Top Gainer: Medusa (MML)

 Closing price  $7.38
 Change  +$0.21
 % change  +2.9%


Broker Calls

Goldman Sachs: BUY

NCP Northland: BUY, price target $8.90


In a day that saw the stockmarket plunge 2.3% to a 12-month low, there wasn’t a lot to cheer about for Australian investors. Only a handful of gold miners managed to eke out gains, including Newcrest, Gryphon, Alacergold, Perseus and Medusa, who made up five of the top six gainers. Ultimately it was Medusa who came out on top, with a 2.9% gain to finish the day at $7.38. 

After hitting an all-time high of $8.71 at the end of May Medusa Mining has been on a rollercoaster ride, tumbling 30% in a month to $6.12 by June 29. It has since put back on 21% in five weeks as global markets have plunged and investors have rushed into the save haven of gold – pushing it to a record high of US$1,671. 

Despite its volatility, the Australian-based Phillipine-focussed gold producer has been a standout performer this year in a sideways market, rising 80% over the past 12 months on the back of soaring bullion prices.

Listed in Australia, Canada and the UK, the principal activities of MML include mineral exploration, evaluation, stgelopment, mining and production of gold. MML’s projects include multiple mines in the Phillipines, where it produced 90,000 ounces of gold last year.

Medusa reported just last week that it had set a new production record at the Co-O gold mine, one of the cheapest gold mines to run in the world on a per ounce basis. In the 12 months to June 30, Medusa produced over 100,000 ounces of gold at a cash cost of US$189 an ounce, then selling it at an average price of US$1,371.

“I am pleased to report that annual production of 101,474 ounces for this financial year is a new record,” said MD Peter Hepburn-Brown. Hepburn-Brown suggested that the record annual production could be broken this coming financial year, with a forecast production of 100,000 to 110,000 ounces. “During July 2011 we commenced changes to the majority of our existing haulage shafts to facilitate the increasing rate of stgelopment and set the mine up for longer term benefits.” You can read the full quarterly report here.

Goldman Sachs is keen on the stock, recently purchasing shares in MML for its Resources Fund. “MML offers low-cost gold production and a significant opportunity to expand its resource inventory through near-mine exploration,” said Goldman Sachs in a research note.  

Canadian broking house NCP Northland has a buy and a $8.90 12-month target price on MML, saying that Medusa’s low operating costs make it relatively lower-risk versus its global peers. “Exploration programs extending beyond the Co-O mine area indicate the potential for reserve expansion,” it says. “Additionally, several projects are being tested along its significant land package held in the eastern Philippines, which should provide long-term upside.” You can read thefull report here.

Major shareholders are Bendigo & Adelaide Bank and Trust Company Fiduciary Services.

Based on Thomson Reuters data, analysts are bullish on MML – four analysts have a buy on MML, two have a hold, none have a sell. 


Chart: Share price over the year to 03/08/2011 versus ASX200 (XJO)

Stock code: MML

Charts: Medusa Mining Limited

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Company website: Medusa Mining Limited