MEDUSA MINING LIMITED

Photos: Photos of the on-going Installation of trusses and construction of Multi-purpose Hall for Human Resource & Institutional Building of Consuelo, Bunawan, ADS, funded by SDMP

A SOCIALLY RESPONSIBLE & ENVIRONMENT FRIENDLY COMPANY

SUSTAINABILITY REPORT 2015

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CONTENTS

CONTENTS .................................................................................................................................. 2

1. COMPANY PROFILE ............................................................................................................. 3

2. REPORT SCOPE .................................................................................................................... 4

3. ENVIRONMENTAL PERFORMANCE ..................................................................................... 5

4. EDUCATION, COMMUNITY PARTICIPATION, PROGRAMMES AND BENEFITS .................. 15

5. MISSION AND VALUES ...................................................................................................... 18

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1. COMPANY PROFILE

Medusa Mining Limited (ABN 60099377849) is a gold producer in the Philippines through affiliate Philsaga Mining Corporation and is focussed on organic growth on its tenements in Central East Mindanao, Republic of the Philippines.

The Company’s producing gold mine is Co-O Gold Mine, which is located centrally on the Company’s 596 km2 tenement holding.

Growth has involved expanding the current Co-O Mine and milling operations to 750,000 tonnes per annum. The Co-O Mine’s combined resources are currently 1.15 million ounces of gold which are still open capacity down-plunge.

Following a successful exploration programme at the Tambis area, 30 kilometres north of the Co-O Mine, combined resources of 1.41 million ounces of gold have been outlined at the Bananghilig Gold Deposit where preliminary feasibility studies have been undertaken.

Medusa Mining Limited is listed on the Australian Stock Exchange (ASX: MML) and the corporate office is located in Perth, West Australia.

Photo: Co- O Mine Level 8 Shaft

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2. REPORT SCOPE

Medusa’s Sustainability Report provides information about the Company’s sustainability performance for the financial year ending 30 June 2015. Medusa is focused on organic growth in the Philippines from the Co-O narrow vein underground mine and the Bananghilig potential open pit operation.

The target audiences for this report are Medusa’s stakeholders at the community, government, regulatory and investor levels.

With the exception of financial, safety and employee-related information, and unless otherwise stated, this report does not include exploration programmes or the corporate office in Perth, Australia.

Data are generally consolidated, recognising that the Company’s current principal activity is the Co-O Gold Mine and milling operation in the Philippines.

Medusa recognises that any safety and environmental incidents may have a negative impact on the operations, the Company and its stakeholders. Therefore, through proactive management, incidents are managed through the recognised strategies that the Company has in place. The severity of incidents is classified according to five levels of consequence with Level 1 representing the level of least consequence and Level 5 representing the highest. Under its continuous disclosure requirements, the Company reports all incidents that are material to its operations.

Currency

Unless otherwise stated, all monetary amounts in this report are expressed in United States dollars (US$).

Forward-Looking Statements

This report contains 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.

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3. ENVIRONMENTAL PERFORMANCE

Partnerships with our communities

On 27 August 2010, as part of its commitment to environmental performance, the Board approved the establishment of a Safety, Health and Environment Committee. The role and responsibility of the Safety, Health and Environment Committee is set out in a formal charter adopted by the Board, which is summarised in the Corporate Governance Statement in the 2015 Annual Report.

The charter reflects the Company's commitment to achieving continuous improvement in targeting high safety and environmental performance and best practice.

The fiscal year (2014– 2015) saw Philsaga continue to meet its mission and visions. All of our previous programmes and projects are progressing towards the specific goals of meeting the needs of our local stake holders. The programmes are tailored to suit the unique circumstances of our communities and run in parallel with the aims of the Local Government to address economic, educational and environmental advancement. Examples of community award presented to the Company for its community contributions are summarised below.

Photos: Supplemental feeding activity in Barangay Wasian, Women’s & Children Desk Section Staff (Municipal Police Station of Rosario) for the distribution of foods to the identified malnourished children

NAME DATE TYPE AWARDED BY Philsaga Mining Corporation

Fiscal Year 2013-2014 Best Mining Forest Contest (3rd runner-up) The Department of Environmental and Natural Resources Mines &

Geosciences Bureau Philsaga Mining Corporation 10/02/2014 Certificate of Appreciation - Adopt-an -

Estero/Water Body Program Department of Environmental and Natural Resources, Environmental Management Bureau

PMC Firefighters 11/02/2014 Plaque of Recognition (2nd Runner-up Fire Fighting Competition)

The Department of Environmental and Natural Resources Mines & Geosciences Bureau

Philsaga Mining Corporation 12/09/2014 Certificate of Recognition Labor Management Committee (initiated by DOLE, NCMB, RTWFB, ECC, &

OHS) Philsaga Mining Corporation 12/09/2014 Certificate of Compliance for Labor Relations Department of Labor & Employment- Caraga Region Office

Philsaga Mining Corporation 12/10/2014 Certificate of Recognition Lapinigan National High School

Philsaga Mining Corporation 12/ 17/2014 Certificate of Appreciation AMA Computer Learning Center

MMPRC 12/ 20/ 2014 Plaque of Recognition Barangay Wasian (Municipality of Rosario) MMPRC 12/ 20/2014 Plaque of Appreciation Boan Barangay Irrigation Development Association, Inc. (BBIDAI) Atty. Raul C. Villanueva 2/ 27/2015 Certificate of Appreciation (30th Araw ng Tambis) Barangay Tambis Philsaga Mining Corporation 2/17/ 2015 Salamat Po Award DSWD Field Office Caraga Butuan City

Philsaga Mining Corporation 3/ 19/ 2014 Plaque of Appreciation Mindanao State University

Philsaga Mining Corporation 3/ 25/2015 Plaque of Appreciation Tambis Central Elementary School

Philsaga Mining Corporation 3/ 26/2015 Certificate of Commendation Bayugan 3 National High School

Philsaga Mining Corporation 3/ 27/2015 Certificate of Commendation Tambis National High School

Philsaga Mining Corporation 3/ 28/ 2015 Plaque of Appreciation Caraga Regional Science High School-San Juan, Surigao City

Atty. Raul C. Villanueva 3/ 30/ 2015 Certificate of Appreciation Loon North Central Elementary School- Loon Bohol Philsaga Mining Corporation 3/25/2015 Plaque of Appreciation Dinuyan Elementary School- District II of Barobo

Atty. Raul C. Villanueva 5/ 20/2015 Certificate of Recognition DEPED, Rosario Central Elementary School, Rosario Agusan del Sur Philsaga Mining Corporation 5/ 26,/2015 Certificate of Appreciation Barangay Local Government Unit of Alegria

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NAME DATE TYPE AWARDED BY Atty. Raul C. Villanueva 5/ 27/2015 Certificate of Recognition Wasian Elementary School Philsaga Mining Corporation- SDMP (Social Development & Management Program)

5/18/2015 Certificate of Appreciation Bunawan Religious Organization (BRO) INC.

Philsaga Mining Corporation 6/16/2015 Certificate of Recognition

(Job and Livelihood Fair)Provice of Agusan del Sur, Public Employment Service Office, The Department of Labor & Employment & the Philippine Overseas Employment Job & Livelihood Fair

Atty. Raul C. Villanueva 7/ 16/2015 Plaque of Recognition 401st Infantry Brigade

Philsaga Mining Corporation 8/20/2015 Certificate of Recognition

Provice of Agusan del Sur, Public Employment Service Office, The Department of Labor & Employment & the Philippine Overseas Employment Job & Livelihood Fair

Philsaga Mining Corporation Child Labor-Free Establishment DSWD

PMC Firefighters 2015 Regional Fire Olympics 2015 (First Runner-up) Industrial Fire Brigade Category Caraga Regional Office - Bureau of Fire Protection

PMC Firefighters 2015 Event Winner -Rescue & Transfer Relay (Industrial Fire Brigade Category) Caraga Regional Office - Bureau of Fire Protection

Managing Risk

The Board recognises that risk oversight is a core function of the Board that serves in protecting and enhancing shareholder wealth.

The Board has approved a Risk Management Policy that outlines the Company's policies for the oversight and management of material business risks and the design, implementation and monitoring of an internal compliance and control framework. A copy of the Risk Management Policy is available on the Company’s website at www.medusamining.com.au.

The Board is ultimately responsible for the oversight and management of material business risks. However, the design and implementation of the risk management policy and the day to day management of risk is the responsibility of the Managing Director, with the assistance of senior management.

The Managing Director is responsible for reporting directly to the Board on all matters associated with risk management and in fulfilling his duties. The Managing Director has unrestricted access to all company employees, contractors and records and may obtain independent expert advice on any matters he deems appropriate.

Whilst the Board acknowledges that it is responsible for the overall internal control framework, it is also cognisant that no cost-effective internal control system will preclude all errors and irregularities.

The Company's main business risks are determined by the nature of its business activities and assets. There are numerous factors (both external and internal) that could influence the risk profile of the Company.

External risk factors that could influence the risk profile of the Company include:

• exposure to gold price;

• exchange rate fluctuations;

• geographical location;

• weather;

• political issues;

• nature of operations;

• environmental management;

Internal risk factors that could influence the risk profile of the Company include:

• operational performance;

• compliance;

• commercial dealings and relationships;

• financial control;

• information systems and technology;

• people and skills; and

• quality of management.

The Company’s risk management system is continuously developing and will evolve with the evolution and growth of the Company’s activities.

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Occupational Health and Safety

The Safety Department has established a Company-wide system of identifying, measuring, appraising and controlling performance problems that may produce accident loss.

The Safety Department conducts:

1. Safety and Skills Training for employees 2. Apprenticeship Training 3. First Aid Training 4. Mine rescue training 5. Site Inspections

During the year the following activities were undertaken:

• a comprehensive Safety Review was undertaken of the Company's operations by an external consultant (this is the fourth audit completed and is be done annually);

• continued comprehensive annual health checks and drug testing for all employees;

• expanded training activities for all underground personnel;

• first aid training for all mine employees for use at work and in the home;

• mine rescue and fire fighting teams and equipment have been upgraded with the teams participating in annual national competitions; and

• regular safety meetings that emphasise workforce participation in ensuring safety and hazard minimisation.

The 12 month Lost Time Accident Frequency Rate to 30 June 2011 was 1.63, to 30 June 2012 was 1.04, to 30 June 2013 was 0.10, to 30 June 2014 was 0.18 and to June 30 2015 was 0.25 which is below industry standards for manually intensive, narrow vein, underground mines and shows the continuing progress made in Safety during the year.

Photo: Participated on the Annual National Field Competition on First Aid and Fire Fighting

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Table III Summarising The Safety Statistics

Description

FY 2015

FY 2014

FY 2013

FY 2012

FY 2011

FY 2010

FY 2009

FY 2008

FY 2007

Lost time injuries (1) 6 7 9 6 0 1

LTAFR (2) - Philsaga 0.25 0.18 0.10 1.0 1.6 2.2 1.7 0 0.6

LTAFR (WA U/G Gold Mining Industry) - 3.1 2.8 1.6 4.4 3.5

Notes:

(1) Does not include first aid injuries

(2) Per million man-hours worked

Graph showing the safety statistics

0

1

2

3

4

5

6

7

8

9

10

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Lost time injuries

LTIFR - Philsaga

LTIFR - WA U/G Goldmining Industry

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Graph Showing Lost Incident Frequency Rate – Philsaga

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

FY 2008 -2009 FY 2009 -2010 FY 2010 -2011 FY 2011 -2012

Lost Incident Frequency Rate-Philsaga

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Photos: Joint PMC & MMPRC Community Technical Working Group

Photos: MMPRC-SDMP paid Elementary Teachers, School Guards, ALS Facilitator and Day care workers

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The Company operates a 24 hour, fully staffed and functional hospital with services available for Company personnel and their families, and other local residents.

Student vocational employment

The Company regularly provides vocational employment for student accountants, metallurgists, engineers and geologists from provincial universities and technical colleges. A number of these students have become employees of the Company after graduation.

Environmental responsibility

Environmental responsibility forms an important part of the Company's Code of Conduct. The Code of Conduct outlines the Company's commitment to appropriate and ethical corporate practices and describes how the Company expects its Directors and employees to behave in the conduct of the Company's business activities.

In accordance with the Code of Conduct, the Company:

• is fully aware of its obligations to comply with relevant statutory and regulatory requirements with respect to the environment; and

• monitors appropriately its environmental performance and is committed to ensuring proper rehabilitation is carried out on the sites where the Company has been conducting its exploration or operational activities.

One of the Company’s objectives is to undertake a baseline Carbon Footprint Analysis of the Co-O operations once the expansion of the mine and mill has been completed and operating at full capacity.

Environmental operating requirements

The Company's flagship Co-O Gold Project’s established processing facilities are subject to regular inspections by the Department of Environment and Natural Resources (“DENR”) through the Mines and Geosciences Bureau (“MGB”). The operations continue to maintain a high level of recognition for adherence to statutory requirements.

The Company through its Environmental Protection and Enhancement Program conducts environmental activities for the protection and conservation of the environment. Activities such as reforestation, enhancement, and mitigation and pollution control were among the major activities set by the company to comply with all regulation related to the environment and improve its environmental performance. Further, the company endeavours to be an environmentally and socially responsible mining company, hence adopting best mining practices from exploration to mine development to minimise environmental impacts. As part of the new Co-O Mill expansion, a detoxification plant has been constructed to ensure the tailings waste water will is benign and to maximise the recirculation of chemicals and water.

The Company's Co-O mining operation is underground thus resulting in very small surface footprint. Rehabilitation of disturbed areas around all operations is part of the Company's normal operating procedure. Water samples are taken on a monthly basis to monitor water quality in and around the operation's facilities and during each year over 1,600 samples are collected and analysed with the results submitted to the relevant authorities.

The Company has also adopted the Mining Forest, Green Philippines and Tree for Life Programmes as prescribed by the Philippines Government. The Company has its own nursery which produces local tree

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species for reforestation projects as well as the rubber tree seedlings used for the establishment of the rubber plantations.

The Co-O Gold Project operates under the terms of an Environmental Compliance Certificate (“ECC”) which was renewed by the Philippines Environmental Management Bureau (“EMB”) on 15 July 2009. An updated ECC for 2,500 tonnes per day was issued on 9 October 2012. The conditions of the updated ECC require the Company to:

(a) institute a number of commitments, mitigating measures and monitoring requirements to minimise any adverse impact of the project to the environment throughout its implementation, including:

• observing good vegetative practices, proper land use and sound soil management; • conducting an effective information, education and communication programme to inform and

educate all stakeholders, especially local residents, on the project’s mitigating measures; • rehabilitating roads with minimal land and ecological disturbance; and • establishing a reforestation and carbon sink programme to mitigate greenhouse gas emissions of the

project; • ensure that its mining and milling processing operations conform with the provisions of R.A. No, 6969

(Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990), R.A. No. 9003 (Ecological Solid Waste Management Act of 2000), R.A. No. 9275 (Philippine Clean Water Act of 2004), and R.A. No. 8749 (Philippine Clean Air Act of 1999);

• comply with the environmental management and protection requirements of the Philippine Mining Act of 1995 (RA. No. 7942) and its Revised Implementing Rules and Regulations (D A, O). No, 96-40, as amended), as well as the pertinent provisions of the Memorandum of Agreement between the EMB and Mines and Geosciences Bureau (“MGB”) executed on 16 April 1998, which include:

• submitting an Environmental Protection and Enhancement Programme with the Final Mine Rehabilitation and/or Decommissioning Plan integrated thereto, to the MGB, for approval;

• setting up a Contingent Liability and Rehabilitation Fund and Environmental Trust Fund; • maintaining the existing Mine Environmental Protection and Enhancement Office to competently

handle the environmental aspects of the project; • establishing a Mine Rehabilitation Fund Committee and Multipartite Monitoring Team; • submitting a Social Development and Management Programme; and • designating a Community Relations Officer; • ensure that the Company's contractors and subcontractors properly comply with the relevant

conditions of the ECC; • protect the headwaters and natural springs/wells within the project site that are being utilised as

sources of potable water by the community; • Continued operation and maintenance of the Philsaga Hospital; • Each of Philsaga Mining Corporation (“PMC”) and Mindanao Mineral Processing and Refining

Corporation (“MMPRC”) shall have its own Environmental and Protection and Enhancement Programme (“EPP”) and Final Mine Rehabilitation/Monitoring and/or Decommissioning Plan (‘FMRDP”) with corresponding Mine Rehabilitation and/or Decommissioning Fund; and

• Each of PMC and MMPRC shall have its own Five-Year Social Development and Management Programme (“SDMP”) with the corresponding budget allocation of 1.5% of the operating costs.

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4. EDUCATION, COMMUNITY PARTICIPATION, PROGRAMMES AND BENEFITS

COMMITMENT

The Company, through Philsaga which was established in since 2001, has established an enviable record in the local communities in which it operates. This record is acknowledged by municipal and regional governments, and at a national level.

The vision of Philsaga is:

“To see the Filipino people improve their quality of life by addressing the unmet basic needs of the people at the provincial and village levels with special emphasis on the youth and the environment, by providing scholarship to the poor and deserving students by assisting them in their livelihood and for uplifting their social and economic needs”.

It is the Company’s objective to build on this record and strengthen reciprocal relationships between the Company, Philsaga and other organisations and the communities in which it operates. EDUCATION

“Through all our education initiatives, it is pleasing to report that over 9,840 students are enrolled at the schools supported by the Company.”

Scholarships

The Company support for two scholarship programmes, which commenced in 2003, has continued strongly during the year:

• Full education scholarships currently support 41 students;

• Half scholarships supports 4 students; and

• Educational assistance supports 31 Students.

Company schools and Adopt-a-School programme

During the year, the Company managed the Philsaga High School at the mill, supported the Upper Co-O Elementary School at the Co-O Mine and continued its “adopt–a-school” programme in which 22 schools participated. Corporate sponsorship also assisted in achieving its aims.

The following were achieved:

• Supported 67 teacher’s salaries and support for training seminars for teachers to upgrade their teaching skills, as well as provision of instructional materials;

• Since commencement of the Adopt-a-School programme more than 24 classrooms have been constructed including at the Philsaga High School and the Upper Co-O Elementary School;

• In conjunction with its partner agencies, provided school supplies for students; and

• Provided two daily return bus services for high school students from remote areas to attend high school.

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Photos: Scholars during their meeting together with the MMPRC Accounting staff, and orientation of the new system in claiming their monthly allowances through pay cards, held at PHILSAGA Admin. Building.

Photos: Newly purchased School Bus for Barangay San Marcos, Bunawan. Tthis will cater for high school and college students

transportation from San Marcos to Bunawan

LIVELIHOOD PROJECTS

Rice production financing

This project has continued through the year aimed at progressively developing debt free farming communities through the provision of financing arrangements to qualified farmers. The programme is in its fifth cropping season and extends assistance to over 100 beneficiaries covering 100 hectares of rice farms.

Rice Growing

Photo: Rice Plantations

Rubber tree plantation re-afforestation

The Company provides interest free loans in the form of rubber tree seedlings and other inputs to indigenous landowners for the establishment of rubber plantations which provide income for 50-60 years from around year seven. A total of approximately 401.5 hectares have been planted with seedlings which were generated in the Company’s nurseries.

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Photo: Rubber Seedlings delivered to Barangay San Andres, Bunawan, ADS, funded by PHILSAGA

Photo: Rubber Seedling Nursery

COMMUNITY DEVELOPMENT AND ASSISTANCE PROGRAMMES

The Company continued to provide assistance with a number for community-based projects.

Teacher training

The Company continued to support teacher salaries for volunteer teachers as well as teacher training to improve teacher knowledge and skills in conjunction with the Department of Education for the fifth year.

Day care centres

Support is provided for day care centres which cater for children below six years old. Philsaga provides teacher and staff salaries, school supplies and instructional materials.

Community health

The Company provides general health and dental services to its employees and dependants and undertakes minor surgical and dental missions to nearby villages within its sphere of operation.

In addition to the 16 bed hospital at the Co-O Mine site, the Company provides a clinic at the mill site for employees and local residents.

Organic fruit tree programmes

The adoption of four sitios (or small villages) aims to provide a sustainable livelihood by planting of fruit trees suitable in the area and by encouraging the use of organic fertiliser over that of inorganic. The

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programs have the technical support of the Department of Agriculture and the Department of Trade and Industry conducts various financial seminars.

The Company’s nursery has produced over 10,000 fruit trees for distribution.

Institutional partnering

Philsaga frequently partners various local government departments such as Department of Social Work and Development, Department of Trade and Industry, Department of Agriculture and Department of Education to achieve common goals. The same goes for various indigenous cultural communities.

The Company has likewise created an informal partnership with Caraga State University by means of supporting all of its environmental and bio-diversity studies, monitoring and geo-tagging of the flora and fauna in the mill and mine site areas.

Non-government organisation partnering

Philsaga is partnering three non-government organisations involved in community assistance

• A home for abandoned or orphaned children of local indigenous people;

• an orphanage for boys aged 6 to 17 years where support is provided for the boys to develop small business skills; and

• care for the Elderly Foundation Inc. which provides comfort for residents and support staff.

These Foundations care for the abandoned or sick senior members of the community, orphaned or neglected children, children of indigenous people who have been deserted by their families and a group of talented and skilled handicapped associates.

5. MISSION AND VALUES Medusa’s Mission

Our business is producing gold in the Philippines. We strive to create growth by discovery, development and training of people.

Setting the Standards for Behaviour

The Company has a formal Code of Conduct, which outlines the Company's commitment to appropriate ethical and responsible decision making and corporate practices.

The Code of Conduct describes how the Company expects its Directors and employees to behave in the conduct of the Company's business activities.

The Company reviewed its Code of Conduct during 2015.

Values

Medusa continuously and consistently strives to balance key economic, social, environmental and ethical values at our projects. Every employee takes responsibility for their health and safety and are encouraged to work together as a team to create a workplace free of injury, illness and discrimination.

The Company provides its employees with training, education and skills to promote innovation, teamwork and accountability at work and at home. We embrace cultural diversity and form partnership with local communities and organisations, sharing their environment, traditions and values.