Southern Gold has executed conditional agreements with London Stock Exchange listed Bluebird Merchant ventures for Bluebird to farm-in to two of Southern Gold’s 17 gold projects in South Korea. The farm-in relates to the Gubong and Taechang gold projects.
During the farm-in Bluebird will undertake initial feasibility studies over a 12-month period, investing US$1 million in its investigation of the reopening of the Gubong and Taechang two gold mines after which the two parties will form a 50/50 joint venture.
The projects represent two of the 17 projects acquired as a package from Asiatic Gold in July 2016.
Bluebird can earn a 50% interest in each or either of the projects on the following basis:
· Bluebird to spend US$500,000 on each project, or a total of US$1 million.
· Expenditure to be directed towards investigating the feasibility of re-opening the historic mines.
· Bluebird to undertake a technical and economic assessment of multiple options to re-open the mines and then deliver a feasibility report on the preferred option, targeting a low capital start-up of less than US$10,000,000.
· Bluebird to subscribe for A$250,000 of Southern Gold shares at $0.386 per share for each project, or a total of A$500,000.
· Upon completion of the above steps, and within 12 months of Southern Gold providing access to the projects, a 50/50 unincorporated joint venture will be formed with Bluebird as manager of the operations.
· The farm-in agreements are not cross-conditional – Bluebird could theoretically complete the farm-in conditions for one project, but not the other, although the target is to generate production from both projects in due course.
· The agreements are conditional on access to the relevant old mine workings being obtained and to Korean legal advice on changes required to the agreements to satisfy Korean legal requirements and these being confirmed as reflected in the document, a process that is currently in train.
Southern Gold managing director Simon Mitchell said, “Since acquiring our South Korean tenement package from Asiatic Gold, we have sought opportunities to fast track the re-opening of historic mines on selected projects whilst conserving Southern Gold’s capital and sharing the risk with proven mine operators.
“This agreement introduces an experienced South East Asian-based mining team with extensive experience in advancing similar narrow vein underground gold projects. There are accessible old mine workings still in place at the Gubong and Taechang projects which were significant gold producers in the past.
“There remains an enormous amount of value embedded in the extensive underground development at these projects and I am confident Bluebird will unlock this value by assisting Southern Gold to fast-track a new, low cost gold mining development.
“Importantly, Southern Gold still retains 100% ownership of the remainder of our extensive South Korean gold portfolio and our Korean exploration budget can be directed to other exciting projects such as Weolyu, Kochang and Hampyeong where there is potential for new discoveries.”
Bluebird is a South East Asian focused mining development and commodity trading group. It is led by professional mine operators that have many years of experience in all aspects of mining throughout South East Asia, where many of the executives are based.
Up until the early 1970s, the Gubong mine exploited six high‐grade quartz veins within gneissic granite over an area of 14sqkm. The most extensive workings were on the No 6 Vein that was mined down‐dip for approximately 1km or 550 vertical metres below surface. Bluebird estimates that historical infrastructure includes major adits, two vertical shafts, an incline shaft and several hundred kilometres of underground development.
Southern Gold has previously announced an exploration target range of 1 to 4.5 million tonnes at 6-12 g/t (500,000-1.5 million ounces) for Gubong. This target is not a mineral resource and is conceptual in nature.
Taechang is smaller scale than Gubong but is typically higher grade. Mineralisation is hosted in narrow shallowly dipping quartz veins with typical grades in excess of 16g/t. Underground workings are not as extensive as at Gubong but are significant nonetheless and are in excellent condition. Physical mine access was confirmed recently by Southern Gold’s reconnaissance exploration.
Based on Korean government publications the average grade of remnant mineralisation is believed to be very high grade. Because of the good condition of the workings and the excellent access on site, Taechang is seen as a quick potential development option.