Medusa Mining (ASX:MML, LON:MML, TSX:MLL) has said that the new estimate for its Co-O gold mine in the Philippines put the probable reserve at 505,000 oz (ounces) contained in 1.46 Mt (million tonnes) grading 10.7 g/t gold.
Conversion of resources this year has maintained the probable reserve contained ounces at a slightly higher level compared to the reserve of 500,000 oz at 14.9 g/t gold in 1.04 Mt announced in July. The current reserve would allow for a five year mine life at a production of 100,000 ozpa (ounces per year). The estimate was based on a gold price of US$900 per ounce and the current indicated resource, which was upped by 4% to 603,000 oz in July, while the inferred resource was increased by 36% to 898,000 oz.
“We have continued to replace mined ounces through the conversion of Indicated Resources, primarily through underground development, and we expect to be able to annually maintain a mine life of approximately 5 years based on reserves. Narrow vein mines are well known to operate in this manner and continually extend reserves and mines lives, in some cases for decades. We are optimistic Co-O will repeat this pattern,” said managing director Geoff Davis.
The target size estimates for the Co-O mine indicate a range of 3 Moz (million ounces) in 9.3 Mt to 7,000,000 ounces in 22 Mt using a grade range of 9 to 11 g/t gold with a preferred average grade of 10 g/t gold.
The Indicated Resource grade has reduced from 15 g/t gold to 13.2 g/t gold due to the addition of more veins into the resource estimate, and the re-interpretation of the 3D vein model reported in January. Development during the year has added material from more veins, reducing the influence of the high grade veins. The company said that additional dilution was introduced as me of the new veins added to the reserve estimate are narrower than the minimum stoping width of 1.2 metres assumed for the reserve estimate.
Late last month, Medusa reported a record production of 25,012 oz in the fourth quarter to end-June 2010, helping it to a yearly record of 89,679 oz with further exploration planned for this year to further increase the resources and boost output.
Fairfax commented that further exploration could continue to expand the resource, which could lead to an expanded production base beyond its currently modelled 130,000 ozpa by 2012 and potentially to 200,000 ozpa. Exploration has now identified a total of 45 veins that have been modelled, many of which could become larger as they remain open along strike and at depth, said Fairfax.
The broker’s estimate put Co-O’s NPV (net present value) at US$513 million and forecasted the company’s cash position to reach US$62.8m at the end of June, which includes 25,000oz of gold on account worth US$31 million.