IONDRIVE LIMITED - Capital/Financing Update 2013

SOUTHERN GOLD LTD

RIGHTS ISSUE

OFFER MEMORANDUM

For a non-renounceable rights offer to Eligible Shareholders on the basis of three (3) New Shares for every eight (8) Shares held on the Record Date at an issue price of A$0.015 (1.5 cents) per New Share to raise approximately A$2 million.

BBY Ltd – Lead Manager

CLOSING DATE: 5.00pm AEST time on Tuesday, 3 December 2013

THIS OFFER BOOKLET AN IMPORTANT DOCUMENT AND REQUIRES IMMEDIATE ATTENTION. IT SHOULD BE READ IN ITS ENTIRETY. IF YOU DO NOT UNDERSTAND IT, OR ARE IN DOUBT AS TO HOW TO ACT, YOU SHOULD CONSULT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISOR.

IMPORTANT NOTICES

Reliance on Offer Memorandum

This Offer Memorandum has been prepared in accordance with section 708AA of the Corporations Act. In general terms, section 708AA relates to rights issues by certain companies that do not require the provision of a prospectus or other disclosure document. Accordingly, the level of disclosure in this Offer Memorandum is considerably less than the level of disclosure required in a prospectus and does not contain all of the information which an investor may require to make an informed investment decision.

In deciding whether or not to accept the Offer, you should rely on your own knowledge of Southern Gold, refer to disclosures made by Southern Gold to ASX (which are available for inspection on the ASX website at www.asx.com.au and on Southern Gold’s website at www.southerngold.com.au) and seek the advice of your professional adviser.

Forward looking statements

This Offer Memorandum includes forward looking statements that have been based on current expectations about future acts, events and circumstances. These forward looking statements are, however, subject to risks, uncertainties and assumptions that could cause those acts, events and circumstances to differ materially from the expectations described in such forward looking statements. These factors include, among other things, commercial and other risks associated with the meeting of objectives and other investment considerations, as well as other matters not yet known to Southern Gold or not currently considered material by Southern Gold. Any representation in this Offer Memorandum should not be relied upon as to its accuracy or completeness or as a recommendation or forecast by Southern Gold. Southern Gold advises that independent advice be sought before making any binding decision in connection with the Offer.

No overseas offering

No offer is made by this Offer Memorandum in any jurisdiction outside of Australia and New Zealand. The distribution of this Offer Memorandum (including an electronic copy) within jurisdictions outside Australia and New Zealand may be restricted by law and persons into whose possession this Offer Memorandum comes should inform themselves about and observe any such restrictions.

This Offer Memorandum is not an investment statement or prospectus under New Zealand law, and does not contain all the information that an investment statement or prospectus under New Zealand law is required to contain. The New Shares being offered under this Offer Memorandum are being offered to Eligible Shareholders with registered addresses in New Zealand in reliance on the Securities Act (Overseas Companies) Exemption Notice 2013 (New Zealand)

United States

The New Shares to be offered and sold in the Offer have not been, and will not be, registered under the U.S. Securities Act of 1933 (the Securities Act), or under the securities laws of any state or other jurisdiction of the United States. Accordingly, the New Shares to which this Offer Memorandum relates may only be offered or sold, directly or indirectly, outside the United States in “offshore transactions” (as defined in Rule 902(h) under the Securities Act) in relation on Regulation S under the Securities Act.

Representations and warranties

No person is authorised to give any information or to make any representation in connection with the Offer which is not contained in this Offer Memorandum. Any information or representation not so

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contained may not be relied on as having been authorised by Southern Gold in connection with the Offer. Except as required by law, and only to the extent so required, none of SAU, or any other person, warrants or guarantees the future performance of SAU or any return on any investment made pursuant to the Offer.

No cooling-off rights

Cooling-off rights do not apply to an investment in New Shares. You cannot, except as permitted by law, withdraw your application for New Shares once it has been received.

Not financial product advice

This Offer Memorandum is not financial product advice, does not propose to contain all the information that you may require in evaluating a possible acquisition of New Shares, and has been prepared without taking into account your investment objectives, financial situation or needs. Before deciding whether to apply for New Shares under the Offer, you should consider whether they are a suitable investment for you in light of your own investment objectives and financial circumstances and having regard to the merits or risks involved. If, after reading the information, you have any questions about the Offer, you should contact your financial adviser, accountant or other professional adviser.

Defined terms and time

Defined terms used in this Offer Memorandum are contained in Section 6. All references to time are references to AEST.

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CORPORATE DIRECTORY

Directors

Mr Greg Boulton AM – Non-Executive Chairman Ms Nanette Anderson – Managing Director Mr Michael Billing – Non-Executive Director Mr David Turvey – Non-Executive Director

Company Secretary

Mr Dan Hill

Registered Office

229 Greenhill Road, Dulwich, South Australia 5006

Telephone: +61 8 8368 8888 Facsimile: +61 8 8431 5619

Share Registry

Computershare Investor Services Pty Ltd Level 5, 115 Grenfell Street, Adelaide, South Australia 5000 Australia

Auditor

Grant Thornton Pty Ltd Level 1, 67 Greenhill Road, Wayville, South Australia 5034 Australia

Lawyers

Watsons Lawyers Ground Floor, 60 Hindmarsh Square, Adelaide, South Australia 5000 Australia

Web site: www.southerngold.com.au

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CHAIRMAN’S LETTER

Dear Southern Gold Shareholder,

On behalf of the directors of Southern Gold Limited (Southern Gold or SAU) I am pleased to offer you the opportunity to participate in a partially underwritten non-renounceable rights issue of up to approximately 135 million New Shares in total (based on Southern Gold’s undiluted share capital as at 5 November 2013, without taking into account the impact of rounding) to raise up to approximately A$2 million (before expenses).

Following Southern Gold’s announcement on 29 August 2013 of the completion of its PreFeasibility Study (PFS) of the Cannon Gold deposit, and the Board’s decision to mine the deposit (subject to finance and regulatory approvals), proceeds of the Offer will be used to fund final works relating to completion of the Mining Proposal, initial preparation work for site development and follow up drilling of near resource targets. Full details of the Cannon Gold deposit, the results of the PFS and Southern Gold’s near term work programmes can be found in its Quarterly Report lodged with ASX on 31 October 2013.

The results of the PFS showed that the proposed development of the Cannon Gold deposit would provide Southern Gold with a platform to generate attractive revenue streams within the next 18 to 24 months. In the current environment of constrained capital, the Offer provides Eligible Shareholders with the opportunity to further support the Company as it looks to transition from explorer to near term gold miner.

This capital raising will assist Southern Gold to bring together the final components (including securing project finance and regulatory approvals) required to meet the proposed timetable for mine development, scheduled to commence in the first half of 2014. As outlined in the PFS and Southern Gold’s announcement on 29 August 2013, developing the Cannon Gold deposit as a toll treatment operation can deliver positive economic returns with a low capital cost structure.

The rights issue offers Eligible Shareholders the right to take up three (3) New Shares for every eight (8) Shares they hold as at 5.00pm AEST on 14 November 2013, at an issue price of A$0.015 (1.5 cents) per New Share. The issue price of the New Shares represents a discount of:

16.7% to the closing market price of SAU’s Shares on 5 November 2013 (being the last trading day prior to announcement of the Offer) of A$0.018 (or 1.8 cents) per Share; and
19.8% to the volume weighted average market price of SAU’s Shares for the 5 trading days to close of the trade on 5 November 2013 of $A0.0187 (1.87 cents) per Share.

Eligible Shareholders may also apply for additional New Shares in excess of their Entitlement at the same issue price of A$0.015 (1.5 cents) per New Share. This is an opportunity for Eligible Shareholders to apply for additional Shares in order to top up their holdings at an attractive price.[1]

1 There is no guarantee of the number of New Shares (if any) that will be available to Eligible Shares to top up their Shareholdings in addition to their Entitlements and the allocation of those New Shares among applicants will be at SAU’s discretion.

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The Offer will be conducted without a prospectus in accordance with the streamlined offering provisions of the Corporations Act.

Your Directors consider that Southern Gold has a positive future and recommend this Offer to you as an opportunity to further participate in Southern Gold’s future growth. All Board members intend to take up their respective Entitlements in full and Ms Anderson, SAU’s Managing Director, has agreed to underwrite up to a further 7 million Shares.

You are encouraged to read this Offer Memorandum and the accompanying Entitlement and Acceptance Form fully. If you have any queries in relation to the Offer, you should consult your stockbroker or other professional advisor.

On behalf of your Board, I invite you to consider this investment opportunity and thank you for your ongoing support of Southern Gold.

Yours sincerely,

==> picture [119 x 42] intentionally omitted <==

Greg Boulton AM Chairman

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KEY OFFER DETAILS

Offer Price	A$0.015 (or 1.5 cents)per New Share
Entitlement Ratio	3 New Shares for every8 Shares held
Number of New Shares to be issued under	Approximately135 million
Gross Proceeds from Offer	ApproximatelyA$2 million

KEY DATES

The indicative timetable for the rights issue is as follows:


EVENT	DATE
Announcement of rights issue–Offer Memorandum, ASX Appendix 3B and Cleansing Notice lodged with the ASX.	6 November 2013
Ex date– the date on which Shares commence trading without the entitlement toparticipate in the Offer.	8 November 2013
Record date– the date for determining entitlements of Shareholders to participate in the Offer.	14 November 2013
Offer Memorandum sent to Shareholders– dispatch of Offer Memorandum and Entitlement and Acceptance Forms - Offer opens for acceptances	19 November 2013
Closing date– the last day for receipt of acceptance forms (5.00pm AEST)	3 December 2013
Deferred Settlement Trading commences- New Shares commence quotation on ASX on deferred settlement basis	4 December 2013
Shortfall notification date	6 December 2013
Dispatch date– allotment of New Shares. Deferred settlement trading ends	11 December 2013
Expected commencement of normal trading in New Shares on ASX	12 December 2013
Dispatch of holding statements to Shareholders who accepted the offer	13 December 2013

This timetable is indicative only. Subject to the ASX Listing Rules, the Directors reserve the right to vary the dates for the Offer at their discretion. Should this occur, then the extension will have a consequential effect on the anticipated date of issue and normal trading of the New Shares.

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SECTION 1: DETAILS OF THE OFFER

1. Offer

The Offer is a pro-rata non-renounceable entitlement offer of approximately 135 million New Shares to Eligible Shareholders at an issue price of A$0.015 (or 1.5 cents) per New Share.

Each Eligible Shareholder is entitled to subscribe for three (3) New Shares for every eight (8) Shares held by that Eligible Shareholder as at the Record Date at an issue price of A$0.015 (1.5 cents) per New Share.

The issue price of the New Shares represents a discount of approximately:

16.7% to the closing market price of SAU’s Shares on 5 November 2013 (being the last trading day prior to announcement of the Offer) of A$0.018 (or 1.8 cents) per Share; and
19.8% to the volume weighted average market price of SAU’s Shares for the 5 trading days up to 5 November 2013 of A$0.0187 (or 1.87 cents) per Share.

If an Eligible Shareholder becomes entitled to a fraction of a Share, the entitlement will be rounded up to the nearest whole number.

The New Shares will be fully paid and will rank equally in all respects with SAU’s existing Shares on issue.

2. What is my entitlement?

The number of New Shares to which you are entitled is shown in the accompanying Entitlement and Acceptance Form (Entitlement). You can subscribe for all, or part, of your Entitlement to New Shares. Detailed instructions on how to accept all or part of your Entitlement are set out in Section 3.

Please note that if you choose not to accept your Entitlement under the Offer your shareholding in SAU will be diluted to the extent that the Offer is taken up by other Shareholders and Shortfall Shares are allocated to Eligible Shareholders who elect to take up more than their Entitlement and to the Underwriter (see paragraphs 3 and 11 of this Section 1 for further details).

3. Shortfall Shares

In addition to being able to apply for New Shares in the manner described in paragraph 2 above, Eligible Shareholders who subscribe for their full Entitlement will also have the opportunity to apply for additional New Shares that are not subscribed for under the Offer (Shortfall Shares), subject to the limitations set out in Sections 3 and 4.

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4. Opening and closing dates

The Offer opens for receipt of acceptances on Tuesday, 19 November 2013. The closing date and time for acceptances and payments is 5.00pm AEST time on Tuesday, 3 December 2013, subject to the Directors varying the closing date in accordance with the Listing Rules.

5. Who is entitled to participate in the Offer?

Each Shareholder with a registered address in Australia or New Zealand, who is registered as the holder of Shares as at 5.00pm AEST time on Thursday, 14 November 2013 is entitled to participate in the Offer in respect of the number of Shares that person is then registered as the holder of.

Existing option holders may only participate in the Offer in respect of Shares to be issued on exercise of the options held by them if they exercise their options and are registered as the holder of the underlying Shares by the Record Date.

6. Offer not made to Excluded Shareholders

SAU has decided that it is unreasonable to make the Offer to Shareholders who have a registered address in a country outside of Australia or New Zealand having regard to the number of Shareholders in such places, the number and value of the New Shares they would be offered and the substantial costs of complying with the legal and regulatory requirements in those jurisdictions.

This Offer Memorandum does not constitute an offer to Excluded Shareholders and the Offer Memorandum will not be sent to Excluded Shareholders.

This Offer Memorandum and accompanying Entitlement and Acceptance Form do not constitute an offer for securities in any place in which, or to any person to whom, it would not be lawful to make such an offer. Shareholders holding Shares on behalf of persons who are resident outside of Australia or New Zealand are responsible for ensuring that subscribing for the New Shares under the Offer does not breach regulations in the relevant overseas jurisdiction. Return of a duly completed Entitlement and Acceptance Form will constitute a representation that there has been no breach of such regulations. Where the Offer Memorandum has been dispatched to Shareholders domiciled in a country outside Australia or New Zealand and where that country’s securities code or legislation prohibits or restricts in any way the making of the Offer, the Offer Memorandum and accompanying Entitlement and Acceptance Form are provided for information purposes only.

7. Nominees

The Offer is being made to all Eligible Shareholders, who must be (among other things) registered as a holder of Shares in Australia or New Zealand and are not in the United States. SAU is not required to determine whether or not any registered holder is acting as a nominee or the identity or residence of any beneficial owners of Shares. Where any holder is acting as a nominee for a foreign person that holder, in dealing with its beneficiary, will

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need to assess whether indirect participation by the beneficiary in the Offer is permitted under applicable foreign laws.

8. Rights issue exception not available

No nominee has been appointed for Excluded Shareholders under section 615 of the Corporations Act and, as such, Eligible Shareholders will not be able to rely on the exception for rights issues in item 10 of section 611 of the Corporations Act. Accordingly, when an Eligible Shareholder applies for some or all of its Entitlement, it must have regard to section 606 of the Corporations Act. Eligible Shareholders who may be at risk of exceeding the 20% voting power threshold in section 606 as a result of acceptance of the Offer should seek professional advice before completing and returning the Entitlement and Acceptance Form.

9. Effect on share capital

The effect of the Offer on the capital structure of SAU will be as follows:


Shares	Number
Number on issue at 5 November 2013 (the last trading day prior to announcement of the Offer)	360,596,981
Maximum number to be issued under the Offer	135,223,868
Maximum number on issue following the Offer	495,820,849

The figures in the table above are based on the undiluted share capital of SAU as at 5 November 2013 and, in the case of the maximum number of Shares on issue following the Offer, assumes all Shareholders take up their Entitlements in full. The figures are also approximate as individual Entitlements will be rounded up to the nearest whole figure.

There are 3.58 million unlisted options to subscribe for Shares currently on issue. If any of these options are exercised prior to the Record Date this will also impact the maximum number of New Shares to be issued under the Offer and the maximum number of Shares on issue following the Offer.

10. Non-Renounceable Offer

The Offer is non-renounceable. This means that your right to subscribe for New Shares under the Offer is not transferable. Any Entitlements not taken up by Shareholders will be dealt with in accordance with Section 4 of this Offer Memorandum.

11. Underwriting

The Offer is partially underwritten by Ms Nanette Anderson who has agreed to subscribe for up to a maximum of 7,000,000 Shortfall Shares, being New Shares not taken up by Eligible Shareholders under the Offer. Ms Anderson is the Managing Director of Southern Gold.

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Further details of the Underwriting Agreement are set out in Section 5.

12. Issue of New Shares

SAU expects that the New Shares will be issued by no later than 11 December 2013. The issue of New Shares will only be made after permission for their quotation on ASX has been granted. If you apply for Shortfall Shares then, subject to SAU’s discretion to scale back your allocation of Shortfall Shares (in whole or in part), it is expected you will be issued those Shortfall Shares by no later than 11 December 2013.

SECTION 2: PURPOSE OF THE OFFER

The proceeds from the Rights Issue will be primarily directed to the final works relating to the completion of the mining proposal and initial preparation work for site development of SAU’s Cannon Gold deposit, along with follow up drilling of near resource targets.

SECTION 3: HOW TO ACCEPT THE OFFER

1. How to take up all or part of your entitlement

To subscribe for New Shares offered to you, please complete the accompanying Entitlement and Acceptance Form according to the instructions on the form for all, or that part of your Entitlement you wish to subscribe for.

You must make payment for the appropriate application monies (at A$0.015 (1.5 cents) per New Share subscribed) as provided in paragraph 4 below.

Acceptances will not be valid if they are received after the Closing Date.

Please note that all applications, once received, are irrevocable, except as permitted by law.

2. How to apply for Shortfall Shares

If you wish to accept your Entitlement in full and apply for Shortfall Shares, complete the Entitlement and Acceptance Form and also fill in the number of Shortfall Shares you wish to apply for in the space provided on the Entitlement and Acceptance Form. You must make payment for the appropriate application monies (at A$0.015 (1.5 cents) per New Share subscribed) as provided in paragraph 4 below.

There is no limit on the number of Shortfall Shares that may be applied for by Eligible Shareholders in excess of their Entitlement. However, Shortfall Shares will only be issued if the Offer is undersubscribed and will only be issued to the extent necessary to make up any shortfall in subscriptions and at the discretion of the SAU Board.

The Directors reserve the right to reject any application for Shortfall Shares or to allot a lesser number of Shortfall Shares than applied for. Application monies received but not applied towards subscriptions for Shortfall Shares will be refunded as soon as practicable. No interest will be paid on application monies held and returned.

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3. Lapse of Rights

If you decide not to accept all or part of your Entitlement or fail to do so by the Closing Date, your Entitlement will lapse and will form part of the Shortfall.

4. Payment

Payments must be made by 5.00pm AEST time on Tuesday, 3 December 2013 and must be made in Australian currency and by:

(a) cheque drawn on and payable at any Australian bank;
(b) bank draft drawn on and payable at any Australian bank; or
(c) BPAY®.

Entitlement and Acceptance Forms, together with cheque or bank draft for the appropriate application monies (at A$0.015 (1.5 cents) per New Share subscribed) must be sent to SAU’s share registry, Computershare Investor Services Pty Ltd, so that they reach the registry by no later than 5.00pm AEST time on Tuesday, 3 December 2013.

If you wish to pay by BPAY®, you do not need to return the Entitlement and Acceptance Form, you simply need to follow the instructions on the Entitlement and Acceptance Form. Different financial institutions may implement earlier cut of times with regards to electronic payment, so please take this into consideration when making payment. It is your responsibility to ensure that funds submitted through BPAY® are received by the Closing Date.

Cheques or bank draft must be made payable to ‘Southern Gold Limited’ and crossed ‘Not Negotiable’. Cash payments will not be accepted and receipts for payment will not be provided.

SAU will treat you as applying for as many New Shares as your payment will pay for in full, subject to any scale-back SAU may determine to implement in respect of Shortfall Shares. Amounts received by SAU in excess of your Entitlement may be treated as an application to apply for as many Shortfall Shares as that excess amount will pay for in full.

By returning an Entitlement and Acceptance Form or lodging an Entitlement and Acceptance Form with your stockbroker or otherwise arranging for payment for your New Shares through BPAY®in accordance with the instructions on the Entitlement and Acceptance Form, you acknowledge that you have received and read this Offer Memorandum, you have acted in accordance with the terms of the Offer detailed in this Offer Memorandum and you agree to all of the terms and conditions as detailed in this Offer Memorandum.

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5. Declarations

By completing and returning your personalised Entitlement and Acceptance Form along with your cheques, bank draft or money order or making a payment by BPAY®, you will be deemed to have:

(a) represented and warranted that you are an Eligible Shareholder;
(b) represented and warranted that you are not in the United States and are not acting for the account or benefit of a person in the United States (to the extent you are holding Shares for the account or benefit of such person in the United States);
(c) represented or warranted that you understand and acknowledge that neither the Entitlements nor the New Shares have been, nor will be, registered under the Securities Act or the securities laws of any state or other jurisdiction in the United States. The Entitlements may not be taken up or exercised by, and the New Shares may not be offered or sold to, persons in the United States. Neither the Entitlements nor the New Shares may be offered, sold or resold in the United States except in a transaction exempt form, or subject to the registration requirements of the Securities Act and any other applicable U.S. state securities laws;
(d) represented and warranted that you are purchasing New Shares in an “offshore transaction” (as defined in Rule 902(h) under the Securities Act) in compliance with Regulation S under the Securities Act;
(e) represented and warranted that you have not and will not send this Offer Memorandum, the Entitlement and Acceptance Form or any other materials relating to the Offer to any person in the United States;
(f) acknowledged that you have fully read and understood both this Offer Memorandum and the Entitlement and Acceptance Form in their entirety and you acknowledge the matters and make the warranties and representations and agreements contained in this Offer Memorandum and the Entitlement and Acceptance Form;
(g) agreed to be bound by the terms of the Offer, the provisions of the Offer Memorandum and SAU’s constitution;
(h) authorised SAU to register you as the holder of the New Shares and Shortfall Shares (if any) allotted to you;
(i) declared that all of the details and statements in the Entitlement and Acceptance Form are complete and accurate;
(j) declared that you are over 18 years of age and have full legal capacity and power to perform all your rights and obligations under the Entitlement and Acceptance Form;

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(k) acknowledged that once SAU receives your Entitlement and Acceptance Form or any payment of application monies via BPAY® you may not withdraw your application for funds provided except as allowed by law;
(l) agreed to apply for and be issued up to the number of New Shares and Shortfall Shares (if any) specified in the Entitlement and Acceptance Form, or for which you have submitted payment of any application monies via BPAY®, at the issue price of A$0.015 per New Share;
(m) authorised SAU its Share Registry and their respective officers or agents to do anything on your behalf necessary for New Shares and any Shortfall Shares to be issued to you, including to act on instructions of the Share Registry upon using the contact details set out in your Entitlement and Acceptance Form;
(n) declared that you were a registered holder(s) at the Record Date of the Shares indicated in the Entitlement and Acceptance Form as being held by you on the Record Date;
(o) represented and warranted that you are a resident of Australia or New Zealand;
(p) acknowledged that the information contained in this Offer Memorandum and your Entitlement and Acceptance Form is not investment advice nor a recommendation that the New Shares are suitable for you given your investment objectives, financial situation or particular needs;
(q) acknowledged that this Offer Memorandum is not a prospectus, does not contain all of the information that you may require in order to assess an investment in SAU and is given in the context of SAU’s past and ongoing continuous disclosure announcements to ASX;
(r) acknowledged that investments in SAU are subject to risk;
(s) acknowledged that none of SAU or its related bodies corporate, affiliates or directors, officers, employees, representatives, agents, consultants or advisers, guarantees the performance of SAU, nor do they guarantee the repayment of capital;
(t) agreed to provide (and direct your nominee or custodian to provide) any requested substantiation of your eligibility to participate in the Offer and your holding of Shares on the Record Date;
(u) authorised SAU to correct any errors in your Entitlement and Acceptance Form or other form provided by you;
(v) represented and warranted that the law of any place does not prohibit you from being given this Offer Memorandum and the Entitlement and Acceptance Form, nor does it prohibit you from making an application for New Shares or, if applicable, Shortfall Shares;

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(w) represented and warranted that if in the future you decide to sell or otherwise transfer the New Shares (or any Shortfall Share issued and allotted to you), you will only do so in regular way transactions on ASX or otherwise where neither you nor any person acting on your behalf know, or has reason to know, that the sale has been prearranged with, or that the purchaser is, a person in the United States or is acting for the account or benefit of a person in the United States; and
(x) represented and warranted that if you are acting as a nominee or custodian, each beneficial holder on whose behalf you are submitting the Entitlement and Acceptance Form is resident in Australia or New Zealand and does not reside in the United States, and you have not sent this Offer Memorandum, the Entitlement and Acceptance Form or any information relating to the Offer to any person in the United States.

SECTION 4: SHORTFALL SHARES

Shortfall Shares will only be issued if the Offer is undersubscribed and will only be issued to the extent necessary to make up any shortfall in subscriptions.

If there is any Shortfall, the Shortfall Shares will, at the SAU Board’s absolute discretion, first be allocated to Eligible Shareholders who have applied for Shortfall Shares. Any remaining Shortfall Shares will be allocated to the Underwriter in accordance with the Underwriting Agreement.

If there remains a Shortfall after allocation of Shortfall Shares to Eligible Shareholders who have applied for Shortfall Shares and to the Underwriter, the Directors reserve the right to issue the Shortfall Shares in their discretion. Any Shortfall Shares so issued will, in accordance with the Listing Rules, be issued within 3 months after the Closing Date and will be issued at a price that is not less than the issue price of the New Shares under the Offer. Southern Gold has engaged BBY, Lead Manager to the Rights Issue, to assist place any Shortfall not allocated to Eligible Shareholders or the Underwriter.

If Southern Gold receives applications for Shortfall Shares that would result in the Offer being oversubscribed then it will not accept such oversubscriptions and will reject or scale back applications at its discretion.

Southern Gold will not issue Shortfall Shares where it is aware that to do so would result in a breach of the Corporations Act, the Listing Rules or any other relevant legislation or law. Eligible Shareholders wishing to apply for Shortfall Shares must consider whether the issue of the Shortfall Shares applied for would breach the Corporations Act, the Listing Rules or any other law having regard to their own circumstances.

SECTION 5: UNDERWRITING

1. Underwriting Terms

Southern Gold has entered into an underwriting agreement with its Managing Director, Ms Nanette Anderson, pursuant to which Ms Anderson has agreed to partially underwrite the

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Offer by subscribing for up to 7,000,000 Shortfall Shares, for an aggregate subscription price of up to A$105,000.

Ms Anderson will not receive any fee for the underwriting and has no right to terminate her underwriting commitment unless SAU withdraws the Offer. No warranties, covenants or indemnities were given by Southern Gold in favour of Ms Anderson pursuant to the Underwriting Agreement.

Assuming no other Eligible Shareholders take up their Entitlements, the underwriting commitment of Ms Anderson will have the following effect on her shareholding in SAU:

As at	5 November	20131	Immediately following the Offer	Immediately following the Offer	Immediately following the Offer
Shareholding2	Option holding2	% Total SAU	Shareholding2	Option holding2	% Total SAU
1,058,571	1,000,000	0.29%	8,058,571	1,000,000	2.19%

1 The trading day immediately prior to announcement of the Offer.
2 Share and option holdings include the Shares and options directly and indirectly held by Ms Nanette Anderson, and in which, Ms Anderson has a relevant interest. This also assumes no options are exercised between 5 November 2013 and the close of the Offer.

2. Chapter 2E of the Corporations Act

Ms Anderson is a Related Party of Southern Gold within the meaning of the Corporations Act. Chapter 2E of the Corporations Act states that shareholder approval must be obtained before giving a financial benefit to a Related Party of SAU, unless the financial benefit comes within one of the exceptions in sections 210 to 216 of the Corporations Act.

The issue of Shortfall Shares to Ms Anderson pursuant to the Underwriting Agreement constitutes the giving of a financial benefit to a Related Party for the purposes of Chapter 2E of the Corporations Act. However, Shareholder approval is not being sought for the underwriting for those purposes as the Directors (other than Ms Anderson) are of the opinion that the exception to the shareholder approval requirement in section 210 of the Corporations Act applies. That exception provides that shareholder approval is not required for the giving of a financial benefit on terms that:

(a) would be reasonable in the circumstances if the public company and the Related Party were dealing at arm’s length; or
(b) are less favourable to the Related Party than the terms referred to in (a).

The Directors (other than Ms Anderson) have formed the view that the exception applies on the basis that the terms of the Underwriting Agreement are less favourable to Ms Anderson than if Ms Anderson had entered into the underwriting arrangements for the Offer on arm’s length commercial terms. This is because SAU has not provided any warranties, covenants

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or indemnities in favour of Ms Anderson, Ms Anderson does not have any termination rights other than if SAU withdraws the Offer and no underwriting fee is payable to Ms Anderson.

3. ASX Listing Rule 10.11

ASX Listing Rule 10.11 requires that shareholder approval be obtained where an entity issues, or agrees to issue, securities to a Related Party, or a person whose relationship with the entity or a Related Party is, in ASX’s opinion, such that approval should be obtained, unless an exception in ASX Listing Rule 10.12 applies.

The issue of Shortfall Shares to Ms Anderson as underwriter of the Offer and in accordance with the Underwriting Agreement will come within Exception 2 of Listing Rule 10.12 which states that shareholder approval is not required where a Related party receives shares under an underwriting agreement in relation to a pro rata issue, and the terms of the underwriting were included in the offer document sent to Shareholders. Accordingly, Shareholder approval is not being sought for the purposes of Listing Rule 10.11 for the issue of the Shares to Ms Anderson in accordance with the Underwriting Agreement.

SECTION 6: FURTHER INFORMATION

1. Withdrawal of the Offer

SAU reserves the right to withdraw all or part of the offer and this Offer Memorandum at any time, subject to applicable laws, in which case SAU will refund application monies in relation to New Shares not already issued in accordance with the Corporations Act and without payment of interest. In circumstances where allotment under the Offer has occurred, SAU may only be able to withdraw the Offer with respect to New Shares to be issued under the Offer.

To the fullest extent permitted by law, you agree that any application monies paid by you to SAU will not entitle you to receive any interest and that any interest earned in respect of application monies will belong to SAU.

2. Fees and expenses

BBY has been engaged as Lead Manager to the Offer. In consideration for its services as Lead Manager, BBY will be paid a fee of 1.5% (exclusive of applicable goods and services tax) of the gross proceeds raised pursuant to the Offer.

No broker handling fees will be paid in respect of the Offer.

3. Further information

If you have any questions about your entitlement to New Shares, please contact either:

a) SAU’s Share Registry, Computershare Investor Services Pty Ltd, on 1300 787 272 (within Australia) or +61 3 9415 4000 (outside Australia); or
b) your stockbroker or professional adviser.

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4. Governing law

This Offer Memorandum, the Offer and the contracts formed on acceptance of valid applications to subscribe for New Shares pursuant to the Offer are governed by the law of South Australia, Australia. Each Eligible Shareholder who has applied to subscribe for New Shares in accordance with this Offer Memorandum submits to the exclusive jurisdiction of the courts of South Australia, Australia.

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SECTION 6: DEFINED TERMS

In this Offer Memorandum, the following words have the following meanings unless the context requires otherwise:

A$	Australian Dollars.
AEST	Australian Eastern Standard Time
ASX	Australian Securities Exchange or ASX Limited (ACN 008 624
	691), as the context requires.
BBY	BBY Limited, Lead Manager to the Offer.
Business Day	has the meaning given in the Listing Rules.
Closing Date	the last date for accepting the Offer, being 5.00pm AEST on
	Tuesday, 3 December 2013 (or such other date determined by
	the Directors in accordance with the Listing Rules).
Corporations Act	Corporations Act 2001(Cth).
Directors	the directors of Southern Gold Limited.
Eligible Shareholder	a registered holder of Shares with a registered address in either
	Australia or New Zealand as at the Record Date.
Entitlement	as defined in paragraph 2 of Section 1.
Entitlement and	the personalised form accompanying this Offer Memorandum.
Acceptance Form
Excluded Shareholder	a registered holder of Shares on the Record Date with a
	registered address in a country outside of either Australia or
	New Zealand.
Listing Rules	the official listing rules of ASX Limited.
SAU or Southern Gold	Southern Gold Limited ACN 107 531 822
New Share	a Share to be issued pursuant to this Offer Memorandum at
	A$0.015 (1.5 cents) per Share.
Offer	the offer made under this Offer Memorandum of three (3) New
	Shares for every eight (8) Shares held by a Shareholder on the
	Record Date.
Offer Memorandum	this memorandum under which the Offer is being made.
Record Date	5.00pm AEST time on Thursday, 14 November 2013.

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Related Party means a related party of SAU within the meaning of section 228 of the Corporations Act. Securities Act United States Securities Act of 1933 Share a fully paid ordinary share in the capital of SAU. Share Registry Computershare Investor Services Pty Ltd. Shortfall Shares means those New Shares forming Entitlements or part of Entitlements not accepted under the Offer. Underwriter Ms Nanette Anderson, Managing Director of SAU. Underwriting Agreement Underwriting Agreement between Southern Gold and the Underwriter dated on or about 5 November 2013. United States United States of America

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