Q3 Gross margin was US$364 per oz, up 385%.

Q3 Gross margin was US$364 per oz, up 385%.

Q3 production . This is the best quarterly result for many moons and long, long overdue I must say!

Is it sustainable?

It certainly should be after all the money poured into the mine and mill for the past 5, 6 years or more. Guidance for FY production and AISC have been blown out of the water by this result and can be expected to no longer apply. The company should revise its guidance before the end of June.

The standouts from Q3 report are:

1. Production was29,858 oz of gold, up 29% from 23,120 oz in Q2. This may fall back a bit in Q4.

2. Grade was 6.98 gm/t which is quite high and the guidance is this is likely to return to nearer 6 gm in Q4.

3. Gold selling price was US$1303 per oz of gold, an increase of 6% on Q2.

4. AISC wasUS$939 per oz of gold, a reduction of 18% on Q2.

*** 5. Gross margin was US$364 per oz, an increase from $75 oz or 385% on Q2.***

This is a transformation in profitability that is likely to be continued in Q4 and FY results.

6. Cash was US$19.7 million, an increase of US$5.1 million from US$14.6 million in Q2.

FY Estimates:

2018/19 production: 24.2k oz + 23.1 + 29.8 +28? = 105k oz

2018/19 AISC: $1126 + 1156 +939 + 950? = w av $1030?

2018/19 gold price: $1206 + 1231 + 1303 + 1290? = w av $1270?

2018/19 Estimated gross margin:

Production 105k oz, gold $1270, AISC $1030 = $240/oz

Est Q3 cash generation: 28.6k oz x $364 = $10.4 million - $4.1 million (tax, int, VAT, etc) = $6.3 million

Est Q4 cash generation: Q4 28k oz + Q3 1k oz x $340 = $9.8 million

less $1.5 million (Q3 tax & interest) = $8.3 million

Medusa Mkt Cap at 37c = A$77 million (US$54 million)

PE Ratio: 2