Perseus Mining (ASX:PRU) is a gold explorer, focused on under-explored gold belts in West Africa.

The group’s Central Ashanti Gold Project has reserves of 3.3 million ounces (Moz) of gold, plus 1.5 Moz Measured and Indicated gold resources and 1.9 Moz Inferred gold resources.

A further 570,000 ounces of indicated gold resources and 1.21 Moz inferred gold resources are held on PRU’s West African projects, Grumesa and Tengrela.

The two projects (Central Ashanti Gold and Tengrela) aim to put out 670,000 oz per year once at full production, which would make PRU Australia’s second-largest listed miner by production after Newcrest Mining.

Further mineral resource and reserves upgrades are planned for later this year.

The miner recently completed its first gold pour during commissioning at the Central Ashanti Gold Project.

Though PRU is currently an explorer, the company is on track to become a producer.

PRU’s aim is to become a 400,000 ounce per annum gold producer from 2013, and the company is on target to achieve this following its consistent over-delivery on targets.

PRU is looking promising owing to its exposure to the under-explored gold belts in West Africa and on strength in gold prices.

Operational update

Following a recent updated economic analysis incorporating a revised life of mine plan (LOMP), PRU has planned throughput optimisation upgrades over the next 18 months.

Under the upgrade, average process throughput will increase from 5.5 Mtpa to 7.9 Mtpa.

Average annual gold production is set to increase by 38% to approximately 265,000oz.

Cash costs will drop to US$551/oz with a base case gold price of US$1,150/oz.

As a result, PRU’s EBITDA over the life of the project has increased by 127% to $1.56 billion.

The early start up of the Central Ashanti Gold Project could push the gold miner’s EBITDA up to US$300 million a year in 2013 and 2014.

Of course, the company will continue to lose money until it starts producing, although it has ample funding facilities to pursue its exploration activities and mine development plans.

Looking ahead

Perseus Mining is turning market heads over its consistent over-delivery on targets. The group is also in good financial stead, with approximately US$100 million cash.

Though PRU’s recent financial results are nothing to write home about, this is typical of a company in its emerging stages.

PRU is looking promising owing to its exposure to the under-explored gold belts in West Africa and on strength in gold prices.

The group will continue to expand its gold resources through rapid exploration of existing tenements and the acquisition of prospective new projects, while developing the Central Ashanti Gold Project.

Gold has gained significant ground this year, consistently reaching fresh record highs.

However, the precious metal saw a pullback late last week but is still in a good position to register further gains.

The metal printed highs of around US$1900 early last week and continues to hold its ground well above US$1800.

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Medusa Mining (MML) is an Australian-based gold and copper miner, focused solely on operating in the Philippines.

MML’s assets include the high grade, underground, narrow vein Co-O Gold Mine and the Lingig copper prospect.

The miner has a 5-year, 2-phase growth path to production of 400,000 ounces per year underpinned by strong cash flow from the Co-O Mine.

With total current resources of over 2 million ounces (oz) of gold, Medusa Mining is in prime position to become a prominent gold producer.

The group is impressively debt-free and un-hedged, with long-term cash costs slated for around US$200 per ounce but currently sitting comfortably below this level.

The company is also looking robust at present on an encouraging environment for gold, which has continued to linger around all-time highs.

Key upside drivers

MML’s board recently approved construction of a new Co-O plant with capacity to produce 200,000 oz per year.

Surface drilling results from the Co-O have already yielded an exceptionally wide and high grade zone.

Elsewhere in MML’s large tenement holding, work is progressing on a number of prospects, including the Bananghilig deposit.

A pipeline of deposits is now being established within the Bananghilig Deposit (650,000 ounces at 1.3 g/t gold), and planning is now underway to commence a pre-feasibility study drilling campaign in July this year.

MML’s projects have excellent exploration upside, with high grade vein and disseminated bulk gold targets, plus six porphyry copper targets.

Its current exploration budget for FY11 is US$21 million.

Revised production for FY11 of 102,000 oz at cash costs of US$190 per oz would see MML become an extremely profitable miner.

Gold price rally

We expect gold and silver prices to remain strong, as many investors seek to hedge the market with precious metals such as silver and gold.

Gold is currently at record highs with the trend likely to continue in the short to medium term.  In fact, MML has been one of the hot stocks since August last year on surging bullion prices.

Key upside drivers for the gold price include inflation fears and US dollar weakness.

Gold is now well above US$1450 and looks poised for further gains.

First half joy

MML recently reported a record first half profit.

EBITDA was up 101% to $63.3 million (from $31.5 million) on year. EPS nearly doubled to $0.31 based on a NPAT of US$58.1 million.

Revenues increased 90% to a record US$78.3 million, due to increased gold production and a higher price received on sale of gold.

Following the solid result, MML paid a maiden un-franked dividend of 5 cents on 8 November.

The unhedged gold miner achieved an average gold price of US$1,291 per oz.

Cash costs were marginally lower at US$186 per oz than the previous corresponding period’s costs of US$189 per oz.

This is considerably lower than Australian based miners like NCM and OZL which have cash costs $400+ per oz.

Looking ahead

The Philippines presents a reasonably safe mining environment with plenty of government support.

The region has an excellent mineralized structural framework with world class gold-copper deposits.

There has been an abundance of discoveries in the area.

MML has huge potential for long mine life at the Co-O Mine with a conceptual exploration target size of 3 to 7 million oz.

The miner has a good history of production upgrades which presents significant upside, so it will be one of the stocks to watch in coming months.

In a sign of balance sheet health, MML advised that it is debt free. With money in the bank and solid cash generation, the company can afford to ramp up production organically, or perhaps through an acquisition.

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