South Korean Joint Venture Update
ASX Announcement 21 September 2018
Highlights
- Pre-development activity at the Gubong gold mine to increase over next 4-5 months including permit and approvals process.
- Formation of operating company nearing completion and key personnel appointed to the Joint Venture.
- Report on the feasibility of re-starting mining at the Kochang Project expected late October 2018.
Overview
Australian gold explorer Southern Gold Ltd (“Southern Gold”) advises that its development partner in South Korea, London Stock Exchange listed Bluebird Merchant Ventures Ltd (“Bluebird”), continues to make good progress at both the Gubong and Kochang gold projects in South Korea.
Bluebird completed the report on the feasibility of reopening the Gubong Project in late July (ASX: 1st Aug 2018 – BMV Report on Feasibility, Gubong Gold Mine, South Korea), as part of its final requirement to the commencement of the Joint Venture. Bluebird are the operators of the Joint Venture with equity interests being 50% each and future costs shared on that basis.
The Joint Venture will now advance the Gubong Mine by the engagement of all stakeholders over the next 4-5 months with necessary approvals obtained within this period, including the grant of a ‘Permit to Develop’.
Bluebird is also anticipating completing the pre-conditions for the formation of the Kochang Joint Venture by the end of October. Metallurgical test work is currently being undertaken with results and a subsequent report on the feasibility of restarting gold mining at Kochang submitted to Southern Gold by the end of October
Southern Gold Managing Director, Mr. Simon Mitchell: “We are very pleased with the progress being made by Bluebird and, with the increased activity levels at Gubong over the coming year, we should see the first major new gold mine open in South Korea in over 15 years. Bluebird brings extensive experience and management expertise to these projects and once through the permitting phase we anticipate Gubong will develop rapidly as dewatering progresses.”
“At Kochang we anticipate the formation of the second Joint Venture to be completed in October and a second potential mining front to advance in 2019. I see the Kochang project as potentially complimenting the development proposal at Gubong rather than competing with it and there is a lot of information being extracted from each project that is applicable in our understanding of the other.”
“With first gold pour by the end of next year I think the Joint Venture will surprise investors with the speed of these developments.”
Project Developments
Bluebird expect physical activity to ramp up during this pre-development phase with the emphasis of opening new areas of the Gubong Mine over the December quarter. Suitable sites will also be evaluated for the positioning of the process plant and other infrastructure in consultation with the community.
Bluebird is targeting the commencement of gold production in the December quarter of 2019 with gold production levels progressively increasing over a 5-year period. Estimated capital costs are significantly lower because most of the development infrastructure is already in place and only requires progressive dewatering as the mine reactivates from the top down. Current early capital cost estimates suggest a total of less than US$5 million (on a 100% basis) is required to bring Gubong into production.
At Kochang, significant channel sampling and easy access to the old workings have advanced the project more quickly than Gubong but development timeframes are pending the report on feasibility. Part of this process will involve establishing diamond drilling platforms from underground to enable the estimation of Mineral Resources defined in accordance with the 2012 JORC Code and allow a life of mine schedule and mine design to be completed.
Bluebird has also recently appointed personnel into two key positions.
Mr Joseph Lee has been selected as the President of the Joint Venture company. Joseph has spent the last five years in the Korean mining sector managing relations with government, corporate and community stakeholders for Southern Gold Korea and its predecessor companies.
Graeme Fulton, who joined Bluebird in April 2017, has been appointed as General Manager – Gubong Project. Graeme has been involved in the mining industry for more than thirty years including as a Mining Engineer and General Manager having worked in New Zealand, Canada, Malaysia, Papua New Guinea, Vietnam, South Africa and Australia. He has expertise in geological modelling and evaluation, resource and reserve definition, mine design and scheduling, feasibility studies and due diligence. Graeme is a Fellow of the Australian Institute of Mining and Metallurgy.
Project Generation strategy continues to build a very valuable portfolio of high-grade gold-silver projects in South Korea
ASX Announcement 4 September 2018
Highlights
- Project Generation strategy continues to capitalise on numerous exciting commercial opportunities across a wide spectrum of prospective epithermal systems across southern South Korea.
- Southern Gold now has one of the most strategic tenure positions of any foreign company active in South Korea covering a surface area of approximately 150km2 .
- Southern Gold’s strategic posture reflects our geological understanding of mineralised epithermal systems and the striking analogue with world-class deposits discovered and mined in southern Japan such as Hishikari (see Figure 1).
- New tenement granted at the Neungju gold-silver epithermal target with recent sampling across multiple vein corridors returned grades up to 20.3g/t Au and 13g/t Ag.
- Follow-up sampling on quartz veining over 1km long at the historic Sonbul gold mine, an existing Southern Gold tenement, returned grades up to 18.0g/t Au and 270g/t Ag.
- Neungju is the fourth new project acquired so far in 2018 with first drilling of these new assets scheduled before the end of the year.
Southern Gold Managing Director, Mr. Simon Mitchell: “Our strategic aim with the Project Generation strategy is not to ‘land grab’for the sake of it but to build a quality portfolio of targets with demonstrable mineralisation on or close to surface with the potential for the discovery of a Tier 1 gold deposit. We only add a project to our portfolio if there is a net improvement in the overall quality of our holdings and the project has the potential for economic exploitation. Under this successful strategy, a significant amount of value has been added to the Southern Gold portfolio in South Korea in the past 12 months.”
“I believe Southern Gold now has the largest tenure position of any foreign exploration company active in South Korea. Tenure is difficult to secure in South Korea and we have now been successful in acquiring 4 additional projects over the course of 2018, including Beopseongpo, Deokon, Aphae and now Neungju. This suite of projects in the Republic of Korea is a potential game-changer for Southern Gold and, subject to securing access and regulatory approvals, we look forward to commencing drilling activity on these new projects by the end of the year.”
Project Generation
Ongoing Project Generation across the southern half of the Republic of Korea continues to identify numerous exciting prospective epithermal systems, including recently granted tenure, as well as several other projects which are being prepared for application or acquisition. This highly active Project Generation programme is evidence of Southern Gold’s strategic approach to developing a portfolio of high-quality value-adding commercial opportunities within highly prospective rocks in South Korea (Figure 1 and 2).
Detailed mineral system models and an understanding of various epithermal target types have only been developed in the past 25 to 30 years. Little modern exploration for this target type has taken place in South Korea outside the work of Ivanhoe Mines in the 1990’s. However, much of this data is available to Southern Gold through the engagement of Douglas Kirwin as technical advisor.
A schematic of the setting of high-, intermediate-, and low-sulphidation (HS, IS, LS) epithermal systems is illustrated in Figure 1 below. Of note is the key world-class analogs, like Hishikari (LS), Kushikino (IS) and Nansatsu (HS) (all from southern Kyushu in Japan, see inset Figure 1) and their related analogs as evidenced in South Korea, including the historic Tongyeong Mine, and the more recent and still active Eunsan-Moisan goldsilver mines in South Korea. Southern Gold’s portfolio of epithermal targets covers the whole spectrum from high-level low-sulphidation epithermal vein systems, to mineralised low-sulphidation systems (Weolyu, similar to Hishikari), to intermediate-sulphidation systems, to high sulphidation gold-copper systems. Significantly, many of the higher-level epithermal systems Southern Gold has in its portfolio have significant depth potential.
Placement to Bluebird Merchant Ventures
ASX Announcement 20 August 2018
- Placement completed to entity controlled by Bluebird Merchant Ventures Ltd (Bluebird), under the Share Subscription, Farm In and Incorporated Joint Venture Agreement – Kochang Project
- Placement of $250,000 at $0.386 per Southern Gold share, a 35% premium at the time of original agreement execution with Bluebird in February 2018 or 88% premium to last closing price
Placement Completed
Southern Gold Ltd (‘Southern Gold’) is very pleased to advise the completion of a placement to an entity controlled by Bluebird Merchant Ventures Ltd (‘Bluebird’). The placement comprised 647,668 shares in Southern Gold priced at $0.386 per share for total proceeds of $250,000.
This placement has been made under the terms of the Share Subscription, Farm In and Incorporated Joint Venture Agreement - Kochang Project executed earlier this year (see ASX Release 13 February 2018). Pricing for the placement was set at the time the agreement was executed as a 35% premium to the 20-day volume weighted average price. It is an 88% premium to the closing price on Friday 18 August 2018.
Kochang is one of two historical gold mines in South Korea that Bluebird has agreed to farm into, the other being Gubong. The placement allows Bluebird to take Kochang to the next stage and to complete a Report on Feasibility which will assess a development scenario with capital costs of US$10 million or less.
Southern Gold Managing Director, Mr Simon Mitchell:
“It is very pleasing to see Bluebird move forward with the Kochang Project and taking it to the next stage. The placement is a vote of confidence in not only the Kochang Project itself but also Southern Gold as a company. Our recent success in the securing of additional tenure at Deokon, Beopseongpo, Hampyeong and Aphae, point to Southern Gold as a major emerging South Korean gold explorer and developer and I am sure Bluebird can see the longer-term value proposition this represents.”
“We look forward to seeing Kochang progress down the development path and see huge potential for multiple production sites in South Korea into the medium term. This vision will be executed on a very rapid timeframe with our development partner, Bluebird, indicating a target of first gold pour from the first development by the end of 2019.”
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”). At the Cannon project near Kalgoorlie we are currently developing a small underground operation where Northern Star Resources Ltd holds a five year right-to-mine. Southern Gold is also looking to develop a much larger mine, Gubong, in South Korea within the next 18 months with development partner London-listed Bluebird Merchant Ventures
We are also active explorers. Around Kalgoorlie Southern Gold is testing projects such as Glandore, Transfind Extended and Cowarna looking for additional small high-grade open pit-able gold resources to maintain cash flow. In South Korea, Southern Gold also owns a portfolio of high grade gold projects that are a combination of decommissioned gold mines with orogenic gold mineralisation and greenfield epithermal gold targets. Backed by a first-class technical team, including renowned geologist Douglas Kirwin, Southern Gold’s aim is to find world-class epithermal gold deposits.
In essence, Southern Gold looks to monetise the small gold deposits while we search for the bigger ones
Bonanza grade gold-silver in tenements granted to Southern Gold in South Korea
ASX Announcement 6 August 2018
HIGHLIGHTS
- Bonanza grade gold-silver in two new tenements granted 100% to Southern Gold at the historic Deokon Gold Mine, central-southwest South Korea.
- Grades up to: 13.3 g/t Au & 2,130 g/t Ag (mullock); 9.23 g/t Au & 1,080 g/t Ag (mullock); and, 4.0 g/t Au & 681 g/t Ag (outcrop) returned from recent rock chip and grab sampling of in-situ vein and mullock.
- Historical underground channel sampling peak results include: 0.5m @ 59.3 g/t Au & 8,879 g/t Ag; 0.6m @ 29.3 g/t Au & 3,820 g/t Ag; and, 0.6m @ 28.5 g/t Au & 7,485 g/t Ag.
- Historical drilling is sparse and poorly targeted. Mineralisation remains open along strike and down-dip of historically mined high to bonanza grade gold and silver.
- First pass field mapping and sampling by Southern Gold has, in addition to confirming mineralised zones, identified large zones of intense alteration that remain untested.
- “Walk-up” drill target to be tested in the next few months.
Tenure granted over historic Deokon Gold Mine
Southern Gold Limited is pleased to announce the granting of Exploration Rights for the Deokon Project hosting two historical gold-silver mines in central-southwest of South Korea (Figure 1). Detailed ground work early in 2018 by Southern Gold identified Deokon as one of several very prospective epithermal gold-silver targets where there is the potential for a mineralised system much greater in size than what was historically recognised.
Sampling by Southern Gold of mullock (waste from previous mining) adjacent to and on exposed veining within adits at the Deokon Main Mine and Shin Adit prospects returned nine (9) samples over 1g/t Au and a peak of 13.3 g/t gold and 2,130 g/t silver (Table 1 and Photos A to D). Two historically exploited vein trends have been defined that constitute early drill targets.
Southern Gold Managing Director, Mr Simon Mitchell: “Deokon represents a Tier 1 exploration target for Southern Gold with large footprint, spectacular gold-silver grades and easy drill and development access. It is also part of the early stages of our Project Generation work and, if the broader Deokon system is as good as we anticipate, we are confident that we will add more similar high potential projects to our portfolio. With some of these samples going 6 gold ounces equivalent to the tonne, it doesn’t take a lot of tonnes to achieve a very profitable deposit. Deokon is therefore a very important and valuable addition to our asset base.”
New report points to first gold pour in 2019 at Gubong mine in South Korea
ASX Announcement 1 August 2018
- Southern Gold development partner, Bluebird Merchant Ventures (BMV) has completed the report on the feasibility of re-opening the Gubong gold mine, South Korea.
- The delivery of the report indicates the commencement of the preconstruction phase.
- The report bolsters expectations of first gold production in late 2019 with low upfront capital costs being confirmed.
Australian gold producer, Southern Gold Ltd (“Southern Gold”) advises that its development partner in South Korea, London Stock Exchange-listed Bluebird Merchant Ventures Ltd (“BMV”), has completed its initial report on the feasibility of re-opening the historic Gubong Gold Mine.
This report is the required catalyst for the formation of a formal 50:50 joint venture between Southern Gold and BMV over the Gubong Gold Project. Over the coming months, Southern Gold will establish a Korean-based operating entity. BMV will be the Operator of the joint venture.
BMV is confident that the mooted re-opening of the old gold mine will facilitate substantial immediate mining development with access to initial low-cost ore that can be cost effectively and quickly processed after a small scalable trial plant has been established. BMV has indicated that the project could advance to production late in 2019 and look to then progressively expand production over the next 5 years.
It is important to note that the BMV report has not been prepared in accordance with the JORC Code and this limits reporting further detail around the analysis of the report, particularly the quantitative elements.
Southern Gold Managing Director, Mr. Simon Mitchell: “The report on the feasibility of re-opening Gubong is a substantive document and a lot of work has gone into its development. I appreciate the hard work undertaken here by the Bluebird team and I think this document will serve as a solid foundation for future work as we build our knowledge base in each area. While the report has not been completed to a JORC standard, it has been prepared by highly experienced technical personnel very familiar with the mine re-development scenario at Gubong.
From my perspective, the report confirms two key things, firstly, that the project can be developed very quickly and that, secondly, the low capital intensity of the redevelopment may be even lower than first targeted. The report provides confidence that the Gubong mine can be re-opened and recommissioned, with production late in 2019.”
BMV report on the feasibility of reopening of the Gubong Gold Mine
The mine closed in 1971 predominantly due to the low gold price at the time combined with the mine getting deeper, low capex investment in infrastructure and the intensive manual mining method. Gubong, as quoted in Korean Government reports, had a historical production of 430,000 ounces of gold and 110,000 ounces of silver over an intermittent production period from 1926-1971. Korean government group, KORES, has stipulated a significant residual ’Mining Resource’ but this cannot be validated under any code (JORC 2012) and as such has not been reported.
The report highlights that a preconstruction phase is required that includes ongoing dewatering of lower levels of the mine, establishing a permanent entrance to the mine requiring key land acquisitions and a more extensive sampling and metallurgical program to refine process flow. This phase will also allow the completion of a full feasibility to prepare for the construction of the processing plant and commencement of mining. This preconstruction phase has been costed at US$850,000 for the joint venture and has commenced.
The report indicates following this establishment phase, mining would initially be based around 150t per day using a range of mining methods from semi-manual to mechanized narrow vein equipment. Initial metallurgical results show high recoveries are attainable with low capital cost associated with the proposed leach method.
The report on feasibility has indicated that the gold resource potential at Gubong is very high and that there are four main sources of readily accessible ore from broken stocks in stockpile, sweeping and vamping, small remnant pillars and unmined blocks of ore. As the mine was shut very quickly, there is a high likelihood that 3- 4 months production capacity would have been available for haulage, drilled or prepared ore stopes would have been scheduled and development of ore blocks would have also been ongoing.
A combination of mining methods is envisaged using mechanised flat back stoping where possible or mechanized room and pillar or breast stoping as the ore dictates.
