IONDRIVE LIMITED - Annual Report 2012

Annual Report 2011/12

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Directors

Greg Boulton AM Non-Executive Chairman

Nanette Anderson Managing Director Michael Billing Non-Executive Director David Turvey Non-Executive Director

Company Secretary Nick Harding

Registered and Principal Address 229 Greenhill Road Dulwich SA 5065 PO Box 255

Kent Town SA 5071 T +61 (0)8 8368 8888 F +61 (0)8 8431 5619

www.southerngold.com.au

Solicitor

Watson Lawyers Ground Floor, 60 Hindmarsh Sq Adelaide SA 5000 T +61 (0)8 8418 8580 F +61 (0)8 8215 0337

Auditor

Grant Thornton Pty Ltd Level 1, 67 Greenhill Rd Wayville SA 5034 T +61 (0)8 8 372 6666 F +61 (0)8 8 83726677

Share Registry Computer Share Registry Services Level 5, 115 Grenfell St Adelaide SA 5000 T +61 (0)8 8236 2300 F +61 (0)8 8236 2305

Southern Gold Limited ACN 107 424 519 ABN 30 107 424 519

	Chairman’s Letter Operations Report	02 05
	Bulong Gold Project	05
	Background	06
	Cannon Gold Resource Evaluation	07
	Regional Exploration	13
	Proposed Work Program 2012/2013	16
	Corporate	16
	Glossary	18
	Tenement Schedule	20
	Corporate Governance Statement	24
	Directors’ Report	29
	Remuneration Report (Audited)	36
	Notes to the Financial Statements for the Financial Year Ended 30 June 2012	48
	Directors’ Declaration	73
	Independent Audit Report to the Members	74
	Shareholder Information	75

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Chairman’s Letter

AM Greg Boulton Non-Executive Chairman

Dear Shareholder,

The 2012 year has been one of consolidation, drawing the exploration and development focus to your Company’s flagship project, the Bulong Gold project in Western Australia.

Following the exploration success at Bulong in 2011, which included increasing the Cannon gold resource to 94,500oz (896,000t @ 3.3 g/t Au – Appendix 1) and identifying new regional gold anomalies, it became clear that this project area had significant capacity to grow.

With this in mind management set about strengthening the foundation in both a corporate and technical capacity to maximise this growth potential.

At a corporate level Southern Gold secured funds for exploration and development through a placement of

shares for $1.35m to the Company’s Kalgoorlie neighbour Integra Mining Ltd[1 ] (“Integra”) and a fully underwritten rights issue to raise $3.31m. As a key cornerstone investor Integra participated in the rights issue and increased its shareholding from 10% to 12.48%.

The business relationship with Integra is seen as a key step forward in building value for the Bulong Gold project, particularly as Integra is an owner operator of a 1 Mtpa gold processing plant that is within “trucking distance” of the Cannon gold resource. As part of the placement, Southern Gold agreed to grant Integra a three year pre-emptive right, to

Subsequent to the end of the financial year (6/8/2012) Integra and Silver Lake Resources Ltd announced a Merger Implementation Agreement whereby Silver Lake will acquire Integra through a Scheme of Arrangement.

match or better any third party offer to purchase, treat or sell ore derived from the Cannon resource.

Post the reporting period two additional corporate transactions were finalised, releasing value from both the Company’s Cambodian and South Australian assets. These projects had received little if no attributable market value since the growth of the Bulong project.

An agreement with Mekong Minerals Ltd was finalised whereby Mekong has the exclusive right to earn up to a 70% interest in Southern Gold’s Cambodian assets by sole funding US$5.7 million on expenditure over a three year period. On earning a 70% interest, Mekong will have the option to purchase Southern Gold’s remaining 30% interest for US$4.5 million in cash or cash and shares in Mekong (if ASX listed).

Under a Sale Agreement with Trafford Resource Ltd, Southern Gold sold its South Australian Challenger project for A$500,000 cash and 3,000,000 Trafford shares. In the event of a discovery and decision to conduct a feasibility study on a JORC resource of over a cumulative 500,000 oz gold, Trafford will issue a further A$1 million worth of Trafford shares to Southern Gold.

Both these transactions realise value through receipt of proceeds and reduction of operating costs, while maintaining exposure to any future upside gained from Mekong or Trafford’s exploration success.

From a technical view point a substantial amount of work has been undertaken at the Bulong Gold project targeting three key areas. Preliminary economic evaluation and development studies at the

Cannon gold resource, near resource exploration along the 1km “Cannon Trend” and regional exploration over the expanded tenement package.

While stand-out grades from the Cannon gold resource have captured the markets attention recently (including the highest grade intersection to date of 1.1m @ 192.31 g/t Au within a zone of 4m @ 52.98 g/t Au (from 82m) and followed by another 5.7m @ 10.6 g/t Au (from 120.7m) in the same hole), it is the consistency of results from the drill programmes both at Cannon, as well as the regional exploration success that encourages management that further work will generate additional new gold discoveries.

Following these positive indicators a decision was made to expand the Company’s technical team, splitting the focus between regional exploration

and the development of the Cannon resource and near resource targets.

Test work for development and associated permitting is well underway with reports received from independent consultants. These consultants were employed over the past 6 months to undertake technical assessments relevant to mining, milling and permitting. The results of these studies are considered to be sufficiently encouraging to warrant more detailed evaluation of open pit mining and/or underground mining and toll treating scenarios.

Southern Gold is now well positioned to take the next step towards developing a mine in 2013. While this goal is set against the backdrop of the instability of the global financial markets, these risks are mitigated to some extent by two overarching factors.

Firstly, that with predictions on the future price of gold ranging considerably between forecasters, gold historically tends to perform positively in times of economic uncertainty. Secondly, that while forecasts for the gold price in 2013 ranged from US$1400/oz to US$2,550 (Bloomberg analyst survey Dec 2011) with updated forecasts in June 2012 anywhere in between, there are key elements of the Cannon Gold resource which have the potential to drive positive economic outcomes in this range.

These elements are the proximity of Cannon to Kalgoorlie with its abundance of logistical and technical support infrastructure, the presence of five operating gold plants in the vicinity and the relatively high grade of the deposit. When combined, these elements provide a strong foundation for believing that Cannon’s potential value can be realised.

The Company is entering an exciting period next year with the potential development of a mining operation and building on the current resource base. While this is part of our near term growth strategy, the Company continues to assess additional opportunities with the aim of continuing to grow shareholder value.

It is through the hard work of the Southern Gold management, staff and contractors that has seen the Company achieve its 2012 strategic objectives in a timely and cost effective manner. This work along with the stand-out results from Bulong have positioned Southern Gold so that it “set to go” in 2013.

I would like to thank my fellow Directors, Managing Director, staff and contractors for their hard work and dedication this year, and welcome those who’ve recently joined Southern Gold.

Thank you to our Shareholders for your ongoing support and we look forward to being able to update you with further positive progress at our Annual General Meeting scheduled for the 21[st] November, 2011.

Yours faithfully,

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Greg Boulton AM Non-Executive Chairman

Operations Report

Bulong Gold Project

The Bulong Gold Project is located 30 km east of the world class Kalgoorlie Goldfield in Western Australia where the Company controls 250 km[2] of tenements (Figure 1) over the Bulong Complex, a sequence of ultramafic and mafic rocks. These rock types are proven hosts to large gold resources elsewhere in the Kalgoorlie district.

The Company is targeting the discovery of gold resources in an area where past exploration was principally for nickel. Work to date has successfully delineated the Cannon gold resource which is currently estimated at 94,500oz gold (“Au”) contained in 896,000 tonnes with an average grade of 3.3 g/t Au (see Appendix 1 for the Resource Table).

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Kanowna Belle
Mt Charlotte
Super Pit
Lakewood Mill
Salt Creek Mill
Mt Monger
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Figure 1

Location of the Bulong Gold Project, 30km east of Kalgoorlie, Western Australia.

Legend

SAU Tenements SAU - Heron HOA areas Gold Mill

Gold Mine Main Road Railway

A Turnpike Anomaly B Amersham Anomaly

Geology

Sediments and felsic volcanics Granite Mafic/ultramafic belts

Background

The Cannon gold resource was discovered after drill testing the first of five gold in soil anomalies (ie >50ppb) generated from a soil sampling programme. Five anomalies (including Cannon) were generated within a 1km anomalous gold zone referred to as the Cannon Trend (Figure 2).

Exploration drilling at three of these targets intersected significant gold mineralisation, defining the Pinner, Homerton and Monument prospects.

Figure 2

“Cannon Trend” Gold in soil anomalies in the vicinity of the Cannon Gold Resource.

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Arsenal
Cannon Gold
Resource Centre
Pinner
Euston
Auger Soil Contours
300ppb Au
Homerton 200ppb Au
Monument 100ppb Au
50ppb Au
20ppb Au
10ppb Au
Legend
SAU Tenement
Boundary
High Priority
Targets
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Cannon Gold Resource Evaluation

Evaluation of the Cannon Gold

resource over the past year has provided insights into the nature and style of gold mineralisation that is present in the project area. This has enabled our exploration team to develop exploration strategies for evaluating the tenement package as a whole and the identification of areas that appear to have similar prospectivity to Cannon.

The implementation of these

strategies proved successful with the definition of a number of goldin-soil anomalies. Drill testing using both reverse circulation (“RC”) and air core (“AC”) methods at seven of these newly defined targets resulted in four returning significant results.

Substantial work has been undertaken during the year in addition to the drill testing of the Cannon Trend and regional auger gold in soil anomalies. This work was directed toward

progressing the evaluation of various development scenarios for the Cannon Gold resource relating to possible open pit mining and/or underground mining options.

Work also commenced and was largely completed, on all the studies required (i.e. environmental, metallurgical and geotechnical) to enable the permitting of a mining operation should on-going evaluation work in the coming year determine that mining the Cannon resource is economically viable.

The Cannon Gold resource is currently estimated at 94,500oz gold (“Au”) (from 896,000 tonnes at an average 3.3g/t Au – Appendix 1). The resource is hosted by a sequence of mafic and ultramafic rocks. Located close to several gold processing facilities (Figure 1) and with mineralisation intersected close to surface, assessment of the resource’s economic potential was a key component of the 2011/12 work programme.

Resource evaluation work completed during the year included the drilling of 38 drill holes comprising 2,589m of RC drilling and 1,446m of diamond drilling (Figure 3). The drill programme was designed to test the broad high grade zones of the resource to provide a greater level of detail of the nature of the geological host rock and controlling structures.

RC holes drilled in the southern zones of the resource targeted additional potential near surface mineralisation.

Stand-out broad high grade gold zones intersected in this programme (Table 1) are consistent with previous intersections, and significantly, have confirmed the near surface presence of elevated gold grades over wide widths (BSRCD 191, 193, 197 and BSRC209, 213 and 215).

Figures 3, 4, 5 and, 6 depict the location of these intersections in relation to each other and the consistency of the mineralisation up and down dip and also north to south. The broad envelopes shown in the sections depict the scale of the alteration envelopes defined by +0.1g/t gold grades surrounding potential economic grades.

From an exploration perspective, the intersections at depth in holes BSRCD200 and BSRCD204 suggests that the mineralisation is still open down dip to the west on these sections (Figures 4, 5, 6).

Figure 3

Plan view of Cannon Gold resource Envelope, showing location of significant intersections

Legend

Previous RC holes Recent RC collar Recent RC Collar - significant intersection Mineralised envelope projected to surface Potential down dip extension of mineralisation

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Table 1

Significant Reverse Circulation and Diamond Core Drilling Intersections - Cannon Resource

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DRILL HOLE ID FROM (M) INTERVAL (M) GRADE (g/t Au) DRILL HOLE ID FROM (M) INTERVAL (M) GRADE (g/t Au)
BSRCD190 44.5 1.3 4.43 BSRCD199 100.1 8.25 8.58
BSRCD191 22 2 4.75 BSRCD200 130.7 7.6 21.46
BSRCD192 71.2 0.9 30.26 including 131.5 4.5 33.82
BSRCD192 89 4.1 52.98 BSRCD200 140.6 1.2 10.83
including 92 1.1 192.31 BSRCD201 130 2.8 14.84
BSRCD192 107 8.5 4.54 BSRCD201 137.6 9.6 16.17
BSRCD192 120.7 5.7 10.60 BSRCD201 152.25 1.75 2.83
BSRCD193 31 6 2.36 BSRCD201 158.8 1 3.68
BSRCD193 64 7 1.95 BSRCD203 118 2 3.42
BSRCD193 88.4 4.7 5.52 BSRCD204 183 7.5 11.51
BSRCD194 50 2 3.09 BSRCD204 195.5 3.2 1.94
BSRCD194 57 2 2.57 BSRC206 55 8 1.35
BSRCD194 65.8 9.4 1.63 BSRC209 27 8 2.75
BSRCD194 86.5 15.5 5.19 BSRC211 20 6 12.16
BSRCD194 114 1 5.98 BSRC211 38 11 7.85
BSRCD195 63 3.7 4.78 BSRC213 9 9 3.84
BSRCD185 87 1 3.48 BSRC215 33 5 4.13
BSRCD195 96.1 18 3.37 BSRC215 51 2 5.65
BSRCD196 202.5 3.1 3.34 BSRC219 8 1 6.49
BSRCD197 49 4 13.54 BSRC219 18 6 1.68
BSRCD198 80 5 3.99 BSRC220 5 15 6.06
BSRCD199 81.7 13.9 6.61 BSRC222 17 3 3.42
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Figure 4 Schematic Section 30mN, shows high grade gold mineralisation near surface.

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Figure 5

Schematic Section 110mN, showing wide consistent high grade gold mineralised zones persisting down dip.

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Figure 6

Schematic Section 175mN, continuation of wide, high grade gold zones down dip.

Legend for Cross Sections

BOCO Base of Complete Oxidisation TOFR Top of Fresh Rock Gold Mineralisation Envelope > 0.5 g/t Au (Max. dilution width 3m) Gold Mineralisation Envelope > 0.1 g/t Au (Max. dilution width 2m) Ultramafic/Mafic units

Conceptual Economic Evaluation Studies

The results obtained from the recent drilling at the Cannon resource were combined with those from previous resource definition programmes and used to support geotechnical, metallurgical, environmental and conceptual mine planning studies. Each of these studies was undertaken by independent consultants and directed toward assessing development scenarios for possible open pit mining and/or underground mining.

Analysis of three diamond core holes drilled specifically to establish indicative geotechnical parameters of an open pit development on the Cannon resource, confirmed that conditions were typical for these types of rock units and could be managed through prudent mine design parameters and mining practices such as are employed elsewhere in the Kalgoorlie district.

This study was preliminary in nature and will be further refined as evaluation studies progress.

A first pass programme of metallurgical test work was undertaken on 100 kg composite samples of transitional and fresh mineralisation derived from reverse circulation drilling. Samples were composited together to give approximate head grades that could be expected during mining and processing.

The results of this test work show that the transition ore is relatively soft with respect to grindability and approximately 10-15% gold could be recovered by means of gravity concentration. The test work also showed that if recovery of coarse gold by gravity methods is followed by standard processing methods of, i.e. CIP or CIL, the overall recovery should be greater than 93%. This recovery estimate appears to be

independent of grind size (80% passing 75 – 150 micron) tested.

The fresh ore sample tested is only moderately hard with respect to grindability and that approximately 30-35% gold could be recovered by means of gravity concentration. The test work also showed that if gravity recovery is followed by standard means of cyanidation (CIP/CIL), the overall recovery is estimated to be greater than 85%, a value that appears to be partly dependent on grind size. In addition, this ore type leaches rapidly post gravity recovery and has both low cyanide and lime consumptions.

Flora, fauna, hydrological and waste characterisation studies were also completed during the year. These studies were undertaken in parallel with the conceptual technical studies to ensure that the permitting time line could be reduced as far as practical should detailed economic

analysis of the Cannon gold resource result in a decision to mine.

All of the permitting-related studies have confirmed that there should be no major environmental hurdles to development options for the Cannon Resource.

Conceptual Mine Planning Mine development scenarios were evaluated using prevailing mining and toll treatment milling costs and the preliminary metallurgical performance data discussed above. These scenarios, whilst conceptual in nature, indicate that further detailed modelling is warranted.

The Company believes that finalising key independent consultant studies at this time reduces permitting lead times required for any future development operations that may be considered by the Company once evaluation work is completed.

Regional Exploration

Southern Gold’s recognition of the gold potential and its exploration strategy in the Bulong region has led to the completion of a first pass regional auger soil sampling programme over the whole tenement area early in 2011/2012. This programme identified over 30 targets with anomalous gold values extending over distances ranging from 200m at Imperial to greater than 600m at Turnpike (Figure 7). The 30 targets were prioritised for further testing, with three selected for reverse circulation (“RC”) and an additional four for air core (“AC”) evaluation during the year.

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Figure 7

First pass drilling results from the southern portion of the Turnkpike gold anomaly which is approximately 600 m long. Initial results are positive and require further testing.

Legend

Aircore Drill Collar

Soil geochemistry Au (ppb) Tenement boundary Track

The significance of the soil anomalies in the Turnpike – Hammersmith – Perivale area was tested by the drilling of 3,244 m resulting in a number of significant intersections (Table 2), the best of which was 4 m @ 14.47 g/t Au in BERC021 from 26 m.

Table 2

Significant RC Drill Results from Hammersmith, Perivale and Turnpike.

DRILL HOLE ID	PROSPECT	FROM (M)	INTERVAL (M)	GRADE (g/t Au)
BERC001	Hammersmith	70	2	0.85
BERC004	Hammersmith	52	4	0.48
BERC010	Perivale	41	2	1.00
BERC012	Perivale	34	3	0.79
BERC015	Turnpike	26	1	3.66
BERC019	Turnpike	59	2	1.4
BERC020	Turnpike	70	2	0.71
BERC020	Turnpike	83	1	1.98
BERC021	Turnpike	26	4	14.47*
including	Turnpike	26	1	55.12*
BERC021	Turnpike	73	1	6.23
BERC021	Turnpike	79	3	0.37
BERC022	Turnpike	39	1	4.13

1m riffle splits. Analysis by 25gm fire assay, Genalysis, Perth. 0.5g/t cutoff, 2m maximum width for dilution

These initial results are considered to be very encouraging and confirm that the systematic approach to target generation, selection and testing adopted is appropriate for this area.

Prioritisation of the targets subsequently tested by AC drilling was achieved by comparing their trace element signatures to the trace element signature of the Cannon deposit. By the end of the 2011/2012 year, four additional targets (Amersham, Snaresbrook, Brondesbury and Imperial) had been tested by 2,545 m of drilling. The significant results obtained from the initial testing of Amersham (Table 3, Figure 8), demonstrate the effectiveness of the approach adopted for evaluating the significance of these regional anomalies.

Table 3

Significant Air Core Drilling Results From Amersham

DRILL HOLE ID	PROSPECT	FROM (M)	INTERVAL (M)	GRADE (g/t Au)
BEAC003	Amersham	8	11	0.6
including		12	4	1.5
BEAC010	Amersham	84	5	0.9
including		84	4	1.2
BEAC011	Amersham	60	4	0.5

Figure 8

Legend

First pass drilling tests of the Amersham gold anomaly which is approximately 600 m long. Initial results are positive and require further testing

Aircore Drill Collar

Soil geochemistry Au (ppb) Tenement boundary Track 0 100 METRES

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Proposed Work Program 2012/2013

Southern Gold is well placed to make significant advances in the coming year as a result of the substantial progress made during the year on evaluating the Cannon gold resource and by our growing understanding of the nature of gold mineralisation in the regional Bulong project area.

Bulong Gold Project Exploration Exploration work will continue at the Bulong Gold project, with geochemical and geophysical surveys and assessment through follow-up air-core and reverse circulation drilling of targets located close to the Cannon resource and regional targets aimed at growing the Company’s current resource base, in particular along the “Cannon Trend” to the south-west of Cannon.

The on-going evaluation of targets along the Cannon Trend and the success obtained from testing

gold in soil anomalies identified in the wider Bulong Project area highlight the potential of the “longer term” growth story that the Bulong Gold project holds.

Cannon Development Studies

The encouraging outcomes obtained from the preliminary evaluation studies undertaken during the year on the Cannon gold resource will provide the foundation for further work which will enable your Board to determine the best pathway to maximising the return that could be derived from developing this resource.

Corporate

Corporate activities during the 201112 year have included the sale of the Company’s 51% interest in the Challenger JV and entering into the farm-in agreement with Mekong on the exploration assets in Cambodia. These activities are consistent with Southern Gold’s intention to focus its exploration, evaluation and development efforts on the Bulong Gold project, Western Australia.

Both these outcomes enable Southern Gold to release value by reducing operating costs, while maintaining exposure to future upside in Cambodia and advancing the Bulong Gold Project.

Cambodia

On the 5th July 2012 Southern Gold finalised an earn-in and shareholders’ agreement (“Agreement”) with Mekong Minerals Limited (“Mekong”) whereby, subject to the satisfaction or waiver of the conditions precedent, Mekong has the exclusive right to earn an interest

in Southern Gold subsidiary, Southern Gold (Asia) Pty Ltd (“SG Asia”) and to manage the activities of SG Asia and its wholly owned subsidiary, Southern Gold Cambodia Ltd (“SG Cambodia”).

The Agreement regulates Southern Gold’s and Mekong’s obligations as shareholders of SG Asia. Under the Agreement, Mekong has the exclusive right to earn up to a 70% interest in SG Asia by sole funding US$5.7 million on expenditure of SG Asia and SG Cambodia. On earning a 70% interest in SG Asia, Mekong will have the option to purchase Southern Gold’s remaining 30% interest in SG Asia (“Option”).

Mekong’s work plan in Cambodia for the 2012/13 financial year will include follow up reconnaissance of untested gold and copper soil anomalies and detailed structural mapping at prospect scale. Incorporating this work with the analysis of existing drilling and trenching results, and airborne and

geophysics data, will form the basis of generating drill ready targets for the upcoming field season.

Challenger Project, South Australia Trafford Resources Limited (“Trafford”) has agreed to purchase Southern Gold’s 51% interest in the Western Gawler Craton JV with Dominion Gold Operations (a 100% owned subsidiary of Kingsgate Consolidated Limited) and its 100% owned Challenger West tenement (“Challenger Project”) on August 7, 2012.

Appendix 1

Cannon Deposit May 2011 Mineral Resource Estimate – 1.0 g/t Au Cut-off

TYPE	INDICATED INFERRED TOTAL
	TONNES Au Au TONNES Au Au TONNES Au Au
	g/t OUNCES g/t OUNCES g/t OUNCES
Oxide Transitional Fresh	8,400 3.0 800 1,000 1.4 - 9,000 2.9 900 113,700 3.1 11,400 25,700 1.3 1,100 139,000 2.8 12,500 549,500 3.8 66,600 198,300 2.3 14,600 748,000 3.4 81,100
Total	672,000 3.6 78,800 225,000 2.2 15,700 896,000 3.3 94,500

Competent Persons Statement

Under the sale terms, signed on 7/09/2012, Trafford purchased the Challenger Project for A$500,000 cash and 3,000,000 Trafford shares (subject to a 12 month voluntary escrow period). Trafford will issue a further A$1 million worth of Trafford shares to Southern Gold upon defining a mineral resource, and a decision is made to conduct a feasibility study on a JORC resource of over 500,000oz gold.

The information in this report that relates to Exploration Results has been compiled by Mr Ian Blucher. Mr Blucher, who is a full time employees of Southern Gold Limited and a Member of the Australian 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 2004 Edition of the Australasian Code for the Reporting of Mineral Resources and Ore Reserves. Mr Blucher consents to the inclusion in the report of the matters based on his information in the form and context in which it appears

The information in this report that relates to Mineral Resources is based on information compiled by Mr Aaron Green Mr Green who is a full time employees of Runge Limited and a Member of the of the Australian Institute of Geoscientists, 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 2004 Edition of the Australasian Code for the Reporting of Mineral Resources and Ore Reserves. Mr Green consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Glossary

AC	Air-core drilling (AC) is a type of narrow diameter drilling
	used to drill a hole into clays and weathered rock. The
	method is generally used as a reconnaissance tool,
	prior to using more expensive forms of drilling.
Alteration	A term used to describe the process where the constituents of a rock
	are changed from one set of minerals to another by interaction with
	hydrothermal fuids. This is ofen associated with mineralisation.
Anomaly	A departure from the expected normal or typical geochemical or
	geophysical values; either greater or lesser than the normal values.
Au	Chemical symbol for Gold.
CIP	Carbon in pulp (CIP) is a method of recovering gold and silver
	from fne ground ore by adsorption of the precious metals onto
	fne carbon in an agitated tank of ore solids/solution slurry.
CIL	Carbon in leach (CIL) is a method of recovering gold and
	silver from fne ground ore by simultaneous dissolution
	and adsorption of the precious metals onto fne carbon
	in an agitated tank of ore solids/solution slurry.
Diamond	Type of drilling employed to search for mineralisation and
drilling	is ofen used to test targets generated from geochemistry or
	geophysics (or both). Diamond drilling can be used in difcult
	terrain and hard to access areas due to the ability to have the
	drill rig picked up by a helicopter and fown anywhere.

Disseminated	Mineralisation in which the mineral of interest
	is fnely dispersed through out the rock.
Fault	A crack in the earth’s crust resulting from the displacement of
	one side with respect to the other. Commonly provides a pathway
	for alteration and mineralisation by hydrothermal fuids.
Geochemistry	A technique used to determine whether rocks or soils contain
survey	anomalous values of economically important minerals, whereby
	the person conducting the geochemistry takes samples of
	soils, or stream sediments (or other media), and has them
	analysed in a laboratory for specifc minerals like gold.
Hydrothermally	Rock is altered by hot mineral rich fuids. Ofen associated
altered	with intrusive rocks and large fault systems and is an
	important process in mineralisation and the formation
	of economic mineral deposits (ore bodies).
Indicated	In situ mineral resource calculated with a moderate
resource	confdence level to which economic parameters have
	not been applied (classifed under the JORC code).
Inferred	In situ mineral resource calculated with a low confdence
resource	level to which economic parameters have not been
	applied (classifed under the JORC code).

Igneous rock Rocks formed by the cooling and solidifying of molten materials. Igneous rocks can form beneath the Earth’s surface as magma (intrusive), or at its surface, as lava (extrusive). JORC Joint Ore Reserves Committee, which provides the minimum standard for reporting exploration results, mineral resources and mineral (ore) reserves and the standard for resource and reserve classification, ie the JORC code. Lithology The physical characteristic of a rock, including composition, grain size, texture, degree of cementation (or lithification) and structure, that determine the rock type. Another word used for the geology, or rock sequence. Mafic rock A rock type containing or relating to a group of darkcoloured minerals, composed chiefly of magnesium and iron, that occur in igneous rocks.

ppb Parts per billion ppm Parts per million RC drilling Reverse Circulation (RC) drilling is a type of drilling employed to search for mineralisation and is often used to test targets generated from geochemistry or geophysics (or both). RC drilling is used in easily accessible areas due to the drill rig being mounted on the back of a truck. Strike The direction in which a geological feature trends, like a fault or sedimentary bedding. Structure Refers to an often linear object, normally identified by aeromagnetics or gravity surveys. A structure often represents an unseen fault, shear or contact between two rock types. Ultramafic rock A rock type containing or relating to a group of dark-coloured minerals, composed chiefly of iron and magnesium, with little or no silica

Mineral resource A mineral deposit that is potentially valuable, and for which reasonable prospects exists for eventual economic extraction.

Mineral reserve A mineral deposit that are valuable and legally and

economically and technically feasible to extract.

Ore A mineral or an aggregate of minerals from which a valuable constituent, especially a metal, can be profitably mined or extracted.

30 June 2012

Tenement Schedule

PROJECT	TENEMENT NUMBER	AREA	REGISTERED HOLDER	SOUTHERN GOLD LTD
				EQUITY
		KM2[IF NOT STATED]		%
SOUTH AUSTRALIA Challenger Project1 Challenger West	4465	309	Challenger West Holdings PtyLtd	100%
Challenger Dominion JV	3782	36	Dominion Gold Operations Pty Ltd, Coombedown Resources PtyLtd	51% of Gold Rights
Challenger DominionJV	4014	1527	Dominion Gold Operations PtyLtd	51% of Gold Rights
Challenger Dominion JV	4577	140	Dominion Gold Operations Pty Ltd, Coombedown Resources PtyLtd	51% of Gold Rights
Challenger DominionJV	4468	752	Dominion Gold Operations PtyLtd	51% of Gold Rights
Challenger DominionJV	4532	234	Dominion Gold Operations PtyLtd	51% of Gold Rights
Challenger DominionJV	4644	53	Dominion Gold Operations PtyLtd	51% of Gold Rights
Challenger DominionJV	3554	205	Dominion Gold Operations PtyLtd	51% of Gold Rights
WESTERN AUSTRALIA
BulongProject
BulongSouth	P25/1896	49 ha	Southern Gold Limited	100%
BulongSouth	M25/182	429 ha	Inferus Resources PtyLtd	100%
BulongSouth	M25/183	295 ha	Inferus Resources PtyLtd	100%
BulongSouth	E25/349	9220 ha	Southern Gold Limited	100%
BulongSouth	P25/1990	121 ha	Southern Gold Limited	100%
BulongSouth	M25/333	400 ha	Southern Gold Limited	100%
BulongSouth	E25/405	1158 ha	Inferus Resources PtyLtd	100%
Clinker Hill	P 25/2126	100 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2127	121 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2128	122 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2129	75 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2130	189 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2131	93 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2132	199 ha	Southern Gold Limited	100%

PROJECT	TENEMENT NUMBER	AREA	REGISTERED HOLDER	SOUTHERN GOLD LTD
				EQUITY
		KM2[IF NOT STATED]		%
Clinker Hill	P 25/2133	190 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2134	122 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2135	121 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2136	122 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2137	121 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2138	200 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2139	126 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2140	121 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2141	188 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2142	166 ha	Southern Gold Limited	100%
BulongSouth	P 25/2143	54 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2155	122 ha	Southern Gold Limited	100%
Clinker Hill	P 25/2156	122 ha	Southern Gold Limited	100%
Clinker Hill	P 26/3762	118 ha	Southern Gold Limited	100%
Clinker Hill	P 26/3781	160 ha	Southern Gold Limited	100%
Clinker Hill	P 26/3782	193 ha	Southern Gold Limited	100%
Clinker Hill	P 26/3783	188 ha	Southern Gold Limited	100%
North Dam	P27/2046	198 ha	Southern Gold Limited	100%
North Dam	E27/459	7 blocks	Southern Gold Limited	100%
BulongSouth	P25/2181	16 ha	Southern Gold Limited	100%
BulongSouth	P25/2182	21 ha	Southern Gold Limited	100%
BulongSouth	P25/2183	38 ha	Southern Gold Limited	100%
Heron Railway JV	E25/250	1418 ha	Heron Resources Limited	Earningupto 80%
Heron Railway JV	E25/321	269 ha	Heron Resources Limited	Earningupto 80%
Heron Railway JV	E25/361	233 ha	Heron Resources Limited	Earningupto 80%
Heron KNPJV	M25/161	640 ha	Hampton Nickel PtyLtd	Earningupto80%
Heron KNPJV	M25/234	606 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/260	4 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/341	2 ha	Hampton Nickel PtyLtd	Earningupto 80%

	TENEMENT NUMBER	AREA	REGISTERED HOLDER	SOUTHERN GOLD LTD
				EQUITY
		KM2[IF NOT STATED]		%
Heron KNPJV	P25/1058	121.4 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	P25/1061	120 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	P25/1062	115.5 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	P25/1063	87.5 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	P25/1175	121 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	P25/1177	75.48 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/59	84.235 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	P25/2050	120 ha	Heron Resources Limited	Earningupto 80%
Heron KNPJV	P25/2171	121 ha	Heron Resources Limited	Earningupto 80%
Heron KNPJV	P25/2170	121 ha	Heron Resources Limited	Earningupto 80%
Heron KNPJV	M25/171	100.8 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/206	214 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/134	815.61 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	P25/1176	168.58 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/207	182 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/208	121 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/209	960 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/210	958 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/220	121 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/111	119.35 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/162	366 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	P25/2062	120 ha	Heron Resources Limited	Earningupto 80%
Heron KNPJV	P25/1853	19.8062 ha	Hampton Nickel PtyLtd	Earningupto 80%
Heron KNPJV	M25/145	172 ha	Hampton Nickel PtyLtd	Earningupto 80%
NEW SOUTH WALES
Devils Elbow Project
Eurow-Vychan	6653	283	Southern Gold Limited	100%
Grenfell	6122	~125(42 blks)	Inferus Resources PtyLtd	Relinquished

==> picture [548 x 59] intentionally omitted <==

----- Start of picture text -----

PROJECT TENEMENT NUMBER AREA REGISTERED HOLDER SOUTHERN GOLD LTD
EQUITY
KM [2] [IF NOT STATED] %
CAMBODIA
----- End of picture text -----

Kratie South2
Preak Khlong	271.5	Southern Gold(Cambodia)LtdJOGMECJV	49%
O’Khtung	274	Southern Gold(Cambodia)LtdJOGMECJV	49%
Memot
Phnum Khnach	225	Southern Gold(Cambodia)Ltd	100%
Snoul	198	Southern Gold(Cambodia)Ltd	100%
Srae Pok
Srae Pok	258	Southern Gold(Cambodia)Ltd	100%
Phnum Romdul
Phnum Romdul	180	Southern Gold(Cambodia)Ltd	100%
Kratie North
Phnum Khtong	234	Southern Gold (Cambodia) Ltd	100%

Notes

1 Southern Gold’s 51% interest in the Challenger Project was sold to Trafford Resources on 7/09/2012.

2 Under an agreement signed 4/07/2012, Mekong Minerals Limited has an exclusive right to earn up to a 70% interest in SG Asia by sole funding US$5.7 million on expenditure over a three year period.

Corporate Governance Statement

Principle 1 Lay solid foundations for management and oversight

The Board of Directors is committed to maintaining good standards of corporate governance and as such has established corporate governance policies and procedures that are, where appropriate and practical, consistent with the revised Corporate Governance Principles and Recommendations, 2nd edition with 2010 Amendments issued by the ASX Corporate Governance Council.

The following statement sets out a summary of the Group’s corporate governance practices that were in place during the financial year ended 30 June 2012 and how those practices relate to the revised ASX recommendations. The recommendations themselves are not intended to be prescriptions to be followed by all ASX listed companies, but are rather guidelines designed to produce an outcome that is effective and of high quality and integrity. The Corporate Governance

Council has recognised that a “one size fits all” approach to Corporate Governance is not required. Instead, it states aspirations of best practice for optimising corporate performance and accountability in the interests of shareholders and the broader economy. A company may consider that a recommendation is not appropriate to its particular circumstances and has flexibility to not adopt it and explain why.

Role of the Board

The Board is governed by the Corporations Act 2001, ASX listing rules and a formal constitution.

The Board’s primary role is the protection and enhancement of shareholder value.

The Board takes responsibility for the overall Corporate Governance of the Company including its strategic direction, management goal setting and monitoring, internal risk control, risk management and financial reporting.

Board processes and management The Board has an established framework for the management of the Company including a system of internal control, a business risk management process and appropriate ethical standards. To assist in the execution of its responsibilities, the

Board has an Audit Committee to deal with internal control, ethical standards and financial reporting.

The Board appoints a Managing Director with responsibility for the day to day management of the Company including management of financial, physical, and human resources, development and implementation of risk management, internal control and regulatory compliance policies and procedures, recommending strategic direction and planning for the operations of the business and the provision of relevant information to the Board.

Principle 2 Structure the Board to add value

Composition of the Board

The names of the directors of the Company and terms in office at the date of this Statement together with their experience and expertise are set out in the Directors’ Report section of this report. The Directors’ terms in office and experience are considered appropriate for a publicly listed junior exploration company.

The composition of the Board currently consists of four directors of whom three, including the Chairman, are Non-executives. Mr Boulton’s role as Chairman of the Board is separate from that of the Managing Director, Ms Anderson who is responsible for the day to day management of the Company, and is in compliance with the ASX Corporate Governance Council’s best practice recommendation that these roles not be exercised by the same individual.

The Company’s constitution stipulated that the number of Directors must be at least three and no more than ten. The Board may at any time appoint a Director to fill a casual vacancy. Directors appointed by the Board are subject to election by shareholders at the following annual general meeting and thereafter Directors (other than the Managing Director) are subject to reelection at least every three years. The tenure for Executive Directors is linked to their holding of executive office.

Formal deeds have been entered

into by the Company with Directors whereby all Directors are entitled to take such legal advice as they require at any time, and from time to time, on any matter concerning or in regards to their rights, duties, and obligations as Directors in relation to the affairs of the Company.

Principle 3 Promote ethical and responsible decision making

Code of Conduct

The Company requires all its Directors and employees to abide by the highest standards of behaviour, business ethics, and in accordance with the law. In discharging their duties, Directors of the Company are required to:

Act in good faith and in the best interests of the Company;
Exercise care and diligence that a reasonable person in that role would exercise;
Exercise their powers in good faith for a proper purpose and in the best interests of the Company;
Not improperly use their position or information obtained through their position to gain a personal advantage or for the advantage of another person to the detriment of the Company;
Disclose material personal interests and avoid actual or potential conflicts of interests;
Keep themselves informed of

relevant Company matters;

Keep confidential the business of all Directors meetings; and
Observe and support the Board’s Corporate Governance practices and procedures.

Ethical standards

The Company aims for a high standard of corporate governance and ethical standard by Directors and employees.

All Directors are required to provide the Company with details of all securities registered in the Director’s name or an entity in which the Director has a relevant interest within the meaning of section 9 of the Corporations Act 2001 and details of all contracts, other than contracts to which the Company is a party to which the Director is a party or under which the Director is entitled to a benefit, and that confer a right to call for or deliver shares in the Company and the nature of the Director’s interest under the contract.

Principle 4 Safeguard integrity in financial reporting

Directors are required to disclose to

the Board any material contract in which they may have an interest. In accordance with section 195 of the Corporations Act 2001, a Director having a material personal interest in any matter to be dealt with by the Board, will not be present when that matter is considered by the Board and will not vote on that matter.

Trading in the Company’s Securities Directors, officers and employees are not permitted to trade in securities of the Company at any time whilst in possession of price sensitive information not readily available to the market. Section 1043A of the Corporations Act 2001 also prohibits the acquisition and disposal of securities where a person possesses information that is not readily available and which may reasonably be expected to have a material effect on the price of the securities if the information was generally available.

Diversity Policy

The Company does not have a formal diversity policy given its current size. Notwithstanding this the Company strives to provide the best possible opportunities for current and prospective employees of all backgrounds in such a manner that best adds to overall shareholder value that is based upon an applicant’s ability to fulfil the required role.

As required under Recommendation 3.4 the following details are provided. For the financial year 2012, the

proportion of women employed by the Company in Australia as employees or contractors was 40%, and held 30% of the Executive Management positions and 25% of the Board

positions. The majority of employees of the Company’s Cambodian operations were comprised of local people with the addition of Philippine geologists and field technicians.

Audit Committee

Southern Gold Limited has an Audit Committee to oversee the Company’s internal controls, ethical standards, financial reporting, and external accounting and compliance procedures. The committee currently consists of two non-executive Board directors, Messrs Billing, and Boulton, and is chaired by Mr Billing.

The main responsibilities of the audit committee are:

Monitor the integrity of the financial statements of the Company and review significant financial reporting changes.
Review the Company’s internal financial control system and, unless expressly addressed by a separate risk committee or by the Board itself, risk management systems.
Make recommendations to the Board in relation to the appointment of the external auditor and to approve the remuneration and terms of engagement of the external auditor.
Monitor and review the external auditor’s independence, objectivity and effectiveness, taking into consideration relevant professional and regulatory requirements.
Develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm.

The Committee is to meet at least twice a year, with further meetings on an as required basis. The Committee has authority to investigate any

activity within its terms of reference or any matter specifically requested by the Board. The Committee has unrestricted access to all records and staff of the Company including full access to the external auditors. The Committee is authorised by the Board to obtain outside legal or other independent professional advice as necessary to assist the Committee.

Principle 5 Make timely and balanced disclosure

Continuous Disclosure

The Company operates under the continuous disclosure requirements of the ASX Listing Rules and ensures that all information, apart from information which is confidential, and ASX has not formed the view that the information has ceased to be confidential, which may be expected to affect the value of the Company’s securities or influence investment decisions is released to the market in order that all investors have equal and timely access to material information concerning the Company. This information is made publicly available on the Company’s website following release to the ASX.

Principle 6 Respect the rights of shareholders

Communication with shareholders

The Board aims to ensure that

shareholders are informed of all major developments affecting the Company’s state of affairs. In accordance with the ASX Corporate Governance Council best practice recommendations, information is communicated to shareholders as follows:

The annual financial report which
includes relevant information about the operations of the Company during the year, changes in the state of affairs of the entity and details of future developments, in addition to other disclosures required by the Corporations Act 2001;
The half yearly financial report lodged with the Australian Securities Exchange and Australian Securities and Investments Commission and sent to all shareholders who request it;

• Notifications relating to any proposed major changes in the Company which may impact on share ownership rights that are submitted to a vote of shareholders;

Notices of all meetings of shareholders;
Publicly released documents including the full text of notices of meetings and explanatory material made available on the Company’s internet web-site at www.southerngold.com.au ; and
Disclosure of the Company’s Corporate Governance practices and communications strategy on the internet web-site.

The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company’s strategy and goals. Important issues are presented to the shareholders as single resolutions. The external auditor of the Company is also invited

to the Annual General Meeting of shareholders and is available to answer any questions concerning the conduct, preparation and content of the auditor’s report. Pursuant to Section 249K of the Corporations Act 2001 the external auditor is provided with a copy of the notice of meeting and related communications received by shareholders.

Principle 7 Recognise and manage risk

Risk Assessment and Management The Board recognises that there are inherent risks associated with the Company’s operations including mineral exploration, environmental, title, native title, legal, and other operational risks. The Board endeavours to mitigate such risks by continually reviewing the activities of the Company in order to identify key business and operational risks and ensuring that they are appropriately assessed and managed.

Principle 8 Remunerate fairly and responsibly

Remuneration Policy

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 remuneration of Nonexecutive directors is 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.

Further details of Directors’ and Executives/officers’ remuneration, superannuation and retirement payments are set out in the Directors’ Report.

Performance Evaluation

The Board evaluates the performance of the Managing Director on a regular basis and encourages continuing professional development.

The remuneration of the Managing Director is determined by the Board as part of the terms and conditions of her employment which are subject to review from time to time. The remuneration of employees is determined by the Managing Director subject to the approval of the Board

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Directors’ Report

The directors present their report of Southern Gold Limited (the Company) and its controlled entities (consolidated group or group) for the financial year ended 30 June 2012.

Principal Activities

The principal continuing activity of the group in the year was the exploration for gold, copper, nickel, 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 $3,234,649 (2011: $1,855,318).

Dividends

No dividends were paid or declared since the start of the financial year, and the directors do not recommend the payment of dividends in respect of the financial year.

Review of Operations

Southern Gold Limited (“Southern Gold” or the “Company”) is a goldfocused, exploration company working within the framework of the company’s core values, to deliver capital growth to shareholders through the discovery and development of high value mineral deposits.

During the financial year ending 30 June 2012, Southern Gold successfully achieved its goal to release value from non-core assets within the project portfolio and progress the development opportunity and exploration of the Company’s flagship Bulong Gold project (Kalgoorlie WA).

Throughout the 12 month period Southern Gold has maintained a tight fiscal policy as global and domestic financial markets remained volatile. Cash administration overheads for the year were significantly lower than for the previous year with a

consequential increase of exploration and evaluation expenditure as a proportion of cash outflows for 2011/12.

As the gold sector also faced volatility in 2012, the gold price tapered off from the 2011 record highs of US$1900/oz. While gold price fluctuations caused some instability during the year, overall the average gold price of $1650/oz continued to underpin the value of gold exploration and mining companies.

In January 2012, Integra Mining Limited (“Integra”) took a placement in Southern Gold at a premium to the then share price and participated in the subsequent rights issue to hold a 12.5% stake in Southern Gold. Under the placement agreement Southern Gold agreed to grant Integra a preemptive right to match or better any third party offer to purchase, treat or sell ore or dore derived from the company’s Cannon Gold resource.

This business partnership was a natural fit between the two Kalgoorlie neighbours, as Integra owned and operated mining and processing facilities close to Southern Gold’s project area. In August 2012 neighbouring Silverlake Resources Limited (“Silverlake”) and Integra announced that Silverlake would acquire Integra through a scheme of arrangement. On completion of this transaction Silverlake will hold the 12.5% stake in Southern Gold and be operating two gold processing facilities within 30 km of the Bulong Gold project

Bulong Gold Project

Western Australia

The Bulong Gold project is located 30km east of Kalgoorlie, WA. Since the discovery and delineation of the Cannon Gold resource in 2010/11, preliminary economic evaluation studies have been completed to assess various development scenarios.

Following the success at Bulong South, Southern Gold has expanded its tenement holding to 154 km[2] , through tenement applications and via two joint venture agreements with Heron Resources Ltd. This area has been the focus of the Company’s regional exploration programmes.

i) Cannon Gold Resource Evaluation

The Cannon Gold resource is currently estimated at 94,500oz gold (“Au”) (from 896,000 tonnes at an average grade of 3.3g/t Au). Located close to several gold

processing facilities and with mineralisation intersected close to surface, assessment of the resource’s economic potential was a key component of the 2011/12 work programme.

The preliminary evaluation work completed to date includes geotechnical, metallurgical, environmental and conceptual mine planning studies, all undertaken by independent consultants. The work was directed toward assessing various development scenarios relating to possible open pit mining and/ or underground mining options of the resource. The results of these studies are considered to be sufficiently encouraging to warrant a more detailed economic evaluation for development to commence (see SAU’s March and June 2012 quarterly reports for detailed results).

ii) Bulong Regional Exploration

Southern Gold’s recognition of the gold potential of the greater Bulong region lead to the Company completing a first pass regional auger soil sampling programme over the newly expanded tenement package, with a view to identifying gold anomalism similar to that which defines the Cannon trend.

As much of this ground was previously held by companies that had a greater focus on nickel exploration, Southern Gold was keen to replicate its success of discovery at Cannon, as part of its strategy to build on the current gold resource.

Work programmes in 2011/12 were successful in identifying significant gold anomalism throughout the tenement package. Drilling to date has identified zones of low grade gold mineralisation, and in

particular drilling at one target (Turnpike) has intersected gold mineralisation over an area 600m x 100m wide. Given the success of the regional programme in 2012 further work will be conducted on the remaining untested anomalies.

Exploration work will continue at the Bulong Gold project and include geochemical and geophysical surveys followed up with aircore and reverse circulation (RC) drilling of near resource and regional targets, with the aim of growing the Company’s current resource base.

The work to be completed on the Cannon Gold resource is seen as the opportunity for “near term” value growth for Southern Gold, however much of this work will be conducted in conjunction with the exploration and generation of regional gold targets. The definition

of the Cannon Trend prospects and the recent gold-auger anomalies identified in the Bulong east area highlights the potential of the “longer term” growth story that the Bulong Gold project holds.

Competent Persons Statement: The information in this report concerning Australian exploration has been compiled by Mr I Blucher (MSc) as an employee of Southern Gold and who is a member of the AusIMM and is bound by and follows the Institute’s codes and recommended practices. As a Competent Person, as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserve.’he has a minimum of 5 years relevant experience in the style of mineralisation and types of activities being reported and has given written consent to the above report in the form and context in which it appears.

Corporate

During the reporting period Southern Gold completed a successful $3.3m capital raising through a fully underwritten, non-renounceable rights issue, supported by cornerstone investor Integra. Focused on directing capital toward the economic development of the Bulong Gold project, Southern Gold undertook two transactions to unlock value from its second tier assets.

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 Balance Date Cambodia On 5 July 2012 Southern Gold finalised an agreement with Mekong Minerals Ltd (“Mekong”) whereby Mekong has the exclusive right to earn an interest

in Southern Gold subsidiary, Southern Gold (Asia) Pty Ltd (“SG Asia”) and to manage the activities of SG Asia and its wholly owned subsidiary, Southern Gold Cambodia Ltd (“SG Cambodia”).

The agreement regulates Southern Gold’s and Mekong’s obligations as shareholders of SG Asia. Under the agreement, Mekong has the exclusive right to earn up to a 70% interest in SG Asia by sole funding US$5.7 million on expenditure of SG Asia and SG Cambodia.

On earning a 70% interest in SG Asia, Mekong will have the option to purchase Southern Gold’s remaining 30% interest in SG Asia (“Option”). The grant of the Option is conditional on compliance with ASX Listing Rule 11.4, including Southern Gold obtaining shareholder approval for the grant, if required.

Finalising this transaction has

allowed Southern Gold funds, that were allocated for the Cambodian assets, to be redirected to the Bulong Gold project. In the longer term, future value may be created through Mekong’s investment and exploration success in Cambodia and/or through exercising their buy-out option.

Challenger – South Australia Pursuant to a Sale Agreement signed in September 2012, Trafford Resources Limited (“Trafford”) has purchased Southern Gold’s 51% interest in the Western Gawler Craton JV with Dominion Gold Operations (a 100% owned subsidiary of Kingsgate Consolidated Limited) and the Company’s 100% owned Challenger West tenement (“Challenger Project”).

Under the sale terms Trafford purchased the Challenger Project for A$500,000 cash and 3,000,000 Trafford shares (subject to a 12 month

voluntary escrow period). On a decision to conduct a feasibility study on a JORC resource of over 500,000oz gold, Trafford will issue a further A$1 million worth of Trafford shares to Southern Gold or its nominee.

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

Further information about likely developments in the operations of the Company and the expected results of those operations in future years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Company.

Environmental Regulation and Performance Statement

The Company’s operations are subject to significant environmental regulations under Commonwealth, South Australian, Western Australian and NSW legislation in relation to discharge of hazardous waste and materials arsing from any mining activities and development conducted by the Company on any of its tenements. The Company is also in compliance with all Cambodian environmental regulations. To date the Company has only carried out exploration activities and there have been no known breaches of any environmental obligations.

Options

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

GRANT DATE	DATE OF	FAIR VALUE AT	EXERCISE	NUMBER
	EXPIRY	GRANT DATE	PRICE	UNDER OPTION
		($)	($)
22.10.2007	21.10.2012	0.310	0.35	50,000
26.02.2008	28.11.2012	0.132	0.75	500,000
26.08.2008	25.05.2013	0.109	0.20	100,000
30.09.2008	30.09.2013	0.096	0.15	150,000
30.09.2008	30.09.2013	0.093	0.15	150,000
30.06.2009	30.06.2014	0.098	0.30	150,000
30.10.2009	30.10.2013	0.082	0.15	500,000
1.12.2010	1.12.2014	0.040	0.105	500,000
1.12.2010	1.12.2015	0.044	0.105	1,000,000
				3,100,000

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

There have been no unissued shares or interests under option of any controlled entity within the Group during or since reporting date.

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

During the year ended 30 June 2012, no ordinary shares of Southern Gold Limited were issued on the exercise of options granted. No further shares have been issued since year end.

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)

Greg has extensive commercial experience spanning over 25 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 Institute of Chartered Accountants, CPA Australia and the Australian Institute of Company Directors.

Greg is currently Chairman of Paragon Equity Limited, an Adelaide based private equity firm and Deputy Chairman of ASX listed K&S Corporation Limited. He is also on the board of the Statewide Superannuation Trust.

Greg currently has 2,212,185 shares and 500,000 options to acquire further shares in Southern Gold Limited.

Nanette Anderson B Sc(Hons) Geol, MAusIMM (Managing Director)

Nanette has over 15 years experience in the exploration and mining industry. As a geologist she has experience exploring and developing gold, diamond and base metal projects throughout Australia and South East Asia.

Moving into the corporate side of business, Nanette has successfully undertaken capital raisings, project acquisitions and joint venture negotiations. She is a member of the Australian Institute of Company Directors, the Australian Institute of Mining and Metallurgy and the Geological Society of Australia. She previously was a director of ASX listed Jaguar Minerals Limited.

Nanette currently has 701,429 shares and 1,000,000 options to acquire further shares in Southern Gold Limited.

Mick Billing

B Bus, CPA, MAICD (Non-Executive Director) (Member of Audit Committee)

Mick is an accountant with in excess of 30 years of mining industry experience in company secretarial, senior commercial, and chief financial officer roles including lengthy periods with Bougainville Copper Ltd and WMC Resources Ltd. He has had experience with corporate governance issues, debt and equity raising, and project evaluation and feasibility studies in Australia and overseas, and consults to a number of companies in these fields.

Mick is also Executive Chairman of AIM listed Thor Mining PLC. He previously has acted as Chairman of ASX listed Western Desert Resources Limited and as a Non-Executive Director of Australasia Gold Limited.

Mick currently has 2,798,550 shares and 500,000 options to acquire further shares in Southern Gold Limited.

Company Secretary

David Turvey B Sc(Hons) Geol, MAusIMM (Non-Executive Director)

David is a geologist with over 27 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.

David is currently a Non-Executive Director of ASX listed Lawson Gold Limited and is a former Managing Director of FerrAus Limited.

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

Nick Harding

B.A (Acc),Grad Dip (Acc), Grad Dip (Applied Finance), Grad Dip (Corp Governance), FCPA, F Fin, ACIS (Company Secretary)

Nick is an accountant with over 25 years experience in the resources industry. He has held senior financial roles at various times with WMC Resources Limited, Normandy Mining Limited and Newmont Australia Limited and currently consults to a number of exploration companies in providing financial and company secretarial services.

David currently has 941,899 shares and 500,000 options to acquire further shares in Southern Gold Limited.

Remuneration Policy (audited)

The remuneration policy is designed to align Key Management Personnel objectives with shareholder and business objectives by providing a fixed remuneration package to Nonexecutive 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 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 Nonexecutive 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 Nonexecutive Directors and approved by the Board as part of the terms and conditions of her 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. Nonexecutive Directors do not participate

in schemes designed for remuneration of executives and are not provided with retirement benefits other than salary sacrifice and statutory superannuation.

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 benefits, 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 to her 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 Harding is not employed by the Company. His services are provided in his capacity as a consultant to act as Chief Financial Officer and Company Secretary of Southern Gold.

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

Performance-based Remuneration (audited) The Group currently has no performance based remuneration component built into Non-executive Director packages. The Managing Director has included in her remuneration package an incentive

payment based on a percentage of fixed remuneration, conditional upon the achievement of certain performance criteria being met. The maximum percentage of fixed remuneration for the current financial year is 25%. The performance conditions, or Key Performance Indicators (KPI’s) are set by the Board, and may vary from year to year, but reflect the financial and operating goals of Southern Gold Limited. The Board has set KPI measures, which must be achieved in any individual KPI before an entitlement to any payment for that KPI. Current KPI’s are in the form of share price performance, cost savings, successful capital raisings and resource definition.

The Group has one Executive Director, and three 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 – salary/fees; Post Employment Benefits – superannuation

Shares issued on exercise of remuneration options (audited) 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 (audited) Directors’ and other Key Management Personnel relevant interests in shares and options of the Company are disclosed above and in Note 4 of the Financial Report.

Options granted as

remuneration (audited) No options were granted as remuneration to Directors and other Key Management Personnel during the year.

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

Remuneration of Directors and Key Management Personnel (audited) This report details the nature and amount of remuneration for each Key Management Person of Southern Gold Limited.

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	POSITION
G C Boulton AM	Chairman – Non-executive
N M Anderson	Managing Director – Executive
M R Billing	Director – Non-executive
D J Turvey	Director – Non-executive
KEY MANAGEMENT PERSONNEL	POSITION
N J Harding	Chief Financial Ofcer / Company Secretary
P W Hill1	Exploration Manager
G Thomas2	General Manager – Cambodia
I D Blucher3	Project Development Manager
P A O’Sullivan4	Exploration Manager

1 P W Hill resigned 9 September 2011
2 G Thomas resigned 15 November 2011
3 I D Blucher commenced 16 November 2011
4 P O’Sullivan commenced
6 September 2012

b) Directors’ remuneration

2012 PRIMARY BENEFITS	DIRECTORS’ FEES SALARY AND LEAVE CASH BONUS PERFORMANCE INCENTIVE PAYMENTS SUPER CONTRIBUTION OPTIONS TOTAL
	$ $ $ $ $ $ $
G C Boulton AM N M Anderson M R Billing D J Turvey 2011 PRIMARY BENEFITS	80,000 - - - - - 80,000 - 272,411 4,000 - 21,774 - 298,185 40,000 - - - - - 40,000 36,648 - - - 3,352 - 40,000
	156,648 272,411 4,000 - 25,126 - 458,185

	DIRECTORS’ FEES SALARY AND LEAVE CASH BONUS PERFORMANCE INCENTIVE PAYMENTS SUPER CONTRIBUTION OPTIONS TOTAL
	$ $ $ $ $ $ $
G C Boulton AM N M Anderson1 2 M R Billing D J Turvey1 S R Biggins	80,000 - - - - - 80,000 - 179,251 14,000 - 15,874 44,439 253,564 38,800 - - - 1,227 - 40,027 36,387 - - - 3,613 19,859 59,859 - 4,408 - - - - 4,408
	155,187 183,659 14,000 - 20,714 64,298 437,858

1 N Anderson was issued 1,000,000 options and D Turvey 500,000 options at an exercise price of 10.5 cents in December 2010, expiring on 1 December 2014 and 1 December 2015 respectively. 2 N Anderson appointed Managing Director of Southern Gold Ltd 29 September 2010.

A cash performance bonus was paid to Ms Anderson during the 2012 financial year for achievement of certain milestones as agreed by the Board under her remuneration package.

c) Other Key Management Personnel Remuneration

2012 PRIMARY BENEFITS	SALARY AND LEAVE CASH BONUS SUPER CONTRIBUTION OPTIONS TOTAL
	$ $ $ $ $
N J Harding1 P W Hill G Thomas I D Blucher	- - - - - 44,584 - 6,688 - 51,272 95,529 - 8,598 - 104,127 131,385 - 13,138 - 144,523
	271,498 - 28,424 - 299,922

2011 PRIMARY BENEFITS	SALARY AND LEAVE CASH BONUS SUPER CONTRIBUTION OPTIONS TOTAL
	$ $ $ $ $
N J Harding1 P W Hill G Thomas	- - - - - 174,748 - 26,212 - 200,960 223,464 - 20,112 - 243,576
	398,212 - 46,324 - 444,536

1 Mr Harding was appointed Chief Financial Officer on 7 April 2008 and Company Secretary from 19 February 2009. Mr Harding is not employed by the Company. His services are provided in his capacity as a consultant to act as Chief Financial Officer and Company Secretary of Southern Gold Limited. Mr Harding was paid $87,870 (2011: $95,200).

d) Service agreements

Remuneration and other items of employment for the Managing Director, Ms Nanette Anderson, are formalised in a service agreement agreed to by the Board. The major provisions are as follows:
∙Ms Anderson agreed to provide her services for a period of 3 years with an option to extend at the expiration date.
∙Remuneration of $230,000 per annum plus 9% superannuation contributions, subject to annual salary review increases for the term of the service agreement, and the value of the provision of a fully serviced motor vehicle.
∙Termination without notice in the event that Ms Anderson:
is guilty of serious or wilful misconduct
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 three calendar months’ notice.

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 Nonexecutive 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 Nonexecutive 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 Nonexecutive Director of the Company.

e) Director related entities

During the year to 30 June 2012 the Company paid consulting fees totalling $11,438 (2011: $15,373) to a Director related entity of Mr Turvey and $Nil (2011: $17,750) to a Director related entity of Mr Billing for services provided beyond their duties as Non-executive Directors.

Information of amounts paid to director related entities is set out in note 14 to the financial statements.

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

Meetings of Directors

The Company held 12 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	NUMBER	NUMBER	NUMBER
	OF BOARD	OF BOARD	OF BOARD	OF BOARD
	MEETINGS	MEETINGS	MEETINGS	MEETINGS
	ELIGIBLE TO	ATTENDED	ELIGIBLE TO	ATTENDED
	ATTEND		ATTEND
G C Boulton AM	12	12	2	2
N M Anderson	12	12	2	2
M R Billing	12	12	2	2
D J Turvey	12	10	-	-

g) Voting at 2011 AGM

Southern Gold Limited received more than 80% of ‘yes’ votes on its remuneration report for the 2011 financial year. The Company did not receive any specific feedback at the AGM on its remuneration report.

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 for the following reasons.

› 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.

The following fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2012:

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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.

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 South Australian Partnership.

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 2012 is set out immediately following the end of the Directors’ report.

Dated at Adelaide, this 27th day of September 2012

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

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N M Anderson Managing Director

G C Boulton A M Chairman

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Statement of Comprehensive Income

for the Year ended 30 June 2012

NOTE	CONSOLIDATED 2012 CONSOLIDATED 2011
	$ $
Revenue from ordinary activities 2 Exploration expenditure written of Salaries and wages Directors fees Shareholder relations Other consulting expenses Other administrative expenses 2 Depreciation Share based payments Loss before income tax expense Income tax expense 3 Loss for the year Other comprehensive income Exchange diferences on translation of foreign controlled entity Total comprehensive income for the year Earnings Per Share Basic (cents per share) – Loss 20 Diluted (cents per share) – Loss 20	132,320 339,944 (1,542,659) (621,338) (478,555) (469,211) (160,000) (155,049) (90,647) (97,599) (144,000) (343,712) (809,576) (581,994) (53,100) (53,955) (16,000) (64,298)
	(3,162,217) (2,047,212) (72,432) 191,894
	(3,234,649) (1,855,318)
	176,154 (890,621)
	(3,058,495) (2,745,939)
	(1.20) (0.86) (1.20) (0.86)

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

as at 30 June 2012

Statement of Financial Position

NOTE	CONSOLIDATED 2012 CONSOLIDATED 2011
	$ $
CURRENT ASSETS Cash and cash equivalents 5 Trade and other receivables 6 Assets held for sale 8 Other assets 7 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Other assets 7 Exploration and evaluation expenditure 8 Plant and equipment 9 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 10 Provision for employee benefts 11 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provision for employee benefts 11 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 12 Reserves Retained losses TOTAL EQUITY	3,673,094 2,934,003 119,804 705,110 980,000 - 41,288 71,786
	4,814,186 3,710,899
	68,905 110,232 15,113.454 14,296,175 97,205 93,991
	15,279,564 14,500,398
	20,093,750 18,211,297
	835,495 413,074 58,505 32,009
	894,000 445,083
	7,384 23,894
	7,384 23,894
	901,384 468,977
	19,192,366 17,742,320
	33,507,897 28,999,356 1,420,615 1,244,461 (15,736,146) (12,501,497)
	19,192,366 17,742,320

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

Statement of Changes in Equity for the year ended 30 June 2012

	ISSUED CAPITAL RETAINED LOSSES SHARE-BASED PAYMENT RESERVE FOREIGN CURRENCY TRANSLATION RESERVE TOTAL
	$ $ $ $ $
Balance at 1 July 2010 Total comprehensive income Fair value of options issued to employees Issue of share capital Costs associated with the issue of shares Balance at 30 June 2011 Total comprehensive income Issue of share capital Costs associated with the issue of shares Balance at 30 June 2012	25,020,634 (10,646,179) 1,834,588 236,196 16,445,239 - (1,855,318) - (890,621) (2,745,939) - - 64,298 - 64,298 4,194,600 - - - 4,194,600 (215,878) - - - (215,878)
	28,999,356 (12,501,497) 1,898,886 (654,425) 17,742,320
	- (3,234,649) - 176,154 (3,058,495) 4,677,550 - - - 4,677,550 (169,009) - - - (169,009)
	33,507,897 (15,736,146) 1,898,886 (478,271) 19,192,366

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

Statement of Cash Flows for the year ended 30 June 2012

NOTE	CONSOLIDATED 2012 CONSOLIDATED 2011
	$ $
Cash fows relating to operating activities Interest received Payments to suppliers and employees Net operating cash outfows (Note (a)) Cash fows relating to investing activities Payments for mining tenements, exploration and evaluation expenditure Reimbursed from co-venturers Proceeds from sale of fxed assets Payments for plant and equipment Net investing cash outfows Cash fows relating to fnancing activities Proceeds from share issues Payments for share issue costs Net fnancing cash infows Net (decrease)/increase in cash Cash at beginning of fnancial year 5 Cash at end of fnancial year 5 Note (a): Reconciliation of net loss from ordinary activities to net cash fow from ordinary activities. Loss from ordinary activities afer related income tax Non-cash fows in proft Share based remuneration Proft on sale of fxed assets Depreciation Unrealised foreign exchange Tax efect of capital raising expenses Exploration written of Changes in assets and liabilities (Increase) decrease in receivables (Increase) decrease in other fnancial assets Increase/(decrease) in payables Increase/(decrease) in provisions Net operating cash fows	121,321 175,467 (989,500) (1,779,513)
	(868,179) (1,604,046)
	(3,063,345) (3,645,723) 300,911 1,197,624 3,000 - (53,405) (26,891)
	(2,812,839) (2,474,990)
	4,661,549 4,194,601 (241,440) (313,349)
	4,420,109 3,881,252
	739,091 (197,784) 2,934,003 3,131,787
	3,673,094 2,934,003
	(3,234,649) (1,855,318) 16,000 64,298 (3,000) - 53,100 53,955 (18,515) (243,385) 72,432 97,470 1,542,659 621,338 399,990 (295,513) 71,824 81,801 221,994 (141,244) 9,986 12,552
	(868,179) (1,604,046)

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

Notes to the Financial Statements for the Financial Year Ended 30 June 2012

1 STATEMENT OF SIGNIFICANT

ACCOUNTING POLICIES

This financial report includes the consolidated financial statements and notes of Southern Gold Limited 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 Limited, 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.

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.

Third statement of financial position 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

The Group has adopted the following revisions and amendments to AASB’s issued by the Australian Accounting Standards Board and IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group’s financial statements for the annual period beginning 1 July 2011.

The adoption of new and revised Accounting Standards effective for the financial statements for the annual period beginning 1 July 2011 did not have a material impact on the Group’s financial statements.

a. Principles of Consolidation A controlled entity is any entity Southern Gold Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities. A list of controlled entities is contained in Note 21 to the financial statements. All controlled entities have a 30 June financial year-end.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another

entity. The purchase method of accounting is used to account for the acquisition of subsidiaries.

All inter-company balances and transactions between entities in the Consolidated Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the Parent Entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Where controlled entities have entered or left the Consolidated Group during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

Accounting policies of subsidiaries are consistent with those adopted by the Parent Entity.

b. 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.

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 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 Limited 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.

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 including building and capitalised lease assets, but excluding freehold land, 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 5–33% 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.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

d. Exploration and Evaluation

Expenditure

Exploration and evaluation and 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 over the life of the facility 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 the 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 amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties. 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.

Impairment

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

f. 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 statement of comprehensive income.

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.

h. Non-current Assets held for sale Non-current assets are classified as held for sale if their carrying value amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and the fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts which are specifically exempt from this requirement.

An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent

increases in fair value less costs to sell an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition.

i. 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 recognised income and expense. 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.

j. Interests in Joint Ventures

The Consolidated Group’s share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the consolidated financial statements. Details of the Consolidated Group’s interests are shown at Note 15.

k. Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance 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 national government 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.

l. 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.

m. 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.

n. 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).

o. 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.

p. Government Grants

Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited

to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis.

q. 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.

r. Comparative Figures

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

s. 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 — 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.

t. 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.

u. Accounting standards not yet effective

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group.

Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements is provided below.

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group’s financial statements.

AASB 9 Financial Instruments (effective from 1 January 2013)

The AASB aims to replace AASB

139 Financial Instruments:

Recognition and Measurement in its entirety. The replacement standard (AASB 9) is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and derecognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning 1 January 2013. Further chapters dealing with impairment methodology and hedge accounting are still being developed.

Management have yet to assess the impact that this amendment is likely to have on the financial statements of the Group. However, they do not expect to implement the amendments until all chapters of AASB 9 have been published and they can comprehensively assess the impact of all changes.

Consolidation Standards

A package of consolidation standards are effective for annual periods beginning or after 1 January 2013. Information on these new standards is presented below. The Group’s management have yet to assess the impact of these new and revised standards on the Group’s consolidated financial statements.

AASB 10 Consolidated Financial Statements (AASB 10)

AASB 10 supersedes the consolidation requirements in AASB 127 Consolidated and Separate Financial Statements (AASB 127) and Interpretation 112 Consolidation – Special Purpose Entities. It revised the definition of control together with accompanying guidance to identify an interest in a subsidiary. However, the requirements and mechanics of consolidation and the accounting for any noncontrolling interests and changes in control remain the same.

AASB 11 Joint Arrangements (AASB 11)

AASB 11 supersedes AASB 131 Interests in Joint Ventures (AASB 131). It aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. It introduces two accounting categories (joint operations and joint ventures) whose applicability is determined based on the substance of the joint arrangement. In addition, AASB 131’s option of using proportionate consolidation for joint ventures has been eliminated. AASB 11 now requires the use of the equity accounting method for joint ventures, which is currently used for investments in associates.

AASB 12 Disclosure of Interests in Other Entities (AASB 12)

AASB 12 integrates and makes consistent the disclosure requirements for various types of investments, including

unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities.

Consequential amendments to AASB 127 Separate Financial Statements (AASB 127) and AASB 128 Investments in Associates and Joint Ventures (AASB 128)

AASB 127 Consolidated and Separate Financial Statements was amended to AASB 127 Separate Financial Statements which now deals only with separate financial statements. AASB 128 brings investments in joint ventures into its scope. However, AASB 128’s equity accounting methodology remains unchanged.

AASB 13 Fair Value Measurement (AASB 13)

AASB 13 does not affect which items are required to be fairvalued, but clarifies the definition of fair value and provides

related guidance and enhanced disclosures about fair value measurements. It is applicable for annual periods beginning on or after 1 January 2013. The Group’s management have yet to assess the impact of this new standard.

AASB 2011-9 Amendments to Australian Accounting Standards Presentation of Items of Other Comprehensive Income (AASB 101 Amendments)

The AASB 101 Amendments require an entity to group items presented in other comprehensive income into those that, in accordance with other IFRSs: (a) will not be reclassified subsequently to profit or loss and (b) will be reclassified subsequently to profit or loss when specific conditions are met. It is applicable for annual periods beginning on or after 1 July 2012. The Group’s management expects this will change the current presentation of items in other comprehensive income; however, it will not affect the measurement

or recognition of such items.

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (AASB 124 Amendments)

AASB 2011-4 makes amendments to AASB 124 Related Party Disclosures to remove individual key management personnel disclosure requirements, to achieve consistency with the international equivalent (which includes requirements to disclose aggregate (rather than individual) amounts of KMP compensation), and remove duplication with the Corporations Act 2011. The amendments are applicable for annual periods beginning on or after 1 July 2013. The Group’s management have yet to assess the impact of these amendments.

AASB Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine

Clarifies that costs of removing mine waste materials (overburden) to gain access to mineral ore deposits during the production phase of a mine must be capitalised as inventories under AASB 112 Inventories if the benefits from stripping activity is realised in the form of inventory produced. Otherwise, if stripping activity provides improved access to the ore, stripping costs must be capitalised as a noncurrent, stripping activity asset if certain recognition criteria are met (as an addition to, or enhancement of, an existing asset). The interpretation is applicable for annual periods beginning on or after 1 January 2013. The interpretation will have no impact on the Group as it has no mining activities.

We do not expect these accounting standards to materially impact our financial results upon adoption.

v. Parent Entity

The financial information of the parent entity, Southern Gold Limited, disclosed at note 22, has been prepared on the same basis, using the same accounting policies as the consolidated financial statements.

The financial report was authorised for issue on 27th September 2012 by the Board of Directors.

2 LOSS FROM ORDINARY ACTIVITIES

Loss from ordinary activities included the following items of revenue and expense:


	CONSOLIDATED 2012 CONSOLIDATED 2011
	$ $
a) Operating Revenue Interest received/receivable Other Income b) Other Administrative Expenses Ofce rent	111,714 134,074 20,606 205,870
	132,320 339,944
	124,973 152,651

3 INCOME TAX EXPENSE

	CONSOLIDATED 2012 CONSOLIDATED 2011
	$ $
a) The prima facie income tax expense on pre-tax accounting loss reconciles to the income tax attributable to operating loss as follows: Loss from ordinary activities Income tax beneft calculated at 30% of operating loss Tax efect of capital raising costs Share-based payments expensed during the year Research and development tax concession Timing diferences and tax losses not brought to account Income tax attributable to loss from ordinary activities b) Deferred tax assets not brought to account, the benefts of which will only be realised if the conditions for deductibility set out in Note 1(b) occur Operating Losses c) Income tax losses Total deferred tax asset arising from carried forward tax losses not recognised as meeting probable criteria Tax Losses at 30%	(3,162,217) (2,047,212)
	(948,665) (614,164) 72,432 97,470 4,800 19,289 - (202,488) 943,865 507,999
	72,432 (191,894)

	943,865 507,999
	5,883,271 4,419,893

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 INTERESTS OF KEY MANAGEMENT PERSONNEL

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 2012. The totals of remuneration paid to key management personnel during the year are as follows:

	CONSOLIDATED 2012 CONSOLIDATED 2011
	$ $
Short term employee benefts Post employment benefts Share-based payments	704,557 751,855 53,550 66,241 - 64,298
	758,107 882,394

Mr Harding is not employed by the company and provides his services as a consultant. Mr Harding was paid $87,870 (2011: $95,200). Mr Turvey was also paid consulting fees of $11,438 (2011: $15,373).

a) The names and positions held of the group’s key management personnel in office at any time during the financial year are:

DIRECTORS	POSITION
G C Boulton AM	Chairman – Non-executive
N M Anderson	Managing Director – Executive
M R Billing	Director – Non-executive
DJTurvey	Director – Non-executive
KEY MANAGEMENT PERSONNEL	POSITION
N J Harding	Chief Financial Ofcer / Company Secretary
P W Hill1	Exploration Manager
G Thomas2	General Manager Cambodia
I D Blucher3	Project Development Manager

1 P W Hill resigned 9 September 2011
2 G Thomas resigned 15 November 2011
3 I D Blucher commenced 16 November 2011

b) The number of ordinary shares held by Key Management Personnel in Southern Gold Limited during the financial year is as follows:

30 JUNE 2012	BALANCE AT BEGINNING OF YEAR GRANTED AS REMUNERATION DURING THE YEAR ISSUED ON EXERCISE OF OPTIONS DURING YEAR OTHER CHANGES DURING THE YEAR4 BALANCE AT END OF YEAR
G C Boulton AM N M Anderson M R Billing D J Turvey N J Harding P W Hill G Thomas I D Blucher	1,520,588 - - 691,597 2,212,185 180,000 - - 521,429 701,429 2,176,649 - - 621,901 2,798,550 732,588 - - 209,311 941,899 111,529 - - 46,511 158,040 - - - - - - - - - - - - - 128,572 128,572
	4,721,354 - - 2,219,321 6,940,675

30 JUNE 2011	BALANCE AT BEGINNING OF YEAR GRANTED AS REMUNERATION DURING THE YEAR ISSUED ON EXERCISE OF OPTIONS DURING YEAR OTHER CHANGES DURING THE YEAR3 BALANCE AT END OF YEAR
G C Boulton AM N M Andreson1 M R Billing D J Turvey S R Biggins2 N J Harding P W Hill G Thomas	900,000 - - 620,588 1,520,588 - - - 180,000 180,000 1,856,061 - - 320,588 2,176,649 - - - 732,588 732,588 3,757,727 - - - 3,757,727 - - - 111,529 111,529 - - - - - - - - - -
	6,513,788 - - 1,965,293 8,479,081

1 N M Anderson commenced 23 September 2010.
2 S R Biggins resigned 2 July 2010.
3 Purchases of shares on market or through take up of shares by Directors under the December 2010 share purchase plan.
4 Purchases of shares on market or through take up of shares by Directors under the April 2012 rights issue.

c) The number of options over ordinary shares held by Key Management Personnel in Southern Gold Limited during the year is as follows:

30 JUNE 2012	BALANCE AT BEGINNING OF YEAR GRANTED AS REMUNERATION DURING THE YEAR EXERCISED DURING THE YEAR OTHER CHANGES DURING THE YEAR1 BALANCE AT END OF YEAR VESTED DURING THE YEAR VESTED AND EXERCISABLE
G C Boulton AM N M Anderson M R Billing D J Turvey N J Harding P W Hill G Thomas I D Blucher	500,000 - - - 500,000 - 500,000 1,000,000 - - - 1,000,000 - 1,000,000 500,000 - - - 500,000 - 500,000 500,000 - - - 500,000 - 500,000 350,000 - - - 350,000 - 350,000 550,000 - - (550,000) - - - 250,000 - - (250,000) - - - - - - - - - -
	3,650,000 - - (800,000) 2,850,000 - 2,850,000

30 JUNE 2011	BALANCE AT BEGINNING OF YEAR GRANTED AS REMUNERATION DURING THE YEAR EXERCISED DURING THE YEAR OTHER CHANGES DURING THE YEAR1 BALANCE AT END OF YEAR VESTED DURING THE YEAR VESTED AND EXERCISABLE
G C Boulton AM N M Anderson S R Biggins M R Billing D J Turvey N J Harding P W Hill G Thomas	500,000 - - - 500,000 - 500,000 - 1,000,000 - - 1,000,000 1,000,000 1,000,000 2,500,000 - - (2,500,000) - - - 500,000 - - - 500,000 - 500,000 - 500,000 - - 500,000 500,000 500,000 350,000 - - - 350,000 - 350,000 550,000 - - - 550,000 - 550,000 250,000 - - - 250,000 - 250,000
	4,650,000 1,500,000 - (2,500,000) 3,650,000 1,500,000 3,650,000

d) Other Key Management Personnel Transactions

There have been no other transactions involving equity instruments other than those described in the tables above. For details of other transactions with key management personnel, refer to Note 14 Related Parties. For details of payables to Key Management Personnel, refer to Note 10 Trade and Other Payables.

5 CASH AND CASH EQUIVALENTS

	CONSOLIDATED 2012 CONSOLIDATED 2011
	$ $
Cash at bank and in hand Term deposits TRADE AND OTHER RECEIVABLES Trade and other receivables Interest receivable Research and development tax concession receivable	658,344 434,003 3,014,750 2,500,000
	3,673,094 2,934,003
	98,147 422,202 21,657 31,264 - 251,644
	119,804 705,110

6 TRADE AND OTHER RECEIVABLES

Trade and other receivables are not considered past due and/or impaired (2011: nil)

7 OTHER ASSETS

OTHER ASSETS
Current Prepayments Exploration tenement performance bonds Other assets Non-Current Exploration tenement performance bonds	20,523 27,103 20,000 20,000 765 24,683
	41,288 71,786

	68,905 110,232

8 EXPLORATION AND EVALUATION EXPENDITURE

Costs carried forward in respect of areas of interest:

	CONSOLIDATED 2012 CONSOLIDATED 2011
	$ $
Exploration and evaluation phase 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 Expenditure incurred during the year Less: Expenditure recovered from co-venturer Net foreign exchange diferences - Cambodia Transferred to held-for-sale Expenditure written of / impairment	15,113,454 14,296,175 14,296,175 12,960,332 3,286,193 3,662,184 (137,776) (1,078,539) 191,521 (626,464) (980,000) - (1,542,659) (621,338)
	15,113,454 14,296,175

9 PLANT AND EQUIPMENT

	2012 2011
	$ $
Plant and equipment at cost Less: Accumulated depreciation Opening written down value Additions Disposals and write ofs Net foreign currency exchange diferences Depreciation Closing written down value TRADE AND OTHER PAYABLES Trade creditors Sundry payables and accruals Amount payable to Directors and Key Management Personnel related entities1	339,044 298,987 (241,839) (204,996)
	97,205 93,991
	93,991 141,827 56,649 26,962 (3,244) (71) 2,909 (20,772) (53,100) (53,955)
	97,205 93,991
	400,506 238,214 391,729 153,130 43,260 21,730
	835,495 413,074

10 TRADE AND OTHER PAYABLES

11 PROVISION FOR EMPLOYEE BENEFITS

The aggregate employee benefit liability recognised in and included in the financial statements is as follows:

	2012 2011
	$ $
Provision for employee benefts Current Non-Current Movement schedule for employee benefts Opening balance Additional provision Benefts utilised or surrendered Closing balance	58,505 32,009 7,384 23,894
	65,889 55,903
	55,903 43,351 68,231 81,063 (58,245) (68,511)
	65,889 55,903

The current provision portion relates to annual leave, while the non-current portion relates to long service leave.

Provision for long service leave

1 Payable amount to N A Anderson of $23,000

Payable amount to Greg Boulton and Associates Pty Ltd (an entity associated with G C Boulton AM) of $9,175 Payable amount to Equant Resources Pty Ltd (an entity associated with D J Turvey) of $2,967 Payable amount to Twentyfour Carat Pty Ltd (an entity associated with N J Harding) of $8,118

A provision for long service leave has been recognised for employee benefits. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits have been included in Note 1 to this report.

12 ISSUED CAPITAL

a) Ordinary Shares

SUED CAPITAL Ordinary Shares
	2012 2011
Issued share capital:	$ $
	33,507,897 28,999,356

346,726,851 fully paid ordinary shares (2011: 242,375,463)

Movement in issued shares for the year:

	2012 2011
	NO. $ NO. $
Balance at beginning of fnancial year Share placement at 6.8 cents Share purchase plan at 6.8 cents Share placement at 5.0 cents Rights issue at 4.3 cents Shares issued for services received Net costs associated with the issue of shares Balance at end of fnancial year	242,375,463 28,999,356 180,690,173 25,020,634 - - 44,200,000 3,005,600 - - 17,485,290 1,189,000 26,967,644 1,348,382 - - 77,050,411 3,313,168 - - 333,333 16,000 - - - (169,009) - (215,878)
	346,726,851 33,507,897 242,375,463 28,999,356

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.

b) Options on Issue

For information relating to share options issued to Key Management Personnel during the financial year, refer to Note 4.

At 30 June 2012, there were 3,100,000 (30 June 2011: 6,400,000) unissued shares for which the following options were outstanding:

GRANT DATE DATE OF EXPIRY FAIR VALUE AT GRANT DATE EXERCISE PRICE	NUMBER UNDER OPTION
22.10.2007 21.10.2012 0.310 0.35 26.2.2008 28.11.2012 0.132 0.75 26.8.2008 31.5.2013 0.109 0.20 30.9.2008 30.9.2013 0.096 0.15 30.9.2008 30.9.2013 0.093 0.15 30.6.2009 30.6.2014 0.098 0.30 30.10.2009 30.10.2013 0.082 0.15 1.12.2010 1.12.2014 0.040 0.105 1.12.2010 1.12.2015 0.044 0.105	50,000 500,000 100,000 150,000 150,000 150,000 500,000 500,000 1,000,000
	3,100,000

c) Capital Management

Management effectively manages the capital of the Group 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.

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

13 REMUNERATION OF AUDITORS

The auditor of Southern Gold Limited is Grant Thornton.

	2012 2011
	$ $
Amounts received or due and receivable by Grant Thornton for: An audit or review of the fnancial report of the entity and any other entity of the group Taxation and other services Amounts received or due and receivable by overseas related practices of Grant Thornton for: External audit Taxation and other services	30,500 31,900 14,600 20,685 2,887 7,382 - -
	47,987 59,967

14 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 in related parties

Equity Interests in controlled entities

Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 21 to the financial statements.

Equity Interests in joint ventures

Details of interests in joint ventures are disclosed in Note 15 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 Limited.

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

c) Transactions with Directors and Key Management Personnel A rental agreement with T&E Investments, a party related to Ms Anderson, to rent additional office premises in Perth, Western Australia at a cost of $22,056 per annum plus GST, on a rolling 3 month basis with a 3 month notice period was negotiated in July 2012.

The following comprises payments made to entities

in which Directors have an interest.

DIRECTOR	RELATED PARTY	2012	2011
AND KEY	TRANSACTION
MANAGEMENT
PERSONNEL
		$	$
M R Billing	Payments to a Director related	-	17,750
	entity for consulting services
	provided
D J Turvey	Payments to a Director related	11,438	15,373
	entity for consulting services
	provided
N J Harding	Payments to a member of Key	87,870	95,200
	Management for fnancial and
	company secretarial services
	provided

d) Related party balances

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

	2012 2011
	$ $
Current payables Amounts payable to Directors and Key Management Personnel related entities	43,260 21,730
	43,260 21,730

There were no amounts receivable from related parties.

15 JOINT VENTURES

The consolidated entity had interests in unincorporated joint ventures at 30 June 2012 as follows:

		2012	2011
		PERCENTAGE	PERCENTAGE
		INTEREST	INTEREST
a)	Challenger Area Joint Venture - Gold	51%	51%
b)	Kratie South Joint Venture – JOGMEC, Cambodia – All	49.9%	49%
	minerals
c)	Heron Resources Bulong South Joint Venture	51%	0%
d)	Heron Resources Bulong East Joint Venture	60%	0%

Notes

a) Under the terms of the agreement with Kingsgate Consolidated Ltd, Southern Gold completed $2m expenditure by October 2009 to earn a 51% JV interest in 7 ELs held by Kingsgate Consolidated Ltd surrounding (but excluding) the Challenger gold mine in northern South Australia. The Joint Venture relates only to gold. The JV interest has subsequently been sold (refer note 23 subsequent event to balance date).
b) Under the terms of the agreement with Japan Oil Gas Minerals National Corporation (JOGMEC), JOGMEC completed US$3.03 million expenditure over 3 years commencing April 2008 to earn a 51% interest in two adjoining tenements, Preak Khlong and O’Kthung (Kratie South Project) in north east Cambodia. From 1 November 2011, JOGMEC have elected not to contribute further expenditure for the current financial year and consequently their interest is being diluted.
c) Under the terms of the agreement with Heron Resources Limited, Southern Gold has earned a 51% interest in 3 tenements east of Kalgoorlie in Western Australia by spending a total of $120,000 over 2 years to September 2011. Southern Gold has elected to spend a further $120,000 to September 2012 in order to earn a further 29%.
d) Under the terms of a Heads of Agreement with Heron Resources Limited, Southern Gold has the right to earn up to 80% of the gold interests associated with Heron’s Bulong project. Southern Gold has met an initial requirement to spend a minimum of $150,000 within 3 months from commencement and a further $350,000 over the following 9 months to earn a 60% interest. Heron have elected not to contribute their ongoing 40% share of expenditures and Southern Gold is now sole funding a further $500,000 within the next 12 months to acquire an additional 20% of the gold interests in the project area.

16 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.

Total expenditure commitments at balance date in respect of minimum expenditure requirements not provided for in the financial statements are approximately:

	2012	2011
	$	$
Not later than one year:	997,940	858,820
Later than one year but not later than two years:	997,940	858,820
Later than two years but not later than fve years:	2,993,820	2,576,460

c) Native Title

Native Title claims have been made with respect to tenements in South Australia in which Southern Gold Limited has interests. The Group is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the claims may significantly affect the Group or its projects.

d) Office Rental

The consolidated entity has entered into a rental agreement to occupy its principle office at a cost of $63,040 per annum plus GST, for a term of 3 years expiring on 31 October 2014. In July 2012 the consolidated entity entered into a rental agreement with T&E Investments, a party related to Ms Anderson, to rent additional office premises in Perth, Western Australia at a cost of $22,056 per annum plus GST, on a rolling 3 month basis with a 3 month notice period.

	2012	2011
	$	$
Not later than one year:	86,777	126,622
Later than one year but not later than two years:	67,310	53,619
Later than two years but not later than fve years:	22,728	-

b) Service Agreements

Service agreements between the Group and Non-executive Directors are disclosed in the Remuneration Report of the Directors Report.

17 FINANCIAL INSTRUMENTS

a) Financial Risk Management

The Group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and accounts payable.

The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows:

	2012 2011
	$ $
Financial Assets Cash and cash equivalents Loans and receivables Financial Liabilities Trade and other payables	3,673,094 2,934,003 119,804 705,110
	3,792,898 3,639,113
	835,495 413,074
	835,495 413,074

ii) 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 balance 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 balance date.

SENSITIVITY ANALYSIS

i) 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.

The Company has not performed a sensitivity analysis relating to its exposure to price risk at balance 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.

2012	INTEREST BEARING NON-INTEREST BEARING TOTAL FLOATING INTEREST RATE
Financial assets Cash and deposits Receivables Less: Payables Net fnancial assets	3,615,992 57,102 3,673,094 5.14% - 119,804 119,804 - - (835,495) (835,495) -
	3,615,992 (658,589) 2,957,403

2011	INTEREST BEARING NON-INTEREST BEARING TOTAL FLOATING INTEREST RATE
Financial assets Cash and deposits Receivables Less: Payables Net fnancial assets	2,933,909 94 2,934,003 5.64% - 705,110 705,110 - - (413,074) (413,074) -
	2,933,909 292,130 3,226,039

Interest rate risk is managed with a mixture of fixed and floating rate cash deposits. At 30 June 2012, 82% (2011: 85%) of group deposits are fixed.

SENSITIVITY ANALYSIS

The company has not performed a sensitivity analysis relating to its exposure to interest rate risk at balance 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.

18 SHARE BASED PAYMENTS

No shares have been granted to Key Management Personnel as sharebased payments during the financial year. 333,333 shares were issued to a consultant valued at $16,000 for part payment of services rendered.

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 2012:

OPTIONS – SERIES	NO.	GRANT DATE	EXPIRY DATE	EXERCISE	FAIR VALUE
				PRICE	AT GRANT
					DATE
Employee Share Option	Plan
October 20071	50,000	22.10.2007	21.10.2012	$0.35	$0.3095
August 20081	100,000	26.08.2008	25.05.2013	$0.20	$0.1091
September 20081	150,000	30.09.2008	30.09.2013	$0.15	$0.0962
September 20081	150,000	30.09.2008	30.09.2013	$0.15	$0.0934
June 20091	150,000	30.06.2009	30.06.2014	$0.30	$0.0975
Director Options
February 20082	500,000	26.02.2008	28.11.2012	$0.75	$0.1319
October 20093	500,000	30.10.2009	30.10.2013	$0.15	$0.0819
December 20104	500,000	1.12.2010	1.12.2014	$0.105	$0.0397
December 20105	1,000,000	1.12.2010	1.12.2015	$0.105	$0.0444

1 In accordance with the Employee Share Option Plan, share options have been granted to employees at various times at prices and terms as shown in the above table.
2 On 26 February 2008, 2,500,000 share options were granted to directors as approved by shareholders at an AGM to take up ordinary shares at an exercise price of $0.75 each. 2,000,000 of these options have subsequently lapsed, 500,000 of these during the current financial year. The options are exercisable on or before 28 November 2012.

3 On 30 October 2009, 500,000 share options were granted to Mr G Boulton AM as approved by shareholders at an AGM to take up ordinary shares at an exercise price of $0.15. The options are exercisable on or before 30 October 2013.

4 On 1 December 2010, 500,000 share options were granted to Mr D Turvey as approved by shareholders at an AGM to take up ordinary shares at an exercise price of $0.105. The options are exercisable on or before 1 December 2014.

5 On 1 December 2010, 1,000,000 share options were granted to Ms N Anderson as approved by shareholders at an AGM to take up ordinary shares at an exercise price of $0.105. The options are exercisable on or before 1 December 2015.

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.

There were no options granted to Key Management Personnel during the year.

The following reconciles the outstanding share options granted under the Plan at the beginning and end of the financial year:

	2012	2012	2011	2011
SHARE OPTION GRANTED	NUMBER OF	WEIGHTED	NUMBER OF	WEIGHTED
	OPTIONS	AVERAGE	OPTIONS	AVERAGE
		EXERCISE		EXERCISE
		PRICE $		PRICE $
Balance at beginning of fnancial year	6,400,000	$0.253	7,850,000	$0.403
Granted during the fnancial year	-	-	1,500,000	$0.105
Exercised during the fnancial year (i)	-	-	-	-
Cancelled during the fnancial year	(3,300,000)	($0.269)	(2,950,000)	($0.373)
Balance at end of the fnancial year (ii)	3,100,000	$0.237	6,400,000	$0.253

i) Options exercised

No share options granted under the Plan were exercised during the financial year (2011: nil).

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 $0.237 (2011: $0.253) and a weighted average remaining contractual life of 740 days (2011: 748 days).

19 OPERATING SEGMENTS Segment Information Identification of reportable segments The consolidated entity has adopted AASB 8 Operating Segments with effect from 1 July 2009. 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 to be Australia and Cambodia based on different geological regions and the similarity of assets within those regions. 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 consolidated entity operates primarily in one business, namely the exploration of minerals.

Basis of accounting for purposes of reporting by operating segment Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors, being the chief operating decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the group.

Details of the performance of each of these operating segments for the financial years ended 30 June 2012 and 30 June 2011 are set out below:

2012		AUSTRALIA CAMBODIA	CONSOLIDATED
		$ $	$
Revenue Interest Income Other Income Expenditure Loss from Ordinary Activities before Income Tax Expense Net Loss for Year	Income Tax	111,714 - 8,280 12,326	111,714 20,606
		119,994 12,326	132,320
		(2,349,014) (945,523)	(3,294,537)
		(2,229,020) (933,197)	(3,162,217) (72,432)
			(3,234,649)

2012	AUSTRALIA	CAMBODIA TOTAL INTER-SEGMENT ELIMINATION CONSOLIDATED
	$	$ $ $ $
Assets and Liabilities Segment Assets 15,692,165 Inter-Segment Assets 7,013,336 Total Assets 22,705,501 Segment Liabilities 649,455 Inter-Segment Liabilities - Total Liabilities 649,455 Net Assets 22,056,046 Segment asset increases for the period Plant & equipment 48,143 Exploration expenditure 2,454,761	15,692,165 7,013,336	4,401,586 20,093,751 - 20,093,751 - 7,013,336 (7,013,336) -
	22,705,501 649,455 -	4,401,586 27,107,087 (7,013,336) 20,093,751 251,930 901,385 - 901,385 7,013,336 7,013,336 (7,013,336) -
	649,455	7,265,266 7,914,721 (7,013,336) 901,385

	22,056,046	(2,863,680) 19,192,366 - 19,192,366
		8,506 56,649 - 56,649 831,432 3,286,193 - 3,286,193

2011	2011	AUSTRALIA CAMBODIA	CONSOLIDATED
		$ $	$
Revenue Interest Income Other Income Expenditure Loss from Ordinary Activities before Income Tax Income Tax Expense Net Loss for Year		134,074 - 99,796 106,074	134,074 205,870
		233,870 106,074	399,944
		(1,961,726) (425,430)	(2,387,156)
		(1,727,856) (319,356)	(2,047,212) 191,894
			(1,855,318)

2011	AUSTRALIA	CAMBODIA TOTAL INTER-SEGMENT ELIMINATION CONSOLIDATED
	$	$ $ $ $
Assets and Liabilities Segment Assets 14,007,918 Inter-Segment Assets 6,209,996 Total Assets 20,217,914 Segment Liabilities 368,957 Inter-Segment Liabilities - Total Liabilities 368,957 Net Assets 19,848,957 Segment asset increases for the period Plant & equipment 3,597 Exploration expenditure 1,502,168	14,007,918 6,209,996	4,203,379 18,211,297 - 18,211,297 - 6,209,996 (6,209,996) -
	20,217,914 368,957 -	4,203,379 24,421,293 (6,209,996) 18,211,297 100,020 468,977 - 468,977 6,209,996 6,209,996 (6,209,996) -
	368,957	6,310,016 6,678,973 (6,209,996) 468,977

	19,848,957	(2,106,637) 17,742,320 - 17,742,320
		23,365 26,962 - 26,962 2,160,016 3,662,184 - 3,662,184

20 EARNINGS PER SHARE

	2012	2011
	CENTS PER SHARE	CENTS PER SHARE
Basic earnings per share – loss	(1.20)	(0.86)
Diluted earnings per share – loss	(1.20)	(0.86)

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:

Basic and Dilutive Earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earningsper share are as follows:
	$	$
Earnings	(3,234,649)	(1,855,318)
Earnings used in the calculation of basic and diluted
earnings per share agree directly to net loss in the
statement of fnancialperformance.
	NO.	NO.
Weighted average number of ordinary shares	268,851,883	215,497,928

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, as options are not considered dilutive.

21 CONTROLLED ENTITIES CONSOLIDATED

		OWNERSHIP	INTEREST
NAME OF ENTITY	COUNTRY OF	2012	2011
	INCORPORATION
		%	%
Parent Entity
Southern Gold Limited	Australia
Controlled Entities
Challenger West Holdings Pty Ltd	Australia	100%	100%
CMH Resources Pty Ltd	Australia	100%	100%
Gawler Arc Holdings Pty Ltd	Australia	100%	100%
Southern Mining Pty Ltd	Australia	100%	100%
Inferus Resources Pty Ltd1	Australia	100%	100%
Southern Gold Asia Pty Ltd	Australia	100%	100%
New Southern Mining Pty Ltd	Australia	100%	100%
Southern Gold Cambodia Pty Ltd2	Cambodia	100%	100%

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

2 All shares in Southern Gold Cambodia Pty Ltd are held by Southern Gold Asia Pty Ltd

22 SOUTHERN GOLD LIMITED COMPANY INFORMATION

	2012 2011
	$ $
PARENT ENTITY Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Retained earnings Reserves Share-based payments reserve Total reserves Financial Performance Proft/(loss) for the year Other comprehensive income Total comprehensive income Guarantees in relation to the debts of subsidiaries Contingent liabilities Contractual commitments - exploration	4,768,191 3,256,031 15,073,630 14,855,247
	19,841,821 18,111,278
	642,071 345,064 7,384 23,894
	649,455 368,958
	33,507,897 28,999,356 (16,214,417) (13,155,922)
	17,293,480 15,843,434
	1,898,886 1,898,886
	1,898,886 1,898,886
	(3,058,495) (2,745,940) - -
	(3,058,495) (2,745,940)
	- - - - 214,080 330,420

23 EVENTS SUBSEQUENT TO BALANCE DATE

Cambodia

On 5 July 2012 Southern Gold finalised an agreement with Mekong Minerals Ltd (“Mekong”) whereby Mekong has the exclusive right to earn an interest in Southern Gold subsidiary, Southern Gold (Asia) Pty Ltd (“SG Asia”) and to manage the activities of SG Asia and its wholly owned subsidiary, Southern Gold Cambodia Ltd (“SG Cambodia”).

A$500,000 cash and 3,000,000 Trafford shares (subject to a 12 month voluntary escrow period). On a decision to conduct a feasibility study on a JORC resource of over 500,000oz gold, Trafford will issue a further A$1 million worth of Trafford shares to Southern Gold or its nominee.

24 RESERVES

Share options reserve – the share options reserve records items recognised as expenses on valuation of employee share options.

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

25 REGISTERED OFFICE AND PRINCIPLE OFFICE

Finalising this transaction has allowed Southern Gold funds that were allocated for the Cambodian assets, to be redirected to the Bulong Gold project. In the longer term, future value may be created through Mekong’s investment and exploration success in Cambodia and/or through exercising their buy-out option.

Challenger – South Australia

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

229 Greenhill Road DULWICH SA 5065

ABN 30 107 424 519

Pursuant to a Sale Agreement signed in September 2012, Trafford Resources Limited (“Trafford”) has purchased Southern Gold’s 51% interest in the Western Gawler Craton JV with Dominion Gold Operations (a 100% owned subsidiary of Kingsgate Consolidated Limited) and the Company’s 100% owned Challenger West tenement (“Challenger Project”).

Under the sale terms Trafford purchased the Challenger Project for

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Directors’ Declaration

The Directors of Southern Gold Limited declare that:

a) the financial statements and notes, as set out on pages 14 to 44 are in accordance with the Corporations Act 2001, and:
i) give a true and fair view of the financial position as at 30 June 2012 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 Limited complies with International Financial Reporting Standards as described in Note 1; and
b) the Chief Executive Officer and Chief Financial Officer 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;
c) 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 27th day of September 2012.

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N M Anderson Managing Director

G C Boulton AM Chairman

Independent Audit Report to the Members

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Shareholder Information

The shareholder information set out below was applicable as at 27 September 2012.

1. Substantial Equity Holders

1. Substantial Equity Holders
		FULLY PAID SHARES
NAME	NUMBER	PERCENTAGE
Integra Mining Limited	43,277,337	12.48

2. Number of Shareholders

2. Number of Shareholders
NUMBER OF SHAREHOLDERS	CLASS OF SHARED	VOTING RIGHTS
2,483	ORDINARY	Full

3. Distribution of Equity Securities

DISTRIBUTION	OF HOLDINGS	OF HOLDINGS	NUMBER OF HOLDERS	ORDINARY SHARES	% OF ISSUED CAPITAL
1	-	1,000	234	104,467	0.03
1,001	-	5,000	387	1,157,446	0.33
5,001	-	10,000	314	2,568,519	0.74
10,001	-	100,000	1,069	42,929,264	12.38
100,001	-	and over	479	299,967,155	86.52
			2,483	346,726,851	100.00
Holding less than a marketable		parcel	967	4,175,487

4. Twenty Largest Shareholders

	The names of the twenty largest holders of fully paid ordinary shares comprise:	The names of the twenty largest holders of fully paid ordinary shares comprise:	The names of the twenty largest holders of fully paid ordinary shares comprise:
	NAME	NUMBER HELD	PERCENTAGE OF ISSUED SHARES
1	Integra Mining Limited	43,277,337	12.48
2	National Nominees Limited	16,263,000	4.69
3	Gary B Branch Pty Ltd	10,030,000	2.89
4	Jimmy Thomas & Ivy Ruth Ponniah	8,823,013	2.54
5	Nefco Nominees Pty Ltd	6,500,000	1.87
6	CITIC Australia Pty Ltd	6,473,000	1.87
7	Whittingham Securities Pty Ltd	5,000,000	1.44
8	Dr Leon Eugene Pretorius	5,000,000	1.44
9	BBY Nominees Limited	4,800,000	1.38
10	J P Morgan Nominees Australia Limited	3,964,693	1.14
11	Weybridge Pty Ltd	3,497,899	1.01
12	Elaine Rose Gibson	3,150,000	0.91
13	Arredo Pty Ltd	3,000,000	0.87
14	SA Capital Funds Management Limited	2,928,572	0.84
15	Kimbriki Nominees Pty Ltd	2,571,429	0.74
16	Hawthorne Park Investments Pty Ltd	2,484,558	0.72
17	C W Johnston Pty Ltd	2,231,100	0.64
18	G Boulton Pty Ltd	2,212,185	0.64
19	Buckingham Investment Financial Services Pty Ltd	2,200,000	0.63
20	Michael Robert Billing	2,121,429	0.61
		136,528,215	39.35

southerngold.com.au

Southern Gold Limited ACN 107 424 519

AI assistant

IONDRIVE LIMITED — Annual Report 2012

65132_rns_2012-10-28_7cd6185a-5e48-4aa0-9f67-90788fa84fc9.pdf

Solicitor

Auditor

Table of Contents

Chairman’s Letter

AM Greg Boulton Non-Executive Chairman

Operations Report

Bulong Gold Project

Figure 1

Legend

Geology

Background

Figure 2

Cannon Gold Resource Evaluation

The implementation of these

Figure 3

Table 1

Figure 5

Figure 6

Legend for Cross Sections

Conceptual Economic Evaluation Studies

Regional Exploration

Figure 7

Legend

Aircore Drill Collar

Table 2

Table 3

Figure 8

Legend

Aircore Drill Collar

Proposed Work Program 2012/2013

Cannon Development Studies

Corporate

Cambodia

Appendix 1

Competent Persons Statement

Glossary

Tenement Schedule

Notes

Corporate Governance Statement

Principle 1 Lay solid foundations for management and oversight

Principle 2 Structure the Board to add value

Composition of the Board

Formal deeds have been entered

Principle 3 Promote ethical and responsible decision making

Code of Conduct

relevant Company matters;

Ethical standards

Principle 4 Safeguard integrity in financial reporting

Directors are required to disclose to

Diversity Policy

Audit Committee

Principle 5 Make timely and balanced disclosure

Continuous Disclosure

Principle 6 Respect the rights of shareholders

Communication with shareholders

Principle 7 Recognise and manage risk

Principle 8 Remunerate fairly and responsibly

Remuneration Policy

Performance Evaluation

Directors’ Report

Principal Activities

Financial Results

Dividends

Review of Operations

Bulong Gold Project

Western Australia

i) Cannon Gold Resource Evaluation

ii) Bulong Regional Exploration

Corporate

Finalising this transaction has

Likely Developments

Environmental Regulation and Performance Statement

Options

Directors

Greg Boulton AM

Mick Billing

Company Secretary

IONDRIVE LIMITED Annual Report 2012

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