SOUTHERN GOLD SECURES CORNERSTONE INVESTOR THROUGH SHARE...

SOUTHERN GOLD SECURES CORNERSTONE INVESTOR THROUGH SHARE PLACEMENT TO INTEGRA MINING LIMITED INITIATING UP TO $4.35M CAPITAL RAISING

Key Points:
• INTEGRA MINING LIMITED to invest $1.35 million in Southern Gold Ltd through the Placement of shares representing 10% of Southern Gold’s expanded share capital at $0.05 cents per share.
• The cornerstone investment is a natural fit between two Kalgoorlie neighbours in Western Australia.
• Proposed non-renounceable pro rata Rights Issue to Southern Gold shareholders to raise up to $3 million, to be supported by Integra Mining.
• Investment funds will be directed towards advancing evaluation studies into mining Southern Gold’s wholly owned Cannon Gold Resource1, located 30km south east of
Kalgoorlie.

The Directors of Southern Gold Limited (ASX :SAU) (“Southern Gold”) are pleased to announce that
Southern Gold and Integra Mining Limited (ASX : IGR) (“Integra”) have executed a Share Subscription Agreement pursuant to which Integra has agreed to take a placement of Southern Gold shares equal to 10% of the expanded share capital at $0.05 per share to develop Southern Gold’s wholly owned Cannon Gold Resource.

Commenting on the transaction, Southern Gold Managing Director, Nanette Anderson said “this initial business relationship with Integra Mining is seen as a key step forward in realising value from our exploration success at the Bulong Gold project. The funding premium to the current share price highlights the value placed by our industry peer on the high quality and potential of the Cannon Gold Resource; These are near surface gold ounces which warrant economic evaluation”.

Further, Nanette Anderson pointed out that, “Southern Gold acknowledges the commercial success of Integra as evidenced by their successful exploration and recent development of several nearby gold resources. We see a strong business synergy and added value in our relationship with Integra in the evaluation and possible development of the Cannon Gold Resource”.

On announcing the share placement by Southern Gold, Integra’s Managing Director Chris Cairns said, “the transaction with Southern Gold is in keeping with Integra’s strategy of growing our gold business and generating shareholder value. We see Southern Gold as a solid investment with real opportunity for near-term gold production along with a prospective tenement portfolio nearby to our operations”.
1 [For ‘Resource Statement and Parameters’ and other details of the Cannon Gold Resource as estimated by Runge Limited, see Southern Gold’s ASX Announcement dated 22 June 2011
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Southern Gold Limited PO Box 255 email [email protected] telephone 08 8368 8888
ABN 30 107 424 519 Kent Town web southerngold.com.au facsimile 08 8368 8899
South Australia 5071

Share Placement
The key terms of the Share Subscription Agreement are as follows:
• Integra will be issued with a number of fully paid ordinary shares that is equal to 10% of Southern Gold’s expanded issued share capital at the time of completion of the placement, calculated (based on the current share capital structure of Southern Gold) as 26,976,644 ordinary shares at $0.05 cents per share, for consideration payment of approximately $1.35 million.
• The Southern Gold shares placed to Integra will be subject to a 12 month voluntary escrow period.
• Integra has agreed to a standstill period of 12 months following completion of the placement, subject to certain exceptions including Southern Gold Board approval and a 3% creep provision for on-market share purchases during any 6 month period up to a maximum shareholding of 15%.
• Southern Gold has agreed to grant Integra a pre-emptive right to match or better any third party offer to purchase, treat or sell ore or dore derived from Southern Gold’s Cannon Gold Resource or purchase the Cannon Gold Resource mining lease. The pre-emptive right will have a maximum
term of 3 years from completion of the placement and will be conditional on Integra not disposing of any of the placement shares to a third party.
• Integra has agreed to take up its full entitlement, and may elect to underwrite, the proposed Rights Issue (discussed below) in order to maintain its cornerstone investment position, subject to certain conditions and an ultimate cap on its shareholding of 15%.
• SAU has agreed to consult Integra (for so long as it holds at least 5% of Southern Gold’s issued share capital) in respect to its participation in any future non pro-rata share offers in order for Integra to maintain a cornerstone investment position.
• Completion of the Integra share placement is due to occur on Wednesday 1 February 2012

No shareholder approval will be sought or required by Southern Gold to the Integra share placement.
Southern Gold and Integra view the terms and conditions of the Share Subscription Agreement as being supportive of Southern Gold’s near-term efforts in evaluation and development of the Cannon Gold Resource, and recognise likely business synergies that may benefit future commercial outcomes from gold production.
Proposed Rights Issue In parallel with the Integra share placement, SAU intends to offer eligible shareholders the
opportunity to participate in the fund raising through a non-renounceable pro rata rights issue to raise up to $3 million.

It is Southern Gold’s intention to seek full underwriting of the proposed rights issue. Directors of Southern Gold intend to take up their full entitlement under the rights issue.

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Southern Gold Limited PO Box 255 email [email protected] telephone 08 8368 8888
ABN 30 107 424 519 Kent Town web southerngold.com.au facsimile 08 8368 8899 South Australia 5071

Integra has agreed, pursuant to the Share Subscription Agreement to take up its full entitlement under the proposed rights issue subject to certain conditions. If the proposed rights issue is not fully subscribed, Integra will have the right to elect to underwrite the shortfall to a level agreed by Southern Gold.

Full details of the proposed Rights Issue are expected to be announced in early February 2012.
Use of Funds
The funds from the Integra share placement will be used towards advancing current evaluation studies on development of the Cannon Gold Resource. The majority of funds raised from the proposed Rights Issue are intended to be expended on near-Cannon resource exploration and
regional exploration of the Bulong Project, Western Australia.
The preliminary economic evaluation work on the Cannon Gold Resource has commenced and will include metallurgical and geotechnical test work, environmental and aboriginal heritage surveys,and as required mine planning and permitting.
Exploration work will continue with geochemical and geophysical surveys and assessment, with follow up aircore and reverse circulation (RC) drilling of near resource and regional targets that will be aimed at growing the Company’s current resource base of 94,500 ounces of gold.
Integra has endorsed and supported SAU’s upcoming work by their investment through the share placement and their commitment to support the proposed rights issue.
Southern Gold believes this investment will contribute significantly to the growth value of the Bulong Gold project, particularly with the potential business synergies with Integra and all the key benefits of a prime location just 30km east of Kalgoorlie, Western Australia.