Southern Gold strikes price for sale of stakes in Korean gold projects

Adelaide-based Southern Gold (ASX: SAU) has come to agreement with its joint venture partner in South Korea, reporting the sale price for its 50% stake in two gold projects has been set at US$9.945 million (A$13.475 million).

The Australian company will now press on with its 100%-owned projects, which includes the historic gold-silver-germanium Weolyu mine.

The ending of the joint venture follows a decision mid-year by Southern Gold that it did not want to proceed with the development of the Gubong and Kochang projects, a decision that automatically triggered an offer to sell its 50% stake to Singapore-based Bluebird Merchant Ventures (BMV).

The Australian company made that decision in light of its belief that there would be issues with local country government about timing of the project and COVID-19 delays which made, in its view, an early development start date unlikely.

BMV is the operator of both projects.

The implied value of the sale is A$0.064 per Southern Gold share.

The Southern Gold share price as of last Friday was $0.105, with the company holding about $11 million in cash, or about $0.051 per share.

Payment terms negotiable

BMV may offer a combination of cash, equity and/or royalty to satisfy the 60-day settlement deadline.

Southern Gold says it could consider a combination of payment options if BMV offers acceptable terms.

Unless a further deal is struck in the interim as to the form of the payment, as things stand now BMV will be expected to settle in cash by 26 January 2021.

Southern Gold managing director Simon Mitchell says the company is pleased to have finalised the sale of its joint venture interests.

Plans to revive Korean gold mining

“With an underlying value per share of $0.064, it really reinforces the value investors receive from a position in Southern Gold and the relatively low implied value for the greenfield exploration play in South Korea,” he added.

Southern Gold has eight 100%-owned projects in South Korea and is aiming to revive gold production in the country.

The Korean peninsula has a long history of gold production although very little activity for the past 50 years.

Gold production grew after the peninsula was annexed by Japan in 1910, with the Japanese operating mines until the 1945 surrender.

There was also mining in the 1960s.