Southern Gold inks drilling partnership in South Korea
Southern Gold’s deal with Ausino covers exploration drilling services to the value of US$4.4 million.
Junior explorer Southern Gold (ASX: SAU) has formed a strategic partnership with privately-owned Ausino Drilling Services to support exploration drilling at its South Korean gold and silver projects.
The companies today confirmed they have signed a binding legal agreement that secures their alliance for four years and supports the provision of drilling services to the value of US$4.4 million (A$6.13 million).
Ausino is an Australia-based contract drilling company with an operations centre in China’s Hubei Province and a long history of drilling in typical North Asian conditions.
Southern Gold managing director Simon Mitchell said Ausino has already been assisting the company with local contractors in South Korea for around 12 months.
“This has lifted core recovery to more than 95% and productivity at the rig has almost tripled,” he said.
“This deal will help build the position of both companies in South Korea and ensure a very high standard of drilling is attained for a competitive cost and on a shared risk basis,” Mr Mitchell added.
Ausino general manager Campbell Powell said his company looks forward to lifting Southern Gold’s drilling capability.
“We are keen to build a Korean-based drilling business with the sorts of standards you see in Australia,” he said.
“We have seen Southern Gold at work in South Korea and can see the huge potential of the potential … we’re convinced South Korea is the next big play in North Asia,” Mr Powell added.
Deal terms
Under the terms of the deal and subject to shareholder approval, Southern Gold will grant Ausino 10 million performance rights at US$0.11 each (equivalent to A$0.155 per share) for US$1.1 million.
Following delivery of the drilling services, each of Ausino’s submitted invoices will be paid 75% in cash and 25% by the vesting of the performance rights.
The vested rights will accumulate until US$1.1 million in value is satisfied before the shares are issued and will offset a maximum of US$1.1 million of a total of US$4.4 million of drilling services.
Southern Gold in South Korea
Southern Gold is the only foreign gold explorer currently active in South Korea and holds six wholly-owned epithermal gold-silver projects in the country’s southwest. These largely greenfield projects include Aphae, Deokon, Beopseongpo, Weolyu, Dokcheon and Jangwhal.
In early August, Southern Gold announced plans to sell its 50% stake in the Gubong and Kochang joint venture company to the operating partner, London-listed Bluebird Merchant Ventures. It said this divestment would allow it to focus on an intensive drilling program already underway on its wholly-owned exploration tenure.
Southern Gold reported results from a maiden diamond drilling program at the Alphae project in mid-August that revealed high to moderate-grade gold-silver intersections including 0.21m at 107.5 grams per tonne gold and 166g/t silver and 0.86m at 5.49g/t gold and 59/t silver.
The next planned sites for drilling are Weolyu South possibly Dokcheon.