The Cannon gold mine, some 30km east of Kalgoorlie in Western Australia’s Goldfields, has so far delivered A$5.5 million in payments to Southern Gold, which is now debt free and has hedged a portion of upcoming final production at A$1,621 an ounce for just over A$4 million of future revenue.

Cannon is being mined by Westgold Resources (AU:WGX), the demerged gold arm of Metals X (AU:MLX), under a 50/50 profit share arrangement.

Cashed-up Southern Gold is now in an enviable position as it enters a new phase of working on what managing director Simon Mitchell describes as its “six plus six” projects.

Half are in the Goldfields in the company’s vast landholding, including the prospect of going underground at Cannon, and the other six are in South Korea, which Mitchell acknowledged was a surprise choice of jurisdiction to some investors.

“I’m tempted to put a video on our soon-to-be launched new website, to show people Korea’s potential beyond Gangnam-style dancing,” he said.

“But the reason we’re there is that the geological prospectivity is just first-class, there’s a lot of risks in South East Asia that you just don’t see there. Think of it as North Asia, not South East Asia.”

Among the Korean six are two, near-term gold mining projects which Mitchell is confident of getting into production within three years.

“When I say I’m trying to do it in under three years, people shake their heads but the reason I say that with confidence is that the projects have an incredible amount of underground development already in place, and this not only means we save a lot of money but it also means we can get access to the ore face very quickly” he said.

“We’re looking to re-open the Taechang and Gubong mines, which have a suggested exploration target of up to 1.5 million ounces of gold.

“We’ll be getting access to ore inside one or two months of development activities and the upfront capital costs are a lot lower because we’re not building a mine from scratch.”

Mitchell said Gubong was historically the country’s second largest gold mine and there were several vein systems that had been poorly drilled or not drilled at all, where a typical orogenic gold system tends to have significant scale and depth continuity.

He said Korea offered many advantages, from reliable power and excellent infrastructure to a supportive government, that did not impose royalties and provided capital payment incentives for mine development.

“That means a company like us is going to get a bit of a lift-up,” he said.

“It also has one of the biggest manufacturing bases in the world, so you can source in-country pretty much anything you want to build, 99% of the time.

“We see a huge opportunity to hit the ground running in terms of production – it won’t be overnight but I think it’ll be a lot quicker than the average investor would think.”

The company’s remaining Korean portfolio comprises the epithermal gold and silver exploration projects.

Weolyu (pictured, left) is the flagship, where field reconnaissance has found classic banded low sulphidation mineralised quartz veins and surface sampling yielded up to 8.4g/t gold and 200g/t silver. 

Mitchell would like to put a Cannon-style development programme in place in Korea and is talking to narrow vein, high-grade underground gold mining specialists to fast-track the restarts.

“I’m hoping to bring in specialists into Korea to assist us to develop the Taechang and Gubong mines in a timeframe that will surprise the average investor,” he said.

Back in Australia, the natural question is what comes after Cannon.

The Cannon deposit is open at depth and drilling has intersected 0.27m at 76.4g/t gold under the resource envelope but Mitchell said he did not want to overblow the possibility of going underground.

“We’re coming to the end of the openpit life, we don’t want drill rigs to get in the way of operations, so we’re waiting for operations to cease in the next couple of months before we take a very good look at it,” he said.

“Hopefully we can get a repeat of the good high-grade Cannon mineralisation and we should have some drilling results within the next three to four months.”

However the company is already looking to a possible “second Cannon,” a near-term mine replacement at the nearby Glandore gold project.

Southern Gold entered a farm-in and joint venture agreement with Aruma Resources (AU:AAJ) in April 2016 to earn up to 90% of the Glandore project, which includes three mining leases and lies within 10km of Cannon.

“We’ve just been working through heritage issues and we hope to be drilling out there by the end of March,” Mitchell said.

“We’re quietly confident we’ll be talking about JORC resources in the near-term and we can clearly see the potential for another Cannon-style openpit if we can do it again.”

Turning to the remaining Kalgoorlie exploration projects, Mitchell said Cowarna had the most exciting potential for finding something “new and off the radar”.

He said the company’s philosophy of teaming up with a third party to progress a project had worked well at Cannon and put Southern Gold in a strong position.

“If we can repeat the Cannon experience in a relatively short timeframe, and behind that can make new discoveries in new areas, I think the perception of Southern Gold should change,” Mitchell said.

The company’s shares have been tracking sideways in recent months but are up more than 40% over a year.

Both Mitchell and company chairman Greg Boulton have been buying shares on market and Mitchell said the company just had to stay its course.

“As a matter of philosophy, we’re trying to make returns to shareholders in two ways, through income generation from the mining activities we’re involved in, and by growing our asset base significantly in time and hopefully that will be reflected in the growing share price,” he said.

“It’s a very unusual position for a junior to be in, but we’re making about $10 million from the Cannon pit and we’re seriously looking at paying some of that back to our shareholders, potentially as a special dividend.”

Mitchell is very happy with the company’s position as it enters its new phase of development.

“We’ve got a very substantial portfolio of projects, and on the back of making a significant amount of money from the Cannon openpit, we’re approaching an exciting year of working on our ‘six plus six’ in Kalgoorlie and South Korea,” he said.

“We’ll be testing them to look at expanding our resource base, potentially starting up other mining projects and we have the very real possibility of making a new discovery.

“We’ve just got to stay our course and demonstrate that mine number two is not far away.

“I hope we’ve established a reputation that we deliver what we say we’ll do, even if sometimes what we say is a bit surprising.”