IONDRIVE LIMITED — Capital/Financing Update 2005

Aug 31, 2005

SOUTHERNGOLD ABN 30 107 424 519

1 September 2005

Company Announcements Office Australian Stock Exchange Limited 20 Bridge Street SYDNEY NSW 2000

Dear Sir /Madam

URANIUM GROUND HOLDING TO DOUBLE TO 10.000km²

HIGHLIGHTS

• Uranium coverage on the Gawler Craton increased to 10,000 $km^2$
• Granted tenement extended to 5,000 $km²$
• Granted ground holding to double through exploration licence applications
• Ground holding in Gawler Craton to triple since SAU listing in April 2005
• Developing best ground holding of IOCGU (Olympic Dam style) and palaeochannel uranium targets in the Gawler Craton

The Southern Gold Ltd (SAU) group has interest in 10,000 $km²$ of exploration licences and exploration licence applications in one of the world's richest uranium provinces, the Gawler Craton in South Australia.

SAU has extended its granted licence interests by more than 2000km² through acquisition and joint ventures since SAU listed in April. In addition, 5000km² of exploration licence applications have been lodged since May based on strategic geological and identified geophysical targets some of which were highlighted in PIRSA's new gravity surveys.

The Company's combined uranium assets in South Australia are both hardrock Iron Oxide Copper Gold Uranium (IOCGU) targets similar to Olympic Dam and palaeochannel uranium targets similar to Paladín Resources Limited's Langer Heinrich deposit in Namibia.

Targeting Strategy and Tenement Position

Eight additional tenements have been applied for by SAU over priority IOGCU and palaeochannel uranium targets within the highly prospective Gawler Craton (refer map). The new applications will double Southern Gold's current holding of about 5,000 sq km of granted exploration licences.

Southern Gold has identified the new areas with uranium potential by using its extensive South Australian expertise, re-analysis of past curtailed palaeochannel exploration and new targeting insights for IOCGU deposits developed from the recent Prominent Hill and Carrapateena discoveries. The recent Carrapateena discovery by RMG Services Pty Ltd and a recent gravity survey by the State Government has revitalized interest in gravity targeting for IOCGU deposits.

Southern Gold has taken a lead position in evaluating the PIRSA and regional gravity data to pinpoint potential IOCGU targets in prospective geological areas. The company aims to maximise the opportunities for discovery success by testing a pipeline of these priority targets.

SAU's tenements now cover 6 deposit centres including established IOCGU targets at Victory and Westpoint and an additional 9 new IOCGU "Olympic Dam" style gravity targets (refer map) providing an excellent opportunity for the discovery of new uranium bearing deposits.

This is an expansion on the approach that developed the current secondary uranium targets within 250 km of palaeochannels covered by the Company's tenements and the advanced TOCGU gravity target at Victory. Preliminary exploration, abandoned largely due to political policies since the early 1980's, showed the palaeochannels in the Gawler Craton had the right processes and environments to form secondary uranium deposits like Beverley and Honeymoon in eastern South Australia.

Uranium related exploration activities

Southern Gold is currently evaluating radiometric anomalies associated with the Narlaby palaeochannel at Yarlbrinda South.

Southern Gold will also commence drilling the Victory IOCGU target at the earliest opportunity from late September. This deep drilling program will be jointly funded by Joint Venture partners Hindmarsh Resources Ltd ("HMR") and also by PIRSA through its Plan for Accelerating Exploration (PACE) funding scheme.

The combination of its large quality ground holding, South Australia's supportive political environment for uranium mining and Southern Gold's local exploration and development expertise provide Southern Gold and its subsidiary Southern Uranium Ltd with ideal exposure to the uranium market

Yours faithfully

HylBu

S BIGGINS Managing Director

Contact: Mr Stephen Biggins Managing Director Phone: +61 (0) 8 8132 0044 $+61(0)881320199$ Fax:

The information in this report has been compiled by Stephen Biggins who is a member of the Australasian Institute of Mining and Metallurgy and is bound by and follows the Institute's codes and recommended practices. He has a minimum of 5 years experience in the types of activities being reported.

Please visit our website at www.southerngold.com.au