Southern Gold enters strategic partnership with Ausino for drilling Korean projects

Southern Gold Ltd (ASX:SAU) has executed a binding legal agreement with Ausino Drilling Services (ADS) Pty Ltd in support of the delivery of mineral exploration drilling in South Korea. This strategic partnership has a term for four years and involves issuing ADS with performance rights, which are anticipated to vest in a shorter time frame. ADS is a privately owned contract drilling company based in Adelaide and Perth, Australia, with operations in the People’s Republic of China. They are well established in China having operated there for around 18 years with extensive experience in drilling in the conditions typical of North Asia. The principals of ADS have extensive drilling experience in several different drilling styles including underground and surface diamond drilling capability, which is critical to Southern Gold’s strategy in South Korea. High standard of drilling  Managing director Simon Mitchell said: “It is great to have ADS on board in South Korea. “They have been assisting Southern Gold with local contractors for the past 12 months or so and this has lifted core recovery to more than 95% and productivity at the rig has almost tripled. “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.” Provisions The agreement includes the following provisions: ADS will set up appropriate corporate entities and operational capability in the Republic of Korea with the aim of directly supporting Southern Gold exploration drilling activity; Southern Gold has agreed to grant to ADS 10 million performance rights at a deemed value of US$0.11/right (A$0.155/right at current AUD:USD exchange rate of US$0.71) the issue of which will be subject to shareholder approval at the next annual general meeting; The total value of the performance rights on issue to ADS will, therefore, be US$1.1 million; The performance rights will vest to ADS on delivery of the services (and in certain limited circumstances such as corporate takeover) - this will happen on the submission of each invoice (in USD) which will be satisfied by 75% cash payment and 25% by the vesting of performance rights based on the US$0.11/share value; and The vested rights will accumulate until US$110,000 in value is satisfied before the shares are issued to ADS or its nominee and will offset a maximum of US$1.1 million of a total of US$4.4 million of drilling services. “Keen to build Korean-based business” ADS general manager Campbell Powell said: “We have seen Southern Gold at work in South Korea and can see the huge potential of the opportunity. “We are keen to build a Korean-based drilling business with the sorts of standards you see in Australia and we can’t wait to get into country to lift Southern Gold’s drilling capability to another level. “The potential into the medium term is also huge as we’re convinced South Korea is the next big play in North Asia.” Ausino’s operations centre is in Zhangjiakou, Hebei Province, and the company has continued operations throughout the COVID-19 crisis. It is anticipated that maintenance and operations support activities will benefit the South Korean operations into the future until the ADS operations are well established. ADS focus is on the delivery of best practice in safety, quality and productivity all of which are key to Southern Gold’s operations in South Korea as well.