THE BOURSE WHISPERER: Southern Gold (ASX: SAU) announced it has extended its Farm In and Joint Venture arrangement with London listed Bluebird Merchant Ventures (LON: BMV).
Southern Gold said the extension would now include the Kochang project in South Korea with terms for the Kochang gold project being broadly in line with what was previously agreed for the Gubong and Taechang gold projects – being:
A farm-in stage where BMV is to invest US$0.5 million in compiling a high level report on project feasibility targeting capital expenditure of no more than US$10 million, or less than US$5 million each;
The report may or may not provide for several projects to be developed in parallel or potentially as stand-alone operations but Kochang’s relatively high gold and silver grades may enable transport of ore over distance; and
BMV (or one of its associates) is to complete a placement in Southern Gold shares to the value of $0.25 million and at the same price agreed for the other projects, or 38.6 cents per share, by 31 May 2018.
Southern Gold said this takes the potential investment by BMV to US$1.5 million across three projects (Gubong, Taechang and now Kochang) should they take all of them through the farm-in and joint venture process.
It also potentially means a total equity investment in Southern Gold of $0.75 million at the 38.6 cents share price, with $0.25 million having already been completed.
After the completion of the farm-in investment, the share placement and the report on project feasibility, a contributing Joint Venture will be formed with BMV as the operator.
This is expected to occur within approximately 12 months.
“Bluebird is the right group to get underground at Kochang and move this project forward more aggressively,” Southern Gold managing director Simon Mitchell said in the company’s announcement to the Australian Securities Exchange.
“Drilling from the steep hills would be expensive but given there is substantial mine infrastructure in place it isn’t necessary.
“We can get to the vein face and work out the system from underground, and given the high grades seen here historically there may be the potential for a low tonnage, very high-grade development.
“Southern Gold acquired the South Korean projects in July 2016 for around $2 million in scrip.
“It is pleasing to extract in excess of this value inside 18 months on only a portion of our Korean portfolio.
“And there is much more value yet to be released – something that will become quite apparent during the course of 2018.”