IONDRIVE LIMITED — Capital/Financing Update 2014

Aug 21, 2014

ASX Announcement 22 August 2014

Southern Gold and Silver Lake Resources agree to extend Pre-Emptive right period to 29 August 2014

ASX Code: SAU Issued Shares: 386M ABN: 30 107 424 519

Directors

Greg Boulton AM Nanette Anderson Michael Billing David Turvey

Top Shareholders

Silver Lake Resources Ltd 11.21% G B Branch 7.03% JP Morgan Nominees 4.28% National Nominees 3.03%

Head Office

229 Greenhill Road Dulwich SA 5065

Telephone: (08) 8368 8888 Facsimile: (08) 8431 5619 info@southerngold.com.au www.southerngold.com.au

Southern Gold Ltd (ASX: SAU – “Southern” or “the Company) announced on the 4 August 2014, that it has secured a near-term development pathway for its Cannon Gold Project, located 30km from Kalgoorlie in WA, after signing a non-binding term sheet with Metals X Limited (ASX: MLX – “Metals X”) to finance, mine and process ore from the deposit.

The signing of the Mine Finance and Profit Share term sheet (“Term Sheet”) triggered the pre-emptive right held by Silver Lake Resources Limited (ASX: SLR – “Silver Lake”), which is a right to match or better any third party offer to purchase, treat or sell ore or dore derived from the Cannon Gold deposit or the purchase of the resource mining lease.

Under the Pre-Emptive Right agreement Silver Lake have 15 business days (or such longer period as agreed to by the parties in writing) to exercise or waive its right. The pre-empt period has been extended to the 29 August 2014, allowing Silver Lake to complete a thorough review before making its decision.

The Term Sheet proposes a mine finance and profit sharing agreement to develop and mine the Cannon gold deposit. The arrangement will see Metals X manage all services required for mining, haulage and treatment (Operating Activities) of ore from the Cannon deposit in accordance with approved budgets and programs. Operating Activities will be charged on an at-cost, open-book basis for the duration of open pit mining and/or underground mining.

Under the Pre-Emptive Right agreement Silver Lake can elect to exercise its pre-emptive right and either;

• a) enter into an agreement with Southern Gold on the terms and conditions as set out in the Term Sheet; or

• b) provide Southern Gold with a set of alternative terms and conditions which are of the same kind of transaction as proposed under the Term Sheet and are on equivalent terms with those of the Term Sheet.

If Silver Lake elects to waive its pre-emptive right, then Metals X and Southern Gold will, as soon as practicable, work co-operatively to finalise a binding Mine Finance and Profit Sharing Agreement to fully document the proposed transaction, based on the agreed terms set out in the term sheet. Additionally under the Term Sheet, if the Silver Lake pre-emptive right is waived, Metals X will provide Southern Gold with a loan facility for $500,000 to fund pre-development costs.

The arrangement under the Term Sheet provides Southern with the opportunity to reduce project risk by working with an experienced and well-funded mining company to develop the Cannon Gold Project. Teaming up with a dedicated technical team with experience in both ore processing, open-pit and underground mine development, it is anticipated to considerably reduce operational risks.

As announced earlier in the year (ASX 13/02/2014) results from Southern Gold’s pre-feasibility study on the Cannon Gold deposit demonstrated forecast free surplus cash flow estimates as set out in the following table. These have been calculated at a nominal gold price, after infrastructure and operating costs, but do not include any potential cost benefits that may be achieved under the terms of the Finance and Profit Share Term Sheet.

Table 1 – Cannon Pre-Feasibility Forecast Free Surplus Cash Flow

(see ASX 13/2/14 and 28/8/2013 for details)

Item	Units	Revised Costs Scenario 1 A$1,350/oz Au	Revised Costs Base Case A$1,400/oz Au	Revised Costs Scenario 2 A$1,500/oz Au
Mine Life (Phase 1 & 2)	Months	36	36	36
Mined Ounces1	oz Au	68,200	68,200	68,200
Recovery (ave)	%	92	92	92
Operating Cost (C1)	A$/oz	964	964	964
WA State Royalty2	%	2.5	2.5	2.5
Free surplus cash flow3	A$M	9.3	12.4	18.5

Note 1: Mined ounces and grade calculated, based on cut-off grade from $1400/oz base case scenario.

Note 2: WA State Royalty of 2.5% is applied to all ounces produced after the first 2,500 oz produced in each financial year.

Note 3: See ASX Announcement 13 February 2013 for details

CONTACT

For further information contact:

Nanette Anderson

Managing Director

Pre-Feasibility Study Results

The Optimisation announcement dated 13 February 2014 had no material changes to the methodology and assumptions used to determine the production target as detailed in the PFS announcement of 28 August 2013, and all of the key parameters continue to apply. The Optimisation announcement provided an update to the market of the reduction in the forecast operating costs. There have been no material changes to the methodology used to determine the operating costs as outlined in the PFS announcement.

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