ASX Release

Tuesday 11 August 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's First Salvo

Mining of the Cannon Gold Resource has commenced

The Directors of Southern Gold (ASX Code "SAU") are extremely pleased to announce the commencement of mine operations at the Cannon Gold Resource,

30km east of Kalgoorlie, Western Australia. (Photo 1, as photomontage, above)

Metals X has been contracted by Southern Gold to conduct all mining, haulage and processing activities associated with the development of the Cannon mine, with profit to be shared on a 50%:50% basis.

Stage 1 Open Pit

Operations have begun on the previously described Stage 1 Open Pit which will see approximately 152kt of ore mined at an average fully diluted grade of 3.1g/t Au (ASX release 16 June 2015 "Cannon Mine Go Ahead Approved").

Photo 2: Southern Gold hosted a Cannon site visit for industry analysts after the Diggers and Dealers mining forum. The group is standing adjacent to a recently excavated trench designed to expose the southern portion of the ore body (marked out in red paint in the photo above).

Mining will take place over the next 4-5 months and ore from Cannon processed through Metals X Jubilee mill facility, approximately 35km to the southwest. Ore will be batch processed (i.e. unblended) with expected Stage 1 recovery of 13.5koz of gold at an AISC of A$1084/oz with an implied cash margin of

~A$400/oz assuming this cost base.

Updated Schedule

With the completion of the rail crossing, pre-strip and site access and with the commencement of mining operations the project schedule has been updated with several additional boxes now ticked.

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

The preferred haul route along miscellaneous license L25/48 is progressing well. The license was granted recently and haul road construction will commence once a Native Vegetation Clearing Permit is granted, expected sometime in the next few months. Mining of the deposit will progress normally while this preferred haul route is established with alternative route L25/43 available in the interim.

Potential "Big Pit" Scenario

It is anticipated that the current Stage 1 Open Pit will be superseded by a new larger pit development plan but Southern Gold is committed to maintaining momentum on the current Cannon Mine construction phase and the completion of the Stage 1 Open Pit to ensure near term cash flow.

Discussions between Southern Gold and Metals X on the commercial arrangements around the larger pit development are continuing.

Underground Potential

The possibility of an underground development after open pit operations under the "Big Pit" Scenario is subject to further extension of the deposit by drilling below the current limits of the JORC Resource as the

Cannon deposit remains open at depth. However, the width and grade of several previously reported deeper

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intersections are of excellent tenor (e.g.: 7.6m @ 19.04g/t Au in BSRCD200 and 6.0m @ 16.17g/t Au in BSRC201) the extension of which constitutes an obvious drill target likely to be drilled at the conclusion of Stage 1 Open Pit.

Exploration - Drilling Commences at Arsenal

In addition to the commencement of mining at the Cannon Gold Resource, Southern Gold is also pleased to advise the start of an 800m reverse circulation drilling programme at Arsenal, one of several satellite drill targets.

Previous drilling at Arsenal revealed alteration that was similar to that seen at the Cannon project but this early programme was restricted to a single drill hole. The current drilling programme is designed to follow up on that early positive indication and hopefully identify additional mineralisation outside the Cannon Gold Resource. Results from this round of drilling are expected in the next few weeks.

Photo 3: RC Drilling at Southern Gold's Arsenal Project with Cannon Mine just visible in the background.

Hitting Some Important Milestones

The Managing Director of Southern Gold, Mr Simon Mitchell, commented: "Southern Gold has hit a few key milestones this week, in what is the culmination of several years' work on the part of the Southern team. It is great to see 'big yellow' mining equipment deployed to site and the first unearthing of ore geology in the pit. In addition we have a huge opportunity when it comes to the possibility of a larger open pit operation as well as the longer term underground potential."

"Not only do investors get exposure to one of the few new open pit mines in the Kalgoorlie district but also Southern Golds exploration efforts continue with the drill testing of nearby satellite targets. The Arsenal project has been a favourite of our geologists for some time and it is great to get back in there with a drill rig."

Simon Mitchell

Managing Director

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Photo 4: First stage excavation at the Cannon Gold Mine with120 tonne Komatsu PC1250 Excavator loading a

Caterpillar 777F 100 tonne truck

Photo 5: Close up of the recent excavation at the Cannon Gold Mine

Photo 4 and 5 c/o Hampton Mining & Civil Services

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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.

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.

Forward-looking statements

Some statements in this release regarding estimates or future events are forward looking statements. These may include, without limitation:

 Estimates of future cash flows, the sensitivity of cash flows to metal prices and foreign exchange rate movements;

 Estimates of future metal production; and

 Estimates of the resource base and statements regarding future exploration results.

Such forward looking statements are based on a number of estimates and assumptions made by the Company and its consultants in light of experience, current conditions and expectations of future developments which the Company believes are appropriate in the current circumstances. Such statements are expressed in good faith and believed to have a reasonable basis. However the estimates are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from estimated results.
All reasonable efforts have been made to provide accurate information, but the Company does not undertake any obligation to release publicly any revisions to any "forward-looking statement" to reflect events or circumstances after the date of this presentation, except as me be required under applicable laws. Recipients should make their own enquiries in relation to any investment decisions from a licensed investment advisor.

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