A: Hi Denis,

Thanks for the question.

I am not sure I would ever compare Medusa Mining to a “blue chip” – it is still an active explorer and closer to the “speculative” category. It didn’t pay a dividend last financial year.

That said, it is a low cost gold producer, with an increasing production schedule. Its main activities are in the Philippines – so you take on country, exchange rate and exploration risk. Problems with the development of its new mill, together with a run down in cash, seem to be behind its current share price dip.

Cti rates it a “buy” with a target price of $3.70. According to FN Arena, they “upgraded earnings forecasts driven by higher gold price assumptions. Medusa is a key pick, which the broker sees delivering volume growth and reduced costs. The Buy rating is retained and the price target is raised to $3.70 from $3.20.”

On the other hand, Deutsche Bank rates it a “hold” with a price target of $1.95, citing “FY13 profit was below the broker's estimates largely from the write-off relating to the Anoling project. Deutsche Bank believes the new mill will soon be commissioned but, given the recent delays, stays cautious. The timing of the ramp up has implications not only for production growth but also the balance sheet”.

As I make pretty clear in many articles – I don’t like gold and so don’t invest in gold stocks. If you want to play in gold, there may be easier ways to take exposure – such as through a gold ETF or investing in one of the major producers, rather than a second tier producer like Medusa. Too much risk for me.