Quarterly Activities Report - 30 June 2017

31 July 2017

Quarterly Activities Report 30 June 2017

Dear fellow Southern Gold shareholder,

Your company has entered the new 2017-18 financial year after a strong finishing quarter and a 12 month performance rating arguably second to none among our junior Australian gold exploration and mining peers.

Strategically, the outlook for Southern Gold over the next 12 months is equally as strong, including our potential move to underground gold mining at Cannon in Western Australia where we recorded robust cash generation from our maiden open-pit mining operations.

Few junior miners in the Australian resources sector have delivered such levels of cash, a maiden dividend, and an advanced portfolio of near-term development and mining opportunities over such a short timeframe.

Our year end highlights to June 30, 2017 include:

  • Significant cash flow, with more cash to come and actively developing other sources of cash flow from our expanding gold project portfolio;
  • Drilling at multiple very prospective exploration projects, several with kilometre scale mineralisation trends; and
  • Maintaining a very tight capital structure and paying a dividend of 3c per share in cash, or shares under our Dividend Reinvestment Plan.

As a result, Southern Gold now stands apart from the crowd of junior explorers. We are cashed up, have a clean balance sheet, have only 47 million ordinary shares on issue, are actively developing projects with the potential to generate more cash and are very active in the exploration space. Your Board and management team have effectively positioned Southern Gold such that we are organically funding our exploration by monetising assets in our portfolio. And we have done it using the unique Cannon model of financing and development, where we minimised the need for dilutive capital raisings and generated significant funds for the Company.

Two and a half years ago, Southern Gold had a market capitalisation of $4 million. Today, it has generated several multiples of this in cash, made three corporate acquisitions and transacted a significantly value-releasing deal with London’s Bluebird Merchant Ventures on a portion of one of the acquisitions. We are generating a healthy return for our shareholders from each of these acquisitions, effectively providing a free option on development and discovery in the case of the South Korean deal.

Total Shareholder Return in each of the past two financial years has been around 35% per annum on a pre-tax basis, the past financial year including a 3c per share unfranked dividend.

We now stand at an important juncture for the company. We are working hard in two flagship jurisdictions, Australia and South Korea, to deliver new gold production and cash flow and maintain the organic funding model. At the same time, we are using this organic funding to look for world class gold deposits that will truly transform the company.

Our scheduled drilling campaigns over the coming 12 months offer substantial exploration upside.

Thank you for your support over the past year and I invite you to join our promising journey over 2017-2018.

Simon Mitchell

Managing Director

Key Points for the June Quarter 2017

  • Cash flow continues: $4.0m received in June quarter, taking the total received to date of $11.5 million from the Cannon open pit in Kalgoorlie, WA;
  • Maiden dividend declared: A special unfranked dividend of 3c per share cash, or equivalent in shares, was declared for shareholders registered on 4 July 2017;
  • Drilling results have started to come in: First results from drilling at Glandore Project, WA, and pending on successful structural target intercept at Weolyu South Project, SK;
  • Multi-kilometre scale mineralised systems being defined in South Korea and Australia: Fieldwork in first half of current calendar year has defined significant systems at Weolyu, Kochang and Lake Consols (Glandore, WA).


  • Maiden special unfranked dividend of 3c per share cash or equivalent in shares under the Dividend Reinvestment Plan (DRP) declared during the quarter with record date on 4 July 2017.
  • Cash position at quarter end was $5.4 million.
  • Final cash payment based on the profit share after completion of the Cannon open pit is expected in August 2017.
  • A placement to entity controlled by Colin Patterson, CEO of Bluebird Merchant Ventures Ltd. The placement was for $250,000, or 647,668 Southern Gold shares at $0.386 per share, a 35% premium at the time of the original agreement execution in March 2017.
  • Quarterly production of 4,388oz Au (4koz was forecast last quarter) from the ninth processing campaign with metallurgical recovery averaging 91%.
  • RC drilling programme designed to firm up the grade and distribution of the Cannon resource was completed post quarter with results pending.

Cannon Gold Mine

  • Quarterly production of 4,388oz Au (4koz was forecast last quarter) from the ninth processing campaign with metallurgical recovery averaging 91%.
  • RC drilling programme designed to firm up the grade and distribution of the Cannon resource was completed post quarter with results pending.

Exploration – South Korea

  • Diamond drilling at Weolyu South has intersected a broad zone of stockwork and vein breccia from 168m to 179m (11m downhole width), including 169.13m to 174.74m (5.61m downhole width) of epithermal quartz vein and vein breccia (Photo 1). Drilling of hole continues and assays pending.
  • Field work by mapping experts at Weolyu and Kochang has identified multi-kilometer scale mineralised systems and augmented the overall project prospectivity significantly.

Photo 1: Zone of epithermal quartz veining intercepted in WUDD005 (3rd drill hole). Assays pending and drill hole still in progress.

Exploration – Australia

  • With the Aboriginal heritage survey completed a Section 18 submission was made to the WA Government covering Southern Gold’s proposed programme at Glandore.
  • Diamond drilling at Glandore returned a best result of 18.2m @ 3.7g/t Au from 4.9m including 3m @ 6.84g/t Au from 20.1m.
  • Assessment of open pit mining scenarios at Doughnut Jimmy and Lavaeolus is currently in process with the potential for small but high grade deposits based on a new JORC resource to be defined over the next quarter.
  • Surface mapping and sampling in the Lake Consols region has identified a significant mineralised trend over 1km in length.

To read the full report please download the pdf document.