ASX Release 8 July 2016

High grade South Korean gold projects acquired under strategic overseas expansion

Transaction Highlights:

• Southern Gold acquires 100% interest in multiple high grade gold projects across southern Korea

• Represents strategic international acquisition under expansion strategy providing opportunity for additional gold production and new discovery

• Operating Cannon gold mine in Western Australia remains core business

• High calibre in-country technical team including internationally renowned consultant Mr. Douglas Kirwin and Exploration Manager Dr. Chris Bowden

• Additional A$1.2 million cornerstone placement to three Asiatic shareholders at $0.35/share, a 18% premium to the 20 day VWAP, subject to shareholder approval

ASX Code: SAU

Shares on Issue: 36.53M Consideration Shares: 6.29M Placement Shares: 3.43M

Shares Post Acquisition: 46.25M

Directors

Greg Boulton AM (Chairman) Simon Mitchell (MD) Michael Billing

David Turvey

Head Office Southern Gold Ltd Level 1, 8 Beulah Rd

Norwood SA 5067

Telephone: (08) 8368 8888

Facsimile: (08) 8363 0697 [email protected] www.southerngold.com.au

Postal Address

PO box 255

Kent Town SA 5071 ABN: 30 107 424 519

Assets acquired:

• Korean assets cover 44 granted tenements across 17 project areas

• All host historic gold (+/- silver) mining operations with formal underground mine or artisanal workings, many over large surface areas

• High potential for extensions to orogenic quartz veins in historic gold mines with potential for production in the medium term

• Highly prospective greenfield epithermal gold targets offering potential new discovery upside

  Immediate Government-backed drill start:

• At least four of six highest priority targets to be drilled within 18 months

• First drilling commences in just two weeks with drill funding support from Government-backed Korean Resources Corporation (KORES)

  Terms of acquisition:

• Acquired from unlisted public company Asiatic Gold Ltd for 6.29m SAU shares, A$116,000 cash and assumption of approximately A$70,000 debt

• Shares to be distributed 'in-specie' to 77 Asiatic Gold shareholders

• Values acquisition at approximately A$2 million

  Managing Director's Comment: "Southern Gold has a very solid cash flow story with our Kalgoorlie region exploration position and current gold mining at Cannon and that will remain our focus. Today's acquisition announcement, part of our strategic expansion strategy, provides investors with exciting exposure to a new and truly world class gold exploration opportunity. These assets are located in areas of exceptional geological prospectivity, backed by a first class exploration team and multiple, very promising drill targets. The acquisition provides Southern Gold with the potential for additional high grade gold production sources in the medium term as well as the possibility of new greenfield discoveries in a jurisdiction that has seen very limited modern exploration. I also believe this to be the most significant package of fully granted tenure held by a foreign company in South Korea, a jurisdiction where tenure is difficult to acquire and therefore a very valuable and strategic asset."

  Introduction

  Southern Gold Limited ("Southern Gold") has executed binding legal documentation with unlisted public company, Asiatic Gold Ltd ("Asiatic") to acquire its wholly-owned Singaporean registered company, International Gold Private Ltd ("IGPL"), itself 100%-owner of Korean company, Hee Song Metals Co. Ltd ("HSML"). The consideration includes 6,294,942 Southern Gold ordinary shares and A$116,000 cash. Further, Southern Gold has agreed to assume certain liabilities in HSML to the value of $70,000. The Southern Gold consideration shares will be distributed to 77 Asiatic shareholders on a 38 Asiatic shares to 1 Southern Gold share basis (subject to Asiatic shareholder approval).

  HSML holds significant mineral tenure in South Korea, consisting of 44 granted tenements across 17 project areas (Figure 1, Figure 2, Appendix 2) totaling some 119km2.

  The Key Projects

  While the portfolio of 17 projects is an exciting and very substantial ground position in South Korea (Figure 2), there are 6 projects that stand out with excellent near term potential. These include the following (Figure 1):

  • Weolyu: historically a silver-gold-germanium mine, recent exploration has discovered classic high level low sulphidation epithermal veining in a district yet to see a single drill hole and with rock float sampling at surface generating up to 17.6g/t Au and 820g/t Ag. Priority drill target.

  • Gubong: historically a significant orogenic gold mining district and Korea's second largest producer, this project has the potential to open up underground workings and fast track development. Potential for large gold system and significant exploration target range (see below).

  • Hampyeong: up to 21g/t Au in rock chip samples in classic epithermal quartz veins. New 'A-Cha' vein discovery points to the potential for an epithermal gold system at depth. Priority drill target.

  • Kochang: historically extremely high grade gold and silver in narrow veins were mined with old mine workings still in place. Potential to open up old mine to fast track development. KORES supported drilling (where KORES provides 70% of the direct drilling cost) to commence in the next few weeks.

  • Heungdeok: extensive area of artisanal mining across several parallel quartz veins in a district that has seen no drilling. Also potential for large tonnage Intrusion Related Gold mineralization.

  • Taechang: Historically mined very high grade gold deposit with old mine workings still in place and potentially accessible to fast track underground exploration and development.

The potential significance of the Weolyu system is highlighted by the recent location of a number of previously unrecorded adits 250m to the south of the main mine which apparently contain at least one stope. These adits are proximal to float and sub-crop of classic high-level, low-sulphidation epithermal

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veining hosted by Cretaceous volcanic (extrusive and sub-volcanic intrusive) rocks that show significant propylitic - sericitic and acid sulfate alteration. Combined, these features suggest that the Weolyu system is much larger than previously thought and as such is considered to be a high priority re-development and exploration target.

The Gubong area in particular is a significant acquisition in its own right containing the historically 2nd largest gold mine in Korea with more than 400koz Au production. The tailings from this production have not been reprocessed and remain onsite in a rehabilitated Tailings Storage Facility (Photo 6 and Figure 8 in Appendix 2), offering a potential early cashflow opportunity if appropriate permitting can be obtained.

Southern Gold intends to deploy specialist geological expertise onto both Weolyu and Gubong projects to fast track their assessment.

More technical detail around these projects is in the Project Highlights section on page 8 and Appendix 1.

Figure 1: Major Projects in South Korea (map courtesy of Asiatic Gold Ltd)

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Figure 2: HSML Tenure in South Korea

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