ASX Release Wednesday 10 August 2016

Cave explorers check South Korean gold mine

• Cave explorers descend into small historic gold mining shaft at the Weolyu South project in South Korea, confirming the target epithermal quartz vein at depth

  Shares

  ASX Code: SAU

  Issued: 42.9M Placement: 3.43M (TBC)

  Shares Post Placement: 46.33M

  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]com.au www.southerngold.com.auABN: 30 107 424 519

  Postal Address Southern Gold Ltd PO Box 255

  Kent Town SA 5071

  Photo 1: Sulphidic zone in quartz vein, KCDD002, Kochang

• Scout Diamond drilling at another South Korean gold project, Kochang, returns brecciated quartz veins in drill hole KCDD002

Progress at Second South Korean Project Area: Weolyu South

Australian gold miner, Southern Gold Ltd ("Southern Gold"), advises that the novel use of cave explorers has been employed to initiate exploration on a second gold- silver project in South Korea, Weolyu South, located about 150km southeast of the capital Seoul (Figure 1).

A small team of South Korean cave explorers (Photo 2 and 3) was engaged to gain access to the bottom of a small shaft within an artisanal scale mine at Weolyu South (approximately 20m below surface). This enabled the exploration team to confirm, in a qualitative fashion, the target of the old mine workings.

Photo 2: Cave explorers prepare to descend into the Weolyu South shaft

Photo 3: Cave explorers advance to lower level of the Weolyu South workings

The mine workings do not appear on any government maps or records. Adjacent to the mine workings are mullock heaps that contain banded epithermal quartz vein fragments (Plate 1 - see ASX release 8 July 2016).

It has now been confirmed that an approximately 1 metre wide zone including banded and highly oxidized epithermal quartz vein has been observed in the mine wall at the bottom of the shaft (Photo 4 and 5). It is important to note that the quartz vein appears to be in-situ, augmenting the quality of the drill target.

Photos 4 and 5: Banded epithermal quartz vein at the Weolyu South Working (note: field of view 1m to 2m)

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Diamond Drilling Continues at Kochang

On 18 July 2016 Southern Gold announced the commencement of Diamond drilling at its first South Korean exploration target, Kochang. Progress since has been good, with two drill holes completed for 450.8 metres of core and with two drill holes in the current campaign still to be completed.

Qualitative results from the second drill hole have been encouraging, with a zone of silicified sulphidic breccia across 1m down hole and adjacent, variably altered, hanging wall with multiple narrow quartz veins across 4m width downhole. (Photo 1, front page, and Photos 6 and 7 below)

Photo 6: Example of initial core drilling from drill hole KCDD002 (Polymict vein breccia with sulphide in red zone, Photo 7, and sulphide bearing mesothermal quartz vein in yellow zone, Photo 1)

Photo 7: Close up of polymict vein breccia with clasts of sulphide bearing veins and sulphide in silicified matrix, from 63.4m in drill hole KCDD002

Because this drill programme is receiving funding support from Korean Resources Corporation (KORES), all four drill holes need to be completed, logged and processed before sample dispatch. Assay results from this initial four hole programme are therefore expected in mid-September, or approximately 2-3 weeks after drilling programme completion.

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Figure 1: Location of key projects in South Korea with Weolyu (Cave explorers) and Kochang (KORES supported drilling) highlighted

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