IONDRIVE LIMITED - Proxy Solicitation & Information Statement 2009

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7[th] August, 2009

Dear Southern Gold Limited Shareholder,

Notice of General Meeting – 10.00am (CST), Friday 11[th] September, 2009

A General Meeting is being called on the above date to consider two resolutions that will provide Southern Gold Limited ( Company ) with further funds to continue exploration across our portfolio of gold and base metal assets in Australia and Cambodia and our Roxby Geothermal Project proof of concept development.

The resolutions to be considered at the General Meeting are summarised below:

Resolution 1 - A resolution to consider and, if thought fit, approve the sale of the Company’s interest in Southern Uranium Limited ( SNU ) to existing SNU shareholders for 5.5 cents per share for the purpose of ASX Listing Rule 10.1. The sale of the Company’s interest in SNU is underwritten by CITIC Australia Pty Ltd and Talbot Group Holdings Pty Ltd.
Resolution 2 - A resolution to approve the previous issue of 16,000,000 ordinary shares and 1,500,000 options by the Company on 29 June 2009 for the purpose of ASX Listing Rule 7.4

I encourage your attendance at the General Meeting and vote on the resolutions or if you are unable to attend to submit the enclosed Proxy Form before Wednesday 9[th] September 2009.

The Company’s Annual General Meeting is scheduled to be held in late October 2009. A full report on the Company’s exploration activities will be provided at that meeting.

Yours faithfully

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Greg Boulton Chairman

Southern Gold Limited 47 Tynte Street PO Box 1016 [email protected] telephone 08 8368 8888 ABN 30 107 424 519 North Adelaide North Adelaide web southerngold.com.au facsimile 08 8368 8899 South Australia 5006 South Australia 5006

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SOUTHERN GOLD LIMITED ACN 107 424 519 (“ Company ”)

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN that a General Meeting of the Company will be held at the Company’s registered office at 47 Tynte Street, North Adelaide, South Australia, commencing at 10.00am (CST) on Friday 11[th] September 2009.

Special Business

To consider and, if thought fit, to pass the following resolutions:

Resolution 1

“ That, for the purpose of Listing Rule 10.1, the sale of the Company’s interest in Southern Uranium Limited as detailed in the Explanatory Memorandum which accompanied the notice convening this meeting, is approved. ”

In accordance with the Listing Rules, the Company will disregard any votes cast on this resolution by or on behalf of the Talbot Group or CITIC Australia Pty Ltd or any of their respective associates.

However the Company will not disregard a vote if:

it is cast by a person as proxy for a person who is entitled to vote in accordance with the directions on the proxy form; or
it is cast by a person chairing the meeting as proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides.

Your directors recommend that you vote in favour of the resolution, for the purposes of Listing Rule 10.1. Funds raised pursuant to the sale of the Company’s interest in Southern Uranium Limited will provide important funding for the Company to continue exploration across its portfolio of gold and base metal assets in Australia and Cambodia.

Resolution 2

“That for the purpose of Listing Rule 7.4 and for all other purposes, the issue by the Company on 29 June 2009 of:

16,000,000 fully paid ordinary shares in the capital of the Company at 10 cents per share; and
1,500,000 options, each being an option to subscribe for one fully paid ordinary share in the capital of the Company at 15 cents per share, to Zenix Nominees Pty Ltd, the nominee of Hartleys Limited, broker to the above share placement,

Southern Gold Limited ABN 30 107 424 519

47 Tynte Street PO Box 1016 [email protected] telephone 08 8368 8888 North Adelaide North Adelaide web southerngold.com.au facsimile 08 8368 8899 South Australia 5006 South Australia 5006

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details of which are set out in the Explanatory Memorandum which accompanied the notice convening this meeting, is approved.”

In accordance with the Listing Rules, the Company will disregard any votes cast on this resolution by or on behalf of any person who participated in the issue or any of their respective associates.

However the Company will not disregard a vote if:

it is cast by a person as proxy for a person who is entitled to vote in accordance with the directions on the proxy form; or
it is cast by a person chairing the meeting as proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides.

By order of the Board

N Hardin

N J Harding Company Secretary Dated this 7[th] Day of August 2009

Voting Entitlements

Pursuant to the Corporations Regulations 2001, Regulation 7.11.37 made pursuant to Section 1074E(2)(g) of the Corporations Act 2001, the Directors have determined that the shareholding of each shareholder for the purposes of ascertaining the voting entitlements for the meeting will be as it appears in the share register at close of business on Wednesday 9[th] September 2009.

Custodian Voting

For Intermediary Online subscribers only (custodians) please visit www.intermediaryonline.com to submit your voting intentions.

Proxies

A shareholder has the right to appoint a proxy, who need not be a shareholder of the Company. If a shareholder is entitled to cast two or more votes they may appoint two proxies and may specify the percentage of votes each proxy is appointed to exercise. The proxy form must be deposited at the share registry of the Company, Computershare Investor Services Pty Limited, GPO Box 242, Melbourne, VIC 3001 or at the Company’s registered office, 47 Tynte Street, North Adelaide, SA 5006, or by facsimile to Computershare on (within Australia) 1800 783 447 or (outside Australia) 61 3 9473 2555 or to the Company on 61 8 8132 0199 not later than 48 hours before the commencement of the meeting.

SOUTHERN GOLD LIMITED ACN 107 424 519 (“Company”)

EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared to assist shareholders in consideration of the resolutions proposed for the General Meeting of the Company to be held on Friday 11[th] September, 2009 at the Company’s registered office at 47 Tynte Street, North Adelaide, South Australia commencing at 10.00am (CST).

It should be read in conjunction with the Notice of General Meeting.

RESOLUTION 1 – Approval of sale of substantial asset to related party

Overview

The Company holds 45,000,000 shares in Southern Uranium Limited ( SNU ), comprising 39.13% of the issued capital of SNU ( Sale Shares ).

SNU was formed by the Company in July 2005 to house and manage the Company’s uranium assets and explore, acquire and develop Australia’s substantial uranium resources. On 3 April 2007, SNU listed on the Australian Stock Exchange. The Company has retained an interest in SNU since its establishment in 2005 and subsequent listing in 2007.

The Company now wishes to dispose of its interest in SNU to increase its cash reserves to fund ongoing exploration on its portfolio of Australian and Cambodian gold and base metal projects.

Offer Implementation Deed

On 31 July 2009, the Company entered into an Offer Implementation Deed with SNU pursuant to which the Company agreed to make a pro rata offer of the Sale Shares to the remaining shareholders of SNU for 5.5 cents per Sale Share ( Offer ).

The Company and SNU’s obligations under the Offer Implementation Deed are subject to the following conditions:

(a) the Company, CITIC Australia Pty Ltd ( CITIC ) and Talbot Group Holdings Pty Ltd ( Talbot ) entering into an underwriting agreement in respect of the Offer;
(b) the Company obtaining the approval of its shareholders for the Offer;
(c) SNU obtaining the approval of its shareholders for Talbot and CITIC to increase their voting power in SNU, under the Underwriting Agreement, from below 20% to more than 20% pursuant to Exception 7 of section 611 of the Corporations Act;
(d) SNU obtaining any consents and approvals required from the ASX or ASIC required to enable SNU and the Company to perform their obligations under the Offer Implementation Deed; and
(e) any necessary approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth) being obtained for CITIC and CITIC obtaining any other required approvals for it to participate in the Offer and enter into the Underwriting Agreement.

As at the date of this notice of meeting, the condition set out in paragraph (a) has been satisfied. If the resolution to be considered at this meeting is approved the condition set out in paragraph (b) above will also be satisfied. The conditions set out in paragraph (c) to (e) are expected to be satisfied within one month of this meeting.

Underwriting Agreement

On 4 August 2009, the Company entered into an Underwriting Agreement with Talbot and CITIC (each an Underwriter and, together, the Underwriters ) pursuant to which the Underwriters each agreed to acquire fifty percent of any Sale Shares not taken up by SNU shareholders under the Offer.

The Underwriting Agreement is subject to the following key conditions:

(a) execution of the Offer Implementation Deed;
(b) approval by SNU’s shareholders of the acquisition by the Underwriters in their respective proportions of the Sale Shares in accordance with item 7 in section 611 of the Corporations Act;
(c) approval of SAU’s shareholders for the purpose of ASX Listing Rule 10.1;
(d) approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth) of the acquisition by CITIC of its respective proportion of Sale Shares pursuant to the Underwriting Agreement; and
(e) CITIC obtaining approval from CITIC Group to the acquisition of its respective proportion of the Sale Shares pursuant to the Underwriting Agreement.

As at the date of this notice of meeting, the condition set out in paragraph (a) has been satisfied. If the resolution to be considered at this meeting is approved the condition set out in paragraph (c) above will also be satisfied. The conditions set out in paragraphs (b) to (e) are expected to be satisfied within one month of this meeting.

The Underwriting Agreement is also subject to a number of termination events. The key termination events include:

(a) the Company not remedying a material breach of the Underwriting Agreement, or any warranty given by it in the Underwriting Agreement, within 2 Business Days or such longer period specified by the Underwriters or such default or breach incapable of remedy;
(b) a prescribed occurrence (as specified in section 652C of the Corporations Act) occurring in relation to SNU or a related body corporate of SNU (assuming that it was a target company within the meaning of Chapter 6 of the Corporations Act);
(c) there being a material misstatement or inaccuracy in, or a material omission in, the Offer Document, or any statement in the Offer Document is or becomes false or misleading, in a material respect;
(d) at any time after the date of the Underwriting Agreement, the All Ordinaries Index or the S&P/ASX 200 Index being 15% or more below its level as at the close of trading on 3 August 2009, being the trading day immediately preceding the date of the Underwriting Agreement;
(e) the Sale Shares being removed from official quotation on the ASX;
(f) an application being made to the Takeovers Panel in relation to the Offer and the application not being withdrawn or disposed of within 14 days after it is made, or the Takeovers Panel making a declaration of unacceptable circumstances in relation to the Offer or the Underwriting Agreement;
(g) a Material Adverse Change occurring in relation to SNU (being an change or event that, in the reasonable opinion of the Underwriters, may have an adverse effect on the assets, liabilities or financial position or performance, profits, losses or prospects of SNU of $200,000 or more, or which results in an Underwriter’s obligations becoming materially more onerous);
(h) the Offer being withdrawn or failing to proceed; or
(i) an insolvency event occurring in relation to SNU.

Listing Rule Requirements

Listing Rule 10.1 provides that the Company must not dispose of a substantial asset to a substantial holder of shares, without the approval of its shareholders.

Substantial asset

Pursuant to Listing Rule 10.2, an asset is a substantial asset if its value, or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the equity interest of the Company as set out in the latest accounts given to ASX under the Listing Rules.

The value of the consideration for the Company’s interest in SNU under the Offer is $2,475,000.

Depending on the level of acceptance of the Offer by SNU shareholders, it is possible that the SNU shares to be acquired by Talbot could be a substantial asset of the Company.

Substantial holder of shares

Talbot is a substantial holder of shares of the Company for the purposes of the Listing Rules. As at the date of this Notice of Meeting, Talbot’s interest in the Company is as follows:

Name	Number	Percentage
Talbot	32,696,070	23.24%

Voting Exclusion Statement

In accordance with the Listing Rules, the Company will disregard any votes cast on this resolution by or on behalf of Talbot or CITIC or any of their respective associates.

However the Company will not disregard a vote if:

it is cast by a person as proxy for a person who is entitled to vote in accordance with the directions on the proxy form; or
it is cast by a person chairing the meeting as proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides.

Independent Expert’s Report

Enclosed is an independent expert’s report prepared by Leadenhall VRG Pty Ltd in relation to the Offer. Leadenhall VRG Pty Ltd has found that the transaction is fair and reasonable to the Company’s ordinary shareholders.

Offer Timetable

In the event the conditions in the Offer Implementation Deed and the Underwriting Agreement are all satisfied or waived on or before 14 September 2009, the Offer is expected to proceed in accordance with the following timetable:

the Offer will be made to all persons on the SNU register of members who are resident in Australian and New Zealand during the week commencing 14 September 2009;
acceptances of the Offer will close at 5.00pm on 2 October 2009 (or earlier if the Offer is fully subscribed prior to that date);
the Underwriters obligations to acquire any unsubscribed Sale Shares will be determined on 7 October 2009;
the transfer of the Sale Shares will occur on 12 October 2009.

Your directors recommend that you vote in favour of the resolution to approve the potential acquisition by the Underwriters of Sale Shares in accordance with the Underwriting Agreement, for the purposes of Listing Rule 10.1. Funds raised pursuant to the sale of the Company’s interest in Southern Uranium Limited will provide important funding for the Company to continue exploration across its portfolio of gold and base metal assets in Australia and Cambodia.

RESOLUTION 2 – Ratification of issue of shares

Listing Rule Requirements

Listing Rule 7.1 provides that, subject to certain exceptions under Listing Rule 7.2, a company may not issue equity securities without shareholder approval if those equity securities will, when aggregated with the equity securities issued by the company during the previous 12 months, exceed 15% of the number of equity securities on issue as at the commencement of that 12 month period.

Listing Rule 7.4 states that an issue of securities made without approval under Listing Rule 7.1 will be made with approval for the purposes of Rule 7.1 if the issue did not breach Listing Rule 7.1 and holders of ordinary shares subsequently approve the issue.

Issue of Securities

On 29 June 2009, the Company finalised a placement of 16,000,000 ordinary shares in the capital of the Company ( Placement Shares ), representing approximately 12.8% of the Company’s issued share capital at the time of the placement, to a number of sophisticated and professional investors. The placement was fully subscribed and the Placement Shares were issued and allotted on that day at a subscription price of 10 cents per share. Talbot Group Holdings Pty Ltd ( Talbot ) participated in the placement to maintain its 23.24% shareholding in the Company.

Hartleys Limited ( Hartleys ) acted as broker to the placement and, in payment of its corporate advisory fee for arranging the placement, was issued 1,500,000 options at a nil issue price, each being an option to subscribe for one fully paid ordinary share in the capital of the Company for an exercise price of 15 cents, expiring on 29 June 2012 ( Options ). The Options were granted in the name of Hartley’s nominee, Zenix Nominees Pty Ltd, a related body corporate of Hartleys.

Resolution 2 seeks approval by shareholders to the issue and allotment of the 16,000,000 Placement Shares and the issue of the 1,500,000 Options. If the resolution is passed then those securities will be deemed to have been issued with shareholder approval and will therefore not be counted towards the 15% limit prescribed by Listing Rule 7.1. This will ensure the Company maintains flexibility during the upcoming 12 month period to supplement its working capital requirements, should the Board determine this to be in the best interests of the Company.

The funds raised through the placement will allow the Company to progress its current exploration program on its highly prospective projects in both Australia and Cambodia.

Listing Rule 7.5 requires that the following information be provided to shareholders for the purposes of obtaining shareholder approval pursuant to Listing Rule 7.4:

(a) The total number of securities issued under, and in connection with, the placement was 16,000,000 Placement Shares and 1,500,000 Options.
(b) The issue price for each Placement Share was 10 cents per share. Each Option was issued free of charge.
(c) The Placement Shares were issued and allotted as fully paid and rank equally with the existing ordinary shares on issue in the capital of the Company. The Options were issued on the terms set out in Annexure A to this Explanatory Memorandum.
(d) The Placement Shares were issued and allotted to a number of sophisticated and professional investors identified by Hartleys, as broker to the placement. The Options were issued to Zenix Nominees Pty Ltd, nominee and related body corporate of Hartleys.
(e) Funds raised from the issue of the Placement Shares have been and will be applied towards the Company’s exploration programs in both Australia and Cambodia. No funds were raised from the issue of the Options.

Voting Exclusion Statement

In accordance with the Listing Rules, the Company will disregard any votes cast on this resolution by or on behalf of any person who participated in the issue of the Placement Shares, Hartleys, Zenix Nominees Pty Ltd or any of their respective associates.

However the Company will not disregard a vote if:

it is cast by a person as proxy for a person who is entitled to vote in accordance with the directions on the proxy form; or
it is cast by a person chairing the meeting as proxy for a person who is entitled to vote in accordance with a direction on the proxy form to vote as the proxy decides.

ANNEXURE A

SOUTHERN GOLD LIMITED

(the Company )

TERMS AND CONDITIONS

EXPIRING 29 JUNE 2012

Each Option entitles the holder to subscribe for one ordinary share in the capital of the Company ( Share ) (subject to adjustment in accordance with these Terms and Conditions) upon exercise by notice in writing to the Company and payment of the exercise price, during the exercise period.
The exercise price of each Option is $0.15.
The exercise period of the Options is from the date the Company issues the Options to 5.00pm (CST) on 29 June 2012.
An Option will not confer an entitlement to receive a dividend declared or paid by the Company, or an entitlement to vote at a general meeting of the Company nor will it confer an entitlement to participate in any pro rata or entitlement offer of securities to Shareholders, unless the Option has been duly exercised prior to the relevant record date.
Subject to the Company’s Constitution, each Share issued pursuant to the exercise of an Option will rank equally in all respects with all other issued Shares.
The Company will not apply for official quotation on ASX of the Options. The Company will apply for official quotation on ASX of the Shares issued upon exercise of Options within the time period required by the Listing Rules.
Any Option not exercised before the end of the exercise period will lapse at the end of the exercise period.
All Options may be exercised if a takeover bid (as defined in the Corporations Act) is made for Shares.
In the event of a reorganization or reconstruction of the capital of the Company, the rights of the Option holder will be changed to the extent necessary to comply with the Listing Rules applying to the reorganization or reconstruction of capital at the time of the reorganization or reconstruction.
If the Company makes a pro rata issue (other than a bonus issue) of securities to the holders of Shares, the exercise price of Options on issue will be reduced according to this formula:

A = O – E[P – (S + D)] (N + 1)

Where:

A = the new exercise price of the Option;
O = the old exercise price of the Option;
E = the number of Shares into which one Option is exercisable
P = the average closing sale price per Share (weighted by reference to volume) recorded on the stock market of ASX during the 5 trading days ending on the day before the ex rights date or ex entitlements date (excluding special crossings, overnight sales and exchanged traded option exercises);
S = the subscription price for an ordinary share under the pro rata issue;
D = the dividend due but not yet paid on each existing issued Share at the relevant time (except those to be issued under the pro rata issue); and
N = the number of Shares that must be held to entitle holders to receive a right to one new ordinary share in the pro rata issue.
If there is a bonus issue to the holders of Shares, the number of Shares over which an Option is exercisable will be increased by the number of Shares which the holder of the Option would have received if the Option had been exercised before the record date for the bonus issue.
Optionholders appearing on the Company’s Register of Optionholders at the relevant date will be entitled to receive and will be sent all reports and accounts required to be laid before shareholders in general meetings and will have the right to attend but shall have no right to vote at such meetings.

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000001 000 SAU MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

Lodge your vote:

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By Mail:

Computershare Investor Services Pty Limited GPO Box 242 Melbourne Victoria 3001 Australia

Alternatively you can fax your form to (within Australia) 1800 783 447 (outside Australia) +61 3 9473 2555

For Intermediary Online subscribers only (custodians) www.intermediaryonline.com

For all enquiries call:

(within Australia) 1300 556 161 (outside Australia) +61 3 9415 4000

Proxy Form

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For your vote to be effective it must be received by 10:00am (Adelaide Time) Wednesday 9 September 2009

How to Vote on Items of Business

Signing Instructions

All your securities will be voted in accordance with your directions.

Individual: Where the holding is in one name, the securityholder must sign.

Appointment of Proxy

Joint Holding: Where the holding is in more than one name, all of the securityholders should sign.

Voting 100% of your holding: Direct your proxy how to vote by marking one of the boxes opposite each item of business. If you do not mark a box your proxy may vote as they choose. If you mark more than one box on an item your vote will be invalid on that item.

Power of Attorney: If you have not already lodged the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please sign in the appropriate place to indicate the office held.

Voting a portion of your holding: Indicate a portion of your voting rights by inserting the percentage or number of securities you wish to vote in the For, Against or Abstain box or boxes. The sum of the votes cast must not exceed your voting entitlement or 100%.

Appointing a second proxy: You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you appoint two proxies you must specify the percentage of votes or number of securities for each proxy, otherwise each proxy may exercise half of the votes. When appointing a second proxy write both names and the percentage of votes or number of securities for each in Step 1 overleaf.

Attending the Meeting

Bring this form to assist registration. If a representative of a corporate securityholder or proxy is to attend the meeting you will need to provide the appropriate “Certificate of Appointment of Corporate Representative” prior to admission. A form of the certificate may be obtained from Computershare or online at www.computershare.com.

A proxy need not be a securityholder of the Company.

Comments & Questions: If you have any comments or questions for the company, please write them on a separate sheet of paper and return with this form.

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Turn over to complete the form

View your securityholder information, 24 hours a day, 7 days a week:

www.investorcentre.com

Your secure access information is:

Review your securityholding

SRN/HIN: I9999999999

Update your securityholding

PLEASE NOTE: For security reasons it is important that you keep your SRN/HIN confidential.

916CR_0_Sample_Proxy/000001/000002

MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

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Change of address. If incorrect, mark this box and make the correction in the space to the left. Securityholders sponsored by a broker (reference number commences with ’ X ’) should advise your broker of any changes. I 9999999999

I ND

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Proxy Form

Please mark

to indicate your directions

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Appoint a Proxy to Vote on Your Behalf

XX

I/We being a member/s of Southern Gold Limited hereby appoint

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the Chairman OR of the meeting

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PLEASE NOTE: Leave this box blank if you have selected the Chairman of the Meeting. Do not insert your own name(s).

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the General Meeting of Southern Gold Limited to be held at 47 Tynte Street, North Adelaide, South Australia 5006 on Friday 11 September 2009 at 10:00am (Adelaide Time) and at any adjournment of that meeting.

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Items of Business

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PLEASE NOTE: If you mark the Abstain box for an item, you are directing your proxy not to vote on your behalf on a show of hands or a poll and your votes will not be counted in computing the required majority.

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1 Approval of the sale of the Company's interest in Southern Uranium Limited.
2 Ratification of a prior issue of shares.

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The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business.

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Signature of Securityholder(s) This section must be completed.
Individual or Securityholder 1 Securityholder 2 Securityholder 3
Sole Director and Sole Company Secretary Director Director/Company Secretary
Contact
Contact Daytime
Name Telephone Date / /
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S A U

0 2 6 6 3 8 A

INVESTOR CENTRE www.investorcentre.com/au

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000001 000 SAU MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

FOR ALL ENQUIRIES CALL: (within Australia) 1300 556 161 (outside Australia) +61 3 9415 4000

ALL CORRESPONDENCE TO: Computershare Investor Services Pty Limited GPO Box 2975 Melbourne Victoria 3001 Australia Facsimile +61 3 9473 2500

IMPORTANT NOTICE

The default option for receiving your annual report has changed from a printed copy to be via our website. You have the choice of receiving notification about accessing your annual report online or continuing to receive a printed annual report.

MAKE YOUR SELECTION ON THE BACK OF THIS FORM

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Dear valued securityholder

LEGISLATION CHANGE - WHAT THIS MEANS FOR YOU

The Australian Government recently introduced legislation allowing the default option for receiving annual reports to be via a company’s website. You will now receive timely, cost effective and greener online annual reports unless you request a printed copy. You can choose to be notified by email when the annual report becomes available on our website at www.southerngold.com.au - otherwise this information will be provided in your AGM mail pack. All other securityholder communications will continue to be sent to you by post.

WHAT ARE YOUR OPTIONS?

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Elect to receive email notification when your annual report and other securityholder communications become available online.

Elect to continue receiving, free of charge, a printed copy of the annual report.

If you take no action, information on accessing your online annual report will be provided in your AGM mail pack.

If you have any questions about this form please contact an investor services representative on 1300 556 161.

Yours sincerely

N J Harding

Company Secretary

916CR_0_Sample_Proxy/000001/000003/i

I9999999999

0810

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MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

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LEADENHALL VRG PTY LTD

A.B.N. 11 114 534 619

C O R P O R A T E A D V I S E R S

Level 1, 31 Franklin Street, Adelaide, South Australia 5000 ADELAIDE: T (08) 8385 2200 MELBOURNE: T (03) 9600 4344 SYDNEY: T (02) 9262 9022 E-Mail: [email protected] Home Page: http://www.leadenhall.com.au

31 July 2009

The Board of Directors Southern Gold Limited 47 Tynte Street North Adelaide SA 5006

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Valuation Research[®] Group

Dear Sirs

RE: Independent Expert Report and Financial Services Guide

1. INTRODUCTION

Southern Uranium Limited [“Southern Uranium” or “the Company”] is an Australian public company listed on the Official List of the Australian Securities Exchange Limited [“ASX”]. The principal activity of Southern Uranium is the exploration of gold uranium tenements in Australia. As at the date of this report, Southern Uranium had a market capitalisation of approximately $10.5 million[1] on an undiluted basis.

On 29 June 2008, Southern Gold Limited [“Southern Gold”] announced its intention to monetise its investment in Southern Uranium through an in-principle agreement with Talbot Group Holdings Pty Ltd [“Talbot”], CITIC Australia Pty Ltd [“CITIC”] and Southern Uranium in relation to a non-renounceable pro rata offer of its 39.1% interest in Southern Uranium to Southern Uranium’s shareholders at 5.5 cents per share [‘the Offer”]. The Offer will be underwritten by Talbot and CITIC.

In order to comply with ASX Listing Rule 10.10.2 and ensure that Southern Gold shareholders are fully informed as to whether or not to approve the Offer, Southern Gold’s directors have requested Leadenhall VRG Pty Ltd [“Leadenhall”] complete an independent expert report as to whether the divestment of Southern Gold’s stake in Southern Uranium is fair and reasonable to Southern Gold shareholders.

This letter is a summary of Leadenhall’s opinion as to the merits or otherwise of the Offer. This report should be considered in conjunction with and not independently of the information set out in the attached report.

1 All amounts denominated in Australian dollars (‘$’) unless specifically noted otherwise.

Leadenhall VRG Pty Ltd A.F.S. Licence No: 293586

Page 2

2. DESCRIPTION OF THE OFFER

Under the terms of the Offer, Southern Gold is offering its shareholding in Southern Uranium to all remaining shareholders of Southern Uranium by way of a pro rata non renounceable share offer at 5.5 cents per share.

At the date of this Report, Southern Gold holds 45 million of Southern Uranium’s 115 million shares on issue. Therefore, each remaining shareholder will be entitled to buy 0.643 shares of Southern Uranium for each Southern Uranium share they hold.

Talbot and CITIC are substantial shareholders of Southern Uranium, holding approximately 10.05 million and 10 million shares of Southern Uranium respectively. Talbot and CITIC have reached an agreement with Southern Gold to fully underwrite the Offer at 5.5 cents per share. Under this agreement, on the Offer closing date the shortfall of offered shares for which valid applications have not been received from Southern Uranium shareholders will be calculated. Talbot and CITIC will be notified of this shortfall and must each acquire 50% of the shortfall.

The Offer will raise $2.475 million less estimated expenses of $0.165 million, or net proceeds of $2.31 million.

2.1. Conditions of the Offer and Underwriting

The Offer and Underwriting are subject to a number of conditions up to the end of the Offer period, including:

the approval of shareholders of both Southern Uranium and Southern Gold;
all regulatory and other approvals, consents, clearances and permissions that are necessary in order to give effect to the transaction, including but not limited to approval under the Foreign Acquisitions and Takeovers Act 1975 (Cwth);
approval by the Board of CITIC Group, the ultimate parent company of CITIC.

2.2. Termination of the Underwriting Agreement

Either Southern Gold, Talbot or CITIC may terminate the Underwriting Agreement if the conditions of the Offer and underwriting, stated above, are not satisfied by 30 September 2009, or such later date agreed to by the parties.

3. SCOPE OF REPORT

This report has been prepared by Leadenhall for inclusion in Southern Gold’s Notice of Meeting to be issued to Southern Gold shareholders.

3.1. Technical Requirements

Pursuant to ASIC Regulatory Guide 111, “Content of expert reports” an offer is “fair” if:

“the value of the offer price or consideration is equal to or greater than the value of the securities the subject of the offer.”

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Pursuant to ASIC Regulatory Guide 111, an offer is reasonable if it is fair. It might also be reasonable if, despite being “not fair”, the expert believes that there are sufficient reasons for shareholders to accept the Offer in the absence of any higher bid before the close of the offer.

This report has been prepared by Leadenhall to assist the shareholders of Southern Gold in evaluating the offer. This report should not be used for any other purpose.

3.2. Factors considered in forming our opinion

We have valued Southern Uranium on the basis of the fair market value of Southern Uranium as a whole, being the price which an independent third party would likely be prepared to pay to acquire all of the Company’s issued shares. Fair market value is defined as the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arms length within a reasonable time frame.

In forming our opinion as to whether the Offer is fair, we have had regard to:

the assessed fair value of a fully diluted Southern Uranium share, including a premium for control but excluding any additional strategic / leverage premium to reflect the added benefit of one shareholder or a group of related shareholders gaining control over the cash in Southern Uranium;
a technical review and assessment of Southern Uranium’s exploration assets by Al Maynard & Associates. The scope of Al Maynard & Associates’ work was controlled by Leadenhall;
an analysis of recent trading in the shares of Southern Uranium, including liquidity and whether the most recent share prices are an appropriate reflection of the underlying share value;
an analysis of the share prices of comparable Australian exploration companies and relevant indices on the ASX from January 2008 to July 2009.

The above information was used to form a view as to the amount which an alternative acquirer might be willing to offer for Southern Gold’s shareholding in Southern Uranium or, alternatively, the amount that would be distributed to Southern Uranium shareholders in an orderly realisation of assets.

In assessing whether the Offer is fair, we have compared the price at which Southern Gold is offering its shares in Southern Uranium with our assessed value of a Southern Uranium share. If the price at which the shares are being offered is greater than the value of a Southern Uranium share, the transaction will be fair.

In assessing reasonableness of the Offer, we have considered a number of factors including:

the terms of the Offer;
the likelihood of an alternative buyer of the shares;

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the advantages and disadvantages of the Offer that may impact the shareholders of Southern Gold in the event that the Offer proceeds; and
the impact on Southern Gold if it does not proceed with the Offer.

3.3. Limitations and reliance on information

In preparing this report and arriving at our opinion, we have considered the information detailed in Appendix 2 of this report. Nothing in this report should be taken to imply that Leadenhall has verified any information supplied to us, or has in any way carried out an audit of the books of account or other records of Southern Gold or Southern Uranium for the purpose of this report.

Further, we note that an important part of the information base used in forming our opinion is comprised of the opinions and judgements of management. In addition, we have also had discussions with Southern Gold’s management in relation to the nature of the Company’s business operations, its specific risks and opportunities, its historical results and its prospects for the foreseeable future. This type of information has been evaluated through analysis, enquiry and review to the extent practical. However, such information is often not capable of external verification or validation.

We have no reason to believe that any material facts have been withheld from us but do not warrant that our inquiries have revealed all of the matters which an audit or extensive examination might disclose. The statements and opinions included in this report are given in good faith, and in the belief that such statements and opinions are not false or misleading.

The information provided to Leadenhall included budgeted/prospective financial information prepared by the management of Southern Gold. Whilst Leadenhall has relied upon this budgeted/prospective information in preparing this report, Southern Gold remains responsible for all aspects of this budgeted/prospective information. Achievement of budgeted/prospective results is not warranted or guaranteed by Leadenhall. Budgeted/prospective results are by their nature uncertain and are dependent on a number of future events that cannot be guaranteed. Actual results may vary significantly from the budgeted/prospective results relied on by Leadenhall. Any variations from budgeted/prospective results may affect our valuation and opinion.

We note that the forecast results prepared by Southern Gold do not include estimates as to the potential impact of any future emissions trading scheme [“ETS”] in Australia. As the structure and mechanism of any such ETS is unable to be reliably determined at this time, we have adopted Southern Gold’s position as to the impact of such a scheme upon the operations and financial results of Southern Gold in forming our opinion. We however cannot comment as to the position of Southern Uranium.

The opinion of Leadenhall is based on prevailing market, economic and other conditions at the date of this report. Conditions can change over relatively short periods of time. Any subsequent changes in these conditions could impact upon our opinion. We note that we have not undertaken to update our report for events or circumstances arising after the date of this report other than those of a material nature which would impact upon our opinion.

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3.4. Valuation approaches adopted

In assessing the value of Southern Uranium we have considered a range of valuation methods. ASIC Regulatory Guide 111 states that it is appropriate for independent experts to consider, amongst other methods of valuation, asset-based methodologies, DCF analysis and the application of earnings multiples.

The principal assets of Southern Uranium comprise cash and its interest in exploration assets in South Australia, Queensland, Northern Territory and Western Australia. The future profitability and operational life of such assets depend on the outcome of, inter alia, exploration and evaluation programmes that are not predictable.

In our experience, the most appropriate method for determining the value of companies similar to Southern Uranium is on the basis of the fair value of their underlying net assets. We have used the estimated net assets of Southern Uranium as at 30 June 2009 as the basis for our valuation.

ASIC Policy Statements envisage the use by an independent expert of specialists when valuing specific assets. To assist Leadenhall in the valuation of Southern Uranium’s exploration assets, Al Maynard & Associates were engaged to prepare an independent report providing a valuation of Southern Uranium’s exploration assets. A copy of Al Maynard & Associates’ report is attached to this report as Appendix 3.

Al Maynard & Associates’ report was prepared in accordance with the ValMin Code.

We have satisfied ourselves as to Al Maynard & Associates’ qualifications and independence from both Southern Uranium and Southern Gold and have placed reliance on their report.

We note that the valuation methodology of mineral properties, particularly early stage projects, is subjective. Accordingly, due to the various uncertainties inherent in the valuation process, Al Maynard & Associates has determined a range of values within which they consider the value of each of the exploration assets of Southern Uranium to lie. The valuations ascribed by Al Maynard & Associates to the exploration assets of Southern Uranium have been adopted in our report.

Other assets and liabilities of Southern Uranium have been incorporated in our valuation at book values unless noted otherwise.

4. SUMMARY OF OPINION

In order to assess whether the Offer is fair and reasonable we have considered the overall effect of the Offer on the shareholders of Southern Gold and formed a judgement as to whether the expected benefits to the shareholders of Southern Gold outweigh any disadvantages that may result.

In our opinion, the Offer is fair and reasonable.

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We have assessed the fair value of a share in Southern Uranium, excluding any discount for minority interest, to fall within the range of 4.74 cents to 4.80 cents, with a ‘preferred’[2] value of 4.77 cents, as shown in Table 1 below. In arriving at our valuation we have relied upon the report prepared by Al Maynard & Associates, the independent mineral specialist engaged by Southern Gold.

Table 1: Summary of assessed fair value of Southern Uranium

			Assessed values

	Section	Low	High Preferred
	reference	$000	$000 $000
Total exploration and evaluation assets Add: Net cash Other assets Plant and equipment Less: Trade and other payables Contingent liabilities Tax losses Total equity value (non-diluted) Add: proceeds from unlisted options exercised1 Total equity value after options (diluted) Number of shares Add: unlisted options exercised1 Diluted number of shares on issue Value per share (fully diluted)	10.4 10.5 10.5 10.5 10.5 10.6 10.7 Note 1	252 308 280 5,354 5,354 5,354 40 60 50 300 300 300 (500) (500) (500) - - - - - -
		5,446 5,522 5,484 - - -
		5,446 5,522 5,484 115,000,000 115,000,000 115,000,000 - - -
		115,000,000 115,000,000 115,000,000 0.0474 0.0480 0.0477

Note 1) Based on our range of assessed fair values for an undiluted Southern Uranium share, no options over unlisted shares are currently 'in the money' (refer to Section 8.15). Accordingly, we have assumed that no options will be converted into shares in our assessed values for a Southern Uranium share. Source: Leadenhall analysis

The consideration of 5.5 cents to be received for each Southern Uranium share represents a 15% premium to the preferred value of a Southern Uranium share, excluding any discount for minority interest. We note that if a discount for minority interest were applied, the offer would be more fair to shareholders of Southern Gold.

The value attributed to a share in Southern Uranium represents a discount to the price at which Southern Uranium shares traded in the period prior to the Offer. This reflects the independent analysis undertaken by Al Maynard & Associates, prevailing conditions in the uranium sector in Australia and the lack of liquidity in Southern Uranium shares, as described at Section 8.14 of this report. Due to the limited liquidity in Southern Uranium shares, its

2 The ‘preferred’ value is a mathematical calculation based on the ‘most likely’ value attributed by Al Maynard & Associates to the exploration assets plus the mid-point of the valuation range attributed to all other assets and liabilities.

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daily trading prices are of limited assistance in determining the value of a Southern Uranium share.

4.1. Advantages of the Offer

In reaching our opinion, we have performed an analysis of the likely advantages and disadvantages to Southern Gold shareholders of the Offer. We have considered whether there are other significant factors relating to the Offer which suggest that Southern Gold shareholders should accept the Offer in the absence of a higher offer. The principal factors considered by us are detailed below.

The prospect of an alternative offer for the Southern Uranium stake emerging in the near term is unlikely.

We have discussed the likelihood of alternative offers emerging for Southern Gold’s 39% stake in Southern Uranium with Southern Gold management, Southern Gold directors and uranium industry participants. We have been advised that no alternative offer for Southern Gold’s stake or for Southern Uranium as a whole has been announced at the date of this report.

There are impediments to a purchaser acquiring the 39% stake in Southern Uranium as:

if more than 20% of the voting interests are acquired then the acquirer would have to make a takeover offer – and that would only occur where they saw substantial opportunities in the exploration assets and had the wherewithal to make a takeover offer;
the existence of the Priority Agreement (refer Section 8.4) is seen as a deterrent to acquiring a controlling interest in Southern Uranium;
if 20% or less is acquired the acquirer could have another shareholder with a similar size stake and who may have differing views about the future direction and management of Southern Uranium; and
an acquirer would not acquire a substantial shareholding in Southern Uranium unless some congruence of goals would be able to be achieved with the Cornerstone Investors - CITIC and Talbot.

In our view, and based on discussions with industry participants, the prospect of a higher alternative offer emerging in the near term is unknown but is not expected for the reasons set out above. In the absence of an alternative offer for Southern Gold’s stake in Southern Uranium, Southern Gold may be unable to monetise its investment in Southern Uranium in the near future. In this regard reference should also be made to the liquidity issues discussed in Section 8.14 and the length of time it would take for an orderly disposal of the 39% stake through the market in the absence of corporate interest or special arrangements / sale.

Based on the terms of the Offer, Southern Gold is receiving a premium to the cash backing per share of Southern Uranium.

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Southern Uranium share as at 30 June 2009, attributing 0.84 cents per share value to Southern Uranium’s exploration assets.

Southern Uranium does not have any producing assets to bring enhanced cash flow to Southern Gold in the near term.

Southern Uranium does not have any projects which are in production and likely to generate cash flow for distribution to shareholders in the near term.

There are potential adverse implications of Southern Gold retaining its shareholding in Southern Uranium if alternative sources of development capital are not available.

Southern Gold held cash of $1.9 million as at 30 June 2009 and is budgeting average monthly total expenditure for the twelve months ended 30 June 2010 of approximately $0.3 million per month. At this rate of expenditure, Southern Gold’s current cash reserves will be depleted by January 2010.

The dilutionary effect of a further share placement by Southern Gold may result in lower net assets per Southern Gold share than will be the case after divestment of the Southern Uranium stake.

If Southern Gold does not monetise its investment in Southern Uranium it may raise additional capital through a further placement of shares to current and/or new investors.

The sale of Southern Gold’s stake in Southern Uranium will generate estimated net proceeds of $2.31 million ($2.475 million gross proceeds less estimated transaction costs of $0.165 million). As shown in Table 2 below, based on Southern Gold’s balance sheet as at 30 June 2009, this divestment will result in an increase in net assets per share from 9.58 cents to 10.97 cents.

In the current investment climate, we estimate that Southern Gold might be able to raise the same net proceeds via a share placement at a 20% discount to the lower of its closing price or 5 day VWAP. Assuming a placement price of 8 cents and 5% underwriting costs, this would require Southern Gold to issue an additional 30.395 million shares and, restating the carrying value of Southern Gold’s investment in Southern Uranium to its fair value of $2.475 million, net assets per share would increase from 9.58 cents to 10.47 cents.

Therefore, estimated net assets per share as a result of the transaction will be 0.5 cents higher if the required funds are raised via divestment of the Southern Uranium stake rather than a share placement.

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Table 2: Southern Gold estimated net assets per share

	Restated Restated
	Sell Southern Uranium Retain Southern Uranium
	Book value and do Placement
	30 Jun 09 30 Jun 091 30 Jun 092
Cash and cash equivalents Investment in Southern Uranium Other assets3 TOTAL ASSETS Less liabilities NET ASSETS Southern Gold shares outstanding Net Assets per share (cents)	1,961 4,271 4,271 3513 - 2,475 11,726 11,726 11,726 14,038 15,997 18,472
	560 560 560 13,478 15,437 17,912
	140,690,173 140,690,173 171,085,173 9.58 10.97 10.47

Notes:

1) Assuming net proceeds of $2.31M (gross proceeds of $2.475M less transaction costs of $0.165M)

2) Assuming net proceeds from placement of $2.31M (30.395M shares placed at 8 cents less 5% total costs) 3) Book value as at 31 December 2008

Source: Leadenhall analysis

4.2. Disadvantages of the Offer

Southern Gold will no longer have exposure to uranium exploration assets.

Southern Gold will no longer hold a stake in uranium exploration assets, one or more of which might become valuable depending on the outcome of further exploration and/or market conditions.

Southern Gold could be seen to be achieving less than a full price as it will be divesting its investment in Southern Uranium at a share price below the current market price.

4.3. Opinion

Having regard to the advantages and disadvantages of the Offer as summarised above, we are of the view that the advantages outweigh the disadvantages and therefore the Offer is fair and reasonable to the shareholders of Southern Gold.

An individual shareholder’s decision in relation to the Offer may be influenced by his or her particular circumstances. If in doubt the shareholder should consult an independent adviser.

This opinion should be read in conjunction with our detailed report which sets out our scope and findings.

4.4. General warning advice

This letter is a summary of Leadenhall’s opinion as to the merits or otherwise of the Offer. This opinion should be read in conjunction with, and not independently of, Leadenhall’s detailed report and appendices as attached.

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In forming our opinion, we have considered the interests of the shareholders as a whole. Our advice does not consider the financial situation, objectives or needs of Southern Gold’s individual shareholders.

Our report has been prepared in accordance with the relevant provisions of the Corporations Act and other applicable Australian regulatory requirements. This report has been prepared solely for the purpose of assisting Southern Gold shareholders in considering the Offer. We do not assume any responsibility or liability to any other party as a result of reliance on this report for any other purpose.

Yours sincerely

==> picture [186 x 59] intentionally omitted <==

T.O. Lebbon Director

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1.	Introduction ....................................................................................................................... 1
2.	Description of the Offer..................................................................................................... 2
3.	Scope of Report ................................................................................................................. 2
4.	Summary of opinion .......................................................................................................... 5
5.	Description of the Offer................................................................................................... 14
6.	Scope of the report .......................................................................................................... 14
7.	Uranium industry overview ............................................................................................. 18
8.	Profile of Southern Uranium ........................................................................................... 19
9.	Profile of Southern Gold ................................................................................................. 31
10.	Valuation of Southern Uranium ...................................................................................... 36
11.	Evaluation of the Offer .................................................................................................... 40

Index of Tables

Table 1: Summary of assessed fair value of Southern Uranium ......................................... 6 Table 2: Southern Gold estimated net assets per share ....................................................... 9 Table 3: Southern Uranium interests in joint ventures ..................................................... 22 Table 4: Summary of Southern Uranium’s historical financial performance ................. 23 Table 5: Summary of Southern Uranium’s historical financial position ......................... 25 Table 6: Estimate of Southern Uranium’s financial position as at 30 June 2009 ............ 25 Table 7: Summary of Southern Uranium’s equity raising activities since incorporation26 Table 8: Summary of Southern Uranium’s historical cash flow statements .................... 26 Table 9: Southern Uranium’s top ten shareholders ........................................................... 27 Table 10: Substantial shareholders ..................................................................................... 28 Table 11: Relative share price performance ....................................................................... 29 Table 12: Trading liquidity in Southern Uranium shares pre-announcement ................ 30 Table 13: Trading liquidity in Southern Uranium shares post-announcement ............... 31 Table 14: Southern Uranium unlisted options on issue ..................................................... 31 Table 15: Summary of Southern Gold’s financial performance ....................................... 33 Table 16: Summary of Southern Gold’s financial position ............................................... 34 Table 17: Summary of Southern Gold’s cash flow statements .......................................... 35 Table 18: Southern Gold’s top ten shareholders ................................................................ 36 Table 19: Substantial shareholders ...................................................................................... 36 Table 20: Summary of assessed fair market value of Southern Uranium ........................ 38 Table 21: Southern Gold estimated net assets per share ................................................... 42

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We provide financial product advice by virtue of an engagement to issue a report in connection with a financial product of another person. Our report will include a description of the circumstances of our engagement and identify the person who has engaged us. You will not have engaged us directly but will be provided with a copy of the report as a retail client because of your connection to the matter in respect of which we have been engaged to report.

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General Financial Product Advice

In our report we provide general financial product advice, not personal financial product advice, because it has been prepared without taking into account your personal objectives, financial situation or needs.

You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice. Where the advice relates to the acquisition or possible acquisition of a financial product, you should also obtain a product disclosure statement relating to the product and consider that statement before making any decision about whether to acquire the product.

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We charge fees for providing reports. These fees will be agreed with, and paid by, the person who engages us to provide the report. Fees will be agreed on either a fixed fee or time cost basis.

Except for the fees referred to above, neither Leadenhall, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

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All our employees receive a salary or are remunerated for time spent on assignments. No employees receive commission and no remuneration is dependent on the opinion expressed in a report.

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We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

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Mr Tim Lebbon, a Director of Leadenhall is also a Director of Paragon Advisory Pty Ltd, a company which is chaired by Mr Greg Boulton who is also Chairman of Southern Gold. This association does not affect the independence of this report.

Complaints resolution

Internal complaints resolution process

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing, addressed to Mr Simon Dalgarno, a Director of Leadenhall.

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A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service [“FOS”]. FOS is an independent company that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial services industry.

Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly at: Financial Ombudsman Service Limited, GPO Box 3, Melbourne Victoria 3001 or Toll free: 1 300 78 08 08 or by Facsimile: (03) 9613 6399.

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You may contact us using the contact details set out at the top of the letterhead on page 1 of this report.

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5. DESCRIPTION OF THE OFFER

The Offer will raise $2.475 million less estimated expenses of $0.165 million, or net proceeds of $2.31 million.

5.1. Conditions of the Offer and Underwriting

The Offer and Underwriting are subject to a number of conditions up to the end of the Offer period, including:

the approval of shareholders of both Southern Uranium and Southern Gold;
all regulatory and other approvals, consents, clearances and permissions that are necessary in order to give effect to the transaction, including but not limited to approval under the Foreign Acquisitions and Takeovers Act 1975 (Cwth);
approval by the Board of CITIC Group, the ultimate parent company of CITIC.

5.2. Termination of the Underwriting Agreement

6. SCOPE OF THE REPORT

6.1. Purpose

Southern Gold is offering its shareholding in Southern Uranium to all remaining shareholders of Southern Uranium by way of a pro rata non renounceable share offer at 5.5 cents per share.

The value of the consideration to be received by Southern Gold for its 45 million shares in Southern Uranium at the offer price is $2,475,000. The shareholding is a substantial asset of Southern Gold because the value of the consideration is greater than 5% of the equity

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interests of Southern Gold of $11,295,979 as set out in the Southern Gold accounts as at 31 December 2008 (ASX Listing Rule 10.2).

A substantial shareholder is one which has a relevant interest in at least 10% of the total votes attached to the voting securities of the company. Talbot is a substantial shareholder of Southern Gold because it holds a relevant interest (23.24%) in the total votes attached to the voting securities of Southern Gold.

As Southern Gold’s shareholding in Southern Uranium is a substantial asset of Southern Gold and part of it is being divested to a substantial shareholder of Southern Gold, among others, pursuant to ASX Listing Rule 10.10.2, an independent expert report is required to be included in the documentation to be sent to Southern Gold shareholders.

The number and value of shares in Southern Uranium to be obtained by Talbot is not known as at the date of this report. The range could be between 6.4 million and 22.5 million shares in Southern Uranium and will be dependent upon the extent to which the Offer is taken up by other Southern Uranium shareholders.

6.2. Technical requirements

Pursuant to ASIC Regulatory Guide 111, “Content of expert reports” an offer is “fair” if:

“the value of the offer price or consideration is equal to or greater than the value of the securities the subject of the offer.”

Pursuant to ASIC Regulatory Guide 111, an offer is reasonable if it is fair. It might also be reasonable if, despite being “not fair”, the expert believes that there are sufficient reasons for shareholders to accept the offer in the absence of any higher bid before the close of the offer.

This report has been prepared by Leadenhall to assist the shareholders of Southern Gold in evaluating the offer. This report should not be used for any other purpose.

6.3. Basis of the assessment of Southern Uranium

In forming our opinion as to whether the Offer is fair, we have had regard to:

the assessed fair value of a fully diluted Southern Uranium share, including a premium for control but excluding any additional strategic/ leverage premium to reflect the added benefit of one shareholder or a group of related shareholders gaining control over the cash in Southern Uranium;
a technical review and assessment of Southern Uranium’s exploration assets by Al Maynard & Associates;

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an analysis of recent trading in the shares of Southern Uranium, including liquidity and whether the most recent share prices are an appropriate reflection of the underlying share value;
an analysis of the share prices of comparable Australian exploration companies and relevant indices on the ASX from January 2008 to July 2009.

In assessing reasonableness of the Offer, we have considered a number of factors including:

the terms of the Offer;
the likelihood of an alternative buyer of the shares;
the advantages and disadvantages of the Offer that may impact the shareholders of Southern Gold in the event that the Offer proceeds; and
the impact on Southern Gold if it does not proceed with the Offer.

6.4. Limitations and reliance on information

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6.5. Disclosure of information

In preparing this report, Leadenhall has had access to all financial information considered necessary in order to provide the required analysis in respect of Southern Gold. However, Southern Gold has requested Leadenhall limit the disclosure of some commercially sensitive information relating to Southern Gold. This request has been made on the basis of the commercially sensitive and confidential nature of the operational and financial information of Southern Gold.

Leadenhall has not had access to internal or management information in respect of Southern Uranium and as such the information in this report has been limited to the type of information that is regularly placed into the public domain by Southern Uranium.

6.6. Reliance on technical expert

ASIC Regulatory Guides envisage the use by an independent expert of specialists when valuing specific assets. To assist Leadenhall in the valuation of Southern Uranium’s assets, Al Maynard & Associates were engaged to prepare an independent technical report providing a mineral valuation of the exploration assets of Southern Uranium. A copy of this report, dated 31 July 2009 is attached to this report as Appendix 3.

The Al Maynard & Associates report was prepared in accordance with the requirements of the AusIMM Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports (the ValMin Code).

We have satisfied ourselves as to Al Maynard & Associates’ qualifications and independence from Southern Gold and Southern Uranium and have placed reliance on their report.

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The valuation methodology adopted by Al Maynard & Associates was the empirical approach, as outlined in the report attached as Appendix 3.

Due to various uncertainties inherent in the valuation process, Al Maynard & Associates has determined a range of values within which they consider the value of each of the exploration assets of Southern Uranium to lie. The valuations ascribed by Al Maynard & Associates to the exploration assets of Southern Uranium have been adopted in our report.

7. URANIUM INDUSTRY OVERVIEW

7.1. Overview

Southern Uranium’s assets comprise primarily uranium exploration tenements in South Australia, Queensland, Northern Territory and Western Australia. Accordingly, developments in the uranium industry significantly impact the business operations of Southern Uranium.

7.2. Demand for Uranium

The outlook for the uranium market is robust due to high demand growth in China and the adverse environmental impact of fossil fuel consumption which has made nuclear energy more attractive.

According to the World Nuclear Association, there are 438 nuclear reactors operating in 30 countries with total capacity of 370,000 mega watts providing 15% of the world’s electricity. Forty three additional reactors are under construction, 108 are being formally planned and another 266 reported proposals are seeking construction approval.

The three strongest demand growth regions of the world are Russia, China and India. China has 11 reactors with 9GWe[3] capacity and the Chinese government has announced plans to expand capacity to 40GWe by 2020.

According to Ux Consulting Group, uranium production to support western reactors will need to expand by 47% from 2007 production levels of 107Mlbs[4] to 152Mlbs in 2010 and by almost 100% to 212Mlbs by 2015. Given that 60% of nuclear reactor demand is currently met by mine production, with increased mine requirements expected as the secondary supply of ex-weapons material is likely to decline from 2011, the uranium market is expected to remain tight for the next few years.

7.3. Supply of Uranium

The world’s uranium mines collectively produced 127 Mlbs of oxide in 2008 and are forecast to increase output by 13% year on year to approximately 144 Mlbs in calendar year 2009. Analyst consensus expects this output to increase by approximately 7% per annum until 2015.[5]

3 GWe = gigawatt electricity

4 Mlbs = million pounds

5 Source: Rodman & Renshaw Equity Research

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Uranium mine supply is highly consolidated, with the top 10 companies producing 90% of total output. Primary uranium supply includes:

McArthur River, Canada - the world’s largest operation, producing approximately 18 Mlbs per year or 17% of total mine supply from the world’s highest grade ore body;
Olympic Dam, South Australia – the world’s largest reserve (510 Mlb of oxide) and resource (approximately 30% of the world’s known resources); and
the following key projects:
Cigar Lake, Saskatchewan, Canada – the world’s largest known high-grade uranium deposit consisting of one mineral lease totalling 308 ha and another 25 contiguous mineral claims that cover 92,740 ha;
Imouraren, Niger – the largest uranium mine in Africa with a deposit covering 8 km by 2.5 km and containing 146,000 tonnes of measured and indicated uranium resources and an estimated mine life of 35 years. Mining is planned to start in 2012; and
Midwest, Saskatchewan, Canada – starting in 2011 and producing up to 8Mlb per year.

Secondary supply sources now account for 36% of the world’s total uranium supply and include highly enriched uranium, low enriched uranium, tailings, spent uranium fuel and mixed oxides.

Further information about the uranium industry is available on the Southern Uranium website.

8. PROFILE OF SOUTHERN URANIUM

8.1. Corporate background

Southern Uranium was formed by Southern Gold in July 2005 to house and manage Southern Gold’s uranium assets and explore, acquire and develop uranium resources in Australia. Southern Uranium was incorporated on 18 July 2005 and admitted to the ASX on 3 April 2007. Its principal activities include the development of a uranium exploration program in Australia while seeking uranium resource opportunities both in Australia and overseas. The Company’s objective is to establish, through exploration or acquisition, a quality uranium resource of greater than 10,000 tonnes U[3] O[8] , being the threshold size that management believes is appropriate for an economic uranium deposit that may be competitively developed.

8.2. Southern Uranium’s project portfolio

Southern Uranium’s primary focus in Australia is on the iron oxide copper gold uranium [“IOCGU”] and unconformity uranium styles that offer the best potential for large uranium resources. Its tenements are located in South Australia, Northern Territory, Western Australia and Queensland. A complete list of Southern Uranium’s tenements is contained in the technical expert report at Appendix 3.

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8.3. Project status

The following summarises the exploration status of Southern Uranium’s current projects[6] . For further detail, refer to Al Maynard & Associates’ report at Appendix 3.

8.3.1. South Australian projects

Jindivik Prospect

Gravity surveys, baseline interpretation and drilling.

Southern Gawler Arc

Baseline geochemical sampling and follow up drilling. Over 3,000 infill soil samples were collected in April and May 2009.

East Eyre Peninsula

Gravity detailing of Waxings Dam and Jungle Dam. Drill access to test 5 selected soil targets was delayed by difficulties in scheduling heritage surveys. The surveys are currently being conducted with aircore drilling anticipated in September.

Jumpuppy

Gravity surveying in 3Q 2008.

Streaky Bay

First pass gravity surveying is near completion. Initial drill targets have been identified.

South Vivian

Early stage gravity surveying was undertaken with interpretation still to be completed.

Yalbrinda South

Southern Uranium has given notice of withdrawal from this joint venture.

Warrior South

The process is ongoing to obtain access to drill the paleochannel targets. This project is under review by Southern Uranium management.

Challenger West

Prior drill results have been compiled and a proposal is being prepared to follow up the MegA prospect discovered during 2007.

The Southern Uranium June 2009 Quarterly Report stated that the Company has relinquished tenements with downgraded prospectivity in the wider Gawler Craton. It did not disclose the specific tenements relinquished.

8.3.2. Northern Territory projects

Rum Jungle

Geological interpretation and geophysical processing of acquired field data from 2007 are underway. Data from the collaborative AEM survey conducted with Geoscience Australia has not yet been received.

6 Sources: Southern Uranium website, Q3 and Q4 quarterly reports, company announcements

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Calvert Hills

Target priortisation was completed using the integrated geophysical datasets. The Company announced on 30 June 2009 that it had been allocated $75,000 under Round 2 of the NT Government’s Geophysical and Drilling Collaborations Program as a contribution towards the drill-testing of specified uranium targets at the Calvert Hills Project. Work and access permits are being finalised for the scheduled August drilling of six 200m percussion/diamond drillholes.

8.3.3. Queensland projects

Boulia / Cloncurry

One of six applications has been approved. No activity has been undertaken while the company awaits the grant of the highest priority tenement.

Pandanus West

The new airborne magnetic and radiometric data were interpreted and reconciled with the past drill data to refine target extensions to the historic prospects. Heritage consultations for drill access are in progress. Opportunities are being pursued to expand the ground holding in the area.

8.3.4. Western Australia projects

Three Springs

Southern Uranium has given notice of withdrawal from this joint venture.

8.4. Priority agreement with Cornerstone Investors

Southern Uranium has a Priority Agreement with CITIC and Talbot. Under this Agreement, Southern Uranium has granted to CITIC and Talbot rights of first refusal to acquire certain mining tenements in which Southern Uranium has or acquires interests. The term of the Priority Agreement is 10 years from 21 December 2007 unless all the parties agree to an extension.

8.5. Corporate structure

Southern Uranium has one wholly owned subsidiary, Sunthe Uranium Pty Ltd, which was incorporated in Australia and holds mineral exploration tenements.

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Southern Uranium had entered into the following joint ventures as at 30 June 2009[7] .

Table 3: Southern Uranium interests in joint ventures

		%
		Interest
		as at
		30-Jun-09
Challenger West Joint Venture	Palaeochannel uranium exploration	49%
Tallaringa JointVenture	Palaeochanneluraniumexploration	30%
	Iron Oxide Copper Gold Uranium exploration. Mega
	Hindmarsh Ltd (HMR) a 100% subsidiary of Mega
	Uranium earned in to 25% of the project during the
Southern Gawler Arc Joint	financial year through expenditure on exploration
Venture	activities in accordance with the JV agreement	75%
	Iron Oxide Copper Gold Uranium exploration.
	Uranium West Pty Ltd, a 100% subsidiary of Crescent
	Gold Ltd earned in to 25% of the project during the
	financial year through expenditure on exploration
Gawler Craton Joint Venture	activities in accordance with the JV agreement	75%
Kimba Joint Venture	Iron Oxide Copper Gold Uranium exploration (farm in)	0%
CalvertHills	Unconformity style Uraniumexploration(farm in)	0%
RumJungle	Unconformity style Uraniumexploration(farm in)	0%
PandanusWest	VolcanicHosted Uraniumexploration(farm in)	0%

As at 30 June 2009, Southern Uranium had given notice of withdrawal from the Yarlbrinda South Joint Venture and the Three Springs Joint Venture.

8.6. Financial performance

Southern Uranium’s audited financial results for the three years ended 30 June 2006, 2007 and 2008 and reviewed financial results for the six months to 31 December 2008 are summarised in the table below. We note that financial statements for the year ended 30 June 2009 have not been made available to us.

7 Source: Southern Uranium announcements, Q4 Quarterly Report

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Table 4: Summary of Southern Uranium’s historical financial performance

	Audited Audited Audited Unaudited
	Year ended Year ended Year ended 6 mths ended
	30 Jun 06 30 Jun 07 30 Jun 08 31 Dec 08
	$000 $000 $000 $000
Operating revenue Trading income Total operating revenue1 Employee benefits expense Administration expenses Exploration and evaluation expenses written off EBITDA2 Depreciation and amortisation EBIT3 Net interest income/(expense) Operating loss before income tax Income tax benefit/(expense) Operating loss after income tax	- - - -
	- - - - (50) (504) (307) - (218) (1,234) (619) - (11) (102) (102)
	- (278) (1,840) (1,029) - (1) (54) (67) - (279) (1,894) (1,095)
	- 141 680 294
	- (138) (1,214) (801) - (239) - -
	- (377) (1,214) (801)

Notes:

1) Revenue from operations excludes interest revenue

2) EBITDA means earnings before interest, tax, depreciation and amortisation
3) EBIT means earnings before interest and tax

Source: Southern Uranium’s audited 30 June 2007 and 2008 annual reports, Appendix 5B, half year financial statements as at 31 December 2008

Observations in relation to Southern Uranium’s historical financial performance are set out below:

Two years ended 30 June 2007

The Company was incorporated on 18 July 2005.
Southern Uranium spent approximately $103,000 on exploration between when the Company was established and 30 June 2007. Approximately $92,000 of this expenditure was capitalised on the basis that exploration activities had not reached a stage that permitted Southern Uranium to reasonably assess the existence of economically recoverable reserves.
The Company was admitted to the official list of the ASX on 3 April 2007 with the issue of 70 million fully paid shares at 20 cents each pursuant to the prospectus dated 19 February 2007.
The offer was fully subscribed, raising $14 million (before expenses) to fund exploration of the Company’s initial projects and provide administration and working capital.

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Southern Uranium earned net interest income of $0.14 million over the period.

Year ended 30 June 2008

During the year ended 30 June 2008, the Company focused on its exploration activities and entered into joint venture partnerships in South Australia, the Northern Territory, Queensland and Western Australia.
Southern Uranium spent approximately $2.1 million on exploration activities and $0.3 million on plant and equipment during the period.
The Company earned net interest income of approximately $0.7 million over the period.

Six months ended 31 December 2008

Southern Uranium undertook target selection work ahead of proposed intensive drilling activity planned for late in the second half of the financial year.
The Company spent approximately $1.5 million on further exploration activities and $0.1 million on plant and equipment during the period.
Southern Uranium earned approximately $0.3 million of net interest income over the period.

Southern Uranium had exploration expenditure of $0.9 million in the quarter ended 31 March 2009 and exploration expenditure of $0.5 million in the quarter ended 30 June 2009.[8] This expenditure is reflected in Southern Uranium’s estimated balance sheet at 30 June 2009 in Section 8.7.2.

8.7. Financial position

8.7.1. Historical reported financial position

Southern Uranium’s historical audited balance sheets as at 30 June 2006, 2007 and 2008, and reviewed balance sheet as at 31 December 2008 are summarised in the table below.

8 Source: Southern Uranium Q3 and Q4 reports

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Table 5: Summary of Southern Uranium’s historical financial position

	Audited Audited Audited Unaudited
	30 Jun 06 30 Jun 07 30 Jun 08 31 Dec 08
	$000 $000 $000 $000
Cash and cash equivalents Trade and other receivables Other assets Total current assets Exploration and evaluation assets Property, plant and equipment Other financial assets Total non-current assets TOTAL ASSETS Trade and other payables Total current liabilities TOTAL LIABILITIES NET ASSETS	- 12,914 9,565 7,278 - 86 869 15 - 2 - - 13,000 10,436 7,293
	- 1,244 3,463 5,095 - 62 270 298 - - 26 33
	- 1,306 3,759 5,426
	- 14,306 14,196 12,719 - 99 1,178 504
	- 99 1,178 504
	- 99 1,178 504
	- 14,208 13,018 12,215
Number of ordinary shares on issue Net assets per share (cents) Cash backing per share (cents)	115,000,000 115,000,000 115,000,000 NA 12.35 11.32 10.62 11.23 8.326.33

Source: Southern Uranium’s audited 30 June 2007 and 2008 annual reports, half year financial statements as at 31 December 2008

8.7.2. Estimated financial position as at 30 June 2009

Southern Uranium’s estimated (by Leadenhall) balance sheet as at 30 June 2009 is summarised in the table below.

Table 6: Estimate of Southern Uranium’s financial position as at 30 June 2009

	Estimated
	30 Jun 09
Note	$000
Cash and cash equivalents 1 Exploration and evaluation assets 2 Property, plant and equipment 3 Other assets 3 TOTAL ASSETS Trade and other payables 3 TOTAL LIABILITIES NET ASSETS	5,354 6,106 300 50
	11,810 500
	500
	11,310
Number of ordinary shares on issue Net assets per share (cents) Cash backing per share (cents) 4	115,000,000 9.84 4.66
Notes:

1) Balance as at 30 June 2009 per Appendix 5B

2) Adjusted for disclosed exploration spend in Q3 and Q4 of $553K and $458K respectively

3) Balance as at 31 December 2008

4) Subject to expenditure commitments

Source: Southern Uranium Q3, Q4 Quarterly Reports, Leadenhall analysis

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We note that a portion of Southern Uranium’s cash balance as at 30 June 2009 is likely to be committed for future expenditure. The June 2009 Mining Exploration Entity Quarterly Report notes that the estimated cash outflows for the next quarter (ending September 2009) on exploration and evaluation are $1.63 million.

The table below summarises Southern Uranium’s equity raising activities since incorporation.

Table 7: Summary of Southern Uranium’s equity raising activities since incorporation

			Total ordinary
			shares
Date	Capital issue	Change	outstanding
	Initial shares issued to Southern Gold on
18 July 2005	incorporation	100,000	100,000
31 October 2006	Equity settled share transfer to Southern Gold	44,900,000	45,000,000
19February2007	Issued pursuant to prospectus	70,000,000	115,000,000

Source: Southern Uranium annual reports

8.8. Summary of cash flow statements

Southern Uranium’s historical audited cash flows for each of the financial years ended 30 June 2006, 2007, 2008 and 2009 are summarised in the table below.

Table 8: Summary of Southern Uranium’s historical cash flow statements

	Audited Year ended Audited Year ended Audited Year ended Audited Year ended
	30 Jun 06 30 Jun 07 30 Jun 08 30 Jun 09
	$000 $000 $000 $000
Cash flows from operating activities Interest received Reimbursements from JV partners Payments to suppliers and employees Net cash flows from operating activities Cash flows from investing activities Payment for: Exploration expenditure Property, plant and equipment Net cash flows used in investing activities Cash flows from financing activities Proceeds from the issue of shares Share issue expenses Net cash flows from financing activities Net increase/ (decrease) in cash Cash at the beginning of the period Cash at the end of the period	- 141 680 401 - - - 869 - (265) (1,666) (1,575)
	- (124) (986) (305) - (103) (2,101) (3,773) - (63) (262) (133)
	- (166) (2,363) (3,906) - 14,000 - (795) - 13,205 - -
	- 12,914 (3,349) (4,211) - - 12,914 9,565
	- 12,914 9,565 5,354

Source: Southern Uranium’s audited 30 June 2007 and 2008 annual reports; Appendix 5B

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Movements in Southern Uranium’s net cash position over the period are principally the result of:

the Company’s initial public offer completed on 19 February 2007 which raised $14 million gross proceeds through the issue of 70 million fully paid up shares at 20 cents per share;
cash outflows of approximately $1.4 million to finance operations of the Company; and
cash outflows of approximately $6.5 million to finance the exploration activities of the Company.

8.9. Contingent liabilities

Southern Uranium had disclosed no material contingent liabilities as at the date of this report.

8.10. Taxation

As at 30 June 2008, Southern Uranium had unused tax losses of approximately $1.5 million, representing a potential future income tax benefit of approximately $451,000. These tax losses have not been brought to account by Southern Uranium on the basis that the Company does not consider it probable in accordance with accounting standards that future taxable profits will be available against which these tax losses can be utilised.

8.11. Share capital and ownership

Southern Uranium has 115 million fully paid shares on issue. Southern Uranium’s top ten shareholders as at 30 June 2009 are set out in the table below.

Table 9: Southern Uranium’s top ten shareholders

	Number of
Name	shares held % of Issued Capital
Southern Gold Limited Talbot Group Holdings Pty Ltd CITIC Australila Pty Ltd Mr Dezong Yuan ANZ Nominees Limited Mr Yu Xuan Yuan Dr Leon Eugene Pretorius Plaisance Pty Ltd Miss Yu Chuan Chen Boulevade Investments Pty Ltd Total shares held by top ten shareholders Other shareholders Total number of shares on issue	45,000,000 39.1% 10,049,406 8.7% 10,000,000 8.7% 1,973,393 1.7% 1,443,383 1.3% 1,246,996 1.1% 800,000 0.7% 725,000 0.6% 640,888 0.6% 600,000 0.5%
	72,479,066 63.0% 42,520,934 37.0%
	115,000,000 100.0%
Source: Southern Uranium Annual Reports, ASX announcements

Substantial shareholder notices have been received by the Company from the parties set out in the table below.

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Table 10: Substantial shareholders

	Number of
Name	shares held	% of Issued Capital
Southern Gold Limited	45,000,000	39.1%
Talbot Group Holdings Pty Ltd	10,049,406	8.7%
CITICAustralilaPtyLtd	10,000,000	8.7%
Source: Southern Uranium Annual Reports, ASX announcements

We note that Southern Uranium has a Priority Agreement with its two substantial shareholders, Talbot and CITIC, as described in Section 8.4 of this report.

8.12. Share price history

The figure below depicts Southern Uranium’s daily closing share price from listing on 3 April 2007 to 26 June 2009 (the last trading day prior to the offer) and the volume of shares traded expressed as a percentage of issued capital.

Figure 1: Southern Uranium’s share price and trading volume prior to the Offer

==> picture [391 x 208] intentionally omitted <==

----- Start of picture text -----

0.5
12%
0.45
0.4
10%
0.35
0.3 8%
0.25
6%
0.2
[share price (A$)] C [losing]
0.15 4%
e [ traded as a percentage of shares on issue]
0.1
2%
0.05 D [aily volum]
0 0%
Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09
Volume Southern Uranium
----- End of picture text -----

Significant announcements made by Southern Uranium since 3 April 2007 which may have impacted on its share price include:

3 July 2007 – Southern Uranium announced that Hindmarsh Resources Limited, a subsidiary of TSX-listed joint venture partner Mega Uranium had completed the first of its expenditure requirements in the Challenger West area.
30 October 2007 - Southern Uranium released its Quarterly Activities Report and management subsequently made presentations to a Mining Industry Conference and the Mining 2007 Resources Convention.
14 January 2009 – Southern Uranium announced that it had received encouraging assays for a small air core drill programme undertaken in December 2008 at the Jungle Dam project in South Australia.

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Southern Uranium’s share price has been generally correlated with the decline in the uranium spot price from mid 2007, as shown in the figure below.

Figure 2: Historical uranium prices

==> picture [317 x 18] intentionally omitted <==

==> picture [328 x 18] intentionally omitted <==

==> picture [328 x 19] intentionally omitted <==

==> picture [312 x 18] intentionally omitted <==

==> picture [330 x 20] intentionally omitted <==

Source: UxC.com.au

8.13. Relative share price performance

We summarise in the figure below the relative share price (represented by the closing price) performance of Southern Uranium versus the S&P/ASX 300 Metals and Mining Index and the S&P/ASX Small Resources Index between 9 January 2008 and 20 July 2009.

Table 11: Relative share price performance

==> picture [373 x 251] intentionally omitted <==

----- Start of picture text -----

140%
120%
100%
80%
60%
40%
20%
0%
SNU S&P/ASX 300 Metals and Mining Index S&P/ASX Small Resources Index
Source: IRESS, Bourse Data
----- End of picture text -----

The above figure indicates that:

Page 30

the share price of Southern Uranium, on a relative basis, generally underperformed both the S&P/ASX 300 Metals and Mining Index and the S&P/ASX Small Resources Index over the period; and
movement in the share price of Southern Uranium has been highly correlated to both indices, reflecting the decline in mining stocks generally over the period.

8.14. Liquidity history

An analysis of the volume of trading in Southern Uranium’s shares in the 12 month period up to 26 June 2009, being the last trading day prior to the announcement of the Offer, is set out in the table below.

Table 12: Trading liquidity in Southern Uranium shares pre-announcement

	Closing	Closing	Weighted
Period up to	share price	share price	average spread		Cumulative	As a % of
Offer date	(high)	(low)	% of	VWAP	volume	fully paid
	$	$	offer price	$	000s	shares issued
1 week	0.090	0.070	18.8%	0.071	578,900	0.5%
1 month	0.094	0.062	16.8%	0.080	1,773,200	1.5%
3 months	0.096	0.050	14.3%	0.077	3,029,800	2.6%
6 months	0.100	0.045	14.3%	0.067	3,818,400	3.3%
12 months	0.140	0.031	13.0%	0.082	9,780,700	8.5%

Source: Bourse data, Leadenhall analysis

Southern Uranium’s shares have exhibited limited liquidity over the 12 months prior to the Offer, as evidenced by the following:

over the 3 months prior to the Offer, there have been 20 trading days on which Southern Uranium did not trade; and
the average spread (as measured by the difference between the bid and offer price of Southern Uranium shares as a percentage of the offer price) ranged between 13% and 19% over the 12 months prior to the Offer.

Based on the above observations and the volume of Southern Uranium shares traded in the 12 month period prior to the Offer, we estimate that it may take 2 years or more to trade 45 million shares in Southern Uranium through the market. Therefore, a corporate sale of the Southern Uranium stake is the only reasonable alternative to disposing of the stake.

We note that given the limited liquidity in Southern Uranium shares, its daily trading prices are of limited assistance in determining the value of Southern Uranium shares.

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Table 13: Trading liquidity in Southern Uranium shares post-announcement

	Closing	Closing	Weighted			As a %
Period	share price	share price	average spread		Cumulative	of
29-Jun-09 to	(high)	(low)	% of	VWAP	Volume	Issued
29-Jul-09	$	$	offer price	$	000s	Capital
23 trading
days	0.092	0.062	8.9%	0.081	1,643,000	1.4%

Since the announcement of Southern Gold’s Offer on 29 June 2009, Southern Uranium has announced that the Company had been allocated $75,000 under Round 2 of the Northern Territory government’s Geophysical and Drilling Collaborations Program as a contribution towards the drill-testing of specified uranium targets at its Calvert Hills project.

8.15. Options

As at 30 June 2009, Southern Uranium had 9.8 million unlisted options on issue as set out in the table below.

Table 14: Southern Uranium unlisted options on issue

Number of options	Exercise price		Expiry date
	$
7,500,000		0.250	31/03/2010
2,000,000		0.250	2/04/2011
100,000		0.180	12/08/2012
100,000		0.184	23/09/2012
100,000		0.205	1/10/2012
9,800,000

Source: Southern Uranium Appendix 5B June 2009

No options on issue are in the money at the offer price of 5.5 cents per share and our valuation of 4.77 cents per share; therefore we have not taken them into account in our valuation of Southern Uranium shares.

9. PROFILE OF SOUTHERN GOLD

9.1. Corporate background

Southern Gold is a gold focused resources business with advanced exploration assets in Australia and Cambodia. Its key projects include the following:

South Australia

interest in a number of exploration licences in the Gawler Craton; and
a 260,000PJ[9] Geothermal Resource within GEL 302, which forms part of the Roxby Geothermal Project.

New South Wales

2 projects in the Grenfell and Eurow-Vychan areas along Coolac Narromine Fault Zone.

9 PJ = peta joule

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Western Australia

exploration in the Bulong South Project which hosts gold and nickel in granite and komatiite of the Wiluna-Norseman greenstone belt in the Archaean Yilgarn Craton.

Cambodia

a large prospective land position in the eastern provinces of the Kingdom of Cambodia; and
exploration on 3 of Southern Gold’s 7 tenements which is being fully funded by the Japanese Government-backed JOGMEC pursuant to a joint venture agreement whereby JOGMEC can fully fund exploration activity to a total of US$4.5 (~A$7) million over 3 years to earn a 51% interest in the tenements. The 3 tenements covered by this joint venture include Phnum Khtong (Kratie North Project), and two adjoining blocks, Preak Khlong and O’Kthung (Kratie South Project).

On 29 June 2009, Southern Gold completed a placement of 16 million ordinary shares and 1.5 million options expiring 29 June 2012 with an exercise price of 15 cents. The funds raised will allow Southern Gold to progress its current exploration programs in both Australia and Cambodia.

In Australia, Southern Gold’s exploration programme primarily involves:

follow-up reverse circulation and diamond drilling on the Challenger Area Gold Project in South Australia. Drilling commenced in July 2009, following previous high-grade gold intersections;
follow-up drilling on the Bulong Gold and Nickel Sulphide Project in Western Australia to test broad gold intersections discovered at the Monument and Cannon Prospects, and nickel sulphides at the Euston Prospect; and
advancing development of inferred geothermal resource within the Roxby Geothermal Project in South Australia.

In Cambodia, Southern Gold will undertake further exploration on all tenements.

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9.2. Financial performance

We set out below Southern Gold’s financial performance for the 4 years ended 30 June 2009, showing that Southern Gold has been loss making over the period.

Table 15: Summary of Southern Gold’s financial performance

	Audited Audited Audited Unaudited
	Year ended Year ended Year ended Year ended
	30 Jun 06 30 Jun 07 30 Jun 08 30 Jun 09
	$000 $000 $000 $000
Operating revenue Trading income Total operating revenue1 Employee benefits expense Administration expenses Exploration expenses written off EBITDA2 Depreciation and amortisation EBIT3 Share of Southern Uranium loss Net interest income/(expense) Operating loss before income tax Income tax benefit/(expense) Operating loss after income tax	15 28 131 196
	15 28 131 196 (139) (634) (874) (895) (673) (846) (1,229) (1,200) (17) (69) (787) (730) (815) (1,521) (2,760) (2,630) (16) (23) (46) (90) (831) (1,544) (2,806) (2,720)
	- (147) (473) (314)
	136 179 207 36
	(695) (1,511) (3,072) (2,997) - - (33) -
	(695) (1,511) (3,104) (2,997)

Notes:

1) Revenue from operations excludes interest revenue
2) EBITDA means earnings before interest, tax, depreciation and amortisation
3) EBIT means earnings before interest and tax

Source: Southern Gold's audited 30 June 2007 and 2008 Annual Reports, management accounts, management estimates of full year depreciation and exploration expenses written off in FY2009

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9.3. Financial position

Southern Gold’s historical audited balance sheets as at 30 June 2006, 2007 and 2008, and unaudited balance sheet as at 30 June 2009 are summarised in the table below.

Table 16: Summary of Southern Gold’s financial position

	Audited Audited Audited Unaudited
	30 Jun 06 30 Jun 07 30 Jun 08 30 Jun 09
	$000 $000 $000 $000
Cash and cash equivalents Trade and other receivables Other financial assets Total current assets Exploration and evaluation assets Plant and equipment Investment in Southern Uranium Total non-current assets TOTAL ASSETS Trade and other payables Provision for employee entitlements Total current liabilities Provision for employee entitlements Deferred income Total non-current liabilities TOTAL LIABILITIES NET ASSETS	1,991 3,541 1,735 1,961 77 165 536 290 14 90 336 324
	2,083 3,796 2,606 2,575 1,822 4,672 9,757 10,968 53 94 170 144 - 1,129 665 351
	1,876 5,895 10,593 11,464
	3,958 9,691 13,199 14,038 236 381 512 516 22 44 109 10
	257 425 620 526 9 4 18 20 74 16 14 14
	83 21 32 34
	340 446 652 560
	3,618 9,245 12,547 13,478
Number of ordinary shares on issue Net assets per share (cents) Cash backing per share (cents)	45,904,221 74,285,074 92,517,051 140,690,173 7.88 12.45 13.56 9.58 4.34 4.77 1.87 1.39

Source: Southern Gold's audited 30 June 2007 and 2008 annual reports, Southern Gold management reports

9.4. Summary of cash flow statements

Southern Gold’s historical audited cash flows for each of the financial years ended 30 June 2006, 2007 and 2008 as well as unaudited cash flows for the year ended 30 June 2009 are summarised in the table below.

Page 35

Table 17: Summary of Southern Gold’s cash flow statements

	Year ended Year ended Year ended Year ended
	30 Jun 06 30 Jun 07 30 Jun 08 30 Jun 09
	$000 $000 $000 $000
Cash flows from operating activities Interest received Management fees and customer receipts Payments to suppliers and employees Net cash flows from operating activities Cash flows from investing activities Government grants received Payment for exploration expenditure Reimbursed from co-venturers Payment for plant and equipment Net cash flows used in investing activities Cash flows from financing activities Proceeds from the issue of shares Share issue expenses Net cash flows from financing activities Net increase/ (decrease) in cash Cash at the beginning of the period Cash at the end of the period	138 178 198 46 - - - (676) (1,158) (1,527) (1,664)
	(537) (981) (1,329) (1,618) 74 - - - (1,313) (3,645) (7,875) (1,199) 35 46 1,710 - (57) (63) (122) (3)
	(1,261) (3,754) (6,286) (1,202) 937 6,386 5,918 3,118 - (101) (109) (72)
	937 6,285 5,809 3,046
	(861) 1,550 (1,806) 226 2,852 1,991 3,541 1,735
	1,991 3,541 1,735 1,961

Source: Southern Gold’s audited 30 June 2007 and 2008 annual reports, Appendix 5B

9.5. Southern Gold budget and projected cash burn

Southern Gold’s draft budget for the 12 months ending 30 June 2010 forecasts total exploration spend of approximately $2.3 million and total administration spend of approximately $1.7 million during the period. Average monthly total expenditure over the period is forecast to be approximately $0.3 million per month. Southern Gold’s cash balance of $1.9 million at 30 June 2009 will be depleted in January 2010.

9.6. Contingent liabilities

Southern Gold management has advised that it has no material contingent liabilities at the date of this report.

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9.7. Share capital and ownership

Southern Gold has 140.7 million fully paid shares on issue. Southern Gold’s top ten shareholders as at 25 July 2009 are set out in the table below.

Table 18: Southern Gold’s top ten shareholders

	Number of
Name	shares held % of Issued Capital
Talbot Group Holdings Pty Ltd CITIC Australia Pty Ltd Macquarie Bank Limited ANZ Nominees National Nominees Cameron Stockbrokers Ltd Mr John Alexander Genex Resources Pty Ltd Dr Leon Eugene Pretorius Michael Walsh McDonald Total shares held by top ten shareholders Other shareholders Total numberofshares on issue	31,029,403 23.24% 6,473,000 4.60% 4,423,077 3.14% 4,142,530 2.94% 4,110,500 2.92% 3,500,000 2.49% 2,522,727 1.79% 2,257,727 1.60% 2,000,000 1.42% 1,714,320 1.22%
	62,173,284 44.19% 78,516,889 55.81%
	140,690,173 100.00%

Source: Southern Gold Annual Reports, ASX announcements

Substantial shareholder notices have been received by the Company from the parties set out in the table below.

Table 19 : Substantial shareholders

	Number of
Name	shares held	% of Issued Capital
Talbot Group Holdings Pty Ltd	31,029,403	23.24%

Source: Southern Gold Annual Reports, ASX announcements

10. VALUATION OF SOUTHERN URANIUM

10.1. Valuation methodology

In our experience, the most appropriate method for determining the value of companies similar to Southern Uranium is on the basis of the fair value of their underlying net assets.

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We have used the estimated net assets of Southern Uranium as at 30 June 2009 as the basis for our valuation.

ASIC Policy Statements envisage the use by an independent expert of specialists when valuing specific assets. To assist Leadenhall in the valuation of Southern Uranium’s exploration assets, Al Maynard & Associates were engaged to prepare an independent report providing a valuation of Southern Uranium’s exploration targets and other exploration assets. A copy of Al Maynard & Associates’ report is attached to this report as Appendix 3.

Al Maynard & Associates’ report was prepared in accordance with the ValMin Code.

We have satisfied ourselves as to Al Maynard & Associates’ qualifications and independence from both Southern Uranium and Southern Gold and have placed reliance on their report.

Other assets and liabilities of Southern Uranium have been incorporated in our valuation at book values unless noted otherwise.

10.2. Valuation summary

We have assessed the fair value of Southern Uranium to lie in the range of $5.446 million to $5.522 million, with a ‘preferred value’ of $5.484 million, which equates to an assessed fair value per Southern Uranium share of between approximately 4.74 cents to 4.80 cents, with a ‘preferred value’ of 4.77 cents. Our range of assessed fair values represents the value based on a 100 percent interest in Southern Uranium.

We have assessed the value of Southern Uranium by aggregating the estimated market value of Southern Uranium’s exploration assets, adding the assessed value of other assets considered to be surplus to the current exploration assets of the Company and, if appropriate, deducting any relevant liabilities. The value of Southern Uranium’s business operations has been assessed on the basis of fair market value, that is, the value that would be negotiated between a knowledgeable and willing, but not anxious buyer, and a knowledgeable and willing, but not anxious seller, acting in an arm’s length transaction, where both buyer and seller are fully informed.

In forming our view as to value, we have relied upon the valuation of Southern Uranium’s exploration asset portfolio prepared by Al Maynard & Associates. In arriving at his range of assessed values for Southern Uranium’s exploration assets, Al Maynard & Associates considered various scenarios for each of the exploration assets. An overview of Al Maynard & Associates’ valuation results, adopted methodologies and assumptions is set out in Al Maynard & Associates’ report which is included at Appendix 3.

Set out in the table below is a summary of the range of fair market values at which Southern Uranium’s shares have been assessed.

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Table 20: Summary of assessed fair market value of Southern Uranium

			Assessed values

Total exploration and evaluation assets Add: Net cash Other assets Plant and equipment Less: Trade and other payables Contingent liabilities Tax losses Total equity value (non-diluted) Add: proceeds from unlisted options exercised1 Total equity value after options (diluted) Number of shares Add: unlisted options exercised1 Diluted number of shares on issue Value per share (fully diluted)	Section	Low	High Preferred
	reference	$000	$000 $000
	10.4 10.5 10.5 10.5 10.5 10.6 10.7 Note 1	252 5,354 40 300 (500) - -	308 280 5,354 5,354 60 50 300 300 (500) (500) - - - -
		5,446 -	5,522 5,484 - -
		5,446 115,000,000 -	5,522 5,484 115,000,000 115,000,000 - -
		115,000,000 0.0474	115,000,000 115,000,000 0.0480 0.0477
Note 1) Based on our range of assessed fair values for an undiluted Southern Uranium share, no options over unlisted shares are currently 'in the money' (refer to Section 8.15). Accordingly, we have assumed that no options will be converted into shares in our assessed values for a Southern Uranium share.
Source: Leadenhall analysis

Our range of assessed fair values is narrow, reflecting the fact that Southern Uranium’s asset base predominantly comprises cash and exploration assets and Al Maynard & Associates has valued this portfolio of exploration assets in a narrow range.

10.3. Premium for control

It is generally acknowledged that in order to acquire a controlling interest in a listed entity, the acquirer must pay a premium over and above the price at which the shares in the target are traded on the ASX prior to the announcement of the offer. This is because the trades on the ASX are for small minority parcels of shares and thus suffer from a minority discount. The converse of a minority discount is termed a premium for control. This premium reflects the benefits which the acquirer achieves through controlling the Board of the company and by extension its cash flow. When assessing the value of an entity as though all the shares are available for purchase the assessed value automatically includes such premium unless specific adjustments are made.

The benefits of a controlling interest typically may include:

control over the cash flows of the company;
control over dividend decisions; and
control over the future direction of the company.

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Through its 39% interest in Southern Uranium, Southern Gold does not hold a 100% interest in the Company but holds a large enough position to elect [potentially] one or more directors to the Board of Southern Uranium and have significant input into the future direction of the Company. Therefore, we have included a premium for control in our preferred valuation range.

We have not applied a minority discount to the assessed range as the 39% parcel in the hands of a single shareholder should be sufficient to prevent any adverse decisions being made against the interests of Southern Gold. This is particularly so where the next two shareholders combined hold approximately 17.4% and thereafter the next largest shareholder has 1.7%.

We note, however, that Southern Gold does not have a seat on the Board of Southern Uranium and therefore does not currently exert control over the Company.

10.4. Valuation of exploration assets

Al Maynard & Associates has valued Southern Uranium’s exploration assets in the range of $252,000 to $308,000 with a ‘preferred value’ of $280,000. In assessing the values for each of the assets, Al Maynard & Associates considered accepted methods for valuing such assets as described in their report at Appendix 3.

10.5. Other assets

Net assets not valued as part of Southern Uranium’s exploration assets comprise cash, various trade and other receivables, plant and equipment, and payables. The valuation of these assets has been estimated by Leadenhall based on Southern Uranium’s financial statements as at 31 December 2008 and subsequent ASX announcements.

10.6. Off balance sheet items

Southern Uranium has not announced any contingent assets or liabilities to the market since release of its most recent financial statements as at 31 December 2008. Consequently, we have included no off balance sheet items in our valuation.

10.7. Tax losses

We have not included any value in respect of carry forward tax losses as Southern Uranium does not expect to be in a position to utilise these losses in the short to medium term.

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11. EVALUATION OF THE OFFER

The primary matter considered by us in forming this opinion was whether the Consideration offered for Southern Gold’s stake in Southern Uranium, being 5.5 cents per Southern Uranium share, reflects a fair consideration.

In our opinion, the Offer is fair and reasonable.

We have assessed the fair value of a share in Southern Uranium, excluding any discount for minority interest, to fall within the range of 4.74 cents to 4.80 cents, with a ‘preferred’[10] value of 4.77 cents, as shown in Table 20 above. In arriving at our valuation we have relied upon the report prepared by Al Maynard & Associates, the independent mineral specialist engaged by Southern Gold.

11.1. Advantages of the Offer

The prospect of an alternative offer for the Southern Uranium stake emerging in the near term is unlikely.

10 The ‘preferred’ value is a mathematical calculation based on the ‘most likely’ value attributed by Al Maynard & Associates to the exploration assets plus the mid-point of the valuation range attributed to all other assets and liabilities.

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Gold’s stake or for Southern Uranium as a whole has been announced at the date of this report.

There are impediments to a purchaser acquiring the 39% stake in Southern Uranium as:

if more than 20% of the voting interests are acquired then the acquirer would have to make a takeover offer – and that would only occur where they saw substantial opportunities in the exploration assets and had the wherewithal to make a takeover offer;
the existence of the Priority Agreement (refer Section 8.4) is seen as a deterrent to acquiring a controlling interest in Southern Uranium;
if 20% or less is acquired the acquirer could have another shareholder with a similar size stake and who may have differing views about the future direction and management of Southern Uranium; and
an acquirer would not acquire a substantial shareholding in Southern Uranium unless some congruence of goals would be able to be achieved with the Cornerstone Investors - CITIC and Talbot.

Based on the terms of the Offer, Southern Gold is receiving a premium to the cash backing per share of Southern Uranium.

We estimate that Southern Uranium cash backing per share as at 30 June 2009 was 4.66 cents as described at Section 8.7.2 of this Report. The Consideration of 5.5 cents per Southern Uranium share therefore represents an 18% premium to the estimated cash backing per Southern Uranium share as at 30 June 2009, attributing 0.84 cents per share value to Southern Uranium’s exploration assets.

Southern Uranium does not have any producing assets to bring enhanced cash flow to Southern Gold in the near term.

Southern Uranium does not have any projects which are in production and likely to generate cash flow for distribution to shareholders in the near term.

There are potential adverse implications of Southern Gold retaining its shareholding in Southern Uranium if alternative sources of development capital are not available.

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The dilutionary effect of a further share placement by Southern Gold may result in lower net assets per Southern Gold share than will be the case after divestment of the Southern Uranium stake.

If Southern Gold does not monetise its investment in Southern Uranium it may raise additional capital through a further placement of shares to current and/or new investors.

The sale of Southern Gold’s stake in Southern Uranium will generate estimated net proceeds of $2.31 million ($2.475 million gross proceeds less estimated transaction costs of $0.165 million). As shown in Table 21 below, based on Southern Gold’s balance sheet as at 30 June 2009, this divestment will result in an increase in net assets per share from 9.58 cents to 10.97 cents.

Table 21: Southern Gold estimated net assets per share

	Restated Restated
	Sell Southern Uranium Retain Southern Uranium
	Book value and do Placement
	30 Jun 09 30 Jun 091 30 Jun 092
Cash and cash equivalents Investment in Southern Uranium Other assets3 TOTAL ASSETS Less liabilities NET ASSETS Southern Gold shares outstanding Net Assets per share (cents)	1,961 4,271 4,271 3513 - 2,475 11,726 11,726 11,726 14,038 15,997 18,472
	560 560 560 13,478 15,437 17,912
	140,690,173 140,690,173 171,085,173 9.58 10.97 10.47

Notes: 1) Assuming net proceeds of $2.31M (gross proceeds of $2.475M less transaction costs of $0.165M) 2) Assuming net proceeds from placement of $2.31M (30.395M shares placed at 8 cents less 5% total costs) 3) Book value as at 31 December 2008

Source: Leadenhall analysis

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11.2. Disadvantages of the Offer

Southern Gold will no longer have exposure to uranium exploration assets.

Southern Gold will no longer hold a stake in uranium exploration assets, one or more of which might become valuable depending on the outcome of further exploration and/or market conditions.

Southern Gold could be seen to be achieving less than a full price as it will be divesting its investment in Southern Uranium at a share price below the current market price.

11.3. Opinion

An individual shareholder’s decision in relation to the Offer may be influenced by his or her particular circumstances. If in doubt the shareholder should consult an independent adviser.

This opinion should be read in conjunction with our detailed report which sets out our scope and findings.

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Appendix 1 – Leadenhall Disclosures

Qualifications and declarations

Leadenhall

The individuals responsible for preparing this report on behalf of Leadenhall are Tim Lebbon and Sarah Emms. Each has a significant number of years of experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of expert reports.

Tim Lebbon is the Chairman of Leadenhall VRG Pty Ltd. He started the consultancy practice of Leadenhall in 1982. Tim has a depth of experience in strategic planning, corporate development, evaluation, financing and investment. He has undertaken many valuation assignments, independent expert reports and concluded successfully a number of purchases and sales of companies / businesses. He is co-author of the major reference work, Australian Valuation Handbook.

Sarah Emms is a Senior Advisor of Leadenhall, having joined the practice in 2009. She has over nine years experience in the preparation of valuations of shares and businesses as well as divestment and acquisition mandates across a broad range of industries. Sarah is a Chartered Financial Analyst.

Disclaimers

It is not intended that this report should be used or relied upon for any purpose other than Leadenhall’s opinion as to whether the Offer is fair and reasonable for Southern Gold’s shareholders. Leadenhall expressly disclaims any liability to any Southern Gold shareholder who relies or purports to rely on the report for any other purpose and to any other party, who relies or purports to rely on the report for any purpose whatsoever. Further, recipients of this report should be aware that it has been prepared without taking account of their individual objectives, financial situation or needs. This engagement has been conducted in accordance with professional standard APES 225 Valuation Services issued by APESB.

Other than this report, Leadenhall has not been involved in the preparation of any documentation prepared in respect of the Offer. Accordingly, we take no responsibility for the content of offer documentation as a whole or other documents prepared in respect of the Offer.

Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Leadenhall has relied upon, among other things, the information provided by Southern Gold and its officers, employees, agents or advisors, as well as other publicly available information which Leadenhall believes, on reasonable grounds, to be reliable, complete and not misleading. Leadenhall does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. To the extent that this report refers to prospective financial information, we have considered the prospective financial information and basis of the underlying assumptions. The procedures involved in Leadenhall’s consideration of this information consisted of enquiries of Southern Gold personnel and analytical procedures applied to the financial data. These procedures and enquiries did not include verification work nor constitute an audit or a review engagement in accordance with standards issued by the Auditing and Assurance Standards Board.

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Based on these procedures and enquiries, Leadenhall considers that there are reasonable grounds to believe that the prospective financial information included in this report has been prepared on a reasonable basis. In relation to the prospective financial information, actual results may differ from prospective financial information since anticipated events frequently do not occur as expected and the variation may be material. The achievement of the prospective financial information is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the prospective financial information will be achieved.

Independence

Leadenhall is entitled to receive a fee based on time spent for the preparation of this report. This is expected to be approximately $28,000, excluding GST, Except for these fees, Leadenhall has not received and will not receive any pecuniary or other benefit whether direct or indirect for or in connection with the preparation of this report.

Employees of Leadenhall may hold securities in Southern Gold and/or Southern Uranium. However, no individual involved in the preparation of this report, or review thereof, holds any interest in the securities of Southern Gold or Southern Uranium. With the exception of these matters, Leadenhall will not receive any other benefits, whether directly or indirectly, for or in connection with the making of this report.

During the course of this engagement, Leadenhall provided draft copies of this report to management of Southern Gold for comment as to factual accuracy, as opposed to opinions, which are the responsibility of Leadenhall alone. Changes made to this report as a result of these reviews have not changed the opinions reached by Leadenhall.

Consent

Leadenhall consents to the inclusion of this report in the form and context in which it is included with the offer documentation to be issued to the shareholders of Southern Gold. Neither the whole nor any part of this report nor any reference thereto may be included in any other document without the prior written consent of Leadenhall as to the form and context in which it appears.

Indemnity

Southern Gold has agreed to indemnify and hold harmless Leadenhall against any and all losses, claims, costs, expenses, actions, demands, damages, liabilities or any other proceedings, whatsoever incurred by Leadenhall in respect of any claim by a third party arising from or connected to any breach by you of your obligations.

Southern Gold has also agreed that Leadenhall shall not be liable for any losses, claims, expenses, actions, demands, damages, liabilities or any other proceedings arising out of reliance on any information provided by it or any of its representatives, which is false, misleading or incomplete. The Company has agreed to indemnify and hold harmless Leadenhall from any such liabilities we may have to it or any third party as a result of reliance by Leadenhall on any information provided by Southern Gold or any of its representatives, which is false, misleading or incomplete.

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Appendix 2 – Sources of information

In preparing this report we have been provided with and considered the following sources of information:

Publicly available information

Southern Gold and Southern Uranium audited financial statements and quarterly reports for the last three financial years, along with supporting schedules and notes thereto;
Various ASX company announcements for Southern Gold and Southern Uranium;
Various broker and analyst reports;
Various press and media articles;
Financial information sourced from The Bourse;
Various websites including World Nuclear Association, The Ux Consulting Company, Areva and Infomine;

Non-public information

Copies of prospective financial information prepared by Southern Gold including cash flow forecasts to 30 June 2010;
The Priority Agreement between Southern Uranium, Talbot and CITIC;
The Cornerstone Investment Agreement between Southern Uranium, Talbot and CITIC;
The Underwriting Agreement between Southern Gold, Talbot and CITIC;
Discussions with various potential purchasers of the Southern Uranium stake.

In addition, we have had discussions with Southern Gold and Southern Uranium management, restricted to matters of factual accuracy.

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Appendix 3 – Technical expert report

AL MAYNARD & ASSOCIATES Pty Ltd Consulting Geologists

www.geological.com.au

www.geological.com.au ABN 75 120 492 435 9/280 Hay Street, Tel: (+618) 9388 1000 Mob: 04 0304 9449 SUBIACO, WA, 6008 Fax: (+618) 9388 1768 A/h: (618) 9443 3333 Australia [email protected] Australian & International Exploration & Evaluation of Mineral Properties

INDEPENDENT APPRAISAL

AND

VALUATION

OF

EXPLORATION ASSETS

HELD BY

SOUTHERN URANIUM LTD

JULY, 2009.

PREPARED FOR

LEADENHALL VRG PTY LTD

Author: Allen J Maynard BAppSc(Geol), MAIG, MAusIMM Company; Al Maynard & Associates Pty Ltd Date 31[st] July, 2009

Southern Uranium – Independent Appraisal – AM&A

EXECUTIVE SUMMARY

This report has been prepared by Al Maynard & Associates (“AM&A”) at the request of Leadenhall VRG Pty (‘Leadenhall’) who has commissioned this valuation of the Exploration Assets held by Southern Uranium Ltd to provide an independent opinion of the current cash value of those assets for Leadenhall’s client Southern Gold Ltd (ASX:SAU).

Southern Uranium (ASX:SNU) has a portfolio of tenements acquired on the basis of prospectivity for uranium in South Australia, Queensland and the Northern Territory.

The tenements are valued at $280,000 from within a range of $252,000 to $308,000

==> picture [240 x 204] intentionally omitted <==

Figure 1: Generalised map of the Project Areas

MAP KEY: 1-JINDIVIK PROSPECT; 2-JUNGLE DAM PROSPECT; 3- EAST EYRE PENINSULA & STREAKY BAY; 4- YARLBRINDA SOUTH (WITHDRAWING), WARRIOR SOUTH, CHALLENGER WEST & TALLARINGA; 5 RUM JUNGLE; 6-CALVERT HILLS; 7-TOOLEBUC; 8-PANDANUS WEST; 9-THREE SPRINGS (WITHDRAWING).

SNU Uranium Projects – Independent Appraisal Summary

Southern Uranium – Independent Appraisal – AM&A

1.0	Introduction ............................................................................................................1
1.1	Scope and Limitations ............................................................................................1
1.2	Statement of Competence......................................................................................2
2.0	Valuation of the Mineral Assets – Methods and Guides ......................................3
2.1	General Valuation Methods....................................................................................3
2.2	Discounted Cash Flow/Net Present Value ............................................................3
2.3	Joint Venture Terms ...............................................................................................4
2.4	Similar Transactions ...............................................................................................4
2.5	Multiple of Exploration Expenditure........................................................................4
2.6	Ratings System of Prospectivity (Kilburn)..............................................................4
2.7	Empirical Methods (Yardstick – Real Estate) ........................................................4
2.8	General Comments ................................................................................................5
2.9	Environmental implications.....................................................................................5
2.10	Native Title Claims..................................................................................................5
2.11	Commodities-Metal prices......................................................................................5
2.12	Resource/Reserve Summary.................................................................................5
2.13	Previous Valuations................................................................................................5
2.14	Encumbrances/Royalty...........................................................................................5
3.0	Background Information .........................................................................................6
3.1	Introduction .............................................................................................................6
3.2	Specific Valuation Methods....................................................................................6
4.0	South Australian Uranium Projects ........................................................................7
4.1	Introduction .............................................................................................................7
4.2	Tenure .........................................................................................................................9
4.3	Resources and Potential ........................................................................................9

SNU Uranium Projects – Independent Appraisal Contents ( i )

Southern Uranium – Independent Appraisal – AM&A

5.0	Northern Territory Uranium Projects....................................................................10
5.1	Summary...............................................................................................................10
5.2	Exploration Potential.............................................................................................10
6.0	Queensland Uranium Projects .............................................................................11
6.1	Summary...............................................................................................................11
6.1	Exploration Potential.............................................................................................11
7.0	Valuation of the Projects.......................................................................................12
7.1	Valuation Methods................................................................................................12
7.2	Valuation Conclusions.........................................................................................12
6.0	References............................................................................................................15

List of Figures

Figure 1: Generalised map of the Project Areas................................................... 1 Figure 2: Location Map of the SNU Project Areas................................................ 7 Figure 3: South Australian Map of the SNU Project Areas................................... 8 Figure 4: Potential Uranium Targets at Calvert Hills........................................... 10 Figure 5: Schematic diagram of uranium mineralised zones found at Westmoreland. .................................................................................................... 10

List of Tables Table 1: SA Tenement Information Summary. .................................................... 9 Table 2: NT & Qld Tenement Information Summary......................................... 11 Table 3: Summary of Value Ranges.................................................................. 13

SNU Uranium Projects – Independent Appraisal Contents ( ii )

Southern Uranium – Independent Appraisal – AM&A

The Directors, Leadenhall VRG Pty Ltd Level 1, 31 Franklin Street, Adelaide SA 5000

31st July, 2009

Dear Sirs,

1.0 Introduction

This report has been prepared by AM&A at your request to provide an independent appraisal of the current cash value of the exploration assets held by SNU for inclusion in your Independent Expert’s Report (“IER”) to your client SAU.

1.1 Scope and Limitations

This independent valuation and its accompanying geological description have been prepared at the request Ms. S. Emms, Senior Advisor of Leadenhall, to provide the writer’s opinion of the current value of the properties described in this report to be relied upon, in turn, for Leadenhall’s IER for SAU.

This valuation has been prepared in accordance with the requirements of the Valmin code (1999, 2005) as adopted by the Australian Institute of Geoscientists (‘AIG’) and the Australasian Institute of Mining and Metallurgy (‘AusIMM’).

This valuation is valid as of 31st July, 2009 and refers to the writer’s opinion of the value of the SNU exploration assets at this date. This valuation can be expected to change over time having regard to political, economic, market and legal factors. The valuation can also vary due to the success or otherwise of any mineral exploration that is conducted either on the properties concerned or by other explorers on prospects in the near environs. The valuation could also be affected by the consideration of other exploration data, not in the public domain, affecting the properties which have not been made available to the author.

In order to form an opinion as to the value of any property, it is necessary to make assumptions as to certain future events, which might include economic and political factors and the likely exploration success. The writers have taken all reasonable care in formulating these assumptions to ensure that they are appropriate to the case. These assumptions are based on the writers’ technical training and experience in the mining industry. The opinions expressed represent the writers’ fair professional opinion at the time of this report. These opinions are not however, forecasts as it is never possible to predict accurately the many variable factors that need to be considered in forming an opinion as to the value of any mineral property.

The valuation methodology of mineral properties is exceptionally subjective. If an economic reserve or resource is subsequently identified then this valuation will be dramatically low relative to any later valuations, or alternatively if further exploration is unsuccessful it is likely to decrease the value of the tenements.

The values obtained are estimates of the amount of money, or cash equivalent, which would be likely to change hands between a willing buyer and a willing seller in an arms length transaction, wherein each party had acted knowledgeably, prudently and without compulsion. This is the required basis for the estimation to be in accordance with the provisions of the Valmin Code. .

SNU Uranium Projects – Independent Appraisal for Leadenhall VRG -SAU Page 1

Southern Uranium – Independent Appraisal – AM&A

There are a number of generally accepted procedures for establishing the value of mineral properties with the method employed depending upon the circumstances of the property. When relevant, AM&A uses the appropriate methods to enable a balanced analysis. Values are presented as a range and the preferred value is identified.

The readers should therefore form their own opinion as to the reasonableness of the assumptions made and the consequent likelihood of the values being achieved.

The information presented in this report is based on publicly available information provided by SNU supplemented by our own inquiries. At the request of AM&A copies of relevant technical reports and agreements were made available excluding specific tenement expenditure details not in the public domain.

SAU will be invoiced and expected to pay a fee for the preparation of this report. This fee comprises a normal, commercial daily rate plus expenses. Payment is not contingent of the results of this report or the success of any subsequent public fundraising. Except for these fees, neither the writers nor their families nor associates have any interest in the properties reported upon nor in either SAU or SNU or Leadenhall. SNU has confirmed that all technical data known to the public domain is available to the writer.

The valuation presented in this document is restricted to a statement of the fair value of the tenement package. The Valmin Code defines fair value as “The estimated amount of money, or the cash equivalent of some other consideration, for which, in the opinion of the Expert reached in accordance with the provisions of the Valmin Code, the mineral asset or security shall change hands on the Valuation date between a willing buyer and a willing seller in an arms length transaction, wherein each party had acted knowledgeably, prudently and without compulsion”.

It should be noted that in all cases, the fair valuation of the mineral exploration properties presented is analogous with the concept of “valuation in use” commonly applied to other commercial valuations. This concept holds that the properties have a particular value only in the context of the usual business of the company as a going concern. This value will invariably be significantly higher than the disposal value, where, there is not a willing seller. Disposal values for mineral or exploration assets may be a small fraction of going concern values.

In accordance with the Valmin Code, we have prepared the “Range of Values” as shown in Table 3, section 7. Regarding the project areas it is considered that sufficient geotechnical data has been provided from the reports covering the previous exploration of them to enable an understanding of the geology. This, coupled with general knowledge of the areas provides sufficient information to form an opinion as to the current value of the exploration assets.

1.2 Statement of Competence

This report has been prepared by Allen J. Maynard BApp.Sc(Geol) MAusIMM and Member of AIG, a geologist with 30 years in the industry and 25 years in mineral asset valuation. The writer holds the appropriate qualifications, experience and independence to qualify as an independent “Expert” under the definitions of the Valmin Code.

SNU Uranium Projects – Independent Appraisal for Leadenhall VRG -SAU Page 2

Southern Uranium – Independent Appraisal – AM&A

2.0 Valuation of the Exploration Assets – Methods and Guides

Without proven ore reserves it is difficult to place a ‘singular dollar value’ on any mining tenement. However, with due regard to the guidelines for assessment and valuation of mineral exploration assets and mineral securities as adopted by the AusIMM Mineral Valuation Committee on 17 February 1995 – the Valmin Code (updated 1999 & 2005) – we have derived the estimates listed below using the appropriate method for the current technical value of the mineral exploration properties as described.

The following ASIC publications have also been duly referred to and considered in relation to the valuation procedure: Practice Note (“PN”) 42 on Independence of Expert’s Reports which is read in conjunction with Practice Note 43 (Valuation Report and Profit Forecasts), Policy Statement (“PS”) 74 (Acquisitions agreed to by shareholders) and Policy Statement 75 (Independent Expert Reports to Shareholders). These PNs & PSs were replaced by ‘Regulatory Guidelines’ 111 & 112 on 30th October, 2007.

The subjective nature of the valuation task is kept as objective as possible by the application of the guideline criteria of a “fair value”. This is a value that an informed, willing, but not anxious, arms length purchaser will pay for a mining (or other) property in a transaction devoid of “forced sale” circumstances.

2.1 General Valuation Methods

The Valmin Code identified various methods of valuing mineral and exploration assets, including:-

Discounted cash flow,
Capitalisation of earnings,
Joint Venture and farm-in terms for arms length transactions,
Precedents from similar asset sales/valuations,
Multiples of exploration expenditure,
Ratings systems related to perceived prospectivity,
Real estate value and,
Empirical or yardstick approach.

2.2 Discounted Cash Flow/Net Present Value

This method provides an indication of the value of a property with identified reserves. It utilises an economic model based upon known resources, capital and operating costs, commodity prices and a discount for risk estimated to be inherent in the project. Alternatively a value can be assigned on a royalty basis commensurate with the in situ contained metal value.

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Southern Uranium – Independent Appraisal – AM&A

Net present value (‘NPV’) is determined from discounted cash flow (‘DCF’) analysis where reasonable mining and processing parameters can be applied to an identified ore reserve. It is a process that allows perceived capital costs, operating costs, royalties, taxes and project financing requirements to be analysed in conjunction with a discount rate to reflect the perceived technical and financial risks and the depleting value of the mineral asset over time. The NPV method relies on reasonable estimates of capital requirements, mining and processing costs.

2.3 Joint Venture Terms

The terms of a proposed joint venture agreement may be used to provide a market value based upon the amount an incoming partner is prepared to spend to earn an interest in part or all of the property. This pre-supposes some form of subjectivity on the part of the incoming party when grass roots properties are involved.

2.4 Similar Transactions

When commercial transactions concerning properties in similar circumstances have recently occurred, the market value precedent may be applied in part or in full to the property under consideration.

2.5 Multiple of Exploration Expenditure

The multiple of exploration expenditure method (‘MEE’) is used whereby a subjective factor (also called the prospectivity enhancement multiplier or ‘PEM’) is based on previous expenditure on a tenement with or without future committed exploration expenditure and is used to establish a base value from which the effectiveness of exploration can be assessed. Where exploration has produced documented positive results a MEE multiplier can be selected that takes into account the valuer's judgment of the prospectivity of the tenement and the value of the database. MEEs can typically range between 0 to 3.0 and occasionally up to 5.0 applied to previous exploration expenditure to derive a dollar value.

2.6 Ratings System of Prospectivity (Kilburn)

The most readily accepted method of this type is the modified Kilburn Geological Engineering/Geoscience Method and is a rating method based on the basic acquisition cost (‘BAC’) of the tenement that applies incremental, fractional or integer ratings to a BAC cost with respect to various prospectivity factors to derive a value. Under the Kilburn method the valuer is required to systematically assess four key technical factors which enhance, downgrade or have no impact on the value of the property. The factors are then applied serially to the BAC of each tenement in order to derive a value for the property. The factors used are; off-property attributes onproperty attributes, anomalies and geology. A fifth factor that may be applied is the current state of the market.

2.7 Empirical Methods (Yardstick – Real Estate)

The market value determinations may be made according to the independent expert’s knowledge of the particular property. This can include a discount applied to values arrived at by considering conceptual target models for the area. The market value may also be rated in terms of a dollar value per unit area or dollar value per unit of resource in the ground. This includes the range of values that can be estimated for an exploration property based on current market prices for equivalent properties, existing or previous joint venture and sale agreements, the geological

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potential of the properties, regarding possible potential resources, and the probability of present value being derived from individual recognised areas of mineralisation. This method is termed a “Yardstick” or a “Real Estate” approach. Both methods are inherently subjective according to technical considerations and the informed opinion of the valuer.

2.8 General Comments

The aims of the various methods are to provide an independent opinion of a “fair value” for the property under consideration and to provide as much detail as possible of the manner in which the value is reached. It is necessarily subjective according to the degree of risk perceived by the property valuer in addition to all other commercial considerations. Efforts to construct a transparent valuation using sophisticated financial models are still hindered by the nature of the original assumptions where a known resource exists and are not applicable to properties without an identified resource.

The values derived for this report have been concluded after taking into account:-
The general geological environment of the property under consideration is taken into account to determine the exploration potential;
Current market values for properties in similar or analogous locations;

2.9 Environmental implications

Information to date indicates that the project areas do not contain fauna or flora species regarded as being rare, threatened or endangered. This requires validation by relevant parties and is not in the scope of this report.

2.10 Native Title Claims

The tenements may be subject of Native Title Claims and will be dealt with through the normal administrative process. AM&A is not aware of any sacred sites or areas of significance within the tenements.

2.11 Commodities-Metal prices

Where appropriate, current metal prices are used sourced from the usual metal market publications.

2.12 Resource/Reserve Summary

No JORC compliant resources have yet been identified.

2.13 Previous Valuations

No previous valuations have been declared within the last two years.

2.14 Encumbrances/Royalty

There may be statutory Government royalties due on any future production.

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3.0 Background Information

3.1 Introduction

Initially SNU acquired from SAU interests in certain exploration tenements within the highly prospective Gawler Craton in South Australia that has a favourable geological setting for the discovery of world-class uranium deposits and hosts two of the three operating mines in Australia. Over one third of the world’s known uranium resources are located within the Gawler Craton.

SNU has interests in a number of exploration projects covering the Gawler Craton in South Australia that have potential for the discovery of commercial deposits of uranium in three different geological settings: They are: as sedimentary roll front uranium deposits in Tertiary palaeochannels; in Mesoproterozoic and Palaeoproterozoic basement rocks, associated with Olympic Dam style IOCGU deposits or as structurally controlled deposits in faults; and as unconformity related uranium deposits associated with Mesoproterozoic redbeds of the Pandurra Formation SNU has expanded its uranium search in other parts of Australia. Two projects are in the Northern Territory. They are the Rum Jungle Project which covers a portion of the historical Rum Jungle Uranium province and Calvert Hills Project. The Rum Jungle Project is prospective for vein and sediment hosted uranium and copper uranium style mineralisation. The Calvert Hills Project occurs over the western extension of the highly prospective Westmorland uranium province with uranium mineralisation having a spatial association with the unconformity between Westmorland conglomerate and the underlying basement volcanics and granite.

Two projects are in Queensland; the Pandanus West and the “Toolebuc” CloncurryBoulia Projects. The Pandanus West Project is prospective for volcanic- and sandstone-hosted style uranium deposits. The Toolebuc Project is prospective for roll front style deposits in reduced palaeochannel sediments with targets modelled on the Beverly Four Mile style deposit. In Western Australia the Three Springs Project is being dropped.

The areas under review comprise 25 exploration licences and six exploration licence applications that have the potential to host uranium resources. Our full geological report is included as a separate report available in the offices of SAU, Leadenhall and SNU.

3.2 Specific Valuation Methods

There are several methods available for the valuation of a mineral prospect ranging from the most favoured DCF analysis of identified Reserves/Resources to the more subjective rule-of-thumb assessment when no Reserves have yet been calculated but Resources may exist. These are discussed in Section 2.0.

For the SNU tenements an empirical approach is adopted as specific exploration expenditure for each tenement is not available. We have used a value range from $5.00 to $290 per square kilometre depending upon the perceived prospectivity of the area in question.

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Figure 2: Location Map of the SNU Project Areas.

4.0 South Australian Uranium Projects

4.1 Introduction

SNU, along with many other explorers, consider the Gawler Craton and environs to be highly prospective for the occurrence of one or more styles of uranium mineralisation to continue ongoing exploration activities. Consequently SNU’s portfolio within the Gawler Craton was carefully selected priority ground considered prospective for palaeochannel roll front uranium deposits, unconformity uranium deposits and iron oxide copper gold uranium (IOCGU) deposits, the latter well exampled by the giant Olympic Dam Mine.

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Figure 3: South Australian Map of the SNU Project Areas. (From SNU June Qtr. 2009 Report).

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4.2 Tenure

		SNU %	AREA	Granted /
Ten ID	PROJECT	Held	km2	Applied	Expiry
SA IOCGU &RelatedTypes
3603	Oak Dam	75	174	17-Jul-06	16-Jul-09
SthnGawler Arc JV
4228	Peterlumbo	75	583	03-Mar-09	02-Mar-10
EastEyrePeninsula
3479	Lake Giles J Dam	100	605	22-Dec-05	21-Dec-10
3552	Moonabie	100	402	01-May-06	30-Apr-10
3594	Moseley Nobs	100	253	05-Jul-06	04-Jul-10
4257	Botenella Gate	100	66	20-Apr-09	19-Apr-10
79/09	Lincoln Gap	100	93	24-Mar-09
83/09	Mount Middleback	100	26	30-Mar-09
116/09	Carpie Puntha Hill	100	189	29-Apr-09
StreakyBay	/Mt Sam/ Jumpuppy
3512	Streaky Bay	100	551	31-Jan-06	30-Jan-10
4195	Corvisart Bay	100	10	03-Nov-08	02-Nov-09
3766	Courela	100	266	11-May-07	10-May-10
3675	Mount Sam	100	652	11-Dec-06	10-Dec-09
Tallaringa
JV
3395	Tallaringa South	30	990	15-Aug-05	14-Aug-09
3396	TallaringaNorth	30	505	17-Aug-05	16-Aug-10
Challenger West JV
4161	Garford	49	497	24-Jun-08	23-Jun-09
4165	Indooroopilly	49	496	15-Jul-08	14-Jul-09
3308	Half Moon Lake	49	517	17-Feb-05	16-Feb-10
Yarlbrinda South JV
4265	Yarlbrinda South	35	470	15-Jun-09	14-Jun-10
YorkePeninsula
4278	The Hummocks	100	1000	30-Jun-09	29-Jun-10
WarriorSouthJV
3284	Warrior South	40	321	02-Dec-04	01-Dec-10
Comet
Well
144/09	YalandaEast	100	144	15-May-09

Table 1: SA Tenement Information Summary.

(Tenement Details supplied by SNU).

4.3 Resources and Potential

Exploration priority programs within the Gawler Craton will be to target IOCGU deposits with more than 10 prospective gravity targets identified within the Company’s tenements. By employing refined geological models and new proven exploration technologies, developed by the resources industry, in approximately 260km of prospective palaeochannels with potential for roll-front uranium style deposits and in the newly recognized opportunities for unconformity style uranium deposits.

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5.0 Northern Territory Uranium Projects

5.1 Summary

The Calvert Hills project comprises one tenement that is located some 100km west of the Westmoreland Uranium Field and has similar geology and structural characteristics of the shallow covered Moreland unconformity style uranium deposits.

5.2 Exploration Potential

The project area covers a portion of the western extension of the Westmorland uranium field. It has similar geology and therefore has good potential to contain similar styles of uranium mineralisation as found in the neighbouring Westmorland Uranium field in Queensland. Potential targets defined by SNU are illustrated in Figure 4.

==> picture [327 x 245] intentionally omitted <==

Figure 4: Potential Uranium Targets at Calvert Hills.

==> picture [332 x 207] intentionally omitted <==

Figure 5: Schematic diagram of uranium mineralised zones found at Westmoreland.

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Ten ID PROJECT	SNU % Held AREA km2 Grant / Applied Expiry
CalvertHills JV NT
24837 Calvert Hills	50 822 06-Apr-06 05-Apr-12
RumJungle JV NT
24867 Rum Jungle	JV(0) 10 15-Mar-06 14-Mar-12
Boulia Cloncurry Qld
EPM 16507 Dover EPM 16506 Answer Downs EPM 16513 Strathfield EPM 16509 Corner Creek EPM 16511 Brodes Lookout	100 222 22-Sep-08 21-Sep-13 100 102 25-Jun-08 24-Jun-13 100 83 25-Jun-08 24-Jun-13 100 54 13-Mar-09 12-Mar-14 100 318 27-Apr-09 26-Apr-14
PandanusWest JVQld
EPM 15041 Pandanus West EPMA17940 Montgomery	60 280 08-Jan-07 07-Jan-12 100 62 28-Nov-08 100 71 02-Jan-09
EPMA17978 Wallaroo

Table 2: NT & Qld Tenement Information Summary. (Tenement Details supplied by SNU).

6.0 Queensland Uranium Projects

6.1 Summary

The Pandanus West EPM applies to a 400km2 area located 50km south of Greenvale township between Charters Towers and Georgetown in the region that includes the Ben Lomond and Maureen uranium deposits.

Initially six tenement applications were applied for in Cloncurry-Boulia Districts east of the dormant Mary Kathleen uranium deposit. The objective is to secure the most prospective parts of uraniferous targets where ground-waters draining the Eastern Succession basement are likely to form roll front style deposits in reduced palaeochannel sediments.

Three initial tenements have been granted. One tenement was relinquished during the quarter. An agreement was signed with the Kalkadoon People to facilitate the grant of the remaining two tenement applications.

6.1 Exploration Potential

At Pandanus West the recognised deposit styles are volcanic and sandstonehosted uranium. Furthermore the Pandanus West area directly abuts the Greenvale Uranium project.

At the Cloncurry-Boulia area research of past exploration and water bore drilling is underway and a field reconnaissance of some of the prospective Toolebuc Formation outcrops has been undertaken. Where ground-waters draining the Eastern Succession basement are likely to form roll front style deposits in reduced palaeochannel sediments with targets modelled on the Beverly Four Mile style deposit.

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7.0 Valuation of the Projects

7.1 Valuation Methods

As no JORC Resources are available, the Discounted Cash Flow method is not applicable. The Kilburn method is considered to provide a range of values that is so wide that it is not realistic. Expenditure details are not available for the individual tenements so the MEE method is not applicable. An empirical method whereby a dollar value per unit area is applied is considered the most appropriate in this case.

The details of the historical and recent exploration are discussed in the full geological report only summarised in part above and have been sent separately to SNU and SAU.

The writer presents the valuation calculations based on varying dollars per unit area in Table 3 below. The amounts range from $5.00 to $290 per square kilometre based on the perceived prospectivity of the particular project with adjustments made to allow for SNU’s varying percentage holdings as tabulated.

7.2 Valuation Conclusions

The current cash value of the SNU tenements is ascribed at $280,000 from within the ranges of $252,000 to $308,000.

Yours faithfully,

==> picture [132 x 74] intentionally omitted <==

Allen J Maynard

BAppSc(Geol), MAIG, MAusIMM.

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Table 3: Summary of Value Ranges

Ten ID PROJECT	SNU % Held AREA km2 COMMENTS Low $ High $ Preferred $ SNU $/km	$/km
SA IOCGU &RelatedTypes		20
3603 Oak Dam
SthnGawler Arc JV
4228 Peterlumbo	75 583 5247 6413 5830 10	15
EastEyrePeninsula
3479 Lake Giles J Dam 3552 Moonabie 3594 Moseley Nobs 4257 Botenella Gate 79/09 Lincoln Gap 83/09 Mount Middleback 116/09 Carpie Puntha Hill		30 20 20 20 20 20 20 5 5 5 5 33 33
StreakyBay /Mt Sam/ Jumpuppy
3512 Streaky Bay 4195 Corvisart Bay 3766 Courela 3675 Mount Sam
Tallaringa JV
3395 Tallaringa South 3396 TallaringaNorth
Challenger West JV
4161 Garford 4165 Indooroopilly	49 497 JV Partner to renew 4473 5467 4970 10 49 496 JV Partner to renew 4464 5456 4960 10	20 20 20
3308 Half Moon Lake	49 517 4653 5687 5170 10

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Ten ID PROJECT	SNU % Held AREA km2 COMMENTS Low $ High $ Preferred $ SNU $/km	SNU % Held AREA km2 COMMENTS Low $ High $ Preferred $ SNU $/km	$/km
Yarlbrinda SouthJV			30
4265 Yarlbrinda South
YorkePeninsula
4278 The Hummocks	100 1000 9000 11000 10000 10		10
WarriorSouthJV
3284 Warrior South			75 100 290 200
CometWell
144/09 Yalanda East
CalvertHills JV
24837 Calvert Hills
RumJungle JV
24867 Rum Jungle
Boulia Cloncurry
EPM 16507 Dover EPM 16506 Answer Downs EPM 16513 Strathfield EPM 16509 Corner Creek EPM 16511 Brodes Lookout			30 50 50 50 20 85 50 50
Pandanus West JV
EPM 15041 Pandanus West EPMA17940 Montgomery EPMA17978 Wallaroo
		$ 250,268 $ 305,883 $ 278,075
	10,834	Totals (rounded) $ 252,000 $ 308,000 $ 280,000

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6.0 References

AusIMM, (2004): "Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC Code), prepared by the Joint Ore Reserves Committee (JORC) of the AusIMM, the Australian Institute of Geoscientists (AIG) and the Minerals Council of Australia (MCA), effective December 2004.

AusIMM. (2005): "Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (the VALMIN Code)" 2005 Edition.

AusIMM, (1998): "Valmin 94 - Mineral Valuation Methodologies" . Conference Proceedings.

CANADIAN INSTITUTE OF MINING, METALLURGY AND PETROLEUM, (2000), "ClM Standards on Mineral Resources and Reserves-Definitions and Guidelines". Prepared by the CIM Standing Committee On Reserve Definitions. Adopted by CIM Council August 20, 2000.

CIM, (April 2001), "CIM Special Committee on Valuation of Mineral Properties (CIMVAL)" Discussion paper.

ClM, (2003): - "Standards and Guidelines for Valuation of Mineral Properties. Final Version, February 2003". Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum on Valuation of Mineral Properties (CIMV AL).

Kilburn, LC, 1990: "Valuation of Mineral Properties which do not contain Exploitable Reserves" CIM Bulletin, August 1990.

Southern Uranium Ltd, 2007, 2008, 2009: Prospectus and Company Annual Reports and ASX Releases.

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AI assistant

IONDRIVE LIMITED — Proxy Solicitation & Information Statement 2009

65132_rns_2009-08-09_27a2d6bf-b06e-4e78-bc50-ad0d9b37ba1d.pdf

Notice of General Meeting – 10.00am (CST), Friday 11[th] September, 2009

SOUTHERN GOLD LIMITED ACN 107 424 519 (“ Company ”)

NOTICE OF GENERAL MEETING

Special Business

Resolution 1

Resolution 2

Voting Entitlements

Custodian Voting

Proxies

SOUTHERN GOLD LIMITED ACN 107 424 519 (“Company”)

EXPLANATORY MEMORANDUM

RESOLUTION 1 – Approval of sale of substantial asset to related party

Overview

Offer Implementation Deed

Underwriting Agreement

Listing Rule Requirements

Substantial asset

Substantial holder of shares

Voting Exclusion Statement

Independent Expert’s Report

Offer Timetable

RESOLUTION 2 – Ratification of issue of shares

Listing Rule Requirements

Issue of Securities

Voting Exclusion Statement

ANNEXURE A

SOUTHERN GOLD LIMITED

(the Company )

TERMS AND CONDITIONS

EXPIRING 29 JUNE 2012

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Proxy Form

For your vote to be effective it must be received by 10:00am (Adelaide Time) Wednesday 9 September 2009

How to Vote on Items of Business

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Items of Business

IMPORTANT NOTICE

MAKE YOUR SELECTION ON THE BACK OF THIS FORM

LEGISLATION CHANGE - WHAT THIS MEANS FOR YOU

WHAT ARE YOUR OPTIONS?

N J Harding

LEADENHALL VRG PTY LTD

RE: Independent Expert Report and Financial Services Guide

1. INTRODUCTION

2. DESCRIPTION OF THE OFFER

2.1. Conditions of the Offer and Underwriting

2.2. Termination of the Underwriting Agreement

3. SCOPE OF REPORT

3.1. Technical Requirements

3.2. Factors considered in forming our opinion

3.3. Limitations and reliance on information

3.4. Valuation approaches adopted

4. SUMMARY OF OPINION

In our opinion, the Offer is fair and reasonable.

4.1. Advantages of the Offer

4.2. Disadvantages of the Offer

4.3. Opinion

4.4. General warning advice

Contents

Index of Tables

Financial Services Guide

Financial Services Guide

IONDRIVE LIMITED Proxy Solicitation & Information Statement 2009