ASX Release 1 April 2016

'Convertible Debt Facility' Term Sheet Executed

• A$1,000,000 unsecured debt facility

• Lenders issued call options equivalent to face value of the debt

  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 [email protected]com.au www.southerngold.com.au

  
  

  Postal Address

  PO box 255

  Kent Town SA 5071 ABN: 30 107 424 519

• Funding deployed on diamond drilling programme targeting potential Cannon underground and new JORC resources

  
  

  'Convertible Debt Facility'

  Southern Gold Ltd (Southern Gold, ASX Code "SAU") has executed a binding term sheet for the provision of a $1,000,000 'Convertible Debt Facility' ("the Facility"). The lenders are sophisticated high net worth investors with a deep understanding of Southern Gold's medium to longer term value potential.

  The key terms of the Facility are as follows:

  • A $1,000,000 debt facility available as a single drawdown and repayable by 30 June 2017 attracting a 2% arrangement fee and an 8% interest rate, calculated semi-annually in arrears payable in cash;

  • The debt is unsecured but is nominally backed by the issuance of call options to the lenders as follows:

    • 1,388,888 call options at $0.32/share expiring on 30 June 2017, and

    • 1,388,888 call options at $0.40/share also expiring on 30 June 2017.

      The options will be unlisted and are not transferrable to third parties. If exercised prior to full debt repayment, proceeds from the options are to be applied to repayment of the loan. If all options were exercised this would raise the equivalent of the debt amount (i.e.: $1,000,000) for Southern Gold.

      This Facility, combined with the Metals X loan available under the Supplementary Deed to the Contracting and Financing Agreement for Cannon Resources and cash flow from the Cannon Mine itself, means Southern Gold is fully funded to advance its projects for the next several years. Cash flow from the Cannon Mine is expected at the end of 2016 well before the debt repayment date of 30 June 2017.

      Use of Funds

      The funds are generally available for Southern Gold's project development and working capital requirements. More specifically the funds will be directed to:

  • Cannon Underground: Diamond drilling targeting mineralisation outside the current pit shell with the intention of extending JORC resources in preparation for potential underground mining; and

  • New JORC Resources: Advancing other projects in the portfolio with new JORC resource potential and the possibility of open pit extraction.

Southern Gold Managing Director, Simon Mitchell, commented: "This facility minimises dilution for existing shareholders by avoiding the issuance of more shares at current share prices while enabling Southern Gold to hit the underground scenario at Cannon hard with diamond drilling and unlocking further value prior to the conclusion of current open pit operations in early 2017. It is important for investors to note that we are fully funded for several years to come."

Southern Gold Limited: Company Profile

Southern Gold Ltd is a successful gold explorer and producer 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.

Mining at Cannon has commenced with Metals X Ltd financing and developing 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) with this mandate recently expanded to incorporate the commercial terms of a larger open pit development (ASX announcement 3/11/2015).

By monetising the Cannon Gold resource, the company will look to accelerate project development opportunities within its broader tenement holdings to ensure continuity of cash flow into the medium term.

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 may 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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