Southern Gold Annual Report 2018

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FY2018 Annual Report · Southern Gold

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ANNUAL REPORT
2017/18

Directors

Greg Boulton AM
Non‑Executive Chairman

Simon Mitchell
Managing Director

Michael Billing
Non‑Executive Director

David Turvey
Non‑Executive Director

Peter Bamford
Non‑Executive Director

Company Secretary

Daniel Hill

Registered and Principal Address

1, 8 Beulah Road
Norwood, SA 5067

PO Box 255
Kent Town SA 5071

T +61 (0)8 8368 8888
F +61 (0)8 8363 0697

southerngold.com.au

Southern Gold Ltd.
ACN 107 424 519
ABN 30 107 424 519

Solicitor

Piper Alderman
Level 16, 70 Franklin Street
Adelaide SA 5000

GPO Box 65, Adelaide SA 5001

T +61 8 8205 3333
F +61 8 8205 3300

Auditor

Grant Thornton Audit Pty Ltd.
Level 1, 67 Greenhill Road
Wayville SA 5034

T +61 (0)8 8 372 6666
F +61 (0)8 8 83726677

Share Registry

Security Transfer Registrars
770 Canning Highway
Applecross WA 6953

T +61 (0)8 9315 2333
F +61 (0)8 9315 2233

CONTENTS

CHAIRMAN’S LETTER

MANAGING DIRECTOR’S OPERATIONS REPORT

TENEMENT SCHEDULE

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED)

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018

DIRECTORS’ DECLARATION

INDEPENDENT AUDIT REPORT TO THE MEMBERS

SHAREHOLDER INFORMATION

CHAIRMAN’S LETTER

Dear fellow Southern Gold shareholder,

The 2017-2018 financial year has been one of building our asset base and setting
up the company for significant growth in value into the medium to long term.
While the share market has not always reflected it, the last year, and the last 6
months in particular, has seen a significant expansion of the company’s activities
both in regard to future mine developments and exploration targets with the
potential for a significant discovery.

In South Korea, we have made progress on several of the potential
near-development gold projects, Gubong and Kochang, by joint-venturing with
London-listed Bluebird Merchant Ventures (BMV) group who are experts at
re-starting old mines and building narrow vein underground gold operations.
BMV has stated that, subject to timely dewatering of the mines, they expect to
achieve first gold pour by the end of 2019.

This has enabled us to focus on building our exploration footprint in Korea by
targeting highly prospective epithermal gold-silver mineralisation.

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018CHAIRMAN’S LETTER

In Australia, we continue to do exploration work around our
Kalgoorlie based tenement package. We expect the Cannon
Gold Mine to move to underground phase at some point in the
not‑to‑distant future but the exact timing of this is currently in
the hands of Northern Star Resources who are the current holders
of the right‑to‑mine. Southern Gold hopes to announce further
developments on the Australian front in the coming financial year.

Some of the highlights for your Board in the past year include:

• Completion of the 5 year right‑to‑mine agreement for the Cannon
deposit with Westgold Resources Ltd in January this year, which
was subsequently inherited by Northern Star Resources when
Westgold sold its Kalgoorlie asset position. The Cannon Gold
Mine remains an important asset of the company and we are
confident of releasing additional value from it in due course.

• The appointment of Mr Peter Bamford, a very experienced mining
executive with specific underground mining experience, including
narrow‑vein gold mining. Peter’s background will be very useful to
the company as it pursues underground mining opportunities in
both Australia and South Korea.

• The securing of new tenements in South Korea over the last 6 to
9 months or so with the addition granted tenure at Hampyeong,
Aphae, Beopseongpo, Deokon and Neungju. All of these projects
are epithermal gold‑silver mineralised systems, some of which
have extremely high grades at or near surface and we are quietly
confident of making new discoveries here once we get drilling.

Looking forward to 2019, Southern Gold will be hitting some
important milestones: the commencement of underground mining
at the Cannon Gold Mine, the completion of a feasibility study for
the Gubong project, the definition of a maiden JORC resource at
Weolyu and the testing of multiple drill targets, particularly our
100% held epithermal gold‑silver targets in South Korea. Success
on any of these fronts will add significant value to the company.

At the time of writing Southern Gold was in the process of raising
funding for this next phase of our corporate growth. We have been
actively promoting the company in Australia and intend to expand
this into off shore jurisdictions where equity market support for
mining and exploration in South Korea is much stronger.
Already the Company has been getting very good feedback from
investors in Singapore, Hong Kong and London and we will build
on that sentiment.

I sincerely thank all the people who have worked on behalf of
Southern Gold this last year including our staff, contractors and
advisors. There have been some challenges in the operating
environment in 2017‑18, including a comprehensive regulatory
environment in Australia and physical barriers to entry to the
old mines in South Korea that have required perseverance.
Overall, I would say our people have done a great job of keeping
our objectives on track, albeit at a slower pace than we would
sometimes like.

I would also like to thank our Board, Managing Director Simon
Mitchell, and Non‑Executive Directors, Peter Bamford, Mick Billing
and David Turvey. I would like to add special thanks to Mick Billing
who has served as a director of Southern Gold for over 12 years and
retires at the November 2018 AGM. Mick has been a steady hand
on our board and made a significant contribution to the evolution of
the company over the past decade.

I look forward to the coming financial year where a lot of the
base line work conducted so far will come to fruition. Subject to
adequate funding we will be drill testing a lot of epithermal targets
in South Korea and still expect to generate cash from the Cannon
underground. It should be a busy and exciting time for our staff
as they seek to make the next major discovery and, ultimately,
a rewarding one for our shareholders.

Yours sincerely,

Greg Boulton AM

Chairman

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORT

Dear fellow Southern Gold shareholder,

Further to the Chairman’s review of the past financial year and our
future corporate strategy, I provide the following high-level overview
to our specific project assets:

Western Australia

The Cannon Gold Mine continues to be a flagship asset in the
Western Australian portfolio. Late in 2017 we defined a new
underground Indicated and Inferred JORC resource total of
142kt @ 5.2g/t Au for 23.6koz Au (see Table 1 below for details).
The resource constitutes a tightly defined, relatively high‑grade
gold pod below the Cannon open pit and presents a good
opportunity for underground mining (see Figure 1). In addition, the
deposit remains open at depth and it is intended to drill potential
extensions of the deposit from the underground workings once
they are in place. Southern Gold sold a 5 year ‘right‑to‑mine’ to
Westgold Resources Ltd for A$1.5m with a significant trailing royalty
(see Table 2), an arrangement inherited by Northern Star Ltd. when
they purchased Westgold’s Kalgoorlie based assets. At the time of
writing Northern Star were yet to provide a development proposal or
timeline but Southern Gold remains confident that the deposit will
be monetised as we move into 2019.

Southern Gold also conducted exploration drilling programmes
at Glandore, Cowarna, Bulong and Transfind Extended gold
projects. Mineralisation worthy of follow up was intersected at
Glandore, Cowarna and Transfind where some very high‑grade
intercepts (1m @ 133.7g/t Au and 2m @ 24.95g/t Au for example)
were returned. It is the technical teams’ interpretation at this time
that Transfind presents an opportunity to define a small but very
high‑grade open pit, not unlike what was mined historically at
Transfind itself.

While good grades were intersected at Glandore and several of the
targets such as Doughnut Jimmy and Lavaeolus were technically
advanced, we were not successful in defining a JORC resource that
had a reasonable economic rationale. The deposits currently remain
small but are open to extension and may ultimately qualify for a
JORC resource, but this will require another round of exploration
drilling, particularly targeting high grade gold shoots at depth.

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORTTable 1: Cannon Underground Resource between 255m RL and 145m RL at 1g/t Au lower cut off and variable top‑cut by domain.

JORC Category

Total Indicated

Total Inferred

Total Resource

Tonnes

121,570

20,700

142,270

Grade
g/t Au

5.68

2.10

5.17

Au Troy
Ounces

22,180

1,400

23,580

Note: totals may differ due to rounding.

Table 2: Production Payment Matrix: Cannon Right‑to‑Mine

Au Produced

Quarterly Au Price =A$1800/oz

Production up to 15koz Au

Production over 15koz Au

$160/oz

$180/oz

$190/oz

$210/oz

Figure 1: Cannon oblique cross section view looking to the north‑north‑east, showing Cannon Pit, and conceptualised UG development.

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORTChannel sampling of the Shin Adit, Deokon Gold‑Silver Project, South Korea

South Korea

In South Korea while progress on some fronts has been slower than
we would like, in other areas we have made great strides. On the
slow front we have been frustrated by the productivity of drilling
contractors – something we have a solution come 2019. On the
positive side we have made very good progress with our dealings
with the Mine Registry Office in South Korea and have had several
projects granted to the company particularly over the last 6 months
of the financial year.

Some of the important milestones achieved in South Korea were:

• The Farm In and Joint Venture Agreement with London listed
Bluebird Merchant Ventures was expanded to include the
Kochang project and BMV securing physical access to the inclined
adit at Gubong which is now ready for de‑watering and more
comprehensive underground access;

• The installation of ladders and safe access to the underground
workings at Weolyu – this enabled the in‑situ sampling of the
epithermal vein system, backing up our surface drilling results that
confirm the top of the deposit;

• A first pass scout drilling programme was completed at the

Hampyeong Project with best result of 0.95m @ 5.3g/t Au and
4.9g/t Ag in drill hole HPDD003 and confirming mineralization
over 1km of strike.

Project Generation samples laid out on the floor ready for slabbing and sampling.

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORT7

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORTFigure 2: Stylised long section of Weolyu South old workings and sampling with interpreted plunging mineralised shoots open at depth.

South Korea cont.

Outlook for FY19

In addition to the above, Southern Gold has added a significant
amount of value to its South Korean portfolio with the grant of
several epithermal gold‑silver projects. This includes tenure being
granted 100% to Southern Gold for Aphae, Beopseongpo, Deokon
and Neungju projects, some of which have demonstrable very
high‑grade gold‑silver mineralisation outcropping at or near surface.
In other cases, the target is a technical one, with high confidence
that economic mineralisation may be defined approximately 150m
below surface. All of these new projects represent first class
exploration drill targets.

We are seeing some astounding rocks in South Korea and continue
to build our portfolio with better and better quality targets.
In essence we believe we are gradually uncovering an evolving new
epithermal mineralized district scale play, with the potential for
multiple discoveries. It is a truly exciting exploration play and we
cannot wait to drill test them.

Southern Gold is a company with a significant asset base and a
modest market capitalisation. With more than 16 projects across
2 jurisdictions, including development projects in both Australia
(Cannon) and South Korea (Gubong and Kochang) and a significant
and growing epithermal gold‑silver target portfolio in southern
South Korea, there is more underlying asset value that needs to
be released.

This will be achieved in several ways. Assets within the portfolio that
are currently getting little value in the market will be monetised in
some way, either through cash sale or equity vend into a third‑party
company.

But perhaps the most important task ahead of us is bringing drilling
expertise into South Korea to improve drilling productivity. Southern
Gold stands ready to lift the drilling activity significantly in South
Korea, and subject to funding being secured, we will test multiple
highly prospective targets with the potential for a significant
precious metals’ discovery.

I, for one, can’t wait to get drilling!

Simon Mitchell

Managing Director

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORTJORC Resource Statement

Mineral Resource Estimate – Cannon

Cannon Mineral Resource Statement ‑ 30/06/2018

Ore Body

Reporting
Lower
Cut-Off

Measured

Tonnes

Au Grade
(g/t)

Ounces
Au

Indicated

Tonnes

Au Grade
(g/t)

Ounces
Au

Inferred

Tonnes

Au Grade
(g/t)

Ounces
Au

Cannon

1.0g/t

‑

121,570

5.68

22,180

20,700

2.10

1,400

Notes:

• The Resource as at 30/06/18 represents the remnant portion of the Resource that remains beneath the final pit and only within the

Southern Gold Cannon ML25/333 tenement (i.e. exclusive of Georges Reward Resources).

• Rounding will affect numerical totals.

Competent Person’s Statement

The information in this report that relates to Exploration Results in the Company’s Australia tenements has been compiled under the
supervision of Mr Justin Gum (MAIG). Mr Gum who is an employee of Southern Gold Limited and a Member of the Australasian Institute of
Geoscientists, has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration and to the
activity he has undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for the Reporting of
Mineral Resources and Ore Reserves. Mr Gum consents to the inclusion in this report of the matters based on the information in the form
and context in which it appears.

The information in this report that relates to Exploration Results in the Company’s South Korean tenements has been compiled under the
supervision of Dr Chris Bowden (FAusIMM(CP)). Dr Bowden, who is an employee of Southern Gold Limited and a Fellow and Chartered
Professional of The Australasian Institute of Mining and Metallurgy, has sufficient experience which is relevant to the style of mineralisation
and type of deposit under consideration and to the activity he has undertaken to qualify as a Competent Person as defined in the 2012 Edition
of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr Bowden consents to the inclusion in
this report of the matters based on the information in the form and context in which it appears.

The information in this report that relates to Cannon Mineralisation has been compiled under the supervision of Mr Paul Androvic (MAusIMM).
Mr Androvic, who is an employee of Southern Gold Limited and a Member of The Australasian Institute of Mining and Metallurgy, has
sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he has
undertaken to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for the Reporting of Exploration
Results, Mineral Resources and Ore Reserves”. Mr Androvic consents to the inclusion in this report of the matters based on the information in
the form and context in which it appears.

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, except as
me be required under applicable laws. Recipients should make their own enquiries in relation to any investment decisions from a licensed
investment advisor.

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORTTENEMENT SCHEDULE – WESTERN AUSTRALIA

The following interests in tenements are held by Southern Gold, as at 2 October 2018.

PROJECT

Bulong Project

Bulong South

Heron KNP JV

Cowarna Project

Cowarna

Glandore Project

Glandore

TENEMENT
NUMBER

L25/43

L25/50

L25/51

E25/349

M25/182

M25/333

P25/2143

P25/2365

P25/2449

M25/59

M25/134

M25/145

M25/161

M25/171

M25/209

E25/474

E25/497

E25/503

E25/551

M25/327

M25/329

M25/330

P25/2154

P25/2215*

P25/2216*

P25/2390

AREA

148 ha

16 ha

13 ha

922 ha

429 ha

400 ha

54 ha

49 ha

21 ha

84 ha

815 ha

172 ha

640 ha

101 ha

960 ha

7065 ha

6580 ha

294 ha

2058 ha

122 ha

456 ha

703 ha

110 ha

45 ha

117 ha

84 ha

REGISTERED
HOLDER

SOUTHERN GOLD
EQUITY

Southern Gold Ltd.

Inferus Resources Ltd.

Southern Gold Ltd.

Hampton Nickel Pty Ltd.

Southern Gold Ltd.

Aruma Exploration Pty Ltd.

Southern Gold Ltd.

100%

80%

100%

75%

100%

*Application has been made for the surrender of these tenements.

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORTTENEMENT SCHEDULE – SOUTH KOREA

The following tenements are held by a 100% owned South Korean subsidiary, Southern Gold Korea Ltd., as at 2 October 2018.

TENEMENT INFO

MINE NAME

Korean

English

Block ID

Hwangryong (Yangji)

Weolyu

Hampyeong Sonbul

Hwacheon

Ongam

Daeil

Heungdok

Samhwang‑hak

Pungsan

대천

영동

망운

영덕

대천

설천

대흥

Daecheon

Yeongdong**

Mangun

Yeongduk**

Daecheon

Seolcheon

Daehung

No.

79249

79250

79174

79251

79254

79255

79233

79234

79231

79232

79177

79224

79223

79226

79178

79225

79179

79180

79181

79227

79229

79230

79228

Type

Mining

Date of
Granting

10/02/2011

24/01/2011

10/02/2011

14/02/2011

8/02/2011

24/01/2011

8/02/2011

24/01/2011

8/02/2011

24/01/2011

8/02/2011

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORTTENEMENT SCHEDULE – SOUTH KOREA cont.

The following tenements are held by a 100% owned South Korean subsidiary, Southern Gold Korea Ltd., as at 2 October 2018.

TENEMENT INFO

MINE NAME

Cheongwon

Jangam

Suam

Gubong***

Taechang (Sobo)

Kochang***

Hampyeong Sonbul

Imcheon

Hampyeong

Aphae‑Do

Beopseongpo*

Deokon*

Neungju*

Korean

English

Block ID

No.

증평

미원

증평

청양

대천

목계

안의

망운

부여

나주

무안

법성포

덕온

능주

Jeungpyeong

100

Miwon

Jeungpyeong

Cheongyang

Daecheon

Mockgye

Aneui

Mangun

Buyeo

Naju

Muan

Beopseongpo

Jeonju

Neungju

134

135

136

137

146

147

145

136

137

136

109

77037

77028

77066

77067

77065

78089

78090

78091

78092

78093

78094

78095

78096

78097

78645

78646

78086

78087

78088

200136

200222

200970

200996

201028

201029

201041

201040

201042

Type

Mining

Date of
Granting

19/06/2008

16/06/2008

24/06/2008

1/09/2009

1/06/2010

1/09/2009

Exploration

27/08/2012

Exploration

14/01/2013

Exploration

11/01/2018

Exploration

6/03/2018

Exploration

11/07/2018

Exploration

11/07/2018

Exploration

31/07/2018

Exploration

31/07/2018

Exploration

31/07/2018

*Granted post 30 June 2018

**English translation spelling change from 2017 version

***Ownership is to be transferred to a 50% owned joint venture company, the other 50% being owned by Bluebird Merchant Ventures Ltd.

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MANAGING DIRECTOR’S OPERATIONS REPORTThe directors present their report of Southern Gold Ltd.
(the Company) and its controlled entities (consolidated group or
group) for the financial year ended 30 June 2018.

Principal Activities

The principal continuing activity of the group in the year was the
mining of gold and exploration for gold, silver, and other economic
mineral deposits.

Financial Results

The net result of operations for the group for the year was a loss
after income tax of $702,955 (2017: profit of $2,506,188).

Dividends

In the prior financial year, a dividend of $0.03 per share was
declared on 6th June 2017. Shareholder were offered a dividend
re‑investment plan with Shares priced at $0.25 per share. On 30
August 2017, the Company paid the dividend as $945,648 in cash
and issued 1,858,138 shares through the dividend re‑investment
plan with Shares priced at $0.25 per share.

No dividends were declared in relation to the current financial year
ended 30 June 2018, and the directors do not recommend the
payment of dividends in respect of the financial year.

REVIEW OF OPERATIONS

Southern Gold Ltd. (“Southern Gold” or the “Company”) operates
in two jurisdictions, in the Kalgoorlie district of Western Australia
and in various regions of South Korea. In Australia the Cannon Gold
Mine is entering an underground development phase with potential
cash flow underpinning our exploration and development activities
on other fronts. Those development activities include the Gubong
and Kochang projects in South Korea, currently under farm‑in with
Bluebird Merchant Ventures Ltd., and the Weolyu gold‑silver project
where underground workings were accessed and the definition of
a maiden JORC Resource remains a possibility. In parallel with this
development work is a substantial portfolio of largely epithermal
gold‑silver targets in southern South Korea which we have been
actively exploring in the past year.

Australia

Southern Gold has a substantial exploration footprint in and around
Kalgoorlie in Western Australia. The company has 5 projects:

• The Cannon Gold Mine: which is in the process of transitioning

to underground mining;

• The Bulong Gold Project: which is to the immediate east of the

Cannon Gold Mine;

• The Glandore Gold Project: which is currently being farmed

into by Southern Gold;

• The Transfind Gold Project: a small area but with high grade

(visible) gold on surface;

• The Cowarna Gold Project: a significant area adjacent to
the operations of Silverlake Resources Ltd. and covering a
regional‑scale extension to the banded iron formation which host
Silverlake ore deposits at Santa, Cockeyed Bob and Maxwells.

Cannon Gold Mine: Southern Gold announced a new gold
resource estimate, defined in accordance with the 2012 JORC code,
at the Company’s Cannon gold mine, near Kalgoorlie, Western
Australia (Table 1 and see ASX Release 9 October 2017).

The resource was estimated using the Inverse Distance Weighting
(IDW) method based on the results of 126 drill holes (105 RC, 21
DDH through the mineralized zone) using a nominal 1g/t Au cut off
grade and a maximum internal dilution of 3m down hole. The drill
hole spacing across the resource ranges from 5m to 10m along
strike and is considered close spaced drilling providing a very high
confidence in the data and resource estimate.

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018REVIEW OF OPERATIONS cont.

Table 1: Cannon Underground Resource between 255m RL and 145m RL at 1g/t Au lower cut off and variable
top-cut by domain.

JORC Category

Total Indicated

Total Inferred

Total Resource

Note: totals may differ due to rounding.

Early in 2018 Southern Gold agreed the terms of a 5 year
right‑to‑mine with Westgold Resources Ltd. (‘Westgold’) in a
defined area covering the Cannon deposit and immediate surrounds.
The agreement essentially allowed Westgold to advance the Cannon
mine to the underground stage with Southern Gold to receive
$1.5 million upfront (paid in January 2018) and then a production
payment of between

$160/oz and $210/oz depending on cumulative production levels
and the prevailing gold price. See ASX Release 23 January 2018
for details.

Subsequently Northern Star Resources acquired Westgold’s
Kalgoorlie assets and is now the holder of the Cannon right‑to‑mine.
Northern Star is yet to formally advise its intention regarding
advancing the Cannon project and time frames for the underground
development. The legal agreement includes provisions that result in
the right‑to‑mine expiring should the project not be advanced in a
timely manner.

Bulong Gold Project: activity during the reporting period has
been limited to soil and bio‑ geochemistry surveys to develop new
methods of looking through cover to discover blind mineralisation,
principally in the north‑easterly and south‑westerly extensions
of the Cannon shear. Follow‑up drilling at Monument South
consisting of 16 RC drill holes for 1332m did not return any
significant intersection.

Glandore Gold Project: Southern Gold is farming into the
Glandore Project, 40km east of Kalgoorlie and currently held by
Aruma Resources, and can earn up to 90% of the project after
expenditure of $1.2m over a 3 year period. Southern Gold has now
completed expenditure of approximately $1.1 million after 2 years
and earnt the right to 75% of the project. Our Joint Venture partner,
Aruma Resource Ltd., is currently diluting to 10%.

Section 18 Ministerial consent to disturb the registered heritage Site
DAA 30602 “Lake Yindarlgooda Mammu Tjukurrpa” was approved
during the reporting period.

A program of 15 Reverse Circulation (RC) and 31 Air Core (AC) drill
holes for 2467.5m was completed to evaluate shallow (<40m) gold
mineralisation at Doughnut Jimmy prospect and, secondly, to target
regional gold exploration targets at the project’s Lavaeolus, Lankin
and Lakes Consol prospects.

Tonnes

Grade g/t Au

Au Troy Ounces

121,570

20,700

142,270

5.68

2.10

5.17

22,180

1,400

23,580

Doughnut Jimmy was targeted with 25 AC holes (GLAC001‑025)
drilled to ~40m in depth. These holes were designed as tightly
spaced (10m) infill holes, to test for a previously modelled, flat lying
gold supergene blanket, residing above fresh rock over a 90m x
50m area.

Exploration drilling at Lavaeolus consisted of 6 aircore holes
(GLAC026‑031) for 240m. These holes were designed to test for
extensional gold mineralisation in the upper 30m. No significant
gold assays were intersected.

Exploration drilling at Lankin consisted of 4 RC holes for 352m
(GLRC012–015). Drilling intersected a east dipping quartz veined
dolerite unit with silica‑pyrite alteration. However only low‑
level gold (<1g/t Au) was intersected. One drill hole, GLRC015,
intersected 3m @ 3.51g/t Au from 109m, in a more dominant shear
zone with associated biotite alteration.

Exploration drilling at Lakes Consol consisted of 11 x RC holes for
888.5m (GLRC001 – 011). The RC drilling successfully intersected
the targeted shear zone (chlorite‑sericite schist) however, the shear
returned no significant intersection.

Transfind Extended Gold Project: Soil sampling has highlighted
two parallel shear zones extending from the Transfind pit. These
correspond with previous sampling and drilling results and reinforce
the quality of the drill target at Transfind Extended.

Follow up drilling consisting of 984m of RC drilling returned some
high‑grade intercepts including 1m @ 133.7g/t Au and 2m @24.4g/t
Au and warrants further drilling and assessment.

Cowarna Gold Project: Southern Gold received approval from
the Department of Biodiversity, Conservation and Attractions for
its Conservation Management Plan and enables the company to
proceed with drilling and exploration works in the area.

A first pass drilling programme at Cowarna targeting the Pryde and
Logan prospects was completed with 16 RC drill holes for 1694m.
Best intersections include 8m @ 1.05g/t Au, including 1m @ 3.68g/t
Au at Logan, and 2m @ 1.51g/t Au at Pryde. Follow up is required
on both targets, particularly to assess the Banded Iron Formation
at depth.

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018Weolyu Gold-Silver Project: Southern Gold’s 2017 program at
Weolyu South comprised 5 diamond drill holes for 1,256m and
the drilling program successfully intersected high‑grade gold and
silver bearing banded low‑sulphidation epithermal quartz veins at
the Surprise, Moonlight and Summit vein systems. The drilling was
conducted in steep, difficult‑to‑access terrain with the topography
limiting optimal drill targeting of veins.

The mapped and logged epithermal quartz vein textures and silver
values up to 0.1% Ag are indicative of a high‑level low‑sulphidation
epithermal quartz vein system with significant depth potential over
hundreds of metres.

Safe underground access at Weolyu South was also achieved in
November 2017 via newly installed ladders, and from this, an
intense phase of underground works focused on testing the
Surprise and the Moonlight Veins was completed. A total of 101
underground channel samples (wall/back/face) were collected, over
a strike length of 150m, covering three levels. The sampling was
conducted on in‑ situ veining of the mapped Surprise and Moonlight
veins with assay results confirming numerous intercepts of
high‑grade epithermal gold and silver quartz veining and excellent
mineralisation continuity.

A series of high grade shoots have been interpreted plunging below
the level of the old workings and supported by the intersection from
the diamond drilling in WUDD007.

In terms of future potential and extensions to mineralised zones,
Weolyu South sits within the high‑ silver zone of the epithermal
mineralisation vertical zonation model, with the expectation that the
high‑gold zone is situated below this level.

Hampyeong Gold Project: Southern Gold announced the
discovery of multiple gold mineralised epithermal quartz veins
outcropping in a zone over 200m wide and over 1 km in strike
extent, with outcropping veins having true widths of 4‑5m in
some zones.

A maiden diamond drilling program at Hampyeong confirmed the
presence of shallow gold mineralisation with best intersections of
0.95m @ 5.33g/t Au from the Nabi vein and 0.7m @ 2.47g/t Au
from the A’Cha vein.

REVIEW OF OPERATIONS cont.

South Korea

In addition to its Australian portfolio, Southern Gold has a
significant exploration position in South Korea. The company has
2 projects (Gubong and Kochang) currently being advanced under
a farm‑ in and joint venture agreement with Bluebird Merchant
Ventures Ltd., a London listed specialist narrow‑vein underground
gold mining group. In addition to these development projects
Southern Gold is also actively exploring its portfolio of epithermal
gold‑silver targets.

Gubong Gold Project: Southern Gold wholly‑owned subsidiary,
Southern Gold Korea (SGK) has been working with development
partner, London Stock Exchange‑listed Bluebird Merchant Ventures
Ltd. (‘Bluebird’) on the reopening of the Gubong Gold Mine in
central South Korea. Bluebird has confirmed physical access to
the mine has been achieved and has now commenced preliminary
assessment works.

The current Bluebird mine model capturing the extent of the
historical data indicates that the mine has been developed along at
least 1.5km of strike and to 500m below ground level and includes
in the order of 120km of underground development. Subsequent
to the end of the financial year, Bluebird submitted a Report on
Feasibility to Southern Gold on the potential re‑development of the
Gubong Gold Mine. The high‑level conclusion of the report was that
it should be feasible to re‑open the old workings and commission
a low‑cost vat leach processing system. The aim is to produce a
modest amount of gold initially but then ramp up production with
time and the benefit of cash flow. The next stage at Gubong will see
Bluebird complete a more detailed feasibility study that will provide
a more quantitative assessment of the re‑development option.
This is expected at the end of 2018 or early 2019.

Kochang Gold Project: Southern Gold completed a significant
amount of ‘boots on the ground’ field mapping and sampling
and demonstrated kilometre scale mineralisation is in place at
Kochang during the field season in 2017. With an historic gold and
silver mine on the tenement and with relatively easy underground
access at the gold mine, and challenging topography on surface,
the logical next step is to evaluate the project at the quartz vein
system underground.

To that end the arrangement with Bluebird has been extended
with an additional Farm In and Joint Venture Agreement over
the Kochang Project. Bluebird has confirmed physical access
underground and taken extensive underground samples confirming
the overall tenor and potential for remnant gold mineralisation to
be exploited with a re‑development programme similar to what is
contemplated at Gubong.

Bluebird is now working on the Report on Feasibility for Kochang
which is expected early in the new financial year.

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018The information in this report that relates to JORC Resources has
been compiled under the supervision of Mr. Paul Androvic (AusIMM).
Mr Androvic who is an employee of Southern Gold Ltd. and a
Member of the Australasian Institute of Mining and Metallurgy, has
sufficient experience which is relevant to the style of mineralisation
and type of deposit under consideration and to the activity he has
undertaken to qualify as a Competent Person as defined in the
2012 Edition of the Australasian Code for the Reporting of Mineral
Resources and Ore Reserves. Mr Androvic consents to the inclusion
in this report of the matters based on the information in the form
and context in which it appears.

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,
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.

REVIEW OF OPERATIONS cont.

Project Generation: A major Project Generation exercise in
South Korea has been launched involving the detailed study of
historical databases and the work of very experienced technical
advisors to generate a short list of highly prospective high to low
sulphidation epithermal gold‑silver projects in the south of the
country. The most prospective of these targets were checked on the
ground and several new tenement applications were put in place.

During 2018 several of these projects have now been granted 100%
to Southern Gold, including, in chronological order of grant (Deokon
was subsequent to financial year end):

• Aphae: a small historic gold mine (with reportedly bonanza

grades) where mullock sampling by Southern Gold has returned
6.8g/t Au and where access is relatively straight forward.

• Beopseongpo: a 3.8km long Au‑Ag epithermal system with

surface samples up to 21.8g/t Au and 19g/t Ag but where the
surface expression represents a very high level in the epithermal
mineralisation model and the drill target is 150m below surface.

• Deokon: bonanza grade gold and silver returned from mullock

and ourcrop samples (peak result of 13.3g/t Au and 2,130g/t Ag)
with the mineralised system including multiple vein or mineralised
zones which is open in all directions.

These all constitute excellent drill targets for the coming
financial year.

Competent Person’s Statements

The information in this report that relates to Exploration Results
in Australia has been compiled under the supervision of Mr. Justin
Gum (MAIG). Mr Gum who is an employee of Southern Gold Ltd.
and a Member of the Australasian Institute of Geoscientist, has
sufficient experience which is relevant to the style of mineralisation
and type of deposit under consideration and to the activity he has
undertaken to qualify as a Competent Person as defined in the
2012 Edition of the Australasian Code for the Reporting of Mineral
Resources and Ore Reserves. Mr Gum consents to the inclusion in
this report of the matters based on the information in the form and
context in which it appears.

The information in this report that relates to Exploration Results in
South Korea has been compiled under the supervision of Dr Chris
Bowden (FAusIMM(CP)). Dr Bowden, who is an employee of
Southern Gold Ltd. and a Fellow and Chartered Professional of
The Australasian Institute of Mining and Metallurgy, has sufficient
experience which is relevant to the style of mineralisation and type
of deposit under consideration and to the activity he has undertaken
to qualify as a Competent Person as defined in the 2012 Edition
of the Australasian Code for the Reporting of Exploration Results,
Mineral Resources and Ore Reserves. Dr Bowden consents to the
inclusion in this report of the matters based on the information in
the form and context in which it appears.

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018CORPORATE

Finance

Early in the year ended 30 June 2018, Southern Gold received
$2,185,413 in final cash distributions from the open cut mining
phase of the Cannon gold deposit, near Kalgoorlie.

Southern Gold has entered a new agreement with development
partner, Westgold Resources Ltd. (“Westgold”) (ASX: AGX) for
the underground development phase at the Cannon gold deposit.
The agreement grants Westgold a 5 year right‑to‑mine the Cannon
gold deposit, for consideration of $1,500,000 paid to Southern
Gold in January 2018 together with future production payments
based on a $/troy oz of gold produced. Subsequently Northern Star
Resources Ltd. acquired Westgold’s Kalgoorlie assets and is now the
holder of the Cannon right‑to‑mine.

Southern Gold also received a Research and Development tax refund
of $187,482.

On 30 August 2017, the Company paid a dividend declared in the
prior year ended 30 June 2017, as a cash payment of $945,648 and
1,858,138 shares for those shareholders participating in the Dividend
Reinvestment Plan. This was the only issue of shares during the year
ended 30 June 2018.

The Company’s ending cash balance was $2,080,242.

Changes in State of Affairs

During the financial year there was no significant change in the state
of affairs of the Group other than that referred to in the financial
statements or notes thereto.

Events Subsequent to Reporting Date

On 20 August 2018, a total of 647,668 shares were issued to
Bluebird Merchant Ventures Ltd. (‘Bluebird’), for proceeds of
$250,000. The placement was made pursuant to the Share
Subscription, Farm In and Joint Venture Agreement – Kochang
Project, which had been executed earlier in the year (refer ASX
release 13 February 2018).

New exploration rights, in South Korea, were granted 100% to
Southern Gold as follows:

• Two tenements granted at the recently identified Beopseongpo
gold‑silver epithermal target in the south west of South Korea
(refer ASX Announcement 19 July 2018);

• One tenement granted at the Deokon Project hosting two

historical gold‑silver mines in the in the central ‑ south west of
South Korea (refer ASX Announcement 6 August 2018).; and

• One tenement granted at the Neunju gold‑silver epithermal target

in the south west of South Korea (refer ASX Announcement
4 September 2018).

Following completion of the required US$500,000 expenditure
at the Gubong Gold Project in South Korea by Bluebird Merchant
Ventures Ltd. (Bluebird), Bluebird and Southern Gold executed
a definitive Farm In and Joint Venture Agreement (refer ASX
Announcement 29 March 2018). The Joint Venture was to formally
commence after submission of the feasibility report on the Gubong
Gold Project. The feasibility report was completed subsequent to the
year ended 30 June 2018 (refer ASX Announcement 1 August 2018).

Other than the above, there has not arisen in the interval any
matters or circumstances, since the end of the financial year which
significantly affected or could affect the operations of the Company,
the results of those operations, or the state of the Company in
future years.

Likely Developments

Southern Gold will continue to advance the Australian asset base
and seeks to monetise additional value, particularly from the
advancement of the Cannon Gold Mine which is moving into an
underground mining phase. Additional exploration assets around
Kalgoorlie have the potential to add to a JORC resource base over
time or provide opportunities for synergistic transactions with other
explorers in the district.

In South Korea the Company will seek to advance on two fronts.
Firstly, the Farm In and Joint Venture with Bluebird Merchant
Ventures will advance to the development stage with near term
production potential from at least one project. And secondly,
Southern Gold intends to drill test multiple epithermal gold‑silver
targets in southern South Korea where it is believed the chances of
new discovery are very high.

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018CORPORATE cont.

Environmental Regulation and Performance Statement

The Company’s operations are subject to significant environmental regulations under Commonwealth and Western Australian legislation in
relation to discharge of hazardous waste and materials arising from any mining activities and development conducted by the Company on any
of its tenements.

In South Korea exploration and mining activity is principally regulated at the national level by the Ministry of Trade, Industry and Energy
(MOTIE) which in turn manages mining and exploration affairs through the Mine Registration Office and the Mine Safety Office.

Environmental issues are regulated through either the Framework Act on Environmental Policy or the Environmental Impact Assessment Act.
Southern Gold is currently investigating the detailed regulatory framework in South Korea to ensure it manages the business prudently as we
move projects forward into production.

Southern Gold’s wholly owned subsidiary in South Korea, Southern Gold Korea, carries out exploration activities and there have been no
known environmental breaches attributed to these exploration activities to date.

Options

At the date of this report, the unissued ordinary shares of Southern Gold Ltd. under option are as follows:

Issue Date

27.11.2014

01.02.2015

12.07.2016

15.05.2017

26.10.2017

30.11.2017

Date of Expiry

Fair Value at
Grant Date

Exercise Price

Number under
Option

30.11.2019

18.11.2020

30.06.2021

15.05.2022

25.10.2020

30.11.2022

31.07.2022

0.105

0.109

0.282

0.152

0.153

0.139

0.112

0.108

0.375

0.400

0.500

0.375

400,002

333,334

955,000

250,000

1,750,000

475,000

30,000

5,943,336

Option holders do not have any rights to participate in any issues of shares or other interests in the Company or any other entity.

For details of options issued to Directors and Executives as remuneration, refer to the Remuneration Report.

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018David Turvey
B Sc(Hons) Geol, MAusIMM (Non‑Executive Director)

Mr Turvey is a geologist with over 30 years’ experience in the
Australian and Asian mining industries where he has driven business
development and corporate M&A activities in precious metals,
bulk commodities and industrial minerals. His experiences include
holding key management roles and consulting assignments in
minerals exploration, technical marketing, project development and
commercial evaluation of mineral asset investments.

Mr Turvey was formerly a Non‑Executive Director of ASX listed
Lawson Gold Ltd. until July 2013, and was previously Managing
Director of FerrAus Ltd. from December 2005 to June 2009.

Mr Turvey currently has 501,208 shares and 633,334 options in
Southern Gold Ltd.

Peter Bamford (appointed 13 February 2018) (Member of
Audit Committee)
BSc (Eng) Mining, ARSM, MAICD, FAusIMM

Mr Bamford has a career spanning more than 40 years in the
construction and mining industries, principally in underground
mining operations as a mining engineer and corporate executive.
His experience includes senior appointments with Mount Isa Mines,
Metana/Gold Mines of Australia, and Doray Minerals and he has
served as a director on the Boards of Maiden Gold, Heron Resources
and Dominion Mining. His responsibilities have included reviewing
merger and acquisition opportunities as well as development and
project oversight including accountability for establishing Challenger,
Andy Well and Deflector gold mines in Australia. He also served for
nine years until 2017 as a member of the Executive Council for the
Chamber of Minerals and Energy of Western Australia.

Mr Bamford currently has nil shares and nil options in
Southern Gold Ltd.

Company Secretary
The following person held the position of Company Secretary during
the financial year:

Daniel Hill
B.A (Acc), CA, MBA, MAppFin, FFin, CSA (Company Secretary)

Mr Hill has over 20 years’ experience in finance. With a background
in accounting practice, he has also held finance roles at Paragon
Private Equity, Diageo plc, Hess Oil & Gas Inc and Grosvenor Estates.

Mr Hill is also Company Secretary of LBT Innovations Ltd. (ASX:LBT).

Mr Hill currently has nil shares and 100,000 options in
Southern Gold Ltd.

DIRECTORS

The Directors of the Company at any time during the financial year
are as set out below. Details of Directors’ qualifications, experience
and special responsibilities are as follows:

Greg Boulton AM
B.A (Accounting), FCA, FCPA, FAICD (Non‑Executive Chairman)
(Member of Audit Committee)

Mr Boulton has extensive commercial experience spanning over 30
years as CEO and Non‑Executive Director for many Private and Public
companies. He has broad experience in capital raisings, acquisitions
and commercial negotiations and is a Fellow of the Chartered
Accountants Australia & New Zealand, CPA Australia and the
Australian Institute of Company Directors.

Mr Boulton is currently on the board of ASX listed Kangaroo Island
Plantation Timbers Ltd., the Statewide Superannuation Trust, and
other South Australian private companies.

Mr Boulton currently has 1,666,883 shares and 633,334 options in
Southern Gold Ltd.

Simon Mitchell
BSc (Hons) Geol, MAusIMM, GAICD, MSEG (Managing Director)

Simon Mitchell was appointed Managing Director, effective from
1 February 2015.

Mr. Mitchell is a geologist and corporate executive with 27 years
of resources industry experience in technical and finance roles
including 10 years gold exploration and mine development
experience with Normandy NFM, RGC, Goldfields and Aurora
Gold in countries as diverse as Australia, Bolivia, Chile, Papua
New Guinea and Indonesia. Mr Mitchell worked for 6 years at
the Commonwealth Bank of Australia, predominantly in Project
Finance, and more than 6 years with Toro Energy as General
Manager of Business Development where he was responsible for
the raising of more than US$80 million in capital and engaging
investors worldwide. More recently Mr. Mitchell has been Managing
Director of Asiatic Gold Ltd., an unlisted public company with
gold exploration projects in South Korea, a company subsequently
acquired by Southern Gold in mid‑2016.

Mr Mitchell currently has 510,000 shares and 2,333,334 options in
Southern Gold Ltd.

Michael Billing
B Bus, CPA, MAICD (Non‑Executive Director)
(Audit Committee Chairman)

Mr Billing is an accountant with in excess of 40 years of mining
industry experience in senior management, company secretarial,
senior commercial, and chief financial officer roles including lengthy
periods with Bougainville Copper Ltd. and WMC Resources Ltd.
He has worked extensively with junior resource companies since the
late 1990’s. Mr Billing is also Executive Chairman of ASX and AIM
listed Thor Mining PLC.

Mr Billing currently has 558,811 shares and 633,334 options in
Southern Gold Ltd.

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018REMUNERATION REPORT (AUDITED)

The remuneration policy is designed to align Key Management
Personnel objectives with shareholder and business objectives by
providing a fixed remuneration package to Non‑Executive Directors
and time based remuneration to Executive Directors. The Board of
Southern Gold believes the policy to be appropriate and effective in
attracting and retaining the best Directors and Executives to manage
and direct the Group, as well as create goal congruence between
Directors, Executives and shareholders.

The Company’s policy for determining the nature and amounts
of emoluments of board members and other Key Management
Personnel of the Company is as follows:

The Company’s Constitution specifies that the total amount of
remuneration of Non‑Executive Directors shall be fixed from time
to time by a general meeting. The current maximum aggregate
cash remuneration of Non‑Executive Directors has been set at
$300,000 per annum. Directors may apportion any amount up to
this maximum amount amongst the Non‑executive Directors as
they determine. Directors are also entitled to be paid reasonable
travelling, accommodation and other expenses incurred in
performing their duties as Directors. The remuneration of the
Managing Director is determined by the Non‑Executive Directors
and approved by the Board as part of the terms and conditions
of employment which are subject to review from time to time.
The remuneration of other executive officers and employees is
determined by the Managing Director subject to the approval
of the Board.

Non‑Executive Director remuneration is by way of fees and
statutory superannuation contributions. Non‑Executive Directors do
not participate in schemes designed for remuneration of executives
and are not provided with retirement benefits.

The Company’s remuneration structure is based on a number of
factors including the particular experience and performance of the
individual in meeting key objectives of the Company. The Board is
responsible for assessing relevant employment market conditions
and achieving the overall, long term objective of maximising
shareholder value, through the retention of high quality personnel.

The Company has a performance bonus scheme in place for the
Managing Director which provides for the payment of a cash
bonus on the achievement of agreed milestones during the year as
determined by the Board.

The Company also has an Employee Share Option Plan approved
by shareholders that enables the Board to offer eligible employees
options to acquire ordinary fully paid shares in the Company. Under
the terms of the Plan, options to acquire ordinary fully paid shares
may be offered to the Company’s eligible employees at no cost
unless otherwise determined by the Board in accordance with the
terms and conditions of the Plan. The objective of the Plan is to
align the interests of employees and shareholders by providing
employees of the Company with the opportunity to participate in
the equity of the Company as an incentive to achieve greater success
and profitability for the Company and to maximise the long term
performance of the Company.

The employment conditions of the Managing Director are formalised
in a contract of employment. The base salary as set out in the
employment contract is reviewed annually. The Managing Director’s
contract may be terminated at any time by mutual agreement.
The Company may terminate the contract without notice in
instances of serious misconduct.

Mr Hill is not employed by the Company. His services are provided
in his capacity as a consultant to act as Company Secretary of
Southern Gold.

During the financial year there were no remuneration consultants
engaged by the Company.

2 0

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018REMUNERATION REPORT (AUDITED) cont.

Shares and Options granted as remuneration

No remuneration shares were issued in the year ended 30 June 2018.

On 12 July 2016, the Company issued 1,245,000 unlisted options to
the employees, pursuant to the terms of the Employee Share Option
Plan. The exercise price is $0.375, with an expiry of 30 June 2021.
The options granted to employees included options granted to Key
Management Personnel Mr Hill 100,000 options and Mr Blucher
100,000 options (since cancelled due to cessation of employment)

A further 250,000 options were issued to two new employees on
15 May 2017, pursuant to the terms of the Employee Share Option
Plan. The exercise price is $0.375, with an expiry of 15 May 2022.

As announced to the ASX on 3 April 2017, the Company proposed
to grant 3,500,000 unlisted options to the Directors, subject to
shareholder approval. For accounting purposes, these options
were valued using a Black‑Scholes method and were expensed
in the year ended 30 June 2017. These options were granted on
26 October 2017, following shareholder approval on 25 October
2017. The options expire 25 October 2020. 1,750,000 of the options
have an exercise price of $0.40, and the other 1,750,000 have an
exercise price of $0.50.

Options granted to Directors & Key Management Personnel during
the year are disclosed in section (c).

All options granted have vested and no options were exercised in
the financial year.

Performance-based remuneration

The Group currently has no performance based remuneration
component built into Non‑Executive Director packages.
The Managing Director’s remuneration package includes a maximum
performance incentive of $50,000 each year. The Managing
Director’s base salary package increased from $270,000 to
$276,000 effective 1 July 2018, following an annual performance
review. In deciding the bonus to be paid to the Managing Director
each year, the Board take into account a number of performance
criteria including share price performance against peers, the
maintenance of expenses within budget and operational milestones.
Outside of this, there is no formal relationship between the board
policy for remuneration of Key Management Personnel and the
company’s performance for the last four years.

The Group has one Executive Director, and four Non‑Executive
Directors. The Managing Director is paid a salary, while
Non‑executive Directors are paid directors’ fees. The Non‑Executive
Directors do not currently participate in any incentive scheme.

Remuneration packages contain the following key elements:

• Primary Benefits – base salary/fees;

• Post Employment Benefits – superannuation.

Shares issued on exercise of remuneration options

No shares were issued to Directors or other Key Management
Personnel as a result of the exercise of remuneration options during
the financial year.

Directors’ and other Key Management Personnel
interests in shares and options

Directors’ and other Key Management Personnel relevant interests
in shares and options of the Company are disclosed in section (d) of
the Remuneration Report and in Note 4 of the Financial Report.

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018REMUNERATION REPORT (AUDITED) cont.

Remuneration of Directors and Key Management Personnel

This report details the nature and amount of remuneration for each Key Management Person of Southern Gold Ltd.

a) Directors and Key Management Personnel

The names and positions held by Directors and Key Management Personnel of the Group during or since the end of the financial
year are:

Directors

G C Boulton AM

S Mitchell

M R Billing

D J Turvey

P Bamford

Key Management Personnel

D L Hill

b) Directors’ remuneration

2018
Primary
Benefits

Directors’

Fees

G C Boulton

90,000

Position

Chairman – Non‑Executive

Managing Director – Executive

Director – Non‑Executive

Director – Non‑Executive (appointed 13 February 2018)

Position

Company Secretary

Short Term Benefits

Post
Employment

Salary and
Leave

Cash
Bonus

Consulting
fees

Share
Based
Payments
(options)

‑

1,000

6,148

‑

Super
Contribution

‑

Total

90,000

27,075

312,075

3,904

1,487

46,000

51,148

17,143

36,370

516,366

Remuneration
as share based

‑

S Mitchell

M R Billing

D J Turvey

P Bamford*

‑

270,000

15,000

41,096

15,656

‑

187,848

270,000

15,000

7,148

* Appointed 13 February 2018.

2 2

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018
REMUNERATION REPORT (AUDITED) cont.

b) Directors’ remuneration cont.

Short Term Benefits

Post
Employment

Share
Based
Payments
(shares)

Super
Contribution

2017
Primary
Benefits

Directors’

Fees

G C Boulton

90,000

Salary
and Leave

Cash
Bonus

Consulting
fees

‑

3,000

73,127

‑

Total

166,127

S Mitchell

M R Billing

D J Turvey

‑

245,000

27,500

‑

292,509

25,888

590,897

41,096

‑

3,000

6,000

73,127

3,904

121,127

124,127

172,192

245,000

27,500

12,000

511,890

33,696

1,002,278

c) Other Key Management Personnel remuneration

2018
Primary Benefits

D L Hill1

2017 Primary Benefits

D L Hill1

I D Blucher2

Salary and
Leave
$

‑

Salary and
Leave
$

‑

150,865

Cash
Bonus
$

Super
Contribution
$

Share Based
Payments
$

‑

Cash
Bonus
$

Super
Contribution
$

Share Based
Payments
$

‑

14,332

15,156

30,312

Remuneration
as share based

44.02%

49.50%

60.37%

58.91%

51.07%

Total
$

‑

Total
$

15,156

180,353

195,509

1 Mr Hill provides services as a consultant to act as Company Secretary of Southern Gold Ltd. Mr Hill was paid $13,972 during the 2018 year (2017: $14,318).

2 Mr Blucher ceased employment with the Company on 30 June 2017.

2 3

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018REMUNERATION REPORT (AUDITED) cont.

d) Ordinary Shares and Options Held by Directors and Key Management Personnel

The number of ordinary shares held by Directors and Key Management Personnel in Southern Gold Ltd. during the financial year is as
follows:

30 June
2018

Balance at
beginning of
year

Acquired/
(disposed) on
market

Issued on
exercise of
options during
year

Other changes
during the year1

Balance at end
of year

G C Boulton AM

1,399,003

S Mitchell

M R Billing

D J Turvey

D L Hill

418,733

528,811

447,507

‑

100,000

41,019

30,000

‑

2,794,054

171,019

‑

167,880

50,248

‑

53,701

‑

1,666,883

510,000

558,811

501,208

‑

271,829

3,236,902

1 Participation in the dividend reinvestment plan offered to all shareholders at $0.25 per share.

The above balances as at 30 June 2018, may differ from the holdings disclosed in the Directors Report, as the Directors Report provides each Directors’ shareholdings as at the
date of the Directors report.

The number of options over ordinary shares held by Directors and Key Management Personnel in Southern Gold Ltd. during the year is
as follows:

30 June
2018

G C Boulton AM

S Mitchell1

M R Billing

D J Turvey

D L Hill

Balance at
beginning
of year

Acquired
off market

ESOP
options
granted

Other
changes
during the
year

Balance at
end of year

Vested
during the
year1

Vested and
exercisable

633,334

2,333,334

633,334

100,000

4,333,336

‑

633,334

500,000

633,334

2,333,334

2,000,000

2,333,334

633,334

500,000

633,334

500,000

633,334

100,000

‑

100,000

4,333,336

3,500,000

4,333,336

1 As announced to the ASX on 3 April 2017, the Company proposed to grant 3,500,000 unlisted options to the Directors, subject to shareholder approval. These options were

included in the opening balance as at 1 July 2017, although not considered vested until the options were approved by shareholders on 25 October 2017.

2 4

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018
REMUNERATION REPORT (AUDITED) cont.

Service agreements
Remuneration and other items of employment for the Managing Director, Mr Simon Mitchell, are formalised in a service agreement
agreed to by the Board. The major provisions are as follows:

• Mr Mitchell commenced employment on 1 February 2015.

• For the year ended 30 June 2018, the Managing Director’s annual salary was set at $270,000 base salary per annum, plus statutory

superannuation.

• Following the annual performance and salary review, effective 1 July 2018 the Managing Director’s annual salary was increased to

$276,000 base salary per annum, plus statutory superannuation

• The Managing Director’s remuneration package includes a maximum performance incentive of $50,000 per annum. The Managing

Director was awarded $15,000 in bonuses, plus superannuation at 9.5%, related to the year ended 30 June 2018.

• Termination without notice in the event that Mr Mitchell

– is guilty of serious or wilful misconduct; or

– fails to remedy a breach of the Agreement within 14 days of receipt of notice to do so

• Termination without cause by either party with the provision of maximum three calendar months’ notice or by agreement in writing by
the parties. In the event of redundancy due to takeover, merger or other corporate arrangements, a six month notice period applies.

The Company entered into a service agreement with an entity associated with Mr Boulton on 19 February 2008 to provide services
over and above his duties as Chairman on an as needs basis at a daily rate of $1,000 covering his term as a Non‑Executive Director of
the Company.

The Company entered into a service agreement with an entity associated with Mr Billing on 24 April 2005 to provide services over and
above his duties as a Non‑Executive Director on an as needs basis at a daily rate of $1,000 covering his term as a Non‑Executive Director
of the Company.

The Company entered into a service agreement with an entity associated with Mr Turvey on 20 September 2011 to provide services over
and above his duties as a Non‑Executive Director on an as needs basis at a daily rate of $1,000 covering his term as a Non‑Executive
Director of the Company.

The Company entered into a service agreement with an entity associated with Mr Hill on 30 May 2013 to provide financial and company
secretarial services. The contract is subject to a four week termination without cause.

Post-employment/retirement and termination benefits
There were no post‑employment retirement and termination benefits paid or payable to Directors or Key Management Personnel.

g) Voting at 2017 AGM

Southern Gold Ltd. received more than 92.2% of ‘yes’ votes on its remuneration report for the 2017 financial year. The Company did not
receive any specific feedback at the AGM on its remuneration report.

2 5

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018REMUNERATION REPORT (AUDITED) cont.

h) Related party disclosures

The terms and conditions of the transactions between related parties are on normal commercial terms and conditions no more
favourable than those available to other parties unless otherwise stated.

The following comprises payments made to entities in which Directors or Key Management Personnel have an interest:

Director and Key
Management Personnel

Related Party
Transaction

D L Hill

GC Boulton

D Turvey

M Billing

Payments to a member of Key Management for financial and company
secretarial services provided

Payments to a Director related entity for Director and consulting
services provided*

Payments to a Director related entity for consulting services provided

2018
$

2017
$

13,972

14,318

90,000

93,000

6,148

1,000

6,000

3,000

*During the year ended 30 June 2018, the value of payments comprised Directors fee of $90,000, and consulting fees of nil. (For the year ended 30 June 2017, the value of
payments comprised Directors fee of $90,000, and consulting fees of $3,000.)

Amounts receivable from and payable to Directors and Key Management Personnel and their related entities, at report date, arising from
these transactions were as follows:

Current payables

Amounts payable to Directors and Key Management Personnel related entities (refer Note 11)1

1 Payable to Greg Boulton and Associates Pty Ltd. (an entity associated with G C Boulton) of $7,500 (2017:$ 7,500).

Payable to Red Balloon Superannuation Fund (an entity associated with Mr David Turvey) of $651 (2017: $296).

Payable to Lapun Kamap Superannuation Fund (an entity associated with Mr Michael Billing) of $651 (2017: $296).

Payable to Bamford Superannuation Fund (an entity associated with Mr Peter Bamford) of $651 (2017: nil).

Payable to Bayfront Nominees Pty Ltd. (an entity associated with D L Hill) of $1,995 (2017: $2,760).

Payable to Mr Simon Mitchell, being a final bonus relating to the year ended 30 June 2018 $5,475 and superannuation of $4,275 (2017: $31,081).

There were no amounts receivable from related parties.

2018
$

2017
$

21,157

41,934

2 6

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

MEETINGS OF DIRECTORS

The Company held 10 meetings of Directors (including committees of Directors) during the financial year. Attendances by each Director during
the year were as follows:

Director Meetings

Audit Committee Meetings

Number of
Meetings Eligible
to Attend

Number of
Meetings
Attended

Number of
Meetings Eligible
to Attend

Number of
Meetings
Attended

G C Boulton AM

S Mitchell

M R Billing

D J Turvey

P Bamford

Non-audit services

‑

The Board of Directors is satisfied that the provision of the non‑audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non‑audit services, as set out below, did not
compromise the audit independence requirement of the Corporations Act 2001.

All non‑audit services have been reviewed by the Board to ensure they do not adversely affect the integrity and objectivity of the auditor.

The nature of the services provided do not compromise the general principle relating to auditor independence as set out in the APES 110 Code
of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

Non‑audit services paid and/or payable to the external auditors during the year ended 30 June 2018 were nil (2017: $2,000 comprising
taxation related services).

Indemnification and insurance of officers

Indemnification
The Company is required to indemnify the Directors and other officers of the Group against any liabilities incurred by the Directors and officers
that may arise from their position as Directors and officers of the Group. No costs were incurred during the year pursuant to this indemnity.

The Group has entered into deeds of indemnity with each Director whereby, to the extent permitted by the Corporations Act 2001, the
Group agreed to indemnify each Director against loss and liability as an officer of the Group, including all liability in defending any

relevant proceedings.

Insurance Premiums
Since the end of the previous year the Group has paid insurance premiums in respect of Directors’ and Officers’ liability and legal expenses’
insurance contracts.

The terms of the policies prohibit disclosure of details of the amount of insurance cover, the nature thereof and the premium paid.

2 7

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018MEETINGS OF DIRECTORS cont.

Proceedings on behalf of the Company
No person has applied to the Court for leave to bring proceedings on behalf of the Group or to intervene in any proceedings to which the
Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. The Group was not
a party to any such proceedings during the year.

Auditor of the Company
The auditor of the Group for the financial year was Grant Thornton Audit Pty Ltd.

Auditor’s Independence Declaration
The auditor’s independence declaration as required by section 307C of the Corporations Act 2001 for the year ended 30 June 2018 is set out
immediately following the end of the Directors’ report.

Dated at Adelaide, this 19th day of September 2018.

The report of Directors, incorporating the Remuneration Report is signed in accordance with a resolution of the Board of Directors:

S Mitchell
Managing Director

G C Boulton AM
Chairman

2 8

DIRECTOR’S REPORTSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

Grant Thornton House
Level 3
170 Frome Street
Adelaide, SA 5000
Correspondence to:
GPO Box 1270
Adelaide SA 5001

T 61 8 8372 6666
F 61 8 8372 6677
E info.sa@au.gt.com
W www.grantthornton.com.au

Auditor’s Independence Declaration

To the Directors of Southern Gold Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Southern
Gold Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been:

no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

no contraventions of any applicable code of professional conduct in relation to the audit.

Grant Thornton Audit Pty Ltd
Chartered Accountants

I S Kemp
Partner – Audit & Assurance

Adelaide, 19 September 2018

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

www.grantthornton.com.au

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation.

2 9

AUDITOR’S INDEPENDENCE DECLARATIONSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE Y E A R ENDED 3 0 JUNE 2 018

Revenue

Cost of Sales

Other revenue

Exploration expenditure written off

Exploration expenses

Exploration expenses (Cannon underground)

Mine management costs

Mine development amortisation

Salaries and wages

Directors fees

Interest expense

Shareholder relations

Other consulting expenses

Other administrative expenses

Depreciation

Share based payments

Profit/(Loss) before income tax

Income tax (expense)/benefit attributable to profit/(loss) from ordinary activities

Net Profit/(Loss) for the year

Other comprehensive income

Items that may be reclassified to profit or loss:

Exchange differences on translation

Total comprehensive income

Earnings Per Share

Basic (cents per share) – Profit/(Loss)

Diluted (cents per share) – Profit/(Loss)

Consolidated

Note

2018
$

2017
$

2(a)

2(b)

1,997,548

18,889,851

(820,725)

(6,565,679)

1,176,823

1,554,536

12,324,172

10,473

(102,530)

(461,905)

(437,846)

‑

(818,057)

(197,143)

‑

(275,003)

(267,560)

(945,833)

(59,372)

(56,547)

(1,669,307)

(260,822)

‑

(252,588)

(1,618,061)

(786,744)

(180,000)

(213,461)

(289,854)

(460,559)

(755,483)

(47,035)

(900,952)

(890,437)

4,899,779

187,482

(702,955)

(2,393,591)

2,506,188

217,280

(60,292)

(485,675)

2,445,896

(1.44)

5.51

5.25

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

3 0

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

STATEMENT OF FINANCIAL POSITION
AS AT 3 0 JUNE 2 018

CURRENT ASSETS

Cash and cash equivalents

Trade and other receivables

Inventories (gold)

Other assets

TOTAL CURRENT ASSETS

NON-CURRENT ASSETS

Exploration and evaluation expenditure

Mine development assets

Deferred tax asset

Plant and equipment

TOTAL NON‑CURRENT ASSETS

TOTAL ASSETS

CURRENT LIABILITIES

Trade and other payables

Dividend payable

Provisions

TOTAL CURRENT LIABILITIES

NON-CURRENT LIABILITIES

Provisions

TOTAL NON‑CURRENT LIABILITIES

TOTAL LIABILITIES

NET ASSETS

EQUITY

Issued capital

Reserves

Retained losses

TOTAL EQUITY

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

Consolidated

Note

2018
$

2017
$

2,080,242

5,376,908

134,994

‑

19,090

403,711

820,725

23,904

2,234,326

6,625,248

13,248,642

10,270,630

‑

176,242

168,308

13,424,884

10,438,938

15,659,210

17,064,186

340,635

‑

134,121

474,756

31,094

355,330

1,418,772

172,130

1,946,232

‑

505,850

1,946,232

15,153,360

15,117,954

40,072,064

39,607,530

1,112,836

2,814,815

(26,031,540)

(27,304,391)

15,153,360

15,117,954

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

STATEMENT OF CHANGES IN EQUITY
FOR THE Y E A R ENDED 3 0 JUNE 2 018

Issued
Capital
$

Retained
Losses
$

Share-
Based
Payment
Reserve
$

Foreign
Currency
Translation
Reserve
$

Total
$

Balance at 30 June 2016

Profit or loss

Other comprehensive income

Total comprehensive income

Dividend declared

Issue of share capital

Options lapsed or exercised

Fair value of options issued

Costs associated with the issue of shares

35,700,379

(28,492,218)

2,074,566

‑

2,506,188

‑

2,506,188

(1,418,772)

3,920,603

‑

(13,452)

100,411

(100,411)

‑

900,952

‑

Total transactions with owners

3,907,151

(1,318,361)

800,541

‑

9,282,727

2,506,188

(60,292)

2,445,896

‑

(1,418,772)

3,920,603

‑

900,952

(13,452)

3,389,331

Balance at 30 June 2017

Profit or loss

Other comprehensive income

Total comprehensive income

Issue of share capital

Options lapsed or exercised

Fair value of options issued

Costs associated with the issue of shares

Total transactions with owners

Balance at 30 June 2018

39,607,530

(27,304,391)

2,875,107

(60,292)

15,117,954

‑

(702,955)

‑

(702,955)

464,534

‑

1,975,806

(1,975,806)

‑

56,547

‑

464,534

1,975,806

(1,919,259)

‑

(702,955)

217,280

(485,675)

‑

464,534

‑

56,547

‑

521,081

40,072,064 (26,031,540)

955,848

156,988

15,153,360

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

3 2

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

STATEMENT OF CASH FLOWS
FOR THE Y E A R ENDED 3 0 JUNE 2 018

Cash flows relating to operating activities

Interest received

Other income

Receipts from operations

R&D tax offset received

Mining costs

Payments to suppliers and employees

Interest paid

Net operating cash inflows/(outflows) (Note (a))

Cash flows relating to investing activities

Note

Consolidated

2018
$

54,438

2017
$

9,947

526

3,685,413

11,353,000

187,482

‑

299,479

(543,347)

(3,334,428)

(2,816,179)

‑

(258,607)

593,003

8,044,819

Payments for mining tenements, exploration and evaluation expenditure

(2,881,523)

(2,346,688)

Payments for mine development assets

Payments for acquisition of a subsidiary

Disposal of subsidiary (cash held)

Payments for plant and equipment

Net investing cash (outflows)

Cash flows relating to financing activities

Proceeds from share issues

Payments for share issue costs

Payment of dividends

Repayment of borrowings

Proceeds of borrowings

Net financing cash (outflows)

Net increase/(decrease) in cash

Net foreign exchange difference

Cash at beginning of financial year

Cash at end of financial year

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

‑

(115,695)

‑

(64,102)

(163,963)

(2,945,625)

(2,626,346)

‑

(945,648)

‑

1,530,000

(13,452)

‑

(3,500,000)

500,000

(945,648)

(1,483,452)

(3,298,270)

3,935,021

1,604

5,376,908

2,080,242

(4)

1,441,891

5,376,908

3 3

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

STATEMENT OF CASH FLOWS
FOR THE Y E A R ENDED 3 0 JUNE 2 018

Note (a): Reconciliation of net loss from ordinary
activities to net cash flow from operating activities

Profit/(Loss) from ordinary activities after income tax

Adjustments to reconcile profit before tax to net cash flows

Share based payments

Depreciation

Mine development amortisation

Exploration written off and expensed – continuing operations

Loss on sale of plant & equipment

Changes in assets and liabilities

(Increase)/decrease in trade and other receivables

(Increase)/decrease in other financial assets

(Increase)/decrease in inventories

(Increase)/decrease in deferred tax assets

Increase/(decrease) in trade and other payables

Increase/(decrease) in provisions

Net operating cash flows

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

Consolidated

2018
$

2017
$

(702,955)

2,506,188

56,547

59,372

‑

102,530

‑

273,946

4,869

820,724

‑

(14,328)

(7,702)

900,952

47,035

1,618,061

1,669,307

656

(339,982)

2,941

(783,308)

2,693,070

(431,321)

161,220

593,003

8,044,819

3 4

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

This financial report includes the consolidated financial statements and notes of Southern Gold Ltd. and controlled entities (‘Consolidated
Group’ or ‘Group’).

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards,
Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and
the Corporations Act 2001.

The financial report covers the consolidated group of Southern Gold Ltd., a listed public company incorporated and domiciled
in Australia.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing
relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting
Standards ensures compliance with International Financial Reporting Standards. Southern Gold Ltd. is a for‑profit entity for the purpose
of preparing the financial statements.

The following is a summary of the material accounting policies adopted by the Consolidated Group in the preparation of the financial
report. The accounting policies have been consistently applied, unless otherwise stated.

These financial statements have been prepared on an accruals basis and are based on the historical cost convention where applicable, by
the measurement at fair value of selected non current assets, financial assets and financial liabilities.

The accounting policies set out below have been consistently applied to all years presented.

Two comparative periods are presented for the statement of financial position when the Group:

i. Applies an accounting policy retrospectively,

ii. Makes a retrospective restatement of items in its financial statements, or

iii. Reclassifies items in the financial statements

The Group has determined that only one comparative period for the statement of financial position was required for the current
reporting period as the application of the new accounting standards have had no material impact on the previously presented primary
financial statements that were presented in the prior year financial statements.

New and revised accounting standards

New and revised standards which were effective for annual periods beginning on or after 1 July 2018 are as follows:

• AASB 2016‑2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107.

The above amendment did not have a material impact on the Group.

a) Principles of Consolidation

The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2018. The Parent
controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to
affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June.

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses
on transactions between Group companies. Where unrealised losses on intra‑group asset sales are reversed on consolidation, the
underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the
effective date of acquisition, or up to the effective date of disposal, as applicable.

Income Tax
The income tax expense/(benefit) for the year comprises current income tax expense/(income) and deferred income tax/(income).

Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax
rates enacted at reporting date.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as
unused tax losses.

3 5

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Income Tax cont.
Current and deferred income tax (expense)/benefit is charged or credited directly to equity instead of the profit and loss when the
tax relates to items that are credited or charged directly to equity.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from
the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable
profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled.
Deferred tax is credited in the Statement of Profit or Loss and Other Comprehensive Income except where it relates to items that may
be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which
deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse
change will occur in income taxation legislation and the anticipation that the Consolidated Group will derive sufficient future
assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

Southern Gold Ltd. and its wholly‑owned Australian subsidiaries have formed an income tax consolidated group under the tax
consolidation regime. Each entity in the group recognises its own current and deferred tax liabilities, except for any deferred tax
liabilities resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. The current tax
liability of each group entity is then subsequently assumed by the parent entity. The group notified the Australian Tax Office that
it had formed an income tax consolidated group to apply from 1 July 2006. The tax consolidated group has entered a tax sharing
agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net
profit before tax of the tax consolidated group.

Research and development tax incentive
To the extent that research and development costs are eligible activities under the “Research and development tax incentive”
programme, a 43.5% refundable tax offset is available for companies with annual turnover less than $20 million. The Group
recognises refundable tax offsets received in the financial year as an income tax benefit, in profit or loss, resulting from the
monetisation of available tax losses that otherwise would have been carried forward.

c) Plant and Equipment

Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and
impairment losses.

Plant and equipment
Plant and equipment are measured on a cost basis. The carrying amount of plant and equipment is reviewed annually by directors
to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the
expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows
have been discounted to their present values in determining recoverable amounts.

Depreciation
The depreciable amount of all fixed assets is depreciated on a straight‑line basis over their useful lives to the Consolidated Group
commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the
unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

Plant and equipment
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at reporting date. An asset’s carrying
amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.

20–33%

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included
in the Statement of Profit or Loss and Other Comprehensive Income.

3 6

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES cont.

d) Exploration and Evaluation Expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are
only carried forward to the extent that they are expected to be recouped through the successful development of the area or
where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically
recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon
the area is made.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in
relation to that area of interest.

Costs of site restoration are provided from when exploration commences and are included in the costs of that stage.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there
is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly
costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

e) Financial Instruments

Initial recognition and measurement
Financial assets and liabilities are recognised when the entity becomes a party to the provisions to the instrument. For financial assets
this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset.

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value
through the profit or loss’, in which case the costs are expensed to the profit and loss immediately.

Classification and subsequent measurement
Financial instruments are subsequently measured at either of fair value, amortised cost using the interest rate method or cost. Fair
value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Where available, quoted prices, in an active market are used to determine fair value.

The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of
accounting standards specifically applicable to financial instruments,

i. Loans and receivables

Loans and receivables are non‑derivative financial assets with fixed or determinable payments that are not quoted in an active
market and are stated at amortised cost using the effective interest rate method.

ii. Financial liabilities

Non‑derivative financial liabilities are subsequently measured at amortised cost.

iii. Available for sale (AFS) financial assets

AFS financial assets are non‑derivative financial assets that are either designated to this category or do not qualify for inclusion
in any of the other categories of financial assets. The Group’s AFS financial assets include listed securities and are measured at
fair value.

Impairment
At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired.

Impairment of Non Financial Assets
At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any
indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher
of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying
value over its recoverable amount is expensed to the Profit or Loss.

g) Leases

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in
the periods in which they are incurred.

3 7

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES cont.

h) Discontinued Operations

A discontinued operation is a component of an entity, being a cash generating unit (or a group of cash generating units), that
either has been disposed of, or is classified as held for sale, and represents a separate major line of business or geographical area of
operations, is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
is a subsidiary acquired exclusively with the view to resale.

Investments in Associates
Investments in associate companies are recognised in the financial statements by applying the equity method of accounting. The
equity method of accounting recognises the Group’s share of post‑acquisition reserves of its associates.

Where there has been a change recognised directly in an associate’s equity, the Group recognises its share of any changes and
discloses this in the statement of profit of loss and other comprehensive income. The reporting dates of the associates and the
Group are identical and the associates accounting policies conform to those used by the Group for like transactions and events in
similar circumstances.

Joint Operations
The Group had a Mine Finance and Profit Sharing Agreement (Agreement), with Westgold Resources Ltd. (Westgold) (ASX: WGX).
Under the Agreement, Westgold provided the funding and manage all services required for the mining, haulage and the treatment
of ore from the Cannon deposit, through their nearby Jubilee Mill.

The mine development costs and costs of mining, incurred by Westgold, are only recoverable from mining profits. During this period,
Westgold owned the ore from the time it was mined.

Once the costs of development and mining have been recovered by Westgold, then Southern Gold and Westgold share all mining
profits on a 50:50 basis. This point was achieved during the year ending 30 June 2017, and Southern Gold commenced to account
for its 50% share in the mining operations as joint operation.

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and
obligations for the liabilities, relating to the arrangement. The Group has recognised its share of jointly held assets, liabilities revenue
and expenses of joint operations. These have been incorporated in the financial statements under the appropriate classifications.
The Cannon operations are further detailed at Note 9. The Company’s interests in other joint operations are listed at Note 16.

In addition, any costs incurred directly by Southern Gold in overseeing the contract with Westgold are expensed as incurred. The
costs are shown in the Consolidated Statement of Profit or Loss and Other Comprehensive Income, as ‘Mine management costs
(Joint Operations)’.

Mining of the open pit was concluded in the year ended 30 June 2017 with final cash distributions were received in the year ended
30 June 2018.

Inventories
Mining of the open pit was concluded in the year ended 30 June 2017. At 30 June 2017, Southern Gold recognised its 50% share
of inventory held by the joint operation with Westgold. Inventory consisted of gold held at the Perth mint. There were no ore
stockpiles held at 30 June 2017. The gold inventory at 30 June 2017 was sold in the current year ended 30 June 2018, and final cash
distributions made to Southern Gold and Westgold.

Inventories are stated at the lower of cost and net realisable value on a first in first out basis. Cost comprises direct materials and
the cost of mining and stockpiling the ore, haulage, and a proportion of Southern Gold’s amortisation of development expenditure
incurred prior to the commencement of the Westgold Agreement. Cost is determined on an average cost basis.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.

l) Mine restoration costs

The Group recognised its 50% share of the estimated mine restoration costs to be undertaken by the joint operations at the Cannon
mine. Judgement is required in determining the provision for restoration as there are many transactions and other factors that will
affect the ultimate payable to rehabilitate and restore the mine site. The estimate of the future costs therefore requires management
to make an assessment of the future restoration date, future environmental legislation, changes in regulations, price increases,
and the extent of restoration activities. When these factors change or become known in the future, such differences will impact
will impact the restoration provision in the period in which they change or become known. At each reporting date, the restoration
provision will be re‑measured to reflect any of these changes.

There is no provision required at 30 June 2018.

3 8

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES cont.

m) Mine Development asset

Development assets represent expenditure in respect of exploration, evaluation, feasibility and development incurred by or on behalf
of the group, including overburden removal and construction costs, previously accumulated and carried forward in relation to areas
of interest in which mining has now commenced. Such expenditure comprises net direct costs and an appropriate allocation of
directly related overhead expenditure.

All expenditure incurred prior to commencement of production from each development property is carried forward to the extent to
which recoupment out of future revenue from the sale of production, or from the sale of the property, is reasonably assured.

When further development expenditure is incurred in respect of mine property after commencement of production, such
expenditure is carried forward as part of the cost of the mine property only when future economic benefits are reasonably assured,
otherwise the expenditure is classified as part of the cost of production and expensed as incurred. Such capitalised development
expenditure is added to the total carrying value of development assets being amortised.

Amortisation and impairment
Development assets are amortised based on the unit of production method which results in an amortisation charge proportional
to the depletion of the estimated recoverable reserves. Where this is a change in the reserve the amortisation rate is adjusted
prospectively in the reporting period in which the change occurs. The net carrying values of development expenditure carried
forward are reviewed half yearly by directors to determine whether there is any indication of impairment.

n) Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to report date.
Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when
the liability is settled, plus related on‑costs. Employee benefits payable later than one year have been measured at the present value
of the estimated future cash outflows to be made for those benefits. The cash flows are discounted using market yields on national
government bonds with terms to maturity that match the expected timing of cash flows.

In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy
vesting requirements. Those cash flows are discounted using market yields on high quality corporate bonds with terms to maturity
that match the expected timing of cash flows.

Share based payments
The Company has an Employee Share Option Plan where employees may be provided with options to acquire shares in the Company.
The fair value of the options are measured at grant date and recognised as an expense over the vesting period with a corresponding
increase in equity. The fair value of options is ascertained using the Black‑Scholes pricing model which incorporates all market
vesting conditions.

o) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable
that an outflow of economic benefits will result and that outflow can be reliably measured.

p) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short‑term highly liquid investments with
original maturities of three months or less, and bank overdrafts.

q) Revenue

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.
Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

All revenue is stated net of the amount of goods and services tax (GST).

r) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset
or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. The
net amount of GST recoverable from, or payable to, the Australian Taxation Office is included as a current asset or liability in the
statement of financial position.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.

3 9

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES cont.

s) Trade and other payables

Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the
group during the period which remains unpaid. The balance is recognised as a current liability with the amount being normally paid
within 30 days of recognition of the liability.

t) Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the
current financial year.

u) Critical Accounting Estimates and Judgments

The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best
available current information. Estimates assume a reasonable expectation of future events and are based on current trends and
economic data, obtained both externally and within the Group.

Key Judgments – Deferred Tax Assets
A deferred tax asset was recognised in the year ended 30 June 2016. The deferred tax assets represented carry forward tax losses
that were utilised during the year ended 30 June 2017.

In determining the extent to which sufficient future taxable profits are probable, the Group considered the projected income
from the Cannon operations. The recognition of a $2,611,283 increase in the deferred tax asset, during the year ended 30 June
2016, reflected the revised Mine Finance and Profit Sharing Agreement with Metals X Ltd. (ASX: MLX – “Metals X”) (refer ASX
announcement 3 November 2015). Under the revised agreement, the development of the Company’s Cannon Gold Resource was
expanded to a larger open pit. The larger open pit development increased expectation for future taxable income.

As expected, these tax losses were utilised in the year ended 30 June 2017.

Refer to Note 3.

Key Judgments – Impairment of Exploration and Evaluation Assets
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of
exploration and evaluation assets. Where an impairment trigger exists, the recoverable amount of the asset is determined.

The Group capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the
activities have not reached a stage which permits a reasonable assessment of the existence of reserves. While there are certain areas
of interest from which no reserves have been extracted, the Directors are of the continued belief that such expenditure should not
be written off since feasibility studies in such areas have not yet concluded.

v) Earnings per share

Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial
year, adjusted for bonus elements in ordinary shares during the year.

Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect and other financing costs associated with dilutive potential ordinary shares and the weighted average number of
additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

w) Accounting standards not yet effective and not adopted early

The Company notes the following Accounting Standards which have been issued but are not yet effective at 30 June 2018. These
standards have not been adopted early by the Company. The Company‘s assessment of the impact of these new standards and
interpretations is set out below:

AASB 9 Financial Instruments (December 2014)

AASB 9 Financial Instruments addresses the classification, measurement and de‑recognition of financial assets and financial liabilities
and introduces new rules for hedge accounting. In December 2014, the AASB made further changes to the classification and
measurement rules and also introduced a new impairment model.

These latest amendments now complete the new financial instruments standard. This standard does not apply mandatorily before
the year ending 30 June 2019.

4 0

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES cont.

w) Accounting standards not yet effective and not adopted early cont.

The Company is yet to undertake a detailed assessment of the impact of AASB 9. However, based on the Company’s preliminary
assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial
statements when it is first adopted for the year ending 30 June 2019.

AASB 7 Financial Instruments Disclosures (December 2014)
AASB 2014‑7 (issued December 2014) gives effect to the consequential amendments to Australian Accounting Standards (including
Interpretations) arising from the issue of AASB 9: Financial Instruments (December 2014). More significantly, additional disclosure
requirements have been added to AASB 7: Financial Instruments: Disclosures regarding credit risk exposures of the entity. This
Standard also makes various editorial corrections to Australian Accounting Standards and an Interpretation. However, based on
the Company’s preliminary assessment, the Standard is not expected to have a material impact on the transactions and balances
recognised in the financial statements when it is first adopted for the year ending 30 June 2019.

AASB 15 Revenue from Contracts with Customers
AASB 15 replaces AASB 118 Revenue and AASB 111 Construction Contracts. The new standard is based on the principle that
revenue is recognised when control of a good or service transfers to a customer ‐ so the notion of control replaces the existing
notion of risks and rewards. The standard permits a modified retrospective approach for the adoption. Under this approach entities
will recognise transitional adjustments in retained earnings on the date of initial application, i.e. without restating the comparative
period. They will only need to apply the new rules to contracts that are not completed as of the date of initial application. This
standard does not apply mandatorily before 1 July 2018.

Adoption of this amendment will not result in a material impact on the Group’s financial statements.

AASB 16 Leases
AASB 16 replaces AASB 117 Leases and some lease related Interpretations. The new standard requires all leases to be accounted for
as ‘on balance sheet’ by lessees, other than short term and low value asset leases.

The standard provides new guidance on the application of the definition of lease and on sale and lease back accounting.
The standard also requires new and different disclosures about leases. This standard does not apply mandatorily before
1 January 2019.

The Group is yet to undertake a detailed assessment of the impact of AASB 16. However, based on the entity’s preliminary
assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial
statements when it is first adopted for the year ending 30 June 2020.

AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture
The amendments address a current inconsistency between AASB 10 Consolidated Financial Statements and AASB 128
Investments in Associates and Joint Ventures.

The amendments clarify that, on a sale or contribution of assets to a joint venture or associate or on a loss of control when joint
control or significant influence is retained in a transaction involving an associate or a joint venture, any gain or loss recognised will
depend on whether the assets or subsidiary constitute a business, as defined in AASB 3 Business Combinations. Full gain or loss
is recognised when the assets or subsidiary constitute a business, whereas gain or loss attributable to other investors’ interests is
recognised when the assets or subsidiary do not constitute a business.

This amendment effectively introduces an exception to the general requirement in AASB 10 to recognise full gain or loss on the loss
of control over a subsidiary. The exception only applies to the loss of control over a subsidiary that does not contain a business, if the
loss of control is the result of a transaction involving an associate or a joint venture that is accounted for using the equity method.
Corresponding amendments have also been made to AASB 128.

When these amendments are first adopted for the year ending 30 June 2019, there will be no material impact on the
financial statements.

There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future transactions.

x) Parent Entity

The financial information of the parent entity, Southern Gold Ltd., disclosed at note 23, has been prepared on the same basis, using
the same accounting policies as the consolidated financial statements, other than investments in controlled entities which are carried
at cost, less any provision for impairment.

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES cont.

y) Foreign Currency Transactions and Balances

i. Functional and presentation currency

The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in
which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s
functional currency.

ii. Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary items are translated at the year‑end exchange rate. Non‑monetary items measured at
historical cost continue to be carried at the exchange rate at the date of the transaction. Non‑monetary items measured at fair
value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as
a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non‑monetary items are recognised directly in other comprehensive income to the
extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised
in profit or loss.

Group companies
The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation
currency, are translated as follows:

• assets and liabilities are translated at exchange rates prevailing at the end of the reporting period;

• income and expenses are translated at average exchange rates for the period; and

• retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are
recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial
position. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is
disposed of.

The financial report was authorised for issue on 19th September 2018 by the Board of Directors.

4 2

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

2. PROFIT/(LOSS) FROM OPERATIONS

Profit/(Loss) from ordinary activities included the following items of
revenue and expense:

a) Other Revenue

Right to mine income1

Interest received/receivable

Other income

b) Other Administrative Expenses

Office rent

2018
$

2017
$

1,500,000

54,438

1,554,536

‑

9,947

526

10,473

169,274

109,629

1. On 23rd January 2018, the Southern Gold entered a new agreement with development partner, Westgold for the underground development phase at Southern Gold’s Cannon

gold mine, near Kalgoorlie. The features of the agreement comprise:

• Westgold to have a 5 year right‑to‑mine over a defined 1km radius on mining license M25/333 covering the Cannon Gold deposit, with Westgold assuming all financing

and operating risk; and

• Westgold to have the right and flexibility to devise its own mine plan.

In exchange for this right to mine, Westgold paid Southern Gold $1.5 million up front and will pay future production payments based on a $/troy oz of gold produced as follows:

• $160/oz for the first 15,000oz produced (or $190/oz in any quarter where the average gold price exceeds $1,800/oz), and

• $180/oz for all production in excess of 15,000oz (or $210/oz in any quarter where the average gold price exceeds $1,800/oz).

Subsequently Northern Star Resources Ltd. acquired Westgold’s Kalgoorlie assets and is now the holder of the Cannon right‑to‑mine.

4 3

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

INCOME TAX EXPENSE

The components of tax benefit comprise:

Research and development tax concession

Tax (expense)/benefit

2018
$

2017
$

187,482

299,479

‑

(2,693,070)

Income tax (expense)/benefit attributable to loss from ordinary activities

187,482

(2,393,591)

The prima facie income tax benefit on pre‑tax accounting loss reconciles
to the income tax attributable to operating loss as follows:

Income tax (expense)/benefit at 27.5% (2017: 30%) of operating loss

244,870

(1,469,934)

Tax effect of capital raising costs

Tax effect of Share‑based payments expensed

Research and development tax concession

Timing differences and tax losses not brought to account

Income tax benefit attributable to loss from ordinary activities

Deferred tax assets not brought to account, the benefits of which will only
be realised if the conditions for deductibility set out in Note 1(b) occur

Operating Losses

Income tax losses

‑

(15,550)

(187,482)

(41,838)

8,184

(164,935)

(299,479)

(766,906)

(2,693,070)

Total deferred tax asset arising from carried forward tax losses not recognised as meeting probable criteria

Gross tax losses

Tax Losses at 27.5% (2017: 30%)

17,329,153

17,294,437

4,765,517

5,188,331

A deferred tax asset is only recognised for the carry forward of unused tax losses to the extent that it is considered probable that future
taxable profit will be available against which the unused tax losses can be utilised.

The taxation benefits of tax losses and timing differences not brought to account will only be obtained if:

i. assessable income is derived of a nature and amount sufficient to enable the benefit from the deductions to be realised;

ii. conditions for deductibility imposed by the law are complied with; and

iii. no changes in tax legislation adversely affect the realisation of the benefit from the deductions.

4 4

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

2018
$

2017
$

4. KEY MANAGEMENT PERSONNEL REMUNERATION

Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to each member of
the group’s key management personnel for the year ended 30 June 2018. The totals of remuneration paid to key management personnel
during the year are as follows:

Short term employee benefits

Post‑employment benefits

Share‑based payments

479,996

36,370

‑

456,692

33,696

511,890

516,366

1,002,278

Mr Hill is not employed by the Company. His services are provided in his capacity as a consultant to act as Company Secretary of
Southern Gold Ltd. Mr Hill was paid $13,972 during the 2018 year (2017: $14,318).

5. CASH AND CASH EQUIVALENTS

Cash at bank and in hand

6. TRADE AND OTHER RECEIVABLES

Trade and other receivables

Cannon undistributed cash

Office lease bond

Trade and other receivables considered past due and/or impaired is nil (2017: nil).

7. OTHER ASSETS

Current

Prepayments

2,080,242

5,376,908

51,730

‑

83,264

134,994

37,502

289,964

76,245

403,711

19,090

23,904

4 5

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

8. EXPLORATION AND EVALUATION EXPENDITURE

Costs carried forward in respect of areas of interest:

Exploration and evaluation phase

2018
$

2017
$

13,248,642

10,270,630

The ultimate recoupment of costs carried forward for exploration and evaluation phase is dependent on the successful development and
commercial exploitation or sale of respective areas.

i. Reconciliation

A reconciliation of the carrying amount of exploration and
evaluation phase expenditure is set out below:

Costs brought forward

Subsidiary acquired1

Net foreign exchange differences

Expenditure incurred during the year

Expenditure written off/impairment for relinquished tenements

10,270,630

‑

7,132,433

2,489,661

184,112

(18,631)

2,896,430

2,336,474

(102,530)

(1,669,307)

13,248,642

10,270,630

On 8 July 2016 Southern Gold acquired 100% of a Singaporean registered company, International Gold Private Ltd. (“IGPL”), itself a
100% owner of a South Korean company Hee Song Metals Co, Ltd. (now Southern Gold Korea Ltd.). The acquisition consideration
included 6,294,942 Southern Gold ordinary shares and cash of $115,695 (refer ASX Announcement 8 July 2016). The value of the
acquisition consideration was $2,476,603. The $745,124 excess of the acquisition price over the book value of net assets acquired is
recognised as part of value of exploration and evaluation assets acquired of $2,489,661. The net liabilities acquired were ($13,058).

The acquisition was considered as an asset acquisition and not a business combination under AASB3. The asset acquired was the
exploration and evaluation asset. Other net liabilities of ($13,058) were immaterial.

During the period ending 30 June 2018, Southern Gold has written off exploration and evaluation expenditure of $102,530 relating
to eight tenements in Western Australia that were relinquished in the period. In the prior period, ending 30 June 2017, the amounts
written off was comprised of:

• $377,899 for five tenements in Western Australia that were relinquished in that period, and

• $1,291,408 being a number of tenements impacted by a heritage re‑instatement.

4 6

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

9. MINE DEVELOPMENT ASSETS

Costs carried forward in respect of the development of Cannon

Accumulated amortisation

ii. Reconciliation

A reconciliation of the carrying amount
of mine development assets is set out below:

Costs brought forward

Expenditure incurred during the year

Amortisation expense

Amortisation capitalised to ending inventories

2018
$

2017
$

‑

2,744,487

(2,744,487)

1,655,478

‑

(1,618,061)

(37,417)

Southern Gold had entered into a Mine Finance and Profit Sharing Agreement with Metals X Ltd., now Westgold Resources Ltd.,
(Westgold) for the financing and development of its Cannon Gold Resource, located 30km from Kalgoorlie in WA. Under the
Agreement, Westgold provided all funding and management of services required for the mining, haulage and the treatment of ore from
the Cannon deposit. Mining operations commenced in August 2015.

The Mine Development asset was amortised over the estimated economic life of the open pit operation on the basis of tonnes of
ore mined. Mining of the expanded open pit was completed in June 2017.

Costs incurred directly by Southern Gold in overseeing the Mining contractor (WestGold) and exploration costs associated with the
existing open pit resource, were expensed as incurred. These costs are shown in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income, as ‘Mining Costs’. There were no further Mining Costs in the year ended 30 June 2018.

As part of the Agreement, Westgold also provided Southern Gold with a secured loan facility of $2,500,000. The loan was interest
bearing, fixed at 8% per annum. The final $500,000 was drawn down in the year ended 30 June 2017.

Mining profits from the Cannon Mine were first applied to the reimbursement of Westgold’s mining and development costs, with all
subsequent Mining Profits shared on a 50:50 basis. Southern Gold’s 50% share of the final cash distributions from the open pit in the

year ending 30 June 2018 were $2,185,413 (2017: $11,353,000).

Southern Gold’s 50% share of cash distributions were first applied to repayment of the loan balance, with $2,500,000 repaid in the
year ended 30 June 2017. [Southern Gold also repaid a $1,000,000 convertible debt facility in March 2017, taking the total repayment of
borrowing, during the year ended 30 June 2017, to $3,500,000 in the Statement of Cash Flows]

On 23rd January 2018, the Southern Gold entered a new agreement with development partner, Westgold for the underground
development phase at Southern Gold’s Cannon gold mine, near Kalgoorlie in return for an upfront payment of $1,500,000 and future
royalties (refer Note 2a).

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

10. PLANT AND EQUIPMENT

Plant and equipment at cost

Less: Accumulated depreciation

Opening written down value

Additions

Acquisition of Subsidiary

Net foreign currency exchange differences

Disposals

Depreciation

Closing written down value

11. TRADE AND OTHER PAYABLES

Trade payables

Sundry payables and accruals

Amount payable to Directors and Key Management related entities1

2018
$

2017
$

561,823

(385,581)

176,242

168,308

64,102

‑

3,204

‑

(59,372)

176,242

190,227

129,251

21,157

340,635

488,852

(320,544)

168,308

31,054

163,963

20,724

243

(641)

(47,035)

168,308

135,705

177,691

41,934

355,330

1. Payable to Greg Boulton and Associates Pty Ltd. (an entity associated with G C Boulton) of $7,500 (2017:$ 7,500).

Payable to Red Balloon Superannuation Fund (an entity associated with Mr David Turvey) of $651 (2017: $296).

Payable to Lapun Kamap Superannuation Fund (an entity associated with Mr Michael Billing) of $651 (2017: $296).

Payable to Bamford Superannuation Fund (an entity associated with Mr Peter Bamford) of $651 (2017: nil).

Payable to Bayfront Nominees Pty Ltd. (an entity associated with D L Hill) of $1,955 (2017: $2,760).

Payable to Mr Simon Mitchell, being a final bonus relating to the year ended 30 June 2018 $5,475 and superannuation of $4,275 (2017: $31,081).

4 8

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

12. PROVISIONS

The aggregate provisions recognised in and included in the financial statements is as follows:

Current Provisions

Employee entitlements provision

Mine restoration provision

Non-Current Provisions

Employee entitlements provision

13. ISSUED CAPITAL

a) Ordinary Shares

Issued share capital:

49,150,553 fully paid ordinary shares
(2017: 47,292,415)

2018
$

2017
$

134,121

‑

134,121

70,130

102,000

172,130

31,094

‑

40,072,064

39,607,530

Movement in issued shares for the year:

No.

2018
$

No.

2017
$

Balance at beginning of 2017 financial year

47,292,415

39,607,530

36,567,820

35,700,379

Dividend reinvestment plan

Shares issued to Directors

Options exercised

Acquisition shares

Placement of shares

Net costs associated with the issue of shares

1,858,138

464,534

‑

103,413

250,000

6,294,942

4,076,240

30,000

80,000

2,360,603

1,450,000

‑

(13,452)

Balance at end of financial year

49,150,553

40,072,064

47,292,415

39,607,530

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
shareholders’ meetings.

In the event of winding up of the Company ordinary shareholders rank after all creditors and are fully entitled to any proceeds of
liquidation.

b) Options on Issue

At 30 June 2018, there were 5,943,336 unlisted options outstanding (30 June 2017: 2,267,006).

All of the above options are accounted for as share based remuneration. Refer to Note 19 for further detail.

4 9

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

13. ISSUED CAPITAL cont.
c) Capital Management

The capital of the Group is managed by assessing the financial risks and adjusting the capital structure in response to changes in
these risks and in the market. The responses include the management of dividends to shareholders and share issues. There have
been no changes in the strategy adopted by management to control the capital during the year.

The amounts managed as capital by the Group for the reporting periods under review are as follows:

2018
$

2017
$

Debt

Cash

Equity

Net debt to equity ratio

14. REMUNERATION OF AUDITORS

The auditor of Southern Gold Ltd. is Grant Thornton Audit Pty Ltd.

Amounts received or due and receivable by Grant Thornton for:

An audit or review of the financial report of the entity and any other entity of the group

Taxation and other services

‑

2,080,242

15,153,360

‑

5,376,908

15,117,954

38,725

‑

38,725

41,324

2,000

43,324

15. RELATED PARTY AND KEY MANAGEMENT DISCLOSURES

The terms and conditions of the transactions between related parties are on normal commercial terms and conditions no more
favourable than those available to other parties unless otherwise stated.

a) Equity Interests

Equity Interests in controlled entities
Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 22 to the financial statements.

Equity Interests in joint ventures

Details of interests in joint ventures are disclosed in Note 16 to the financial statements.

b) Transactions within wholly owned group

The wholly owned group includes:

• The ultimate parent entity in the wholly‑owned group; and

• The wholly‑owned controlled entities.

The ultimate parent entity in the wholly‑owned group is Southern Gold Ltd.

During the financial year Southern Gold Ltd. provided accounting and administrative services at no cost to the controlled entities and
the advancement of interest free loans.

5 0

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

15. RELATED PARTY AND KEY MANAGEMENT DISCLOSURES cont.

c) Transactions with Directors and Key Management Personnel

The following comprises payments made to entities in which Directors or Key Management Personnel have an interest;

Director and Key
Management Personnel

Related Party
Transaction

D L Hill

GC Boulton

D Turvey

M Billing

Payments to a member of Key Management for
company secretarial services provided

Payments to a Director related entity for Director
and consulting services provided*

Payments to a Director related entity for consulting
services provided

2018
$

13,972

2017
$

14,318

90,000

93,000

6,148

1,000

6,000

3,000

* During the year ended 30 June 2018, the value of payments comprised Directors fee of $90,000, and consulting fees of nil. (For the year ended 30 June 2017, the value of

payments comprised Directors fee of $90,000, and consulting fees of $3,000.)

d) Related party balances

Amounts receivable from and payable to Directors and Key Management Personnel and their related entities at report date arising
from these transactions were as follows:

Current payables

Amounts payable to Directors and Key Management Personnel related entities

There were no amounts receivable from related parties.

e) Remuneration of Key Management Personnel (see summary in Note 4)

21,157

41,934

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

16. JOINT OPERATIONS

The consolidated entity had interests in unincorporated joint operations at 30 June as follows:

a) Southern Gold (Asia) Joint Venture (SG Asia)

b) Heron Resources KNP Joint Venture

c) Glandore Joint Venture ‑ Aruma

Interest
2018

15%

80%

75%

Interest
2017

15%

80%

50%

Notes
a)

Under the terms of the sale of Southern Gold’s former subsidiary, SG Asia, Southern Gold retains a 15% free carried interest in an
unincorporated Joint venture with SG Asia based on selected tenements held by SG Asia that were re‑granted by the Cambodian
authorities until the completion of a positive definitive feasibility study, together with a 2% gross sales royalty on all products sold
from the tenements until US$11 million is received, then reverting to a 1% gross sales royalty.

Under the terms of a Heads of Agreement with Heron, Southern Gold earned an 80% gold interest associated with Heron’s Bulong
Project (held by Hampton Nickel Pty Ltd.), by meeting agreed exploration expenditures through to 30 June 2014. Heron continues to
hold a free carry 20% interest, until Southern Gold meet $8m in total expenditure or conduct a feasibility study.

On 4 April 2016, Southern Gold entered into the Glandore Project Farm In and Joint Venture Agreement (“Glandore Agreement”)
with Aruma Exploration Pty Ltd. (refer ASX announcement 4 April 2016). Under the Glandore Agreement, Southern Gold may
earn up to a 90% interest in the Glandore tenements, through staged exploration expenditure of up to $1,200,000 within three
years from the date of the agreement. The Glandore tenements are located adjacent to Southern Gold’s Bulong Project. During the
2018 financial year, Southern Gold achieved the second milestone expenditure of $700,000, resulting in the Company earning an
additional 25% interest, to take the Company’s interest to 75% at 30 June 2018.

Gubong Joint Venture
On 27 March 2017, Southern Gold executed conditional agreements with London Stock Exchange listed Bluebird Merchant Ventures
Ltd. (Bluebird) for Bluebird to farm‑in to two of Southern Gold’s projects in South Korea. During the farm‑in, Bluebird is required to
undertake initial feasibility studies over a 12 month period, investing US$1 million in its investigation of the reopening of the Gubong and
Taechang gold mines after which the two parties will form a 50:50 joint venture (US$500,000 per project).

Following the required US$500,000 expenditure at Gubong, Bluebird and Southern Gold executed a definitive Farm In and Joint Venture
Agreement for the Gubong Gold Project (refer ASX Announcement 29 March 2018). The document provides the final framework for the
management of the Joint Venture. The Joint Venture commences after submission of a report on feasibility for the Gubong Gold Project.
The feasibility study was completed subsequent to the year ended 30 June 2018 (refer ASX Announcement 1 August 2018). The joint
venture will be conducted through an entity to be incorporated in South Korea (refer Note 22), with Bluebird as operators.

In respect of the Taechang Project, Bluebird has not completed the requirements to maintain their farm‑in option in place and Southern
Gold intends, in due course, to formally notify Bluebird to that effect.

Kochang Joint Venture
Southern Gold extended its Farm In and Joint Venture arrangement with Bluebird to include the Kochang project in South Korea.
The terms for the Kochang gold project are broadly in line with what was previously agreed for the Gubong and Taechang gold projects,
being a farm‑in stage where Bluebird are required to invest US$0.5 million in compiling a high level report on project feasibility targeting
capital expenditure of no more than US$10 million and Bluebird (or one of its associates) is to complete a placement in Southern Gold
shares to the value of A$0.25 million and at the same price agreed for the other projects, or A$0.386/share (refer ASX Announcement
13 February 2018). Subsequent to the year ended 30 June 2018, the $250,000 placement was completed to an entity controlled by
Bluebird (refer ASX Announcement 20 August 2018).

5 2

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

2018
$

2017
$

17. COMMITMENTS FOR EXPENDITURE AND CONTINGENT LIABILITIES

a) Exploration Expenditure Commitments

The Group has certain obligations to perform exploration work and expend minimum amounts of money on such works on mineral
exploration tenements.

These obligations will vary from time to time, subject to statutory approval. The terms of current and future joint ventures, the grant
or relinquishment of licences and changes to licence areas at renewal or expiry, will alter the expenditure commitments of the Group.

The Group also has exploration expenditure commitments pursuant to the Glandore Agreement (refer Note 16c).

Total expenditure commitments at report date in respect of these minimum tenement expenditure requirements, not otherwise
provided for in the financial statements, are as follows:

Not later than one year:

Later than one year but not later than two years:

Later than two years but not later than five years:

Greater than five years

617,664

590,166

1,573,022

3,644,992

6,425,844

689,674

1,020,830

1,816,052

4,951,916

8,478,472

b) Service Agreements

Service agreements between the Group and Non‑Executive Directors are disclosed in the Remuneration Report of the

Directors Report.

c) Office Rental

The consolidated entity has the following rental agreement commitments (excluding GST).

Not later than one year:

Later than one year but not later than two years:

Later than two years but not later than five years:

109,973

‑

120,309

84,431

‑

109,973

204,740

5 3

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

18. FINANCIAL INSTRUMENTS

Financial Risk Management
The Group’s financial instruments consist mainly of deposits with banks, short‑term investments, accounts receivable, accounts payable
and borrowings.

The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in Note 1, are as follows:

2018
$

2017
$

Financial Assets

Cash and cash equivalents

Trade and other receivables

Financial Liabilities

Trade and other payables

Dividend payable

2,080,242

5,376,908

134,994

403,711

2,215,236

5,780,619

340,635

‑

340,635

355,330

1,418,772

1,774,102

ii.

Treasury Risk Management
The Board of the Consolidated Group meets on a regular basis to analyse currency and interest rate exposure and to evaluate
treasury management strategies in the context of the most recent economic conditions and forecasts.

Financial Risks
The main risks the Consolidated Group is exposed to through its financial instruments are liquidity risk, credit risk, and interest
rate risk.

Liquidity risk

Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its
obligations related to financial liabilities.

The Consolidated Group manages liquidity risk by monitoring forecast cash flows.

Credit risk

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.

The maximum exposure to credit risk, excluding the value of any collateral or other security, at report date to recognised
financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of

financial position and notes to the financial statements.

No receivables are considered past due and/or impaired at report date.

Sensitivity Analysis

The Company has not performed a sensitivity analysis relating to its exposure to price risk at reporting date as a change in share
price by 10% is not considered to have a material impact on profit and equity.

Interest Rate Risk
The Consolidated Group’s exposure to interest rate risk, being the risk that a financial instrument’s value will fluctuate as a
result of changes in market interest rates, is contained in the following table which details the exposure to interest rate risk at
the reporting date. All other financial assets and liabilities are non‑interest bearing.

5 4

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

18. FINANCIAL INSTRUMENTS cont.

ii. Financial Risks cont.

2018

Financial assets

Cash and deposits

Receivables

Less: Payables

Interest
Bearing

Non-interest
Bearing

Total

Floating
interest rate

Fixed
interest rate

Net financial assets

2,080,242

‑

2,080,242

0.50%

‑

134,994

(340,635)

(205,641)

134,994

(340,635)

1,874,601

‑

2017

Financial assets

Cash and deposits

Receivables

Less: Payables

Less: Dividends payable

Interest
Bearing

Non-interest
Bearing

Total

Floating
interest rate

Fixed
interest rate

5,376,908

‑

5,376,908

0.60%

‑

403,711

(355,330)

403,711

(355,330)

(1,418,772)

‑

Net financial assets

5,376,908

(1,370,391)

4,006,517

Interest rate risk is managed with a mixture of fixed and floating rate cash deposits. At 30 June 2018, none of group cash deposits
are fixed (2017: nil).

Sensitivity Analysis
The company has not performed a sensitivity analysis relating to its exposure to interest rate risk at reporting date as a change in
interest rates by 2% is not considered to have a material impact on profit and equity.

iii. Net Fair Values

The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective net fair
values, determined in accordance with the accounting policies disclosed in Note 1 to the financial statements.

5 5

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

19. SHARE BASED PAYMENTS

Options
The Group has an ownership‑based compensation plan for employees. In accordance with the provisions of the Employee Share Option
Plan, as approved by shareholders at an Annual General Meeting, Directors may issue options to purchase shares in the company to
employees at an issue price determined by the market price of ordinary shares at the time the option is granted. No Directors participate
in the Employee Share Option Plan.

In accordance with the terms of the Employee Share Option Plan, options vest at grant date and may be exercised at any time from the
date of their issue to the date of their expiry. Share options are not listed, carry no rights to dividends and no voting rights.

The following share based payment arrangements were in existence at 30 June 2018:

Options – Series

No.

Grant Date

Expiry Date

Exercise Price

Employee Share Option Plan

July 20161

May 20172

November 20176

November 20177

Director Options

November 20143

March 20154

April 20175

955,000

250,000

475,000

30,000

400,002

333,334

12.07.2016

30.06.2021

15.05.2017

15.05.2022

30.11.2017

30.11.2022

30.11.2017

31.07.2022

27.11.2014

30.11.2019

01.02.2015

18.11.2020

1,750,000

03.04.2017

25.10.2020

1,750,000

03.04.2017

25.10.2020

$0.375

$0.400

$0.500

Fair value at
grant date

$0.282

$0.152

$0.112

$0.108

$0.105

$0.109

$0.153

$0.139

1. 1,245,000 unlisted options were granted to employees on 12 July 2016, under the Company’s shareholder approved Employee Share Option Plan. The options vested
immediately. The $351,170 fair value of the options was calculated, using the Black Scholes valuation method, using a volatility of 113% and an interest rate of 1.66%
(the five year Australian Government bond rate). 290,000 options have lapsed.

2. 250,000 unlisted options were issued to new employees on 15 May 2017, under the Company’s shareholder approved Employee Share Option Plan. The options vested
immediately. The $37,891 fair value of the options was calculated, using the Black Scholes valuation, using a volatility of 81% and an interest rate of 2.11% (the five year
Australian Government bond rate).

3. 6,000,000 unlisted options issued to Directors on 27 November 2014, pursuant to approval at the Annual General Meeting (2,000,000 each to Messrs. Greg Boulton,
David Turvey and Michael Billing). The number of options and the exercise price has been restated for the impact of the 1 for 15 share consolidation in November 2015.

4. 5,000,000 unlisted options were agreed to be issued to Mr Simon Mitchell, as agreed in his contract of employment as Managing Director, commencing 1 February 2015.
These options vested upon shareholder approval on 22 October 2015. The number of options and the exercise price has been restated for the impact of the 1 for 15 share
consolidation in November 2015.

5. 3,500,000 options were proposed to be granted to the Directors, subject to shareholder approval (announced to the ASX on 3 April 2017). These options vested in the current
financial year, upon shareholder approval on 25 October 2017. 1,750,000 of the options will have an exercise price of $0.40, and the other 1,750,000 have an exercise price
of $0.50. Although shareholders were yet to approve these options as at 30 June 2017, Accounting Standards required the options to be valued and recorded at the date the
options were proposed, being in the 2017 financial year. The $511,891 fair value of the options was calculated, using the Black Scholes valuation method, using a volatility of
86% and an interest rate of 1.88% (the three year Australian Government bond rate).

6. 475,000 unlisted options were issued to new employees on 30 November 2017, under the Company’s shareholder approved Employee Share Option Plan. The options vested
immediately. The $53,320 fair value of the options was calculated, using the Black Scholes valuation, using a volatility of 58% and an interest rate of 2.09% (the five year
Australian Government bond rate).

7. 30,000 unlisted options were issued to a new employee on 30 November 2017, under the Company’s shareholder approved Employee Share Option Plan. The options vested
immediately. The $3,226 fair value of the options was calculated, using the Black Scholes valuation, using a volatility of 58% and an interest rate of 2.09% (the five year
Australian Government bond rate).

The options hold no voting or dividends rights and are unlisted.

Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of
future movements.

The life of the options is based on the historical exercise patterns, which may not eventuate in the future.

Other than the above, there were no other options granted to Key Management Personnel during the year.

5 6

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018
19. SHARE BASED PAYMENTS cont.

Options cont.
The following reconciles the outstanding share options granted as share based payments at the beginning and end of the financial year:

Share Option Granted

2018

2017

Balance at beginning of financial year

Granted during the financial year (i)

Exercised during the financial year

Lapsed during the financial year

Balance at end of the financial year (ii)

i. Options granted

Number of
options

5,767,006

505,000

‑

(328,670)

5,943,336

Weighted average
exercise price
$

$0.453

$0.375

‑

$0.900

$0.419

Number of
options

862,006

4,995,000

‑

(90,000)

5,767,006

Weighted average
exercise price
$

$0.453

‑

$0.453

505,000 options were granted under the Employee Share Option Plan in the year ended 30 June 2018 (2017: 4,995,000 options
being 1,495,000 granted under the Employee Share Option Plan and 3,500,000 options granted to Directors, as approved
by shareholders).

ii. Options outstanding at end of the financial year

The share options outstanding at the end of the financial year had an average exercise price of $0.419 (2017: $0.453) and a
weighted average remaining contractual life of 955 days (2017: 1,242 days).

20. OPERATING SEGMENTS

Segment Information

Identification of reportable segments
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the consolidated entity that
are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.
The consolidated entity has identified its operating segments based upon the geographies of Australia and the Republic of Korea
(South Korea). This is the basis on which internal reports are provided to the Board of Directors for assessing performance and
determining the allocation of resources within the consolidated entity.

The Annual Financial Report for the comparative period ending 30 June 2017 disclosed its operating segments as the exploration for
precious and base metals, and the production of precious and base metals. The Production segment represented the Group’s 50%
interest in the joint operations being undertaken at the open pit Cannon gold mine. Mining activity under the joint operations was
completed in March 2017. The Production segment for current period ending 30 June 2018 comprised two final cash distributions
totalling $2,185,413, representing the Company’s 50% share of revenues of $1,997,548 and cost of goods sold of $820,725. At 30 June
2018, there were nil net assets in the Production segment, and this method of segmenting the Company’s financial information is no
longer relevant. The segment information for the comparative year ended 30 June 2017 has been restated to be consistent with the
geographic segmentation presented for the year ending 30 June 2018.

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

Segment Profit/(Loss) before Income Tax

(1,201,897)

838,644

20. OPERATING SEGMENTS cont.

Year ended 30/6/2018

Segment Revenue

Revenue from Joint Operations

Other Income

Total Segment Revenue

Segment Expenses

Exploration expenditure written off

Exploration expenses

Exploration expenses (Cannon underground)

Share of Joint Operations expenses

Other expenditure

Total Segment Expenditure

Corporate expenses

Profit/(loss) before income tax

Income tax benefit/(expense)

Profit/(loss)

Year ended 30/6/2017

Segment Revenue

Revenue from Joint Operations

Other Income

Total Segment Revenue

Segment Expenses

Exploration expenditure written off

Exploration expenses

Mine management costs (Joint Operations)

Share of Joint Operations expenses

Mine development amortisation

Other expenditure

Total Segment Expenditure

South Korea
$

Australia
$

Consolidated
$

‑

477

‑

(351,109)

‑

(851,265)

(1,202,374)

1,997,548

1,554,059

3,551,607

(102,530)

(110,796)

(437,846)

(820,725)

(1,241,066)

(2,712,963)

1,997,548

1,554,536

3,552,084

(102,530)

(461,905)

(437,846)

(820,725)

(2,092,331)

(3,915,337)

(363,253)

(527,184)

(890,437)

187,482

(702,955)

South Korea
$

Australia
$

Consolidated
$

‑

(253,846)

‑

(822,296)

18,889,851

10,413

10,473

18,900,264

18,900,324

(1,669,307)

(6,976)

(252,588)

(6,565,679)

(1,618,061)

(1,317,572)

(260,822)

(252,588)

(6,565,679)

(1,618,061)

(2,139,868)

(1,076,142)

(11,430,183)

(12,506,325)

Segment Profit/(Loss) before Income Tax

(1,076,082)

7,470,081

Corporate expenses

Profit/(loss) before income tax

Income Tax Expense

Profit/(Loss)

5 8

6,393,999

(1,494,220)

4,899,779

(2,393,591)

2,506,188

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

20. OPERATING SEGMENTS cont.

As at 30/6/2018

Assets and Liabilities

Exploration and evaluation expenditure

Other segment assets

Segment Assets

Segment Liabilities

Segment Net Assets

Corporate net assets

Cash

Total Net Assets

As at 30/6/2017

Assets and Liabilities

Inventories

Exploration and evaluation expenditure

Other segment assets

Segment Assets

Other Segment Liabilities

Segment Liabilities

Segment Net Assets

Corporate net assets

Cash

Provision for dividend

Total Net Assets

Exploration
$

Production
$

Consolidated
$

4,954,956

188,315

5,143,271

43,588

5,099,683

8,293,686

142,011

8,435,697

462,262

7,973,435

13,248,642

330,326

13,578,968

505,850

13,073,118

2,080,242

15,153,360

South Korea
$

Australia
$

Consolidated
$

‑

3,389,692

138,563

3,528,255

68,724

820,725

6,880,938

457,360

8,159,023

458,736

820,725

10,270,630

595,923

11,687,278

527,460

3,459,531

7,700,287

11,159,818

5,376,908

(1,418,772)

15,117,954

5 9

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 201821. EARNINGS PER SHARE

Basic (cents per share) – Profit/(Loss)

Diluted (cents per share) – Profit/(Loss)

Basic and Dilutive Earnings per share

The earnings and weighted average number of ordinary shares used in
the calculation of basic and diluted earnings per share are as follows:

Earnings from operations

Earnings used in the calculation of basic and diluted earnings
per share agree directly to net profit/(loss) in the statement of
financial performance.

Weighted average number of ordinary shares

Weighted average number of shares & options

2018
Cents per share

2017
Cents per share

(1.44)

5.51

5.25

(702,955)

2,506,188

No.

48,840,015

45,467,450

54,783,351

47,734,456

The number of ordinary shares used in the calculation of diluted earnings per share is the same as the number used in the calculation of
basic earnings per share for the year ended 30 June 2018, as options are not considered dilutive, as a loss was incurred.

22. CONTROLLED ENTITIES CONSOLIDATED

Name of Entity

Parent Entity

Southern Gold Ltd.

Controlled Entities

Challenger West Holdings Pty Ltd.

CMH Resources Pty Ltd.

Gawler Arc Holdings Pty Ltd.

Southern Mining Pty Ltd.

Inferus Resources Pty Ltd. 1

New Southern Mining Pty Ltd.

International Gold Private Ltd.

Southern Gold Korea Ltd.2

Gubong Project JV Co Pte. Ltd.3

Kochang Project JV Co Pte. Ltd.3

Country of
Incorporation

2018
%

2017
%

Ownership Interest

Australia

Singapore

South Korea

Singapore

100%

‑

1. All shares in Inferus Resources Pty Ltd. are held by Southern Mining Pty Ltd.

2. All shares in Southern Gold Korea Ltd. are held by International Gold Private Ltd.

3. Two new companies were incorporated in Singapore on 18 June 2018. All shares in these new companies, as at 30 June 2018, are held by International Gold Private Ltd.

These companies have been established with the intention of being the holding companies for the two planned 50:50 joint venture operations with Bluebird Merchant Ventures
Ltd. for the development of mining operations at the Gubong and Kochang projects in South Korea. Refer Note 16.

6 0

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

23. SOUTHERN GOLD LTD. COMPANY INFORMATION

Parent Entity

Assets

Current assets

Non‑current assets

Total assets

Liabilities

Current liabilities

Non‑current liabilities

Total liabilities

Equity

Issued capital

Retained earnings

Share based payments reserve

Financial Performance

Profit/(loss) for the year

Other comprehensive income

Total comprehensive income

Guarantees in relation to the debts of subsidiaries

Contingent liabilities

Contractual commitments - exploration

24. DIVIDEND PAYABLE

2018
$

2017
$

1,996,024

13,619,598

15,615,622

6,516,032

10,548,155

17,064,187

431,168

31,094

462,262

1,877,508

‑

1,877,508

40,072,064

39,607,530

(25,874,552)

(27,295,958)

955,848

2,875,107

15,153,360

15,186,679

(554,400)

2,514,621

‑

(554,400)

2,514,621

‑

6,425,844

8,478,472

A dividend of $0.03 per share was declared on 6 June 2017. A provision for a dividend payable of $1,418,772 was included in the
Company’s financial statements as at 30 June 2017. Shareholders were provided with the option to receive the dividend, in part or in
whole, through a dividend re‑investment plan with Shares priced at $0.25 per share. On 30 August 2017, the Company paid the dividend
as $945,648 in cash and issued 1,858,138 shares.

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

25. GOING CONCERN BASIS OF ACCOUNTING

The financial report has been prepared on the basis of a going concern.

The consolidated entity incurred a net loss after tax from continuing operations of $702,955 for the year ended 30 June 2018, and had
a net cash outflow of $2,352,622 from operating and investing activities. The consolidated entity is reliant upon completion of capital
raising for continued operations and the provision of working capital.

If additional capital is not obtained, the going concern basis may not be appropriate, with the result that the Group may have to realise
its assets and extinguish its liabilities, other than in the ordinary course of business and at amounts different from those stated in the
financial report. No allowance for such circumstances has been made in the financial report.

26. EVENTS SUBSEQUENT TO REPORTING DATE

Subsequent to 30 June 2018, the following exploration rights, in South Korea, were granted 100% to Southern Gold:

• Two tenements granted at the recently identified Beopseongpo gold‑silver epithermal target in the south west of South Korea

(refer ASX Announcement 19 July 2018);

• One tenement granted at the Deokon Project hosting two historical gold‑silver mines in the in the central ‑ south west of South Korea

(refer ASX Announcement 6 August 2018).; and

• One tenement granted at the Neunju gold‑silver epithermal target in the south west of South Korea (refer ASX Announcement 4

September 2018).

On 20 August 2018, a total of 647,668 shares were issued to Bluebird Merchant Ventures Ltd. (‘Bluebird’), for proceeds of $250,000.
The placement was made pursuant to the Share Subscription, Farm In and Joint Venture Agreement – Kochang Project, which had been
executed earlier in the year (refer ASX release 13 February 2018). Refer Note 16.

Following completion of the required US$500,000 expenditure at the Gubong Gold Project in South Korea by Bluebird Merchant
Ventures Ltd. (Bluebird), Bluebird and Southern Gold executed a definitive Farm In and Joint Venture Agreement (refer ASX
Announcement 29 March 2018). The Joint Venture was to formally commence after submission of the feasibility report on the Gubong
Gold Project. The feasibility report was completed subsequent to the year ended 30 June 2018 (refer ASX Announcement
1 August 2018). Refer Note 16.

There has not arisen any other matters or circumstances, since the end of the financial year which significantly affected or could affect
the operations of the Group, the results of those operations, or the state of the Group in future years.

27. RESERVES

Share based payments reserve – the share based payments reserve records items recognised as expenses on valuation of options issued
to employees or other service providers.

Foreign currency translation reserve – the foreign currency translation reserve records exchange differences arising on translation of a
foreign controlled subsidiary.

28. REGISTERED OFFICE AND PRINCIPLE OFFICE

The registered and principle office of the Company and its controlled entities is;

Level 1, 8 Beulah Road, Norwood, South Australia, 5067

ABN 30 107 424 519

6 2

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018DIRECTORS’ DECLARATION

The Directors of Southern Gold Ltd. declare that:

a) The financial statements and notes are in accordance with the Corporations Act 2001, and:

i. Give a true and fair view of the financial position as at 30 June 2018 and of the performance for the year ended on that date of

the Consolidated Group; and

ii. Comply with Accounting Standards; and

iii. Southern Gold Ltd. complies with International Financial Reporting Standards as described in Note 1; and

b) The Chief Executive Officer and Finance Manager have declared that:

i. The financial records of the Company for the financial year have been properly maintained in accordance with s286 of the

Corporations Act 2001;

ii. The financial statements and notes for the financial year comply with the Accounting Standards; and

iii. The financial statements and notes for the financial year give a true and fair view;

In the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors

Dated at Adelaide this 19th day of September 2018.

S Mitchell

G C Boulton AM

Managing Director

Chairman

6 3

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

INDEPENDENT AUDIT REPORT TO THE MEMBERS

Grant Thornton House
Level 3
170 Frome Street
Adelaide, SA 5000
Correspondence to:
GPO Box 1270
Adelaide SA 5001
T
F
E
W

Independent Auditor’s Report

To the Members of Southern Gold Limited

Report on the audit of the financial report

Opinion
We have audited the financial report of Southern Gold Limited (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss
and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows
for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

a giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance for the year

ended on that date; and

b complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern
We draw attention to Note 25 in the financial statements, which indicates that the Group incurred a net loss of $702,955 during
the year ended 30 June 2018, and had a net cash outflow of $2,352,622 from operating and investing activities. As stated in
Note 25, these events or conditions, along with other matters as set forth in Note 25, indicate that a material uncertainty exists
that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

www.grantthornton.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

6 4

INDEPENDENT AUDIT REPORT TO THE MEMBERSSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

INDEPENDENT AUDIT REPORT TO THE MEMBERS

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the Material uncertainty related to going concern section, we have determined the
matters described below to be the key audit matters to be communicated in our report.

Exploration and evaluation assets – Notes 2(d), 2(u) and 8
At 30 June 2018 the carrying value of exploration and
evaluation assets was $13,248,642.

Our procedures included, amongst others:

In accordance with AASB 6 Exploration for and Evaluation of
Mineral Resources, the Group is required to assess at each
reporting date if there are any triggers for impairment which
may suggest the carrying value is in excess of the recoverable
value.

The process undertaken by management to assess whether
there are any impairment triggers in each area of interest
involves an element of management judgement.

This area is a key audit matter due to the significant
judgement involved in determining the existence of
impairment triggers.



obtaining the management reconciliation of capitalised
exploration and evaluation expenditure and agreeing to
the general ledger;
reviewing management’s area of interest
considerations against AASB 6;
conducting a detailed review of management’s
assessment of trigger events prepared in accordance
with AASB 6 including;
-

tracing projects to statutory registers, exploration
licenses and third party confirmations to
determine whether a right of tenure existed;
enquiry of management regarding their intentions
to carry out exploration and evaluation activity in
the relevant exploration area, including review of
management’s budgeted expenditure;
understanding whether any data exists to
suggest that the carrying value of these
exploration and evaluation assets are unlikely to
be recovered through development or sale;
assessing the accuracy of impairment recorded for the
year as it pertained to exploration interests;
evaluating the competence, capabilities and objectivity
of management’s experts in the evaluation of potential
impairment triggers; and
assessing the appropriateness of the related financial
statement disclosures.

Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s financial report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report
thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.

6 5

INDEPENDENT AUDIT REPORT TO THE MEMBERSSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

INDEPENDENT AUDIT REPORT TO THE MEMBERS

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors’ for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.

In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.

Report on the remuneration report

Opinion on the remuneration report
We have audited the Remuneration Report included in the Directors’ report for the year ended 30 June 2018.
In our opinion, the Remuneration Report of Southern Gold Limited, for the year ended 30 June 2018 complies with
section 300A of the Corporations Act 2001.

Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.

Grant Thornton Audit Pty Ltd
Chartered Accountants

I S Kemp
Partner – Audit & Assurance

Adelaide, 19 September 2018

6 6

SOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018

The shareholder information set out below was applicable as at 2 October 2018.

1. SUBSTANTIAL EQUITY HOLDERS

There are no individual shareholders with a relevant interest of 5% or more in the total ordinary shares on issues as at 2 October 2018.

2 NUMBER OF SHAREHOLDERS

Number of Shareholders

Class of Shares

1,302

ORD

Voting Rights

Full

3. DISTRIBUTION OF EQUITY SECURITIES

Distribution of holdings:

1 ‑ 1,000

1,001 ‑ 5,000

5,001 ‑ 10,000

10,001 ‑ 100,000

100,001 ‑ and over

Number of holders of less than a marketable parcel of $500

Number of
Holders

138

434

221

426

1,302

335

6 7

SHAREHOLDER INFORMATIONSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 20184. TWENTY LARGEST SHAREHOLDERS

The names of the twenty largest holders of fully paid ordinary shares comprise:

Name

HSBC Custody Nominees

G Boulton Pty Ltd.

Dr Gary Bennett Branch

Weybridge Pty Ltd.

BNP Paribas Nominees Pty Ltd.

Potezna Gromadka Ltd.

Mr Eric Guerlain

Ilwella Pty Ltd.

Valbonne II

Hush Hush Pty Ltd.

Potezna Gromadka Ltd.

12 Mr Eric Guerlain

Zero Nominiees Pty Ltb

National Nominees Ltd.

15 Mr Colin Weekes

Bluebird Merchant Ventures

Sino Portfolio International

Dr Leon Eugene Pretorius

19 Mr Shane Robert Helm

20 Mr Michael Robert Billing

Number
Held

Percentage of
Issued Shares

2,235,333

1,666,883

1,570,000

1,361,867

1,318,200

1,142,857

963,500

956,140

896,000

877,193

800,000

781,826

656,480

647,668

581,140

560,000

523,105

338,359

4.5

3.3

3.2

2.7

2.6

2.3

1.9

1.8

1.6

1.3

1.2

1.1

0.7

19,896,601

40.0

6 8

SHAREHOLDER INFORMATIONSOUTHERN GOLD LIMITED - CONSOLIDATED ENTITY // ANNUAL REPORT 2018SOUTHERNGOLD.COM.AU

Southern Gold Ltd.
ACN 107 424 519