BMV Joint Venture Project

Southern Gold and Bluebird Merchant Ventures (Bluebird) each hold a 50 % equity interest in Singaporean company Gubong Project JV Co Ltd, which in turn holds 100 % of South Korean company Gubong Project Co Ltd, which holds the Gubong gold development project. Joint Venture costs are shared 50/50. A similar corporate joint venture arrangement is in place for the Kochang Project which is currently still in the approval process for its Permit to Develop.

Bluebird is the operator of the Joint Venture and activities at Gubong and Kochang (Figure 1) including project planning for refurbishment and location and survey of adits and successful entry. Planned works over the next quarter include establishing proper operable entrances to both mines, expand working areas and laydown sites and construct/source minimal infrastructure. The optimal process flows for the two ores will be finalised and the design of plant/s will be drawn up.

Gubong

Introduction

The Gubong Project consists of a number of historical underground mines within approximately 20 km of each other (Figure 2), including the Gubong Mine area itself, which is host to numerous historical mines that have exploited multiple gold-bearing orogenic quartz veins over 5km along strike and several kilometres across strike.

History

Gubong was South Korea’s largest gold producer from 1930-1943, during the Japanese occupation, and still retains a substantial remnant reef between mined blocks and excellent exploration potential. Mine data indicates good potential for mine re-commissioning and the possibility of relatively early cash flow.

The immediate Gubong project area hosts five historical underground mines with the largest being the Gubong mine which exploited high grade quartz veins (Vein 6 being the main lode) hosted in gneissic granite and mined to a vertical depth of approximately 1500 m.

Historic underground sampling results of the deeper levels of Vein 6 gives an arithmetic uncut average of 30.6 g/t gold from 146 values. Exploratory drill core, from one of five holes drilled below the now abandoned mine workings, returned 27.9 g/t gold and 25 g/t silver over 1.6 metres downhole from 845.2 metres. This demonstration of the persistence with depth of the most developed mineralised structure supports the prospectivity of the property for auriferous shoots with considerable depth continuity.

Interestingly Vein No 6, the main vein exploited at Gubong, was found as a blind vein in the hanging wall during mine development work on the other veins. This suggests substantial gold resources may be found in parallel vein systems that do not outcrop in the area. This has important implications for exploration methods when following up historically mined areas – veins may have been missed by previous workers and more modern exploration techniques may help to uncover them.


Figure 1: South Gold project Locations in South Korea including Bluebird JV Projects.

In addition to the Gubong Mine, the Gubong District hosts a number of brownfields exploration opportunities that, if resources were proven up, would be within trucking distance of a potential Gubong Mine central milling facility.

Recent Exploration

Proof of concept drilling at Gubong in 2015 hit relatively shallow orogenic quartz veining in most drill holes near to the modelled veins/structures, including a higher grade intercept of 0.4 m @ 5.18 g/t Au at Danbong (approximately 1 km strike length of vein with no previous production/mining, thus preserving near-surface potential). The ability to engage local drilling contractors, secure land access (including on farms), model the historical data as available, and hit veining, including mineralisation, shows that the drilling program was a success. Furthermore, surface rock chip samples taken in 2015 confirm high-grade veining exists (peak result of 25.4 g/t Au).

Foreign Estimates of Resources: Gubong District Exploration Target Range

Gubong has an exploration target range already established for Vein 6 extension through work undertaken by Southern Gold, as follows:

  • Lower Range Exploration Target - 1.21 million tonnes at 6 g/t gold (230,000 oz Au);
  • Upper Range Exploration Target - 2.28 million tonnes at 8 g/t gold (580,000 oz Au).

The exploration carried out to-date is insufficient to estimate a resource and it is uncertain whether further exploration will result in the estimation of a resource.

This project has the potential to be advanced relatively quickly with the right backing on underground mine execution to allow access to historically worked drives and crosscuts. The district has also not seen systematic modern exploration and several quartz veins remain to be defined: e.g. the Guryeong and Bongam veins.


Gubong mining district showing historical workings

Figure 2: Gubong mining district showing historical workings.

Bluebird Metallurgical Testwork

Bluebird metallurgical testing carried out on a Gubong oxide gold ore sample obtained from the upper levels of the old workings used a simple process known as vat leaching that yielded recoveries of more than 90%.

The evaluation considered conventional leach, carbon-in-leach (‘CIL’) and carbon-in-pulp (‘CIP’) processes that are considered suitable for this type of gold mineralisation. The preliminary test work indicated the vat leach system would provide equivalent recoveries to the other methods but at a lower capital and operating cost. Vat leaching is a well-known and cost-effective processing route, whereby crushed or uncrushed ore is placed in a series of containments known as vats and irrigated with a solution to recover the desired metal into solution. The process may be highly mechanised, reducing the cost of labour and there is no requirement for milling (reduction of ore in size to a powder) thereby greatly reducing power consumption.

Southern Gold has been advised by Bluebird, that it has received confirmation that the Permit to Develop for the Gubong Gold Mine, previously announced as having been approved by the Ministry of Trade, Industry and Energy (MOTIE), has now been endorsed by the Cheongyang Provincial Government. Mine development in South Korea is formally approved through a process run by the provincial government.

This marks the next important milestone in the project development approval process and is subject to several conditions largely in relation to physical development requirements regarding safety and environmental management.


Kochang

Introduction

The Kochang Project consists of a number of historical mines, within approximately 1 km of each other, which have exploited mesothermal style gold-silver-base metal bearing quartz veins. These historical mines are known as: Kochang Gold Mine, Kochang Silver Mine, SanPo Gold Mine (KCNW), and Kochang East (KCE) (Figure 2).


Surface projection of historic Kochang mining along with Bluebird underground sampling and surface sampling

Figure 2: Surface projection of historic Kochang mining along with Bluebird underground sampling and surface sampling.

At Kochang, the known vein system extends over a strike length of some two kilometres. The unexplored gap of 580 metres along strike between the Kochang Gold Mine and the Kochang Silver Mine presents an immediate target to be included in future assessments.

Recent Exploration

Underground sampling of the Kochang gold workings in 1990 (Figure 3) gave a length weighted average value of 17.05 g/t gold over 0.2 metres from 104 samples. In addition, there is also evidence for the presence of high-grade ore shoots.


Historic Kochang Targets

Figure 3: Historic Kochang Targets include potential down plunge of high-grade zones and untested 700 m gap between the “Kochang Gold Mine” and the “Kochang Silver Mine”. Samples indicated in the figure are historical in nature and do not represent the recent Bluebird underground sampling program.

Although vein widths are relatively narrow at Kochang, gold grades and geological context is encouraging and Southern Gold can see the potential for additional higher grade shoots beneath the current mine workings. There are also some indications that more than one vein has been mined in the system and that other ‘blind’ veins may be found through reconnaissance mapping and drilling (Figure 4).


Figure 4: Stylised cross section of the historical development levels with geological interpretation of the multiple vein system and geological structural mapping along the 245mRL Access Drive.

Bluebird Underground Channel Sampling

Bluebird has now completed its preliminary program. This sampling verifies the anomalous nature of the gold and silver mineralisation at the Kochang Gold Mine and the potential for further work to reopen the mine and to explore for depth and repeat vein systems as was identified by surface geological mapping.

Table 1 below highlights the best channel sample intercepts returned from this recent round of sampling at Kochang. A total of 425 channel samples were taken with an additional 100 grab samples taken from in situ stockpiles within accessible stopes and level drives. The channel samples shown are ranked by gold >3 gram/meters to normalize between difference sample widths of the vein taken within the drives.

Table 1. Significant channel samples >3.0 gram metres. Korean 2000 TM co-ordinate system used.

Sample ID

Easting

Northing

Elevation

Length(m)

Au (g/t)

Ag (g/t)

Au (gm)

KRD600156 

287996.57 

239502.21 

246.44 

1.17 

15.6 

64 

18.25 

KRD600334 

288025.76 

239602.27 

247.76 

0.24 

65.8 

170 

15.79 

KRD600277 

288066.81 

239668.52 

245.41 

0.33 

44.5 

42 

14.69 

KRD600276 

288068.46 

239667.68 

247.10 

0.50 

29.0 

59 

14.50 

KRD600490 

288112.82 

239768.39 

245.41 

0.18 

69.2 

80 

12.46 

KRD600358 

288006.47 

239516.82 

246.08 

0.38 

23.5 

67 

8.93 

KRD600294 

288053.15 

239631.68 

247.24 

0.73 

11.5 

52 

8.40 

KRD600349 

288014.00 

239530.40 

246.12 

0.37 

19.9 

130 

7.36 

KRD600135 

288045.82 

239521.83 

248.06 

0.38 

18.9 

49 

7.18 

KRD600348 

288015.18 

239530.14 

247.79 

0.42 

16.8 

120 

7.06 

KRD600297 

288077.54 

239634.45 

247.36 

0.68 

9.4 

52 

6.40 

KRD600354 

288011.02 

239519.61 

247.76 

1.30 

4.6 

23 

6.01 

KRD600159 

287982.41 

239495.38 

247.54 

0.65 

9.2 

24 

5.98 

KRD600484 

288097.35 

239780.19 

247.92 

0.58 

10.1 

24 

5.86 

KRD600109 

288115.35 

239646.41 

245.50 

1.05 

5.3 

59 

5.57 

KRD600494 

288115.19 

239771.81 

247.12 

0.21 

26.2 

91 

5.50 

KRD600186 

287942.86 

239461.07 

249.77 

0.48 

11.3 

18 

5.42 

KRD600355 

288009.49 

239520.80 

246.68 

0.63 

8.1 

140 

5.12 

KRD600040 

288166.44 

239696.87 

264.81 

0.94 

5.2 

25 

4.88 

KRD600046 

288169.19 

239669.80 

264.75 

0.95 

5.0 

33 

4.76 

KRD600485 

288100.00 

239788.37 

245.86 

0.80 

5.9 

14 

4.70 

KRD600343 

288020.38 

239547.87 

247.74 

0.16 

27.2 

180 

4.35 

KRD600045 

288168.73 

239681.93 

265.40 

1.33 

3.1 

14 

4.14 

KRD600359 

288002.08 

239512.36 

246.42 

0.46 

8.7 

32 

3.98 

KRD600473 

288159.73 

239746.74 

245.84 

0.28 

13.8 

130 

3.86 

KRD600167 

287970.88 

239485.25 

248.53 

1.00 

3.7 

10 

3.65 

KRD600039 

288166.40 

239701.15 

264.29 

1.32 

2.5 

20 

3.33 

The average width of all the veins sampled was 0.42m, but ranged from 0.1 m to 1.4 m. The veining predominantly was sub-vertical but did vary along strike to more moderate dips. The veining and vein breccia are clearly observed in the drives and historical mining has developed along three subparallel structures.

Future Plans

Bluebird is the operator of the Joint Venture and activities at Gubong and Kochang including project planning for refurbishment and location and survey of adits and successful entry. Planned works over the next quarter include establishing proper operable entrances to both mines, expand working areas and laydown sites and construct/source minimal infrastructure. The optimal process flows for the two ores will be finalised and the design of plant/s will be drawn up.

At Gubong, Bluebird will now present this approval document to the local County government prior to initiating any site works, for which County government approval is required. From a practical point of view, the approval is now in hand and allows for the next stage of development works to begin, subject to presentation of these activities to local community members.

At the Kochang Project, the ‘Permit to Develop’ is still in process, pending review of supplementary documents required to be submitted during the quarter.