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SOUTHERNGOLD
GOLD MINER & EXPLORER - WHERE TO FROM HERE?
Annual General Meeting - Managing Director's Presentation
22 October 2015
Disclaimer
Forward-looking statements
The information in this presentation is published to inform you about Southern Gold Limited ('Southern Gold') and its activities. Some statements in this presentation
regarding estimates or future events are forward looking statements. These may include, without limitation:
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Estimates of future cash flows, the sensitivity of cash flows to metal prices and foreign exchange rate movements;
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Estimates of future metal production; and
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Estimates of the resource base and statements regarding future exploration results and increasing the company's resource base
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.
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 a full time 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 Mineral Resources is based on information compiled by Mr Ian Blucher (MAusIMM). Mr. Blucher is a full time 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.
Pre-Feasibility Study Results
The Optimisation announcement dated 13 February 2014 had no material changes to the methodology and assumptions used to determine the production target as detailed in the PFS announcement of 28 August 2013, and all of the key parameters continue to apply. The Optimisation announcement provided an update to the market of the reduction in the forecast operating costs. There have been no material changes to the methodology used to determine the operating costs as outlined in the PFS announcement.
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SOUTHERNGOLD From Exploration Discovery to Mining
At Southern Gold our focus is on monetising gold assets: we find them, we define them and aim to turn them into mines.
Our Exploration Effort
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The right address at Kalgoorlie
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Near mine resource upside with multiple targets
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Plenty of Blue Sky with an exciting regional play
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Drill deeper
Our Mining Activity
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At the right address - Kalgoorlie
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The right execution partner in MLX
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Good resource base at the right grade
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Cash flow and leverage to project expansion
The Strategy
Projects Exploration
Sustainable Cash Flow
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Cannon Open Pit
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Cannon Underground?
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Near Mine Targets (e.g. Monument)
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New Projects
Economic Gold Discovery
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Cannon Region
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Bulong Regional (Heron JV)
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Cowarna Regional
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New Projects
'We find, define and develop Australian high grade gold deposits and ensure a return to shareholders by monetising them. Total Shareholder Return is our benchmark.'
The Strategy (2): Gold Projects
~35km
Cannon Project Prior to Open Pit Excavation
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~35km East of Kalgoorlie
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Infrastructure: multiple mills
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Mining Culture and History
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Well embedded regulatory system
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Local Workforce
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Friendly topography
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World class deposits - 'Elephants'
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Cannon AISC
The Strategy (3): Gold Exploration
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Cannon is a small piece of the puzzle…..
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This is a TMI Image with areas of infill SAM
surveys indicated as A…E.
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Numerous targets identified based on:
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Soil geochemistry
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Regional scale RAB and auger drilling
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Geophysics
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On ground prospecting activity
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High level structural interpretation
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Example regional exploration targets:
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Tooting Bec
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Gunnersbury
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Lighthouse
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Cyprus
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Barbican
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Chigwell
Cash Generation - 2013 PFS Estimate
Phase 1 Open Pit & Phase 2 Underground*
Phase 1 & 2
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Months
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36
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Tonnes
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484,000
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g/t Au
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4.4
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oz Au
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68,200
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%
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92
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A$m
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$13.3
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A$/oz
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964
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A$m
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$18.5m
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A$m
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~A$9m
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Mine Life
Tonnes Mines LOM ave. Head grade
Mined Ounces Recovery (ave) Infrastructure Cost C1 Operating Cost
Free surplus cash flow @
$1500/oz Au Sothern Gold Share (50%) Assuming MLX Deal
*See ASX announcements 29 August 2013 & 18 February 2014 for key parameters of PFS. Mined ounces and grade calculated, based on cut-off grade from A$1400/oz base case.
Cash Generation (2) - current Operations stage 1
MLX Modelling Open Pit Only#
Stage 1 Only
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Months
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9
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Tonnes
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152,352
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g/t Au
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3.1#
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oz Au
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15,209
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%
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89
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oz Au
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13,495
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A$m
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$0.89
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A$/oz
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$1053
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A$/oz
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$1084
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A$/oz
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$1150
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Mine Life Tonnes Mines Head grade Mined Ounces Recovery (ave)
Recovered Ounces Infrastructure Cost C1 Operating Cost
AISC
Total Cost/oz, including
capital
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Current AUD Gold price ~A$1600/oz
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Implied margin on open pit, net of all costs ~A$450/oz
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Cash flow expected in 2016Q2
# See ASX announcement 16 June 2015, head grade is fully diluted. See also appendix for MLX open pit cost structure.
Cash Generation (3): potential larger open pit
Potential to extend & deepen the open pit, subject to terms being agreed with MLX
Where is the upside? Follow the high grade.
Excellent grade and width at depth indicating the deposit is open
Section 110mN Section 175mN
7.6m
@21.5g/t Au
7.5m
@11.5g/t Au
Open
Open
Where is the upside? (2) Drill Deeper
Historical workers mainly drilled to 'refusal' so only tested the oxide, or generally
Shallow Regional RAB drilling
RC Drilling: Cannon Discovery Drill deeper than 50m
Initial stage exploration finds ppb level anomalism
RC drilling targets below the oxide finds high grade gold
Implications for regional targets with ppb level results
What has been achieved this last year?
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Mine finance and operating agreement signed with MLX
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All permitting for Cannon Mine was put in place
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All pre-development activities were completed
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Mining commenced in late July/ early August 2015
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A very modest re-start to exploration activity
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Small drilling programs at Railway South and Arsenal projects
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Oversubscribed $1.05m equity raising
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Marketing into Singapore and Hong Kong to spread the word
The Cannon project has gone through all regulatory and development steps and is now an operating mine. Very few Australian junior exploration companies have achieved this.