MML.L Regulatory News (MML)

MEDUSA MINING LIMITED

ABN 60 099 377 849

and Controlled Entities

HALF-YEAR FINANCIAL REPORT

31 DECEMBER 2012

This report should be read in conjunction with Medusa's Annual Report for the year ended 30 June 2012 and any announcements made by the Company during the interim reporting period, as it does not include all the notes of the type normally included in an annual financial report.

Appendix 4D

Half year report

For the 6 months ended 31 December 2012

Results for announcement to the market

MANAGING DIRECTOR'S ADDRESS

I am pleased to report that the "game-changer" Saga Shaft is pulling rock from 350 metres below surface at Level 8 at increasing amounts as we push development laterally along veins and across the strike of the veins to expose as many veins as possible. Our interpretations show that the cross-cuts to the south from the bottom of the Saga Shaft should intersect 11 veins which will provide multiple headings from which to start drawing development ore. The cross-cutting is co-ordinated with two advancing ore passes using Alimak rises from Level 8 to Level 6, in addition to the completed winzed ore pass from Level 5 down to Level 8. These ore passes allow ore to be fed down to Level 8 and hauled up the Saga Shaft which is much more efficient than the older inclined shafts. This development changes the whole concept of the mine and over time will enable new efficiencies to be achieved.

The Baguio Shaft was refurbished and its capacity increased in July-August 2012 and now its depth is being extended from Level 3 to Level 5 to access additional ore and to reduce double ore handling. The next step will be to extend the Agsao Shaft from Level 5 to Level 8 which will be undertaken when Level 8 is fully operational.

The planning of a new deep shaft that I mentioned in my half year report last year has been postponed until later as re-configuring the haulage through deepening the inclined shafts and the success of our exploration has reduced the immediate need for the new deep shaft.

Exploration success has seen the resources for Co-O pass 2 million ounces for the first time. We aim to increase this to and maintain approximately 2.5 million ounces. As the conversion of Inferred Resources to Indicated Resources to Reserves through underground development averages 80%, we will aim to maintain a rolling 2 million ounces (from 2.5 million ounces) or 10 years of potential mineable material, including the current reserves.

Mill construction is on schedule and as at 31 January the new leach tank, installation of the crusher and the all the concrete foundations for the SAG mill were completed. The thickener upgrade and the detoxification plant are scheduled to be completed in February and the SAG mill lifted on to its foundations.

Complementary infrastructure construction completed includes a new senior staff accommodation building at the mine, a new central administration and combined accommodation building at the mill, a new geology office and combined accommodation, and a new central core farm. Planned infrastructure in progress includes new junior staff quarters at the mill, a new maintenance workshop for trucks and heavy equipment, expansion of the mine-and-mill laboratory and the construction of a new laboratory specifically for exploration samples. Planning for additional tailings storage facilities is also in progress.

The difficulties of combining expansion and production from an old mill have continued, however we are confident we will achieve our timelines for the Co-O expansion.

The Bananghilig Deposit has continued to progress well with the publication in January of the first Indicated Resource of 608,000 ounces with the balance of 472,000 ounces still in the Inferred category. An additional 14 holes are in progress to convert the Inferred ounces to additional Indicated ounces. The current Indicated Resource will undergo pit optimisation studies and reserve estimations as the basis for a feasibility study to produce 200,000 ounces per year.

Our Co-O Mill expansion is on schedule, the Saga Shaft is in operation, and the Bananghilig Project is developing its own life in accordance with our initial aims and expectations. All this would not be possible without the dedication of our own staff, contractors, consultants and construction supervisors and contractors. We continue to expand our community activities and maintain a safe working environment for the benefit of all our stakeholders.

DIRECTORS' REPORT

The Directors present their report together with the consolidated financial report for the half-year ended 31 December 2012 and the review report thereon:

DIRECTORS:

The Directors of the Company at any time during or since the end of the half-year are:

HIGHLIGHTS FOR THE SIX MONTHS:

Financials

Revenues of US$52.4 million compared to US$40.9 million for the corresponding period in the previous year, an increase of 28% due to marginal increase in both gold production and a higher average price received on sale of gold. Medusa is an un-hedged gold producer and received an average gold price of US$1,676 per ounce from the sale of 43,492 ounces of gold for the half-year to December 2012 (corresponding period to December 2011: 25,446 ounces at US$1,655 per ounce);

Earnings before interest, tax, depreciation and amortisation ("EBITDA") of US$35.3 million, (US$28.4 million in the prior corresponding period); an increase of 24%.

 Earnings per share ("EPS") of US$0.152 on a weighted average basis is based on NPAT of US$28.6 million (six months to December 2011: EPS of US$0.127 based on NPAT of US$24.0 million); an increase of 19%.

The Company remains debt free and had total cash, cash equivalent in gold on metal account and bullion on hand of US$15.8 million at 31 December 2012 (corresponding period to 31 December 2011: US$80.2 million).

Dividends

The Board has temporarily suspended the payment of any dividend for the current fiscal year. In the previous half year to 31 December 2011, the Company paid an interim un-franked dividend of A$0.05 per share.

Operations

The Company produced 32,580 ounces of gold for the half-year, compared to 26,780 ounces from the previous corresponding period, at an average recovered grade of 7.82 g/t gold (six months to December 2011: 8.10 g/t gold);

Average cash cost for the half-year of US$300 per ounce, was higher than the previous corresponding period's costs of US$261 per ounce;

Production Guidance

The revised forecast gold production for the fiscal year to 30 June 2013 after taking into account current year to date production of 32,580 is now between 80,000 to 90,000 ounces at anticipated cash costs of US$250 per ounce.

A breakdown of actual and forecasted production ounces in calendar years (CY2011 to CY2016) and financial years (FY2012 to FY2017) is highlighted in tables below.

CALENDER YEARS

FINANCIAL YEARS

OPERATIONS OVERVIEW

The locations of the Company's projects are shown on Figures 1 and 2 (please see link at the end of this announcement).

EXECUTIVE ORDER ON MINING IN THE PHILIPPINES

The new legislation on mining taxes and royalties is yet to be finalised by Congress

PRELIMINARY DEVELOPMENT TIMETABLE

To view the Preliminary Development Timetable, please see link at the end of this announcement.

MINERAL RESOURCES and ORE RESERVES

Following the estimation of the Indicated Resource for the Bananghilig Deposit, Table I shows the Company's Mineral Resources and Ore Reserves:

Table I. Mineral Resources and Ore Reserves

Note:

(i) Resources include reserves

(ii) Co-O Mine ressources lower cut 3g/t gold, various upper cuts

(iii) Banaghilig Deposit lower cut 0.8g/t gold, various upper cuts

GOLD PRODUCTION

The production statistics for the six months to 31 December 2012 with comparatives for the December 2011 half year are summarised in Table II.

Table II. Gold production statistics

Note:

(1) Net of development costs and includes royalties and local business taxes but no by-product credits.

Gold production for the six months to 31 December 2012 was 32,580 ounces of gold at an average grade of 7.82 g/t gold was marginally above last year's production of 26,780 ounces of gold at recovered grades averaging 8.10 g/t gold.

The average cash costs of US$300 per ounce, inclusive of royalties and local business taxes is higher than the previous period's average cash costs of US$261 per ounce.

Medusa, an un-hedged gold producer, sold 43,492 ounces of gold at an average price of US$1,676 per ounce during the period (corresponding period last year 25,446 at average price received of US$1,655 per ounce).

The revised production guidance for the fiscal year to 30 June 2013, following production of 32,580 ounces of gold for the half year to December 2012 is now between 80,000 to 90,000 ounces at anticipated cash costs of US$250 per ounce.

A breakdown of actual and forecasted production ounces in calendar years (CY2011 to CY2016) and financial years (FY2012 to FY2017) is highlighted in the tables below.

CALENDER YEARS

FINANCIAL YEARS

Co-O MINE and MILL

Mine

Mine development and expansion achievements include

·; The commissioning of the 1,500 tonne per day Saga Shaft (Photo 1) has been completed and haulage is now underway from Level 8 (350 metres below surface). The current mine combined shaft haulage capacity has now been boosted to 2,500 tonnes per day but the current mill capacity remains at approximately 1,000 tonnes per day until the new mill is completed;

·; The first ore-pass from Level 6 to Level 8 has been completed by winzing, and two others are underway using Alimaks;

·; The repair and upgrade of the Baguio Shaft was completed in the September quarter following a fire in July;

·; Development is increasing from approximately 800 metres per month to >1,000 metres per month and will continue for the foreseeable future, resulting in a higher percentage of development ore in the mill feed to current mill.

Please see link at the end of this announcement to view Photo 1: Completed Saga Shaft headframe.

Mill

The current mill has continued to operate normally. Production for the financial year 2013 has been revised to 80,000 to 90,000 ounces. Updated planning and scheduling for the tie-in of the new mill to the existing facilities in the June quarter indicates that the tie-in period will take longer than the original time frame estimated, before construction commenced, of 2 to 3 weeks. This will result in reduced milling time due to interruptions and has been taken into account when re-estimating production guidance for the remainder of financial year 2013.

In November 2010 the Company approved the construction of a new mill with the capacity of 200,000 ounces per year. The status of the construction activities as at 30 January 2013:

·; conversion of the leaching circuit from Carbon-in-Pulp to Carbon-in-Leach to be completed in February;

·; crusher installed (Photo 2);

·; pipe racks for piping slurry from the SAG mill to the leaching circuit are advancing (Photo 3):

·; SAG mill installation on schedule;

·; de-toxification plant steel work advanced and to be completed in February;

·; upgrading of thickener to be completed in February;

·; installation of electrical supply systems to the mill is on schedule.

Photo 2 (please see link at the end of this announcement) shows the installed crusher on the right and emergency feed station on the left. The SAG mill foundations are behind the 150 tonne crane which will be used to lift the SAG mill components onto the concrete foundations.

Photo 3 (please see link at the end of this announcement) shows the pipe rack construction from SAG mill to leaching circuit on the left with the emergency feed station on the right.

Tailings Storage

Planning for tailings storage facility number 6 is in progress.

Health and Safety

Lost time accident frequency rate (LTAFR) for the six months to 31 December 2012 is 0.9 including exploration. There were no breaches of any of the project's operating regulations during the period.

Co-O RESOURCES AND RESERVES 

On 6 August 2012 the Company announced the mineral resources as shown in Table III.

Table III. Mineral Resource estimation as at 30 June 2012

The resource estimations were undertaken by Cube Consulting Pty Ltd (2012)

Notes:

(i) Various uppercuts have been applied on an individual vein basis; and

(ii) Resources are inclusive of reserves.

On 24 August 2012 the Company announced the mineral reserve as shown in Table IV.

Table IV. MineralReserve estimation as at 30 June 2012

The reserve estimation was undertaken by Carras Mining Pty Ltd (2012)

Vein modelling

Cube Consulting Pty Ltd of Perth, Western Australia was contracted to undertake the resource estimations. A wireframe model of the vein system and the mine depletions were based on all available information as at 30 June 2012. A 2D longitudinal modelling approach was used and is based on an accumulation variable incorporating mineralised vein horizontal width and intercept grade. Variography was used to analyse the spatial continuity of the horizontal width and accumulation variables within the mineralised veins and to determine appropriate estimation inputs to the interpolation process. The accumulation variables were interpolated into blocks using Ordinary Kriging. High grade limits were applied to gold prior to the calculation of the accumulation variable. Mineral resources have been reported in accordance with The 2004 Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC Code) and Canadian National Instrument 43-101.

Co-O RESOURCE DRILLING

Diamond drilling has continued since the last resource model update announced on 8 August 2012 and has focused on extending the Co-O Vein system along the eastern and western sides of the resource model. Results from a total of 52 surface drill holes for 35,989 metres and 40 underground drill holes for 8,147 metres have been completed since the resource estimation.

Tables V and VI summarise the intersections ≥ 0.5 metres at ≥ 3 g/t gold from the announcement of 21 February 2013 which contains more detailed assay information and maps showing the location of these drill holes.

Table V. Surface drill hole results ≥0.5 g/t gold at ≥3.0 metres downhole for previously completed holes designated †

Notes:

(i) Intersection widths are downhole drill widths not true widths;

(ii) Assays denoted by (*) are by Philsaga Mining Corporation's laboratory;

(iii) Grid coordinates based on the Philippine Reference System 92.

Table VI. Underground drill hole results > 3 g/t gold and > 0.5 metres downhole for new holes and previously completed holes designated †

Notes:

(i) Intersection widths are downhole drill widths not true widths;

(ii) Assays denoted by (*) are by Philsaga Mining Corporation's laboratory;

(iii) Grid co-ordinates based on the Philippine Reference System 92.

TAMBIS-BAROBO AREA

BACKGROUND

The Tambis Project, containing the Bananghilig Gold Deposit as shown on Figures 1 and 2, is operated under a Mining Agreement with Philex Gold Philippines Inc. over Mineral Production Sharing Agreement ("MPSA") 344-2010-XIII which covers 6,262 hectares.

The area has been known as an alluvial gold producing area since Spanish times. The first modern exploration pre-Medusa group was conducted in the 1970s followed by further work in the 1990s. The Company commenced a concerted drilling programme in July 2010 with the aim of extending the initial Inferred Resource of 650,000 ounces to provide a reserve of approximately one million ounces. This reserve would form the basis for a feasibility study which would target production of 200,000 ounces of gold per year from a new milling facility.

The Bananghilig Deposit detailed geological and mineralisation descriptions are contained in the announcement dated 12 September 2011, and additional drilling results are contained in the announcements dated 17 January 2012, 8 August 2012 and 21 November 2012. As there are a large number of intersections reported in these announcements, they have not been repeated in this half yearly report.

REGIONAL GEOLOGICAL SETTING

The Tambis regional geology, termed the Tambis intrusive-breccia complex, typifies a structurally complex intermediate-sulphidation, epithermal gold, breccia-type system, including disseminated gold overprinting the host Tertiary-age igneous package which had been emplaced into an andesitic volcanic basement. The fertile igneous suite comprises a multi-phase calc-alkaline, high level, sub-volcanic intrusive package cut by extensive bodies of phreatomagmatic diatremes and hydrothermal breccias.

Laboratory studies including fluid inclusions have indicated that the Tambis area epithermal mineralisation is only shallowly eroded with an estimated 500 to 950 metres of material stripped from the original surface.

The Tambis intrusive-breccia complex is overlain to the south and east by younger marine limestones and basal mudstones. The extent of the complex below this younger cover is yet to be determined.

To date most of the mineralisation has been identified within or around the margins of the Bananghilig Diatreme.

Exploration

Drilling commenced in July 2010 with seven surface rigs and continued through until October 2012 when infill drilling was completed for Indicated Resources estimations. An additional programme of 14 infill holes recently commenced to convert additional resources to the Indicated Resource category.

Resources

An inferred resource was published on 8 August 2012 of 1,100,000 ounces of gold at a grade of 1.63 g/t gold in 21,000,000 tonnes using a 0.8 g/t gold cut-off.

Following completion of infill drilling in October 2012 and subsequent detailed surveying of artisanal workings, a new resource was published on 29 January 2013 as shown in Table VII. Figure 3 shows the Bananghilig geology and the projection of the resources to surface, and figure 4 shows a cross-section through the deposit showing 5 metres x 5 metres x 2 metres resource blocks represented by coloured dots.

Table VII. Mineral Resource estimation as at 29 January 2013

The resource estimation was undertaken by Cube Consulting Pty Ltd (2013)

Notes:

(i) A lower cut of 0.8g/t gold and various uppercuts were applied; and

(ii) Resources are inclusive of reserves.

Figure 3 (please see link at the end of this announcement) shows the Bananghilig regional surface geology map showing the projection of the resource to surface and cross-section line 10710N.

Figure 4 (please see link at the end of this announcement) shows the Bananghilig Deposit cross section through line 10710N showing the resource blocks.

USA PROJECT

The Usa prospect is predominantly contained within Mineral Production Sharing Agreement application ("APSA") XIII-00077. The Company has a Memorandum of Agreement with Corplex Resources Inc. ("Corplex").

The tenement is being progressed to granting.

ANOLING

The Mines Operating Agreement ("MOA") with Alcorn Gold Resources Inc. covers Mining Production Sharing Agreement ("MPSA") application number 039-XIII situated approximately 8 kilometres north from the millsite.

The project has been terminated due to poor economics.

SAUGON PROJECT

FIRST HIT VEIN

Background

Figure 2 shows the Saugon Project located approximately 28 kilometres by road from the Co-O Mill. Work in 2004 involved drilling at the First Hit Vein (holes SDDH 1 to 35) in conjunction with underground development via a 30 metre deep inclined winze down the quartz vein-breccia to assist in understanding the mineralisation.

The 2004 drilling indicated a well developed central zone (First Hit Vein) with two possible splays partly developed as footwall and hanging wall zones. Further details are contained in the announcements dated 20 April 2010 and 1 December 2010.

Exploration

Work has focussed on regional mapping and detailed mapping, trenching and sampling of new veins with the aim of adding to the available mineralisation in the area.

FINANCIALS

Medusa recorded a net profit after tax ("NPAT") of US$28.6 million and earnings before interest, tax depreciation and amortisation ("EBITDA") of US$35.3 million for the half year to 31 December 2012, compared to US$24.0 million and US$28.4 million respectively in the previous corresponding period.

The Company recorded Revenues of US$52.4 million compared to US$40.9 million in the previous corresponding period. Medusa is an un-hedged gold producer and received an average price of US$1,676 per ounce from the sale of 43,492 ounces of gold for the half-year to December 2012 (previous corresponding period: 25,446 ounces at US$1,655 per ounce).

The marginal increase in NPAT, EBITDA and Revenues is directly linked to a slight improvement in gold production (32,580 ounces compared to 26,780 ounces). The Co-O Mine has been pre-dominantly in development mode since July 2011 to prepare for the anticipated future production increase and all development ore mined has been treated through the mill. A reduction in haulage capacity with the refurbishment of the Baguio Shaft (following a fire) and inclement weather experienced in December 2012 has impacted on mining activities and mill throughput, contributing to lower than expected gold production.

As at 31 December 2012, the Company which is debt free, had total cash, cash equivalent in gold on metal account and bullion on hand of approximately US$15.8 million (Dec 2011: US$80.2 million).

During the half-year:

·; The Company recorded Revenue of US$52.3 million from gold and silver sales (Dec 2011 half-year: gold and silver sales of US$40.6 million and interest of US$0.3 million);

·; Depreciation and amortisation was higher at US$6.7 million, compared with US$4.5 million in the December half of 2011;

·; US$14.6 million outlay on exploration expenditure, including US$9.8 million on the Co-O Mine (Dec 2011 half-year: US$15.9 million, including US$8.3 million for the Co-O Mine);

·; US$23.5 million was spent on sustaining capital at mine and mill and capital works associated with the new mill construction and infrastructure (Dec 2011 half-year: US$9.0 million); and

·; Incurred US$15.8 million on general and accelerated mine development costs, inclusive of shaft sinking costs (Dec 2011 half-year: on general and accelerated mine development costs, inclusive of shaft sinking costs of US$14.7 million).

CORPORATE

Dividend

The Board has temporarily suspended the payment of any dividend for the current fiscal year. In the previous half year to 31 December 2011, the Company paid an interim un-franked dividend of A$0.05 per share.

JORC COMPLIANCE - CONSENT OF COMPETENT PERSONS

Medusa Mining Limited

Information in this report relating to Exploration Results is based on information compiled by Mr Geoff Davis, who is a member of The Australian Institute of Geoscientists. Mr Davis is the Non-Executive Chairman of the Board of Medusa Mining Limited and has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration and to the activity which he is undertaking to qualify as a "Competent Person" as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" and is a "Qualified Person" as defined in "National Instrument 43-101" of the Canadian Securities Administrators. Mr Davis consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Cube Consulting Pty Ltd

Information in this report relating to Mineral Resources has been estimated and complied by Mr Mark Zammit of Cube Consulting Pty Ltd. Mr Zammit is a member of The Australasian Institute of Mining & Metallurgy and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" and is a "Qualified Person" as defined in "National Instrument 43-101" of the Canadian Securities Administrators. Mr Zammit consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Cube Consulting is an independent Perth based resource industry consulting firm specialising in geological modelling, resource estimation and information technology.

Carras Mining Pty Ltd

Information in this report relating to Ore Reserves is based on information compiled by Dr Spero Carras of Carras Mining Pty Ltd. Dr Carras is a Fellow of the Australasian Institute of Mining & Metallurgy and has 30 years of experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" and is a "Qualified Person" as defined in "National Instrument 43-101" of the Canadian Securities Administrators. Dr Carras consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Carras Mining is an independent Perth based resource industry consulting firm specialising in geological modelling and resource and reserve estimations.

DISCLAIMER

This report may contain certain forward-looking statements. The words 'anticipate', 'believe', 'expect', 'project', 'forecast', 'estimate', 'likely', 'intend', 'should', 'could', 'may', 'target', 'plan' and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements.

Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Medusa, and its officers, employees, agents and associates, that may cause actual results to differ materially from those expressed or implied in such statements.

Actual results, performance or outcomes may differ materially from any projections and forward-looking statements and the assumptions on which those assumptions are based.

You should not place undue reliance on forward-looking statements and neither Medusa nor any of its directors, employees, servants or agents assume any obligation to update such information.

LEAD AUDITOR'S INDEPENDENCE DECLARATION

The lead auditor's independence declaration under section 307C of the Corporations Act 2001 is set out on page 21 for the half-year ended 31 December 2012.

ROUNDING OF AMOUNTS

The Company has applied the relief available to it under Class Order 98/100 and accordingly, amounts in the financial report and directors' report have been rounded to the nearest $1,000.

This report is signed in accordance with a resolution of the Board of Directors.

PETER HEPBURN-BROWN

Managing Director

Dated this 27th day of February 2013.

AUDITOR'S INDEPENDENCE DECLARATION

Grant Thornton Audit Pty Ltd

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Auditor's Independence Declaration

To The Directors of Medusa Mining Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the review of Medusa Mining Limited for the half-year ended 31 December

2012, I declare that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act

2001 in relation to thereview; and

b no contraventions of any applicablecode of professional conduct in relation to the review.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

P W Warr

Partner - Audit & Assurance

Perth, 27 February 2013

Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not aworldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited bya scheme approved under Professional Standards Legislation

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

for the half-year ended 31 December 2012

The accompanying condensed notes form part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 December 2012

The accompanying condensed notes form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the half-year ended 31 December 2012