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Apr 2017 - Southern Gold Ltd

Southern Gold Limited (SAU) – Using Cannon’s Cashflow to Advance its Mostly Brownfields Prospects in Australia and South Korea

  • Southern Gold’s business model has been to identify ideally brownfields prospects or areas that lie proximal to operational haul roads and plants, yet for some reason have been overlooked. Having then acquired or farmed-in to such targets, applied geological techniques to advance them and obtained the required approvals up to production readiness, SAU has then formed an alliance with a company capable of mining & treating the target orebody (thus eliminating the operational risk for SAU), as has occurred at Cannon.
  • Cannon, located near Kalgoorlie in WA, has been SAU’s first gold mine to follow this route and has been developed in a 50/50 profit share over the open-cut by Westgold (WGX) (originally Metals X (MLX)), with the ore being processed through WGX’s SKO mill at Jubilee. Having recouped the development costs, Cannon has generated cashflow to SAU totalling $7.5m to March 2017, which has enabled it to repay its $2.7m loan (including interest) to MLX/WGX, and $1m Convertible Note, leaving $3.8m over, with further cashflow coming.
  • With a bonanza double-digit grade block to be mined near the floor of the Cannon open-cut and apparent high grade ore below the pit floor, it has been decided to drive a 50m adit in the SW corner to extract the block and assess an underground operation applying less expensive underground drilling to delineate the depth & extensions of the mineralisation.
  • SAU has 3 brownfields projects in WA near its Cannon mine operation, being Glandore, Cowarna and Transfind. Glandore is the most advanced and its Lavaeolus prospect was expected to be drilled in JQ2017, while Cowarna’s main focus was expected to be the BIF package extension from SLR’s Santa prospect and the potential DCN Mt Morgans parasitic folding look-alikes. Transfind has nearby open-cuts, but the geology seems to be unclear.
  • In South Korea, the main focus has been on the ~400koz @ 4 – 11g/t historic Gubong gold mine, followed by Taechang (high grades, reputedly often >100g/t) and the epithermal region of Weolyu. Exploration expected to focus on the epithermal Yeongdong Project area that includes Weolyu and Kochang, with further drilling of Weolyu South planned for JQ2017, and underground drilling of Weolyu South possibly in DH2017. At Kochang the focus was on exploring the gap between the historically named “gold” and “silver” mines.
  • In late March 2017, SAU announced a farm-in by Colin Patterson & Charlie Barclay’s LSE listed Bluebird Mining Ventures aiming to fast-track the reopening of Gubong and Taechang, targeting feasibility studies by Bluebird with capex of <US$10m in a subsequent 50/50JV between Bluebird and SAU.
  • Written by: Keith Goode
  • Saturday, 01 April 2017