for personal use only - asx · cannon deposit to the regional road system, continue to progress...

Quarterly Activities Report

Period Ending 31 March 2014

BULONG PROJECT, WA

Cannon Gold Resource – Improved Financial Outcomes

� Optimisation of 2013 Pre-Feasibility Study on the Cannon Gold

Development delivered a number of positive outcomes during the

quarter including:

o A reduction in forecast C1 cash operating costs to A$964

per ounce;

o Improved economics with forecast A$12.4M free surplus

cash flow at a gold price of A$1,400 per ounce (current

spot price = A$1,429 per ounce).

� Enhancements flow from discussions with contractors, industry-

wide cost reductions and optimisation of haulage routes for the

proposed toll-treatment operation at Cannon.

Regional Exploration

� Permit of work approvals received for follow up drilling

programmes of Tier 1 gold targets.

� Re-evaluation of historical nickel intersections highlights the

potential for “Kambalda-style” mineralisation within the Bulong

Project area.

� Primary nickel sulphide potential highlighted along a 14 km strike

length of the Bulong Ultramafic Complex held by Southern Gold

Ltd.

CORPORATE

Subsequent to the end of the March quarter Southern Gold received

$276k for a Research and Development claim and a further $100k from

sale of Trafford Resources Ltd shares. With cash at the end of the quarter

equal to $479k Southern Gold’s current cash position at 30 April is $855k.

ASX Code: SAU

Issued Shares: 346M

ABN: 30 107 424 519

Directors

Greg Boulton AM

Nanette Anderson

Michael Billing

David Turvey

Top Shareholders

Silverlake Resources Ltd 11.22%

G B Branch 7.03%

JP Morgan Nominees 4.49%

National Nominees 3.04%

Head Office

229 Greenhill Road

Dulwich SA 5065

Telephone: (08) 8368 8888

Facsimile: (08) 8431 5619

[email protected]

www.southerngold.com.au

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OVERVIEW

Development

During the March quarter Southern Gold was pleased to announce the advancement of pre-

development activities on the Cannon Gold resource (Bulong Gold Project, WA) (Figure1) utilising the

recent optimisation results of the Pre-Feasibility Study (PFS)(ASX announcements 9 August 2013 and 13

February 2014).

The PFS outlined an open pit and underground development strategy that delivers a positive economic

outcome. It demonstrated the potential for Southern Gold to commence its first gold mining operation

and generate cash flow from ore treated through one of a number of third party toll-treatment plants in

the district (Figure 1).

The key results from the optimisation of the PFS showed a reduction of the operating costs to A$964/oz.

Based on the current mine plan and the reduction in the cost inputs, there is also a significant impact on

the forecast free surplus cash flow from A$8.02 million to an estimated A$12.4 million, as set out in

Table 1 below.

The forecast free surplus cash flow estimates in the following table are calculated at several nominal

gold price, after infrastructure and operating costs, but before financing costs.

Table 1 – Forecast Free Surplus Cash Flow

Item Units

Revised Costs

Scenario 1

A$1,350/oz Au

Revised Costs

Base Case

A$1,400/oz Au

Revised Costs

Scenario 2

A$1,500/oz Au

Mine Life Months 36 36 36

Mined Ounces1 oz Au 68,200 68,200 68,200

Recovery (ave) % 92 92 92

Operating Cost (C1) A$/oz 964 964 964

WA State Royalty2 % 2.5 2.5 2.5

Free surplus cash flow 3 A$M 9.3 12.4 18.5

Note 1: Mined ounces and grade calculated, based on cut-off grade from $1400/oz base case scenario.

Note 2: WA State Royalty of 2.5% is applied to all ounces produced after the first 2,500 oz produced in each financial year.

Note 3: Finance charges will apply once funding options have been finalised.

Exploration

Exploration work for the quarter focused on refining the regional structural models developed for both

Bulong and Cowarna. More recently work has been extended to analyse the non-gold datasets for the

Bulong area. This latter work has delivered positive results with the identification of favourable

stratigraphy on the eastern margin of the Bulong Ultramafic Complex with the potential to host nickel

sulphides within the Bulong Project area.

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PRE-DEVELOPMENT ACTIVITIES

The Cannon Pre-Feasibility Study (PFS) demonstrates a solid base case gold operation based on mining

the Cannon Gold resource (Table 2). The resource is located within the company’s 100% owned Mining

Lease (M25/333), 30km south east of Kalgoorlie in WA (Figure 1).

The principal focus during the quarter was the advancement of discussions with prospective milling

partners and developing applicable financing scenarios that will create the foundation for the successful

mine development of the Cannon Gold Resource.

In parallel with these activities, environmental permitting documentation was finalised. Vegetation and

fauna surveys for the haul road and closure plan are scheduled to be completed in the upcoming

quarter.

Figure 1. Bulong Gold Project: located 30km east of Kalgoorlie, WA. Map shows the proximity of

Southern Gold’s tenements to neighbouring tenements, held by companies with market

capitalisations greater than $70m. It also shows the distance to a number of nearby gold

processing facilities.

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Table 2. Bulong Gold Project: Cannon Mineral Resource Estimate (1.0g/t Au Cut-off)(1), (2)

Deposit &

Weathering

Type

Indicated Inferred Total

Tonnes

t

Au

g/t

Au

Ounces

Tonnes

t

Au

g/t

Au

Ounces

Tonnes

t

Au

g/t

Au

Ounces

Cannon

Oxide 8,000 3.0 800 1,500 2.4 100 9,500 2.9 900

Transitional 137,600 3.1 13,900 34,100 2.6 2,900 171,700 3.0 16,800

Fresh 573,500 4.3 78,500 57,500 2.3 4,200 631,000 4.1 82,800

Total: 719,100 4.0 93,200 93,000 2.4 7,200 812,200 3.9 100,400

Note (1): Rounding errors affect totals

Note (2): Source - Cannon Mineral Resource JORC Statement, ASX 31/1/2014

Following recent detailed discussions with mining and transport contractors and processing operators,

Southern has been able to further refine operating costs and optimise a number of parameters,

including alternative haulage routes. The results of this work have significantly strengthened project

economics.

The combined outcome of these positive changes to the Project’s economics has the potential to

increase the pre-financing cash flow from $8.02M to over $12.3M at a gold price of A$1,400/oz.

Permitting Progress

Significant progress was made during the quarter towards finalising the documentation required for

gaining environmental approvals and operating permits:

• The Mining Proposal, Environmental Management Plan, and applications for a Vegetation Clearing

Permit were completed and their submission is scheduled once final fauna and flora surveys have

been completed. These surveys are required for the finalisation of the Closure Plan.

• Post the end of the quarter, the Company was advised of the granting of the permit to operate a

Prescribed Premises.

• Applications for Miscellaneous Licences, required to enable haul road construction from the

Cannon deposit to the regional road system, continue to progress through the approval process.

Development of the Cannon Gold Resource was due to commence by mid 2014, however this timetable

may be extended to accommodate the completion of toll treatment and finance arrangements, and

regulatory permitting timetables.

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EXPLORATION

The reduction in field related activities has enabled a more detailed evaluation of the regional settings

of both the Bulong and Cowarna Projects. The work undertaken during the quarter included:

• refinement of structural models and stratigraphic correlation to aid the predictive modelling of

gold mineralisation within both the Bulong and Cowarna Project areas; and

• re-assessment of the potential for the Bulong Project to host significant accumulations of nickel

sulphides. This work, summarised below, has resulted in the identification of a number of key

areas within the Bulong Project which are believed to possess similar characteristics to proven

nickel producing areas in Western Australia such as Kambalda and Lake Johnston.

Bulong Nickel Sulphide Potential

The Bulong Project area covers a considerable portion of the Bulong Mafic-Ultramafic Complex, where

substantial nickel laterite resources developed over komatiites have been identified by Heron Resources

(see Heron Resources ASX release, 18/10/2013 Kalgoorlie Nickel Project Updated Mineral Resource).

SAU’s Bulong Project was originally developed on the basis of its nickel sulphide prospectivity, with

auger soil sampling, ground electromagnetic surveying (EM), drilling and subsequent downhole EM

surveys undertaken prior to the discovery of the Cannon Gold resource. The discovery of the Cannon

Gold deposit directed attention away from this nickel-related exploration and consequently the nickel

sulphide potential over substantial portions of the Bulong Complex remains largely untested by modern

exploration methods.

Prior to focussing on the gold potential of the Bulong Project, the Company identified komatiite-hosted

nickel sulphides in 2007 at the “Euston prospect”. The intersections are summarised in Table 3.

Table 3: Significant Assay results for Euston Nickel Sulphide Prospect RC Drilling

Drillhole From

(m)

To

(m)

Interval

(m)

Ni

(%)

S

(%)

BSRC004 52 54 2 2.07 2.73

and 56 58 2 1.7 2.17

BSRCD009 245 249 4 0.67 2.87

and 323 325 2 0.58 1.65

and 327 329.3 2.3 0.52 1.00

BSRC035 61 62 1 1.44 1.52

BSRC038 117 120 3 0.54 1.09

BSRC041 140 142 2 2.44 2.84

and 143 144 2 1.56 1.87

Note: BSRCD009 ended in mineralisation at 329.3m.

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A reinterpretation of the geological setting of the Euston mineralisation in the March quarter coupled

with sub-audio magnetic (SAM) imagery generated in 2013, demonstrates that the localised thickening

in komatiites coincides with the nickel sulphide intersections in the same area (Figure2).

This, and the interpretation that BSRCD009 may have intercepted a lower channelized flow with its

high-magnetic surface expression to the NE of Figure 2, implies that the previously interpreted basal

contact of the original discovery (Figure 3) may in fact be higher in the komatiite sequence. If as is seen

at Kambalda, where sulphides typically occur at the base of the lowermost channelized flow unit (Brand,

1999), then even greater potential may exist in the lower mineralised channel identified by BSRCD009.

This corresponds with the much less explored area to the SE of the BSRCD009 collar (Figure 2).

Figure 2: Euston Ni sulphide holes (>0.5% Ni with corresponding >1% S) coincident with localised

thickening identified on SAM Total Magnetic Intensity (Reduced to Pole). BSRCD009

intercepts are below the depth of SAM penetration but the up-dip expression is interpreted

at the single high-magnetic anomaly in the NE. Section line A-A’ shown in Figure 3.

Note: drill holes mapped to the east and west of the Euston target, were drilled to test gold anomalies

and were not follow up drill programs testing extensions to the intersected nickel mineralisation.

0 100m

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Figure 3: Section line A-A’ shown in Figure 2, shows the potential nickel sulphide zones up-dip and

down-dip of the mineralisation intersected in BSRC041.

A petrological study (Pontifex 2007) identified the nickel sulphide minerals violarite and pentlandite in

polished thin sections of drill cuttings from BSRC004.

The nickel sulphide prospectivity of the Bulong Project is further enhanced with the recognition of

extensive zones of elevated Ni:Cr+Cu:Zn geochemistry (“Kambalda Ratio”, Grey & Noble, 2007) within

the mafic-ultramafic stratigraphy adjacent to the Goddard Fault (Figure 4). This relationship can be

traced for at least 14km along the strike of the Goddard Fault under SAU-controlled tenure and suggests

the Goddard fault is a possible conduit for nickel sulphide-enriched komatiites (“Kambalda style”

mineralisation) and/or a mechanism for later remobilisation of disseminated sulphides (similar to the

Maggie Hays and Emily Ann deposits, Lake Johnson).

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Figure 4: Elevated Kambalda Ratio (Ni:Cr+Cu:Zn) values showing strong affinity with the Goddard Fault

(Base image: Regional Aeromagnetics (TMI reduced to pole)). Bulong East JV boundary (green)

0 2.5km

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Southern Gold’s primary focus is to unlock the value of the Cannon Gold deposit and continue to build

its gold resource base by developing its Tier 1 gold targets. Permits of work have been granted over two

of these Tier 1 targets that are now drill ready.

The recent exploration work relating to the nickel prospectivity of the Bulong project will be assessed

and targets will be ranked in relation to Southern’s current Tier 2 and Tier 3 gold prospects. With the

planned development of the Cannon Deposit to commence in 2014, the key objective is to generate an

early cash flow from a toll treatment operation. This will pave the way for Southern Gold to

recommence its exploration programmes on these Tier 2 and 3 targets.

CORPORATE

Further cost reductions were made during the March quarter with administration overheads reduced

further to $246k, which includes ~$45k expenditure by Mekong Minerals Ltd in Cambodia. Southern

Gold’s average monthly administration expenditure was reduced to ~$67k/month during the quarter.

Subsequent to the end of the March quarter Southern Gold received $276k for a Research and

Development claim and a further $100k from the sale of Trafford Resources Ltd shares. With cash at

the end of the quarter equal to $479k Southern Gold’s current cash position at 30 April is $855k.

CONTACT

For further information contact:

Nanette Anderson

Managing Director

PO Box 255 Ph: 08 8368 8888

Kent Town 5071 Fx: 08 8431 5619

South Australia www.southerngold.com.au

Competent Person’s Statements

The information in this report that relates to Exploration Results has been compiled under the supervision of Mr. Ian Blucher

(MAusIMM). Mr Blucher, who is a full time employees of Southern Gold Limited and a Member of the Australian Institute of

Mining and Metallurgy, has sufficient experience which is relevant to the style of mineralisation and type of deposit under

consideration and to the activity he has undertaken to qualify as a Competent Person as defined in the 2012 Edition of the

Australasian Code for the Reporting of Mineral Resources and Ore Reserves. Mr Blucher consents to the inclusion in this report

of the matters based on the information in the form and context in which it appears.

The information in this report that relates to Mineral Resources is based on information compiled by Mr Ian Blucher

(MAusIMM). Mr. Blucher is a full time employee of Southern Gold Limited and has sufficient experience that is relevant to the

style of mineralisation, type of deposit under consideration and to the activity being undertaken to qualify as a Competent

Person as defined in the 2012 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”

(JORC, 2012). Mr Blucher consents to the inclusion in this report of the matters based on the information in the form and

context in which it appears.

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References

Brand. N.W. (1999), Element ratios in nickel sulphide exploration: vectoring towards ore environments.

Journal of Geochemical Exploration Vol. 67.

Gray D. J. and Noble R. R. P. (2007). Nickel Hydro-geochemistry of the NE Yilgarn Craton, Western

Australia. CRC LEME Open File report 212, 128pp.

JORC, 2012. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore

Reserves, 2012 Edition

Pontifex & Assoc. 2007. Mineralogical Report No. 9063. Unpublished report to Southern Gold.

APPENDIX 1

Euston Drillhole Coordinate Details

Hole No. Northing (GDA94)

Easting

(GDA94)

R.L.

(AHD)

Depth (m)

Azimuth Dip

BSRC004 6589608.9 380957.9 357.7 100 091 -60

BSRCD009 6589842.8 381589.0 359.3 329.3 139 -60

BSRC035 6589590.4 380945.8 357.4 76 090 -60

BSRC038 6589607.3 380880.9 356.0 157 090 -60

BSRC041 6589560.3 380915.0 356.9 160 090 -60

APPENDIX 2

SOUTHERN GOLDS AUSTRALIAN TENEMENT HOLDINGS

(as at 31 March 2014)

Project Lease Change This Quarter

Holders

Bulong South P25/2259 Granted - 1/11/2013 Southern Gold Limited (100%)

Bulong South P25/2260 Granted - 1/11/2013 Southern Gold Limited (100%)

Bulong South E25/0349 Southern Gold Limited (100%)

Bulong South E25/0405 Inferus Resources Limited (100%)



Bulong South M25/0182 Inferus Resources Limited (100%)

Bulong South M25/0333 Southern Gold Limited (100%)

Bulong South P25/1896 Southern Gold Limited (100%)






Bulong South M25/0183 Surrendered - 4/10/2013 Inferus Resources Limited (100%)

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Holders

Railway JV E25/0250 Southern Gold Limited (80%), Heron Resources Ltd (20%)



Bulong East JV P25/2251 Granted - 7/10/2013 Southern Gold Limited (80%), Hampton Nickel Pty Ltd (20%)








Bulong East JV P25/1058 Expired - 7/10/2013 Southern Gold Limited (80%), Hampton Nickel Pty Ltd (20%)







Bulong East JV M25/0059 Southern Gold Limited (80%), Hampton Nickel Pty Ltd (20%)
















Bulong East JV P25/1853 Southern Gold Limited (80%), Hampton Nickel Pty Ltd (20%)

Bulong East JV P25/2050 Southern Gold Limited (80%), Heron Resources Ltd (20%)




Bulong East JV M25/0165 Withdrawn - 7/10/2013 Hampton Nickel Pty Ltd (100%)

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Holders

Bulong East JV M25/0191 Withdrawn - 7/10/2013 Hampton Nickel Pty Ltd (100%)

Clinker Hill P25/2126 Southern Gold Limited (100%)























Cowarna E25/0474 Southern Gold Limited (100%)

Cowarna E25/0497 Granted - 12/12/2013 Southern Gold Limited (100%)

North Dam P25/2250 Granted - 14/11/2013 Southern Gold Limited (100%)

North Dam E27/0459 Granted - 14/11/2013 Southern Gold Limited (100%)

North Dam E27/0488 Southern Gold Limited (100%)

North Dam P27/2046 Southern Gold Limited (100%)

SOUTHERN GOLDS CAMBODIAN TENEMENT HOLDINGS

Project Lease Holders

Kratie South Preak Khlong

Southern Gold Ltd 1005 owned subsidiary Mekong Minerals (Cambodia) holds (100%).

Mekong Minerals Ltd currently earning up to 70% through expenditure.

Kratie South O’Khtung

Kratie North Phnum Khtong

Phnum Romdul Phnum Romdul

Memot Project Snoul

Memot Project Phnum Khnach

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JORC Code, 2012 Edition – Table 1 report

Drilling Results - Section 1 Sampling Techniques and Data

Criteria Commentary

Sampling techniques

• RC drill holes were sampled at 1m intervals followed by riffle splitting and collection into

plastic bags for non-pre-collared holes or as four meter, spear sampled, composite samples for

RC precollars.

• Individual RC drilling samples riffle split from the drill rig were collected into pre-numbered

calico bags.

• Diamond core was sampled as half core at intervals not less than 0.14m and no greater than

4.75m. Sampling intervals were controlled by geological boundaries.

Drilling

techniques • The drilling method used at Euston was face sampling reverse circulation percussion drilling.

Diamond core drilling was undertaken by Ausdrill Ltd. Diamond tails were drilled as NQ

(47.6mm diameter).RC percussion drilling downhole depths ranged from 58m to 160m and

diamond core tails to 348m (BSRCD008).

• RC drilling was undertaken by Ausdrill, Strange Drilling and Andrews Drilling, all of Kalgoorlie,

using 5½ inch diameter face sampling hammers.

• Cored hole depths were measured by Company geologists and reconciled with core markers

prepared by the driller.

• Drilled cored meters compared well to recovered meters. Overall recoveries are estimated at

98% for core drilling.

• Diamond drill holes and diamond tails to RC pre-collars downhole depths range from 78m to

225m.

• RC drilling was undertaken by Ausdrill, Strange Drilling and Andrews Drilling, all of Kalgoorlie,

using 5½ inch diameter face sampling hammers.

• All cored holes were orientated using an ACE electronic tool.

Drill sample recovery

• Sampling intervals during RC drilling were routinely checked by comparing the position of the

drill rod against the sample bag being filled.

• Drilling of cored and RC holes was conducted with machinery and using drilling techniques

appropriate to the terrain and with drillers experienced in the area.

• Core and RC sample loss was kept to a minimum by good sampling practices.

• Riffle splitting of RC samples and sampling of half core from diamond holes provided good

representation of the intervals sampled.

• No recovery issues were identified with the RC drilling. Loss of fines at the cyclone was

minimal and is not considered to have had a significant effect on sample recovery.

• No relationship has been noted between sample recovery and grade. Overall, sample

recoveries were very high and did not present a problem.

Logging • Drill holes have been geologically logged by Company geologists using a standard format over

the whole length of each hole. Features for each sample or geological interval recorded

included weathering, lithology, alteration mineralogy, structural information, mineralisation

mineralogy, veining, vein mineralogy and orientation and proportions of non-economic

minerals. This level of detail is considered appropriate to support the Mineral Resource

estimate.

• Geological logging recorded factual data (e.g. colour, grain size, percentage of identifiable

minerals present) and interpretative data (e.g. lithology).

• A subsample of washed and sieved RC chips from each metre was collected and stored

sequentially in numbered plastic chip trays.

• All drill core has been photographed.

• Chips trays representing each RC drill hole are stored in the Company’s head office in

Adelaide.

Sub-sampling • RC samples were riffle split at 1m intervals and rejects collected into green plastic bags.

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Criteria Commentary

techniques and sample preparation

• Riffle split samples were taken dry. On rare occasions when a moist or wet sample was

returned, a PVC spear or scoop was used to avoid contamination of the riffle splitter (three

samples). This was noted in the sample register and subsequently entered into the Company’s

database.

• Composite RC samples were taken from the plastic bags using a PVC spear. Re-splitting into

1m riffle split samples was subsequently undertaken and the new samples submitted for assay

if initial composite analyses were considered anomalous.

• Sample size presented for analysis was typically 1 to 3kg.

• Preparation and analysis of RC and diamond core samples was undertaken by crushing and

pulverizing at Intertek Genalysis’ Kalgoorlie laboratory, followed by analysis at Intertek

Genalysis’ facility in Perth.

• Samples were pulverised to 85% passing 75 micron. Consultation between the Company and

the lab concluded this particle size was suitable for the Cannon samples.

Quality of assay data and laboratory tests

• Samples were assayed for gold by aqua regia digest with a graphite furnace finish and

detection by atomic absorption emission spectra (Genalysis method B/ETA). Other elements

were subjected to a 4 acid digest with detection by optical emission spectra (Genalysis method

AT/OES). Selected samples were assayed by 25 g charge fire assay with detection by mass

spectrometer (Genalysis method FA25/MS) for Au, Pt and Pd.

• No standards or blanks were inserted for holes BSRC001-025. For later drilling at Euston,

standards were inserted at a frequency of 1 in 50 and blanks at a frequency of 1 in 85. No field

duplicates were taken.

Verification of sampling and assaying

• Twinned holes have not been drilled at Euston.

• All sampling data is recorded by hand onto logging sheets and re-checked before submission

to the lab. Data is then entered into digital form and stored on the Company database after

validation. Original logging sheets are filed in the Company’s Head Office in Adelaide.

• The assay database is stored securely on the Company’s server which is backed up routinely

both on and offsite.

• No adjustments are made to the assay data after review of QAQC measures as stated above.

Location of data points

• Drill hole collar positions have been accurately surveyed by registered surveyors utilising DPGS

survey equipment to an accuracy of +/- 0.01m.

• The grid system used for locating the collar positions of drill holes is the Geocentric Datum of

Australia (GDA94), Zone 51 (MGA Projection). Elevations are recorded in Australian Height

Datum (AHD)

Data spacing and distribution

• The drill hole spacing used at Euston is variable between 30 m and 40 m along strike.

• Samples were taken at 1m intervals over the entire length of each RC drill hole and variable

intervals in cored holes controlled by geological boundaries..

Orientation of data in relation to geological structure

• Euston drillholes BSRC001 to BSRC007 and BSRCD008 and BSRCD009 were orientated to the

SE. Subsequent holes were orientated to the east, which is approximately perpendicular to the

general strike of stratigraphy hosting mineralisation which is believed to dip to the west.

Sample security • RC drilling samples are placed into pre-numbered calico bags directly from the splitter under

the supervision of the rig geologist.

• Diamond core is transported from site by Company personnel to a secure facility in Kalgoorlie

where it is logged and sampled then stored.

• The rig geologist places the calicos bags containing the samples into polyweave bags and

transports them to the sample preparation laboratory where a sample submission form is

completed. The details entered onto the sample submission form are the means by which the

samples are tracked through the laboratory.

• Samples are transported by internal courier from the preparation facility to the analytical

laboratory.

• The laboratory provides the Company with a reconciliation of samples submitted compared to

samples received.

Audits or reviews • No audits or reviews relating to historical nickel exploration data have been conducted at this

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Criteria Commentary

stage.

Drilling Results - Section 2 Reporting of Exploration Results

(Criteria listed in the preceding section also apply to this section.)

Criteria Commentary

Mineral tenement

and land tenure

status

• The nickel sulphide mineralisation identified by drill holes detailed in Tables 2 and 3 are

secured by M25/333, located approximately 30km ESE of Kalgoorlie, WA.

Exploration done by

other parties

• Nickel laterite exploration within the KNP JV and Heron Railway JV areas has been

undertaken by Heron Resources since 2005. Kalgoorlie-Boulder Resources Limited undertook

soil sampling, electromagnetic surveying followed by diamond drilling commencing in 2007 in

the Clinker Hill area. Limited information is available regarding earlier exploration activities,

however it is known that Western Nickel undertook drilling and costeaning in the 1960’s

Geology • The geological setting is believed to be a typical Achaean greenstone assemblage. The Bulong

Project areas are prospective for nickel and also gold. The tenements overlie tholeiitic mafic

volcanics, gabbro, dolerites, felsic volcanics and minor sediments. The nature of the potential

nickel mineralisation present is not yet confirmed but believed to be similar to that hosted by

komatiite ultramafic flows and associated mafic ultramafics.

Drill hole

Information

• Refer to the Tables 2 and 3 of drilling results in the body of this report and Appendix 1 for the

coordinates of these holes. All depths refer to down hole depths in metres

Data aggregation

methods

• Individual grades are reported as downhole length-weighted averages. No top cuts have been

applied. In the context of the table of drill results a lower cut of 5,000 ppm (0.5%) Ni has

been applied.

• No metal equivalents are stated or used.

Relationship

between

mineralisation

widths and intercept

lengths

• The orientation, true width and geometry of the nickel mineralisation intercepted in the

drillholes referred to in Tables 2 and 3 is unclear at this stage.

Diagrams • See Figures 2 and 3 in this document and the Companies previous announcement "New

Nickel Sulphide Discovery in WA by Southern Gold" 25/01/2007.

Balanced reporting • All intervals >5,000 ppm Ni (0.5%) Ni only with corresponding >1% S are reported in the table

of drill results within the body of the report to help differentiate from laterite-enriched Ni

closer the surface.

Other substantive

exploration data

• None known which relates to nickel sulphide mineralisation in the Bulong Project area.

Further work • The nickel sulphide mineralisation identified in the drillholes listed Appendix 1 require

follow up with deeper RC and/or diamond drilling to test the up/down dip and strike extents.

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Auger Results - Section 1: Sampling Techniques and Data

Criteria Commentary

Sampling techniques The Bulong East Project was sampled by auger drilling at 200 x 100 m spacing with selected infill

drilling at 100 x 50 m. 4453 samples have been taken since the project was acquired in 2011.

Vertical holes 0.5-1.5 m were drilled and a 10% HCL acid solution was used to test for the most

carbonate rich horizon. Approximately 300g of sample was taken from this horizon.

Each sample location was recorded by handheld GPS. Lithology type and a description of the

sample were recorded at each location. Sample methodology was constant targeting the

pedogenic carbonate horizon.

Auger holes were drilled vertically to a depth of 0.5-1.5 m and a weak acid was used to identify

the most carbonate rich horizon for sampling. Approximately 300g of this material was sampled.

At Genalysis laboratories in Perth, WA, samples were dried and pulverised (75 μm) then split to

produce a 10 g representative sample. This was subjected to an Aqua Regia digest and analysed

for gold by graphite furnace with detection by atomic absorption (Genalysis method: AR10/GF)

and by either ICP-MS (Genalysis method: AR10/MS) or ICP-OES (Genalysis method: AR10/OES)

for other elements.

Other information collected during sampling includes lithology, carbonate content and

appropriate comments where applicable.

Drilling techniques Sampling was by a light vehicle-mounted auger rig.

Drill sample recovery Sample recovery was not recorded.

A weak acid was used to test for the most carbonate rich horizon for sampling. A consistent

volume of sample from this horizon was taken at each location.

No such relationship has been identified.

Logging Auger soil samples are not appropriate for Mineral Resource estimations, mining or

metallurgical studies.

Geological logging was qualitative in nature.

One lithology was logged for each sample location only.

Sub-sampling

techniques and sample

preparation

No core drilled.

Samples were not split. Samples were dry.

Sample preparation is industry standard involving oven drying (110°C), crushing and pulverising

(85% passing less than 75 μm)

Standard laboratory QC procedures when samples were split to 10g aliquots.

No field duplicates were taken.

Sample sizes are appropriate and industry standard for the sample type and grain size.

Quality of assay data

and laboratory results

Aqua Regia is considered a partial digest and is appropriate for carbonate/soil sampling.

None used.

Genalysis conducted its own routine internal checks and is considered to have established

acceptable levels of accuracy and precision for the auger soil sampling program.

Verification of

sampling and assaying

None undertaken.

None undertaken.

Primary data was recorded by a supervising geologist on the sampling program. Data was

verified upon entry into the company database.

No adjustments made.

Location of data points Sample locations recorded by handheld GPS with and accuracy of +/-5m. Auger soil data is not

appropriate for Mineral Resource estimations.

GDA94, MGA Zone 51 J.

As the program was surface sampling, topographic control was not required.

Data spacing and

distribution

Original sampling was done on a nominal 200 x 100m spaced grid. Infill sampling was done on

selected areas at 100 x 50 m spacing.

Not applicable.

Not applied.

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Orientation of data in

relation to geological

structure

The auger soil sampling program is a first-pass, surface sampling technique at the regional scale.

Not applicable.

Sample security All samples were stored in a secure location then submitted to the laboratory. Genalysis’

internal security protocols are considered acceptable.

Audits or reviews None carried out.

Auger Results - Section 2: Reporting of Exploration Results

Criteria Commentary

Mineral tenement and

land tenure status

The auger soil sampling program was carried out over the Bulong East Project which consists of

tenements: M25/59, M25/111, M25/134, M25/145, M25/161-162, M25/171, M25/206-210,

M25/220, M25/234, M25/260, M25/341, P25/1853, P25/2050, P25/2062, P25/2170, P25/2171

and P25/2251-2260. Southern Gold Limited holds an 80% share in the tenements in a joint

venture arrangement with Heron Resources Limited which (or their 100% owned subsidiaries)

hold the remaining 20% share. Nickel laterite resources are excluded from the joint venture

arrangement with Heron Resources maintaining 100% rights.

There are no existing impediments or issues relating to the tenement holdings.

Exploration done by

other parties

The ground has been previously explored for by Heron Resources Limited, mainly targeting

nickel mineralisation. Nickel was also the focus of exploration in the 1970s with Western Nickel

Pty Ltd being the main explorer.

Geology The Bulong East Project lies within the Kurnalpi Terrane of the Eastern Goldfields province. The

Project area overlies the Bulong Complex which is dominated by komatiite flows.

Auger soil sampling has not identified a mineral deposit and cannot be used for Mineral

Resource estimates.

Drill hole information Figures are provided in the report illustrating the auger data used and the sample locations.

Not applicable.

Data aggregation

methods

Not applicable to auger soil sampling.

Not applicable to auger soil sampling.

Not applicable.

Relationship between

mineralisation widths

and intercept lengths

Not applicable to surface sampling.

Diagrams See figures supplied in report.

Balanced reporting All data points are used in figures provided.

Other substantive

exploration data

No other substantive exploration data is available.

Further work No further work required

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