ASX Release

Wednesday 29 July 2015

ASX Code: SAU

Issued Shares: 527.6M ABN: 30 107 424 519

Directors

Greg Boulton AM Simon Mitchell (MD) Michael Billing

David Turvey

Top Shareholders

Silver Lake Resources 8.20% PS Super Nominee 5.93%

G B Branch 4.45%

JP Morgan Nominees 3.44% Hush Hush Pty Ltd 2.08%

G Boulton 2.07%

Head Office

Level 1, 8 Beulah Rd

Norwood SA 5067

Telephone: (08) 8368 8888

Facsimile: (08) 8431 5619 [email protected] www.southerngold.com.au

Cannon Mine Development Update

Mine Development Plan and Economics Transformed by

Metals X acquisition of adjacent deposit

 Integrated development of the adjacent deposit puts the Cannon

"Big Pit" scenario on the table

 Implication is for a longer life open pit with higher operating margins and increased cash flow to Southern Gold

 Current Stage 1 Open Pit remains on track while commercial

arrangements and "Big Pit" designs are worked through

Southern Gold (ASX Code "SAU") is pleased to provide the following update to operations at the Cannon Gold Mine, 30km east of Kalgoorlie, Western Australia.

"Big Pit" Scenario

On Friday 10 July, Metals X Ltd ("Metals X", ASX Code "MLX") announced the
acquisition of the Georges Reward deposit on exploration tenement E25/268 for
$4.5 million. Georges Reward has a publically announced JORC Inferred Resource of 375kt @ 1.89g/t Au for 22.8koz of contained gold (see Northern Mining Ltd ASX Release 10 July 2015 and clarified on 14 July 2015).
For context, Southern Gold's adjacent Cannon Project has a JORC Measured & Indicated Resource of 753kt @ 3.75g/t Au for 90.9koz of contained gold (see ASX Release 16 June 2015 and Tables 2 and 3 on page 5).
Southern Gold's Managing Director, Simon Mitchell, commented: "The Cannon Gold Project has approximately four times the amount of contained gold ounces at twice the gold grade, which puts the consideration of $4.5 million for Georges Reward into sharp context. Not only does this illustrate the compelling

investment proposition that is Southern Gold at the moment, it also highlights the true value of the Cannon Project that will be unlocked by a much larger Big Pit scenario running for several years at a relatively high operating margin."

Stage 1 Open Pit

While the commercial and operating details of the larger open pit scenario are still being worked through with Metals X, the previously approved Stage 1 Open Pit (see ASX Release 16 June 2015) remains on track to ensure near term cash flow. Broadly speaking the Cannon Project is currently entering a new phase of development: from the planning and regulatory phase through to active on ground activities.
It is anticipated that this Stage 1 pit will be superseded by a new larger pit development plan but there is much that can be done that is common to both options going forward and Southern Gold is committed to maintaining momentum on the current Cannon Mine construction phase.

The Cannon Mine is currently under development with Metals X engaged to finance and operate the project under the Mine Finance and Profit Share Agreement (ASX announcement 11 November 2014). Ore is to be processed at Metals X's South Kalgoorlie Operations Jubilee Mill, approximately 35km to the southwest, on a batched unblended basis. The Cannon project is situated on mining license M25/333 which is adjacent to the Georges Reward deposit on mining lease application MLA25/357 which is itself overlying granted exploration
tenement E25/268 (see Figure 1) recently acquired by Metals X.

Figure 1: Location of Southern Gold's Cannon Gold Mine with respect to the Georges Reward deposit

Recent developments at the Cannon Gold project include:

 The completion of follow-up grade control drilling designed to determine the extent of mineralisation defined in the pit shell (this resulted in essentially no change to the current model or resource);

 An access and compensation agreement has been jointly executed with the Hampton Hill pastoral

station and Metals X;

 The engagement of mining and haulage contractors, with mobilisation to site to begin preliminary works;

 The commencement of construction of light and heavy vehicle access, and

 The completion of preliminary water bore field works with three holes completed as part of dust suppression water supply requirements (work is ongoing here with an additional two holes required).

Near term activity will focus on the establishment of site infrastructure and the commencement of top soil removal in August 2015. Mining of the Cannon deposit should follow shortly after as mineralisation is close
to surface at the southern margin of the deposit (Figure 2 illustrates the limits of the stage 1 open pit).

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The preferred haul route along miscellaneous license L25/48 is progressing. The license was granted on the
21 July 2015 and haul road construction will commence once a Native Vegetation Clearing Permit is granted, expected sometime in October when the haulage of stockpiled ore will commence.

Table 1: Updated Schedule on the Development of Stage 1 Open Pit

Expanding the Stage 1 Pit

As flagged in Southern Gold's ASX Release on 13 July 2015, there is now the potential to look at the development of a much larger open pit scenario. This would see both Cannon and Georges Reward deposits exploited in a single pit using common infrastructure and enable optimisation models to capture much more ore previously constrained by the presence of the mutual tenement boundary.
Previous Stage 1 open pit designs retained a 50m buffer to the tenement boundary and this constrained the depth of the pit to 375mRL or around 75m vertical in the case of the Cannon deposit. Preliminary analysis by Southern Gold estimates that a new larger pit optimisation should approach 225mRL or 125m vertical and encapsulate the high grade ore zone centered on 250mRL (see Figure 2 below).
Final design of the big pit scenario is still in process and it is anticipated that additional drilling may be required to upgrade the resource at Georges Reward to JORC Indicated and/or Measured status as well as additional geotechnical and metallurgical information for mine planning and scheduling purposes.

Stage 2 Underground

Notwithstanding the excellent economic outcomes on the development of a much larger open pit, Southern Gold also anticipates further definition drilling to define extensions to the high grade gold shoot that is currently open at depth. The possibility of a Stage 2 underground development after open pit operations therefore remains open and is subject to further extension of the deposit by drilling below the current limits
of the JORC Resource.

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Figure 2: Long Section, looking west, of the Cannon Gold Mine illustrating the current Stage 1 Open Pit

(275mRL) with solid horizontal black line indicating potential unconstrained new open pit depth (225mRL).

Implications

The Managing Director of Southern Gold, Mr Simon Mitchell, commented: "We are yet to agree the final commercial form of a joint development of the Cannon and Georges Reward deposits with Metals X but I can see the potential for significant synergies to be unlocked by both of us."

"Notwithstanding this excellent potential economic outcome on the larger open pit, we are still moving forward with the Stage 1 development to ensure the continuity of cash flow and development momentum on the project."

"The potential for the Cannon Mine to be exploited in a big pit scenario is a material development for Southern Gold as it enables good commercial outcomes to drive the mine development design which will extract much more gold on a high margin open pit basis. With Metals X as a new neighbour adjacent to our flagship project in which we are in joint development, the potential to unlock significant additional value is obvious and I think underscores why this is a very exciting time for Southern Gold shareholders."
Simon Mitchell
Managing Director
Southern Gold Ltd

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Southern Gold Limited: Company Profile

Southern Gold Ltd is a successful gold explorer listed on the Australian Securities Exchange (under ASX ticker "SAU"). The Company's main focus is its Bulong Gold Project located 30 km east of the world renowned gold district of Kalgoorlie (WA) with the flagship Cannon Gold Mine having 846kt @ 3.6g/t Au or 97koz gold defined in accordance with the JORC code, 94% of which is in the Measured and Indicated categories.

After a Pre-Feasibility Study demonstrated the Cannon Gold Resource could generate robust cash flows and a positive economic return (ASX Announcement 13/02/2014) the company entered into an agreement with Metals X Ltd to finance and develop the deposit under a 50/50 profit share arrangement. Metals X is responsible for all mining, haulage and processing activities. (ASX Announcement 11/11/2014)

Southern Gold is currently focused on ensuring cash flow from the Cannon Gold Mine as it moves into production in 2015 and this will act as the foundation to build a longer-term gold exploration and production business. By monetising the Cannon Gold resource, the company will be ideally placed to accelerate exploration within its broader tenement holdings. Southern Gold has identified over 30 exploration targets which will underpin the future growth of the Company.

Southern Gold Limited: Cannon Mineral Resources Defined in Accordance with the JORC Code (2012) Table 2: Cannon Mineral Resource Estimate, Measured, Indicated and Inferred (0.7g/t Au Cut-off)

Table 3: Cannon Mineral Resource Estimate, Total All Categories (0.7g/t Au Cut-off)

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 an employee 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 Cannon Mineral Resources is based on information compiled by Mr Ian Blucher (MAusIMM). Mr Blucher is an 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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