Medusa Mining Limited
Unit 7, 11 Preston Street
COMO WA 6152

REPORT

Authors:
Peter Onley

BSc(Hons), MSc, MBA, FAusIMM, CP

Principal
Golder Associates Pty Ltd

Mark Zammit

BSc(Hons).GradCertGeostats, GradDipBus, MAusIMM.

MAIG
Principal Consultant Geologist,
Cube Consulting Pty Ltd

Declan Franzmann

BEng (Mining) MAusIMM

Principal
Crosscut Consulting Pty Ltd

Report Number.

107641096-002-R-Rev1

174

TECHNI
TECHNICAL
CAL REPORT MEDUS
MEDUSA
A MINING L
LIMITED
IMITED

AUTHOR
AUTHOR

COMPANY
COMPANY

ADDRESS
ADDRESS

Peter
Peter Onley
Onley

Golder
Pty
Golder Associates
Associates P
ty Ltd
Ltd

Level
St,
Level 2,
2, 1 Havelock
Havelock S
t,
West
W est Perth,
Perth, WA
W A 6872
6872

Mark
Mark Zammit
Zammit

ty L
td
Cube
Pty
Ltd
Cube Consulting
Consulting P

Level 4,
4, 1111
1111 H
Level
Hay
St,,
ay St
W est Perth,
Perrtth, WA
West
W A 6005
6005

Declan
Declan
Franzmann
Franzmann

Crosscut
Pty
Ltd
ty L
td
Crosscut Consulting
Consulting P

Unit
Unit 10,
10, 22
22 Jane
Jane St,
Arana
QLD
4054
Arana Hills,
Hills, Q
LD 4
054

Author
Author

Section
Section Responsibility
Responsibility

Peter
Peter Onley
Onley

Overall
with
exception
off Se
Sections
3.3,
12.3.1.1,
18.0,
18.1,
ith tthe
he e
xception o
ctions 3
.3, 1
2.3.1.1, 1
8.0, 1
8.1,
Overall responsibility
responsibility w
18.2,
19.2, 25.1,
25.1, 25.2
25.2
18.2, 19.0,
19.0, 19.1,
19.1, 19.2,

Mark
Mark Zammit
Zammit

3.3,
19.0, 19.1
19.1
3.3, 12.3.1.1,
12.3.1.1, 19.0,

Declan
Franzmann
Declan F
ranzmann

3.3,
25.1, 25.2
25.2
3.3, 19.0,
19.0, 19.2,
19.2, 25.1,

27 August
August 2010
2010
27
Report No.
No. 107641096-002-R-Rev1
107641096-002-R-Rev1
Report

175

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E30A7B3 =4 B63 =;>/<G
+3 1=<A3<B B= B63 <1:CA7=< =4 B67A @3>=@B 7< B63 $@=A>31BCA /<2 B63 @343@3<13A B= B63 @3>=@B /<2 B= =C@ </;3A
7< B63 4=@; /<2 1=<B3FB 7< E6716 B63G />>3/@ /A A6=E< 7< B63 $@=A>31BCA E6716 E3 6/D3 A75<32 4=@
723<B7471/B7=<
+3 /113>B @3A>=<A707:7BG 4=@ B63 @3>=@B /<2 4=@ /<G 7<4=@;/B7=< 7<1:C232 7< B63 $@=A>31BCA E6716 6/A 033<
3FB@/1B32 4@=; B63 @3>=@B 7< /11=@2/<13 E7B6 >/@/5@/>6A
/<2
=4 <<3F /<2 >/@/5@/>6A
/<2
=4 <<3F =4 &35C:/B7=<
)
+3 1=<47@; B6/B B= =C@ 9<=E:3253 B63@3 6/A 033< <= ;/B3@7/: 16/<53 =4 17@1C;AB/<13A =@ /D/7:/0:3
7<4=@;/B7=< A7<13 B63 34431B7D3 2/B3 =4 B67A @3>=@B
C5CAB
/<2 E3 /@3 <=B /E/@3 =4 /<G A75<7471/<B
;/BB3@A /@7A7<5 4@=; =C@ 3D/:C/B7=< B6/B /@3 <=B 1=D3@32 E7B67< B67A @3>=@B E6716 ;756B 03 =4 / ;/B3@7/: </BC@3
E7B6 @3A>31B B= B63 >@=>=A32 2;7AA7=<
-=C@A 4/7B64C::G

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TECHNICAL REPORT MEDUSA MINING LIMITED

Table of Contents
1.0

TITLE PAGE ............................................................................................................................................................... i

2.0

TABLE OF CONTENTS............................................................................................................................................. ii

3.0

SUMMARY................................................................................................................................................................. 1

4.0

3.1

Property Description ..................................................................................................................................... 1

3.2

Ownership .................................................................................................................................................... 1

3.3

Mineral Resources and Mineral Reserves .................................................................................................... 1

3.4

Geology ........................................................................................................................................................ 2

3.5

Exploration.................................................................................................................................................... 2

3.6

Mineralisation................................................................................................................................................ 3

3.7

Production .................................................................................................................................................... 4

3.8

Author's Conclusions .................................................................................................................................... 6

3.9

Recommendations........................................................................................................................................ 6

INTRODUCTION AND TERMS OF REFERENCE .................................................................................................... 7

4.1

Terms of Reference ...................................................................................................................................... 7

4.2

The Purpose of the Report ........................................................................................................................... 7

4.3

Sources of Information.................................................................................................................................. 7

4.4

The Extent of Field Involvement of the Qualified Person .............................................................................. 9

5.0

RELIANCE ON OTHER EXPERTS ........................................................................................................................... 9

6.0

PROPERTY DESCRIPTION AND LOCATION.......................................................................................................... 9

6.1

Area of the property ...................................................................................................................................... 9

6.2

Location ........................................................................................................................................................ 9

6.2.1

Republic of the Philippines...................................................................................................................... 9

6.2.2

Project Location .................................................................................................................................... 10

6.2.3

Tenement Registration and Proprietorship............................................................................................ 12

6.3

Nature of MMLs Interest in the Tenements................................................................................................ 15

6.3.1

Mindanao Philcord Corporation Tenements.......................................................................................... 15

6.3.2

Sinug-ang Project (Salcedo Tenement) ................................................................................................ 15

6.3.3

Corplex Project (EPA 00186-XIII).......................................................................................................... 15

6.3.4

Corplex Project (APSAs)....................................................................................................................... 16

6.3.5

Tambis Project ...................................................................................................................................... 16

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7.0

8.0

6.3.6

Das-Agan Project.................................................................................................................................. 16

6.3.7

Apical Project ........................................................................................................................................ 16

6.3.8

Anoling Project...................................................................................................................................... 17

6.3.9

Sur-Sur Project ..................................................................................................................................... 17

6.4

Legal Survey of the Tenements .................................................................................................................. 17

6.5

Mineral Resources and Mineral Reserves .................................................................................................. 17

6.6

Location of Known Mineralised Zones, Mineral Resources, Mineral Reserves and Infrastructure ............. 18

6.7

Royalties and Encumbrances ..................................................................................................................... 19

6.8

Environmental Liabilities ............................................................................................................................. 19

6.9

Permits Required to Conduct the Work ...................................................................................................... 19

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ..................... 22

7.1

Topography and Land Use ......................................................................................................................... 22

7.2

Access ........................................................................................................................................................ 22

7.3

Population Centres ..................................................................................................................................... 22

7.4

Climate ....................................................................................................................................................... 22

7.5

Surface Rights and Local Resources.......................................................................................................... 22

HISTORY ................................................................................................................................................................. 23
8.1
8.1.1

Co-O Mine prior to interest by MML ...................................................................................................... 23

8.1.2

History of MML and Acquisition of PMC by MML .................................................................................. 23

8.2
9.0

Property Ownership and Ownership Changes............................................................................................ 23

Previous Exploration and Development...................................................................................................... 24

GEOLOGICAL SETTING......................................................................................................................................... 25
9.1

Regional Geology ....................................................................................................................................... 25

9.2

Local and Property Geology ....................................................................................................................... 25

10.0 DEPOSIT TYPES..................................................................................................................................................... 25

11.0 MINERALISATION .................................................................................................................................................. 26
12.0 EXPLORATION ....................................................................................................................................................... 26
12.1

Das-Agan Project........................................................................................................................................ 27

12.1.1

Lingig Prospect ..................................................................................................................................... 27

12.1.2

Usa Prospect ........................................................................................................................................ 29

12.2

Saugon Gold Silver Project......................................................................................................................... 30

12.2.1

Prospect Geology.................................................................................................................................. 31

12.2.2

MML Exploration ................................................................................................................................... 31

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12.3
12.3.1
12.3.1.1
12.3.2
12.4
12.4.1

Tambis Project............................................................................................................................................ 34
Bananghilig Gold Deposit...................................................................................................................... 34
Bananghilig Resource Estimate......................................................................................................... 37
Kamarangan Prospect .......................................................................................................................... 38
Anoling Project............................................................................................................................................ 38
Geology and Diamond Drilling .............................................................................................................. 38

12.5

Apical Project.............................................................................................................................................. 42

12.6

Gamuton Project......................................................................................................................................... 43

12.7

Regional Mineralisation Potential Barobo Fault Corridor ......................................................................... 43

12.7.1

Kamarangan Porphyry Target............................................................................................................... 44

12.7.2

Discussion............................................................................................................................................. 44

12.8

Other Areas ................................................................................................................................................ 46

13.0 DRILLING ................................................................................................................................................................ 47

14.0 SAMPLING METHOD AND APPROACH................................................................................................................ 47
14.1

Diamond Drilling ......................................................................................................................................... 47

14.2

Channel Sampling ...................................................................................................................................... 47

14.3

Density Data ............................................................................................................................................... 47

15.0 SAMPLE PREPARATION ANALYSES AND SECURITY ....................................................................................... 47

15.1

Implementation and Supervision of Sample Preparation ............................................................................ 47

15.2

Sample Preparation and Analytical Procedures and Protocols................................................................... 47

15.3

Quality Control Measures employed........................................................................................................... 48

15.3.1

Accuracy ............................................................................................................................................... 48

15.3.2

Precision ............................................................................................................................................... 49

15.3.3

Inter-Laboratory Checks........................................................................................................................ 49

16.0 DATA VERIFICATION ............................................................................................................................................. 51

17.0 ADJACENT PROPERTIES...................................................................................................................................... 51
18.0 MINERAL PROCESSING AND METALLURGICAL TESTING ............................................................................... 51
19.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES .......................................................................... 51
19.1

Mineral Resources...................................................................................................................................... 51

19.2

Mineral Reserves........................................................................................................................................ 53

20.0 OTHER RELEVANT DATA AND INFORMATION .................................................................................................. 54

21.0 INTERPRETATION AND CONCLUSIONS.............................................................................................................. 54
22.0 RECOMMENDATIONS............................................................................................................................................ 55
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23.0 REFERENCES......................................................................................................................................................... 55
24.0 DATE ....................................................................................................................................................................... 55
25.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND
PRODUCTION PROPERTIES ................................................................................................................................. 56
25.1

Mining ......................................................................................................................................................... 56

25.2

Recoverability ............................................................................................................................................. 56

25.3

Markets ....................................................................................................................................................... 56

25.4

Contracts .................................................................................................................................................... 56

25.5

Environment................................................................................................................................................ 56

25.6

Taxes .......................................................................................................................................................... 57

25.7

Capital and Operating Cost Estimates........................................................................................................ 58

25.8

Economic Analysis...................................................................................................................................... 58

25.9

Payback...................................................................................................................................................... 58

25.10

Mine-life ...................................................................................................................................................... 58

TABLES
Table 1: Summary Mineral Resource Estimate Co-O Mine June 2010 ............................................................................... 1
Table 2: Summary Mineral Reserve Estimate Co-O Mine July 2010 .................................................................................. 2
Table 3: Co-O Previous Production Statistics 2009 and 2010............................................................................................. 4
Table 4: Notional Three Year Mining Schedule................................................................................................................... 5
Table 5: Glossary of Terms ................................................................................................................................................. 8
Table 6: Schedule of Mining Tenements ........................................................................................................................... 14
Table 7: Summary Mineral Resource Estimate Co-O Mine June 2010 ............................................................................. 18
Table 8: Summary Mineral Reserve Estimate Co-O Mine July 2010 ................................................................................ 18
Table 9: Claim Owner Royalties........................................................................................................................................ 21
Table 10: Co-O Production Statistics by Calendar Year Prior to Acquisition by MML ....................................................... 25
Table 11: Summary of All Lingig Drilling Results for Intersections >10 m Wide, 0.3% Cu Cut-off..................................... 29
Table 12: Saugon Drill Hole Assays.................................................................................................................................. 34
Table 13: Summary of Significant Bananghilig Intersections............................................................................................. 37
Table 14: Inferred Mineral Resource Estimate Bananghilig Deposit at August 2009 ........................................................ 37
Table 15: Anoling Drill Assays Greater than 2 g/t Au ........................................................................................................ 41
Table 16: Gamuton Drill Hole Assays ............................................................................................................................... 43
Table 17: Summary of Scout Drilling on Barobo Corridor Limestone Hosted Prospects................................................... 44
Table 18: Summary of Significant Drill Hole Results ......................................................................................................... 46
Table 19: SG Summary Results........................................................................................................................................ 47

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Table 20: Operating Cost Estimate 2010/2011 Base Case ............................................................................................ 55

Table 21: Operating Costs ................................................................................................................................................ 58

FIGURES
Figure 1: Proportion of Mineral Reserve Within the Notional Mining Schedule as of 2009 ................................................. 6
Figure 2: Location Plan. .................................................................................................................................................... 11
Figure 3: Mill-site layout .................................................................................................................................................... 12
Figure 4: Tenements and Projects .................................................................................................................................... 13
Figure 5: 3D image of veins at Co-O Mine ........................................................................................................................ 18
Figure 6: Composite Plan of Veins.................................................................................................................................... 19
Figure 7: Exploration Tenements Showing Main Prospects .............................................................................................. 27
Figure 8: Lingig Regional Geology .................................................................................................................................... 28
Figure 9: Usa Prospect, geology and geochemical anomalies.......................................................................................... 30
Figure 10: Saugon Geology and Drill Hole Plan................................................................................................................ 32
Figure 11: Cross section of First Hit Vein A-A .................................................................................................................. 33
Figure 12: Bananghilig Tenement Location....................................................................................................................... 35
Figure 13: Bananghilig Prospect Geology ......................................................................................................................... 36
Figure 14: Anoling Project Map ......................................................................................................................................... 39
Figure 15: Longitudinal Section of the Anoling (Alcorn) Vein ............................................................................................ 40
Figure 16: Longitudinal Section of the Hope Vein ............................................................................................................. 40
Figure 17: Kamarangan Geological Map........................................................................................................................... 45
Figure 18: Control Charts CRM Assays Co-O Laboratory January to April 2008 .............................................................. 50
Figure 19: Duplicate Assays January to April 2008........................................................................................................... 51

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APPENDICES
APPENDIX A
Qualified Persons Certificates
APPENDIX B
Co-O Mineral Resource Report
APPENDIX C
Co-O Mineral Reserve Report
APPENDIX D
Tenement Boundary Descriptions

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3.0

SUMMARY

Medusa Mining Limited (MML) is a company listed on the Australian Stock Exchange (ASX) and on the
Alternative Investment Market (AIM) of the London Stock Exchange (LSE) and the Main Board of the
Toronto Stock Exchange (TSX).
The report was prepared to update the report previously submitted in March 2010 (Golder Associates
107641096-001-Rev1). It differs from that report with respect to:

Mineral Resources and Mineral Reserves which were re-estimated on the basis of additional
information, in June and July 2010;

Additional information on drilling at Saugon at the First Hit, Paradise, Mabas and Mabas South
Prospects

An update on drilling at the Lingig prospect

Preliminary information on the Usa Prospect

In all other respects the report is identical to Golder Associates Technical Report 097641385-001-R-Rev1.
This report is predominantly derived from information provided by the company and its consultants together
with information gathered independently during the course of a number of site visits to the operations. Peter
Onley visited the Philippines Project in November 2004 and again in June 2006 specifically for the purposes
of preparing reports for the ASX and AIM respectively. He visited the site in August 2007 in order to update
the mineral reserve estimates in 2007 for the mine. The 2007 mineral reserve estimates were superseded in
2008 and again by the mineral reserve estimates presented in this report. A further site visit was made on 19
to 21 October 2009.

3.1

Property Description

MML is currently mining and processing ore from the Co-O Mine and producing and selling gold and
exploring a number of properties centred approximately 180 km north of Davao City, in Agusan del Sur and
Surigao del Sur on the island of Mindanao, Republic of the Philippines. The tenements now comprise
2
approximately 820 km of tenements and tenement applications. The company is also exploring at a number
of other projects within the tenements including Anoling, Saugon, Das-Agan and Tambis. Other exploration
projects are currently inactive while awaiting tenement approvals.

3.2

Ownership

MMLs mineral assets are held through its wholly-owned subsidiary Philsaga Mining Corporation (PMC)
and a series of joint venture and royalty agreements as set out in the tenement report.

3.3

Mineral Resources and Mineral Reserves

Mineral Resources for the Co-O Mine were estimated by Mark Zammit of Cube Consulting Pty Ltd and
reported in accordance with the JORC Code and reconciled to the CIMM Code.
Cube incorporated a wide range of data and information in the estimation project. Mark Zammit visited the
Co-O mine in June 2010 specifically for the purposes of this resource estimation.
Mineral Resources were estimated in June 2010, using a geological cut-off defined by the limits of the
mineralised vein as shown in Table 1:
Table 1: Summary Mineral Resource Estimate Co-O Mine June 2010
Deposit
Co-O Mine

Category

Tonnes

Au g/t

Indicated

1 418 000

13.2

603 000

Inferred

2 905 000

9.6

898 000

Note PMC has 100% attributable interest in these mineral resources, subject to royalties due
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Mineral Reserves were updated in July 2010 by Declan Franzmann of Crosscut Consulting Pty Ltd, based
on the latest Mineral Resource Estimate. The Reserve is reported in compliance with the JORC Code and
reconciled to the CIMM Code using a 2.6 g/t Au gold stope cut-off grade and a US$900/ounce gold price.
The Mineral Reserve estimate is shown in Table 2.
Table 2: Summary Mineral Reserve Estimate Co-O Mine July 2010
Deposit

Category

Co-O Mine

Probable

Tonnage

Grade

(t)

(g/t Au)

1 465 000

10.7

Contained
Gold (oz)
505 000

Note: PMC has 100% attributable interest in these mineral reserves, subject to royalties due

Gold mining in the Philippines is subject to a royalty payment to the government equal to 2% of the gross
value of gold produced. A further 1% of the gross value of the gold is payable to Indigenous Peoples.
In addition to the government and indigenous royalties, a number of the tenements held beneficially by PMC
are subject to private royalties.
The Co-O Mine and plant was originally developed in 1988 at a capital cost of US$22 M by Banahaw Mining
and Development Corporation (BMDC), a wholly owned-subsidiary of Musselbrook Energy and Mines Pty
Ltd. The operation closed in 1991 and was placed on care and maintenance until its purchase acquisition by
PMC in August 2000. PMC recommissioned the Co-O Mine operations using labour intensive mining
methods consisting of hand held mining, hammer and pick excavation and hand operated rail trucks.
Mining at Co-O is carried out under the terms of Mineral Production Sharing Agreement (MPSA) number
262-2008-XIII covering the Co-O gold mine granted on 19 March 2008. The MPSA is valid for 25 years and
renewable for a further 25 years.

3.4

Geology

The mining and exploration tenements are located in the Diwata Range which forms part of the Eastern
Mindanao Highlands. Regional geology comprises an Early Tertiary ophiolitic basement overlain by andesitic
lavas and pyroclastic beds, sandstone, shale, conglomerate and limestone. The volcano-sedimentary
sequence is intruded by Late Tertiary dacite and quartz diorite plutons. This geological setting is host to
epithermal gold and copper-gold porphyry mineralisation.
Gold mineralisation in the Philippines shows very strong structural control. The dominant structural feature is
the Philippine Rift Fault, a major regional structure that extends for 1200 km in a north-northwesterly
direction over the length of the Philippines from southern Mindanao to northern Luzon. The fault is located
approximately 200 km west of the Philippine Subduction System which dips west under the Philippines
landmass and provides the main source of Tertiary volcanism and mineralisation.

3.5

Exploration

The company is also exploring at a number of prospects. These include:

Das-Agan: The Lingig prospect within the Das-Agan project, is a porphyry copper target to the east of the
main tenement block where, previous diamond drilling has indicated anomalous copper. Recent wide and
good grade copper intersections have been returned adjacent to the previous drilling. Epithermal veins up to
one metre wide further south have been worked sporadically by local prospectors for gold.
New mineralisation has been located at the Usa Prospect.
Saugon: At Saugon, the First Hit Vein has been explored by diamond core drilling and by underground
development on the mineralised structure. Other prospects include Paradise, Mabas and Mabas South.
Gold mineralisation at Saugon is hosted by andesitic volcanic rocks. Mineralised vein sets are generally
orthogonal to the Philippine Rift Fault trend and strike northeast. The quartz veins are associated with

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silicification of the host rocks (argillic alteration) and gold mineralisation is associated with pyrite, marcasite,
galena and sphalerite.
Resource estimates have not been prepared for the mineralisation at Saugon.
Tambis: Bananghilig Deposit and Kamarangan prospect: The Tambis project covers the highly
prospective northern strike extensions of the Co-O Mine sequence. The presence of gold mineralisation
within the Bananghilig Deposit is demonstrated by a history of artisan mining on high grade veins. Artisan
mining stopped close to the water table.
At the Bananghilig Deposit, PMC has completed an underground exploration program to explore the veins
at depth. A 50 m decline shaft was sunk in order to confirm the geometry and continuity of the veins and
700 m of horizontal development was completed. Underground and surface diamond drilling was completed
totalling 7715.50 m in 31 holes. Historical drilling totalling 29 477 m in 344 holes was completed in the 1980s
and 1990s.
A resource estimation was completed in August 2009 resulting in an Inferred Resource of 650 000 ounces at
1.3 g/t Au in 15 000 000 t of material. Mineral resources for the Co-O Bananghilig Deposit are reported in
compliance with the JORC Code and reconciled to the CIMM Code.
At the Kamarangan porphyry copper target, 10 scout holes have been completed with encouraging coppermolybdenum results requiring follow-up drilling.
Anoling: The Anoling project comprises approximately 405 hectares of extensions of the favourable
geology. Small artisanal workings are generally located on westerly trending vein systems, with some
indications of a conjugate northeast trending vein set. Two parallel veins trending westerly have been
defined to date. The Hope vein extends for approximately 650 m along strike and the Loring Vein extends for
approximately 750 m along strike, with both veins being open to the east.
Two Small Scale Mining Permits were granted on 19 March 2007 and have been subsequently extended.
Diamond drilling began immediately on the Hope and Anoling Veins. Fifty diamond core holes have been
drilled to date, intersecting the veins at approximately 50 to 200 m below surface. Potentially economic
intersections were returned over a strike length of approximately 300 m with mineralisation open at depth
and to the east.
Apical: The Apical Gold Project is adjacent to Kamarangan and Bananghilig to the north of the Co-O Mine in
an area of favourable geology similar to that at Kamarangan and Bananghilig.
Gamuton: This prospect is located west of the Co-O Mine with mineralisation and alteration interpreted as
being indicative of porphyry copper mineralisation.
Co-O: The company is conducting mining operations at the Co-O Mine which is being developed on a series
of low sulphide, epithermal quartz veins which strike east-west over a strike length of at least 600 m west
from the Oriental Fault and approximately 800 m east of the Oriental Fault. The ore body was mined pre1992 by BMDC from above the (previously 3150 mL) Level 1 to depths of up to 160 m from surface. The vein
system is open at depth and east and possibly to the west.
Drilling since 2006 has extended the vein system by drilling over a length of approximately 1400 m.

3.6

Mineralisation

The mineralisation occurs as auriferous vein sets trending easterly in andesitic volcanics. Within the current
workings to the east and west of the Oriental Fault, there are numerous steeply dipping quartz vein
structures which are being mined to various depths down to 200 m below Level 1 over a maximum length of
approximately 1000 m. The main vein structures, known as the Central Vein, Great Hamish Vein, Jeremy
Vein and a number of others, are cut by north northwesterly trending reverse faults of limited displacement.
Most of the veins have been defined by development over a strike length of approximately 1000 m in the
immediate vicinity of the mine and are believed to possibly extend up to about 2000 m in strike length. The
Co-O Mine works on a 3 shift, 24 hour, 26 day per month basis. The mine has its own team of airleg miners
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TECHNICAL REPORT MEDUSA MINING LIMITED

operating approximately 60 airleg machines, timbermen, bogger drivers, locomotive drivers, hoist drivers,
surveyors, samplers, mappers, mine geologists, mining engineers, shift bosses, maintenance crews,
electricians and other support tradesmen. All new mining data is recorded in the companys data base on a
daily and weekly basis.

3.7

Production

Production statistics for 2009 and 2010 are shown in the following production table:
Table 3: Co-O Previous Production Statistics 2009 and 2010
Unit

Year ended 30 June

2010

Year ended 30 June

2009

Tonnes mined (1)

Wet tonnes

198 693

126 853

Ore milled

Dry tonnes

179 609

116 451

Recovered grade

g/t

16.52

13.30

Recovery

94

93

Gold produced

Ounces

89 679

47 869

Cash costs (3)

US$

184

213

Ounces

64 020

47 869

US$

1100

880

Item

Gold sold
Average gold price
received
Notes:

1) moisture content ranges from 6 to 7%

(2) Gold production is actual gold poured during the period and does not reflect changes in the balance of gold in circuit
(3) Cash costs refer to the cost of gold (net of development costs) produced but not necessarily sold and includes royalties
and local taxes of US$46 per ounce of the year (2009 US$40 per ounce).

The Co-O treatment plant, designed and constructed by BHP Engineering, is located immediately east of the
National Highway on private land owned by the company, approximately 12 km from the Co-O Mine. The
company has developed the following generalised mining schedule:

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Table 4: Notional Three Year Mining Schedule

unit

Q4 2009-Q3
2010

Q4 2010-Q3
2011

Q4 2011-Q3
2012

3 Year
Total

Horizontal
Development

3 909

3 129

2 304

9 342

Vertical Development

425

256

218

899

Waste

11 296

7 436

8 547

27 279

Development tonnes

37 334

30 644

19 400

87 378

Development grade

Item

g/t Au

7.45

7.21

5.30

6.89

Stope tonnes

172 292

203 385

245 541

621 218

Stope grade
Total

g/t Au
t

16.21
209 626

15.68
234 029

13.72
264 941

15.05
708 596

Head Grade

g/t Au

14.65

14.57

13.10

14.05

Total Contained Gold

Oz Au

98 741

109 606

111 627

319 974

Milled tonnes
(includes stockpiles)

229 626

234 029

264 941

728 596

Milled grade

g/t Au

14.68

14.57

13.10

14.07

Contained gold

Oz Au

108 373

109 599

111 613

329 585

Mill recovery

94%

94%

94%

94%

Recovered gold

oz

101 871

103 023

104 916

309 809

Note:
This Notional Mining Schedule includes mineralisation that is not yet included in the Mineral Resources or Mineral Reserves.
This Notional Mining Schedule does not purport to be a Mineral Resource or a Mineral Reserve. Conversion of Exploration Potential in
the Notional Mining Schedule to Mineral Reserves will require successful exploration by underground development during the course of
mining. Failure to convert such Exploration Potential into Mineral Reserves will result in additional development and additional cost
being required to access the equivalent tonnage of material from material which is currently classified as a Mineral Reserve from the
underground workings.

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Figure 1: Proportion of Mineral Reserve Within the Notional Mining Schedule as of 2009

Mining operations are undertaken by mainly staff employed miners and some individual contractors, who
also carry out development activities prior to mining. Other tradesmen and technicians carry out
complementary activities including timbering and tramway construction and maintenance during operations.
The Co-O Mine operates under the terms of an Environmental Compliance Certificate (ECC) originally
issued by the Environmental Management Bureau (EMB) to BMDC on 17 July 1990 and assigned to PMC
in 2006. It has subsequently been renewed on 17 July 2009 and permits the company to process 750 tpd of
ore.

3.8

Author's Conclusions

In our opinion, both mining and exploration is being conducted in accordance with industry standards and is
subject to the expected level of risk and uncertainty normally ascribed to underground mining and
exploration activities being undertaken in the Philippines.
We note that the three year mining schedule assumes mining will occur from material that is not yet included
in the Mineral Reserve and in some cases not in the Mineral Resource. In our experience, this is not an
unusual situation with an operating high-grade, narrow-vein mine, where diamond drilling is used to locate
the vein but the grade of the drill-hole cannot be used to determine the mining grade. Payable stopes (grade
and width of mineralisation) are identified on the basis of samples collected from development levels and
winzes driven on the vein.

3.9

Recommendations

We concur with the development and exploration activities proposed by the Company which recognises the
need to continually improve the performance of the on-site assay laboratory and to increase the proportion of
Mineral Reserves within the notional Mining Schedule.
We are unable to provide a financial evaluation of the project as the base case mine schedule includes
material that is not included in the Mineral Reserve.

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4.0
4.1

INTRODUCTION AND TERMS OF REFERENCE

Terms of Reference

MML instructed Golder Associates Pty Ltd (Golder Associates) to prepare an F1 Report for inclusion in a
submission for listing on the Main Board of the Toronto Stock Exchange (TSX). Specifically the report was
to be prepared by Peter George Onley who meets the requirements of a Qualified Person for the purposes of
reporting in compliance with National Instrument NI 43-101. Golder Associates will be paid a fee for
undertaking this work in line with its normal schedule of fees applying to work of this nature. The payment
and quantum of the fee is not contingent upon the successful listing of the company on the TSX.
Note that all figures included in this report were provided by MML who take responsibility for copyright.

4.2

The Purpose of the Report

MML is a company listed on the Australian Stock Exchange (ASX) and on the Alternative Investment
Market (AIM) of the London Stock Exchange (LSE).
The company was originally incorporated on 5 February 2002 and admitted to the ASX on 23 December
2004. The Initial Public Offering (IPO) raised A$2.5 M through the issue of 12.5 M ordinary shares. In
September 2005, the company made a pro-rate non-renounceable entitlements issue of 10.01 M shares that
raised a further A$6.0 M. At the same time, 2.5 M free options were issued on the basis of one free attaching
option for every four shares subscribed for under the terms of the offer. Golder Associates Pty Ltd (Golder
Associates) prepared the Independent Geologists Report in February 2005 which was included in the offer
documents for that capital raising.
Following MMLs original listing on the ASX it divested itself of a number of exploration properties held in
Australia and concentrated its efforts on acquiring, exploring and developing the Co-O Gold Mine and
surrounding exploration tenements on the island of Mindanao in the southern part of the Republic of the
Philippines. MML completed a Fast Track Listing on AIM and began trading on AIM on 21 November 2006.
Golder Associates prepared the Competent Persons Report in October 2006 which was included in the
listing documents.
MMLs interests in the Philippines were secured through a series of joint ventures and its 50% interest in
PHSAMED Mining Corporation (PHSAMED) held jointly with PMC.
Following the listing and capital raising on the AIM market, MML and its subsidiaries acquired all of the
PMCs interests in the Philippine tenements by purchasing all the shares in PMC. PHSAMED and PMC are
controlled subsidiaries of MML. PMC is the operating company for MML in the Philippines
This report has been prepared by Golder Associates to provide an update of Mineral Resources, Mineral
Reserves and exploration activities.

4.3

Sources of Information

This Qualified Persons report is predominantly derived from information provided by the company and its
consultants together with information gathered independently during the course of several site visits to the
operations. Peter Onley visited the Philippines Project in November 2004 and again in June 2006 specifically
for the purposes of preparing reports for the ASX and AIM respectively. He visited the site in August 2007 in
order to update the 2007 mineral reserve estimates for the mine. The 2007 ore reserve estimate was
superseded in 2008 and again by the mineral reserve estimate included in this report. A further site visit was
made on 19 to 21 October 2009. Information provided by MML and presented in this document has been
released to the relevant markets in compliance with its continuous disclosure obligations to those markets.

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Table 5: Glossary of Terms

A$
Australian dollar
AAS

Atomic Adsorption Spectrometry

Accuracy

The ability to obtain the correct result

AIG

Australian Institute of Geoscientists

AIM

Alternative Investment Market of the London Stock Exchange

ASX

Australian Stock Exchange

AusIMM

Australasian Institute of Mining and Metallurgy

Blank

Sample without metal content to check possible contamination during

assaying (e.g. crushed glass)

CIL

Carbon in leach

CIM

Canadian Institute of Mining, Metallurgy and Petroleum

CIP

Carbon in pulp

Cut off

Grade above which mineralised material is considered to be ore.

DD

Diamond Drill

Dilution

Non-ore material that gets mixed with ore during the mining process

Duplicate

Sample that has been split from another to check the field sampling or
laboratorys precision

HQ

Diamond core 63.5 mm diameter

IP

Induced Polarisation geophysical exploration technique

JORC

Australasian Joint Ore Reserves Committee

Kriging

Grade estimation technique incorporating variability by distance

million

ML

Mining Lease

Moz

Million troy ounces

Mtpa

Million tonnes per annum

NATA

National Association of Testing Authorities, Australia

NQ

Diamond core 47.6 mm

Ordinary Kriging

Estimation of grades into block model using a grade estimation

technique incorporating variability by distance

Ore

Mineralised material that can be economically mined

PhP

Philippine peso

ppb

Parts per billion

ppm

Parts per million (the equivalent of grams per tonne for precious metals)

Precision
RC
Standard Sample
Tailings

The ability to obtain the same result each time

Reverse Circulation a drilling system whereby sample is returned
within the drill rods
Specially prepared sample whose metal grade is very accurately known
and certified
The reject material from the processing plant

TSX

Toronto Stock Exchange

US$

United States dollar

Variogram

Mathematical and graphical way of representing variation of data as a

function of separation distance

Vulcan

Computer program by Maptek that is used to carry out resource

estimation and mine planning www.vulcan3D.com.

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4.4

The Extent of Field Involvement of the Qualified Person

Apart from the field visits made especially for the purposes of preparing the reports for submission to the
ASX and AIM market of the LSE and for the purpose of this Qualified Persons report, Peter Onley was not
involved with any of the fieldwork described in this report.

5.0

RELIANCE ON OTHER EXPERTS

Golder Associates and Peter Onley, the author of this report, were commissioned solely to prepare this
Qualified Persons Report for inclusion in the submission to the TSX and were not involved in the
preparation, authorisation or issue of any other aspect of the documentation.
Golder Associates and Peter Onley, the author of this report, have specifically relied on the following persons
and entities for the following information included in this report:

Resource estimations which were prepared by Mark Zammit of Cube Consulting Pty Ltd of Hay Street,
Perth, Western Australia.

Reserves estimations were prepared by Declan Franzmann of Crosscut Consulting of Brisbane,

Queensland, Australia

Tenement information which was prepared by Carag, Caballes, Jamora & Somera, of The Plaza
Royale, Salcedo Village, Makati City, Manila, Republic of the Philippines and by the companys
tenement officers

Environmental reports were supplied by MML

Our report is also dependent upon future achievement and satisfaction of assumptions, conditions, and
qualifications as set forth in this report.
Data, reports, and opinions supplied by MML and other third party sources are listed as references.

6.0
6.1

PROPERTY DESCRIPTION AND LOCATION

Area of the property
2

The project now comprises approximately 820 km of tenements and tenement applications in Mindanao,
Republic of the Philippines.

6.2
6.2.1

Location
Republic of the Philippines

The mineral assets described in this report are all located on the island of Mindanao which is located in the
south of the Republic of the Philippines Figure 2. The Philippine Archipelago comprises more than 7000
islands located in South East Asia, between the Philippine Sea and the South China Sea. The major island
groups are Luzon in the north, the Visayas in the centre and Mindanao in the south.
The Republic of the Philippines, which has been independent since July 1946, now has a population of
approximately 88 M. The majority of the population is Christian (81%) with a significant Muslim minority (5%)
concentrated in the western part of the island of Mindanao in the south of the country. While Filipino is the
national language, English is widely used and has the status of an official language. English is the language
of instruction in all high schools and higher education institutions.
The country has an expanding well-educated middle class and an economy which depends on a range of
activities from high-tech manufacturing in the cities to subsistence farming in the rural areas. Manufactured
exports include electronic goods, pharmaceuticals, chemicals, furniture and other wood products. Primary
exports include a range of minerals and agricultural products including timber. The Philippines had, until
recently, been experiencing a 30-year decline in its mining sector despite extensive mineral deposits of
copper, gold silver, nickel, lead and chromium.

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6.2.2

Project Location

The tenements and tenement applications are located in Agusan del Sur and Surigao del Sur provinces in
the eastern part of the island of Mindanao, the southernmost major island in the Republic of the Philippines.
The tenements cover approximately 70 km of strike length on the western side of the Diwata Range in
moderately rugged forested terrain (mainly plantation trees) on the eastern side of the island of Mindanao,
the largest island of the southern island group of the Republic of the Philippines. PMC has been successfully
operating the Co-O Mine for more than five years and exploring its extensive landholdings surrounding and
along strike from the mine. The Co-O Mine and the processing plant are located approximately 180 km, and
some three hours by road, north-northeast of Davao City, adjacent and to the east of the National Highway
which runs north-south through the eastern side of the Philippines. The processing facility is currently
treating up to approximately 550 tonnes per day (tpd) at the nameplate design capacity of 550 tpd (180 000
tpa) in carbon-in-pulp (CIP) configuration on current tankage. A new three-stage crushing circuit is being
installed with nominal capacity of approximately 1000 tonnes per day. Increasing production beyond 750 tpd
will require an amendment to the operating approval certificate.
PMC is currently mining and processing ore from the Co-O Mine and producing and selling gold. PMC is also
actively exploring at a number of other projects within the tenements including Anoling, Saugon Das-Agan
and Tambis in which it has a beneficial interest. The plant layout is shown in Figure 3.

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Figure 2: Location Plan.

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Figure 3: Mill-site layout

6.2.3

Tenement Registration and Proprietorship

These projects are secured by contiguous granted tenements and tenement applications as shown in Figure
4 and Table 6. All mineral tenements in the Philippines are subject to the Philippines Mining Act (1995). The
Act is administered by the Mines and Geoscience Bureau (MGB) of the Department of Environment and
Natural Resources (DENR).

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Figure 4: Tenements and Projects

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Table 6: Schedule of Mining Tenements

Tenement Holder

MMLs
Interest

Royalty

Area
(ha)

MPSA No. 2622008-XIII

Philsaga Mining Corporation

100.00%

2539

MPSA No. 00013XIII

Base Metal Mineral Res.

Corp.

100.00%

2200

EP-XIII-017

Philsaga Mining Corporation

100.00%

3132

APSA No. 00012XIII

Base Metal Mineral Res.

Corp.

100.00%

340

APSA No. 00087XIII

Col Samuel G Afdal (Ret)

100.00%

846

APSA No. 00088XIII

Phsamed Mining Corporation

100.00%

7304

APSA No. 00098XIII

Mindanao Philcord Mining

Corp.

100.00%

1% net
profit

1184

APSA No. 00099XIII

Mindanao Philcord Mining

Corp.

100.00%

1% net
profit

1607

Anoling Project

APSA No. 00039XIII

Alcorn Gold Resources

Corp.

100.00%

8% gross

405

Tambis Project

APSA No. 00022XIII

Philex Gold Phils., Inc.

100.00%

7% net
smelter

6208

Das-agan
Project

APSA No. 00024XIII

Das-agan Mining
Corporation

100.00%

3% gross

3810

Apical Project

APSA No. 00028XIII

APMEDORO Mining
Corporation

Earning 70%
(JV)

2084

Corplex Projects

APSA No. 00054XIII

Corplex Resources
Incorporated

100%

3% net
smelter

2118

APSA No. 00077XIII

Corplex Resources
Incorporated

100.00%

4% gross

810

APSA No. 00033XIII

J & E Golden Resources

Corporation

100.00%

2% gross

162

SSMP-ADS-05-1006

Phsamed Mining Corporation

100.00%

8% gross

20

SSMP-ADS-05-1106

Phsamed Mining Corporation

100.00%

8% gross

20

XIII-SDS-SSMP002-07

Philsaga Mining Corporation

100.00%

7% net
smelter

20

XIII-SDS-SSMP003-07

Philsaga Mining Corporation

100.00%

7% net
smelter

20

EPA No. 00064-XIII

Philsaga Mining Corporation

100.00%

3979

EPA No. 00065-XIII

Philsaga Mining Corporation

100.00%

3048

EPA No. 00066-XIII

Philsaga Mining Corporation

100.00%

6769

EPA No. 00067-XIII

Col Samuel G Afdal (Ret)

100%
(assignment)

1693

Project Name

Tenement ID

Approved
MPSA
Co-O Gold
Project

Approved EP
Saugon Project

MPSA Applications
Co-O Projects

Golden Project

Small-Scale Mining Permit

Anoling Project

Tambis Project

EP Applications
Saugon Project

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Tenement ID

Tenement Holder

MMLs
Interest

Royalty

Area
(ha)

EPA No. 00069-XIII

Phsamed Mining Corporation

100.00%

7790

EPA No. 00087-XIII

Philsaga Mining Corporation

100%
(assignment)

764

EPA No. 00176-XIII

Sursur Mining Corporation

100.00%

3% gross

3823

EPA No. 00180-XIII

Sursur Mining Corporation

100.00%

3% gross

5948

EPA No. 00181-XIII

Sursur Mining Corporation

100.00%

3% gross

6118

EPA00186-XIII

Corplex Resources
Incorporated

100.00%

3% net
smelter

7111

XIII-SMP-03-08

Philsaga Mining Corporation

100.00%

20

XIII-SMP-04-08

Philsaga Mining Corporation

100.00%

20

XIII-SMP-01-08

Philsaga Mining Corporation

100.00%

20

Project Name

Tagbina Project

Corplex Projects

Special Mines Permit

Campbagang
Project
Das-agan
Project

XIII-SMP-02-08

Philsaga Mining Corporation

100.00%

20

XIII-SMP-01-09

Phsamed Mining Corporation

100.00%

20

XIII-SMP-02-09

Phsamed Mining Corporation

100.00%

20

Note: Tenement area is rounded to the nearest hectare

Abbreviations:
MPSA Mineral Production Sharing Agreement

EPA EP Application

N North

EP Exploration Permit

SMP Special Mines Permit

S South

APSA MPSA Application

SSMP Small-Scale Mining Permit

JV Joint Venture

6.3

Nature of MMLs Interest in the Tenements

MMLs interest in the tenements through PMC is summarised in Table 6. Golder Associates is not expert in
Tenement Administration and the following information on relevant material conditions was provided to
Golder Associates by MML for inclusion in this report.

6.3.1

Mindanao Philcord Corporation Tenements

The Company has a Memorandum of Agreement whereby the Company will receive 100% of the benefits
from the tenement and is responsible for all aspects of maintaining, exploring and mining on the tenement for
which Mindanao Philcord Mining Corporation will receive a 1% Net Profit Interest.

6.3.2

Sinug-ang Project (Salcedo Tenement)

The Company has a Memorandum of Agreement with Netali P Salcedo (NPS) whereby the Company will
receive 100% of the benefits from EPA (XIII) 000114 and is responsible for all aspects of maintaining,
exploring and mining on the tenement for which NPS will receive a 5% gross royalty. Philsaga is restricted to
mining to no closer than 20 m from the existing small scale workings.

6.3.3

Corplex Project (EPA 00186-XIII)

The Company has a Memorandum of Agreement with Corplex Mining Corporation whereby the Company will
receive 100% of the benefits from EPA00186-XIII and is responsible for all aspects of maintaining, exploring
and mining on the tenements for which Corplex will receive a 3% Net Smelter Royalty.

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6.3.4

Corplex Project (APSAs)

The Company has a Memorandum of Agreement with Corplex Mining Corporation (Corplex) for APSA
00077-(XIII) whereby:

The Company has the right to explore and develop minerals on the tenements and will pay a 4% gross
royalty on all minerals extracted;

If the Company completes a scoping study for a major new discovery which demonstrates a minimum
five year mining life for the deposit, Corplex can:

elect to buy back a 30% interest in the respective tenement by re-imbursing a sum equal to four
times the expenditure to that time on the relevant tenement, and

contribute to 30% of all ongoing costs to develop the project;

In the event that Corplex elects not to contribute, Corplex will:

dilute to a 15% carried interest to commencement of production which will be funded by a loan
from the Company; and

Corplex will repay the loan from production with 70% of Corplexs share of cash flow being used
for loan repayment.

The same agreement terms apply to APSA 00054 (XIII) except the royalty to be received by Corplex is
a 3% Net Smelter Royalty.

6.3.5

Tambis Project

The Company has a Mining Agreement with Philex Gold Philippines Inc. whereby the key terms are:

The Company has the right to explore on the property for an initial two year period from granting
extendable by a further four years in two year periods,

The Company has the right to develop the property into commercial production for the life of the mine,

The Company will pay a total 7% royalty to Philex and the underlying claim holders together.

6.3.6

Das-Agan Project

The Company has a Mines Operating Agreement with Das-Agan Mining Corporation (The Vendors)
whereby the key terms, were:

The Vendors are to be re-imbursed for past expenses totalling PhP12 M (approximately A$318 000)
with the issue of 601 367 MML shares based on an average price of A$0.53 being 10% discount to
market for the five days preceding settlement date, and issued in four equal tranches of 150 417 shares
with first tranche within 30 days of signing the agreement, the second tranche on granting of the
tenement, and the third and final tranches, on the 1st and 2nd anniversary after granting of the
tenement;

The agreement was subject to completion of tenement due diligence within 30 days;

The Company will pay to the vendors a 3% gross royalty on all production from the tenement;

The Company is responsible for all costs incurred to progress the APSA to granting.

Note that only the first tranche of shares has been issued as the tenements have not yet been granted.

6.3.7

Apical Project

The Company has a Joint Venture Agreement with MRL Gold Phils Inc. whereby:

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The Company has the right to earn a 70% interest by:

In narrow vein deposits, by commencing narrow vein development and earning its interest by

producing the first 500 tonnes of ore, after which MRL has the option to contribute to ongoing
expenditure or reduce to a 3% Net Smelter Royalty (NSR);

In large bulk tonnage deposits such as porphyry copper-gold deposits or disseminated gold

deposits, by completing of a Bankable Feasibility Study, after which MRL has the right to contribute
to ongoing expenditure or dilute to a 3% NSR.

The Company is required to spend US$300 000 within three years of grant of the APSA, and spend a
minimum of US$150 000 per year subsequently.

The Company has issued to the underlying claim holder fully paid shares in MML to the value of
US$50 000 when the project was assigned to the joint venture company and registered with the Mines
and Geosciences Bureau.

The Company will be responsible for all costs incurred to progress the APSA to granting.

6.3.8

Anoling Project

The Company has a Mines Operating Agreement (MOA) with Alcorn Gold Resources Corporation
(Alcorn) whereby:

The Company will pay Alcorn a 5% gross royalty on all production from the tenement to be shared with
other parties to the MOA;

The Company has issued Alcorn or its nominee the equivalent of PhP3 M (approximately A$75 000) in
MML shares converted at a discount rate of 10% to market, to reimburse Alcorn for past expenses;

In addition, the Company will pay Alcorn a 10% Net Profit Interest (NPI), capped at PhP11 M
(approximately A$27 000) as further reimbursement of exploration expenses;

The Company will be required to spend a minimum of US$50 000 in year 1 and US$100 000 in year 2;

The Company will pay the underlying claim owner a gross royalty of 3% on all production from the
tenement; and

The Company will be responsible for all costs incurred to progress the APSA to granting.

6.3.9

Sur-Sur Project

The Company has a Mines Operating Agreement with Sur-Sur Mining Corporation whereby

The Company will be responsible for all costs incurred to progress the Exploration Permit Applications
(EPA) to granting; and

The Company will pay the underlying claim owner a gross royalty of 3% on all production from the
tenement

6.4

Legal Survey of the Tenements

Tenements are not surveyed in the Philippines as they are located by a graticule system and boundaries are
described in Appendix D.

6.5

Mineral Resources and Mineral Reserves

Mineral Resources and Mineral Reserves are reported in accordance with the JORC Code and reconciled to
the CIMM Code. Mineral Resources were estimated, using a geological cut-off defined by the limits of
mineralised veins as shown in Table 7.
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Table 7: Summary Mineral Resource Estimate Co-O Mine June 2010

Deposit

Tonnage

Grade

(t)

(g/t Au)

Indicated

1 418 000

13.2

603 000

Inferred

2 905 000

9.6

898 000

Category

Co-O Mine

Contained
Gold (oz)

Note: PMC has 100% attributable interest in these mineral resources, subject to royalties due

Mineral reserves have been estimated in compliance with the JORC Code and reconciled to the CIMM Code
and were reported to both the ASX and to the AIM of the LSE, using only the Indicated Mineral Resources as
shown in Table 7.
Table 8: Summary Mineral Reserve Estimate Co-O Mine July 2010
Deposit

Category

Co-O Mine

Probable

Tonnage

Grade

(t)

(g/t Au)

Contained
Gold (oz)

1 465 000

10.7

505 000

Note: PMC has 100% attributable interest in these mineral reserves, subject to royalties due

6.6

Location of Known Mineralised Zones, Mineral Resources,

Mineral Reserves and Infrastructure

Figure 5 shows a 3D model of the veins and Figure 6 shows a projection of the veins and shafts at the Co-O
Mine.

Figure 5: 3D image of veins at Co-O Mine

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Figure 6: Composite Plan of Veins

6.7

Royalties and Encumbrances

Gold mining in the Philippines is subject to a royalty payment to the government equal to 2% of the gross
value of gold produced. A further 1% of the gross value of the gold is payable to Indigenous Peoples.
In addition to the government and indigenous royalties, a number of the tenements held beneficially by PMC
are subject to a private royalty as shown in Table 9.

6.8

Environmental Liabilities

The Co-O Mine has been in operation since the late 1980s and the mine has inevitably impacted on the local
environment through both operations and exploration. The mining operation has resulted in some ground
disturbance around both the operations and the treatment plant and generated a quantity of tailings which
are contained in a tailings storage facility on the tenements.
The original tailings dam has been lifted to its maximum level and has now been stabilised for long term
storage. A second tailings dam with a two year life has been completed and is currently in use. A third
tailings dam with an estimated eight year life has also been completed.
PMC has undertaken ongoing rehabilitation work on the tenements since their acquisition in line with its
operating permit from the Environmental Management Bureau (EMB) but there will be a need to undertake
further rehabilitation work as mining, exploration and development work proceeds. Ultimately it will be
necessary to dismantle the mining and processing infrastructure and rehabilitate those sites to comply with
current Philippines environmental regulations as required by the EMB.

6.9

Permits Required to Conduct the Work

Mining at Co-O was initially carried out under the terms of a Special Mining Permit (SMP) until March 2008.
MPSA number (XIII)262-2008 granted on19 March 2008 covering the Co-O gold mine and replaced the
SMP. The MPSA was granted to PMC by the Mines and Geosciences Bureau for 25 years renewable for
another 25 years.

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The SMP, which had identical terms and conditions to an MPSA, enabled PMC to conduct commercial full
scale mining operations at the Co-O gold mine for a period of two years prior to the grant of the MPSA.
Following the grant of the SMP, PMC was able to begin the development required for full scale mining
operations at the Co-O gold mine to provide the ore feed to the Co-O Plant that is owned by MMLs wholly
owned subsidiary, Mindanao Mineral Processing and Refining Corporation.

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204

APSA 039-XIII

Alcorn Gold Resources

Corporation

Anoling

APSA 000022-XIII
XIII-SDS-SSMP-002-05
XIII-SDS-SSMP-003-05

Philex Gold Philippines Inc &

claim owners Mr Jose H
Rodriguez & Mrs Erlinda G
Rodriguez.

Corplex Resources Inc

Das-agan Mining Corporation

Sursur Mining Corporation

Tambis

Corplex

Dasagan

Sur-Sur
Gross

EPAs XIII-0000176,
0000180 & 0000181
3%

3%

3%
3%
4%

7%

3%

5%

Amount

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Note: Gross royalties of 2% payable to the State plus 1% payable to Indigenous Peoples apply to all gold production

Gross

Net
Net
Gross

Net Smelter
Royalty
(NSR)

Gross

Gross

Type

APSA 000024-XIII

EPA 00186-XIII
APSA-000054-XIII
APSA-000077-XIII

APSA 000028-XIII

Apical Mining Corporation & MRL

Gold Phils Inc

Apical

Bernstar Mining Exploration &

Agro-Industrial Corporation

Reference

Royalty/Claim Owner

Project
Name

Table 9: Claim Owner Royalties

TECHNICAL REPORT MEDUSA MINING LIMITED

Royalty split 4% to Philex and 3% to Claim owners.

Royalty of 3% NSR only payable if the parties elect to dilute JV

interests.

Php 250 000 advance paid against future royalty payments.

Split 2% to Arumines Corporation, 3% to Alcorn.

Note

TECHNICAL REPORT MEDUSA MINING LIMITED

7.0
7.1

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES,

INFRASTRUCTURE AND PHYSIOGRAPHY
Topography and Land Use

The tenements lie on the western side of the Diwata Range that forms a rugged mountainous chain
extending from Surigao in the north to southeast of Davao. The ranges are largely covered with rainforest
particularly in the more rugged sections although it is usually secondary growth and plantation timber
following logging in more accessible sections. The National Highway follows the Agusan valley on the
western side of the tenements while Mt Saugon to the east of the highway rises to 400 m.

7.2

Access

Access to the Co-O Mine site is via the sealed National Highway which links Davao City in the south with
Surigao City at the northeastern point of Mindanao island. The highway runs parallel to the western margin
of the tenements and provides access to the project area via unsealed roads and timber cutters tracks. The
Co-O Mine is located approximately 12 km east of the highway via a gravel road developed and maintained
by PMC. Further to the north the Co-O Plant is located east of the highway and accessed via a 4 km
all-weather gravel road. Between the Co-O Mine and the treatment plant to the northwest of the mine, PMC
maintains 12 km of all-weather gravel road.
The Saugon Projects exploration camp is reached by 8 km of gravel road which meets with the highway
approximately 4 km south of the town of Bunawan and passes through the village of Imelda. Access within
these tenements is via old logging tracks which also expose the known vein systems where they cross the
strike of the mineralisation. The southern parts of the tenement can be accessed from the towns of Libertad
and Trento located on the National Highway.
The Tambis project can be reached via concrete and gravel roads from the town of San Francisco some
30 km further to the north of the millsite along the highway.

7.3

Population Centres

Most of the population of the region about the Co-O Operations live in small towns and villages along the
highway with scattered small rural settlements in the hilly terrain to the east. Land use is typically small-scale
semi-subsistence agriculture along the Agusan valley with minor forestry activities along the Diwata Range.
The most populous city in Mindanao is Davao City, with a population of approximately two million. It is
located approximately 180 km to the south of the project via the sealed Philippines National Highway. Davao
City has direct air links to Manila and Singapore.

7.4

Climate

The Philippines generally has a tropical maritime climate with a mean annual temperature of 27C. The
months of March to June are hot and dry, with monsoonal rains accompanied by occasional typhoons from
July to October. The period from November to February is cooler and drier.
The climate of eastern Mindanao is equatorial and not impacted by typhoons which affect the central and
northern Philippines. Heavy rainfall can occur at any time of the year although the majority of the rain falls
between December and March with no real dry season. Mean annual rainfall at the Co-O Mine is
approximately 3300 mm and relative humidity averaging 87%.
Operations can continue throughout the year.

7.5

Surface Rights and Local Resources

The company has extensive land holdings in Mindanao and the established the Co-O Mine, treatment plant
andAugust
tailings
dam. The mill and associated facilities are situated on titled land owned by the company. The
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has all necessary permits to allow it to carry22out its normal business of exploration and mining.

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The mill is serviced by electricity from the national electricity grid and has back up generating capacity due to
the low capacity of the rural power line currently connected to the operation. A dedicated power line is under
construction and due for completion in late November 2010.
Process and potable water is obtained from local surface water supplies. There is reliable replenishment of
surface water supply as rainfall in the area averages over 3000 mm per annum.
Unemployment rates are high in the Philippines and the Mindanao region has a long history of mining
resulting in a ready supply of non-skilled through to skilled labour being available locally.

8.0
8.1

HISTORY
Property Ownership and Ownership Changes

8.1.1

Co-O Mine prior to interest by MML

The Co-O Mine and plant was originally developed in 1989 at a capital cost of US$22 M by Banahaw Mining
and Development Corporation (BMDC), a wholly owned subsidiary of Musselbrook Energy and Mines Pty
Ltd. The operation closed in 1991 and was placed on care and maintenance until its purchase acquisition by
PMC in August 2000. PMC recommissioned the Co-O Mine operations using labour intensive mining
methods consisting of hand held mining, hammer and pick excavation and hand operated rail trucks.

8.1.2

History of MML and Acquisition of PMC by MML

MML was originally incorporated on 5 February 2002 and admitted to the ASX on 23 December 2004. The
Initial Public Offering (IPO) raised A$2.5 M through the issue of 12.5 M ordinary shares. In September
2005, the company made a pro-rata non-renounceable entitlements issue of 10.01 M shares that raised a
further A$6.0 M. At the same time 2.5 M free options were issued on the basis of one free attaching option
for every four shares subscribed for under the terms of the offer.
Following MMLs original listing on the ASX, it divested itself of a number of exploration properties held in
Australia and concentrated its efforts on acquiring, exploring and developing the Co-O Mine and surrounding
exploration tenements on the island of Mindanao in the southern part of the Republic of the Philippines.
MML completed a Fast Track Listing on AIM and began trading on AIM on 21 November 2006.
MMLs interests in the Philippines were secured through a series of and joint ventures and its 50% interest in
PHSAMED Mining Corporation (PHSAMED) held jointly with PMC.
Following the listing and capital raising on the AIM market, MML acquired all of the Philsaga Mining
Corporations (PMC) interests in the Philippine tenements by purchasing all the shares in PMC (the
Philsaga transaction). PHSAMED and PMC are now controlled subsidiaries of MML. PMC is the operating
company for MML in the Philippines.
The full terms of settlement of the acquisition of Philsaga from the Philsaga vendors were:

Final payment of A$1 M to contractors;

Yandal Investments Pty Ltd was paid in full, being A$3.584 M and issued with 6.4 M shares;

Secdea Philippines Holdings Corporation was paid in full, being A$80 000 and issued with 4 million
shares;

Advanced Concept Holdings Limited was paid A$920 000 and issued with 14.6 million shares.

Advanced Concept Holdings Limited agreed to provide vendor finance for the balance of the cash payment
of A$7.416 M on the following terms:

A$2.416 M to be paid on or before 15 February 2007;

A$2.5 M to be paid on or before 15 July 2007; and

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A$2.5 M 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 is no
penalty for any early repayments. The acquisition was completed in December 2006.
Production from the Co-O Mine remained subject to a 1.32% uncapped gross royalty payable to Central
Mindanao Mining Corporation. MML purchased this royalty outright at a cost of PhP44.0 M, equivalent to
approximately A$1.12 M on 11 June 2007.
MML and its subsidiaries now hold 100% beneficial interest in the Co-O Mine and treatment plant and other
projects and beneficial interests in the Anoling, Das-Agan, Tambis, Sur-sur and Corplex and other projects
as described in the following sections.

8.2

Previous Exploration and Development

BMDC developed mine access via an adit at the 3150 m Level (mL) (now termed Level 1) which was driven
to the west some 400 m to reach the vein system and extended another 600 m along the system within
waste to facilitate access using trackless equipment. Drives were then mined along several sub-parallel
veins in order to develop shrink stopes above the level at 3185 mL, 3200 mL and 3225 mL. It had been
expected that the mechanised mining method adopted would recover ore with grades of 10 g/t Au to 14 g/t
Au, but records indicate the mill feed grades ranged between 5 g/t Au and 8 g/t Au. During this period BMDC
mined at an average rate of 413 tonnes per day at an average head grade of 5.6 g/t Au and produced
approximately 60 000 ounces of gold before the mine was closed in 1991.
The operation was placed on care and maintenance until purchased by PMC in August 2000 with the
treatment plant in sufficiently good condition to allow its partial recommissioning by installing a gyratory
crusher and two small ball mills with a small amount of expenditure. The mine required rehabilitation of the
3150 mL drive (Level 1), and mining was conducted below this level as underhand benching
PMC recommissioned the Co-O Operations with a different mining approach from that of BMDC, using
labour intensive mining methods consisting of hand held mining, hammer and pick excavation and hand
operated rail trucks. These methods are better suited to narrow vein mining and minimised dilution and
achieved production at low cash costs.
From 2000 until 2005, PMC produced an average of approximately 17 000 ounces of gold per year from
21 000 tonnes of ore in a co-operative arrangement with artisan miners, however, tonnage and grade
declined in 2005. (Table 10). The grant of the SMP covering the Co-O gold mine on 23 January 2006 permits
the use of explosives and hand-held airleg drilling equipment underground. Upon the grant of the SMP, PMC
undertook development work to increase the rate of production initially to 40 000 ounces per year.
The company advised that production for 2002 to 2006 for Co-O prior to its acquisition by MML was as
shown in Table 10.

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Table 10: Co-O Production Statistics by Calendar Year Prior to Acquisition by MML
CY

CY

CY

CY

CY

2002

2003

2004

2005

2006

Tonne

17 032

22 580

21 416

14 083

40 924

g/t Au

32.0

27.54

26.3

11.61

8.60

Tonne

18 772

22 901

21 736

12 978

40 658

g/t Au

29.9

23.4

22.3

12.1

9.0

Tails grade

g/t Au

2.57

1.89

1.18

0.67

0.74

Recovered gold

oz Au

16 709

17 590

15 530

4 965

11 285

Unit cash cost Mining

US$/t

67

78

96

112

26

Unit cash cost Processing

US$/t

20

27

28

30

44

Item

Unit

Mine production

Plant feed

Unit cash cost Administration

US$/t

16

22

37

67

Total unit cash costs:

US$/t

103

127

160

209

75

US$/oz*

NA

NA

NA

NA

NA

Total cash costs

Notes:

(i) * includes royalties and local business taxes

(ii) MML acquired the project in December 2006.

9.0
9.1

GEOLOGICAL SETTING
Regional Geology

The mining and exploration tenements are located in the Diwata Range which forms part of the Eastern
Mindanao Highlands. Regional geology comprises an Early Tertiary ophiolitic basement overlain by andesitic
lavas and pyroclastic beds, sandstone, shale, conglomerate and limestone. The volcano-sedimentary
sequence is intruded by Late Tertiary dacite and quartz diorite plutons. This geological setting is host to
epithermal gold and copper-gold porphyry mineralisation.
Gold mineralisation in the Philippines shows very strong structural control. The dominant structural feature is
the Philippine Rift Fault, a major regional structure that extends for 1200 km in a north northwesterly
direction over the length of the Philippines from southern Mindanao to northern Luzon. The fault is located
approximately 200 km west of the Philippine Subduction System which dips west under the Philippines
landmass and provides the main source of Tertiary volcanism and mineralisation.

9.2

Local and Property Geology

The Local and Property Geology is described for each of the project areas.

10.0 DEPOSIT TYPES

Mineralisation associated with the Philippine Rift Fault and Subduction System occurs as copper-gold
porphyries, epithermal gold and skarn deposits associated with calcareous sediments. In Mindanao, the
Diwata Ranges straddle the Philippine Rift Fault from north to south of the island.
Locally, gold mineralisation is controlled by strike-slip faults parallel to the Philippine Rift Fault or splay
structures off the fault and dilationary structures which develop orthogonally to the main structures as a
result of strike slip movements on structures parallel to the Philippine Rift Fault.
The PMC tenements are centrally located along an arc defining the known gold localities in Eastern
Mindanao extending from Masara to Surigao with mineralisation partly controlled by intrusive bodies.

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The Diwalwal gold mine located some 50 km south of Saugon is reported to have contained seven million
ounces (7 Moz) of gold and represents a target type of epithermal mineralisation throughout the Eastern
Mindanao gold belt while the King King deposit to the southeast of Davao City is a low to medium grade
porphyry copper-gold deposit that to date has only been exploited for gold by artisan miners in the oxidised
zone.

11.0 MINERALISATION
2

MML through PMC now controls more than 820 km of tenements covering approximately 70 km of strike of
the prospective Diwata Range with similar geology to that hosting the Co-O Mine.

12.0 EXPLORATION
PMC is exploring targets within the tenements some of which are owned 100% and some under the terms of
various Mines Operating Agreements and joint ventures (Figure 7).

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Figure 7: Exploration Tenements Showing Main Prospects

12.1

Das-Agan Project

The Das Agan Project comprises Mineral Production Sharing Agreement application APSA 024-XIII situated
in Surigao del Sur province in east Mindanao as shown on Figure 7. The APSA covers approximately 80 km
(8019 ha) in two blocks.
Until recently, exploration has focussed on the Lingig project which is located within the eastern most
tenement block. Permits for drilling were granted in June 2008.
During 2010, MML discovered a new outcropping porphyry copper-gold target at USA in the northern part of
the tenement in the Barabo Fault Corridor.
Lingig was discovered during as the result of an aid programme between Filipino and Japanese geologists
and technicians in 1972 to 1974 over eastern Mindanao. An initial 3000 km prospective area was located by
geological and geochemical surveys and was subjected to additional geological mapping and geochemistry,
followed by drilling of five diamond drill holes, each to 250 metres vertical depth.

12.1.1

Lingig Prospect

Two different styles of mineralisation have now been recognised in the original discovery area in the northern
part of the project, while the southern part of the project is considered prospective for porphyry style
mineralisation.

Breccia Hosted Mineralisation

Mineralisation is hosted by polylithic intrusive hydrothermal breccias. Clasts of quartz diorite, basalt and
minor dolerite ranging in size to 400 mm host fine-grained disseminated chalcopyrite in both the matrix and
in some clasts. Chalcopyrite is associated with secondary pale brown biotite which occurs in both the matrix
and in some of the breccia clasts. Minor magnetite and a distinct lack of mineralised quartz veining
characterise the breccia. The breccia does not appear to reach the surface and is surrounded by a weak
alteration halo of pyrite.
Data compilation and assessment, perhaps including additional geophysical surveys will be undertaken
before any further drilling is planned.

Basalt Hosted Mineralisation

Recent drilling by MML confirmed the continuation of the copper mineralised zone above the thrust contact
(Figure 8). Mineralisation is now interpreted to form a large plunging body with a north northeast trend. Hole
LIN030 was drilled to test the down-plunge continuation of the mineralisation and intersected epidote,
magnetite, pyrite and copper sulphides in a basalt host with similar geology, mineralisation and alteration to
that intersected in hole LIN001. The hole was abandoned due to drilling difficulties within the mineralised
zone but above the level of the interpreted higher grade mineralisation which occurs above the thrust
contact. Hole LIN029 intersected mineralisation which to date is the furthest up-plunge. Hole LIN022 was
collared in the low-grade alteration halo and is interpreted to have been drilled over the top of the
mineralisation.LIN026 intersected basalt within the alteration halo which comprised strong epidote alteration
with pyrite and minor chalcopyrite veining. The hole may have drilled below the plunging body. Hole LIN039
intersected basalt within the alteration halo similar to LIN026 and is interpreted to have drilled beneath the
plunging body. Further drilling will be required below LIN030 to confirm the down-plunge extensions of the
mineralisation. The mineralisation drilled to date may be part of a larger body truncated at depth by the
underlying thrust fault.
Figure 8 shows the current interpretation of the regional geology and Table 11 contains drill hole results to
date.

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Figure 8: Lingig Regional Geology

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Table 11: Summary of All Lingig Drilling Results for Intersections >10 m Wide, 0.3% Cu Cut-off
Hole
LIN006
LIN014
LIN017

Cut-off 0.3% Cu

East

North

Azimut
h

Dip

From
(m)

To
(m)

651 994

897 150

166

-62

364.20

400.20

36.00

0.37

0.03

5.00

17.00

12.00

0.29

0.03

27.95

83.85

55.90

0.44

0.10

652 275
652 469

896 365
896 366

275
270

-60
-60

Width
(m)

Grade
(% Cu)

Gold
(g/t Au)

94.60

124.55

29.95

0.36

0.03

150.70

170.70

20.00

0.37

0.03

234.80

273.30

38.50

0.37

0.10

206.10

284.10

78.00

0.66

0.06

LIN019

652 236

896 845

242

-60
incl

260.10

278.10

18.00

1.23

0.10

LIN020

652 681

896 364

270

-60

282.10

294.10

12.00

0.36

0.05

LIN022

652 071

896 853

270

-60

34.20

46.20

12.00

0.41

0.03

70.20

84.20

14.00

0.32

0.03

LIN027

652 370

896 368

270

-60

55.15

65.15

10.00

0.51

0.09

111.00

132.20

21.20

0.37

0.02

146.20

156.20

10.00

0.30

0.03

LIN029

651 971

896 812

170

-60

140.05

155.30

15.25

1.26

0.17

LIN030

652 131

896 992

180

-60

181.40

280.00

98.60

0.61

0.06

LIN037

652 175

896 264

270

-60

181.90

197.90

16.00

0.54

0.05

LIN038

651 946

895 557

325

-60

127.50

137.50

10.00

0.31

0.02

12.1.2

Usa Prospect

The geology consists of an altered and mineralised diorite complex which intrudes andesitic volcanics, older
limestone and calcareous sediments, similar to the Kamarangan copper-molybdenum porphyry prospect to
the north.
The fine- to medium-grained diorite shows strongly phyllic altered (clay, sericite and pyrite) and veinlets of
fine-grained magnetite. Chlorite alteration becomes stronger away from the diorite. Northeast trending
fractures and veinlets within and on the edges of the diorite are often lined with fine-grained pyrite and
magnetite.
Mineralisation is predominantly pyrite occurring as fracture filling grains disseminated grains and vein infill.
The pyrite is accompanied with bornite, and with occasional chalcopyrite. Malachite stained limestone and
calcareous sediments with sphalerite, pyrite and bornite veins, and weakly mineralised pyrite and
chalcopyrite magnetite have been noted in drainage float samples to the north of the diorite.
Anomalous copper and gold values derived from rock chip samples overlie three magnetic high features
which appear to reflect zones of strong magnetite alteration in the diorite.
Artisanal mining activity for gold occurs in the area and MML has begun a grid-based soil sampling program
to delineate the gold and copper anomalism (Figure 9)

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Figure 9: Usa Prospect, geology and geochemical anomalies

12.2

Saugon Gold Silver Project

MML earned a 50% interest in the Saugon project from PMC by August 2004, by spending the first A$1.2 M
(US$0.9 M) on the project. Exploration was jointly funded until MML acquired PNC in December 2006.

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The Saugon tenements are located 10 km to the south of the Co-O Mine and encompass the southern strike
extensions of the highly prospective stratigraphy.
MML began its exploration at Saugon in mid-2003 and discovered the First Hit Vein in February 2004 when
diamond core drilling intersected 1 m at 36 g/t Au and 541 g/t Ag from 108.5 m downhole. Exploration has
identified numerous outcropping epithermal veins, three of which, First Hit, Mabas and Paradise Ridge, are
being explored.
The First Hit Vein has been followed intermittently at the surface over 600 m and has been explored by
surface drilling and underground development comprising a 40 m deep winze and level development. The
prospect is situated approximately 10 km south of the Co-O gold mine and 28 km by road from the Co-O
treatment plant.

12.2.1

Prospect Geology

The prospect geology on the Saugon tenements comprises a sequence of Palaeocene sediments ranging
from greywacke to conglomerate and calcarenites unconformably overlain by andesitic and basaltic flows
and Upper Eocene pyroclastic rocks which dip gently to the southeast (Figure 10).
Gold mineralisation at Saugon is hosted by andesitic volcanic rocks. Mineralised vein sets are generally
orthogonal to the Philippine Rift Fault trend and strike northeast. The typical epithermal quartz veins are
associated with silicification of the host rocks (argillic alteration) and gold mineralisation is associated with
pyrite, marcasite, galena and sphalerite.
The First Hit Vein is associated with a major northeast trending fault zone and as a consequence has been
extensively brecciated and overprinted by secondary gold-poor silica and carbonate leaving rafts of high
grade material within the breccia zone. Whilst the exploration winze and a number of drill holes have been
completed, at this stage mining is unlikely in this part of the vein system unless further work can confirm vein
continuity.
In addition to the northeast trending vein set a north-south set of veins has also been identified. While a
number of quartz veins have been identified on the tenements recent work concentrated on the First Hit
Vein. An exploration shaft was sunk and a drive developed in mineralisation at 40 m below surface

12.2.2

MML Exploration

Following the initial intersection on the First Hit Vein, MML began underground exploration using a full sized,
inclined and timbered winze. Drilling indicated three zones of mineralisation representing footwall and
hanging wall mineralisation around a central zone the First Hit Vein which has higher grade and is
associated with polymetallic mineralisation (gold-silver-lead-copper-zinc).
Mineralisation in the First Hit Vein is associated with brecciation and gold grades can be very high but
patchy. Hole SDDH 2B exemplifies this mineralisation style with mineralised intersections consisting of
brecciated massive sulfide material including fragments of chalcopyrite, galena and sphalerite. Patches of
sphalerite-rich breccia were also encountered in the exploration winze. Base metal breccia fragments may
be derived from a source at depth.
Following the drilling in 2004, MML commissioned an aeromagnetic survey which indicated the First Hit Vein
set was located on the northern edge of a large northeast-trending demagnetised zone over 2000 m wide
and approximately 8000 m long. Several features within the zone were interpreted as representing intrusive
bodies possibly related to porphyry copper mineralisation. Field work has established that outcrops on the
northern side of this zone are intensely altered (clay-pyrite) and this may extend under cover to the south.
Parts of the demagnetised zone are covered by younger sediments.

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Figure 10: Saugon Geology and Drill Hole Plan

Further drilling was carried out during 2010 both at First Hit and at additional targets outlined by the field
work.

Paradise Prospect
Holes SDDH 19 and 22 were drilled at the Paradise Prospect which consists of an outcropping silica-barite
cap with anomalous gold values. Drilling intersected a 1.6 m wide barite vain containing 0.89 g/t Au.
Extensive clay-pyrite alteration of volcanics was exposed in road cuttings to the south and northeast of the
silica outcrops.

Mabas Prospect
Holes SDDH 15, 16, 18, 20, 21, 23 and 24 were drilled at the Mabas Prospect, where there were some
existing workings. The best drill-hole intersection below the workings was 1 m at 5.64 g/t Au in SDDH 24.
The workings were re-opened and developed to examine the mineralisation which was found to be generally
black chalcedonic silica with some lead-zinc mineralisation and gold values ranging from 6 to 8 g/t Au. Silica
appears to be confined to a lens within the Mabas Shear zone.

Mabas South Prospect

The Mabas South Prospect was identified by recent field work and a narrow (<0.5 m ) quartz vein returned
gold values of around 10 g/t Au. MML plans to drill this vein.
A cross section of the First Hit Vein is shown in Figure 11.

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Figure 11: Cross section of First Hit Vein A-A

Drill hole assays for the Saugon project (including some holes from earlier drilling) are summarised in Table
12 (Coordinates refer to WGS84 Zone 51N).

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Table 12: Saugon Drill Hole Assays

Intercept
Hole No.

East

North

Azimuth

Dip

From
(m)

Length
(m)

Assay
Gold
(g/t Au)

Silver Copper
(g/t Ag)

Lead

Zinc

SDDH2B

616 944

899 267

316

-55

108.50

1.00

35.8

544

0.38

1.88

1.62

SDDH 4

616 912

899 318

290

-60

89.50

0.20

9.76

142

0.30

1.18

0.40

SDDH 5

616 964

899 344

345

-54

71.80

0.95

3.26

32

0.20

0.20

0.61

SDDH 9

616 979

899 250

319

-81

176.20

0.20

4.97

78

0.74

1.51

1.54

SDDH 27

616 921

899 334

300

-73

60.80

1.00

16.3

244

1.32

2.65

4.97

71.05

5.95

9.63

SDDH 28

616 922

899 307

300

-70

89.95

2.05

20.5

Not assayed

SDDH 29

616 961

899 315

300

-72

112.25

0.90

15.3

Not assayed

SDDH 31

616 922

899 254

315

-75

174.25

0.75

3.94

Not assayed

SDDH 34

617 033

899 279

310

-65

173.80

0.40

6.87

Not assayed

SDDH 35

617 000

899 305

310

-65

128.20

0.85

5.05

Not assayed

12.3

Not assayed

Tambis Project

The Tambis Project, currently comprising the Bananghilig and Kamarangan prospects, is operated under a
Mining Agreement with Philex Gold Philippines Inc. over Mineral Production Sharing Agreement (MPSA)
application APSA-000022-XIII which covers 6262 hectares. The tenements are located in the Tambis
Barobo Region, which has been shown to be prospective for gold and copper-gold mineralisation by the
exploration results to date.

12.3.1

Bananghilig Gold Deposit

In the 1980s and 1990s a significant amount of diamond and reverse circulation drilling totalling 29 477 m in
344 holes was undertaken by various explorers to investigate a large area of known mineralisation.
From 2005 to 2007, Philsaga undertook underground exploration through a 50 m deep shaft and
development, adits, and underground and surface drilling totalling 7715.5 m in 31 holes.
Figure 12 show the location of the Bananghilig Deposit and Figure 13 shows the interpreted surface geology.
Table 13 summarises some of the more significant drill hole intersections from the Bananghilig drilling.

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Figure 12: Bananghilig Tenement Location

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Figure 13: Bananghilig Prospect Geology

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Table 13: Summary of Significant Bananghilig Intersections

Hole

East

North

Dip

Azimuth

From

Length

Gold

(m)

(m)

(g/t Au)

DD34-3

612 486

945 509

-45

130

0.00

170.10

2.09

DD34-46A

612 515

945 493

-45

130

0.00

182.00

2.13

DDH-G1

612 541

945 476

-80

90

0.00

116.50

3.96

DDH-G3

612 541

945 476

-80

30

0.00

108.81

2.03

RC38-35

612 680

945 409

-60

130

0.00

64.00

8.40

RC40-16

612 515

945 493

-45

130

0.00

55.00

4.14

TDH 10

612 827

945 226

-50

135

10.50

106.00

1.60

TDH 11

612 808

945 224

-55

320

0.00

569.90

0.64

TDH 12

612 848

945 259

-50

327

0.00

137.80

0.94

TDH 18

612 765

945 263

-45

324

0.00

256.20

1.30

TUG 05

612 748

945 247

-1

153

0.00

205.90

2.42

Notes:
(i) Holes pre-fixed TDH and TUG are PMC surface and underground diamond drill holes
(ii) All other holes pre-date PMC.

12.3.1.1

Bananghilig Resource Estimate

Cube Consulting Pty Ltd of West Perth, Western Australia, prepared a global resource estimate for the
Bananghilig deposit. The estimate was based on both historical and more recent Philsaga drill hole data.
Table 14 summarises the Mineral Resource, classified as an Inferred Resource, at various cut-offs with 0.6
g/t gold being taken as the base case resource estimate. The majority of the resource is contained within a
0.2 g/t gold domain (Domain 1) which measures 850 metres east to west and 550 metres north south, with
the mineralisation defined to variable depths of 100 to 150 metres due to drill hole density constraints. The
mineralisation is also open in all other directions. A smaller domain (Domain 2) to the northeast is
approximately 375 metres long in a northeasterly direction, approximately 100 metres wide and open beyond
75 metres depth and has increasing grades towards the northeast.
Table 14: Inferred Mineral Resource Estimate Bananghilig Deposit at August 2009
Resource
Category

Cut-off grade
(g/t Au)

Grade

Tonnes

g/t Au

Contained
ounces

Inferred

0.50

20 000 000

1.1

730 000

Inferred

0.60

15 000 000

1.3

650 000

Inferred

0.70

12 000 000

1.5

580 000

Inferred

0.80

10 000 000

1.7

530 000

Inferred

0.90

8 000 000

1.9

480 000

Inferred

1.00

7 000 000

2.1

440 000

The Bananghilig Mineral Resource estimate is based on a number of factors and assumptions, some of
which are listed below:

All available drilling data was used for the Mineral Resource estimate.

There is no available QA/QC information (sample duplicates, blanks and certified reference materials)
for the historical drilling data. Drilling completed by Philsaga undergoes internal QA/QC and assays
greater than 1 g/t Au are checked by an independent laboratory, McPhar Geoservices Phils., Inc., in

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Manila (McPhar). The average grade for drilling completed by Philsaga supports the average grade for
the historical drilling data within the mineralised domains.
3

A theoretical bulk density of 2.6 t/m was used throughout the model, based on average bulk densities
for the modelled lithologies.

The mineralisation has been defined using gold only assay data at a plus 0.2 g/t gold lower cut off. This
interpretation has resulted in two broad domains, the principal one, domain 1 and a smaller domain 2 to
the northwest. High grade assay cuts (30 g/t gold in domain 1 and 2 g/t gold in domain 2) have been
applied to 2.5 m downhole composite data.

The Resource has been estimated using Ordinary Block Kriging and Uniform Conditioning (UC). UC is
a mathematical method that allows the discrimination of ore and waste at an assumed selective mining
unit size within an estimated panel of significantly larger size. In theory, this provides a better prediction
of estimated resource grade and tonnes above a cut off, for a selective mining scenario, than an
Ordinary block Kriging alone. The method draws information from the composite data variogram model
and Kriges Relationship.

The application of the UC technique at the Bananghilig is based on the premise that mining would be by
open pit extraction. A Selective Mining Unit (SMU) of 5 metres by 5 metres by 2.5 metres was
evaluated within Ordinary Kriged panels Y = 25 metres; X = 25 metres and Z = 5 metres for the
purposes of reporting recoverable resources.

12.3.2

Kamarangan Prospect

The Kamarangan Prospect will be described in Section 12.7 in the context of regional exploration potential.

12.4

Anoling Project

The Memorandum of Understanding with Alcorn Gold Resource Inc. covers Mining Production Sharing
Agreement (MPSA) application number 039-XIII situated in the Agusan del Sur province in east Mindanao
to the north of the Co-O mine and mill as shown on Figure 7.
The MPSA comprises approximately 405 hectares (4.05km) and covers mineralised extensions of the
favourable geology found further south.
The map shown on Figure 14 summarises the known surface vein expressions and drill hole locations.
The Anoling project is located approximately 8 kilometres by road from the Co-O Plant and is operated under
a Mines Operating Agreement with Alcorn Gold Resources Inc. over MPSA application number 039-XIII.
The Anoling Mine area consisted of a large number of artisanal workings and old mines on narrow veins
dating back to pre-World War II. The veins generally consist of banded quartz-carbonate material within claychlorite-pyrite gouge zones with both types of material carrying gold values.

12.4.1

Geology and Diamond Drilling

Surface work has continued to extend the vein system along strike as well as across strike and diamond
drilling has located additional shoots of potentially minable material
Two Small Scale Mining Permits, SSMP(ADS) 05-10-06 and SSMP(ADS) 05-11-06 were granted on 19
March 2007 and began diamond drilling immediately on the Hope Vein and Anoling (or Alcorn) Veins
(Figure 14). Twenty diamond core holes totalling approximately 2269 m have been drilled to date,
intersecting the veins at approximately 50 m to 100 m below surface. Potentially economic intersections
were returned over a strike length of approximately 300 m with mineralisation open in all directions.
Longitudinal sections of the diamond drilling are show in Figure 15 and Figure 16 and significant results are
shown in Table 15.

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Figure 15: Longitudinal Section of the Anoling (Alcorn) Vein

Figure 16: Longitudinal Section of the Hope Vein

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Two parallel veins trending westerly have been defined to date. The Hope Vein extends for approximately
650 m along strike and the Aloring (Alcorn) Vein extends for approximately 750 m along strike, with both
veins being open to the east.
There are also northeast trending vein segments which appear to have shorter strike extent than the eastwest veins. The Alcorn shaft on the property explored one of the northeast veins. Other east-west veins
parallel to the Anoling and Hope veins were also identified during mapping and drilling but have not yet been
systematically explored.
Diamond core holes are initially drilled using HQ size core reducing where necessary to NQ size. Drill core
from the selected sample intervals were sawn in half longitudinally by diamond saw and half the core was
bagged, numbered and sent to the Co-O in-house laboratory. In a small number of cases to confirm the
geological logging, the selected interval was re-split and quarter core re-submitted for assay.
Initial sample preparation and assaying was undertaken at the in-house laboratory. Samples were dried at
105C for six to eight hours, crushed to less than 125 mm by jaw crusher, re-crushed to less than 3 mm
using a secondary crusher followed by ring grinding of 700 to 800 g of sample to nominal particle size of less
than 200 mesh. Barren rock wash is used between samples in the preparation equipment. The samples
were assayed by fire assay with AAS finish on a 30 g sample. All assays over 5 g/t Au were re-assayed
using gravimetric fire assay techniques on a 30 g sample.
The majority of samples which contained more than 0.5 m at more than 2 g/t Au were re-assayed by
McPhar, a NATA and ISO 9001/2000 accredited laboratory in Manila. The pulps were airfreighted to McPhar
who fire assayed 30 g of sample using AAS finish and a selected number of samples were checked using
gravimetric fire assay techniques. Duplicate samples and standards are included in each batch of check
samples.
When reporting results, where available, the McPhar assays have been given priority over the Company
laboratorys results.
Table 15: Anoling Drill Assays Greater than 2 g/t Au
From

Width

Grade

(m)

(m)

(g/t Au)

-56

190.25

0.95

4.39

-65

66.80

0.50

4.07

-60

59.00

0.95

2.95

923 640

-60

55.90

2.70

13.96

614 497

923 636

-50

65.45

0.45

7.77*

614 497

923 794

-55

84.50

1.90

2.86*

ANL 15

614 497

923 780

-55

ANL 16

614 544

923 796

-68

ANL 17

614 594

923 799

-70

ANL 18

614 643

923 798

-60

ANL 19

614 193

923 794

91.50

ANL 20

614 691

923 793

Hole
Number

East

North

Azimuth

Dip

ANL 05

614 659

923 544

ANL 06
ANL 08

614 550

923 645

614 599

923 642

ANL 09

614 506

ANL 11
ANL 14

87.40

0.65

2.33*

0.60

13.10*

88.95

1.00

2.09*

57.30

1.40

4.20*

62.70

1.60

10.08*

59.70

0.90

9.30*

4.00

17.17*

99.40

-60

147.70

0.55

7.26*

-60

92.50

1.50

7.39*

104.60

0.30

24.30*

ANL 21

614 639

923 164

-60

34.60

0.40

2.04

ANL 22

614 696

923 158

-40

32.40

0.70

11.16

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From

Width

Grade

(m)

(m)

(g/t Au)

Hole
Number

East

North

Azimuth

Dip

ANL 25

614 836

923 133

-60

51.80
66.30

1.00

2.36

ANL 26

614 578

922 972

-50

74.85

0.60

14.28

ANL 27

614 743

923 118

-60

72.05

0.55

2.80

ANL 28

614 789

923 117

-60

102.15

3.35

13.14

ANL 30

614 794

922 947

-50

102.90

1.00

3.51

ANL 31

614 744

922 947

-50

90.20

2.60

7.27

ANL 32

614 508

922 971

-68

28.65

0.50

5.44

ANL 34

614 593

922 963

-44

74.00

0.40

4.40

ANL 35

614 693

922 959

-40

58.50

2.00

2.49

66.00

3.00

4.38

92.50

ANL 39

614 847

922 962

180

-53

0.70

0.50

2.30

2.21

97.70

0.15

14.61

130.35

0.15

11.53
8.22

ANL 40

614 744

922 947

-43

86.10

4.70

ANL 42

614 891

922 959

180

-51

112.60

2.60

4.12

126.80

1.50

10.05

-60

19.50

2.20

1.57

1.40
1.05

29.03
4.02

ANL 43

614 744

922 949

ANL 44

614 946

922 962

180

-51

101.40
69.75

ANL 45

615 005

922 967

180

-45

61.50

0.50

2.44

64.00

1.50

4.37

103.70

1.00

2.98

ANL 48

614 336

923 266

168

-48

108.35

1.05

6.02

12.55

0.95

2.51

15.15

1.85

25.26

29.60

1.40

2.70

154.10

0.30

4.13

158.85

0.85

2.13

166.50

0.85

11.54

ANL 49

615 004

922 970

359

-40

37.90

0.50

3.21

ANL 50

614 325

923 296

168

-48

189.50

1.00

7.67

206.30

1.35

70.76

Note: Assays denoted * are from external laboratory, all other assays are by in-house PMC laboratory.

12.5

Apical Project

The Apical Gold Project is a joint venture between MML (through its wholly owned subsidiary PHSAMED)
and MRL Gold Corporation (the Philippine subsidiary of Mindoro Resources Limited, a public company listed
on the TSX Venture Exchange in Canada) and an underlying claim owner. The JV covers MPSA application
0028-XIII located to the north of the Co-O Mine and millsite. The MPSA application comprises approximately
2084 ha (20.84 km) and covers extensions of the favourable geology to the south of Tambis project.
The agreement gives PMC the right to acquire a 70% interest in the tenement under the following terms:

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PHSAMED has the right to earn a 70% interest:

In narrow vein deposits, by commencing narrow vein development and producing the first 500 t of
ore after which MRL has the option to contribute to ongoing expenditure or reduce to a 3% NSR

In large bulk tonnage deposits such as porphyry copper-gold deposits or disseminated gold

deposits, by completion of a Bankable Feasibility study after which MRL has the right to contribute
to ongoing expenditure or dilute to a 3% NSR

PHSAMED is required to spend US$300 000 within three years of grant of the APSA and spend a
minimum of US$150 000 per year subsequently.

MML will issue to the underlying claim holder fully paid shares in MML to the value of US$50 000 once
the project has been assigned to the joint venture company and registered with the Mines and
Geosciences Bureau.

PHSAMED is incurring all costs to progress the APSA to granting.

12.6 Gamuton Project
PMC advised that it completed four drill holes at the Gamuton Prospect west of the Co-O Mine in August
2006 which intersected intense propylitic alteration, zones of silicification and hydrothermal breccias
associated with strongly anomalous gold-silver values accompanied by irregular copper mineralisation. The
mineralisation is interpreted as being indicative of porphyry copper mineralisation. Best intersections are
shown in Table 16 (Coordinates refer to WGS84, rounded to nearest metre).
Table 16: Gamuton Drill Hole Assays
Hole No.
GAMD0001

Intercept

Assay

East

North

Az

Dip

From
(m)

Length
(m)

Gold
(g/t Au)

Silver
(g/t Ag)

171 237

914 342

155

-55

109.90

16.30

0.50

10.7

GAMD0002

171 285

914 369

155

-50

80.90

7.25

0.69

9.3

GAMD0003

171 330

914 402

125

-50

46.40

3.10

2.19

<2.0

Including
GAMD0004

12.7

171 373

914 429

155

-50

46.40

1.00

5.43

2.0

108.40

3.10

0.69

4.0

196.30

4.70

0.29

6.9

100.70

20.50

0.57

4.7

Regional Mineralisation Potential Barobo Fault Corridor

Figure 7 shows the regional structure and geology highlighting the mineralisation potential in favourable
limestone and calcareous clastic rocks along the Barobo Fault Corridor. Mineralisation has been located in
numerous outcrops and in drill holes which are summarised in Table 17. The mineralisation located to date is
generally associated with silica and sphalerite-galena replacement of the host rocks.
The calcareous sequence along the Barobo Fault Corridor is the same sequence that has been extensively
skarned and mineralised at the Kamarangan copper porphyry prospect. This sequence is interpreted as the
oldest calcareous sequence known to date in the district and may be up to 1600 m thick.
The sequence is regarded as favourable for hosting large disseminated bodies of gold mineralisation.
Table 17 summarises some of the more significant drill hole intersections from scout drilling (four holes at
Guinhalinan, seven holes at Saguilsuilan and six holes at Alikway). The focus of this scout drilling was on
potential high grade mineralisation rather than potentially open-pittable targets. All show that gold

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mineralisation is contained within this calcareous sequence. It should be noted, as also shown in soil
sampling on Figure 8, that zinc is commonly associated with gold in this environment
Table 17: Summary of Scout Drilling on Barobo Corridor Limestone Hosted Prospects
Hole

Azimuth

From (m)

Width
(m)

Gold

Zinc

(g/t Au)

(%)

East

North

Dip

DGN 002

615 640

936 325

-55

315

22.60

7.30

2.72

0.62

DGN 003

615 639

936 323

-50

275

27.55

8.15

1.30

0.27

DGN 004

615 593

936 377

-45

140

15.40

6.00

0.67

0.02

27.40

6.70

2.08

0.38

41.10

17.60

0.81

0.05

Guinhalinan

Saguilsilan
SAG 006

613 277

939 478

-45

230

36.60

24.00

0.52

No assay

616 646

934 544

-50

180

116.40

1.90

21.20

0.85

Alikway
ALK 001
Notes:
(i)

Assaying by Philsaga Mining Corporation. Au by fire assay with AAS finish; Zn by AAS.

(ii)

Grid co-ordinates based on the Philippine Reference System 92

12.7.1

Kamarangan Porphyry Target

The Kamarangan prospect is centrally located in a large aeromagnetic anomaly approximately 10 km in

diameter.
The area is underlain by a well-banded calcareous sequence that appears to be at least 1600 m wide. The
calcareous sequence has been intruded by a complex of fine- to coarser-grained diorites and some andesite
bodies. The intrusives have altered the calcareous rocks to skarns over an approximate area of 1600 m by
1400 m (Figure 17). The area of skarn is open to the east under the younger overlying limestone. Outcrops
of surface geology are mainly limited to magnetite-rich horizons with secondary hematite.
Some of the skarns may contain variable amounts of garnet, diopside, epidote and pyrite. Areas of siliceous
hornfels and unaltered massive limestone were also intersected in the drilling.

12.7.2

Discussion

Ten holes were drilled to test the prospect and Table 18 contains a summary of the significant drill hole
results.
The intersection of what the MML geologists call fertile diorite and other vectors from the drilling indicate a
possible porphyry copper source to the east-northeast of the drilling conducted to date based on:

Copper and gold values in dioritic rocks tend to be higher in holes KAM 1 and 2, and while visible
copper minerals are present in KAM 4 although at a lower level than in KAM 1 and 2;

Molybdenum mineralisation is visible in KAM 1 to a maximum value of 244 ppm Mo and averages
37 ppm Mo over the last 74 m of the hole from 357.70 m downhole;

Molybdenum mineralisation is visible in KAM 2 to a maximum value of 138 ppm Mo and averages
41 ppm Mo over the last 46 m of the hole from 405 m downhole. Other less coherent zones are present
higher up in the hole.

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Skarn-hosted gold with minor copper mineralisation is strongest in KAM 7 in the northeast of the drilled
area, suggesting this hole may be closer to a mineralisation source.

The well mineralised magnetite skarn in KAM 1 (26 to 42.3 m) and in KAM 2 (40 to 44.2 m) and the wide
skarn style mineralisation in KAM 7 (0 to 19.5 m, 211.1 to 267.1 m and 410.8 to 426.8 m) could also be
interpreted to be a halo above and around the elongate (250 by 130 m) deep magnetic anomaly shown on
Figure 17. This anomaly could possibly be interpreted as a pencil porphyry style target.
Drill hole magnetite-rich samples will be submitted for estimation of the magnetite contents and preliminary
metallurgical testing if further assessments regarding the prospects magnetite potential are positive.
Further assessment will be undertaken including additional fieldwork.

Figure 17: Kamarangan Geological Map

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Table 18: Summary of Significant Drill Hole Results

Hole
KAM 1

East

North

Azimuth
()

Dip
()

From
(metres)

Width
(metres)

Gold
(g/t)

Copper
(%)

Lithology

612 304

942 837

90

-60

26.00

16.30

0.43

0.59

Magnetite
skarn

29.00

4.30

1.21

1.44

Magnetite
skarn

147.90

11.80

0.03

0.10

Hornfels

173.70

14.00

0.06

0.16

Diorite

457.70

30.00

0.05

0.15

Diorite

495.70

22.00

0.03

0.11

Diorite

2.00

49.20

0.16

0.16

Diorite with
magnetite lens

40.00

4.20

1.17

0.43

210.00

12.00

0.03

0.14

Magnetite
skarn
Diorite

282.00

18.00

0.06

0.11

Diorite

239.90

10.60

0.17

0.13

including

KAM 2

612 307

942 736

90

-60

including

KAM 3

612 304

942 837

270

-60

KAM 4

612 305

942 597

87

-60

KAM 5

611 936

942 847

110

-90

KAM 7

612 215

943 161

90

31.00

10.00

0.06

0.14

110.00

14.00

0.07

0.20

360.75

11.00

0.11

0.02

Andesite

19.50

0.12

0.01

Calcareous
sediments

157.10

16.00

0.18

0.09

Skarn

211.10

56.00

0.26

0.09

Skarn with
magnetite
239.10-241.10

410.80

16.00

0.22

0.27

446.85

24.00

0.64

0.12

-50

including
KAM 8

612 308

942 561

273

-58

KAM 10

611 724

942 581

156

-50

Diorite
Andesite
porphyry
Andesite

Skarn with
magnetite
410.80-418.80
Skarn

452.85

2.00

7.21

0.01

Skarn

50.00

18.00

0.17

0.06

Diorite

132.15

13.05

0.09

0.01

Diorite

397.50

10.30

0.13

0.24

Andesite

Notes:
(i)

KAM 6 abandoned, KAM 9 no significant results

(ii)

Assaying by McPhar Geoservices Phils Inc. Au by fire assay with AAS finish; Ag, Cu, Pb, Zn and Mo by AAS; and

(iii)

Magnetite contents not yet determined

(iv)

Grid co-ordinates based on the Philippine Reference System 92

12.8

Other Areas

The company has identified high-grade gold veins at Trento which have yet to be tested. There is also
potential for porphyry copper mineralisation at four other targets including, Saugon, Gamuton, Co-O, and
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Lasang where alteration and/or aeromagnetic signatures typically associated with porphyry copper styles of
mineralisation have been identified.

13.0 DRILLING
All exploration undertaken on the companys properties is undertaken by diamond core drilling. All drill hole
collars are surveyed. While a number of earlier core holes were not surveyed down-hole with respect to
azimuth and declination, all holes drilled from 2005 have been surveyed using a digital down-hole camera to
provide quantitative data on azimuth and dip.
The database provided to Cube for estimation of the Co-O mineral resources comprised data from 165
diamond core holes, and numerous drive face samples and stope samples.
The database provided to Cube for estimation of Bananghilig mineral resources comprised data from 375
drill holes.

14.0 SAMPLING METHOD AND APPROACH

14.1 Diamond Drilling
All diamond drill core is cut in half longitudinally in intervals of approximately one metre, although sample
boundaries conform to geological contacts where appropriate. The core size is predominantly HQ with NQ
used only in the deeper sections of some drill holes.

14.2

Channel Sampling

At the Co-O Mine, samples are taken at intervals of 1.5 m to 3.0 m by face sampling technicians. Ore
development drives usually expose the entire width of the mineralised vein and the face channel sample is
taken only from the vein material. The entire channel sample is collected and sent to the sample preparation
laboratory. The process is supervised by the site geologist.

14.3

Density Data

Historically a default SG of 2.45 was used for all mineralised veins. MML completed specific gravity
measurements on more than 1000 vein samples from drill core and rock samples. Results are summarised
in Table 19.
A mean SG of 2.62 has now been applied to all vein mineralisation within the resource. Some minor
stockwork mineralisation is also included within the resource and an SG of 2.45 has been retained for this
material.
Table 19: SG Summary Results
Number of
Samples

Min.

Max.

Mean

Median

Standard
Deviation

Coefficient
of Variation

1136

1.59

3.67

2.62

2.63

0.113

0.043

15.0 SAMPLE PREPARATION ANALYSES AND SECURITY

15.1 Implementation and Supervision of Sample Preparation
All primary analyses are undertaken at the companys in-house laboratory located on site with the work
undertaken and supervised by full-time employees of MML.

15.2

Sample Preparation and Analytical Procedures and Protocols

The laboratory was upgraded following the acquisition of the assets by MML. Major equipment replaced
includes two new AAS machines, new crushing and grinding equipment and additional furnaces.

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Face and drill core samples are submitted to the Co-O assay laboratory. Sample preparation and analytical
methods are as follows:

Samples of 1.5 kg to 5.0 kg are received and oven dried at 105C for one to three hours;

The whole sample is primary crushed to less than 2 mm and then secondary crushed to less than
1 mm;

The 1 mm material is riffle split to create 200 g to 500 g sub-samples;

The sub-sample is ring-pulverised to P 85 200 mesh pulp and coarse reject is discarded;

The pulp is mat rolled and a 30 g charge grid sample is taken using a spatula;

Gold analysis is undertaken using either a 30 g fire assay with AAS finish in single use cupels
(FA 30 AAS) or a 30 g fire assay with a gravimetric finish for high grade samples (FA 30 GRAV).

15.3

Quality Control Measures employed

Standard quality control measures are in place at Co-Os on-site laboratory. Quality control is effected by
reviewing the results of the blanks and certified standards (CRM) inserted into each assay batch. If a
reference standard is found to assay more than 5% higher or lower than the expected value, the entire assay
batch is rejected and re-assayed in accordance with the following protocol:

Assay batches comprise 28 samples with one blank and one reference standard;

One in ten samples in each firing is re-assayed;

Solution standards used are supplied by Aureus at 1, 3 and 5 g/t Au and particle standards used are
0.5, 1, 5 and 10 g/t Au concentrations; and

If the reference standard assay is found to be more than plus or minus 5% of its expected value the
entire batch is rejected and re-processed.

One in ten samples is routinely re-assayed in the Co-O laboratory and in addition to these internal laboratory
checks, regular check samples are undertaken using McPhar in Manila.
McPhar began operations in Manila in 1971 as a joint venture between a listed Filipino mining group and
McPhar Geophysics Ltd of Canada. McPhar now operates the largest commercial laboratory in the
Philippines and was one of the first commercial labs in the world to achieve ISO 9002 accreditation. The
McPhar laboratories in Manila were inspected previously by the author of this report and discussions held
with the management. The laboratories are of a comparable standard to be expected of a certified analytical
laboratory and operated in an efficient and professional manner.
The most recent review of the Co-O Laboratory was undertaken in June 2008 and included a review of
protocols and procedures and considered the precision and accuracy of the results. The review included a
comparison of Co-O laboratory results with McPhar laboratory results and Co-O laboratory results with
certified assay standards. The report covered assays completed from January to April 2008.

15.3.1

Accuracy

The accuracy of gold assays for the first four months of 2008 was assessed based on the CRM samples
analysed in each sample batch. For the FA30 AAS method, the Co-O results indicated higher values than
the certified value of the three CRMs used during the period.
For the FA30 GRAV method of Au fire assaying, the Co-O results generally understate the certified values of
the CRMs. There were more outlier values in the month of April 2008.
Similar observations were made in 2007 and it was concluded that a systematic error occurs which is most
apparent in low grade gold determinations. This is not significant in ore-grade samples.
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A possible source of consistent contamination was the single fusion furnace which at the time of the audit
was being used for both ore and exploration samples submitted to the laboratory for Au determinations. Thus
one furnace is used for both low and high grade samples.
The mill submitted its own blank samples to determine if there was an overstatement of the gold assays for
tailings. Results showed that the anonymous blank samples submitted daily for two months consistently
reported significant gold contents again indicating a source of contamination, possibly the fusion furnace.
Ore samples are now analysed separately from exploration samples. The results of this change have yet to
be evaluated.

15.3.2

Precision

Precision is measured by examining repeat assays of both the CRMs and duplicate assays during routine
analysis. Precision at 95% confidence level ranged from 22 to 31% for the FA30 AAS method. For the FA30
GRAV, the precision was about 18%, slightly better than the FA30 AAS method.
Samples analysed by the FA30 GRAV have higher gold grade and the majority are mine samples. Typically
analysis of higher grade samples exhibit higher precision. A very high variance was found in duplicate
samples below 1 g/t Au. At grades higher than 1 g/t Au, the variance is significantly decreased to within a
reasonable error band. A few outliers were found at > 10 g/t Au.
It was concluded that both accuracy and precision could be improved in the laboratory, although at higher
grades, results were acceptable. Inaccuracy and poor precision at lower grades indicated a systematic error
in Au determinations possibly caused by contamination during the analytical process.

15.3.3

Inter-Laboratory Checks

The inter-laboratory check assays with McPhar indicated very high variance below 1 g/t Au for the FA30 AAS
method. At greater than 2 g/t Au, the variance around the mean reduced to 20% Mean Paired Relative
Difference (MPRD) indicating reasonable agreement with McPhar.
Using the FA30 GRAV method, the correspondence with McPhar is within 15 to 20% MPRD at a range of
about 5 to 70 g/t Au which is considered reasonable.
For copper analyses, the McPhar laboratory returned higher values than Co-O at concentrations of less than
200 ppm. There were some outliers where McPhar reported at greater than 150% MPRD.
Silver analyses showed a wide scatter of values, indicating high variance between the two laboratories. The
variance extends up to 200% MPRD with Mcphar higher than Co-O.
Co-O has subsequently acquired base metal CRMs but results have not yet been analysed.
Assay standard control charts for January to April 2008 are shown in Figure 18 and Figure 19.

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Figure 18: Control Charts CRM Assays Co-O Laboratory January to April 2008

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Figure 19: Duplicate Assays January to April 2008.

16.0 DATA VERIFICATION

Neither Cube Consulting who prepared the mineral resource estimates, nor Golder Associates has
undertaken any primary data verification by way of independently sampling drill holes or underground faces
and assaying those samples. This is considered reasonable given that Co-O is an operating mine that is
producing and selling gold.
Both Cube and Golder Associates have therefore relied on the assurances of the Directors of MML and PMC
that there has been no deliberate misrepresentation of the data provided.

17.0 ADJACENT PROPERTIES

There are no relevant adjacent properties.

18.0 MINERAL PROCESSING AND METALLURGICAL TESTING

There is no further information to add to our previous reports.

19.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

19.1 Mineral Resources
Mineral Resource estimates were prepared in June 2010 by Mark Zammit of Cube Consulting Pty Ltd of
West Perth, Western Australia. Mark Zammit is a Member of both the Australian Institute of Geoscientists
(MAIG) and the Australasian Institute of Mining and Metallurgy (MAusIMM) and has sufficient experience
which is relevant to the style of mineralisation and type of deposit under consideration and to the activity

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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. Mark Zammit has certified
that, by reason of his education, affiliation with a professional association (as defined in NI 43-101) and past
relevant work experience, he is a qualified person for the purposes of NI 43-101.
We have included the full resource report as Appendix B and the following sets out the Executive Summary
to that report:
Cube Consulting Pty Ltd (Cube) was requested by Philsaga Mining Corporation (Philsaga) to undertake an
update to the interpretation and resource estimation of the Co-O Gold Project epithermal gold vein
resources.
Philsaga operates and develops gold mines in the Philippines. The Co-O Project is the main focus for gold
production and is located in Central Eastern Mindanao in the Republic of the Philippines. The Co-O mine
site approximately 180 kilometres north of Davao City and is accessed via a 2.5 hour drive along the national
highway.
The Co-O resource was last estimated in December 2009. The June 2010 resource update focused on the
inclusion of recent drilling from surface and underground plus knowledge obtained from underground mine
development. The most significant changes included modifications to the Royal veins at the northern end of
the Co-O system and the local increase in width and associated tonnes of the Great Hamish vein as
exposed from mine development on Level 5.
Cube incorporated a wide range of data and information in the estimation project. All data including an
interpretation update of mineralisation was completed in conjunction with Philsaga geological staff during
and after a site visit by Mark Zammit in late June 2010. The main data types and information sources
contributing to the project were as follows:
x
x
x
x
x
x
x

An additional 78 holes (29 786.2m) completed since the previous resource estimate in December
2009;
Mineralised vein interpretations in plan and cross section provided by Philsaga;
Philsaga geological mapping of drive backs and development face sample data, as digitised from
paper level plans and supplied as digitised point data;
Mining width and sample grade data from within Philsaga stoping areas;
Mining depletion and pillar outlines to 21 June 2010 maintained and digitised from long section plans
by Philsaga;
Comprehensive specific gravity investigation on vein samples;
A site visit and on-site discussions with Philsaga geological, mining and survey staff.

Cube has applied a 2D longitudinal modelling approach based on an accumulation variable incorporating
mineralised vein horizontal width and intercept grade. Each sample within a mineralised vein was assigned
a unique code. This coding was used to control compositing. Mineralised vein grades were composited
across the entire coded interval resulting in a single intercept composite.
Block estimates were based on interpolation into either 10mE x 10mRL, 25mE x 25mRL or 50m E x 50m RL
parent cells in the longitudinal plane, depending on the vein data density. Block discretisation points,
required for block kriging were set to 5 x 5 points in the longitudinal plane. There is no subdivision of the
composite or block in the Z direction, therefore only a single discretisation point in the Z direction is
appropriate.
Mining depletions as of 21 June 2010 were stamped into the 3D block model using 2D string outlines
digitised from the Philsaga long section.
Cube has classified and reported the Co-O resources in accordance with The 2004 Australasian Code for
Reporting of Mineral Resources and Ore Reserves (JORC Code).

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A summary of Co-O Mineral Resources as of 21June 2010 is reported as cells to the geological block model
with a gold value above 0.0 g/t Au shown in the table below:

19.2

Category

Tonnes

Au g/t

Au Oz

Indicated

1 418 000

13.2

603 000

Inferred

2 905 000

9.6

898 000

Mineral Reserves

Mineral Reserve estimates were prepared as of June 2010 by Declan Franzmann of Crosscut Consulting Pty
Ltd of Arana Hills, Queensland, Australia. Declan Franzmann is a Member of the Australasian Institute of
Mining and Metallurgy (MAusIMM) and has sufficient 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. Declan Franzmann has certified that, by reason of his
education, affiliation with a professional association (as defined in NI 43-101) and past relevant work
experience, he is a qualified person for the purposes of NI 43-101.
We have included the full resource report as Appendix C and the following sets out the Executive Summary
to that report:
Crosscut Consulting was commissioned by Medusa Mining Limited to complete a reserve estimate for the
Co-O Gold Mine located in the Philippines and undertook a site visit between 21 and 25 June 2010.
Resource estimation was completed by Cube Consulting Pty Ltd in June 2010 and reserve estimation was
based on the Surpac resource model co_o_3d_june2010.mdl.
The Probable Reserve for the Co-O Gold mine was estimated to be:

1 465 000 tonnes at 10.72 g/t Au, containing 505 000 Au ounces.

Probable Reserve
Reserve estimation was completed assuming the following parameters:

x
x
x
x
x
x
x
x

Gold price
Process recovery
Total mining and processing cost
Break even grade
Minimum stoping width
Mining recovery (most veins)
Mining recovery (medium grade >10g/t) Mining recovery (high grade >15g/t)
-

US$900 /oz;
94%;
US$71.36 per tonne of ore;
2.62 g/t Au;
1.2m;
85%;
90%; and
94%.

Based on the cost, price and processing recovery parameters, an economic breakeven grade of 2.6g/t Au
was calculated. Detail of the Probable Reserve by vein is shown in the table below:

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Co-O Probable Reserve by Vein

Zone Code

Vein

Tonnes

Au g/t

Au Oz

CV

302 250

7.97

77 470

JV

147 620

7.17

34 030

JVSPLAY

42 020

5.17

6990

JV FW

146 990

93.01

41 720

GHV HW

21 840

6.69

4700

GHV

290 780

18.03

168 560

GHV FW

31 700

9.48

9660

CVW3

19 980

4.25

2730

10

CVW2

9700

3.66

1140

11

GHV EAST

17 730

14.02

7990

12

12GHV EAST FW2

12 940

5.36

2230

13

12GHV EAST FW3

21 150

4.40

2990

14

Catto2

11 530

8.17

3030

15

Catto1

84 350

11.69

31 700

16

Roysan

119 060

19.63

75 160

32

ROYAL2

2310

6.33

470

41

BV

22 650

4.86

3540

42

EDPHIL

79 850

4.65

11 950

43

NORTH

74 800

7.52

18 080

51

TINAGO1

5900

4.16

790

52

TINAGO2

2740

5.34

470

1 465 000

10.72

505 000

TOTAL

20.0 OTHER RELEVANT DATA AND INFORMATION

We have made enquiry of the Companys Directors who advise that they are not aware of any other relevant
data and information.

21.0 INTERPRETATION AND CONCLUSIONS

PMC has been successfully developing and mining at the Co-O mine since 2002. From 2002 to 30 June
2009, PMC has reported a total mine production of 348 885 t at a recovered grade of 13.33 g/t Au. More
significantly for the past two years during a phase of significant development, the operation has produced
189 534 t at a recovered grade of 11 g/t Au at an average cash cost of $223/ounce. The exploration and

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underground development undertaken by PMC over the past few years has resulted in the company being
well positioned to maintain that higher level of operation as it continues mining.
The company proposes to continue exploration and development at Co-O to increase its mineral resources
with the aim of increasing mineral reserves at a greater rate than they are mined to allow further expansion
of production in the future.
PMC is also actively exploring its exploration tenements with the aim of locating and developing copper and
copper-gold mineralisation in addition to adding to its gold reserves.

22.0 RECOMMENDATIONS
The company has successfully and profitably developed and mined the Co-O gold reserves to date.
Canadian Securities legislation precludes the disclosure of an economic evaluation which includes Inferred
Resources. As PMC proposes to continue to mine and treat mineralisation from underground, 45% of which
in the three year mining schedule will be derived from material which is not in the Measured or Indicated
Mineral Resource category, we are not permitted to provide an economic evaluation of the project.
MML provided the following high-level estimate of budget for the Co-O mine for 2010/2011:
Table 20: Operating Cost Estimate 2010/2011 Base Case
Mined &
Treated
(t)
243 500

Gold
Produced
(oz)

Mining

Process

Admin

(US$M)

(US$M)

(US$M)

7.03

6.79

3.05

100 000

Taxes &
Royalties
(US$M)
3.29

Total

Total

(US$M)

($/oz)

17.34

201.50

In addition to the above expenditure, the Company proposes to spend US$10M on development and
US$21M on exploration in financial year 2010-2011.

23.0 REFERENCES
Cube Consulting, June 2009, Co-O Gold Project Resource Estimate Update, Summary Technical Report,
Unpublished Technical Report Prepared for Philsaga Mining Corporation
Cube Consulting, August 2009, Tabis Bananghilig Gold Project Resource Estimate Update, Summary
Technical Report, Unpublished Technical Report Prepared for Philsaga Mining Corporation
Cube Consulting, June 2010, Co-O Gold Project Resource Estimate Update, Summary Technical Report,
Unpublished Technical Report Prepared for Philsaga Mining Corporation
Crosscut Consulting, July 2009, Medusa Mining limited, Co-O Mine Reserve Estimate, July 2009,
Unpublished report for Medusa Mining Limited
Crosscut Consulting, July 2010, Medusa Mining limited, Co-O Mine Reserve Estimate, July 2010,
Unpublished report for Medusa Mining Limited
Golder Associates, May 2010, Technical Report Co-O Project, Mindanao Island, republic of the Philippines,
NI-43-101 Report prepared for Medusa Mining Limited
Obial, R, June 2009, Upgrading of the Philsaga-Medusa Assay laboratory at Agusan del Sur, Philippines,
June 2008, Unpublished Technical Report for Medusa Mining Limited

24.0 DATE
The effective date for this report is 27 August 2010.

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25.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON

DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES
25.1 Mining
Mining at Co-O predominantly employs shrink stoping. Specifically at Co-O the method uses hand held rock
drills. Shrink stoping has traditionally been employed on narrow vein mines to minimise mining losses.
A minimum drive width of 2.4 m and a minimum stope width of 1.2 m are employed in the mining.
Production experience at Co-O has generally resulted in a mining recovery of about 85% with a 15%
allowance for pillars, however an extraction rate of 95% has been achieved in areas that recorded average
grades in excess of 25 g/t Au. This can be achieved because the higher value of the high grade ore justifies
the use of square set timbering for support eliminating the requirement for pillars to be left in ore.
Using current costs for Co-O, the cut-off grade for development drives is 1.1 g/t Au and for stopes is 2.62 g/t
Au.

25.2

Recoverability

The processing plant at Co-O is estimated to achieve an overall gold recovery of 94%. Work is ongoing on
optimising the metallurgical performance to improve these recoveries.

25.3

Markets

Gold is sold on a very liquid international market. PMC currently sells all gold at spot. In our opinion there is
no requirement to undertake an analysis of the gold market for the purpose of this report.

25.4

Contracts

PMC has no contracts for the sale of gold from the Co-O Mine.

25.5

Environment

The Co-O mine operates under Environmental Compliance Certificate 0904-009-1010 issued on 17 July
2009 and replaces the previous Environmental Compliance Certificate 8905-022-301A issued on 17 July
1990.
The Certificate covers:

Rehabiliation of existing mill plant including installation of additional two(2) CIL/CIP tanks and crushing
circuit

Construction of additional 14.63 ha Tailings Storage Facility;

Operating and maintenance (ore extraction, mill processing and tailings disposal)

Mine ancillary facilities; and

Mine rehabilitation and decommissioning

The Certificate was issued subject to the following conditions:

Environmental Management
All commitments, mitigating measures and monitoring requirements, especially those contained in the
EPRMP and the EIS, particularly in the Environmental Management and Monitoring Plans (EMMPS),
including all their modifications and additional information as approved by the EMB, shall be instituted to
minimise any adverse impact of the project on the environment throughout its implementation, including the
following:

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1)

Observance of good vegetation practices, proper land use and sound soil management such as
a)

Proper stockpiling and disposal of the materials generated from the mining site, silt materials
scooped-out from the sediment/silt ponds and other solid waste in permanent stabilised areas to
avoid pollution of any water body and drainage systems and maintaining them in safe and nonpolluting conditions

b)

Strict implementation of stabilisation and erosion control measures of the affected side slopes of
the roads and nearby gullies, creeks, rivers and sediment/silt ponds within the project sit as well as
nearby irrigated ricelands;

c)

Using the recovered topsoil for soil cover on waste dumps, for landscaping or stockpiling on
designated suitable areas maintained at not more than three (3) metres high and stabilised by
temporary vegetation to protect it from erosion;

d)

Limit the clearing of vegetation within the planned areas to be mined and/or to be utilised for
development including re-vegetating of idle land areas in the site with appropriate plant species:

2)

Conduct of an effective Information, Education and Communication (IEC) Program to inform and
educate all stakeholders, especially its local residents, on the projects mitigating measures embodied
in its EIS and EPRMP, the conditions stipulated in this Certificate and measures in mining operations
and processing for greater awareness understanding and sustained acceptance of the project. The
proponent shall implement an annual detailed IEC program in coordination with the Mines and
Geosciences Bureau (MGB) Regional Office No. XIII and EMB Regional Office No. XIII. The proponent
in coordination with EMB and MGB Regional Offices shall also conduct an annual Knowledge, Attitude,
Practice (KAP) Evaluation to determine the effectiveness of the IEC Program;

3)

Rehabilitation of roads shall be implemented with minimal land and ecological disturbance and with
adequate drainage. It shall continuously maintain access roads and other public/private roads within the
project site to offset impact of heavy vehicle traffic and nuisances/damages to the people and
properties, as well as conduct regular water spraying and require vehicles to maintain low speed in
dusty roads.

4)

Establishment of a reforestation and carbon sink program to mitigate greenhouse gas (GHG) emissions
of the project in line with the DENRs thrust for GHG emission reduction programs. The program shall
be submitted to EMB 60 days upon receipt of this Certificate.

General Conditions
5)

The mining and milling/processing operations shall conform with the provisions of RA No. 6969 (Toxic
Substances and Hazardous and Nuclear Wastes Control Act of 1990). RA No. 9003 (Ecological Solid
Waste Management act of 2000), RA No 9275 (Philippine Clean Water Act of 2004) and RA No 8794
(Philippine Clean Air Act of 1999);

6)

The proponent shall comply with the environmental management and protection requirements of the
pertinent provisions of the Philippine Mining Act of 1995 (RA No. 7942).

25.6

Taxes

The corporate tax rate in the Republic of the Philippines is currently 30%. Mindanao Mineral Processing and
Refining Corporation (MMPRC), wholly owned subsidiary which receives the benefit of gold revenue, is
currently the recipient of a tax holiday which applies for a period of four years, extendable for three, one-year
periods subject to compliance with certain criteria which includes employing local labour and using local
inputs in the production of gold.
All gold production from the mine is subject to a Royalty of 2% payable to the government and 1% payable to
Indigenous Peoples.

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25.7

Capital and Operating Cost Estimates

The Operating Cost Estimates shown in Table 21 were provided by MML for the Co-O Mine for the period
July 2010 to June 2011:
Table 21: Operating Costs
Mined &
Treated
(t)
243 500

Gold
Produced
(oz)
100 000

Mining

Process

Admin

(US$M)

(US$M)

(US$M)

7.03

6.79

3.05

Taxes &
Royalties
(US$M)
3.29

Total

Total

(US$M)

(US$/oz)

17.34

201.50

In addition to the above expenditure, the Company proposes to spend US$10M on development and
US$21M on exploration in financial year 2010-2011.

25.8

Economic Analysis

Canadian Securities Legislation precludes the disclosure of an economic valuation which includes Inferred
Resources. Currently 45% of the base-case Co-O Mine Three Year Mining Schedule comprises Inferred
Resources or unclassified mineralisation and we are unable to prepare an economic analysis in compliance
with the requirements of Canadian Securities Legislation.

25.9

Payback

Canadian Securities Legislation precludes the disclosure of an economic valuation which includes Inferred
Resources. Currently 45% of the base-case Co-O Mine Three Year Mining Schedule comprises Inferred
Resources or unclassified mineralisation and we are unable to prepare a payback forecast in compliance
with the requirements of Canadian Securities Legislation.

25.10 Mine-life
At a production rate of approximately 100 000 ounces of gold per annum and on the basis of the current
reserves, the Co-O mine has an expected mine life of five years. Additional exploration success will add to
this minelife.

A.B.N. 64 006 107 857

Golder, Golder Associates and the GA globe design are trademarks of Golder Associates Corporation.
m:\jobs410\mining\107641096_medusa_updated_ni43101\ni 43-101 august 2010\rev1\107641096-002-r-rev1.docx

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APPENDIX A

Qualified Persons Certificates

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CERTIFICATE OF QUALIFIED PERSON

I, Peter Onley, do hereby certify that:

I am a graduate of the University of Exeter, United Kingdom, with a Bachelor of Science degree, with
Honours, in Geology in 1969 and a graduate of Leeds University United Kingdom with a Master of
Science in Engineering Geology and Geotechnics in 1970 and a graduate of University of Western
Australia, Australia, with a Master of Business Administration degree in 1994. I have continually
practiced the profession of geologist since 1970.

I am a Fellow of The Australasian Institute of Mining and Metallurgy.

I am a Principal and Director of Golder Associates Pty Ltd, the Australian operating company of the
Golder Group of companies, a consulting firm specialising in all aspects of earth engineering,
geoscience, hydrology and the environment. I am employed at 1 Havelock Street, West Perth, Western
Australia 6005.

I have worked continuously in the minerals industry for almost 40 years, and have extensive exploration
experience in a variety of commodities including precious metals, base metals, cupriferous and ferrous
metals, uranium and alumina. I have been a consultant for the past 25 years. I am a member of the
AusIMM Geoscience Committee and a member of the Western Australian Geological Survey Liaison
Committee which meets to consider and provide commentary on the activities of the Western Australian
Geological Survey.

I have read the definition of qualified person as set out in National Instrument 43-101 (NI 43-101)
and certify that by reason of my education, affiliation with a professional association (as defined in
NI 43-101) and past relevant work experience, I fulfil the requirements to be a qualified person for the
purpose of NI 43-101.

I am the lead author for this report dated 27 August 2010 entitled Technical Report, Co-O Project,
Mindanao Island, Republic of the Philippines (The Technical Report) and am responsible for the entire
report with the exception of Sections 3.3, 12.3.1.1, 18.0, 18.1, 18.2, 19.0, 19.1, 19.2, 25.1, 25.2.

I have visited the Co-O Gold site most recently in October 2009.

As of the date of this Certificate, to the best of my knowledge, information and belief, the Technical
Report contains all scientific and technical information that is required to be disclosed to make the
Technical Report not misleading.

Neither I, nor any affiliated entity of mine is at present, or under an agreement, arrangement or
understanding expects to become, an insider, associate, affiliated entity or employee of Medusa Mining
Ltd, and/or any associated or affiliated entities.

I am independent (as defined by Section 1.5 of NI43-101) of Medusa Mining Limited.

I have read the NI 43-101 and Form 43-101F1 and the Technical Report has been prepared in
compliance with that instrument and form

Signature

27 August 2010
Report No. 107641096-002-R-Rev1

243

TECHNICAL REPORT MEDUSA MINING LIMITED

CERTIFICATE OF QUALIFIED PERSON

I, Mark Zammit, of Perth, Australia do hereby certify that:

I am a Principal Geological Consultant with Cube Consulting Pty Ltd., 1111 Hay Street, West Perth,
Australia.

I hold a Bachelor of Science degree with Honours (Geology major) from the University of Western
Australia (1992), a Post Graduate Diploma in Business (Management Studies) from Edith Cowan
University (2005) and a Graduate Certificate in Geostatistics from Edith Cowan University (2008).

I am a practicing Geologist registered with the Australian Institute of Mining and Metallurgy (AusIMM)
and the Australian Institute of Geoscientists (AIG). I am a current financial Member of the AusIMM
(112188) and AIG (3843).

I have practiced as a Geologist continuously since 1993.

My relevant experience with respect to the Co-O Gold Project includes approximately 15 years
experience in technical and mine operations predominantly in underground mines, including 4 years at
the Mt McClure Gold Mine, four years at the Lennard Shelf Operations and two years at the Telfer Gold
Mine, all in Western Australia.

I have read the definition of qualified person set out in National Instrument 43-101 Standards of
Disclosure for Mineral Projects (NI 43-101) and certify that, by reason of my education, affiliation with
a professional association (as defined in NI 43-101) and past relevant work experience, I am a
qualified person for the purposes of NI 43-101.

I am responsible, in all or in part, for the preparation of Sections 3.3, 12.3.1.1, 19.0, 19.1 of this report
dated 27 August 2010 entitled Technical Report, Co-O Project, Mindanao Island, Republic of the
Philippines (The Technical Report).

I most recently personally inspected the Co-O Gold Project in June 2010.

I have been involved with the Co-O Gold Project since 2006, as an independent geological consultant
with Cube Consulting Pty Ltd.

As of the date of this certificate, to the best of my knowledge, information and belief, the Technical
Report contains all scientific and technical information that is required to be disclosed to make the
Technical Report not misleading.

I am independent (as defined by Section 1.4 of NI 43-101) of Medusa Mining Limited.

I have read NI 43-101 and 43-101F1 and the Technical Report has been prepared in compliance with
that instrument and form.

Signature

27 August 2010
Report No. 107641096-002-R-Rev1

244

TECHNICAL REPORT MEDUSA MINING LIMITED

CERTIFICATE OF QUALIFIED PERSON

I, Declan Franzmann, of Brisbane, Australia do hereby certify that:

I am a Principal Mining Engineer with Crosscut Consulting Pty Ltd. of 10/22 Jane St, Arana Hills,
Queensland, Australia.

I am a graduate of the University of Ballarat, Ballarat, Victoria, Australia, B.Eng.(Mining).

I am a member of the Australasian Institute of Mining and Metallurgy (AusIMM).

I have practiced my profession for 17 years since graduation.

My relevant experience with respect to the Co-O Gold Mine includes approximately 8 years mine
operations and management experience in underground gold mines. Exclusive of this, I have completed
numerous (>11) technical consulting assignments for gold operations in Australia, Philippines,
Indonesia and Ghana. My experience with mining epithermal gold deposits of similar mineralisation
style to Co-O include the Cracow Gold Mine and the Mt Muro Gold Mine.

I have read the definition of qualified person set out in National Instrument 43-101 Standards of
Disclosure for Mineral Projects (NI 43-101) and certify that, by reason of my education, affiliation with
a professional association (as defined in NI 43-101) and past relevant work experience, I am a
qualified person for the purposes of NI 43-101.

I am responsible, in all or in part, for the preparation of Sections 3.3, 19.0, 19.2, 25.1, 25.2 of this report
dated 27 August 2010 entitled Technical Report, Co-O Project, Mindanao Island, Republic of the
Philippines (The Technical Report).

I most recently personally inspected the Co-O Gold Mine in June 2010.

I have been involved with the Co-O Gold Mine since October 2008 as an independent mining consultant
with Crosscut Consulting Pty Ltd.

As of the date of this certificate, to the best of my knowledge, information and belief, the Technical
Report contains all scientific and technical information that is required to be disclosed to make the
Technical Report not misleading.

I am independent (as defined by Section 1.4 of NI 43-101) of Medusa Mining Limited.

I have read NI 43-101 and 43-101F1 and the Technical Report has been prepared in compliance with
that instrument and form.

Signature

27 August 2010
Report No. 107641096-002-R-Rev1

245

TECHNICAL REPORT MEDUSA MINING LIMITED

APPENDIX B

Co-O Mineral Resource Report

27 August 2010
Report No. 107641096-002-R-Rev1

246

Co-O GOLD PROJECT

RESOURCE ESTIMATE UPDATE
SUMMARY TECHNICAL REPORT
June 2010
PREPARED FOR
PHILSAGA MINING CORPORATION
Cube Consulting Pty Ltd
Perth, Western Australia
Cube Project: 2010_076
www.cubeconsulting.com.au

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Philsaga Mining Corp

Co-O Resource Estimate Update June 2010

Prepared By:
Mark Zammit
BSc(Hons) GradCertGeostat GradDipBus MAusIMM MAIG
Principal Consultant Geologist

.....

Distribution:

Number of Copies

Philsaga Mining Corp

Cube Consulting Pty Ltd

Medusa Mining Limited

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Philsaga Mining Corp

1.0

Co-O Resource Estimate Update June 2010

EXECUTIVE SUMMARY

Cube Consulting Pty Ltd (Cube) was requested by Philsaga Mining Corporation (Philsaga) to
undertake an update to the interpretation and resource estimation of the Co-O Gold Project
epithermal gold vein resources.
Philsaga operates and develops gold mines in the Philippines. The Co-O Project is the main focus
for gold production and is located in Central Eastern Mindanao in the Republic of the Philippines.
The Co-O mine site approximately 180 kilometres north of Davao City and is accessed via a 2.5
hour drive along the national highway.
The Co-O resource was last estimated in December 2009. The June 2010 resource update
focused on the inclusion of recent drilling from surface and underground plus knowledge obtained
from underground mine development. The most significant changes included modifications to the
Royal veins at the northern end of the Co-O system and the local increase in width and associated
tonnes of the Great Hamish vein as exposed from mine development on Level 5.
Cube incorporated a wide range of data and information in the estimation project. All data
including an interpretation update of mineralisation was completed in conjunction with Philsaga
geological staff during and after a site visit by Mark Zammit in late June 2010. The main data
types and information sources contributing to the project were as follows:

An additional 78 holes (29,786.2m) completed since the previous resource estimate in

December 2009;

Mineralised vein interpretations in plan and cross section provided by Philsaga;

Philsaga geological mapping of drive backs and development face sample data, as digitised
from paper level plans and supplied as digitised point data;

Mining width and sample grade data from within Philsaga stoping areas;

Mining depletion and pillar outlines to June 21st 2010 maintained and digitised from long
section plans by Philsaga;

Comprehensive specific gravity investigation on vein samples;

A site visit and on-site discussions with Philsaga geological, mining and survey staff.

Cube has applied a 2D longitudinal modelling approach based on an accumulation variable

incorporating mineralised vein horizontal width and intercept grade. Each sample within a
mineralised vein was assigned a unique code. This coding was used to control compositing.
Mineralised vein grades were composited across the entire coded interval resulting in a single
intercept composite.
Block estimates were based on interpolation into either 10mE x 10mRL, 25mE x 25mRL or 50m E
x 50m RL parent cells in the longitudinal plane, depending on the vein data density. Block
discretisation points, required for block kriging were set to 5 x 5 points in the longitudinal plane.
There is no subdivision of the composite or block in the Z direction, therefore only a single
discretisation point in the Z direction is appropriate.
Mining depletions as of June 21st 2010 were stamped into the 3D block model using 2D string
outlines digitised from the Philsaga long section.

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Co-O Resource Estimate Update June 2010

Cube has classified and reported the Co-O resources in accordance with The 2004 Australasian
Code for Reporting of Mineral Resources and Ore Reserves (JORC Code).
A summary of Co-O Mineral Resources as of June 21st 2010 is reported as cells to the geological
block model with a gold value above 0.0 g/t Au shown in Table 1.1Error! Reference source not
found..

Category

Tonnes

Au g/t

Au Oz

Indicated

1,418,000

13.2

603,000

Inferred

2,905,000

9.6

898,000

Table 1.1 Co-O Resource Tabulation June 21st 2010 > 0.0 g/t Au

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TABLE OF CONTENTS
1.0

EXECUTIVE SUMMARY ................................................................................................. III

2.0

INTRODUCTION .................................................................................................................. 7

3.0

LOCATION AND GEOLOGY ............................................................................................ 7

4.0

DATA SOURCES ................................................................................................................ 9

4.1

DRILLING DATABASE ............................................................................................................... 9

4.2

ORE DEVELOPMENT AND STOPE FACE SAMPLES ................................................................. 9

4.3

SAMPLE PREPARATION AND ANALYTICAL METHOD ............................................................. 10

4.4

BULK DENSITY ...................................................................................................................... 10

5.0

GEOLOGICAL AND VOLUME MODELLING .............................................................. 11

5.1
6.0

GOLD MINERALISATION VEINS ............................................................................................. 11

COMPOSITING .................................................................................................................. 12

6.1
7.0

DISCUSSION ON COMPOSITING TECHNIQUES ...................................................................... 12

DESCRIPTIVE STATISTICS AND HIGH GRADE CUTS ........................................... 13

7.1

DESCRIPTIVE STATISTICS ..................................................................................................... 13

7.2

HIGH GRADE CUTS ............................................................................................................... 14

8.0

VARIOGRAPHY................................................................................................................. 15

9.0

ESTIMATION AND BLOCK MODELLING ................................................................... 16

9.1

BLOCK MODEL DEFINITIONS ................................................................................................. 16

9.2

INTERPOLATION AND BLOCK GRADE CALCULATION ............................................................ 17

9.3

SEARCH STRATEGY .............................................................................................................. 17

9.3.1 Search Strategies ........................................................................................................ 17

10.0

FINAL MODEL ................................................................................................................... 20

10.1

CONVERSION OF 2D MODELS TO 3D................................................................................ 20

10.2

3D BLOCK MODEL DEFINITIONS ....................................................................................... 20

10.3

ASSIGNED GRADES ........................................................................................................... 21

10.4

MINING DEPLETION ........................................................................................................... 21

10.5

MODEL VALIDATION ........................................................................................................... 22

11.0
11.1

RESOURCE CLASSIFICATION AND REPORTING .................................................. 23

RESOURCE STATEMENT .................................................................................................... 24

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LIST OF FIGURES

FIGURE 3.1
FIGURE 5.1
FIGURE 7.1
FIGURE 9.1

PHILSAGA MINING CORPORATION LOCATION MAP (EAST MINDANAO) ...................... 8

CO-O GEOLOGICAL INTERPRETATION W IREFRAMES ISOMETRIC VIEW .................... 11
COMBINED STOPE AND DDH INTERCEPT COMPOSITES (AU) LOG PROBABILITY..... 14
GREAT HAMISH VEIN GRADE ESTIMATION BOUNDARIES LONGSECTION VIEW ........ 19
LIST OF TABLES

TABLE 1.1 CO-O RESOURCE TABULATION JUNE 21ST 2010 > 0.0 G/T AU
TABLE 4.1 DRILL HOLE DATABASE STRUCTURE
TABLE 4.2 SPECIFIC GRAVITY SUMMARY
TABLE 7.1 AU STATISTICAL SUMMARY INTERCEPT COMPOSITES
TABLE 8.1 VARIOGRAM MODEL CENTRAL VEIN AU X HW
TABLE 8.2 VARIOGRAM MODEL GREAT HAMISH AU X HW
TABLE 8.3 VARIOGRAM MODEL JEREME VEIN AU X HW
TABLE 9.1 2D BLOCK MODEL DEFINITION 10M X 10M
TABLE 9.2 2D BLOCK MODEL DEFINITION 25M X 25M
TABLE 9.3 2D BLOCK MODEL DEFINITION 50M X 50M
TABLE 9.4 2D BLOCK MODEL FIELD NAMES
TABLE 9.5 2D SUMMARY ESTIMATION PARAMETERS
TABLE 10.1 3D BLOCK MODEL DEFINITION
TABLE 10.2 3D BLOCK MODEL FIELD NAMES
TABLE 10.3 ASSIGNED DOMAIN GRADES
TABLE 10.4 MODEL VALIDATION
TABLE 11.1 TOTAL CO-O RESOURCE TABULATION JUNE 21ST 2010 > 0.0 G/T AU
TABLE 11.2 MAIN VEIN TABULATION JUNE 21ST 2010 > 0.0 G/T AU

IV

9
10
13
15
15
15
16
16
16
17
18
20
20
21
22
24
24

LIST OF APPENDICES
APPENDIX 1.
APPENDIX 2.
APPENDIX 3.
APPENDIX 4.
APPENDIX 5.

25
26
27
28
29

COMPOSITE LISTING
LABORATORY PROTOCOL
VARIOGRAM MODELS
LONGSECTION PLOTS
ESTIMATION OUTPUTS

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2.0

Co-O Resource Estimate Update June 2010

INTRODUCTION

Cube Consulting Pty Ltd (Cube) was requested by Philsaga Mining Corp (Philsaga) to complete an
updated resource interpretation and estimate for the Co-O Gold Project. The resource update
started in late June 2010 with a site visit and data compilation phase. The updated interpretation
and estimation were then completed by mid-July 2010. The aim of the exercise was to create a
resource model that could be used as the basis for mine planning, scheduling and formation of
reportable reserves. The estimation work utilised all available information and provided a suitable
basis for classification of the Vein resources in accordance with The 2004 Australasian Code for
Reporting of Mineral Resources and Ore Reserves (JORC Code).
All drilling, mapping, mining and geological interpretation data available through to June 21st 2010
was incorporated in the estimate.
Estimates of gold only were carried out.
All estimation work was carried out using SURPAC (Version 6.1.3) mining software.

3.0

LOCATION AND GEOLOGY

The Co-O Project is located in Central Eastern Mindanao in the Republic of the Philippines. The
Co-O mine site is accessed by the national highway via an approximate 2.5 hour drive north of
Davao City. Figure 3.1 show the regional location of the Co-O Gold Mine and the tenement
holding of Philsaga Mining Corp respectively.
The Co-O epithermal quartz veins are of the low sulphidation variety, consisting of white to grey to
black quartz, commonly vuggy and in places slightly banded. Some veins also contain white calcite in
varying amounts. The veins contain low levels of sulphides, primarily pyrite, galena and sphalerite with
total contents less than 5%. The exceptions to this are black leader style mineralisation which are
generally narrow stringers, clots or bands of galena-spahlerite rich or black silica which have
exceptionally high gold values and can occur in positions where vein attitudes change, or more
common in particular veins, eg, the Great Hamish, Jereme and Roysan Veins.
The veins generally have good along strike continuity with pinching and swelling controlled by vein
branching, faulting and rock variability. The host rocks to the veins are generally agglomeratic (or
volcanic breccias) and lesser tuffaceous andesitic rocks. Fragments of volcanic wall rocks and coarsegrained andesitic intrusive rock fragments occur within some of the veins.

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Co-O Resource Estimate Update June 2010

Figure 3.1 Philsaga Mining Corporation Location Map (East Mindanao)

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Co-O Resource Estimate Update June 2010

4.0

DATA SOURCES

4.1

Drilling Database

Drilling data is managed on site by the Philsaga Geological Department in an Access database
(DRILLDB.mdb) and this was supplied to Cube. This database contained the collar, downhole
survey, geology and assay data for a total of 488 historical and recent drill holes undertaken by
Philsaga/Medusa and Banahaw Mineral Development Corporation (BMDC). A total of 78 drill
holes (41 from surface and 37 from underground) have been completed since the previous
resource estimate in December 2010.
A description of the database and the tables and fields used by Cube is shown in Table 4.1.
Table

COLLAR

SURVEY

ASSAYS

GEOLOGY

zonecode

ug_samples

Field

Description

BHID
EOH
PRS_EAST
PRS_NORTH
PRS_RL
BHID
DEPTH
COLDIP
COLAZMAG
BHID
FROM_M
TO_M
Au_use
Au_P
Au_M
BHID
DEPTH_FROM
DEPTH_TO
samp_id
Rocktp1
hole_id
zonecode
depth_from
depth_to
level
prs_east
prs_north
prs_rl
au
width

Hole Id
Total Hole Depth
Collar Easting
Collar Northing
Collar RL
Hole Id
Downhole Depth of Survey
Dip of Hole trace
Azimuth of Hole Trace
Hole Id
Interval Depth From
Interval Depth To
Au used for Estimate
Philsaga Laboratory Au
McPhar Laboratory Au
Hole Id
Interval Depth From
Interval Depth To
Sample Id
Summary Lithology Code
Hole Id
Mineralised Vein Identification Code
Interval Depth From
Interval Depth To

Table 4.1 Drill Hole Database Structure

4.2

Ore Development and Stope Face Samples

Stope face channel samples are also routinely taken every 1.5-3m within the stoping areas.
Channel sampling and face mapping is undertaken in a similar manner to development drives.
Locations of stope samples are measured by tape from survey stations, ore passes or other known
reference points.

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Development and stope face channel sample data and mine depletion outlines are collated onto
longsection projection plans by the mining department. Longsections are scanned and digitised by
the Geology department and provided to Cube in the form of digitised string outlines detailing the
mine workings and spatial point sample data within the drillhole database.

4.3

Sample Preparation and Analytical Method

Face samples and drill core are submitted to the Co-O assay laboratory located approximately
12km from the Co-O mine site. The laboratory is part the Co-O CIP processing plant which is
owned and operated by Philsaga/Medusa. Summary flow charts of the sample preparation and
analytical procedures are shown in Appendix 2. Typically, the pulps from diamond drilling with gold
assays greater than 1 g/t are sent to the McPhar independent laboratory for checking and these
results are used in the drilling database, instead of the Co-O assay laboratory results.
Mark Zammit from Cube has inspected the site laboratory and is satisfied that the protocols in
place were being followed and were of industry standard.

4.4

Bulk Density

Historically a default density value of 2.45 g/cm3 for all mineralised veins has been used. A
program of over 1,000 specific gravity measurements has been complete on vein samples from
drill core and rock samples and a summary of these is presented below in Table 4.2. The mean
value of 2.62 g/cm3 has now been applied to all vein mineralisation within the resource. Some
minor stockwork mineralisation is also included within the resource and this has been assigned a
density of 2.45 g/cm3.

Number
Samples

Min.

Max.

Mean

Median

Standard
Deviation

Coefficient
Variation

1,136

1.59

3.67

2.62

2.63

0.113

0.043

Table 4.2 Specific Gravity Summary

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Co-O Resource Estimate Update June 2010

5.0

GEOLOGICAL AND VOLUME MODELLING

5.1

Gold Mineralisation Veins

The previous resource update in December 2009 involved a complete re-interpretation of the Co-O
project vein system to correct inconsistent vein orientations east of the Oriental Fault as identified
from mine development on Level 5. The June 2010 resource update focussed on revising existing
vein interpretations given the additional mine development and drilling data. The most significant
changes included modifications to the Royal veins at the northern end of the Co-O system and the
local increase in width and associated tonnes of the Great Hamish vein as exposed from mine
development on Level 5. A steepening of dip for a strike length of approximately 80m along the
Great Hamish vein coincides with a significant increase in vein width of up to 7.5m. Associated
with the thickening of the vein system is a comparable volume of lower grade stockwork
mineralisation directly to the footwall. Additional drilling from surface also allowed the inclusion of
additional vein interpretations east of the Oriental fault. A number of intersections are not included
within the current vein interpretation due to the lack of surrounding drill hole data but are likely to
be included as near mine exploration continues. Figure 5.1 illustrates a 3D isometric view of the
Co-O epithermal vein system.

Figure 5.1 Co-O Geological Interpretation Wireframes Isometric View

Cube undertook database coding based on the final geological interpretations which were used to
create unique codes defining the samples for each vein. It should be noted that unforeseen
geological variations on a small scale will occur due to the degree of geological complexity
observed in the Co-O vein system and variations of this scale are not represented in the current
resource model.

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Co-O Resource Estimate Update June 2010

6.0

COMPOSITING

6.1

Discussion on Compositing Techniques

The Co-O mineralised veins are laterally and vertically extensive, undulating, narrow (0.5-9m thick)
deposits defined primarily by underground mapping and diamond drilling. A compositing and
modelling technique should be applied that is suited to this type of deposit.
Given that there will be little or no expectation of mining selectivity across the zone between the
hanging wall and footwall contacts and the limited ability to geologically model the mineralisation
types at the resource scale, it is impractical to incorporate the across zone variability within the
estimation process. Such detail may however be achievable at individual stope scale, where
sufficiently detailed geological mapping and sampling data is available.
Cube concluded that the most suitable method of compositing would be to composite the samples
across the entire coded mineralised vein, creating a single composite from hanging wall to footwall.

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Co-O Resource Estimate Update June 2010

7.0

DESCRIPTIVE STATISTICS AND HIGH GRADE CUTS

7.1

Descriptive Statistics

The basic descriptive statistics for the drillhole data only (excluding development and stope
sampling) are summarised below in Table 7.1 for the most significant veins in June 2010.

Domain

CV

JV

JV_FW

GHV

GHV_FW

Catto1

Roysan

EA4

Zonecode

15

16

24

Number

30

Minimum

0.27

Maximum

12.64

Mean

3.90

Backcalcd
Mean

3.94

Median

2.40

Std Dev

3.54

Variance

12.52

Std Error

0.12

Coeff Var

0.91

Percentiles
10

0.59

20

1.07

30

1.17

40

1.60

50

2.40

60

2.94

70

6.04

80

6.96

90

8.90

95

10.38

97.5

11.90

99

12.34

Table 7.1 Au Statistical Summary Intercept Composites

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7.2

Co-O Resource Estimate Update June 2010

High Grade Cuts

Based on an examination of tabulated statistics and plots, Cube identified potential gold outliers
and after consideration of the 3D position of these composites applied high-grade assay cuts
where required.
High grade limits were applied to gold prior to the calculation of the accumulation variable. A high
grade limit of 300g/t Au was applied and this was based on investigation of the largest data sets
including the Central Vein, Great Hamish Vein and Roysan Veins. Figure 7.1 below represents a
log probability graph for all combined stope and diamond drill intercept composites. For the
combined data, a top cut of 300g/t represents greater than the 99th percentile.

Figure 7.1 Combined Stope and DDH Intercept Composites (Au) Log Probability

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8.0

Co-O Resource Estimate Update June 2010

VARIOGRAPHY

Variography undertaken previously for the Central, Jereme and Great Hamish Vein Veins have
been adopted for this resource update. These 3 veins contain the largest sample data sets and
the relative variogram models were used for all veins proximal to and exhibiting similar statistical
characteristics. The variography was modelled on the accumulation variables (grade x horizontal
width) in the projected longitudinal plane for the vein.
Table 8.1 to Table 8.3 list the resulting experimental variogram models.

Sill

Relative
Variance
%

Range

Azimuth

Plunge

Dip

Major/ Semi
Major Ratio

Major/
Minor
Ratio

Nugget Co

1997

37

Structure1

3395

63

62

Table 8.1 Variogram Model Central Vein Au x HW

Sill

Relative
Variance
%

Range

Azimuth

Plunge

Dip

Major/ Semi
Major Ratio

Major/
Minor
Ratio
1

Nugget Co

745

40

Structure1

320

17

7.4

Structure2

805

43

50

Major/ Semi
Major Ratio

Major/
Minor
Ratio

Table 8.2 Variogram Model Great Hamish Au x HW

Sill

Relative
Variance
%

Range

Azimuth

Plunge

Dip

Nugget Co

230

48

Structure1

155

33

50

Structure1

90

19

70

Table 8.3 Variogram Model Jereme Vein Au x HW

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9.0

ESTIMATION AND BLOCK MODELLING

9.1

Block Model Definitions

Three 2D block models were created with a single cell 1m thick in the longitudinal plane. All block
models had the same extents but different parent cell size which included 10x10m, 25x25m or
50x50m. Veins with sparse drilling intersections and no mining develop were typically estimated
with the 50x50m 2D block model. Veins with sufficient drilling density often better than 50x50m
and possibly including level development with stope sampling were estimated with either the
10x10m or 25x25m 2D block model. The block model prototype definition for the 3 model types
are shown in Table 9.1 to Table 9.3. Individual block models were created for each mineralised
vein. A list of field names and descriptions in the 2D block model are shown in Table 9.4.

Easting
Northing
RL
Parent Cell X
Parent Cell Y
Parent Cell Z

Minimum

Maximum

Model Extent

613,000
-0.5
2,500
10m
1m
10m

615,000
0.5
3,500
Number Blocks X
Number Blocks Y
Number Blocks Z

2,000
1
1,000
200
1
100

Table 9.1 2D Block Model Definition 10m x 10m

Easting
Northing
RL
Parent Cell X
Parent Cell Y
Parent Cell Z

Minimum

Maximum

Model Extent

613,000
-0.5
2,500
25m
1m
25m

615,000
0.5
3,500
Number Blocks X
Number Blocks Y
Number Blocks Z

2,000
1
1,000
80
1
40

Table 9.2 2D Block Model Definition 25m x 25m

Easting
Northing
RL
Parent Cell X
Parent Cell Y
Parent Cell Z

Minimum

Maximum

Model Extent

613,000
-0.5
2,500
50m
1m
50m

615,000
0.5
3,500
Number Blocks X
Number Blocks Y
Number Blocks Z

2,000
1
1,000
40
1
20

Table 9.3 2D Block Model Definition 50m x 50m

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Field Name

Description

X Block Centroid

Y Block Centroid

Z Block Centroid

au

Back Calculated Gold ppm (Au_HW / HW)

au_hw

Kriged Accumulation Au*HW used cut Au

hwidth_au

Kriged HW for Au Back-calculation

hwidth

Kriged HW

au_nbs

Number Composites AuxHW

au_ads

Average Distance to Composites AuxHW

au_dns

Distance to Nearest Composite AuxHW

au_kv

Kriging Variance (AuxHW)

Table 9.4 2D Block Model Field Names

9.2

Interpolation and Block Grade Calculation

The 2D metal accumulation estimation technique is based on two variables; intercept grade and
thickness. The accumulation variable a(x) = t(x).z(x) was interpolated into blocks using ordinary
kriging. The horizontal width t(x) was also interpolated into blocks using ordinary kriging. Final
block grade was back-calculated by dividing the kriged accumulation by the kriged horizontal width
as follows:
Block Grade =

t(x).z(x)
t(x)

Mineralised veins containing more than 4 drillhole intercepts was estimated using the uniquely
coded intercept composites specific to that vein.
All block estimates were based on grade interpolation into 10 x 10 m, 25x25m or 50x50m parent
cells in the longitudinal plane. Block discretisation points were set to 5 x 5 points in the longitudinal
plane. There is no subdivision of the composite or block in the Z direction, therefore only a single
discretisation point in the Z direction is appropriate.

9.3

Search Strategy

A number of issues have been taken into consideration when deciding on an appropriate search
strategy and estimation block size, including data spacing, variogram model ranges, estimation
quality, and resource classification.

9.3.1

Search Strategies

Cube have attempted to characterise the spatial relationship of the data using variography and
have sought to implement search strategies aimed at producing a robust block estimate whilst at
the same time minimising estimation error and conditional biases.
A summary of estimation parameters used for the veins is included below in Table 9.5. Veins
highlighted with * contained sufficient stope sample data to require the use of a soft boundary to
limit the influence of clustered high grade samples. A soft boundary approximately 25 to 50m
surrounding the stope samples enabled blocks within this area to be estimated using all available
data and blocks outside to use only the diamond drill hole data. Figure 9.1 for example shows the
Great Hamish Vein mineralised vein boundary and the soft stope sample boundary plus the
Co-O Resource Estimate Summary Technical Report June 2010

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location of diamond drill hole intersections and the limit of mine development and stoping in
longsection view.

Zonecode

Vein

Block
Model

Min. No.
of Comps.

Max. No.
of Comps.

Search
Radius

Anisotropy
major/semi-major;
major/minor

Central Vein*

25x25m

30

50 (150)*

1:1

Jereme Vein*

25x25m

30

60 (150)*

1:1

Jereme Vein Splay

25x25m

30

60 (125)*

1:1

Jereme Vein FW

25x25m

30

60 (125)*

1:1

Great Hamish Vein HW

25x25m

30

60 (125)*

1:1

Great Hamish Vein*

25x25m

30

60 (150)*

1:1

Great Hamish Vein Splay

25x25m

30

100

1:1

Great Hamish Vein FW

50x50m

30

150

1:1

Catto Vein West 3

10x10m

30

150

1:1

10

Catto Vein West 2

10x10m

30

150

1:1

11

Great Hamish Vein East*

10x10m

30

50 (125)*

1:1

12

Great Hamish Vein East FW2

10x10m

30

100

1:1

13

Great Hamish Vein East FW3

25x25m

30

100

1:1

14

Catto2 Vein

25x25m

30

100

1:1

15

Catto1 Vein*

25x25m

30

50 (125)*

1:1

16

Roysan Vein*

25x25m

30

50 (150)*

1:1

18

Great Hamish Vein East FW1

25x25m

30

100

1:1

23

East Agsao Vein 3

50x50m

30

150

1:1

24

East Agsao Vein 4

50x50m

30

150

1:1

25

East Agsao Vein 6

10x10m

30

150

1:1

31

Royal Vein 1

25x25m

30

100

1:1

32

Royal Vein 2

25x25m

30

125

1:1

33

Royal Vein 3

25x25m

30

100

1:1

34

Royal Vein 4

25x25m

30

125

1:1

35

Royal Vein 5

25x25m

30

100

1:1

36

Royal Vein 6

25x25m

30

125

1:1

41

Breccia Vein

25x25m

30

125

1:1

42

Edphil Vein

25x25m

30

125

1:1

43

North Vein*

25x25m

30

50 (150)*

1:1

44

Jereme Vein East 2*

25x25m

30

50 (125)*

1:1

51

Tinago Vein 1

25x25m

30

75

1:1

52

Tinago Vein 2

25x25m

30

100

1:1

Table 9.5 2D Summary Estimation Parameters

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Figure 9.1 Great Hamish Vein Grade Estimation Boundaries Longsection View

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Co-O Resource Estimate Update June 2010

10.0 FINAL MODEL

10.1

Conversion of 2D Models to 3D

The 2D block grades were converted to 3D and imported into a real world block model using
nearest neighbour assignment. The orientation, block size and sub-celling regime of the real world
block model was designed to provide sufficient volume resolution for accurate surface geometry
representation, mine design, and depletion flagging considerations.

10.2

3D Block Model Definitions

The 3D block model prototype definition is shown in Table 10.1.

descriptions in the 3D block model are shown in Table 10.2.

A list of field names and

Minimum

Maximum

Model Extent

Easting

613,000

615,000

Northing

912,500

913,250

RL

2,500

3,500

Parent Cell X m

10

Min Sub-Cell X m

2.5

Parent Cell Y m

1.25

Min Sub-Cell Y m

0.3125

Parent Cell Z m

10

Min Sub-Cell Z m

2.5

Table 10.1 3D Block Model Definition

Field Name

Description

X Block Centroid

Y Block Centroid

Z Block Centroid

au

Back-calculated Au (ppm)

hwidth

Horizontal width

auxhw

Calculated Au x HW

density

Block Density

zonecode

Domain Number; BKGR. 1, 2, 3 etc

rescat

1=Measured 2=Indicated 3=Inferred 4=Unclassified

depletion

0 = Depleted, 1 = Insitu, 2 = Pillar (Recoverable), 3 = Pillar (Non-Recov.)

Table 10.2 3D Block Model Field Names

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10.3

Co-O Resource Estimate Update June 2010

Assigned Grades

For all domains with less than 5 intercept composites, the gold grade was assigned. The mean grade
was calculated by back calculation of the composite accumulation mean from the mean calculated
horizontal width. Domains assigned a gold grade are summarised below in Table 10.3.

Domain

Zonecode

Assigned Grade (Au g/t)

s

',s

s

s

s



s

:s^

Zs

Zs

Zs

:s

s

Table 10.3 Assigned Domain Grades

10.4

Mining Depletion

Mine workings summarised on hard copy 1:100 longsections were digitised by Philsaga geology
staff and spatially corrected. These polygons represent material that has been mined/broken up to
the 21st of June 2010. These polygons were converted to 3D wireframes and used to flag
individual vein domains with a depletion code of 0 if the material had been mined/broken and a
code of 1 if it is still insitu. Material remaining as insitu pillars was further assigned as 2 if
deemed recoverable or 3 as non-recoverable.
Airleg shrink stoping is employed in the majority of veins, particularly higher grade veins. As a
result, a proportion of broken material remains in the stope until timing permits its complete
extraction. This resource update has taken into account broken stocks remaining in the Great
Hamish and Jereme Veins. The method employed to estimate the tonnage and grade of broken
material remaining in the stope considered a number of factors. The Co-O mining department
provided an estimate for the tonnage of broken material remaining in the stopes for both veins.
Also provided were the hoist tonnes and grade for each vein from July 2009 to May 2010. A
reconciliation exercise comparing the ounces of gold hoisted and the broken material as reported
from the resource block model approximated the original site estimated tonnes. Polygonal outlines
were then developed by Cube to define the most recently broken material which represents the
broken stocks remaining in the stopes. This material was flagged in the block model by the
attribute depletion = 0 for mined and rescat = 2 for indicated.

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Model Validation

10.5

Where appropriate, modelled estimates have been compared to horizontal width weighted mean
composite grades for each vein. Although these two items are not strictly comparable due to data
clustering and volume influences they provide a very useful validation tool in detecting any major
biases. Table 10.4 below is a summary of the validation for 8 of the largest veins compared with
diamond drilling data only.

Zonecode

Vein

Volume

Tonnes

Estimated Au

Composite
Au

% Difference Au

Catto1

15

45,686

118,782

18.95

19.71

96%

CV

278,633

682,650

9.55

3.94 (10.07)

243% (95%)

EA4

24

91,240

237,225

11.98

10.97

109%

GHV

284,492

739,680

19.4

19.25

101%

GHV_FW

94,891

246,716

10.22

8.44

121%

JV

100,459

261,193

11.25

8.37 (10.34)

134% (109%)

JV_FW

65,273

169,711

14.14

15.82

89%

Roysan

16

82,805

215,292

23.71

34.54 (24.43)

69% (97%)

Table 10.4 Model Validation

The largest difference between the estimated and composite mean grade exists for the Central,
Jeremy and Roysan Veins. This is due to the exclusion of the clustered stope samples from the
composite mean in the comparison as these samples are typically focused on higher grade portions of
the vein. The declustered composite mean for the diamond drill hole and stope data is included in the
table in brackets which correspond well to the estimate mean for these three veins.
Visual comparisons were also made between the accumulation variable from the input composites
and the estimated accumulation block values. A similar visual comparison was made for the input
composite gold grade and the back-calculated block grade.

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Co-O Resource Estimate Update June 2010

11.0 RESOURCE CLASSIFICATION AND REPORTING

The criteria used previously for resource classification has been adopted for this resource update.
These criteria include:

Geological continuity and vein volume;

Data quality;

Data spacing and mining information;

Modelling technique;

Estimation properties including search strategy, number of informing composites, average

distance of composites from blocks and kriging quality parameters such as slope of
regression.

As with any non-rigidly defined classification, there will always be some blocks within categories
that depart from defined criteria. It is Cubes view that the final outcome must reflect a practical
combination of geological knowledge, operational experience and some estimation quality
parameters that may be more numerical in nature. This approach to classification aims to avoid
creating a complex numerically based mosaic. Cube has considered all criteria together to derive
a set of practical resource classification boundaries
The Indicated Resource boundary was drawn to encompass those blocks with higher estimation
qualities; typically within 50m of close spaced data where geological and volume continuity is well
established.
Inferred areas reflect identified veins where there is no mining information with limited drill hole
data.
All in-situ mineralised pillars deemed recoverable within the Philsaga mining area have been
classified as Indicated.
Broken stocks contained in the Great Hamish and Jereme Vein Stopes have been classified as
Indicated.
No Measured resources have been included due to the moderate risks identified in the data
quality, data spatial location and mined volume definition.

Co-O Resource Estimate Summary Technical Report June 2010

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Philsaga Mining Corp

11.1

Co-O Resource Estimate Update June 2010

Resource Statement

A summary of the total and individual vein Co-O Resources at a block cut off grade above 0.0 g/t
Au as of June 21st 2010 is shown below in Table 11.1 and
KZK:
sE

d
'
K
'(&(
) 


 ) 
s
'*(
) 


) 
'(&(
 ) 


) 
:s
'*(
) 


) 
'(&(
) 


 ) 
:&
'*(
) 


) 
'(&(
 ) 


) 
',
'*(
) 


) 
'(&(
) 


) 
',&t
'*(
) 


 ) 
'(&(
 ) 


) 
s
'*(
) 


) 
'(&(
 ) 


 ) 
Zs
'*(
 ) 


) 

'*(
 ) 


) 
'(&(
) 


) 
Ks
'*(
) ) 


) 
d/
d/

)) 
) ) 






 ) 
 ) 

Table 11.2 respectively.

Category

Tonnes

Au g/t

Au Oz

Indicated

1,418,000

13.2

603,000

Inferred

2,905,000

9.6

898,000

Table 11.1 Total Co-O Resource Tabulation June 21st 2010 > 0.0 g/t Au

KZK:
sE
s
:s
:&
',


'(&(
'*(
'(&(
'*(
'(&(
'*(
'(&(
'*(

d
) 
) 
 ) 
) 
) 
) 
 ) 
) 

Co-O Resource Estimate Summary Technical Report June 2010

'

















K
 ) 
) 
) 
) 
 ) 
) 
) 
) 
Page 24

270

Philsaga Mining Corp

Co-O Resource Estimate Update June 2010

 $  %"&
 
 
'()
% 

'(&(
'*(
'(&(
'*(
'(&(
'*(
'*(
'(&(
'*(

 !*   
 !* 

) 
) 
 ) 
) 
 ) 
 ) 
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) 
) ) 




















) 
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) 
) 
 ) 
) 
) 
) 
) 

)) 
) ) 






 ) 
 ) 

Table 11.2 Main Vein Tabulation June 21st 2010 > 0.0 g/t Au

Appendix 1.

COMPOSITE LISTING

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Philsaga Mining Corp

Appendix 2.

Co-O Resource Estimate Update June 2010

LABORATORY PROTOCOL

Co-O Resource Estimate Summary Technical Report June 2010

Page 26

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Philsaga Mining Corp

Co-O Resource Estimate Update June 2010

Appendix 3.

VARIOGRAM MODELS

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Philsaga Mining Corp

Co-O Resource Estimate Update June 2010

Appendix 4.

LONGSECTION PLOTS

Co-O Resource Estimate Summary Technical Report June 2010

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Co-O Resource Estimate Update June 2010

Appendix 5.

ESTIMATION OUTPUTS

Co-O Resource Estimate Summary Technical Report June 2010

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275

TECHNICAL REPORT MEDUSA MINING LIMITED

APPENDIX C

Co-O Mineral Reserve Report

27 August 2010
Report No. 107641096-002-R-Rev1

276

Medusa Mining Limited

Co-O Mine
Reserve Estimate
July 2010

Author
Declan Franzmann
Mining Engineer
Crosscut Consulting

Crosscut Consulting
A.C.N. 006 972 907

277

Medusa Mining Limited

Co-O Reserve Estimate
July 2010

TABLE OF CONTENTS
1.0
2.0

3.0
4.0

5.0

6.0
7.0

EXECUTIVE SUMMARY
1.1
PROBABLE RESERVE
INTRODUCTION
2.1
HISTORY
2.2
GEOLOGY
RESOURCE ESTIMATE
RESERVE ESTIMATE
4.1
PROBABLE RESERVE
4.2
POTENTIAL MINING INVENTORY
RESERVE ESTIMATION METHODOLOGY
5.1
CUT OFF GRADE
5.2
DILUTION
5.3
MINING RECOVERY
5.4
RESOURCE TO RESERVE CONVERSION
CONCLUSION
BIBLIOGRAPHY

278

3
3
4
5
5
7
8
8
9
11
11
13
13
13
15
16

Medusa Mining Limited

Co-O Reserve Estimate
July 2010

List of Figures

Figure 2.1 Location plan

Figure 2.2 3D view of Co-O interpreted Vein System
Figure 4.1 Probable Reserve contained Au ounces by vein
Figure 5.1 - Long section of GHV with Probable Reserve blocks
Figure 5.2 Comparison of Indicated Resource vs. Probable Reserve
Figure 5.3 Vein Grade (g/t), Vein width (m) and resource conversion
Figure 6.1 Probable Reserve contained gold (% of total) by vein

List of Tables

Table 1.1 Probable Reserve by vein

Table 3.1 - Co-O Resource Tabulation, June 21st 2010 (> 0.0 g/t Au)
Table 4.1 Co-O Project Probable Reserve at 21st June 2010
Table 4.2 Co-O Project mining inventory (not JORC compliant)
Table 5.1 Break even grade
Table 6.1 Indicated Resource, Probable Reserve and resource conversion (by Au oz)

279

4
6
9
12
14
14
15

3
7
8
10
11
15

Medusa Mining Limited

Co-O Reserve Estimate
July 2010

1.0

Page 3 of 16

EXECUTIVE SUMMARY

Crosscut Consulting was commissioned by Medusa Mining Limited to complete a reserve estimate for the
Co-O Gold Mine located in the Philippines and undertook a site visit between 21st and 25th June 2010.
Resource estimation was completed by Cube Consulting Pty Ltd in June 2010 and reserve estimation
was based on the Surpac resource model co_o_3d_june2010.mdl.
The Probable Reserve for the Co-O Gold mine was estimated to be:
1,465,000 tonnes at 10.72 g/t Au, containing 505,000 Au ounces.

1.1

Probable Reserve

Reserve estimation was completed assuming the following parameters:

x

Gold price

US$900 /oz;

Process recovery

94%;

Total mining and processing cost

US$71.36 per tonne of ore;

Break even grade

2.62 g/t Au;

Minimum stoping width

1.2m;

Mining recovery (most veins)

85%;

Mining recovery (medium grade >10g/t) -

90%; and

Mining recovery (high grade >15g/t)

94%.

Based on the cost, price and processing recovery parameters, an economic breakeven grade of 2.6g/t Au
was calculated. Detail of the Probable Reserve by vein is shown in Table 1.1.
Table 1.1 Probable Reserve by vein
Zone code

Vein

CV

Tonnes
302,250

Au
7.97

Oz
77,470

JV

147,620

7.17

34,030

JV Splay

42,020

5.17

6,990

JV FW

143,990

9.01

41,720

GHV HW

21,840

6.69

4,700

GHV

290,780

18.03

168,560

GHV FW

31,700

9.48

9,660

CVW3

19,980

4.25

2,730

10

CVW2

9,700

3.66

1,140

11

GHV EAST

17,730

14.02

7,990

12

GHV EAST FW2

12,940

5.36

2,230

13

GHV EAST FW3

21,150

4.40

2,990

14

CATTO2

11,530

8.17

3,030

15

CATTO1

84,350

11.69

31,700

16

ROYSAN

119,060

19.63

75,160

32

ROYAL2

2,310

6.33

470

41

BV

22,650

4.86

3,540

42

EDPHIL

79,850

4.65

11,950

43

NORTH

74,800

7.52

18,080

51

TINAGO1

5,900

4.16

790

52

TINAGO2

2,740

5.34

470

1,465,000

10.72

505,000

Total

280

Medusa Mining Limited

Co-O Re
eserve Estimate
July 2010
0

2.0

Page 4 of 16

INTROD
DUCTION

The Co O Project iss located in Central

C
Eastern Mindana
ao in the Republic of the
e Philippines. The Co-O
O
e is accesse
ed by the na
ational highw
way via an approximate
a
2.5 hour driive north of Davao City..
mine site
Figure 2.1 show the regional loca
ation of the Co-O
C
Gold Mine.
M

Figurre 2.1 Loca

ation plan

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Co-O Reserve Estimate
July 2010

2.1

Page 5 of 16

History

The Co-O mine and processing facility was originally developed in 1989 by Banahaw Development and
Mining Corporation (Banahaw), a subsidiary of Musselbrook Energy and Mines Pty Ltd.

Banahaw

developed the underground mine using trackless diesel equipment and the mine ceased operations in
1991.
In August 2000, the mine was purchased by Philsaga Mining Corporation (Philsaga) and recommenced
operations. From 2000 until 2005, and using primitive mining equipment (i.e. hammer, chisel and pick),
Philsaga mined on average around 21,000 tonnes of ore per annum and produced approximately 17,000
ounces of gold per annum.
On 23 January 2006 a Special Mining Permit (SMP) was granted over the Co-O mine, allowing the use of
explosives and handheld rock drills underground.

This was significant in that more efficient mining

techniques have now been employed allowing greater productivity. This was replaced by a 25 year
(renewable) Mineral Production Sharing Agreement (MPSA) on 19 March 2008. Further, exploration
success has provided the justification for the development of several new shafts that will enhance the
production capability of the Co-O Mine.

2.2

Geology

Gold mineralisation at Co-O comprises epithermal quartz veins are of the low sulphidation variety. They
consist of white to grey to black quartz, commonly vuggy and in places slightly banded. The veins contain
low levels of sulphides, primarily pyrite, galena and sphalerite with total contents less than 5%.

The

exceptions to this are black leader style mineralisation which are generally narrow stringers of galenasphalerite rich or black silica which have exceptionally high gold values and can occur in positions where vein
attitudes change.
The vein system is typically steep dipping and generally strikes east-west. At the eastern end of the vein
system, the veins have been offset by the north striking, steeply dipping Oriental Fault approximately 400
metres inside the portal of the 3150m adit level drive. The veins generally have good strike continuity with
pinching and swelling controlled by vein branching, faulting and rock variability. The host rocks to the veins
are generally agglomeratic (or volcanic breccias) and lesser tuffaceous andesitic rocks. Narrow limestone
marker horizons are present in the sequence, and some fragments of these, plus coarse-grained andesitic
intrusive rock fragments have been located within the vein.
The Oriental Fault, whilst containing some alteration and minor mineralisation, appears to be dominantly a
post-mineralisation fault.
Figure 2.2 illustrates the general arrangement of the Co-O vein system and also shows the existing mine
development.

282

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Co-O Re
eserve Estimate
July 2010

Figure 2.2 3D vie

ew of Co-O interpreted Vein System
m

Page
e 6 of 16

Medusa Mining Limited

Co-O Reserve Estimate
July 2010

3.0

Page 7 of 16

RESOURCE ESTIMATE

The resource estimate was completed by Cube Consulting Pty Ltd (Cube) in June 2010. The resource
update focused on the inclusion of recent drilling from surface and underground plus knowledge obtained
from underground mine development. The most significant changes included modifications to the Royal
veins at the northern end of the Co-O system and the local increase in width and associated tonnage of
the Great Hamish vein as exposed from mine development on Level 5.
A summary of Co-O Mineral Resources is shown in Table 3.1.
Table 3.1 - Co-O Resource Tabulation, June 21st 2010 (> 0.0 g/t Au)
Indicated Resource
Vein
Central Vein
Jereme Vein
Jereme Footwall
Great Hamish

Tonnes

Au g/t

Inferred Resource
Au oz

Tonnes

Au g/t

Total Indicated and Inferred

Au oz

Tonnes

Au g/t

Au oz

363,000

9.3

109,000

267,000

3.3

28,000

630,000

6.8

104,000

12.6

42,000

135,000

7.8

34,000

239,000

9.9

137,000
76,000

93,000

16.4

49,000

72,000

11.2

26,000

165,000

14.1

75,000
396,000

239,000

23.9

184,000

432,000

15.3

212,000

671,000

18.4

Great Hamish FW

22,000

15.6

11,000

226,000

9.6

70,000

248,000

10.2

81,000

Catto 1 Vein

60,000

18.1

35,000

57,000

20.2

37,000

117,000

19.1

72,000

Roysan Vein

101,000

24.6

80,000

107,000

23.5

81,000

208,000

24.1

161,000

239,000

12.0

92,000

239,000

12.0

92,000

EA 4
Other Veins
Total

436,000

6.6

93,000

1,370,000

7.2

318,000

1,806,000

7.1

411,000

1,418,000

13.2

603,000

2,905,000

9.6

898,000

4,323,000

10.8

1,501,000

Cube incorporated a wide range of data and information in the estimation project. All data including an
interpretation update of mineralisation was completed in conjunction with Philsaga geological staff during
and after a site visit by Mark Zammit in late June 2010. The main data types and information sources
contributing to the project were as follows:
x

An additional 78 holes (29,786.2m) completed since the previous resource estimate in December
2009;

Mineralised vein interpretations in plan and cross section provided by Philsaga;

Philsaga geological mapping of drive backs and development face sample data, as digitised from
paper level plans and supplied as digitised point data;

Mining width and sample grade data from within Philsaga stoping areas;

Mining depletion and pillar outlines to June 21st 2010 maintained and digitised from long section
plans by Philsaga; and

Comprehensive specific gravity investigation on vein samples;

A site visit and on-site discussions with Philsaga geological, mining and survey staff.

Cube has applied a 2D longitudinal modelling approach based on an accumulation variable incorporating
mineralised vein horizontal width and intercept grade. Mineralised vein grades were composited across
the entire coded interval resulting in a single intercept composite.
Mining depletions as of June 21st 2010 were stamped into the 3D block model using 2D string outlines
digitised from the Philsaga long section.

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July 2010

4.0

Page 8 of 16

RESERVE ESTIMATE

The reserve estimate was based on the predominant mining method of shrink stoping although some
longhole stoping is planned where vein widths allow. The shrink stoping method utilises hand held rock
drills and is well suited to mining the narrow veins that comprise the Co-O vein system. Crosscut has
used a minimum mining width of 1.2m, which is a practical minimum mining width for shrink stoping.

4.1

Probable Reserve

The Probable Reserve for the Co-O Mine was estimated to be 1,465,000 tonnes at an average grade of
10.72g/t Au with 505,000 ounces of contained gold, as detailed in Table 4.1. Crosscut has classified
and reported the Co-O reserve in accordance with The 2004 Australasian Code for Reporting of Mineral
Resources and Ore Reserves (JORC Code).
Table 4.1 Co-O Project Probable Reserve at 21st June 2010
Tonnes

Au

Ave Vein
Width (m)

Zone code

Vein

Oz

CV

302,250

7.97

77,470

JV

147,620

7.17

34,030

0.67

JV Splay

42,020

5.17

6,990

0.49

JV FW

143,990

9.01

41,720

0.78

GHV HW

21,840

6.69

4,700

1.19

GHV

290,780

18.03

168,560

1.28

GHV FW

31,700

9.48

9,660

0.81

1.97

CVW3

19,980

4.25

2,730

0.08

10

CVW2

9,700

3.66

1,140

0.49

11

GHV EAST

17,730

14.02

7,990

1.15

12

GHV EAST FW2

12,940

5.36

2,230

2.28

13

GHV EAST FW3

21,150

4.40

2,990

3.38

14

CATTO2

11,530

8.17

3,030

1.40

15

CATTO1

84,350

11.69

31,700

1.14

16

ROYSAN

119,060

19.63

75,160

1.55

32

ROYAL2

2,310

6.33

470

1.15

41

BV

22,650

4.86

3,540

0.63

42

EDPHIL

79,850

4.65

11,950

0.85

43

NORTH

74,800

7.52

18,080

1.23

51

TINAGO1

5,900

4.16

790

1.09

52

TINAGO2

2,740

5.34

470

2.01

1,465,000

10.72

505,000

1.27

Total

Similar to the 2009 Probable Reserve, Great Hamish Vein (GHV or Vein Code 6) contained the largest
proportion of gold mineralisation. Figure 4.1 shows the percentage of contained gold by vein.
A decrease in the Probable Reserve of GHV between 2009 and 2010 was estimated, with 192,000 Au oz
in 2009 decreasing to 169,000 Au oz in the 2010 reserve estimate.

This decrease reflected the

exploitation of the reserve over the last 12 months, with production (July 2009 to May 2010) of around

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eserve Estimate
July 2010
0

Page 9 of 16

56,000 Au
A oz sourcced from GH
HV. During the same period
p
drillin
ng and deve
elopment res
sulted in the
e
addition of 33,000 Au
u oz to the Probable
P
Resserve of GHV
V (i.e. a net decrease
d
of 2
23,000 conta
ained Au oz).
Figure 4.1 Probable Reserve con
ntained Au ounces
o
by vein

bable Reservve for GHV and

a JV includ
ded the follow
wing broken ore stocks in
n stopes:
The Prob
x

GHV

28,196 tonnes
t
at 29..36g/t for 26,615 Au oz; and
a

J
JV

2,968 tonnes at 20.0

05 g/t contain
ning 1,913 Au
u oz.

4.2

Potentia
al Mining In
nventory

Crosscut applied the

e same estim
mation techniq
ques to the Inferred Res
source in ord
der to determ
mine the totall
mining inventory.

I
Inferred
Ressources are of insufficie
ent data con
nfidence to be used in ore reserve
e

es. Whilst th
his mining invventory does
s not conforrm to the pro
otocols set o
out in the JO
ORC Code, itt
estimate
does pro
ovide a usefful estimate for mine pla
anning purposes. The total mining inventory is
s detailed in
n
Table 4.2.
Crosscut estimated the (non JO
ORC complia
ant) mining inventory for
f the Co-O
O Mine to be
e 2.9 million
n
a 7.7 g/t Au.
tonnes at

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Medusa Mining Limited

Co-O Reserve Estimate
July 2010

Page 10 of 16

Table 4.2 Co-O Project mining inventory (not JORC compliant)

Probable Reserve
Zone Code
Vein
1
CV
2
JV
2 Broken
JV broken stock
3
JV_Splay
4
JV_FW
5
GHV_HW
6
GHV
6 Broken
GHV Broken Stock
7
GHV_Splay
8
GHV_FW
9
CVW3
10
CVW2
11
GHV_East
12
GHV_East_FW2
13
GHV_East_FW3
14
Catto2
15
Catto1
16
Roysan
17
EA5
18
GHV_East_FW1
19
GHVa_East
20
GHVa_East_FW1
21
EA1
22
EA2
23
EA3
24
EA4
25
EA6
26
EA7
27
Catto1a
28
EA8
29
JVa_Splay
31
Royal1
32
Royal2
33
Royal3
34
Royal4
35
Royal5
36
Royal6
37
Royal7
38
Royal8
39
Royal9
41
BV
42
Edphil
43
North
45
JV_East_1
46
BV_East
51
Tinago1
52
Tinago2

TOTAL

t
302,250
144,650
2,970
42,020
143,990
21,840
262,580
28,200
31,700
19,980
9,700
17,730
12,940
21,150
11,530
84,350
119,060
2,310
22,650
79,850
74,800
5,900
2,740

1,465,000

g/t

7.97
6.91
20.00
5.17
9.01
6.69
16.81
29.36
9.48
4.25
3.66
14.02
5.36
4.40
8.17
11.69
19.63
6.33
4.86
4.65
7.52
4.16
5.34

Oz
77,470
32,120
1,910
6,990
41,720
4,700
141,940
26,620
9,660
2,730
1,140
7,990
2,230
2,990
3,030
31,700
75,160
470
3,540
11,950
18,080
790
470

10.72

505,000

Potential mining inventory

(not JORC compliant)
t
g/t
Oz
163,350
3.53
18,550
133,130
5.31
22,710
44,930
3.86
5,580
119,410
5.08
19,500
174,570
4.46
25,030
518,150
11.86
197,550
24,810
4.02
3,210
243,130
7.05
55,090
2,610
4.89
410
71,770
8.18
18,870
28,160
4.06
3,680
12,930
4.19
1,740
24,050
7.35
5,680
116,060
8.87
33,080
174,770
13.55
76,150
80,870
6.54
17,010
35,880
9.19
10,600
13,990
3.38
1,520
52,820
7.59
12,890
43,960
14.55
20,560
125,150
5.74
23,100
314,210
7.74
78,220
82,680
7.15
19,010
48,650
8.45
13,220
25,630
2.72
2,240
4,910
5.19
820
14,270
4.69
2,150
25,990
4.49
3,750
35,300
4.54
5,150
19,090
3.08
1,890
5,610
2.66
480
4,490
3.39
490
17,360
4.16
2,320
15,330
4.00
1,970
42,090
4.21
5,700
9,040
3.06
890
4,530
4.12
600
23,000
4.22
3,120
10,510
7.52
2,540

2,907,000

287

7.67

717,000

Total mining inventory

(not JORC compliant)
t
g/t
Oz
465,600
6.41
96,020
277,780
6.14
54,830
2,970
20.00
1,910
86,950
4.50
12,570
263,400
7.23
61,220
196,410
4.71
29,730
780,730
13.52
339,490
28,200
29.36
26,620
24,810
4.02
3,210
274,830
7.33
64,750
22,590
4.32
3,140
9,700
3.66
1,140
89,500
9.33
26,860
41,100
4.47
5,910
34,080
4.32
4,730
35,580
7.61
8,710
200,410
10.05
64,780
293,830
16.02
151,310
80,870
6.54
17,010
35,880
9.19
10,600
13,990
3.38
1,520
52,820
7.59
12,890
43,960
14.55
20,560
125,150
5.74
23,100
314,210
7.74
78,220
82,680
7.15
19,010
48,650
8.45
13,220
25,630
2.72
2,240
7,220
5.56
1,290
14,270
4.69
2,150
25,990
4.49
3,750
35,300
4.54
5,150
19,090
3.08
1,890
5,610
2.66
480
4,490
3.39
490
17,360
4.16
2,320
37,980
4.51
5,510
121,940
4.50
17,650
83,840
7.04
18,970
4,530
4.12
600
28,900
4.21
3,910
13,250
7.07
3,010

4,372,000

8.69

1,222,000

Medusa Mining Limited

Co-O Reserve Estimate
July 2010

5.0

Page 11 of 16

RESERVE ESTIMATION METHODOLOGY

Crosscut reported the resource for each individual vein by level (typically 50m reduced level increments)
and in 25m easting increments in order to replicate logical stoping blocks. A typical layout for Great
Hamish Vein is shown in Figure 5.1.
The resource tonnage, average grade and horizontal width for each of these stope blocks were reported.
The Cube resource model included kriged estimates of Au grade (g/t) and also the vein thickness (m).
The estimated vein thickness represented a horizontal, north-south estimate of thickness, rather than true
vein thickness.
The strike direction and dip of the vein was measured from the interpreted wireframes that comprised the
resource. In this way an estimate of the true vein thickness, accounting for vein strike direction and angle
of vein dip was calculated.
The proportion of development ore and stope ore was based on an ore drive height of 2.5m. Thus for a
typical 50m high stope block, 2.5m was considered to be ore drive whilst the balance of 47.5m was
attributed as stope. That is 5% of the resource was considered to be extracted in level development with
a minimum width of 2.4m. The remainder was considered to be extracted using stoping techniques to a
minimum width of 1.2m.
The resource tonnage and gold grade for each block were diluted based on the calculated vein width and
the minimum mining widths for development and stoping. A mining recovery factor was then applied and
if the stope block grade was greater than the break even grade, the stope block was included in the
reserve estimate.

5.1

Cut Off Grade

The cut off grades are detailed in Table 5.1. The cost for mining, processing, administration and royalties
were supplied by Medusa.
Table 5.1 Break even grade
unit

Amount

Mining

Item

US$/t

15.36

Processing

US$/t

27.80

Administration

US$/t

14.15

Royalty

US$/t

14.05

Total

71.36

Gold Price

US$/oz

900.00

Process recovery

94%

Stope cut off grade

g/t

2.62

A stope cut off grade of 2.62g/t was used to determine the inclusion of a stope block into the estimate.
Additionally, a development cut off grade of 1.1g/t was used to determine the development material as
ore or waste. This is a marginal cut off grade that covers the cost of processing and haulage only.

288

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Medusa Mining
M
Limited
Co-O Reserve Estimate
July 2010

Figure 5.1
1 - Long section of GHV with Proba
able Reserve bloc
cks

Page 12 of 16

Medusa Mining Limited

Co-O Reserve Estimate
July 2010

Page 13 of 16

It assumes that the material from a development drive will be mined regardless of whether it is waste or
ore (i.e. it is essential development for the associated stope). If the development grade was greater than
1.1g/t then it was included in the estimate. Development material with a grade less than 1.1g/t was
considered as waste.

5.2

Dilution

A minimum drive width of 2.4m and a minimum stope width of 1.2m were used to estimate the quantum of
dilution. The average vein width was calculated and the mined tonnage and grade for the stope block
adjusted to allow for the minimum mining widths for stoping and development. The proportion of dilution
for development ore was based on a 2.5m high development drive whilst the stope consisted of the
balance of the stope block, typically 47.5m. Thus 5% of the stope block was diluted to 2.4m width and
95% to 1.2m. No other dilution allowance was made due to the selective and labour intensive methods
employed at Co-O.

5.3

Mining Recovery

Generally, an allowance of 85% was made for the extraction rate (i.e. 15% allowance for pillars). The
mining recovery factor was varied depending on the average grade of the vein:
x

85% recovery for veins with an average mined grade less than 10g/t;

90% recovery for veins with an average grade in excess of 10g/t (Vein 11 and 15); and

94% recovery for veins with an average grade in excess of 15g/t (Vein 6 and 16).

It is Crosscuts opinion that the higher extraction rate was justified at higher gold grade. The high grades
were considered sufficient to warrant additional expenditure to increase the mining recovery. Techniques
that may be utilised to increase the mining recovery may include:
x

The use of timber packs (pig sties) and timber props (toms or stulls) to reduce the need to
leave pillars in stopes;

The use of square sets along haulage levels to reduce the need to leave pillars separating the
level and the stope; and

Retreat pillar extraction at the end of the operational life of a level.

5.4

Resource to Reserve Conversion

On average the Probable Reserve included 84% of the total contained Au ounces of the Indicated
Resource. This conversion rate is referred to as resource conversion. The resource conversion varied
for each vein dependent on vein true width and grade, with up to 92% for high grade veins such as GHV
(18g/t Au) whilst lower grade veins like North Vein (7.5 g/t Au) converted around 65% of the resource gold
to reserve.
Figure 5.2 illustrates a comparison of Indicated Resource to Probable Reserve for each vein and includes
the resource conversion.

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eserve Estimate
July 2010
0

Page 14 of 16

Fig
gure 5.2 Co
omparison of Indicated Resource
R
vs. Probable Re
eserve

Figure 5.3
5 shows a comparison
c
o Indicated Resource Au
of
u grade (g/t) by vein, ave
erage vein width
w
(m) and
d
the percentage of Ind
dicated Reso
ource contained Au ounc
ces converted to Probablle Reserve contained
c
Au
u
(
resource
e conversion
n). The individual veins are
a ranked in order of con
ntained Au (i.e. GHV hass
ounces (i.e.
the highe
est resource contained gold
g
(oz) whilst Tinago2 has
h the lowesst.
There is a direct corrrelation betw
ween the vein
n resource grade and the
e resource co
onversion ra
ate, with high
h
eins generallly having a high
h
resourcce conversion
n. The lowe
er grade vein
ns typically have
h
a lowerr
grade ve
conversiion rate.
Fig
gure 5.3 Ve
ein Grade (g//t), Vein widtth (m) and re
esource convversion

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eserve Estimate
July 2010
0

6.0

Page 15 of 16

CONCL
LUSION

The Probable Reserrve for the Co-O

C
Gold mine
m
was esttimated to be
e 1,465,000 tonnes at 10.7 g/t Au,,
0 Au ounces, and is ba
ased on the
e use of shrrink stoping as the principal mining
g
containiing 505,000
method. Figure 6.1 illustrates
i
the
e cumulative
e contained gold
g
by vein.

F
Figure
6.1 Probable Re
eserve conta
ained gold (%
% of total) by vein

C
Royssan, Jereme
e Footwall an
nd Jereme Ve
eins containe
ed approximately 79% off
The Great Hamish, Central,
the contained gold of
o the Probable Reserve, at a combiined average
e grade of 12.3g/t. The two highestt
eins, namelyy Great Ham
mish and Roysan contain
ned 48% of the gold witth a combine
ed Probable
e
grade ve
Reserve
e of 410,000 tonnes at 18
8.5 g/t for 244
4,000 Au oun
nces.
Table 6.1 summarise
es the Indicated Resourcce and Proba
able Reserve
e vein.
Table 6.1 Indicated Resource,
R
Pro
obable Reserve and reso
ource converrsion (by Au oz)
Vein
V
Central Vein
V
Jereme Vein
V
Jereme Footwall
F
Great Ha mish
Great Ha mish FW
Catto 1 Vein
V
Roysan Vein
V
Other Ve ins
Total

Indicated Resource
Tonnes
Au g/t
363,000
9.3
104,000
12.6
93,000
16.4
239,000
23.9
22,000
15.6
60,000
18.1
101,000
24.6
436,000
6.6
1,418,000

13.2

Au oz
109,000
42,000
49,000
184,000
11,000
35,000
80,000
93,000
603,000

P
Probable
Reserrve
Tonnes
Au g/t
302,250
8.0
0
147,620
7.2
2
143,990
9.0
0
290,780
18.0
0
31,700
9.5
5
84,350
11.7
7
119,060
19.6
6
345,140
6.0
0
1,465,000

10.7
7

Resource
Conversion
Au oz
77,470
0
71%
34,030
0
81%
41,720
0
85%
168,560
0
92%
9,660
0
88%
31,700
0
91%
75,160
0
94%
67,100
0
72%
505,000
0

84%

The average contain

ned gold convversion of Indicated Reso
ource to Probable Reserrve was 84%. Whilst thiss
is consid
dered relative
ely high, it do
oes reflect th
he high grade and consisstent nature of the Co-O vein system
m
coupled with the low
w operating cost
c
regime. The low op
perating costt permits the
e use of labo
our intensive
e
m
wh
hich may incclude hand mucking and ore sortin
ng to allow high levels of resource
e
mining methods
exploitattion.

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July 2010

7.0

Page 16 of 16

BIBLIOGRAPHY

Co-O GOLD PROJECT, Resource estimate update and summary technical report, Mark Zammit, Cube
Consulting Pty Ltd, June 2010.

Co-O GOLD PROJECT, Resource estimate update and summary technical report, Mark Zammit, Cube
Consulting Pty Ltd, December 2009.

Co-O GOLD PROJECT, Resource Estimate and Technical Report, Mark Zammit, Cube Consulting Pty
Ltd, July 2008.

Medusa Mining Limited, Co-O Mine Reserve Estimate, Declan Franzmann, Crosscut Consulting, July
2010

Ore Reserve Estimate, Co-O Gold Mine, Golder Associates Pty Ltd, September 2008.

Competent Persons Report on the Mineral Assets of Medusa Mining Limited, Peter Onley, Golder
Associates, October 2006.

293

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APPENDIX D

Tenement Boundary Descriptions

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TENEMENT
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TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

APSA (XIII) 000028

Corner

Parcel

Long

126

22

30

126

23

30

126

23

126

23

30

126

23

30

30

126

24

30

126

24

126

22

30

126

22

30

30

10

126

22

30

126

35

30

126

35

30

126

35

17

126

25

35

17

126

25

33

29

126

33

29

126

30

34

23

126

52

34

23

126

52

35

126

35

126

34

126

30

34

126

32

40

126

25

32

40

126

25

32

29

126

32

29

126

30

32

10

126

38

32

10

126

38

31

43

126

25

31

43

126

25

31

17

126

12

31

17

126

12

30

50

126

30

50

126

30

23

10

126

28

30

23

11

126

28

30

50

12

126

38

30

50

13

126

38

31

17

14

126

52

31

17

15

126

52

31

43

16

126

31

43

27 August 2010
Report No. 107641096-002-R-Rev1

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Lat

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

APSA (XIII) 000033

APSA (XIII) 000039

APSA (XIII) 000054

Corner

Parcel

Long

Lat

17

126

30

30

18

126

30

30

30

19

126

30

30

20

126

30

21

126

30

30

22

126

30

30

23

126

31

24

126

30

31

126

30

30

126

30

30

126

30

29

30

126

30

29

30

126

21

126

30

21

126

30

20

30

126

20

30

126

20

126

20

126

30

11

30

126

11

30

126

11

126

30

11

126

30

11

30

126

30

11

30

126

30

12

30

126

12

30

126

12

10

126

30

12

11

126

30

11

30

12

126

11

30

13

126

11

14

126

30

11

15

126

30

10

16

126

30

10

17

126

30

10

30

18

126

30

10

30

19

126

30

10

20

126

10

21

126

10

30

22

126

30

10

30

23

126

30

10

24

126

10

27 August 2010
Report No. 107641096-002-R-Rev1

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TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

APSA (XIII) 000056

APSA (XIII) 000077

APSA (XIII) 000087

APSA (XIII) 000088

Corner

Parcel

Long

Lat

25

126

11

26

126

30

11

125

59

30

12

126

12

126

11

30

125

59

30

11

30

126

30

30

126

30

30

126

30

29

30

126

30

29

30

126

27

30

126

30

27

30

126

30

26

30

126

26

30

126

26

126

30

26

126

30

25

126

25

126

24

30

10

126

30

24

30

11

126

30

25

30

12

126

25

30

126

30

14

126

14

126

12

126

12

126

13

30

126

30

13

30

126

30

126

126

126

13

126

13

126

126

58

40

126

57

30

126

57

45

10

126

55

57

20

11

126

56

20

12

126

43

56

12

13

126

57

14

126

57

30

27 August 2010
Report No. 107641096-002-R-Rev1

299

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

Corner

Parcel

Long

15
APSA (XIII) 000098

APSA (XIII) 000099

APSA 000003-XIII

Lat

126

30

57

30

126

30

30

126

30

126

29

30

126

30

29

30

126

30

27

30

126

30

27

30

126

30

26

126

26

126

26

30

126

30

26

30

126

30

25

126

25

126

23

126

30

23

126

30

23

30

126

23

30

126

24

30

126

30

24

30

126

30

126

29

30

126

29

29

30

126

29

30

126

22

126

30

22

126

30

21

30

126

21

30

126

30

22

126

22

126

20

126

30

20

126

30

20

30

126

30

20

30

125

55

46

125

56

46

125

56

45

30

125

56

30

45

30

125

56

30

43

30

125

55

43

30

125

55

45

29

125

55

45

29

125

57

30

46

27 August 2010
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TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

Corner

Parcel

Long

125

58

46

125

58

45

125

57

45

125

57

45

30

125

57

30

45

30

126

30

20

30

126

20

30

126

20

126

30

20

126

30

20

126

20

126

19

30

126

30

19

30

126

30

19

126

19

126

19

30

126

30

19

30

126

30

19

126

19

126

18

30

126

30

18

30

126

30

19

126

19

126

18

126

30

18

126

30

17

126

17

126

16

30

126

30

16

30

126

30

18

126

18

126

17

30

126

30

17

30

126

30

17

126

17

126

16

30

126

30

16

30

126

17

126

30

17

126

30

16

30

126

16

30

10

126

30

16

30

27 August 2010
Report No. 107641096-002-R-Rev1

301

Lat

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

EP (XIII) 000017

Corner

Parcel

Long

Lat

10

126

16

30

10

126

16

10

126

30

16

11

126

17

30

11

126

30

17

30

11

126

30

17

11

126

17

12

126

16

30

12

126

30

16

30

12

126

30

15

12

126

15

12

126

14

12

125

59

30

14

12

125

59

30

13

12

125

59

13

12

125

59

14

10

12

125

58

30

14

11

12

125

58

30

15

12

12

125

59

15

13

12

125

59

16

14

12

126

16

13

126

15

13

126

15

13

126

14

13

126

14

14

126

30

14

126

30

14

126

30

30

14

126

30

14

126

14

126

30

14

126

30

30

14

126

30

14

126

10

14

126

11

14

126

30

12

14

126

30

30

126

10

126

10

126

126

30

126

30

30

27 August 2010
Report No. 107641096-002-R-Rev1

302

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

Corner
6

126

30

EPA (XIII) 000037

126

30

18

126

30

18

126

30

13

30

126

13

30

126

12

126

30

12

126

30

13

30

126

13

30

126

15

10

126

30

15

EPA (XIII) 000064

Parcel

Long

Lat

125

58

30

13

30

125

59

13

30

125

59

13

125

59

30

13

125

59

30

11

30

126

30

11

30

126

30

11

126

11

126

10

10

125

58

10

11

125

58

12

30

12

125

58

30

12

30

126

12

126

30

12

126

30

11

30

126

30

11

30

126

30

11

126

11

126

30

10

30

126

10

30

126

10

126

30

10

126

30

10

30

126

30

10

30

126

30

10

126

30

10

126

30

10

30

126

10

30

126

10

126

30

10

126

10

27 August 2010
Report No. 107641096-002-R-Rev1

303

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

EPA (XIII) 000065

EPA (XIII) 000066

Corner

Parcel

Long

Lat

126

30

10

126

30

30

126

30

126

30

126

30

30

126

30

126

126

10

126

11

126

30

12

126

30

30

13

126

30

14

126

126

30

12

126

12

126

126

30

126

30

30

126

30

126

30

126

30

30

126

30

10

10

126

10

11

126

10

30

12

126

30

10

30

13

126

30

11

14

126

11

15

126

11

30

16

126

30

11

30

126

25

126

30

25

126

30

24

30

126

24

30

126

23

30

126

30

23

30

126

30

23

126

23

126

20

42

10

126

52

20

45

11

126

27

20

45

12

126

25

20

35

13

126

13

20

32

27 August 2010
Report No. 107641096-002-R-Rev1

304

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

Corner

Parcel

Long

14

126

43

20

35

15

126

20

51

16

126

20

48

17

126

52

20

51

18

126

40

20

43

19

126

30

20

45

20

126

17

21

21

126

20

21

10

22

126

20

21

25

23

126

30

21

41

24

126

40

21

52

25

126

54

21

55

26

126

22

27

126

50

22

24

28

126

42

22

33

29

126

14

22

42

30

126

22

53

31

126

53

23

32

126

58

23

16

33

126

58

23

31

34

126

50

23

31

35

126

45

23

42

36

126

51

24

37

126

24

30

126

30

24

30

126

54

24

30

126

51

24

126

45

23

42

126

50

23

31

126

58

23

31

126

58

23

16

126

53

23

126

22

53

10

126

14

22

42

11

126

42

22

33

12

126

50

22

24

13

126

22

14

126

54

21

55

15

126

40

21

52

16

126

30

21

41

17

126

20

21

25

18

126

20

21

10

27 August 2010
Report No. 107641096-002-R-Rev1

305

Lat

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

EPA (XIII) 000067

EPA (XIII) 000069

Corner

Parcel

Long

Lat

19

126

17

21

20

126

30

20

45

21

126

40

20

43

22

126

52

20

51

23

126

20

48

24

126

20

51

25

126

43

20

35

26

126

13

20

32

27

126

25

20

35

28

126

27

20

45

29

126

52

20

45

30

126

20

42

31

126

17

32

126

30

17

33

126

30

17

30

34

126

30

17

30

35

126

30

18

36

126

30

18

37

126

30

20

38

126

20

39

126

22

30

40

126

30

22

30

126

30

17

30

126

30

17

30

126

30

17

126

17

126

14

126

30

14

126

10

126

10

126

30

126

30

126

126

126

30

126

30

30

126

30

10

126

11

126

12

126

30

13

126

30

14

126

27 August 2010
Report No. 107641096-002-R-Rev1

306

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

EPA (XIII) 000087

EPA (XIII) 000114

EXPA 000176 XIII

Corner

Parcel

Long

Lat

15

126

16

126

30

17

126

30

18

126

19

126

20

126

30

21

126

30

22

126

23

126

24

126

30

25

126

30

26

126

27

126

30

28

126

30

30

29

126

30

30

30

126

30

30

31

126

30

32

126

33

126

30

34

126

30

30

35

126

30

30

36

126

30

126

30

126

30

30

126

30

29

126

29

126

31

30

126

30

31

30

126

30

30

126

30

126

45

17

30

126

17

30

126

17

126

30

17

126

30

15

45

126

15

15

45

126

15

17

15

126

45

17

15

126

25

126

10

25

126

10

21

126

21

27 August 2010
Report No. 107641096-002-R-Rev1

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TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

EXPA 000180 XIII

EXPA 000181 XIII

Corner

Parcel

Long

126

21

30

126

30

21

30

126

30

22

126

22

126

10

18

30

126

11

18

30

126

11

18

126

13

18

126

13

17

126

14

17

126

14

16

126

15

16

126

15

14

10

126

10

14

126

30

20

126

10

30

20

126

10

30

19

30

126

12

19

30

126

12

18

126

11

18

126

11

18

30

126

10

18

30

126

10

14

10

126

14

11

126

17

12

126

30

17

13

126

30

18

30

14

126

18

30

15

126

19

16
FTAA 00004 (XIII)

Lat

126

30

19

126

30

27

126

27

126

25

126

30

25

126

22

126

30

22

126

30

21

30

126

21

30

126

21

126

30

21

126

30

19

126

19

27 August 2010
Report No. 107641096-002-R-Rev1

308

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

MPSA (XIII) 262-2008 (PCL 1)

MPSA (XIII) 262-2008 (PCL 2)

Corner

Parcel

Long

Lat

126

18

30

10

126

30

18

30

11

126

30

17

12

126

17

126

30

126

30

30

126

30

30

126

30

30

126

30

30

126

30

126

126

30

126

30

10

126

10

11

126

10

12

126

10

30

13

126

10

30

14

126

30

15

126

30

16

126

17

126

18

126

30

19

126

30

20

126

126

30

16

30

126

16

30

126

15

30

126

30

15

30

126

30

14

30

126

14

30

126

15

126

30

15

126

20

126

30

20

126

30

19

30

126

19

30

126

19

126

19

126

19

126

30

19

126

30

15

30

10

126

15

30

27 August 2010
Report No. 107641096-002-R-Rev1

309

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

SSMP (ADS) 05-10-06

SSMP (ADS) 05-11-06

XIII-SDS-SSMP-002-07

XIII-SDS-SSMP-003-07

Corner

Parcel

Long

Lat

11

126

16

30

12

126

30

16

30

13

126

30

17

14

126

17

15

126

17

30

16

126

17

30

17

126

15

30

18

126

30

15

30

19

126

30

15

20

126

15

21

126

14

30

22

126

30

14

30

23

126

30

14

24

126

14

25

126

14

30

26

126

14

30

27

126

15

28

126

30

15

29

126

30

16

30

30

126

16

30

31

126

17

32

126

30

17

33

126

30

18

34

126

30

18

35

126

30

18

30

36

126

18

30

126

53

20

45

126

20

45

126

20

30

126

53

20

30

126

15

21

126

30

21

126

30

20

45

126

15

20

45

126

15

33

126

30

33

126

30

32

45

126

15

32

45

126

30

33

126

45

33

126

45

32

45

126

30

32

45

27 August 2010
Report No. 107641096-002-R-Rev1

310

TECHNICAL REPORT MEDUSA MINING LIMITED

TENEMENT

Corner

XIII-SMP-01-08

126

22

30

44

126

22

45

44

126

22

45

29

126

22

30

29

126

22

49

30

126

23

30

126

23

15

126

22

49

15

126

22

45

44

126

22

59

44

126

22

59

29

126

22

45

29

126

22

23

24

126

22

38

24

126

22

38

10

126

22

23

10

126

51

31

43

126

31

43

126

31

29

126

51

31

29

126

31

43

126

21

31

43

126

21

31

29

126

31

29

XIII-SMP-01-09

XIII-SMP-02-08

XIII-SMP-02-09

XIII-SMP-SDS-03-08

XIII-SMP-SDS-04-08

Parcel

311

Long

Lat

Golder Associates Pty Ltd

Level 2, 1 Havelock Street
West Perth, Western Australia 6005
Australia
T: +61 8 9213 7600

312

sterling 132065