IONDRIVE LIMITED — Capital/Financing Update 2018

Feb 12, 2018

Farm In and Joint Venture agreement with Bluebird Merchant Ventures on the Kochang Project, South Korea

Shares on Issue: 49.15m Share Price: $0.245 Market Capitalisation: $12m Cash on hand: $4.6m Enterprise Value: $7.4m

Asset Base – Australia Cannon Gold Mine (100%) Glandore Gold Project (75%*) Cowarna Gold Project (100%) Transfind Extended (Option) *currently earning 90%

Asset Base – South Korea Gubong Project (100%/BMV) Taechang Project (100%/BMV) Kochang Project (100%*/BMV) Weolyu Au-Ag Project (100%) Hampyeong Au-Ag Proj. (100%) *Currently under BMV farm-in

Directors

Greg Boulton AM (Chairman) Simon Mitchell (MD) Michael Billing David Turvey

Head Office

Southern Gold Ltd Level 1, 8 Beulah Rd Norwood SA 5067 Telephone: (08) 8368 8888 Facsimile: (08) 8363 0697 info@southerngold.com.au www.southerngold.com.au ABN: 30 107 424 519

Postal Address

Southern Gold Ltd PO Box 255 Kent Town SA 5071

• London listed Bluebird Merchant Ventures (‘BMV’) to invest a further US$0.5 million and expand BMV activity to 3 historical gold mines: Gubong, Taechang and now Kochang.

• BMV are experienced narrow vein underground gold miners and will evaluate which of these historical mines has the most potential for the re-start of gold mine operations.

• All three mines were closed in the 1970’s when the gold price was less than US$140/oz.

• BMV (or its associates) to also complete a placement of A$0.25 million at A$0.386/ share before 31 May 2018.

• BMV has already dewatered and gained safe access to the Kochang gold mine and is assessing options to rapidly re-start gold mining operations.

Kochang to move forward under Farm-In and Joint Venture

Australian gold producer, Southern Gold Limited (ASX: SAU) is pleased to announce the Company has extended its Farm In and Joint Venture arrangement with London listed Bluebird Merchant Ventures (‘BMV’) to include the Kochang project in South Korea ( Figure 1 ). The terms for the Kochang gold project are broadly in line with what was previously agreed for the Gubong and Taechang gold projects:

• A farm-in stage where BMV invest US$0.5 million in compiling a high level report on project feasibility targeting capital expenditure of no more than US$10 million, or less than US$5 million each;

• The report may or may not provide for several projects to be developed in parallel or potentially as stand-alone operations but Kochang’s relatively high gold and silver grades may enable transport of ore over distance; and

• BMV (or one of its associates) is to complete a placement in Southern Gold shares to the value of A$0.25 million and at the same price agreed for the other projects, or A$0.386/share, by 31 May 2018.

In effect this takes the potential investment by BMV to US$1.5 million across 3 projects (Gubong, Taechang and now Kochang) should they take all of them through the farm-in and joint venture process. It also potentially means a total equity investment in Southern Gold of A$0.75 million at A$0.386/share, with A$0.25 million having already been completed.

After the completion of the farm-in investment, the share placement and the report on project feasibility, a contributing Joint Venture will be formed with BMV as the operator. This is expected to occur within approximately 12 months.

Kochang Location

The Kochang mine is approximately 130 kilometres south-east of the Gubong project and access to the main mine entrance is via sealed road. The project area is covered by 3 graticules, or about 8.6km[2] ( Figure 2 ).

Figure 1 : Kochang Project Location, SK

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Figure 2 : Kochang graticule map with gold and silver mines

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Kochang Potential

Southern Gold completed some surface mapping and rock chip sampling across the broader project area, including between the gold and silver mines in the so-called KC Gap ( Figure 3 ). This exercise demonstrated multi-kilometre scale mineralisation and several parallel mesothermal quartz vein sets, however, to materially move the project forward at reasonable cost, Southern Gold has determined that it is necessary to access the mineralised veins from underground. See ASX Release 7 June 2017 for details.

Figure 3 : Kochang with rock chip results illustrating 2.5km structural corridor of continuous mineralisation

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Kochang Access Established

BMV, in addition to completing its pre-transaction due diligence, has also dewatered the mine and gained access through the cement plug that blocked the main portal ( Photo 1 ). Preliminary works have begun to ensure clear and safe access to the underground workings ( Photo 2 ). Some ground support has also been installed at the entrance.

Photo 1 : Dewatering and opening of the main adit

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Photo 2 : Preliminary works in progress

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BMV are encouraged to move rapidly at Kochang due to a number of factors including ease of access, the near-vertical orientation of the veins (which makes mining and development cheaper) and the excellent local infrastructure, including power and water. Furthermore, while historically much of the district was known for its silver mining, recent work by Southern Gold has demonstrated that there is significant gold grades in the ‘silver mine’ and across long strike extents of parallel veins.

Kochang was closed in the mid 1970’s when the gold price was less than US$140/oz. It is expected that much of the mineralisation that was considered waste in the 1970’s is now likely economic.

While ultimately a complimentary asset to the historically much larger Gubong gold project, Kochang may advance to production more rapidly, albeit at smaller scales of production. Development scenarios will be investigated over the coming months and the project advanced to production over the course of 2018 in parallel with similar studies on the Gubong project.

Southern Gold Managing Director, Mr Simon Mitchell: “ Bluebird is the right group to get underground at Kochang and move this project forward more aggressively. Drilling from the steep hills would be expensive but given there is substantial mine infrastructure in place it isn’t necessary. We can get to the vein face and work out the system from underground, and given the high grades seen here historically there may be the potential for a low tonnage, very high grade development.

Southern Gold acquired the South Korean projects in July 2016 for around A$2m in scrip. It is pleasing to extract in excess of this value inside 18 months on only a portion of our Korean portfolio. And there is much more value yet to be released – something that will become quite apparent during the course of 2018. ”

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Southern Gold Limited: Company Profile

Southern Gold Ltd is a successful gold explorer and producer listed on the Australian Securities Exchange (under ASX ticker “SAU”). At the Cannon project near Kalgoorlie we are currently developing a small underground operation with development partner Westgold Resources Ltd. Southern Gold is also looking to develop a much larger mine, Gubong, in South Korea within the next 12-18 months with development partner London-listed Bluebird Merchant Ventures.

We are also active explorers. Around Kalgoorlie Southern Gold is testing projects such as Glandore, Transfind Extended and Cowarna looking for additional small high grade open pit-able gold resources to maintain cash flow. In South Korea, Southern Gold also owns a portfolio of high grade gold projects that are a combination of decommissioned gold mines with orogenic gold mineralisation and greenfield epithermal gold targets. Backed by a first class technical team, including renowned geologist Douglas Kirwin, Southern Gold’s aim is to find world-class epithermal gold deposits.

In essence, Southern Gold looks to monetise the small gold deposits while we search for the bigger ones.

Competent Person’s Statements

The information in this report that relates to Exploration Results in South Korea has been compiled under the supervision of Dr Chris Bowden (FAusIMM(CP)). Dr Bowden, who is an employee of Southern Gold Limited and a Fellow and Chartered Professional of The Australasian 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 2012 Edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr Bowden consents to the inclusion in this report of the matters based on the information in the form and context in which it appears.

Forward-looking statements

Some statements in this release regarding estimates or future events are forward looking statements. These may include, without limitation:

• Estimates of future cash flows, the sensitivity of cash flows to metal prices and foreign exchange rate movements;

• Estimates of future metal production; and

• Estimates of the resource base and statements regarding future exploration results.

Such forward looking statements are based on a number of estimates and assumptions made by the Company and its consultants in light of experience, current conditions and expectations of future developments which the Company believes are appropriate in the current circumstances. Such statements are expressed in good faith and believed to have a reasonable basis. However the estimates are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from estimated results.

All reasonable efforts have been made to provide accurate information, but the Company does not undertake any obligation to release publicly any revisions to any “forward-looking statement” to reflect events or circumstances after the date of this release, except as may be required under applicable laws. Readers should make their own enquiries in relation to any investment decisions and obtain advice from a licensed investment advisor.

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