Portfolio

Southern Gold

Southern Gold Limited (“Southern Gold”) is a precious metals exploration and development company targeting high-grade epithermal gold-silver vein systems in the southern part of South Korea.

tenements

total tenement area

investment in Southern Gold
(subject to SAU shareholder approval)

Figure 1: Geological Map of South Korea Showing the Location of Southern Gold Projects (source: Southern Gold)

The company is listed on the Australian Securities Exchange (ticker ASX: SAU) and currently has 12 projects consisting 26 tenements with a total area of 70.6km², located in the southern and central parts of the country. Two of Southern Gold’s projects are currently at development stage and ten targets range from Resource definition drilling through to early exploration stage.

Southern Gold’s two development stage projects, the Gubong Gold Projectand Kochang Gold Project, are both held in a 50/50 joint venture (“JV”) with London AIM listed Bluebird Merchant Ventures Ltd (ticker AIM: BMV.L). Both projects consist former operating gold mines which the JV is aiming to get back into production. The proposed re-opening and development of the Kochang Mine underground workings is currently estimated to entail very modest capital costs to achieve first gold production, with Bluebird current estimate being US$2.2m, of which Southern Gold 50% share is US$1.1m. Southern Gold is currently exploring various funding options that will be non-dilutive to current shareholders.

A ‘Permit to Develop’ approval for both JV development projects was received in 4Q 2019. South Korea uses a streamlined process of application for mine plan approvals. There is a single application made that encompasses all government approvals required to carry out mining activities.

Whilst there is currently no JORC compliant Resource or Reserve statement for the two former mines the JV have a conceptual Exploration Targetof 1.2Mt to 2.3Mt ranging 6g/t – 8g/t Au (230-580Koz Au) for Gubong and an Exploration Targetof 500kt to 700kt ranging 5.0g/t to 7.0 g/t Au and 27g/t to 35 g/t Ag, for Kochang.

The highest priority of Southern Gold’s ten, 100% held, highly prospective epithermal targets consist the Beopseongpo,Deokonm, Weolyuand Neungju projects. These have all returned very high-grade gold and silver values in outcrop sampling and are being prioritised for drill testing. Southern Gold’s exploration team also maintains a dynamic pipeline of new projects.

Southern Gold’s management consists a small but highly professional team of corporate finance executives, exploration geologists and experienced mine operations people.

Further details on the technical summaries and locations of the Southern Gold projects are set out in Table 1 and Figure 1 below.

Table 1: Summaries of Southern Gold Development and Exploration Stage Projects (source: Southern Gold)
Development Projects (50% Southern Gold)

Project	Province	Number of Tenements, Total Area (km²)	Key Results, comments
Gubong Mine Development	North Jeolla	8 tenements, 22.08km²	Formerly Korea’s second largest mine. More than 120km of underground development in place. Exploration Target of 1.2Mt to 2.3Mt ranging 6g/t – 8g/t Au. Current conceptual development programme consists a pre-construction phase of dewatering the lower levels, establishing a permanent entrance to the mine and extensive sampling for both quantitative assessment and metallurgical testing programmes with a view to ascertaining the feasibility of low-cost gravity and/or vat leach gold production. The aim is to produce a modest amount of gold initially but then ramp up production with time and the benefit of cash flow. Permit to Develop approved in September 2019.
Kochang Mine Development	North Jeolla	3 tenements, 8.37km²	Mined for gold and silver, produced 110Koz Au & 5.9Moz Ag between 1961-1975. Exploration Target: 500kt to 700kt ranging 5.0g/t to 7.0 g/t Au and 27g/t to 35 g/t Ag. Significant channel sampling and easy access to the old workings have advanced the project. Metallurgical testwork has been conducted at the Mines and Geoscience Bureau and Intertek in Manila, Philippines has been undertaken to evaluate the most appropriate method of recovery of gold and silver from the Kochang ore. Planned works include establishing proper operable entrances to the mine, expand working areas and laydown sites and construct minimal infrastructure. The optimal process flows for the ores will be finalised and the design of process plant’s will be drawn up. Permit to Develop approved in December 2019.

Exploration Projects (100% Southern Gold)

Project	Province	Number of Tenements, Total Area (km²)	Key Results, comments
Weolyu	Weolyu	2 tenements, 5.54km²	Weolyu North is a historical small scale Ag-Au-Ge mine. Weolyu South is newly discovered zone of Au Ag low sulphidation epithermal quartz veins at the top of steep ridge to the south of former mine. Intermediate- to low-sulphidation epithermal systems, geology similar to Sumitomo Metal Mining’s high-grade gold Hishikari Mine in Japan. Five major vein systems identified, 1km lateral strike length, depth of at least 300m Channel samples: 0.4m@32.8 g/t Au & 764 g/t Ag, 0.45m@30.0 g/t Au & 280 g/t Ag Summit Vein Zone Drill hole WUDD006: 2.47m @ 2.36g/t Au & 37g/t Ag from 222.4m and 0.3m @ 21.1g/t Au & 49g/t Ag from 231.4m. Moonlight Vein Drill hole WUDD007: 3.58m @ 4.80g/t Au & 129g/t Ag from 152.9m and 0.92m @ 13.55g/t Au & 447g/t Ag from 165.7m. Resource Drilling with Maiden JORC Compliant Resource planned for 2^{nd^{half 2020}}
Beopseongpo	South Jeolla	2 tenements, 5.60km²	Low-sulphidation vein-breccia epithermal system. Five vein zones identified, vein segments 200m-500m in length, with widths >20m. Combined vein strike length estimated to be more than 2,750m. Highest assays from rock chip sample were 31.9 g/t Au & 19 g/t Ag from Golden Palm. First pass drilling completed at Hand of Faith and Lotus North Drilling currently extends over only 5% of total mapped strike length. Follow-up drilling planned for 2020.
Deokon	North Jeolla	2 tenements, 5.58km²	Geology similar to Weolyu; intermediate to low-sulphidation epithermal vein systems. Four major precious metal mineralised zones identified over several sq.km; district scale. Two identified veined zones, “Bonanza” and “Thorn” are 4m-20m wide 500m apart with interpreted continuity and open along strike. Golden Surprise, newly identified, shows bonanza grades in outcrop, with peak grades of 32.4g/t Au & 1,095g/t Ag in outcrop and 53.9g/t Au & 6,240g/t Ag in float. First pass scout drilling completed at Bonanza Vein Zone. The six hole 456m scout drill programme under the Bonanza zone peak outcrop, returned peak results of 0.15 meters (0.11m true width) at 4.59 g/t Au and 708 g/t Ag from 42.35m. Drilling currently extends over only 5% of total mapped strike length. Follow-up drilling planned for 2020 at Shin Adit and Thorn Zone systems.
Neungju	South Jeolla	1 tenement, 2.81km²	Low-sulphidation epithermal vein system. Five major vein systems identified, identified widths 2m-100m with combined strike length of 1 km. Surface sampling peak results to date 31.8 g/t Au & 6.6 g/t Ag in outcrop and 13.4 g/t Au & 13.4 g/t Ag in float. Mineralisation conceptually open in both strike directions, never drilled. First-pass drilling planned in 2020.

Early Stage Exploration Projects

Project	Province	Number of Tenements, Total Area (km²)	Key Results, comments
Aphae	South Jeolla	2 tenements, 5.62km²	High-sulphidation gold-copper system. First-pass drilling planned.
Hampyeong	South Jeolla	1 tenement, 2.81km²	Low-sulphidation epithermal system. Peak rock chip assays of 13.4 g/t Au at the Nabi Vein, and 15 g/t Au at A’Cha Scout drilling, July 2018; all 3 holes intersected quartz breccia and anomalous gold.
Dokcheon	South Jeolla	1 tenement, 2.82km²	Early stage target with conceptual targets.
Taechang	Chung-cheong	2 tenements, 3.98km²	Former operating gold mine, returned to Southern Gold by joint venture partner, BMV. Multiple veins, hosted within Gyeonggi Massif, (same as Gubong), up to 1.7km strike. Underground face samples show 30-50 g/t Au and up to 102 g/t Au

South Korea Overview

South Korea, officially the Republic of Korea, is a stable first-world jurisdiction and industrial powerhouse boasting the 11th largest economy in the world. It has a highly developed transport, power and communications infrastructure with a high degree of economic freedom. South Korea was ranked 5th in the 2018 Ease of Doing Business Indexand 29th in the 2019 Index of Economic Freedoms.

Southern Gold reports they have found South Korea’s mining law to be straightforward and transparent, with no mining royalties, no government free carry, and no licence fees or security bonds. Southern Gold enjoys a good relationship with the relevant authorities.

Investment Overview

On 23 March 2020, Southern Gold announced a revised share subscription offer for 40,000,000 Southern Gold Ltd ordinary shares at A$0.10 to raise A$4 million before costs, of which Metal Tiger subscribed for 22,000,000 shares for A$2.2 million. The revised placement replaced the proposed deal announced 11 February 2020, in light of economic developments associated with the COVID-19 pandemic.

The Metal Tiger investment follows several months of due diligence and negotiations and makes the company a cornerstone investor in Southern Gold. The placement price was at a 16% discount to the 15-day VWAP share price.

As part of the terms of Metal Tiger’s investment, subject to all necessary approvals, Terry Grammer, Non-Executive Director of Metal Tiger, will join the Board of Southern Gold, Metal Tiger has the right to nominate one director to the board for so long as it holds at least a 10% interest in Southern Gold. Following this investment Metal Tiger will hold a 17.1% interest in Southern Gold. As at 30 March 2020, Metal Tiger held 4.56% but subject to shareholder approval of the second tranche of the Southern Gold placing Metal Tiger will end up holding 17.1% of the issued share capital of Southern Gold.

Post transaction, Southern Gold will have a cash balance of approximately A$5.5M which is sufficient to support a minimum 12 months of exploration work including planned diamond drilling of multiple projects.