IONDRIVE LIMITED — Interim / Quarterly Report 2012

Mar 12, 2012

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SOUTHERN GOLD LIMITED

(ACN 107 424 519)

CONSOLIDATED FINANCIAL REPORT

For the Half Year Ended

31 December 2011

INDEX

	Page
Directors’ Report	2
Auditors Independence Declaration	4
Consolidated Statement of Comprehensive Income	5
Consolidated Statement of Financial Position	6
Consolidated Statement of Change in Equity	7
Consolidated Statement of Cash Flows	8
Condensed Notes to the Financial Statements	9
Directors’ Declaration	13
Independent Review Report	14

Directors Report

The names of the directors of the Company who held office during or since the end of the half year were:

Non-Executive Chairman	Gregory Boulton AM	- BA (Accounting), FCA, FCPA, FAICD
Managing Director	Nanette Anderson	- BSc (Hons) Geol, MAusIMM
Non-Executive Director	Michael Billing	- BBus, CPA, MAICD
Non-Executive Director	David Turvey	- BSc (Hons) Geol, MAusIMM

The name of the company secretary who held office during or since the end of the half year was:

Company Secretary Nicholas Harding - FCPA, F Fin, ACIS

Review of Operations

Expenditure on exploration activities and working capital saw the net result of operations for the half year with a loss after income tax of $1,109,327 (2010 loss of $884,171). Effectively utilising funds, Southern Gold Ltd (“Southern Gold” or “Company) continued to achieve exploration success in the half year ending 31 December 2011.

Work was focused at the Companies’ flagship Bulong Gold project, situated within 30 km of the gold mining district, Kalgoorlie (WA). Exploration programmes conducted in the 6 month period identified new regional gold anomalies. These robust gold targets complement the work to date, which has defined the Cannon Gold Resource[1] and significant near resource mineralisation.

The gold price continued to remain strong during the reporting period, fluctuating between a peak US$1900/oz to a low of US$1600/oz. In view of the strong gold price and with the Bulong Gold project located in close proximity to 5 operating gold treatment plants, the Board agreed to commence preliminary studies into development options for the Cannon Gold resource.

Looking ahead to 2012 Southern Gold continues with these evaluation studies with the aim that this work will underpin a formal scoping study. In conjunction with the development work, a strong emphasis will also be on exploration, with follow up drilling of the near resource and regional gold targets.

While Southern Gold’s focus during the half year has been primarily on the Bulong Gold project, exploration and evaluation of Southern Gold’s South Australian and Cambodian projects has continued. In Cambodia, work conducted and results achieved by the Company and other “pioneer” Australian explorers has started to show the prospectivity of an area that has previously had limited “modernday” exploration or market attention.

In South Australia, Southern Gold is assessing its significant land package where it has 51% of the gold rights (in joint venture with Kingsgate Consolidated Limited (“Kingsgate”)). The tenement package is located around Kingsgate’s million ounce Challenger Gold Mine. Desktop studies were undertaken to prioritise a number of gold in calcrete anomalies.

At the date of this report Southern Gold is in the process of raising a total of A$4.65m. A$1.35m was raised through a placement to Integra Mining Limited, completed in January 2012. A fully underwritten, non-renounceable rights issue is currently underway to raise a further A$3.3m [see section 4 Subsequent Events for details]. Proceeds from this capital raising will be primarily directed to the 2012 work programmes outlined above and towards Southern Gold’s general working capital requirements.

1 For ‘Resource Statement and Parameters’ and other details of the Cannon Gold Resource as estimated by Runge, see Southern Gold’s ASX Announcement dated 22 June 2011 available at www.asx.com.au

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Auditors Independence Declaration

The auditor's independence declaration under section 307C of the Corporations Act 2001 is attached.

Dated at Adelaide this 13th day of March 2012 and signed in accordance with a resolution of the Directors.

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N M Anderson Managing Director

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G C Boulton AM Chairman

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Level 1, 67 Greenhill Rd Wayville SA 5034 GPO Box 1270 Adelaide SA 5001 T 61 8 8372 6666 F 61 8 8372 6677 E info.sa@au.gt.com W www.grantthornton.com.au

AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF SOUTHERN GOLD LIMITED

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the review of Southern Gold Limited for the half-year ended 31 December 2011, I declare that, to the best of my knowledge and belief, there have been:

• a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• b no contraventions of any applicable code of professional conduct in relation to the review.

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GRANT THORNTON SOUTH AUSTRALIAN PARTNERSHIP Chartered Accountants

J L Humphrey Partner

Adelaide, 13 March 2012

Grant Thornton South Australian Partnership ABN 27 244 906 724 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited by a scheme approved under Professional Standards Legislation

Consolidated Statement of Comprehensive Income for the Half Year ended 31 December 2011

Revenue Exploration expenditure written off Salaries and wages Directors fees Shareholder relations expenses Consulting expenses Other expenses Depreciation expense Share based payments Profit/(loss) before income tax expense Income tax expense Profit/(loss) for the period Other Comprehensive Income Exchange differences on translation of foreign controlled entity Total comprehensive income for the period Earnings Per Share Basic (cents per share) Diluted (cents per share)	Half Year Ended 31/12/11 Half Year Ended 31/12/10 $ $ 72,233 97,882 (212,092) (4,288) (242,808) (210,392) (80,000) (82,432) (63,448) (73,063) (70,811) (209,859) (469,412) (300,409) (26,989) (26,718) (16,000) (64,298)
	(1,109,327) (873,577) - (10,594)
	(1,109,327) (884,171)
	170,387 (672,679)
	(938,940) (1,556,850)
	(0.46) (0.47) (0.46) (0.47)

The above Statement of Comprehensive Income should be read in conjunction with the accompanying condensed notes.

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Consolidated Statement of Financial Position as at 31 December 2011

CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Other assets Exploration and evaluation expenditure Plant and equipment TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provision for employee benefits TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provision for employee benefits TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY	Half Year Ended 31/12/11 Year Ended 30/6/11 $ $ 1,239,014 2,934,003 168,993 705,110 74,697 71,786
	1,482,704 3,710,899
	114,793 110,232 15,580,365 14,296,175 87,866 93,991
	15,783,024 14,500,398
	17,265,728 18,211,297
	397,264 413,074 54,927 32,009
	452,191 445,083
	4,346 23,894
	4,346 23,894
	456,537 468,977
	16,809,191 17,742,320
	29,005,167 28,999,356 1,414,848 1,244,461 (13,610,824) (12,501,497)
	16,809,191 17,742,320

The above Statement of Financial Position should be read in conjunction with the accompanying condensed notes.

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Consolidated Statement of Changes in Equity for the Half Year ended 31 December 2011

Balance at 1 July 2010 Total comprehensive income in the period Fair value of options issued to employees Issue of share capital Balance at 31 December 2010 Balance at 1 July 2011 Total comprehensive income in the period Fair value of options issued to employees Issue of share capital Costs associated with the issue of shares Balance at 31 December 2011	Issued Capital Accumulated Losses Share-based payment reserve Foreign Currency Translation Reserve Total $ $ $ $ 25,020,634 (10,646,179) 1,834,588 236,196 16,445,239 - (884,171) - (672,679) (1,556,850) - - 64,298 - 64,298 3,978,722 - - - 3,978,722
	28,999,356 (11,530,350) 1,898,886 (436,483) 18,931,409
	28,999,356 (12,501,497) 1,898,886 (654,425) 17,742,320 - (1,109,327) - 170,387 (938,940) - - - - - 16,000 - - - 16,000 (10,189) (10,189)
	29,005,167 (13,610,824) 1,898,886 (484,038) 16,809,191

The above Statement of Changes in Equity should be read in conjunction with the accompanying condensed notes.

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Consolidated Statement of Cash Flows for the Half Year ended 31 December 2011

Cash flows related to operating activities Interest received Payments to suppliers and employees Net operating cash flows Cash flows related to investing activities Payments for mining tenements, exploration and evaluation expenditure Reimbursement from co-venturers Proceeds from sale of fixed assets Payments for plant and equipment Net investing cash flows Cash flows related to financing activities Proceeds from share issues Payment for share issue costs Net financing cash flows Net increase/(decrease) in cash Cash at beginning of financial period Cash at end of financial period	Half Year Ended 31/12/11 Half Year Ended 31/12/10 Inflows (Outflows) Inflows (Outflows) $ $ 81,809 115,089 (520,055) (766,996)
	(438,246) (651,907)
	(1,420,917) (1,480,546) 181,899 52,068 3,000 - (20,725) (10,625)
	(1,256,743) (1,439,103)
	- 4,194,601 - (308,426)
	- 3,886,175
	(1,694,989) 1,795,165 2,934,003 3,131,787
	1,239,014 4,926,952

The above Statement of Cash Flows should be read in conjunction with the accompanying condensed notes.

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Condensed Notes to the financial statements for the Half Year ended 31 December 2011

1. BASIS OF PREPARATION OF ACCOUNTS

This half year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 “Interim Financial Reporting”, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board.

It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2011 and any public announcements made by Southern Gold Limited and its controlled entities during the half year in accordance with continuous disclosure requirements arising under the ASX Listing Rules.

The half year financial report does not include full disclosures of the type normally included

in an annual financial report.

Southern Gold Limited is a company domiciled in Australia. The Consolidated half year financial report of the Company as at and for the six months ended 31 December 2011 comprises the Company and its subsidiaries (together referred to as the "consolidated” entity)

The accounting policies described in this report have been consistently applied by the entities in the consolidated group and are consistent with those in the 30 June 2011 financial report.

2. OPERATING SEGMENTS

AASB 8 requires operating segments to be identified on the basis of internal reports about components of the consolidated entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The consolidated entity has identified its operating segments to be Australia and Cambodia based on different geological regions and the similarity of assets within those regions. This is the basis on which internal reports are provided to the Board of Directors for assessing performance and determining the allocation of resources within the consolidated entity.

The consolidated entity operates primarily in one business, namely the exploration for gold and base metals.

	Half Year ended 31/12/2011	Australia Cambodia	Consolidated
	Revenue Interest Income Other Income Total Segment Revenue Total Segment Expenditure Loss from Ordinary Activities before Income Tax Income Tax Expense Profit/(loss)	53,567 - 8,279 10,387	53,567 18,666
		61,846 10,387	72,233
		(519,282) (662,278)	(1,181,560)
		(457,436) (651,891)	(1,109,327) -
			(1,109,327)

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	Half Year ended 31/12/2011	Australia Cambodia Total Inter- Segment Elimination Consolidated	Australia Cambodia Total Inter- Segment Elimination Consolidated	Australia Cambodia Total Inter- Segment Elimination Consolidated
	Assets and Liabilities Segment Assets Inter-Segment Assets Total Assets Segment Liabilities Inter-Segment Liabilities Total Liabilities Net Assets Half Year ended 31/12/2010	12,919,288 4,346,440 17,265,728 - 17,265,728 6,822,764 - 6,822,764 (6,822,764) -
		19,742,052 4,346,440 24,088,492 (6,822,764) 17,265,728 344,720 111,817 456,537 - 456,537 - 6,822,764 6,822,764 (6,822,764) -
		344,720 6,934,581 7,279,301 (6,822,764) 456,537
		19,397,332 (2,588,141) 16,809,191		- 16,809,191
			Australia Cambodia
			46,377 - 34,840 16,665
			81,217 16,665
			(745,561) (225,898)
	Assets and Liabilities Segment Assets Inter-Segment Assets Total Assets Segment Liabilities Inter-Segment Liabilities Total Liabilities Net Assets	14,007,918 4,203,379 18,211,297 - 18,211,297 6,209,996 - 6,209,996 (6,209,996) -
		20,217,914 4,203,379 24,421,293 (6,209,996) 18,211,297 368,957 100,020 468,977 - 468,977 - 6,209,996 6,209,996 (6,209,996) -
		368,957 6,310,016 6,678,973 (6,209,996) 468,977
		19,848,957 (2,106,637) 17,742,320 - 17,742,320

3. CONTINGENT LIABILITIES AND CONTINGENT ASSETS

There were no changes in contingent liabilities or contingent assets from those disclosed in the annual report for the year ended 30 June 2011.

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4. SUBSEQUENT EVENTS

On 31 January 2012 Southern Gold and Integra Mining executed a Share Subscription Agreement pursuant to which Integra agreed to take a placement of Southern Gold shares equal to 10% of the expanded share capital at $0.05 per share, which provided approximately $1.35 million towards the undertaking of an economic evaluation of Southern Gold’s wholly owned Cannon Gold Resource.

Under the Share Subscription Agreement Southern Gold has agreed to grant Integra a preemptive right to match or better any third party offer to purchase, treat or sell ore or dore derived from Southern Gold’s Cannon Gold Resource or purchase the Cannon Gold Resource mining lease. The pre-emptive right will have a maximum term of 3 years from completion of the placement and will be conditional on Integra not disposing of any of the placement shares to a third party.

Further, on 9 February 2012 Southern Gold executed a non-binding Term Sheet with Mekong Minerals Limited (“Mekong”) to enter into Shareholder and Management Agreements whereby Mekong will have the exclusive right to earn an interest in Southern Gold’s subsidiary, Southern Gold Asia (“SG Asia”) and to manage the activities of SG Asia and its wholly owned subsidiary Southern Gold (Cambodia) Ltd (“SGC”).

Mekong will spend up to US$5.7m on exploration activities on mineral projects in Cambodia to earn up to 70% of SG Asia.

Southern Gold and Mekong Minerals view the terms and conditions of the Term Sheet and the proposed Agreements as being reflective and supportive of their respective corporate strategies. Additionally, the transaction recognises the success and efforts to date by Southern Gold and the requisite skills base of Mekong Minerals to enable future success in Cambodia.

On 7 March 2012, Southern Gold announced a fully underwritten two (2) for (7) nonrenounceable rights issue at a price of $0.043 per share to raise approximately $3.3 million before costs to further fund the evaluation of the Cannon Gold resource and continue exploration activities at the Bulong project in Western Australia.

5. ISSUE OF SECURITIES

During the half year ended 31 December 2011, no (2010: 44,200,000) shares were issued under a Placement and no (2010: 17,485,290) shares were issued under a Share Purchase Plan. A total of 333,333 shares were issued to a consulting company as part payment of services rendered during the half year ended 31 December 2011.

During the half year ended 31 December 2011, no options were issued (2010; 1,500,000) over ordinary shares. Refer note 6.

6. SHARE BASED PAYMENTS

In accordance with the provisions of the Employee Share Option Plan, as approved by shareholders at an Annual General Meeting, Directors may issue options to purchase shares in the Company to employees, at an issue price determined by the market price of ordinary shares at the time the option is granted. Options generally vest at grant date and may be exercised at any time from the date of their issue to the date of their expiry. An exception to this occurred with the issue of 1,100,000 options in September 2008 which had a vesting period for 50% of the options of 1 January 2009 and the remaining 50% of the options of 1 June 2009. Share options are not listed, carry no rights to dividends and no voting rights.

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During the period no (2010: 1,500,000) options to acquire shares were granted pursuant to this program.

A total of 333,333 shares were issued to a consulting company as part payment of services rendered during the half year ended 31 December 2011 with a fair value of $16,000.

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Directors’ Declaration

Director’s Declaration for the six months ended 31 December 2011

The Directors of the Company declare that:

• 1) The financial statements and notes, as set out on pages 7 to 14 are in accordance with the Corporations Act 2001, including:

• a) comply with Accounting Standards AASB 134 Interim Financial Reporting; and

• b) give a true and fair view of the consolidated entity’s financial position as at 31 December 2011, and of its and performance for the half-year ended on that date.

• 2) In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors

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N M Anderson Managing Director

G C Boulton AM Chairman

Adelaide, South Australia 13th day of March 2012

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Level 1, 67 Greenhill Rd Wayville SA 5034 GPO Box 1270 Adelaide SA 5001 T 61 8 8372 6666 F 61 8 8372 6677 E info.sa@au.gt.com W www.grantthornton.com.au

INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF SOUTHERN GOLD LIMITED

We have reviewed the accompanying half-year financial report of Southern Gold Limited (“Company”), which comprises the consolidated financial statements being the statement of financial position as at 31 December 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, a statement of accounting policies, other selected explanatory notes and the directors’ declaration of the consolidated entity, comprising both the Company and the entities it controlled at the half-year’s end or from time to time during the halfyear.

Directors’ responsibility for the half-year financial report

The directors of the Company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express a conclusion on the consolidated half-year financial report based on our review. We conducted our review in accordance with the Auditing Standard on Review Engagements ASRE 2410: Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001.

Grant Thornton South Australian Partnership ABN 27 244 906 724 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited by a scheme approved under Professional Standards Legislation

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As the auditor of Southern Gold Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we complied with the independence requirements of the Corporations Act 2001.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Southern Gold Limited is not in accordance with the Corporations Act 2001, including:

• a giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and

• b complying with Accounting Standard AASB 134: Interim Financial Reporting and Corporations Regulations 2001.

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GRANT THORNTON SOUTH AUSTRALIAN PARTNERSHIP Chartered Accountants

J L Humphrey Partner

Adelaide, 13 March 2012