Southern Gold : Half Yearly Report - 31 December 2020

ABN 30 107 424 519

SOUTHERN GOLD LIMITED

CONSOLIDATED FINANCIAL REPORT For the Half Year Ended

31 December 2020

INDEX
Page
Directors' Report	3
Auditor's Independence Declaration	8
Consolidated Statement of Profit or Loss and Other Comprehensive Income	9
Consolidated Statement of Financial Position	10
Consolidated Statement of Change in Equity	11
Consolidated Statement of Cash Flows	12
Condensed Notes to the Financial Statements	13
Directors' Declaration	18
Independent Auditor's Review Report	19
CORPORATE INFORMATION
ABN 30 107 424 519
DIRECTORS

Gregory Boulton AM	Non-Executive Chairman
Simon Mitchell	Managing Director
Peter Bamford	Non-Executive Director
Bee Jay Kim	Executive Director
Douglas Kirwin	Non-Executive Director
Michael McNeilly	Non-Executive Director

COMPANY SECRETARY	AUDITORS
Daniel Hill	Grant Thornton Audit Pty Ltd
Level 3, 170 Frome Street
REGISTERED OFFICE AND	Adelaide SA 5000
PRINCIPAL PLACE OF BUSINESS
10 George Street
Stepney SA 5069	EXCHANGE
Telephone: [phone]	Australian Securities Exchange Ltd
Facsimile: [phone]	Exchange Plaza 2 The Esplanade
Email:[e-mail]	Perth WA 6000
SHARE REGISTRY	ASX CODE
Automic Pty Ltd	Ordinary Fully Paid Shares: SAU
Level 2, 267 St Georges Tce
Perth WA 6000
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DIRECTORS' REPORT

The directors present their report together with the interim financial report of Southern Gold Limited and its controlled entities for the six months ended 31 December 2020 and the independent auditor's review report thereon.

The names of the directors of the Company who held office during or since the end of the half year were:

Non-Executive Chairman	Gregory Boulton AM	BA (Accounting), FCA, FCPA, FAICD
Managing Director	Simon Mitchell	BSc (Hons) Geol, MAusIMM, GAICD, MSEG
Executive Director	Bee Jay Kim	BA (Business Administration), MBA
Non-Executive Director	Peter Bamford	BSc (Eng) Mining, ARSM, MAICD, FAusIMM
Non-Executive Director	Douglas Kirwin	MSc, FSEG, FAIG, FAusIMM
Non-Executive Director	Michael McNeilly	BA (Internal Economics)
Non-Executive Director	David Turvey	BSc (Hons) Geol, MAusIMM, FSEG, Dip.GAA
(Retired 26th November 2020)

The name of the company secretary who held office during or since the end of the half year was:

Company Secretary Daniel Hill BAcc, CA, MBA, MAppFin, FFin, AGIA

Financial Results

The loss of the Group after providing for income tax for the half year was $1,009,752 (2019 loss: $2,493,552).

Review of Operations

Southern Gold Limited ("Southern Gold" or the "Company") is focused on exploring its 100% owned exploration properties in South Korea. The projects are generally at an earlier stage of definition but have demonstrated high grade gold and silver mineralisation from surface sampling.

The Company also holds a 50% equity interest in two joint venture companies that are advancing the development of the Gubong and Kochang projects. These two projects are operated by joint venture partner, Bluebird Merchant Ventures Ltd ('BMV'), a London stock exchange listed company.

South Korea: 100% owned exploration projects

Highlights from exploration activities undertaken during the half year ended 31 December 2020 are as follows:

• • Deokon: The Deokon project is a Au-Ag fertile epithermal mineralisation system, with multiple vein zone targets identified across several square kilometres of project area.

  Reconnaissance traversing and sampling was conducted to the NNW of the 'Thorn Zone', where mineralised float and outcrop veined structures were discovered at two new Prospects, the 'Thistle' and 'Nettle' Zones. Subsequent sampling in November located ore grade material in outcrop from the Nettle Zone, with one sample returning 8.56g/t gold and 9,260g/t silver.

This work extends the total known strike extent of the Golden Surprise Structural Corridor by 440m to ~1.1km. This structure, also containing the 'Bonanza Zone' and the 'Thorn Zone', remains open to the north and south and the target is focused veining where the structure intersects a brittle lithology. Follow-up extensional (reconnaissance) sampling, soil sampling and structural measurements are planned at 'Thistle' and 'Nettle' before drill testing. These targets also lie within granted tenure.

In addition, a total of 105.29m was drilled to complete the fourth and final hole in the program at 'Shin Hill', to test beneath and along strike of the historical underground workings. The peak assay was 0.57m @ 2.56g/t Au and 453g/t Ag from 101.71m in DKDD008 which targeted directly beneath the Shin Adit historical underground mine workings. This corresponds with the veining and intense alteration observed in the historical underground adit. The results at 'Shin Hill' were overall low grade, thin width and had limited persistence of veining, so attention is planned elsewhere on the Project.

The next stage at Deokon will be channel saw sampling of the 'Nettle' outcrop, followed by soil sampling. Land access will then be sought to drill at 'Thistle' and 'Nettle' as well as soil sampling at the 'Shin North' Prospect.

• • Aphae: The Aphae Project is a low-sulphidation epithermal gold-silver target within a structurally constrained magmatic breccia. The Project contains small-scale underground historical workings at 'Aphae Pit' where the breccia was partly mined.

  Assays were received from diamond drilling conducted in May-June 2020 at 'Aphae Pit', beneath and along strike of the historical workings. Peak results included 0.21m @ 107.5g/t gold and 166g/t silver in APDD004, 8.12m @ 1.26g/t Au and 7.8g/t Ag in APDD001, and 40.72m @ 0.59 g/t Au and 14.1g/t Ag in APDD003.

  An association of low magnetic susceptibility, alteration and gold mineralisation was identified in the drill core and appeared to follow a linear NNE trend under shallow reclaimed land cover. This warranted a drone magnetic survey, which was then completed over the majority of the Project area. The processed results identified a continuation of the magnetic low trend along strike of the Phase 1 drilling, interpreted to be an extension of the mineralised structure.

  Phase 2 drilling will be completed next to test the structure which is interpreted to represent magnetite destruction by hydrothermal alteration, where associated gold mineralization is sought.

• • Weolyu Project: The Weolyu Project contains an historic underground mine that exploited epithermal style gold-silver (+germanium) mineralisation on several structures. The bulk of historical mining occurred on the north side of the river, referred to as 'Weolyu North'. The south side of the river is referred to as 'Weolyu South', where small scale historical underground workings were also completed some 200m+ higher in elevation than 'Weolyu North'.

  The scale potential of the unmined resource and continuity of the 'Weolyu South' structure at depth was the resolution to move the Project forward. A drill pad position was planned to enable drill testing of the entire 'Summit', 'Surprise-Moonlight' and 'Mystery' vein system with a series of pierce points in each. Due to the deeply incised drainage valleys and very steep outcropping terrain, it was initially thought that a man-portable rig would be required.

  However, the skilled local machine operators were able to construct a suitable track to the drill pad, allowing access for a small track mounted rig.