Southern Gold (ASX: SAU) has agreed to dispose of its 50% stake in the South Korean-based Kochang and Gubong projects to joint venture partner LSE listed Bluebird Merchant Ventures (BMV) in a deal worth US$10 million (A$13.2 million).
The companies have reached a definitive agreement, which will see BMV either issue 200 million shares at US$0.05 each or a minimum of 50 million shares with the remaining to be paid in cash for an ultimate value of US$10 million.
“Southern Gold has effectively agreed to a share swap deal where we will exchange our subsidiary’s 50% interest in the two (Kochang and Gubong) joint ventures for an approximate 30% interest in BMV once all shares are issued,” Southern Gold managing director Simon Mitchell said.
Mr Mitchell pointed out the value of the BMV shareholding will constitute more than 200% of Southern Gold’s A$5.9 million enterprise value based on the company’s 31 March cash balance of A$9 million and market capitalisation of $14.9 million.
“The BMV shareholding will be a very valuable equity interest and I expect it to significantly increase in value as BMV advances the Kochang and Gubong projects towards their stated near-term objective of gold and silver production.”
“As a new and significant shareholder of BMV, our current intent is not to sell small parcels of shares into the market, which would be detrimental to the share price, but allow the company to grow and advance to its next stage of development,” Mr Mitchell added.
South Korean gold projects
Southern Gold has disposed of Kochang and Gubong to focus on its portfolio of gold assets with a focus on the Yeongdong Basin of South Korea.
The company is drilling at its Deokon project while expecting assays from recent soil sampling at Daeam.
Project generation reconnaissance sampling has been completed in the Yeongdong Basin where Southern Gold is concentrating on epithermal gold-silver potential in the region.