ASX Release Monday 1 February 2016

Deep High Grade Gold Intersected

• High grade gold intersected in confirmatory Diamond drilling at the base of the current Cannon Mine Stage 2 pit design;

  ASX Code: SAU

  Issued Shares: 36.53M

  
  

  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 info@southerngold.com.au www.southerngold.com.au

  
  

  Postal Address Southern Gold Ltd PO Box 255

  Kent Town SA 5071 ABN: 30 107 424 519

• Intersection in CARD001 returning 19m @ 15.1g/t gold from 83.0m downhole is the best ever result returned at Cannon;

• Results broadly confirm modelled pit design and highlight the potential for high grade shoot extensions for underground;

• Geotech hole CAGT002 returns 14m @ 2.56g/t gold in potentially new footwall zone.

Deeper Diamond Drilling for Confirmatory Purposes

Southern Gold Ltd ("Southern Gold", ASX Code: SAU) is pleased to provide an update on deep confirmatory drilling activities for its 100% owned Cannon Gold Mine 35km east of Kalgoorlie in Western Australia.

Four reverse circulation, Diamond cored tailed holes (CARD001 - CARD004) have been drilled by Metals X Ltd ("Metals X", ASX Code: MLX) for confirmatory purposes to validate and infill the high grade shoots at the base of the open pit in the vicinity of the original holes. The results of all four of these drill holes are listed in Table 1.

Table 1: Summary Results of Deep Confirmatory Drilling (Uncut)

*Downhole intervals and depths, no more than 3m downhole internal dilution

These results broadly confirm the grade and width tenor of the original drill holes and provide additional confidence in the current block model and pit design. The results from CARD001 are particularly exciting as this is the best intersection ever returned from drilling at Cannon.

Southern Gold Managing Director, Mr Simon Mitchell, said: "it is not often a company can announce an intercept such as that in CARD001 returning around half an ounce per tonne over nearly 20 metres down hole. As a project goes into production the level of information and drill density goes to another level and we should not be surprised if Cannon continues to deliver very good results. I expect the geological, structural and economic story will unfold over the coming year and it should be an exciting one."

Stage 2 Diamond Drill holes for Confirmatory Purposes

The southern portion of Cannon Stage 2 pit is designed to capture the high grades intersected in three holes drilled previously by Southern Gold, the results of which are reflected in the block model slice shown in Figure 1, including a high grade zone at the base of the open pit (see red section >5g/t block model below).

Figure 1: Long Section View of Cannon Mine

Four reverse circulation, Diamond cored tailed holes (CARD001 - CARD004, 507.7m total drill hole length drilled from within the Cannon pit) have been drilled by MLX to validate and infill the high grade shoots at the base of the pit with an objective to complete the drilling before access is lost by the pit void. In particular the holes were designed to confirm the high grades and extensive widths such as in Southern Gold holes BSRC125 (original intercept 20m @ 11g/t Au) and BSRC128 (original intercept 16m @ 5.8g/t Au). These drill intercepts were essentially twinned by drill holes CARD001 and CARD003 respectively.

The results summarised in Table 1 broadly confirm the grade and width of the original drill holes and provide additional confidence in the current block model and pit design. The surveyed path of these holes in relation to resource wire frames are shown in Figures 2 and 3 (next page) with survey data relating to the positions of drill collars provided in Appendix 1.

The results of these drill holes are likely to result in some modification to defined mineralised domains but the overall geometry of the orebody and the pit design is not anticipated to alter materially. More importantly, the results of CARD001 and CARD003 will help our interpretation of the extensions to the currently known orebody and assist in future targeting of the high grade ore shoot with the potential for future underground mining.

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Figure 2: Section View of Cannon Mine on 6590108mN

Figure 3: Section View of Cannon Mine on 6590108mN

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With the results in CARD001 (19m @ 15.1g/t) being the best encountered at Cannon so far, Southern Gold is encouraged that the deposit appears to be improving with depth, albeit with structural complexities that are still being defined. This deep confirmatory drilling will form part of the assessment of potential underground development on completion of the open pit.

Both Metals X and Southern Gold believe the results to date reflect the metrics for an underground mine.

Geotechnical drilling and potential new gold mineralised zone?

With the development of a larger open pit encompassing Georges Reward to the north and the deeper parts of Cannon, further geotechnical drilling has been completed to provide greater confidence in the pit design parameters. Two Diamond holes (CAGT002 and CAGT003, Figure 4 next page) for 330m have been completed, geotechnically logged and any mineralisation intersected was sampled and assayed.

One of these drill holes, CAGT002, encountered mineralisation from shallow depth outside the current resource model as follows:

Table 2: Summary Result from Geotechnical Drilling

*Downhole intervals and depths, no more than 3m downhole internal dilution

The implications of this intersection will be investigated with follow up drilling however Southern Gold is encouraged by the fact that Cannon continues to reveal additional mineralisation through the course of mining operations and the higher density drill coverage that comes with it.

Targeting the High Grade Gold Shoot - Exploring the Underground Mine Scenario

As discussed in the recent quarterly report, Southern Gold is currently planning the first stage of a deeper Diamond drilling programme to target the high grade gold shoot below the limits of the open pit. The aim of this programme will be to define the high grade extensions of the known mineralisation and test gaps in our current drill pattern. (See the grey hashed area in Figure 1 above for the target zone of the initial programme of drilling.)

Should the results of this first stage deeper drill programme be positive, Southern Gold will be looking to explore options to define and execute an underground mining scenario with the objective of ensuring sustainable cash flow into the medium term.

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