The release of its results for the 6 months to 31^st December 2009, on 24th February, neatly summarised the tremendous progress being made at this rapidly growing gold miner.  The headline net profit after tax result of $28.3 million was inevitable after the company had enjoyed records in gold production, gold price and (low) operating costs.  As if that wasn’t enough, the company remains debt free and, with $35.5 million cash in the bank.

Operationally, production from Medusa’s Co-o mine was 39,162 ounces of gold in the 6 months to 31^st December 2009, up from 20,018 ounces on the corresponding figure in 2008.  This production came at an average gold grade of 16.65 g/t (12.71 g/t in 2008) and, as economies of scale and a higher grade will often dictate, the average cash cost decreased by $36 per ounce from an already low $225 in 2008, to $189 per ounce in 2009.  Completing the trifecta, the average gold price received for its output increased to $1,047 per ounce, up $235 per ounce on the $812 averaged in 2008.  

Phase 2 of Medusa’s expansion programme, taking targeted annualised production from 60,000 ounces of gold to 100,000 ounces, is on target with the company raising its full year production level forecast (12 months to 30^th June 2010) to 89,000 ounces at an average cash cost of $190 per ounce.  With the near-term expansion work at Co-O complete, Medusa’s attention now shifts to optimising current production and complementing Co-O’s output through the addition of new projects – Bananghilig, Kamarangan and Lingig for example.

Bananghilig, after the analysis of historical and recent drill data, produced an Inferred resource estimate of 15 million tonnes at an average grade of 1.3 g/t gold (0.6 g/t cut off) for 650,000 ounces of contained metal.  Cube Consulting Pty Ltd produced the estimate in August 2009, while Medusa is already planning to extend and upgrade the resource through step out and infill drilling as well as metallurgical, geotechnical and engineering studies to assess the sites suitability for a mine.

Lingig has been the subject of 6,400 metres of drilling since the 17^th of March 2009.  Spread across 17 holes and 3 surface drill rigs, the highlights so far have been intersections of 267.3 metres at 0.62% copper and 224 metres at 0.77% copper.  All 3 rigs remain in operation as the company is keen to define the boundary and composition of the mineralization.

Financially, revenues increased by 161% to $41.3 million compared to the 6 months to 31^st December 2008.  The company’s administrative expenses were kept flat at $1.4 million and, while the cost of sales doubled to $10.5 million, pre-tax profit leapt 250% to $28.3 million.  Medusa is still receiving income tax benefits from pre-production losses, although this appears to be nearing exhaustion, having declined from $1.4 million in 2008 to $51,859 this period.  Completing the impressive results was the 158% increase in earnings per share from $0.065 to $0.168.  As already mentioned, the company is highly liquid with no debt and $35.5 million, up from $26.5 million in 2008, cash and cash equivalents at 31^st December 2009.

Medusa shares have had a tremendous run during the past 15 months, rising from 30p in excess of 230p in mid-November 2009.  This performance propelled the company into the S&P/ASX200 index in July 2009, and this has further added to the company’s attraction.  Medusa is a self funded operation and, with an increased exploration budget of $18 million, we expect the company to maintain the momentum built in 2009.  Long Term Buy.