The Phase I expansion project at Medusa Mining’s Co-O Gold Project in the Philippines is expected to be completed in the third quarter of 2009.

The expansion will raise gold production at Co-O to 60,000 ounces/year.

A total of 1665 metres of development was completed in the first quarter and the Agsao shaft produced its first development ore.

The connection of the 8E (Beta) and Agsao shafts is the last stage of the Phase I expansion. This development work is under way westwards from the Agsao shaft and will shortly be under way from the 8E shaft.

The Phase II expansion to raise annual gold production from 60,000 to 100,000 ounces in early 2010 is progressing on schedule and is independent of the Phase I work.

For Phase II the Baguio shaft is at 158 metres and on schedule while a decision on the position of the high capacity, three compartment Hillview shaft is expected when sufficient deep drilling is completed.

This phase also involves a mill expansion and construction of two new leach tanks was completed in February. Site works have started for installation of an expanded crushing circuit to reduce the feed size to the ball mill and hence increase ball mill throughput to about 1000 tonnes/day depending on rock characteristics.

Gold production at Co-O increased by 4.6% in the first quarter to 12,716 ounces at an average grade of 13.05 grams/tonne gold and average cash cost of US$211 per ounce. The reduction in grade compared to the previous quarter is primarily due to the contribution of development ore from the Agsao shaft.

The company expects a further incremental increase in gold production in the second quarter with the full benefits of the Phase I expansion on track to flow through in the third quarter.

Drilling in and around the Co-O Mine testing the vein system at depth and along strike is continuing with six surface drill rigs. Deep drilling of the Great Hamish Vein and other veins within the mine area continues to show vein continuity at depth. Drilling east of the Agsao River has intersected extensions of the main vein system about 350 metres east of the Agsao shaft.

At the Lingig porphyry copper discovery drilling is continuing. Recent intersections include 125 metres @ 0.26% copper, 267 metres @ 0.62% copper and 224 metres @ 0.77% copper.

At the Kamarangan porphyry target a first pass drilling program of 10 holes has been completed.

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