IONDRIVE LIMITED — Interim / Quarterly Report 2012

Jan 30, 2013

Quarterly Activity Report 31 December 2012

Quarterly Activity Report December 2012

Highlights

Cannon Gold Resource (Bulong Gold Project, WA)

ASX Code: SAU Issued Shares: 346M ABN: 30 107 424 519

Directors

Greg Boulton AM Nanette Anderson Michael Billing David Turvey

Top Shareholders Silverlake Resources Ltd 12.5% G B Branch Pty Ltd 4.5% National Nominees 2.5%

Head Office 229 Greenhill Road Dulwich SA 5065 Telephone: (08) 8368 8888 Facsimile: (08) 8431 5619 info@southerngold.com.au www.southerngold.com.au

• Cannon Gold Resource increased to:

• 812,299t @ 3.9g/t Au for 100,400oz (Indicated and Inferred)

• With an increased average grade of 4 g/t gold, 92% of the Cannon Gold Resource is estimated at the higher confidence level of Indicated category.

• Bulong Gold Project Global Mineral Resource has increased 18% to: 984,100t @ 3.5 g/t Au for 111,900 oz (Indicated and Inferred)

• Pre-feasibility study commenced to investigate the economic viability of developing the Cannon Resource as a toll treating operation.

• Mineralisation remains open down dip of the Cannon Resource.

Regional Exploration (Bulong Gold Project, WA)

• SAU earns 80% of Bulong East and South joint venture tenements securing a strategic tenement area of 150km[2] , just 30km east of Kalgoorlie, WA.

• Detailed ground geophysics programme over eight priority geochemical anomalies has identified significant structural and lithological associations similar to those that host the Cannon gold mineralisation.

• Southern Gold awarded up to A$150,000 through the WA Department of Mines and Petroleum’s Co-Funding Drilling Incentive Scheme.

Upcoming work programmes

Following encouraging results from conceptual economic studies in 2012, the Board approved the proposal to commence a Pre-feasibility Study on the Cannon Gold Resource.

The aim of this work is to evaluate the value that could be achieved from developing the current resource as a toll treating operation. Potential benefits of undertaking an early stage development include; generating an early cash flow; capitalising on the strong gold price; minimising risk; and limiting high capital costs associated with standalone operations.

In the upcoming quarter work will include incorporating the new data from the reestimate of the Cannon Gold resource into the Pre-feasibility Study. Following increases in both the average grade and contained ounces, it is anticipated that this will improve the final results of the study.

Permitting work will continue in parallel with the Pre-feasibility Study with the completion of a mining proposal, closure plan and other standard documentation required for development.

Regional work will include assessment of the initial results from the geophysical survey which highlighted several key areas that show similar structural setting to that of the Cannon gold mineralisation. Correlating these structures with key geochemical anomalies will assist in prioritising targets for follow up drilling.

Bulong Gold Project, Western Australia

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Figure 1 . Bulong Gold project: showing Heron JV tenements and the proximity to cornerstone shareholder Silverlake Resources Ltd and nearby gold processing facilities.

Cannon Gold Resource Upgrade

In 2012 Southern Gold completed an infill drill programme to test the continuity of high grade gold zones within the Cannon Gold resource envelope. While the programme was not specifically designed to increase the resource, a number of holes intersected broader, higher grade gold zones, which has ultimately led to the upgrade and increased contained ounces of the resource.

Detailed structural and geological interpretation of the setting of the Cannon mineralisation has shown a strong relationship between rock types (lithology), deformation styles (structure), alteration mineralogy and the location and distribution of high grade gold zones. These studies incorporated data from the 2012 infill drill programme and together were used in the development of the revised resource estimate for Cannon (Table 1).

The drill programme met the goal of increasing the level of confidence in the Cannon resource, with 92% of the new total, 100,400 oz gold, categorised as Indicated. With the stand out high grades intersected by the drilling it was anticipated that an improved average grade could be achieved, and in fact for the Indicated ounces the grade increased by 11% to 4 g/t Au and for the total Cannon Resource the average grade is now 3.9 g/t Au. For a resource that was already considered as having a good average grade (previously 3.3 g/t Au) this result has come as an added bonus. It is considered that this higher grade will have positive implications on the value add to the prefeasibility study currently being undertaken.

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The detailed structural interpretation of the mineralisation at Cannon and the mineralisation located to the south-west (“Pinner”) has led to the two zones being estimated and reported separately for the first time. RungePincockMinarco (RPM) undertook a new resource estimation for the Global Mineral Resource within the Bulong Gold Project. This work showed an overall increase of 18% of the contained ounces to 111,900 oz gold. The Cannon Gold Resource has increased to 812,299t @ 3.9g/t Au for 100,400oz of gold (Indicated and Inferred).

While the infill drill programme successfully identified continuity within the resource envelope, analysis of the assay results and drill logs also identified key aspects of the resource that continue to demonstrate the potential of down dip and strike extensions of the Cannon resource itself. In addition, the alteration style and structural controls which characterize the Cannon Gold Resource are similar to exploration targets identified within the greater Bulong Gold project.

These key outcomes arising from the resource upgrade confirm the Company’s view of the prospectivity of the greater Bulong Gold Project and the potential for additional gold discoveries both regionally and along the host structure to the Cannon Resource (the “Cannon Trend”).

Table 1. Bulong Gold Project Global Resources: Mineral Resource Estimate (1.0g/t Au Cut-off)

Deposit & Weathering Type		Indicated			Inferred			Total
	Tonnes t	Au g/t	Au Ounces	Tonnes t	Au g/t	Au Ounces	Tonnes T	Au g/t	Au Ounces
Cannon
Oxide	8,000	3.0	800	1,500	2.4	100	9,500	2.9	900
Transitional	137,600	3.1	13,900	34,100	2.6	2,900	171,700	3.0	16,800
Fresh	573,500	4.3	78,500	57,500	2.3	4,200	631,000	4.1	82,800
Total:	719,100	4.0	93,200	93,000	2.4	7,200	812,200	3.9	100,400
Pinner
Oxide	-	-	-	600	3.0	200	600	3.0	200
Transitional	-	-	-	76,400	2.2	5,400	76,400	2.2	5,400
Fresh	-	-	-	94,900	2.0	6,100	94,900	2.0	6,100
Total:	-	-	-	172,000	2.1	11,500	172,000	2.1	11,500
**Total Resources: **	719,100	4.0	93,200	265,000	2.2	18,700	984,100	3.5	111,900

Note: Rounding errors affect totals

Pre-feasibility Study Commencement

Work commenced in the December quarter on preparing a Pre-feasibility Study based on the economic parameters derived from preliminary studies carried out in 2012. The objective of the study is to evaluate the economic viability of the Cannon Gold resource as a toll treating operation. The study is to be completed by the end of the March quarter.

To shorten any proposed development timetable, permitting documentation is being prepared in parallel with the PreFeasibility Study and will continue during the upcoming quarter.

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Regional Exploration

Following a successful geochemical auger sampling programme over the Bulong Gold project area, over 30 high priority geochemical anomalies were identified. Drill testing of four geochemical anomalies carried out in the 2012 showed elevated gold results down hole, clearly demonstrating that the surface geochemistry tested by this drilling is associated with anomalous gold values at depth. With a further 20 targets to still be evaluated, and based on key structural controls on gold mineralisation identified at the Cannon Resource, ground-based geophysical surveying was selected as a cost effective way to assist in prioritising targets for drill testing.

In December 2012, Southern Gold completed a detailed sub-audio magnetic (“SAM”) survey over eight geochemical targets.

Ground geophysics

Ground-based geophysical assessment of geochemical anomalies situated in the vicinity of significant regional structures, the structures which host the Cannon mineralisation and also along the Cannon structural trend, were surveyed using sub-audio magnetics (“SAM”) (Figure 2).

The SAM method is well proven and enables the mapping of subsurface rock properties to be carried out quickly over large areas. The geochemical targets selected for SAM mapping have variable depths of cover and little or no physical expression, thus this method is seen by the Company to be a cost effective alternative to close spaced (and costly) first-pass drill assessment.

A total of 15.7 km[2] of SAM surveying was undertaken over areas of gold and trace element anomalism in the vicinity of the Railway South (Grid 1), Belham and Tooting Bec (Grid 2), Arsenal and along structures called the “Cannon Trend” (Grids 3 and 4), the anomalies at Gunnersbury – Limehouse – Cyprus (Grid 5), Chigwell (Grid 6) and Barbican (Grid 7) (Figure 2).

With only preliminary results received, already a number of potentially significant structural-lithological associations have been identified which are likely to be prioritised for drilling.

A second SAM programme is planned over geochemical anomalies to the south-east and north-west of the Railway anomaly, which appear associated with similar structures related to the Mt Monger mining centre further to the south east. It is anticipated that the second stage of SAM surveying will cover approximately 19km[2] .

Once all results have been received, the priority targets, both geophysical, geochemical and those anomalies which may have already had some first pass drill testing will be ranked for follow up testwork with either air core and/or reverse circulation drilling. Providing rig availability, permitting and access requirements are met, drilling will be completed in the upcoming quarter.

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Figure 2. Eight gold geochemical anomalies were covered by the SAM survey. Preliminary results have already identified a number of potentially significant structural-lithological associations coincident with the gold anomalies. Bulong Gold Project, WA.

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Western Australian Exploration Incentive Scheme Co-funded Drilling Program

Western Australian Department of Mines and Petroleum (DMP) has awarded Southern Gold funding of up to A$150,000 to co-fund a drilling programme to the south of the Cannon resource. The anticipated programne is designed to provide information that will assist with building a structural and stratigraphic model in a geologically complex area to the south of Cannon where cover precludes effective auger sampling techniques. It is envisaged that the drilling programme will consist of at least two holes drilled to depths of up to 500m. This work programme is not anticipated to be completed until the second half of 2013.

Cambodia

Pursuant to the Joint Venture agreement between Mekong Minerals Ltd (Mekong) and Southern Gold, Mekong as manager of Southern Gold Cambodia (SGC) completed initial field inspections. Site inspections commenced in November at the start of the dry season and field work commenced at a priority prospect in the Kratie North project area. Work included structural and geological mapping and stream based sampling. Following the completion of a desk top study (including satellite imagery interpretations), work for 2013 will focus initially on the Kratie North and Kratie South project areas. A field crew has been assigned to conduct a short reconnaissance field trip to Romdul, Srae Pok and the Snoul licences, commencing February.

Corporate

Southern Gold announced in January (ASX: 14 January 2013) that it had increased its holding in the Bulong South and Bulong East joint venture areas to an 80% interest (with Heron Resources Ltd retaining nickel laterite rights in the latter) (Figure 1).

Southern Gold has been able to leverage off its discovery experience in this area and apply this knowledge to the joint venture areas. The Company regards securing 80% of the joint venture tenements, as a positive and logical step in the development of its project portfolio and the growth of its gold business in this region.

As in the case of the ground where the Cannon Gold resource was discovered, most of these areas, in recent times, were explored primarily for nickel. Positive results during work over the Bulong East and Bulong South areas have highlighted the real potential for gold mineralisation and additional discoveries similar to the Cannon Gold resource, which the Company believes could significantly grow the current resource base.

Contact

For further information contact:

Nanette Anderson

Managing Director

PO Box 255 Ph: 08 8368 8888 Kent Town 5071 Fx: 08 8431 5619 South Australia www.southerngold.com.au

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Competent Person’s Statements

Resource Table

The information in this report that relates to Mineral Resources is based on information compiled by Mr Aaron Green. Mr Green who is a full time employees of Runge Limited and a Member of the of the Australian Institute of Geoscientists, 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 2004 Edition of the Australasian Code for the Reporting of Mineral Resources and Ore Reserves. Mr Green consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Exploration Results

The information in this report concerning Australian exploration has been compiled by Mr I Blucher (MSc) 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.’- he has a minimum of five 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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