IONDRIVE LIMITED — Interim / Quarterly Report 2011

Jan 30, 2012

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ASX Code – SAU
December Quarter 2011
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QUARTERLY ACTIVITIES REPORT DECEMBER 2011

HIGHLIGHTS

Corporate

• Southern Gold secures a key cornerstone investor, Integra Mining Limited. Integra will invest $1.35 million in Southern Gold through the placement of shares representing 10% of the company’s expanded share capital.

• Paying $0.05 cents per share Integra’s investment is at a funding premium to the current share price which highlights the confidence Southern Gold’s industry peer has towards the high quality and potential of the Cannon Gold Resource.

• Integra to support Southern Gold’s proposed non-renounceable pro rata Rights Issue to eligible shareholders to raise up to $3 million.

• Investment funds will be directed toward advancing economic evaluation studies of the development of the Cannon Gold Resource[1] , and continued exploration of the Bulong Project, located 30km east of Kalgoorlie, WA.

Exploration

Cannon Gold Resource (Bulong Project, WA)

• Appointment of Project Development Manager brings key expertise to achieve the company’s strategic objectives at its flagship Bulong Gold project.

• Review of development options and commencement of preliminary works for the evaluation of the Cannon Gold resource.

Near Resource and Regional Exploration (Bulong Project, WA)

• As announced in November, significant gold (“Au”) intersections from RC drilling results along Cannon Trend including: 6m @ 9.32 g/t (from 70m), 3m @ 5.69 g/t (from 66m), 6m @ 2.84 g/t (from 70m) and 4m @ 3.39 g/t gold (from 102m).

• Shallow gold mineralisation intersected at Pinner with high grade hits in similar geological units to the Cannon Resource and continuity of shallow wide zones of gold mineralisation defined at the Monument prospect.

• Following the successful auger sampling program in 2011, three of the 12 high priority targets identified were drill tested. Preliminary composite drill assays show encouraging gold intersections.

Upcoming work

• Further geotechnical and metallurgical drilling to establish conceptual pit design parameters and studies into the performance characteristics of Cannon Gold mineralisation.

• Development of structural models to aid evaluation of deeper targets.

• Heritage clearances and commencement of air-core follow-up drilling of auger-gold anomalies

1 [For ‘Resource Statement and Parameters’ and other details of the Cannon Gold Resource as estimated by Runge Limited, see Southern Gold’s ASX Announcement dated 22 June 2011] Quarterly Report for the period ending 30 September 2011 Page 1 of 8

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ASX Code – SAU
December Quarter 2011
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QUARTERLY SUMMARY

Corporate – Capital Raising

As announced earlier today Southern Gold Limited (ASX :SAU) (“Southern Gold”) and Integra Mining Limited (ASX : IGR) (“Integra”) have executed a Share Subscription Agreement pursuant to which Integra has agreed to take a placement of Southern Gold shares equal to 10% of the expanded share capital at $0.05 per share to develop Southern Gold’s wholly owned Cannon Gold Resource.

The business partnership is a natural fit between the two Kalgoorlie neighbours in Western Australia (Figure 1). In parallel with the Integra share placement, SAU intends to offer eligible shareholders the opportunity to participate in the fund raising through a non-renounceable pro rata rights issue to raise up to $3 million.

Integra has agreed, pursuant to the Share Subscription Agreement to take up its full entitlement under the proposed rights issue subject to certain conditions. If the proposed rights issue is not fully subscribed, Integra will have the right to elect to underwrite the shortfall to a level agreed by Southern Gold.

It is Southern Gold’s intention to seek full underwriting of the proposed rights issue. Directors of Southern Gold intend to take up their full entitlement under the rights issue.

The funds from the Integra share placement will be used towards advancing current evaluation studies on development of the Cannon Gold Resource. The majority of funds raised from the proposed Rights Issue are intended to be expended on near-Cannon resource exploration and regional exploration of the Bulong Project, Western Australia.

The preliminary economic evaluation work on the Cannon Gold Resource has commenced and will include metallurgical and geotechnical test work, environmental and aboriginal heritage surveys, and as and when required mine planning and permitting.

Under the Share Subscription Agreement Southern Gold has agreed to grant Integra a pre-emptive 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 preemptive 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.

The majority of exploration work will continue at Southern Golds flagship Bulong Gold project, with geochemical and geophysical surveys and assessment, follow up aircore and reverse circulation (RC) drilling of near resource and regional targets, aimed at growing the Company’s current resource base. While Southern Gold’s focus will be primarily on the Bulong Gold project, exploration and evaluation of Southern Gold’s South Australian and Cambodia project areas will continue.

Quarterly Report for the period ending 30 September 2011

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ASX Code – SAU
December Quarter 2011
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Legend
Basement Geology Legend
Granite
Sediments
Mafic rocks
Ultramafic rocks
Gold processing facilities
BULONG PROJECT
CANNON GOLD
Lakewood Facility RESOURCE
Alacer Gold
Corporation
Hampton -Boulder
Jubilee Mill
Salt Creek
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Figure 1. Sketch map showing Southern Gold’s tenement package and the proximity to neighbouring Integra’s tenement package and nearby gold processing facilities.

EXPLORATION ACTIVITIES

Summary

Technical activities during the December quarter focused on commencement of preliminary studies into advancing the Cannon Gold resource towards development. Scopes of work have been developed and technical specialists appointed to evaluate environmental, metallurgical, geotechnical and development aspects of the resource. It is anticipated that these studies will lead to a detailed

economic evaluation of the Cannon Gold resource and then form part of the approval process required for permitting.

Assay results received in November 2011[2] , from the RC drill programme targeting the Cannon Trend continue to demonstrate that these 5 near resource anomalies represents an extensive gold mineralised zone (Figure 2).

2 [For detailed results from the Cannon Trend drill programme, see Southern Gold’s ASX Announcement dated 11 November 2011] Quarterly Report for the period ending 30 September 2011 Page 3 of 8

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ASX Code – SAU
December Quarter 2011
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Regional exploration during the quarter focused on refining the extent and tenor of the gold-auger anomalies identified in 2011. A recent follow-up RC drill programme of 22 drillholes for some 2,052m was completed. Four metre composite assays have been received and indicate the presence of a number of encouraging gold mineralised zones with better results including 4m @ 6.8g/t gold from 24m downhole and 4m @ 4.5g/t gold from 76m downhole (from the same drillhole). One metre splits will be assayed from the mineralised intervals and follow-up programmes planned.

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• Figure 2. Follow up RC drilling within 1km of the Cannon Gold resource identified significant gold trends at Pinner and broad low level gold mineralisation at Monument. [Background map : High gold in soil values that define the Cannon Trend].

Regional Auger Sampling

Infill auger sampling to close-up sampling spacing to approximately 100m x 50m over the areas of interest defined last quarter (Figure 3) was completed for a total of 1579 samples. The samples have been submitted for analysis, testing for gold and a suite of base metal elements. Initial results were have only been recently received and a detailed assessment of these results will be completed in the coming quarter. Preliminary interpretation indicates that the original anomalies identified are valid and have a similar extent and consistent values compared to the previous first pass sample results.

Following receipt and interpretation of all new results, prioritisation of targets for follow-up drill assessment will commence.

Quarterly Report for the period ending 30 September 2011

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ASX Code – SAU
December Quarter 2011
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RC Drilling

Twenty two RC drill holes for 2052m were drilled at the Hammersmith, Perivale and Turnpike prospects during the quarter to follow-up regional gold-in-calcrete soil anomalies (Figure 3).

Seven holes were drilled at Hammersmith and four holes were drilled at Perivale for a total of 1,192m. 10 holes were drilled at Turnpike for a total of 860m.

Weathering to a depth of up to 100m and variably to highly sheared lithologies were encountered in the majority of holes drilled, which is typical of this part of the Bulong Complex. Of note is the abundance of quartz veining encountered in the top 30-40m of the holes drilled in the northern part of the Turnpike prospect. This veining may be the source of the gold bearing system located by the auger sampling.

A total of 548, 4m composites were submitted for low level gold (graphite furnace method) and multielement analysis (by OES method) using an Aqua Regia digest.

A number of encouraging gold mineralised zones were identified, with better results including 4m @ 6.8g/t gold from 24m downhole and 4m @ 4.5g/t gold from 76m downhole (from the same drillhole). In addition, these preliminary results have also identified a number of sub-0.5g/t Au intervals of up to 20m down hole width. This provides further validation of auger sampling as a viable targeting tool for mineralisation that occurs near to surface, as demonstrated by Cannon. Once detailed results of 1 metre intervals have been received, a follow up drill programme will target the extent of the significant gold intersections.

Given this success of this drill programme the remaining gold-auger anomalies will now be prioritised for drill testing.

Areas which to date have only exhibited a subdued geochemical response will be further evaluated using a multi-element suite typical of deposits in the district, with a particular emphasis on the suite associated with the Cannon mineralisation.

The results from the first pass soil sampling programme has achieved the objective of identifying additional gold targets, to compliment the current early stage growth potential of first order targets defined near the Cannon Gold resource. These soil anomalies add to the medium-term growth potential of Southern Gold.

Quarterly Report for the period ending 30 September 2011

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ASX Code – SAU
December Quarter 2011
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TURNPIKE
PERIVALE
HAMMERSMITH
CANNON
GOLD
RESOURCE
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Figure 3. RC drilling targeted 3 gold-auger anomalies – Turnpike, Hammersmith and Perivale. Infill auger sampling was completed on the remaining high priority auger anomalies. Preliminary results are encouraging and warrant further test work. [Background map: GSWA 1:500000 scale Regional Geological Map].

Quarterly Report for the period ending 30 September 2011

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ASX Code – SAU
December Quarter 2011
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PLANNED WORK PROGRAMME – MARCH QUARTER

Southern Gold commences a new phase of work, as it focuses on the growth and development of the Cannon Gold resource. With the investment by Integra and the upcoming capital raising Southern Gold believes this investment will contribute significantly to the growth value of the Bulong Gold project, particularly the potential business synergies with Integra and all the key benefits of a prime location ~30km east of Kalgoorlie, Western Australia.

Work to be undertaken during the March 2012 quarter includes:

Cannon Gold resource evaluation

• Drilling of three cored holes for geotechnical and metallurgical purposes.

• Finalisation of first-pass metallurgical test work and preparation of recommendations for follow-up requirements and selection of core for hardness and abrasion determinations.

• Preparation of scopes of works for environmental sub-consultants followed by commencement of surface and subsurface hydrological studies and flora and fauna assessments.

Near Resource and Regional exploration

• Prioritisation of auger-gold anomalies, followed by heritage clearance of proposed drill sites and the engaging of a drilling contractor.

• Structural analysis of the mineralisation present along the Cannon Trend to assist with target generation in other parts of the Company’s tenure.

The work to be completed on the Cannon Gold resource is seen as the “near term” value growth for Southern Gold, however much of this work will be conducted in conjunction with the exploration and generation of regional gold targets. The definition of the Cannon Trend prospects and the recent goldauger anomalies identified on the Bulong East area, highlights the potential of the “longer term” growth story that the Bulong Gold project holds.

Quarterly Report for the period ending 30 September 2011

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ASX Code – SAU
December Quarter 2011
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For further information contact:

Nanette Anderson Managing Director PO Box 1016 North Adelaide, SA, 5006 T: +61 (0) 8 8368 8888 F: +61 (0) 8 8368 8899

W: www.southerngold.com.au E: info@southerngold.com.au

The information in this report concerning Australian exploration has been compiled by Ms N Anderson (BSc) as an employee of Southern Gold and who is a member of the AusIMM and is bound by and follows the Institute’s codes and recommended practices. As a Competent Person, as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserve.’- she has a minimum of 5 years relevant experience in the style of mineralisation and types of activities being reported and has given written consent to the above report in the form and context in which it appears.

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BULONG GOLD PROJECT
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Location Map: Southern Gold’s Bulong Gold project is located 30 km east of the major gold mining district of Kalgoorlie, Western Australia.

Quarterly Report for the period ending 30 September 2011

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