IONDRIVE LIMITED — Capital/Financing Update 2016

Jul 7, 2016

==> picture [595 x 96] intentionally omitted <==

8 July 2016

Listings Compliance (Sydney Interstate) ASX Compliance Pty Ltd

Independent Valuation Report

Southern Gold Limited (ASX:SAU) hereby provides the following independent valuation report in conjunction with the non-cash consideration 7.1A placement of shares on 7 July 2016.

The valuation report is provided due to shares being issued for non-cash consideration in order to demonstrate that the issue price of the shares complies with Listing Rule 7.1A 3.

Yours faithfully

==> picture [72 x 35] intentionally omitted <==

Dan Hill Company Secretary

emailinfo@southerngold.com.au telephone 08 8368 8888 web southerngold.com.au facsimile 08 8368 8899

Southern Gold Limited Level 1 PO Box 255 ABN 30 107 424 519 8 Beulah Road Kent Town Norwood SA 5067 SA 5071

==> picture [426 x 84] intentionally omitted <==

7 July 2016

The Directors Southern Gold Limited Level 1, 8 Beulah Road Norwood SA 5067

==> picture [110 x 48] intentionally omitted <==

Dear Sirs,

Independent Valuation Report

100% of the issued shares in International Gold Private Limited

1 Introduction

1.1 Overview of the Proposed Transaction

SLM Corporate Pty Ltd (“ SLM ”) has been engaged to provide an independent valuation of the shares in International Gold Private Limited. We understand our valuation is for the purpose of a transaction pursuant to which Southern Gold Limited acquired 100% of the issued shares in International Gold Private Limited.

1.2 Background to the Transaction

ASX-listed Southern Gold Limited (“ SAU ”) acquired 100% of the issued shares in International Gold Private Limited (“ IGPL ”), a Singaporean wholly-owned subsidiary of Asiatic Gold Limited (“ Asiatic Gold ”), an Australian public unlisted company. IGPL’s primary asset is 100% of the issued shares in an operating subsidiary, Hee Song Metals Co. Limited (“ HSM ”). HSM’s primary asset is a portfolio of exploration projects (spanning 118.9 sq km of granted tenements and a further 61.1 sq km under application), located in South Korea, which are prospective for gold.

SAU’s purchase consideration for the acquisition of 100% of the issued shares in IGPL was 6,294,942 shares in SAU plus $116,000 cash, as well as the assumption of HSM’s liabilities of approximately $70,000 (“ Transaction ”). The Transaction completion date was 7 July 2016.

SAU has also proposed undertaking a share placement to raise approximately $1.2 million through the issue of 3.4 million SAU shares at an issue price of 35 cents per SAU share to sophisticated investors. A share subscription agreement has been signed and shareholder approval to issue the shares is being sought at an Extraordinary General Meeting.

1.3 Purpose of this Independent Expert’s Report

As part consideration for the acquisition of 100% of the issued shares in IGPL, fully paid ordinary shares in SAU were issued to Asiatic Gold.

Under ASX Listing Rule 7.1A.3, where equity securities are issued for non-cash consideration (i.e. the acquisition of an asset), the eligible entity must provide for release to the market a valuation of the non-cash consideration that demonstrates that the deemed issue price of the

==> picture [586 x 52] intentionally omitted <==

securities complies with ASX Listing Rule 7.1A.3. This Listing Rule requires that the eligible entity must demonstrate that the deemed issue price of the securities issued in consideration for the acquisition of the asset is no lower than 75% of the VWAP of the securities over the 15 days on which trades in the securities are recorded immediately before the securities are issued.

Accordingly, SAU must determine the value of the asset being acquired by the issue of securities (being a 100% equity interest in IGPL) and must demonstrate that the deemed issue price of any securities issued in part consideration for the acquisition of this asset is no lower than 75% of the VWAP of a SAU share calculated over the 15 days on which trades in the securities are recorded immediately before the securities are issued. The securities were issued on 7 July 2016.

ASX Listing Rule 7.1A.3 further states that the valuation may be provided by an independent expert or by the directors of the eligible entity, provided in the latter case that the directors have appropriate expertise to value the relevant kind of non-cash consideration and that the report contains a similar level of analysis and is of a similar standard to an independent expert’s report. By commissioning SLM to prepare this Independent Valuation Report (“ the Report ”) on IGPL for release to the market, Southern Gold is fulfilling the requirements of ASX Listing Rule 7.1A.3.

1.4 Sources of Information

In preparing this Report SLM has reviewed / used the following information:

• South Korean Projects – Historical and Warranted Future Expenditure data and planned expenditure budgets;

• Asiatic Gold Limited FY15 Annual Report;

• Asiatic Gold Limited – International Gold Private Limited Loan General Ledger;

• Hee Song Metals Co. Limited management accounts;

• Financial data for Hee Song Metals Co Limited along with report;

• Asiatic Gold Limited creditors & accruals schedule;

• Asiatic Gold Limited FY15 Audit Report, prepared by BDO;

• International Gold Private Limited FY15 financial statements;

• South Korea Project Technical Review dated June 2016, authored by Ian Blucher[1] ;

• Outcome of a site visit;

• International Gold Private Limited management accounts; and

• Reuters.

1 The information in this report that relates to the Exploration Tenements has been compiled under the supervision of Mr. Ian Blucher (MAusIMM). Mr Blucher, who is an employee 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. Mr Blucher consents to the inclusion in this report of the matters based on the information in the form and context in which it appears.

• 2 -

==> picture [586 x 52] intentionally omitted <==

1.5 Limitations and Reliance on Information

• This Report has been prepared solely for the purpose of assisting SAU to fulfil the requirements of ASX Listing Rule 7.1A.3 for the acquisition of the shares in IGPL.

• The valuation analysis in the Report is based on information that has been provided to SLM by SAU. The information includes historical financial data, key assumptions, a technical review of IGPL’s assets prepared by the Company’s Development Manager Mr Ian Blucher and descriptive details of the assets.

• SLM and its associates have relied solely on the Information and make no representations or warranties, express or implied, as to the accuracy, reliability or completeness of the Information, and the conclusions and recommendations based on the Information, contained in this Report.

• Any analysis, estimates, projections or recommendations in this Report involve significant elements of subjective judgment and analysis, which whilst compiled with due care and professionalism, may or may not be correct.

• Any forward looking statement does not constitute and should not be regarded as a representation that the projected results will be achieved or that the underlying assumptions are valid.

• There are usually differences between forecast and actual results because events and circumstances frequently do not occur as forecast and these differences may be material.

• Any liability to the maximum extent permitted by law, is hereby expressly disclaimed and excluded.

• This Report has been prepared solely for the purposes of preparing a valuation in accordance with ASX Listing Rule 7.1A.3. None of the Information in this Report is a forecast of expected results on or behalf of SAU or by or on behalf of any officer, employee or consultant of SAU or SLM.

• 3 -

==> picture [586 x 52] intentionally omitted <==

2 Overview of IGPL and HSM

2.1 Overview

IGPL is a Singapore-based wholly-owned subsidiary of Asiatic Gold Limited, an Australian public unlisted company. IGPL’s primary asset is 100% of the issued shares in HSM. HSM’s primary asset is a portfolio of exploration projects (spanning 118.9 sq km of granted tenements and a further 61.1 sq km under application), located in South Korea, which are prospective for gold.

The following map shows the location of HSM’s exploration projects and their tenement status:

==> picture [325 x 441] intentionally omitted <==

HSM’s project portfolio comprises a number of brownfields exploration projects (locations of known historical gold mines and gold mining occurrences) which HSM consider to have good potential to be advanced to a JORC-compliant resource status, as well as several “grass roots” exploration targets.

Historical exploration results and recent work undertaken by HSM (including limited drilling, rock chip sampling and other field activities) have confirmed gold prospectivity and identified high priority targets for further drilling at several projects.

• 4 -

==> picture [586 x 52] intentionally omitted <==

We understand that some of HSM’s brownfield projects have historical resource estimates defined by government agency Korea Resources Corporation (“ KORES ”), however these documented resource estimates do not comply with current JORC Code requirements and are considered by HSM to be speculative in nature but possibly indicative of the projects’ potential.

3 Valuation

3.1 Valuation Overview

Under the Transaction, SAU acquired a 100% equity interest in IGPL, whose primary asset is 100% of the issued shares in HSM. We understand that a number of inter-company loans between IGPL and HSM were restructured and extinguished prior to Transaction completion, such that HSM had minimal other net assets at the time of completion. HSM’s equity value therefore comprises the value of its exploration assets.

IGPL also had minimal net assets other than its investment in HSM. Therefore, IGPL’s equity value comprises entirely of the value of its investment in HSM.

3.2 Valuation Methodology

The most commonly employed methods of exploration project evaluation are tabled below:

Valuation Method	Description
Multiple of Exploration	Value depends on how much money has been spent in the past
Expenditure Method	and/or how much will be spent on the project. Assumes that an
	exploration tenement is worth the meaningful past exploration
	expenditures plus warranted future costs adjusted by a market
	factor known as the ProspectivityEnhancement Multiplier(PEM).
Joint Venture Terms Method	Value is related to how much a joint venture partner is planning
	to spend on the project. Takes into account existing joint venture
	agreements or the joint venture terms for nearby and/or similar
	properties.
Kilburn Geoscience Method	Involves assessing the technical aspects of the project. Requires
	the valuer to make a geological assessment and specify, justify
	and rank the keyinherentgeological aspects of theproperty.
Comparable Market Value Method	Value is set by what other similar projects sell for. Uses
	transaction prices or prevailing market prices of similar or nearby
	tenements as aguide to current value.
Income Method	Value is calculated from the likely future cash flows generated
	from the project. Requires a JORC compliant resource and
	scoping study/feasibility study to provide sufficient confidence in
	derivinga cash-flow based valuation.

HSM’s exploration tenements in South Korea are considered early-stage exploration projects, given limited recent exploration work and the absence of JORC compliant defined mineral resources. In SLM’s opinion, these assets can only be realistically valued by the Kilburn Geoscience Method, Comparative Market Value Method or Multiple of Exploration Expenditure Method.

Given the lack of readily available comparables (transactions of similar / nearby projects) and in the absence of detailed geological assessments as required by the Kilburn Geoscience

• 5 -

==> picture [586 x 52] intentionally omitted <==

Method, SLM believes the most appropriate method for valuing HSM’s exploration tenements is the Multiple of Exploration Expenditure Method.

The industry-standard PEM factor criteria are set out below:

PEM Range	Criteria
0.2 – 0.5	Exploration (past and present) has downgraded the tenement prospectivity, no
	mineralization identified.
0.5 – 1.0	Exploration potential has been maintained, rather than enhanced, by past and present
	activity. Mineralised targets identified from regional mapping.
1.0 – 1.3	Exploration has maintained, or slightly enhanced, but not downgraded, the
	prospectivity of the tenement.
1.3 – 1.5	Exploration has considerably enhanced the prospectivity of the tenement by
	identifying mineralization anomalies through geological mapping, geochemical or
	geophysical methods.
1.5 – 2.0	Initial (scout) drilling has identified interesting intersections of mineralisation.
1.0 – 2.5	Detailed drilling has defined targets with potential economic interest with the
	potential to contain significant economic deposits.
2.5 – 3.0	A significant resource has been defined at Inferred Resource Status, no feasibility
	study has been completed.
3.0 – 4.0	Indicated category resources have been identified that are likely to form the basis of a
	prefeasibility study.
4.0 – 4.5	Indicated and Measured category resources have been identified and economic
	parameters are available for assessment.

3.3 Valuation Analysis

To assist in our valuation of HSM’s exploration projects, SAU provided us with historical exploration expenditure data as well as warranted future expenditure estimates which were prepared by Asiatic Gold and SAU collaboratively. Asiatic Gold also provided a range of low and high end PEM factors for each project (“ Exploration Data ”). Their low end PEM factors reflected only recent exploration results from work undertaken by Asiatic Gold, whereas their high end PEM factors considered all available historic exploration (and production) results for each project.

SLM has reviewed the Exploration Data and we have relied on this. We note that SAU has the relevant expertise as per ASIC Regulatory Guide 111.117 ( Expertise ) where an expert is defined as ‘a person whose profession or reputation gives authority to a statement made by him or her’. For the purpose of our valuation, we elected to use the low end PEM factors as this represents the most conservative of the PEM ranges provided to us.

The resulting valuation for HSM’s exploration projects of $9.24 million is detailed below:

• 6 -

==> picture [586 x 52] intentionally omitted <==

Project	Historical	Historical	Warranted Future	Warranted Future	**PEM Factor **	Multiple of Exploration	Multiple of Exploration
	Expenditure		Expenditure			Expenditure
Gubong	$	356,858	$	600,000	1.8	$	1,722,344
Heungdeok	$	55,368	$	200,000	1.2	$	306,442
Kochang	$	48,024	$	600,000	1.5	$	972,036
Taechang	$	41,670	$	200,000	1.3	$	314,171
Weolyu	$	341,607	$	1,800,000	2.0	$	4,283,214
Hampyeong	$	260,127	$	400,000	1.4	$	924,178
Other projects	$	416,072	$	300,000	1.0	$	716,072
					TOTAL	$	9,238,457

As these exploration projects are HSM’s primary asset, and the company has minimal other net assets, we derived an equity value for HSM of $9.24 million:

Value of HSM
Exploration Assets Other Net Assets Net Asset Value of HSM	9,238,457 $ - $
	9,238,457 $

IGPL’s primary asset is its 100% stake in HSM, and it has minimal other net assets. Accordingly the value of a 100% equity interest in IGPL is therefore valued at $9.24 million:

Value of IGPL
Investment in HSM (100% equity interest) Other Net Assets Net Asset Value of IGPL	9,238,457 $ - $
	9,238,457 $

4 Summary and Opinion

As part consideration for the acquisition of the shares in IGPL, fully paid ordinary shares in SAU were issued to Asiatic Gold. Under ASX Listing Rule 7.1A.3, where the equity securities are issued for non-cash consideration, the eligible entity must provide for release to the market a valuation of the non-cash consideration that demonstrates that the issue price of the securities complies with ASX Listing Rule 7.1A.3.

This means that SAU must determine the value of the asset being acquired by the issue of securities (being a 100% equity interest in IGPL) and must demonstrate that the deemed price of any securities issued in part consideration for the acquisition of this asset is no lower than 75% of the VWAP of a SAU share calculated over the 15 days on which trades in the securities are recorded immediately prior to issue of the securities. There securities were issued on 7 July 2016.

We have valued the deemed issue price of the SAU securities issued in consideration for the acquisition of 100% of the shares in IGPL by taking our valuation of IGPL and subtracting the

• 7 -

==> picture [586 x 52] intentionally omitted <==

cash component of the purchase consideration ($116,000) and the HSM liabilities assumed by SAU ($70,000) as part of the Transaction, to arrive at a value of the non-cash consideration.

We divided the value of the non-cash consideration by the number of SAU securities issued in the Transaction in order to calculate a deemed issue price. This has resulted in a deemed issue price of $1.44.

Net Asset Value of HSM Less: Cash Consideration Less: HSM Liabilities Assumed Value of "Non Cash Consideration" SAU Shares Issued Deemed Issue Price	9,238,457 $ (116,000) $ (70,000) $
	9,052,457 $
	6,294,942
	1.438 $

The 15 day VWAP for SAU shares up to 6 July 2016 (the last trading day immediately prior to the issue of the securities) is 29.8 cents. 75% of this VWAP is 22.4 cents. The deemed issue price is significantly higher than this price. Refer to the table below.

15 day VWAP (up to 1 July 2016)	$	0.298
75% of 15 day VWAP	$	0.224
Deemed Issue Price	$	1.438

Accordingly, in our opinion, the deemed issue price of the securities issued as part consideration for the acquisition of 100% of the issued shares in IGPL is greater than 75% of the VWAP calculated over the 15 days on which trades in the securities are recorded immediately prior to the securities being issued.

SAU has therefore satisfied the 75% floor price requirement set out in ASX Listing Rule 7.1.A.3.

5 Glossary

Term	Description
Asiatic Gold	Asiatic Gold Limited
HSM	Hee SongMetals Co. Limited
IGPL	International Gold Private Limited
JORC	Joint Ore Reserves Committee Code
KORES	Korea Resources Corporation
PEM	ProspectivityEnhancement Multiplier
Report	This Independent Valuation Report dated 4 July2016
SAU	Southern Gold Limited

• 8 -

==> picture [586 x 52] intentionally omitted <==

SLM	SLM Corporate PtyLtd
Transaction	SAU’s acquisition of 100% of the issued shares of IGPL
VWAP	Volume-Weighted Average Price

6 Qualifications, Declarations and Consents

6.1 Qualifications

SLM Corporate is an independent corporate advisory firm providing strategic and financial advisory services including in relation to valuations, financial modelling, mergers and acquisitions, public listings, divestments and corporate restructuring, balance sheet and capital optimisation, debt, hybrid and equity raisings, succession planning and general corporate advice.

The team responsible for the preparation of this Report on behalf of SLM Corporate includes Mr Barry Lewin MBA, BCom LLB and Mr Kuo Ning Ho BCom. Mr Lewin is the Managing Director of SLM Corporate and has over 15 years’ experience in relevant corporate advisory matters. Mr Lewin is a responsible manager of SLM Corporate in relation to its AFS License No. 224034 issued pursuant to section 913B of the Corporations Act. Mr Ho is a Director of SLM Corporate and has over 8 years’ experience in relevant corporate advisory matters. Mr Ho is a responsible manager of SLM Corporate under its AFS Licence No. 224034.

6.2 Declarations

It is not intended that this Report should be used or relied upon for any purpose other than as an expression of SLM Corporate’s valuation opinion for the purposes of assessing whether SAU has met the requirements of ASX Listing Rule 7.1A.3 and the note to that Listing Rule in relation to its acquisition of the shares in IGPL and the issue of SAU shares for that purpose. SLM expressly disclaims any liability to any SAU shareholder who relies or purports to rely on this Report for any other purpose and to any other party who relies on or purports to rely on this Report for any purpose whatsoever.

This Report has been prepared by SLM Corporate with care and diligence and the statements and opinions given by SLM Corporate in this Report are made in good faith and in the belief on reasonable grounds that such statements and opinions are correct and not misleading. However, no responsibility is accepted by SLM Corporate or any of its officers or employees for errors or omissions however arising in the preparation of this Report, provided that this shall not absolve SLM Corporate from liability arising from an opinion expressed recklessly or in bad faith.

SLM Corporate will receive a fixed fee of $10,000 plus GST for the preparation of this Report. This fee is not contingent on the outcome of the transaction. SLM Corporate will not receive any other benefit for the preparation of this Report. SLM Corporate does not have any pecuniary or other interests that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation its engagement and the transaction being assessed.

6.3 Financial Services Guide

SLM holds AFS Licence No: 224 034 authorising SLM to provide general financial product advice on securities and interests in managed investment schemes to wholesale investors. SLM does not accept instructions from retail investors, provides no financial services directly to retail investors and receives no remuneration from retail investors for financial services. When

• 9 -

==> picture [586 x 52] intentionally omitted <==

preparing independent valuation and expert’s reports, SLM’s client is the entity to which the report is provided. SLM receives its remuneration from that entity which, in this case, is SAU. No related body corporate of SLM or any of the directors, employees or officers of SLM receives any remuneration or other benefit directly attributable to the preparation and provision of this Report. The guidelines for independent are set out in ASIC’s Regulatory Guide 112 dated 30 March 2011. SLM is only responsible for this Report including this Financial Services Guide.

6.4 Consents

SLM consents to the release by SAU of this Report to the ASX for the purposes of meeting the requirements of ASX Listing Rule 7.1A.3 and the note to the Listing Rule. Neither the whole nor any part of this Report nor any references thereto may be included in any other document without the prior written consent of SLM as to the form and context in which it appears.

Yours faithfully,

SLM CORPORATE PTY LTD

• 10 -