MML.L Regulatory News (MML)

Medusa Mining Limited

("Medusa" or the "Company")

QUARTERLY ACTIVITIES REPORT

PERIOD ENDED 31 MARCH 2012

23 April 2012

Snapshot of Medusa:

- Un-hedged, low cost, dividend paying gold producer focused on organic growth in the Philippines

- Growth path to production of 400,000 ozs per year by end 2015/early 2016

- Growth underpinned by strong cashflow from Co-O Mine (narrow vein underground)

- FY 2011/12: revised production guidance of 60-65,000 ozs at cash costs circa US$250/oz

- Current Mineral Resources comprise

- Co-O Mine: Indicated 616k ozs at 12.0 g/t gold; Inferred 1,344k ozs at 8.8 g/t gold

- Bananghilig: Inferred 650k ozs at 1.3 g/t gold

- Current Probable Reserves: Co-O Mine 502k ozs @ 10.1 g/t gold

- Co-O Mine Resources and Reserves to be maintained at current levels

- Conceptual exploration target size ** of Co-O Mine of 3 to 7 million ozs

- Excellent exploration upside: high grade vein and disseminated bulk gold targets, plus seven copper targets

- 820 km2 of tenements and exploration revised budget for FY 2011/12 of US$30M

** The potential target size and grade is conceptual in nature, and there has been insufficient exploration to define a mineral resource, and it is uncertain if further exploration will result in the target being defined as a mineral resource. Refer to Stock Exchange announcement dated 24 August 2011.

Board of Directors:

Geoffrey Davis (Non-executive Chairman)

Peter Hepburn-Brown (Managing Director)

Ciceron Angeles (Non-executive Director)

Robert Weinberg (Non-executive Director)

Andrew Teo (Non-executive Director)

Capital Structure:

Listings:

ASX and LSE (Code: MML)

Address and Contact Details:

PO Box 860

Canning Bridge WA 6153

Telephone: +618 9367 0601

Facsimile: +618 9367 0602

Email: admin@medusamining.com.au

Website: www.medusamining.com.au

OVERVIEW:

Co-O MINE PRODUCTION & DEVELOPMENT

- New Mill: construction commenced, all long lead time items on schedule.

- Production: 18,258 ounces at a recovered grade of 8.1 g/t gold and cash costs of US$239 per ounce. Production influenced by accelerated development and operational disruptions by leach tank tilting and continued torrential rainfall over the New Year period.

- Saga Shaft: currently at 264 metres on its way to Level 8 (350 metres below surface) to install loading facilities. Completion estimated Q4 in CY12. Production influenced by high percentage of development ore produced to support Level 8 development.

- Emergency assistance: two mine rescue teams assisted at the Negros Island earthquake area in February.

Co-O MINE EXPLORATION

- Drilling is continuing with six surface and five underground rigs. Exploratory drilling of two vertical holes to 1,200 metres for new deep vertical shaft to the east of the Agsao Shaft completed.

- Drill results include: 1.90 metres at 79.18 g/t gold, 2.00 metres at 93.40 g/t gold, 1.90 metres at 79.94 g/t gold, 0.80 metres at 377.24 g/t gold, 8.50 metres at 89.17 g/t gold and 2.40 metres at 159.23 g/t gold. Deepest intersection to date at 1,076 metres vertical of 1.00 metre at 10.39 g/t gold.

TAMBIS AREA - BANANGHILIG DEPOSIT

- Infill resource drilling in progress with seven rigs with the aim of upgrading majority of resources to Indicated category. Infill drilling should be completed in late August 2012

- An updated Inferred resource is planned for the September quarter followed by an Indicated resource and reserve when the infill drilling is completed.

SAUGON and LINGIG PROJECTS

- Saugon IP survey completed and Lingig in preparation.

ANOLING

- Drilling with four rigs is on-going.

CORPORATE & FINANCIALS (unaudited)

- Total cash, cash equivalent in gold on metal account and bullion at end of quarter of approximately US$71.3 million.

- An interim dividend of A$0.05 per share was paid to shareholders on 23 March 2012.

PROJECT OVERVIEW

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

Co-O MINE

Gold Production

The production statistics for the March 2012 quarter with comparatives for the previous three quarters as well as the year-to-date production statistics are summarised in Table I below.

Table I. Gold production statistics

Note:

(1) Net of development costs and includes royalties and local business taxes

Gold production for the quarter was 18,258 ounces, at an average recovered grade of 8.10 g/t gold and cash costs of US$239 per ounce, inclusive of royalties and local business taxes.

As previously advised to the market, the mine continues to operate predominantly in development mode to prepare for the future production increase and all development ore mined to date has been treated through the mill. The increased amount of development ore treated is the primary reason for the lower recovered grade for the past three quarters, compared to quarters from the previous years.

Disruption to production during the quarter was experienced following the passing of tropical storm Sendong (see announcement 19 December 2011) followed by continued torrential rain over the Christmas and New Year period. As a consequence of this disruption over several weeks, in combination with the accelerated development program currently undertaken to prepare for the future production increase and the decision to sink the Saga Shaft to Level 8 (previous target Level 6) and the tilting of four leach tanks as reported on 21 March 2012, the Company has since revised its production guidance to between 60,000 to 65,000 ounces for the financial year.

Cash costs per ounce for the quarter has improved marginally to US$239 per ounce (YTD: US$252 per ounce), and the Company anticipates, that the unit costs will now average circa US$250 per ounce for the year following the latest production guidance.

Medusa, an un-hedged gold producer, sold 10,000 ounces of gold at an average price of US$1,738 per ounce during the quarter.

Preliminary Development Timetable

Graph 1 (please see link at the end of this announcement) is the updated Preliminary Development Timetable and Production Guidance for the new Co-O Mill followed by the Bananghilig Project.

The total estimated Capex (inclusive of mine development and shaft sinking) for the Phase 3 expansion of Co-O is US$70 million which will funded entirely from the Company's cash flow.

New Co-O Mill

In November 2010, the Board approved the construction of a new mill with capacity to produce 200,000 ounces of gold per year based on processing up to 750,000 tonnes per year at the current reserve grade of the Co-O Mine.

The application to upgrade the Environmental Clearance Certificate for the current Co-O Mill to 2,500 tonnes per day awaits signing in Manila pending completion of the mining industry policy review.

Operations

Mine Development

Major renovations are continuing at the Co-O Mine to modernise the mine for its expanded production.

Acceleration of the lateral development is on-going to ensure the underground infrastructure and on-vein development will be in place for the Saga Shaft. This accelerated development reached a new record during the quarter and consequently increased the proportion of development ore supplied to the mill which is expected to continue to comprise the majority of the mill feed during this accelerated development period.

Sinking of the Saga Shaft progressed smoothly, and is currently at 264 metres depth. It is anticipated that the Saga Shaft will be completed during the December quarter 2012 and hauling from Level 8 should commence shortly thereafter.

Mine Production

The haul road repairs were completed during the quarter, and the haul road will be further upgraded during the year as part of the expansion plans and to cater for increased truck traffic.

Ore trucked to the mill during the quarter was development ore and some stope ore.

The re-optimisation of the sinking of the Saga Shaft to Level 8 will mean that the high rate of development will continue until this shaft is completed, continuing the high percentage of development ore in the mill feed. Once the Saga Shaft is completed with an estimated haulage capacity to 1,500 tonnes per day, then it will be possible to increase the amount of stope ore that is hauled and processed.

The average development metres has increased by 18% and at the end of March, there were 68 development headings of which 54 headings were following veins. Haulage through the current shafts increased by 10% during the quarter.

Mill Expansion

The current status of activities is:

- Rectification work for leach tank tilting is underway (see announcement dated 21 March 2012)

- Construction of a new large leach tank is underway;

- Planned re-furbishment of four small leach tanks re-scheduled;

- Site works for the construction of new crushing and grinding sections (separate from the current crushing and grinding sections) commenced;

- Upgrading of the thickener and the elution circuit on-going; and

- Tailings dam number 5 completed.

Exploration

Recent statistical studies undertaken by Carras Mining Pty Ltd indicate that 3 to 5 holes out of every 10 holes in a particular vein are required to return ore-grades to indicate that the vein will be mineable.

Drilling with six surface rigs and five underground drilling rigs is continuing. Drilling of two vertical holes located east of the Agsao River to rig capacity of 1,200 metres completed.

Planning is underway for an extensive regional Induced Polarisation/Resistivity ("IP/Res") and ground magnetics programme around the Co-O Mine.

Drilling results

Detailed information is contained in the announcement dated 16 April 2012 which lists intersections down to 0.2 metres downhole width since 18 October 2011.

Figure 3 (please see link at the end of this announcement) shows the locations of the recently completed surface drill holes EXP111 to EXP145 comprising 35 holes for a total of 25,152 metres. Table II lists the EXP surface diamond drill hole results ≥3 g/t gold over ≥0.5 metres downhole. Assay results are awaited for holes EXP138 to EXP145.

Holes EXP127 to 1,201 metres and EXP133 to 1,200 metres were completed to test for possible deep shaft positions. Hole EXP127 intersected a number of ore-grade veins, however EXP133 did not intersect any significant veins for its entire length.

Figure 4 (please see link at the end of this announcement) shows the locations of the recently completed underground drill holes totalling 14,023 metres in 66 holes. Table III lists underground drill hole results ≥3 g/t gold over ≥0.5 metres received since 27 October 2011 as well as some previously completed holes whose locations are also shown in Figure 2 (please see link at the end of this announcement). Assays are awaited for holes L2-051 to L2-053, L2-055 to L2-057, L3-022, L3-027, L3-028, L5-087, L5-088, L5-091 to L5-096, L5-105, L5-106, L6-023, L6-025, and LM-011.

Table II. Surface drill hole results > 3 g/t gold and ≥ 0.5 metres downhole for previously completed holes EXP102 to 110 and new holes EXP111 to EXP145.

Notes:

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

(ii) Assays denoted by (*) are by Philsaga Mining Corporation's laboratory, all other assays are by McPhar Geoservices Inc. in Manila;

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

Table III. Underground drill hole results ≥ 3 g/t gold and ≥ 0.5 metres downhole.

Notes:

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

(ii) Assays denoted by (*) are by Philsaga Mining Corporation's laboratory, all other assays are by Intertek McPhar Mineral Services in Manila;

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

Co-O Drill Hole Sampling and Assaying Procedures

Samples are taken from mainly HQ sized (hole outside diameter 96 mm, hole inside diameter 63.5mm) and some NQ sized (hole outside diameter 75.8 mm, hole inside diameter 47.6 mm) drill core. The selected sample intervals are halved by diamond saw and half the core is bagged, numbered and sent to the Company laboratory. In a small number of cases to confirm the geological logging, the selected interval was re-split and ¼ core re-submitted for assay.

Initial sample preparation and assaying is undertaken at the Company's on-site laboratory. Samples are dried at 105ºC for 10 to 16 hours, crushed to less than 1.25 cm by jaw crusher, re-crushed to less than 50 mm using a secondary crusher followed by ring grinding of 1kilogram of sample to nominal particle size of less than 200 mesh. Barren rock wash is used after every five samples in the preparation equipment. The samples are assayed by fire assay with Atomic Absorption Spectrometer (AAS) finish on a 30 gram sample. All assays over 5 g/t gold are re-assayed using gravimetric fire assay techniques on a 30 gram sample. Duplicate samples are inserted every 10 samples and standard samples are included in every sample batch.

Check assaying of approximately 50% of samples used in the yearly resource estimates is undertaken by Intertek McPhar Mineral Services ("Intertek"), a NATA and ISO 9001/2000 accredited laboratory in Manila. The pulps are airfreighted to intertek who fire assay 30 grams of samples using AAS finish and a selected number of samples are checked using gravimetric fire assay techniques. Duplicate samples and standards are included in each batch of check samples. When reporting results, where available, the assays of Intertek as an independent laboratory have been given priority over the Company laboratory's results.

Health and Safety

Lost time accident frequency rate (LTAFR) for the nine months to 31 March 2012 is 1.19 including exploration. By comparison, the latest West Australian gold mining industry figure available to 30 September 2011 was 3.10, excluding exploration statistics of 6.70.

There were no breaches of any of the project's operating regulations during the quarter.

TAMBIS REGION

The Tambis project comprising the Bananghilig Gold Deposit (Fig. 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.

BANANGHILIG GOLD DEPOSIT

In July 2010, new regional and detailed mapping and drilling programmes were commenced with the aim of validating the current resource of 650,000 ounces of gold and extending it to provide a reserve of approximately 1,000,000 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 announcement of 12 September 2011 summarises the Tambis regional geological setting, local geological setting, deposit description and mineralisation, shows a typical cross-section through the deposit and the drill hole intersections obtained for the period 24 July 2010 to 31 August 2011. Additional information is contained in the September 2011 quarterly report dated 24 October 2011 and in a drilling update on 17 January 2012.

Current drilling is focussed on infill to upgrade the resources to the Indicated category. The infill programme totals approximately 18,200 metres and is expected to be completed in late August 2012. A new Inferred resource estimate is planned for the September quarter 2012.

A further update of drilling results is planned during the September quarter.

USA PORPHYRY COPPER-GOLD PROSPECT

A Memorandum of Agreement with Corplex Resources Inc. covers the Usa prospect which is located within MPSA application XIII-00077. Processing of the tenement application is progressing.

LINGIG

The Lingig prospect is located in Mineral Production Sharing Agreement 343-2010-XIII with an area of 3,824 hectares over which the Company has an operating agreement.

Grid line preparation for an IP/Res and ground magnetics programme is underway.

ANOLING

The Mines Operating Agreement with Alcorn Gold Resources Inc. covers MPSA application 039-XIII situated approximately 8 kilometres by road to the north of the millsite as shown on Figure 2 (please see link at the end of this announcement). Approval of the MPSA is awaited pending completion of the mining industry policy review.

Four drill rigs are currently operating. Mapping, trenching and sampling are on-going.

SAUGON PROJECT

First Hit Vein

Background

Figure 2 (please see link at the end of this announcement) 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-001 to SDDH-035) in conjunction with underground development via a 30 metre deep inclined winze down the vein-breccia to assist in understanding the mineralisation.

Further details are contained in the announcements dated 20 April 2010 which summarised the historical results and 1 December 2010 which contained drilling results for holes SDDH-36 to SDDH-64A.

Exploration and Drilling

Drilling was terminated in the December 2011 quarter. Regional mapping is continuing and the IP/Res and ground magnetics programme has been completed.

Drilling continued at the First Hit Vein seeking extensions of the mineralisation previously reported and testing a number of other mapped structures with holes SDDH 65 to 104 in 37 holes for 10,790.20 metres. Holes SDDH 65 to 98 were drilled around the First Hit Vein, and SDDH 99 to 104 were drilled to test other regional targets.

Drilling at the First Hit Vein did not significantly extend mineralisation, however the strike length of the mineralisation possibly narrows down at depth and could continue below the drilling as shown on Figure 5 (please see link at the end of this announcement).

Table IV summarises the results >1 g/t gold over >0.2 metres downhole.

** The potential target size and grade is conceptual in nature, and there has been insufficient exploration to define a mineral resource, and it is uncertain if further exploration will result in the target being defined as a mineral resource. Refer to Stock Exchange announcement dated 24 August 2011.

First Hit Vein drill hole results >1 g/t gold and >0.2 metres downhole and Cu, Pb and Zn ≥0.01%

Notes:

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

(ii) All assays are by Intertek McPhar Mineral Services laboratory in Manila except for holes SDDH-095 and SDDH-096 which are by the Philsaga laboratory; and

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

FINANCIALS (unaudited)

As at 31 March 2012, the Company which is debt free, had total cash, cash equivalent in gold on metal account and bullion of approximately US$71.3 million (31 Dec 2011: US$80.2 million).

During the quarter,

- the Company sold 10,000 ounces of gold at an average price of US$1,738 per ounce (YTD: sold 35,446 ounces of gold at an average price of US$1,679 per ounce);

- incurred exploration expenditure of US$8.2 million (YTD: US$23.5 million);

- spent US$7.6 million on capital works, associated sustaining capital at the mine and mill and also costs for the new mill construction and infrastructure (YTD: US$16.6 million); and

- spent US$9.0 million on general and accelerated mine development, inclusive of shaft sinking costs (YTD: US$23.6 million).

CORPORATE

An interim unfranked dividend of A$0.05 per share was paid to shareholders on 23 March 2012. There was no foreign conduit income attributed to the dividend, and the total amount paid, inclusive of associated costs was US$10.2 million.

For further information please contact:

Information in this report relating to Exploration Results has been reviewed and is based on information compiled by Mr Geoff Davis, who is a member of The Australian Institute of Geoscientists. Mr Davis is the Chairman 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.

Information in this report relating to Mineral Resources has been estimated and compiled by Mark Zammit of Cube Consulting Pty Ltd of Perth, Western Australia. 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.

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.

DISCLAIMER

This announcement 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.

To view Figures and Preliminary Development Timetable, please click on or paste the following link in your browser:

http://www.rns-pdf.londonstockexchange.com/rns/8430B_-2012-4-23.pdf