Medusa Mining (ASX:MML) share price climbs on Co-O Mine progress

The Medusa Mining Limited (ASX: MML) share price is moving higher in late afternoon trade. This comes after the company announced its ‘Tigerway’ decline project is set to begin at the Co-O Gold Mine.

At Friday’s market close, the Australian-based gold producer’s shares are swapping hands for 85 cents, up 3.03%.

Co-O Gold Mine Decline Project Approved

Investors are pushing the Medusa share price higher on the back of the company’s latest positive developments.

According to its release, Medusa advised through its affiliate Philsaga Mining Corporation (PMC), it has signed a blasting contract with Mount Rock Powder Corporation (MRPC). The works carried out will be undertaken for the ‘Tigerway’ Decline Project at the Co-O Gold Mine.

MRPC is a leading Philippine underground mining and blast contractor, which has conducted services at the Co-O mine since 2008. Over the past decade, the group has completed more than 18,000 meters of underground mining, civil tunnel and decline projects.

Medusa noted that a comprehensive study was finalised in early 2020 to look at the long-term infrastructure of the site. It found that constructing a decline was the best option to attain the most efficient production when operating at deeper levels. While the project was formally approved in January 2020, the arrival of COVID-19 delayed selecting an Australian-based underground mining contractor. However, since the end of last year, the company moved to choosing a Philippines-based contractor, reducing the risk of operational restrictions and cost impacts.

Benefits of Co-O Gold Mine Decline

Building a decline at the Co-O mine is expected to provide a number of safety and operational benefits. This includes:

• More flexibility and capacity to extend underground mining infrastructure;
• Increased efficiency of installed shafts;
• Ability to increase mechanised mining techniques and increase productivity; and
• Better exploration flexibility from more optimal in-mine and near-mine exploration positions

Time and Cost of Project

Medusa stated that during the construction period, gold production will continue at the unaffected levels. The project plans to extend infrastructure below level 12 and onwards, remaining open at depth.

The total cost of the Decline project is estimated to be US$54 million. This comprises of US$43 million of box cut excavation and underground development, and US$11 million in mining infrastructure and equipment. The company will use its existing cash reserves and future operational cash flows to fund the project.

Medusa expects the construction period to be completed sometime within the next 3 years.

What did the managing director say?

Medusa managing director, Andrew Teo commented:

The Co-O Gold Mine has been in production for 13 years and has been a consistent producer which continues to replace reserves as the orebody extends at depth. While the hoisting and shaft infrastructure has served the mine well over its life to date, we believe this is an important investment in the future efficiency of the operation.

The decline will be constructed by a dedicated contract workforce and we do not expect this activity to have any impact on ongoing operations. Our strong financial position means the project will be funded from our existing cash balance and future cash flows while maintaining flexibility to consider future dividend payments, dependent on the performance of the operation and the prevailing gold price.

Medusa Mining share price snapshot

The Medusa Mining share price has jumped over 60% in the past year, before moving in circles since late September. The company’s shares are sitting just below 20% from its multi-year high of $1.065 reached mid-August 2020.

On valuation grounds, Medusa commands a market capitalisation of roughly $178.7 million.