Southern Gold : Option Secured on High Grade WA Gold Project

ASX Release Wednesday 18 January 2017

ASX Code: SAU

Southern Gold joins Kalgoorlie prospectors at extended high grade WA gold project

• Option to purchase 4 prospecting licenses over the Transfind Extended project from two Kalgoorlie based prospectors.

• High grade surface rock chips have been returned by the prospectors (up to 78.7g/t Au) and Southern Gold (up to 50.4g/t Au).

• Mineralisation interpreted to be the south-westerly extension of the small historic Transfind open pit.

• Project is proximal to nearby haul road system with relatively easy access to 2 mills (Jubilee and Randalls).

Shares Issued: 46.4m 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: [phone]

Facsimile: [phone] [e-mail] www.southerngold.com.auABN: 30 107 424 519

Postal Address Southern Gold Ltd PO Box 255

Kent Town SA 5071

Very High Grade Gold in Sampling

Southern Gold has executed a binding term sheet with two Kalgoorlie based prospectors over four prospecting licenses (Table 2) approximately 70km east of Kalgoorlie (Figure 1 and Figure 2) at the Transfind Extended project.

The prospectors have been working on the project area around the historic Transfind open pit mine, returning high grade gold in surface samples (up to 78.7g/t Au), finding very coarse gold in quartz as mineral specimens suitable for sale and recovering coarse gold through panning or trommeling (Photos 1, 2 and 3).

Photos 1 & 2: Gold recovered by prospectors at Transfind Extended

Preliminary due diligence field work by Southern Gold has also returned high grade gold in surface samples (up to 50.4g/t Au, Table 1) with some samples displaying small (1mm) pieces of visible gold in oxidized quartz vein material. Work by previous explorers, including shallow drilling and soil sampling, indicates several mineralised trends south of the Transfind open pit (Figure 3). Transfind was a small open pit where 31kt of ore @ 4.9g/t Au (~5koz Au) was mined during early 2000.

Southern Gold Ltd's Managing Director, Mr Simon Mitchell: "The Transfind Extended project ticks a lot of boxes - high grade gold indications, 'nearology' to an old open pit and proximity to infrastructure, including 2 mills. We have structured the deal to keep upfront costs to a minimum while putting dollars into the ground in the form of drilling

and the ultimate acquisition cost is only triggered should we see a project development scenario with cash flow at the back end. It's an exciting project where the prospectors have done some good ground work worthy of follow up."

Figure 1: Transfind Extended location in the Kalgoorlie area between the Bulong and Cowarna gold projects Table 1: Recent Southern Gold rock chip results at Transfind Extended

Sample ID	Easting	Northing	Au (g/t)
TFRK001	407552	6581825	8.06
TFRK002	407552	6581825	0.61
TFRK003	407295	6581726	16.17
TFRK004	407295	6581726	0.40
TFRK005	407282	6581751	3.55
TFRK006	407282	6581751	0.10
TFRK007	407282	6581751	10.59
TFRK008	407422	6581972	50.42
TFRK009	407422	6581972	1.95
TFRK0010	407422	6581972	1.67
TFRK0011	407422	6581972	2.22
TFRK0012	407374	6581938	2.99
TFRK0013	407374	6581938	1.79
TFRK0014	407349	6581962	4.31
TFRK0015	407328	6581984	11.48
TFRK0016	407375	6582060	0.97
TFRK0017	404446	6585672	0.08

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Figure 2: Map showing distribution of rock chip results south west of the Transfind open pit Figure 3: Soil sampling results, interpreted mineralised trends and historic haul road at Transfind Extended

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Commercial Terms

On execution of the binding term sheet, Southern Gold paid $50,000 cash to the two prospectors ($25,000 each) to secure a two year option to purchase the prospecting licenses listed below (Table 2). The two year exploration period commences on 1 February 2017 and ends on 31 January 2019 during which time Southern Gold must conduct a minimum of 2,000m of RC or diamond drilling and keep the prospecting licenses in good standing (Table 2) in order to exercise the purchase option.

Should Southern Gold elect to exercise its purchase option it must:

• Pay $200,000 to the prospectors ($100,000 each); and

• Execute a royalty agreement with the prospectors whereby they are entitled to a $1.80/t of ore royalty for all production from the tenements.

The consideration above is to be paid within 20 business days of the transfer of the tenements to Southern Gold's name and Ministerial approval of the transfer.

Table 2: Tenure Details at Transfind Extended

Prospecting Licenses	Grant Date	Expiry Date	Rent	Minimum Commitment
P25/2152	28/02/2011	27/02/2019	$25	$2000
P25/2197	06/07/2011	05/07/2019	$80	$2000
P25/2314	11/02/2016	10/02/2020	$25	$2000
P25/2315	11/02/2016	10/02/2020	$25	$2000

Photo 3: Coarse gold in quartz and ferruginous sediments, Transfind Extended, WA

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