Southern Gold Limited (ASX:SAU) has responded a query from ASX Limited (ASX:ASX), highlighting the company was pursuing potential transactions to “release value” from its Cannon gold mine in Western Australia and other fundraising options.
Responding to a listings query yesterday, the company acknowledged it expected to continue to have negative net operating cashflows as it explored assets on its tenements.
Southern Gold has attracted European investment market interest with its JV holdings in focus market South Korea where it has two key jointly-held gold projects with Bluebird, Gubong Kochang.
The company has previously expressed its hopes at divesting of the now wholly-owned Cannon Gold Project 30 kilometres of Kalgoorlie-Boulder in the Goldfields region of Western Australia.
Yesterday the company upgraded the underground gold resource for the project to a probable reserve.
The probable ore reserve is 117,000 tonnes grading 5.31 g/t gold for 20,000 contained ounces at a 3 g/t gold cut-off.
Cannon project’s independently-prepared new reserve is based on the indicated portion of the Cannon resource, with reserves modelled to be with extracted from 4 levels over an 11-month mine life.
High-grade shoots beneath Cannon pit would be accessed using minimal infrastructure and equipment.
The net profit potential of the reserve is more than $10 million.
Cannon project has a combined indicated and inferred underground resource of 142,000 tonnes grading 5.2 g/t gold for 23,600 ounces.
Southern Gold had $1.6 million cash on March 31, 2019 while holding no debt and expected t $1.1 million of expenses in the June quarter of 2019.
Its June quarter exploration budget was $355,000 while other costs, including JV contributions, were $225,000.
The company yesterday told listings compliance staff it was “considering options” that addressed its cash balance.
Southern Gold company Secretary Dan Hill wrote the company expected to “continue its operations and meet its business objectives on the basis of funds raised through potential transactions in relation to its Cannon gold mine and other fundraising options currently being pursued.”
Hill signalled Southern Gold was confident of a successful outcome for its cash-raising process and would make a future announcement to the market.
In April, the company executed an agreement with Australian mining advisory firm PCF Capital Group to run a formal sale process to dispose or restructure the company’s gold assets east of Kalgoorlie in WA.