Southern Gold executes JV deal over Korean gold project
ASX-listed Southern Gold has executed a definitive Farm-in and Joint Venture Agreement with its development partner, LSE-listed mining expert Bluebird Merchant Ventures over the company’s flagship Gubong Gold project on the west coast of South Korea.
The Agreement provides a framework and surety for the management of the 50/50 Gubong Project Joint Venture through an incorporated structure, with Bluebird as the mining operator.
The agreement is part of Southern Gold’s blue sky strategy to get one or more abandoned historic gold mines in South Korea back into production, some of which still have rich mineral endowments.
Bluebird is a mining expert and will be tasked with restarting and operating the mines.
The UK company is undertaking a technical and economic assessment to re-open the historical Gubong mine and will deliver a feasibility report on the preferred option to Southern Gold, targeting a low capital start-up of possibly less than US$10M.
The JV is triggered when the development framework presented by Bluebird to advance the project is deemed satisfactory to Southern Gold.
The feasibility report is expected to be available in July 2018.
Bluebird has completed its required investment commitment of US$0.5M to advance the project and remains responsible for all costs at the project up to the commencement of the JV.
Once the JV is formally established, costs will be shared 50/50 between the parties.
Southern Gold Managing Director, Mr Simon Mitchell said: “This is an important milestone for the advancement of the Gubong Project and speaks to the quality of the relationship between Southern Gold and Bluebird.”
“Both companies are very excited by what we are seeing at Gubong and the scale of the opportunity suggests the potential for the project to be a true “company maker”.”
The Gubong gold-silver mineralisation is an epithermal ore system contained with a complex spiderweb of high-grade quartz veins, criss-crossing the deposit.
The mine operated up until the 1970s and reportedly produced approximately 400,000 ounces of gold with grades varying between 4 – 11g/t gold to depths of 600m from surface.
No current JORC-compliant mineral resource is currently available at Gubong, however, the exploration target range has been estimated at 1.2 – 2.3 million tonnes grading from 6 – 8g/t gold for up to 500,000 ounces.
Indeed the project is showing a 500,00 ounce resource in Korean terms however the numbers are not yet Jorc compliant and so Southern Gold has simply stated it as an exploration target at this stage.
Bluebird is separately farming into Southern Gold’s historical Kochang and Taechang mines to establish a 50/50 JV for those projects also, on similar investment terms and milestones to the Gubong project.
Southern Gold has outlined a timeline anticipating full feasibility studies and construction options for the projects to be completed by the end of the fourth quarter of 2019.
That scenario also requires Bluebird to invest A$0.75M into Southern Gold at 38.6c/share or a payment of A$0.25M per project advanced to feasibility study level.
Southern Gold has established an organic funding model for its extensive South Korean project portfolio and Bluebird has been engaged based on its experience as Asian mining specialists.
Bluebird’s model is to generate early cash flows from historic projects by redeveloping old mines that still contain mineral riches.
In partnering with Bluebird, Southern Gold will initially fast-track the re-opening of the Gubong gold mine, providing cash flow and self-funding exploration for further acquisitions within South Korea.
Southern Gold has an ongoing revenue stream from underground mining production at the Cannon Gold Mine east of Kalgoorlie and was able to cheaply acquire a 100% interest in the high grade Korean gold projects during 2016, as a strategic overseas expansion for the company.
This week’s announcement shows that Southern Gold is well on its way to achieving gold production from its highly prospective historic assets in South Korea.