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PERTH (miningweekly.com) – Gold producer Southern Gold could restart two of its Korean gold mines with the help of LSE-listed Bluebird Merchant Ventures.
ASX-listed Southern Gold on Monday announced that it has signed a conditional agreement with Bluebird for the farm-in on two of Southern Gold’s 17 gold projects in South Korea.
During the farm-in, Bluebird will undertake initial feasibility studies, investing some $1-million over a 12-month period, to investigate the reopening of the Bugong and Taechang gold mines.
In addition, Bluebird will also subscribe to A$250 000 of Southern Gold shares, priced at 38.6c a share, for each of the two projects, for a combined A$500 000 direct investment in Southern Gold. The placement is priced at a 35% premium to the company’s 20-day volume weighted average price and will see Bluebird own a 2.7% sake in Southern Gold.
After the initial expenditure, the two companies will form a 50:50 joint venture (JV).
“Since acquiring our South Korean tenement package from Asiatic Gold, we have sought opportunities to fast-track the reopening of historic mines on selected projects, while conserving Southern Gold’s capital and sharing the risk with proven mine operators,” said Southern Gold MD Simon Mitchell.
He told shareholders that the agreement with Bluebird introduced an experienced South East Asia-based mining team with extensive experience in advancing similar narrow-vein underground gold projects.
“There are accessible old mine workings still in place at the Gubong and Taechang projects, which were significant gold producers in the past. There remains an enormous amount of value embedded in the extensive underground development at these projects, and I am confident Bluebird will unlock this value by assisting Southern Gold to fast-track a new, low-cost gold mining development,” Mitchell said.
The Gubong project has an exploration target of between 1-million and 4.5-million tonnes, grading between 6 g/t and 12 g/t gold for between 500 000 oz and 1.5-million ounces of gold, while Taechang is considered a quick development option, given the good condition of its workings and excellent access to site.
“The farm-in period will [involve] around 12 months of studies, after which we will have a map of a way forward. Should the feasibility study confirm a viable development scenario, we are looking at construction at some stage in the second year.
“If we can deliver this sort of timetable to production on South Korea, it will be a huge win for shareholders,” Mitchell said.
Southern Gold will retain full ownership of the remainder of the South Korean gold portfolio, with Mitchell saying the Korean exploration budget can now be directed towards other projects such as Weolyu, Kochang and Hampyeong, where there is potential for new discoveries.