The Philippine unit of Australian firm Medusa Mining Ltd. said it had started development of a newly discovered high-grade vein at the Co-O gold mine in the southern province of Surigao del Sur.

Geoff Davis, managing director of Philsaga Mining Corp., said in a statement that the vein dubbed Great Hamish (GHV) was estimated to be between 600 meters and 650 meters long.

Davis said Philsaga started development of the GHV on two levels, samples from which were found to contain up to 39.79 grams of gold per ton of earth and 92 g/t gold.

Each of these, generically called Level 2 and Level 3, have sublevels from which samples showed contents of 33.72 g/t gold and 70.09 g/t gold, respectively.

David said Philsaga was continuing drilling at Co-O using four surface rigs and two underground rigs.

This comes in the wake of an announcement that Medusa Mining issued last August, saying its mining inventory and ore reserve estimate for the Co-O mine put the probable reserve at 249,000 ounces of gold.

The company said the amount was derived from an estimate of 721,000 ton of ore at a grade of 10.77 g/t gold.

Medusa Mining has been on track with its first-phase expansion activities at Co-O, which were expected to triple by late 2009 the mine’s yearly output to 60,000 ounces of gold.

This was expected to increase output from an annualized 20,000 ounces in the first quarter, through 40,000 ounces in the second half of this year to 50,000 ounces in the first half of 2009.