Southern Gold : Half Yearly Report - 31 December 2021

For personal use only

ABN 30 107 424 519

SOUTHERN GOLD LIMITED

CONSOLIDATED FINANCIAL REPORT

For the Half Year Ended

31 December 2021

For personal use only

INDEX

		Page
Directors' Report		3
Auditor's Independence Declaration	6
Consolidated Statement of Profit or Loss and Other Comprehensive Income	7
Consolidated Statement of Financial Position	8
Consolidated Statement of Change in Equity	9
Consolidated Statement of Cash Flows	10
Condensed Notes to the Financial Statements	11
Directors' Declaration	16
Independent Auditor's Review Report	17
CORPORATE INFORMATION
ABN 30 107 424 519
DIRECTORS
Gregory Boulton AM	Non-Executive Chairman
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

2 | P a g e

For personal use only

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 2021 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
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 (International Economics)
Managing Director	Simon Mitchell	BSc (Hons) Geol, MAusIMM, GAICD, MSEG
	(retired 29th October 2021)

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 $4,138,708 (2020 loss: $1,009,752).

Review of Operations

Southern Gold Limited (Southern Gold or the Company) continues with South Korea as its primary focus, aided by the arrival in country of the recently appointed Exploration Manager, Mr Robert Smillie, on 15 October 2021. It is the opinion of our experienced technical team that the prospectivity of South Korea remains very high based on historical gold production and geology. Stable government, minimum regulation and an English-speaking workforce provides a positive environment for modern exploration techniques.

The Company will also leverage its management and exploration expertise to look to expand project and country focus to Australia, by seeking a new strategic investment / project prospects for Gold and Copper. The Board expects the identification of these opportunities to take 2-3 months. Southern Gold's Australian exploration assets previously included the Bulong South, Glandore and Cowarna gold projects, as well as the development of the Cannon Gold project in Western Australia.

South Korea: 100% owned exploration projects

During the November to January winter period, a major data compilation and regional targeting study was undertaken, laying the groundwork for a major campaign of Project Generation fieldwork during the post winter period February to June 2022, with the goal of identifying new highly prospective epithermal gold-silver mineralisation in the Cretaceous-age extensional basins.

This major campaign of Project Generation fieldwork is currently underway, being led by our highly experienced team, spearheaded by our in-country Exploration Manager, Robert Smillie. Robert is leading the target work with the assistance of our NZ based geological consultancy, Craig Panther, who has in-depth experience and knowledge of South Korean geology and epithermal deposit styles through his time in-country with Ivanhoe Mining in early 2000s. Our Non-Executive Director, Doug Kirwin with Craig Panther were key players in the discovery and evaluation of the Gasado,

3 | P a g e

For personal use only

Moisan and Eunsan epithermal gold-silver deposits (Moisan and Gasado are currently in production), and are instrumental in progressing our assets in South Korea.

The field activities are managed by Senior Geologist, Scott Randall, along with a consultant mapping geologist and data management geologist to support our local fourteen geologists and field workers resident in South Korea.

The Company currently has 65 tenement applications in progress with a total area of 181.6 km2.

Discussions have been progressed with a prep laboratory in Pohang to have the laboratory increase capacity for the field campaign. A visit to the laboratory in Pohang was conducted in December. Separate discussions continue with drilling companies, regarding potential provision of drilling services to the Company.

Covid-19

Covid-19 severely impacted field work in 2021, through the inability for key contractors and Australian based staff to travel to South Korea. During 2022, we are seeing global travel restrictions easing. However, the Company expects to continue to be impacted, albeit to a lesser degree, from temporary travel restrictions and quarantine requirements implemented by governments to manage occasional surges in new infections. The recent appointment of an in-country exploration manager has been an important step in helping to mitigate the impact of future restrictions.

Corporate

A global recruitment firm continues to conduct a search process for the right candidate to lead Southern Gold as Chief Executive Officer (CEO). The Board expects to conclude this process towards the end of the financial year. In the interim, Mr Greg Boulton, Chairman of the Board, continues as acting CEO.

All resolutions were passed by an overwhelming margin at the Company's Annual General Meeting, held 29 October 2021, including the re-election of Mr Peter Bamford as a Director.

In December, Southern Gold, through its wholly owned Singaporean subsidiary International Gold Private Limited, was issued the second tranche of 150 million shares in London Stock Exchange listed Bluebird Merchant Ventures Ltd (BMV). Southern Gold now holds 200 million BMV shares, representing 32.1% of the issued capital of BMV. This concludes consideration receivable in accordance with the Completion Agreement (for further details refer ASX Announcement 29 June 2021). 75 million of the shares are subject to escrow until 28 June 2022.

Southern Gold is in a strong cash position (A$6.1 million) and has a "drill for equity" arrangement with Ausino Drilling Services to the value of US$1.1 million (approx. A$1.5 million). Southern Gold's 200 million BMV shares have a "mark to market" value of £3.7 million (A$6.6 million), at the last traded price of BMV shares of 1.75 pence on 11 March 2022. Total cash and listed securities for Southern Gold are approximately A$12.9 million.

4 | P a g e

For personal use only

Events Subsequent to Reporting Date

On 11 February 2022, the Southern Gold granted 400,000 unlisted options under the Company's employee share option plan. On the same date, the Company advised that 1,500,000 unlisted Options had lapsed as a result of an employee ceasing employment.

At the date of signing of this Half Year Report, Southern Gold's 200 million BMV shares had a value of £3,700,000 million (or $6,600,071), based on the closing price of BMV shares of 1.75 pence on 11 March 2022, being the last traded price prior to the signing of this Half Year Report. This is $4,029,647 lower than the carrying value of $10,029,718 as at 31 December 2021 (refer Note 6). This is a non-adjusting subsequent event under Accounting Standard AASB 110.

Other than as noted above, no other matters or circumstances have arisen since the end of the half year which significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations or state of affairs of the consolidated entity in future financial years.

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 or ASX release, 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.

Auditors Independence Declaration

The auditor's independence declaration under section 307C of the Corporations Act 2001 is attached.

Dated at Adelaide this 15th day of March 2022 and signed in accordance with a resolution of the Directors.

G C Boulton AM

Non-Executive Chairman

5 | P a g e