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Medusa Mining set to upgrade gold resource at Co-O Mine on drill results

Medusa Mining (ASX, LON:MML; TSX: MLL), through its operating company Philsaga Mining Corporation, has reported an update on the Co-O Mine in the Philippines with surface drilling results for previous hole MD 237 and new holes MD 241 to MD 260, results from underground drilling and an update on regional drilling in the surrounding areas.

Several drill holes on the north side of the vein system to the north of the Royal Vein indicate the possible discovery of a new vein(s) with intersections including:

- 0.40 metres at 17.30 g/t gold;
- 0.25 metres at 16.87 g/t gold;
- 0.20 metres at 16.11g/t gold;
- 0.35 metres at 10.59 g/t gold; and
- 3.10 metres at 15.37 g/t gold.

Geoff Davis, Medusa's managing director, said “these excellent surface and underground drilling results are being incorporated into a new resource estimate expected to be completed and announced in the latter part of July 2010."

"As an increasing amount of resource drilling will be undertaken from underground at the Co-O Mine and some of the surface rigs will be allocated to other projects, an updated reserve estimate is expected to be announced in August 2010.”

In addition, by using the Co-O Mine as a model, drill testing commenced in the September quarter of 2009 on veins in the vicinity of the Co-O Mine.

The Co-O vein system outcrops at surface on the western side of the Oriental Fault, where it was first discovered.

The veins at surface rarely exceed 0.5 metres width and generally assay around 1 to 5 g/t gold (with possibly some supergene enrichment which is an increased concentration of minerals due to weathering of the near surface mineralisation).

Gold values start to increase significantly approximately 80 metres below surface.

The company said a number of rigs which will continue drilling on the Co-O Mine and surrounding area will be rationalised to four or five rigs over the next few months as some of the rigs are planned to be transferred to commence feasibility study related drilling at the Bananghilig Deposit.

An increasing amount of resource drilling will be undertaken using the four underground drill rigs as drill stations and positions are opened up.

Medusa regards the initial drilling as indicative only and operates the policy of using drilling to locate the extent of the mineralised veins.

This will then be followed by level development to support the drilling results, to provide a more accurate estimate of vein grades and to facilitate the estimation of resources and conversion of Indicated Resources to Probable Reserves.

Fairfax commented in a flash note that the announcement highlights the ongoing potential at and around Co-O which continues to deliver. 

"We look forward to the incorporation of these and other drilling results into the resource and reserve model for the mine.  In addition, the company is sitting on a sizeable gold inventory that is likely to upgrade our numbers significantly which at the end of March was in the region of 25,000oz and has likely grown since," it said. 

It called Medusa an established producer with significant potential. "The company has seen its share price erode in recent months in response to Australian tax year end and other pressures, we feel that this presents an opportunity for investors to build a position," Fairfax added.