My report on Medusa presentation, Mayfair, London, 8/9/2016....

My report on Medusa presentation, Mayfair, London, 8/9/2016.

Summary. Jury is still out on how this company will perform. There are grounds for optimism but there have been many false dawns before. Present and future performance will be largely due to the new CEO who the BoD's has full confidence in. He comes across as being professional, experienced, cautious about not promising too much too soon, good at prioritising things that need fixing, etc.

New CEO, Boyd Timler (BT) gave the presentation using the slides:
http://www.medusamining.com.au/wp-c...easeofinvestorpresentationseptember2016-1.pdf

Not a lot of new information came from this. Some points included:

1. BT had a site visit to the mine and mill facilities on Mindanao and did his own due diligence before accepting this appointment. He was impressed by the mine, the resource, and the potential of the company or else he would not have accepted this appointment in March.

2. Philippines are technically as good as US, Canada, Auz, etc.

3. Slide 12. This is a view of the new Services shaft head frame/winding structure. It was designed by engineers in Australia, manufactured in South Africa, assembled there to prove it was all 100%, disassembled, shipped to Mindanao, and erected on site at the mine by Medusa staff recently in less than a week with no problems.
'E15 (Services shaft) can skip 300 tpd'. This is new. My view on this is that it may be used to haul some ore from Levels 9 and 10 when complete next year as well as act as the personel/plant carrier.

4. Slide 15. The last of the Level 8 drilling stations L8-105E was completed yesterday. It needs ventilation hook up in the coming days etc and then will be operational with the other L8 drilling stations for the major on-going drilling campaign to define resources down to Level 16.

Afterwards, there was an informal opportunity to meet and question: BT, Andrew Teo (Chairman) AT, Roy Daniel (non-exec) RD, Robert Weinberg (ex non-exec) who were also in attendance.

1. The 3 execs have flown in to London from Perth a few days ago to give presentations to about 13 UK institutions/funds, incl major shareholder Ruffer, organised by their Broker, SP Angel.
AT and RD to return to Perth, BT to continue to North America to continue with presentations there to institutions in the coming days.

2. Philippines Mines Dept audit of Medusa was carried out by 8-10 auditors in August who looked in detail at all the company's activities on Mindanao. On leaving, they advised verbally they were quite satisfied but would be filing a report, expected in the next week or so. There are no major issues they found that could result in suspension or closure. This would have been advised immediately. Medusa has to wait for this report to see what it contains eg it could say the company needs to fix A, B and C but if so, these issues would be of non critical significance. The company has not advised the market of progress with the audit so far on advice from its lawyers. It is waiting to see the full report.

3. The new government in The Philippines has started off quite aggressively towards the mining industry in general, in line with its mandate but Medusa expects that after about 6 months, more or less normal relations will return. Medusa is a very good employer on Mindanao and has a high reputation.

4. Bananghilig resource update due this quarter. JORC Code 2004 was used to estimate a resource of 1.1 million oz originally. The new JORC Code 2012 has been used for the updated estimation. This new code is more rigorous and will likely reduce the resource estimation. Any Bananghilig development would be as an open pit mine but this would be unlikely to be approved by the new government.

5. Medusa to concentrate on improving and developing Co-O for now. Needs to provide some quarters of doing what it says to restore confidence. BT's production guidance is very likely to be conservative (ie 105-115k oz for FY 2016/17 because that's the way he is, his job may depend on it and given recent history.

6. Medusa has fallen down in the planning department in the past. BT wants to make an impact here by doing lots of drilling at depth at Co-O to improve mine planning and development going fwd. When the Services Shaft is completed next year there will be no jump to eg an L16 shaft. The position of this is not fixed, the timing is not fixed, the cost etc. This will be dependent on the mine's drilling results over the next 2-3 years.

7. There is plenty of stope development on Levels 1-5 but the ore is at a lower grade than on lower levels. In the past, relatively high production rates have been achieved by high grading from these levels which should not have happened. When the gold price fell to $1050 late last year it was not economic to produce as planned from these levels. Hence the accelerated movement of mine development down to Levels 9 and 10 via winzes which exacerbated the bottle necking of getting ore up the single L8 shaft that can service the deeper levels. Now that the gold price is back to $1350, some of the developed stopes on Levels 1-5 are economic again and can be put back into production quickly to boost output. There is a current initiative for extra shifts to be worked on Sundays to get some of this Level 1-5 ore out of the mine via the declines, Baggio shaft, etc that service these levels. This will likely be announced in the next quarterly update.

8. Problems with operations and failure to perform to guidance over past years have been down to bad management rather than a poor workforce at Co-O.

9. Rob Gregory's payment scheme for the miners based on tons blasted rather than tons trammed still in operation.
Review of operations did not include any recommendations for restructuring of the board. Past failures were said to be due to lack of technical expertise on the Board in vetting plans and operations. No need for the Chairman AT to resign.

10. Company needs to build cash as it is now doing to fund future plans.
Looking at projects that may become a second future mine to Co-O. This will take time.
No rush with development of Co-O which will become more efficient in operation with the improvements to ventilation and pumping that are being implemented.