Australian gold producer, Southern Gold Ltd, has a new agreement with development partner, Westgold Resources Ltd for the underground development phase at Southern Gold’s Cannon gold mine, near Kalgoorlie, Western Australia).

• Proven underground gold mine operator Westgold Resources to pay A$1.5 million upfront to Southern Gold for a five year right-to-mine within a defined area at the Cannon gold project east of Kalgoorlie
• Southern Gold to be paid A$160/oz Au by Westgold for the first 15,000 oz gold produced and then A$180/oz for production in excess of this
• The rate increases to A$190/oz and A$210/oz respectively if the gold price averages in excess of A$1,800/oz in the previous reporting quarter
• JORC Indicated Resources of 22,000 oz @ 5.68g/t Au at Cannon ensure cash flow from production. With the deposit remaining open at depth Southern Gold retains excellent exposure to future upside
• The arrangement removes the need for mine financing, minimises shareholder dilution and shifts underground operating risk to Westgold.

Southern Gold Managing Director, Simon Mitchell: “Southern Gold has turned a cash consuming asset into a cash generating one. And it has done so in alignment with Southern Gold’s development philosophy of bringing in third parties who know how to mine and manage risk, particularly the elevated risks of underground mining. This deal with Westgold should generate cash for Southern Gold based on the high grade gold resource at Cannon which stands at 24,000 oz at 5.2g/t Au in the Indicated and Inferred categories. The arrangement also ensures Southern Gold remains significantly exposed to the upside should the deposit continue at depth.”