Gubong, Taechang, Kochang – South Korea

75 Pages·2017·3.27 MB·English

by  Aidan Bishop

Competent Persons Report for Bluebird
Merchant Ventures Ltd – Gubong,

Taechang, Kochang – South Korea

Partial map of Southern Korea showing the location of the various mine properties held by Southern Gold.

Prepared By: Geoff Boswell, MSEG, AusIMM, CPP Geology
Document No: KSG-001
Date: 8 January 2018
Technical Report – South Korea gold projects

Disclaimer

This Technical Report (Report) has been prepared for Bluebird Merchant Ventures Ltd by
Geoff Boswell, MSEG, AUSIMM, CPP Geology, a qualified person as defined under the JORC
Code 2012, based on assumptions as identified throughout the text and upon information and
data supplied by others.

The Report is to be read in the context of the methodology, procedures and techniques used,
the author’s assumptions, and the circumstances and constraints under which the Report was
written. The Report is to be read as a whole, and sections or parts thereof should therefore
not be read or relied upon out of context.

The author has, in preparing the Report, followed methodology and procedures, and exercised
due care consistent with the intended level of accuracy, using his professional judgment and
reasonable care.

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Technical Report – South Korea gold projects

TABLE OF CONTENTS

TABLE OF FIGURES ............................................................................ 7

TABLE OF TABLES .............................................................................. 8

1 EXECUTIVE SUMMARY ..................................................................... 9

1.1 Overview ................................................................................................................................ 9
1.2 Property Description, Location and Ownership ...................................................................... 9
1.3 Accessibility, Climate, Local Resources, Infrastructure and Physiography .............................. 9
1.4 Project History ...................................................................................................................... 10
1.5 Summary of Geology and Mineralisation ............................................................................. 10
1.5.1 Gubong................................................................................................................................ 12
1.5.2 Taechang ............................................................................................................................. 13
1.5.3 Kochang .............................................................................................................................. 13
1.6 Summary of Exploration Concept ......................................................................................... 14
1.7 Environmental Permitting .................................................................................................... 15
1.8 Summary of Assets ............................................................................................................... 15
1.9 Conclusions and Recommendations ..................................................................................... 16
1.9.1 Conclusions ......................................................................................................................... 16
1.9.2 Recommendations .............................................................................................................. 16
2 INTRODUCTION .............................................................................. 17

2.1 Terms of Reference and Issuer for Whom the Technical Report is Prepared ........................ 17
2.2 Qualified Persons and Inspection of the Property ................................................................ 17
2.3 Declaration ........................................................................................................................... 18
2.3.1 Consent ............................................................................................................................... 18
2.3.2 Copyright ............................................................................................................................. 18
3 RELIANCE ON OTHER EXPERTS ................................................. 18

3.1 Units and Currency and Abbreviations; Glossary of terms ................................................... 19
4 PROPERTY DESCRIPTION AND LOCATION ............................ 19

4.1 Area ...................................................................................................................................... 19
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Technical Report – South Korea gold projects

4.2 Location ................................................................................................................................ 19
4.3 Type of Mineral Tenure ........................................................................................................ 19
4.4 Issuers Interest ..................................................................................................................... 21
4.5 Royalties, Third Party Interests, Payments, Agreements and Encumberances ..................... 21
4.6 Permits ................................................................................................................................. 21
4.7 Other Liabilities including Environmental Liabilities ............................................................. 23
5 OTHER ASSETS ................................................................................ 24

6 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES,

INFRASTRUCTURE AND PHYSIOGRAPHY .................................... 24

6.1 Topography, Elevation and Vegetation ................................................................................ 24
6.1.1 Gubong................................................................................................................................ 24
6.1.1 Taechang ............................................................................................................................. 24
6.1.2 Kochang .............................................................................................................................. 24
6.2 Accessibility .......................................................................................................................... 24
6.2.1 Gubong................................................................................................................................ 24
6.2.2 Taechang ............................................................................................................................. 25
6.2.3 Kochang .............................................................................................................................. 25
6.3 Climate and length of operating season ............................................................................... 25
6.4 Local Resource and Infrastructure ........................................................................................ 25
7 HISTORY ............................................................................................ 25

7.1 Prior Ownership and Ownership Changes ............................................................................ 25
7.1.1 Gubong................................................................................................................................ 26
7.1.2 Taechang ............................................................................................................................. 26
7.1.3 Kochang .............................................................................................................................. 26
7.2 Previous Exploration and Development Work ..................................................................... 27
7.2.1 Gubong................................................................................................................................ 27
7.2.2 Taechang ............................................................................................................................. 33
7.2.3 Kochang .............................................................................................................................. 34
7.3 Production History ............................................................................................................... 37
7.3.1 Gubong................................................................................................................................ 37
7.3.2 Taechang ............................................................................................................................. 38
7.3.3 Kochang .............................................................................................................................. 39
7.4 Resources ............................................................................................................................. 39
7.4.1 Gubong................................................................................................................................ 39
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Technical Report – South Korea gold projects

7.4.2 Taechang ............................................................................................................................. 40
7.4.3 Kochang .............................................................................................................................. 41
8 GEOLOGICAL SETTING AND MINERALIZATION .................... 41

8.1 Regional Geology ................................................................................................................. 41
8.2 Regional Structures .............................................................................................................. 43
8.3 Local Geology ....................................................................................................................... 43
8.3.1 Gubong................................................................................................................................ 43
8.3.2 Taechang ............................................................................................................................. 47
8.3.3 Ko Chang ............................................................................................................................. 48
8.4 Mineralization ...................................................................................................................... 48
8.4.1 Gubong................................................................................................................................ 48
8.4.2 Taechang ............................................................................................................................. 50
8.4.3 Kochang .............................................................................................................................. 53
9 EXPLORATION ................................................................................. 60

9.1 Gubong ................................................................................................................................. 60
9.2 Taechang .............................................................................................................................. 67
9.3 Kochang ................................................................................................................................ 69
10DRILLING .......................................................................................... 69

10.1 Drilling Campaigns ............................................................................................................ 69
11SAMPLE PREPARATION, ANALYSIS AND SECURITY ............ 69

11.1 Sample Preparation .......................................................................................................... 69
11.2 Analytical Methods ........................................................................................................... 69
11.3 Sample Security ................................................................................................................ 69
11.4 Statement of Sample and Assaying Adequacy .................................................................. 69
12DATA VERIFICATION..................................................................... 69

12.1 Performance of Blanks, Standards, Laboratory Repeats and Field Duplicates .................. 69
12.2 Database Verification ....................................................................................................... 69
12.2.1 Collar Survey Verification ................................................................................................ 69
12.2.2 Down-Hole Survey Verification ....................................................................................... 69
12.2.3 Sample Intervals Verification .......................................................................................... 69
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Technical Report – South Korea gold projects

12.2.4 Assay Verification ............................................................................................................ 69
12.2.5 Density Verification ......................................................................................................... 69
13CONCLUSIONS .................................................................................. 69

13.1.1 Gubong ............................................................................................................................ 70
13.1.2 Taechang ......................................................................................................................... 70
13.1.3 Kochang ........................................................................................................................... 71
14RECOMMENDATIONS .................................................................... 71

14.1 Work Program .................................................................................................................. 71
14.1.1 Gubong ............................................................................................................................ 71
14.1.2 Taechang ......................................................................................................................... 72
14.1.3 Kochang ........................................................................................................................... 73
15REFERENCES .................................................................................... 74

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Technical Report – South Korea gold projects

TABLE OF FIGURES

FIGURE 1.1: MAJOR LITHOLOGIC UNITS IN EAST ASIA ......................................................11
FIGURE 1.2: MAJOR LITHOLOGIC UNITS IN KOREA............................................................12
FIGURE 4.1: MAJOR SOUTHERN GOLD PROJECTS IN KOREA .............................................21
FIGURE 4.2: GUBONG MINE SHOWING TENEMENTS, WORKINGS, DRILL HOLES AND
UNDERGROUND SAMPLES ............................................................................22
FIGURE 4.3: TAECHANG PROSPECT SHOWING TENEMENT BLOCKS AND UNDERGROUND
WORKINGS ..................................................................................................23
FIGURE 4.4: KOCHANG SUMMARY MAP SHOWING TENEMENTS, MINE WORKINGS
AND VEINS ................................................................................................23
FIGURE 7.1: GUBONG MINE ............................................................................................27
FIGURE 7.2: GUBONG SUMMARY MAP SHOWING DRILL HOLES AND SIGNIFICANT ASSAYS ..30
FIGURE 7.3: GR ENGINEERING SCOPING STUDY LEVEL PLANT DESIGN ............................32
FIGURE 7.4: ROCK TEAM DECLINE DRIVEN OVERALL MINE LAYOUT ..................................33
FIGURE: 7.5. SHOWING THE 2.5 KM LENGTH OF MINERALISATION DELINEATED AT
KOCHANG BY SOUTHERN GOLD GEOLOGISTS WITH SAMPLING HIGHLIGHTS. ....34
FIGURE 7.6: KOCHANG MINE SHOWING THE LOCATION OF THE SANPO MINE ......................35
FIGURE: 7.7: SHOWING MINERALISATION AT KOCHANG IN RELATION TO AIRBORNE
RADIOMETRIC AND MAGNETIC ANOMALIES ....................................................36
FIGURE 8.1: MAJOR LITHOLOGIC UNITS IN EAST ASIA ......................................................41
FIGURE 8.2: MAJOR LITHOLOGIC UNITS IN KOREA............................................................42
FIGURE 8.3: MAJOR KOREAN LITHOLOGIC SYSTEM EXHIBITING THE
“KOREAN COLLISION BELT” ..........................................................................43
FIGURE 8.4: LOCAL GEOLOGY AT GUBONG ......................................................................44
FIGURE 8.5: SENNITT STRUCTURAL INTERPRETATION MAP ...............................................45
FIGURE 8.6: LOCAL STRUCTURE AT GUBONG ..................................................................46
FIGURE 8.7: TAECHANG GEOLOGICAL SUMMARY MAP......................................................47
FIGURE 8.8: LOCAL GEOLOGY AT KOCHANG SHOWING UPPER AMPHIBOLITE GRADE
METAMORPHISM OVER THE SOUTHERN SILVER MINE AND GNEISS UNITS
OVER THE REST OF THE AREA. ALLUVIUM IS SHOWN IN YELLOW AND
JURASSIC INTRUSIVES IN PINK. THE UNDERGROUND WORKINGS ARE
SHOWN IN GREEN AND MINERALIZED VEIN OUTCROPS IN RED. .........................48
FIGURE 8.9: CUT SLABS OF QUARTZ VEINS FROM THE GUBONG MINE NO 6 VEIN (B, C, D),
DANBONG (A) AND BONGNAM NO 1 VEIN (F). OBSERVED FEATURES INCLUDE
LAMINATIONS OF WALL ROCK, FRACTURING OF EXISTING ORE MINERALS AND
EARLY QUARTZ AND STYLOLITIC DISSOLUTION SEAMS. ...................................49
FIGURE 8.10: TAECHANG MINE LAYOUT AND UNDERGROUND SAMPLES ..............................50
FIGURE 8.11: TAECHANG QUARTZ VEINING WITHIN GNEISS ................................................51
FIGURE 8.12: TAECHANG QUARTZ VEINING WITHIN GNEISS ................................................51
FIGURE 8.13: FACT MAPPING SHOWING THE EXTENT OF THE MONOLITHIC BRECCIA OR
ANTICLINE HINGE WITH MESOTHERMAL QUARTZ STRUCTURES MINERALISED
IF THEY DIP NW AND NOT MINERALISED IF THEY DIP SE. ................................54
FIGURE 8.14: KOCHANG GEOLOGY SHOWING PROPOSES MAGMATIC CENTRE, OUTFLOW
ZONES AND NW FAULTS AS FLUID CONDUITS ...............................................55
FIGURE 8.15: ORE AT KOCHANG .......................................................................................55
FIGURE 8.16: ROCKCHIP SAMPLING BY AU PPM SHOWING SIGNIFICANT AU GRADES
DEVELOPED OVER +2KM ZONE IN A NUMBER OF VEINS. SIGNIFICANTLY,
HIGH GRADE GOLD SAMPLES WERE TAKEN OVER THE SILVER MINE AREA TO
THE SOUTH SUGGESTING THAT THIS MAY PROVIDE A GOLD AND
SILVER RESOURCE. .....................................................................................56
FIGURE 8.17: ROCKCHIP SAMPLING BY AG PPM SHOWING THE AU GRADES INCREASE
SIGNIFICANTLY TOWARDS THE SW AND THE HISTORICAL SILVER MINE. ............57
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FIGURE 8.18: ROCKCHIP SAMPLING BY AS PPM SHOWING THE RELATIONSHIP BETWEEN AS AND
AU. AS MAY BE THE BEST INDICATOR FOR GOLD BEARING QUARTZ VEINS. ONE OR
TWO FOOTWALL VEINS CAN BE SEEN AS CAN AT LEAST ONE HANGING WALL VEIN IN
THE NORTH. ................................................................................................58
FIGURE 8.19: ROCKCHIP ASSAY FROM SURFACE PLOTTED WITH UNDERGROUND FACE SAMPLE
DATA ..........................................................................................................59
FIGURE 8.20: THE “OPEN STOPE” LOCATION SHOWING SAMPLE LOCATIONS AND GOLD ASSAYS.
..................................................................................................................60
FIGURE 9.1: THE REMAINS OF THE CONCRETE COLLAR OF THE MAIN INCLINED SHAFT AT
GUBONG. ...................................................................................................60
FIGURE 9.2: THE TRACK TO ACCESS THE MAIN INCLINED SHAFT BELOW THE CONCRETE
COLLAR AT GUBONG. ..................................................................................61
FIGURE 9.3: THE DIGGING FACE OF THE MAIN INCLINED SHAFT AT GUBONG SHOWING CLAY
FILL TO BE REMOVED. ..................................................................................61
FIGURE 9.4: FACE SAMPLE GRADES ACROSS THE LOWER LEVELS OF THE GUBONG MINE. ..62
FIGURE 9.5: 3D DATAMINE MODEL OF THE MINE – PARTLY COMPLETED. ..........................62
FIGURE 9.6: HEESONG METALS, PLANNED DRILLING PROGRAMS......................................63
FIGURE 9.7: SECTION THROUGH DRILL HOLE GBDD0002 ...............................................64
FIGURE 9.8: SECTION THROUGH DRILL HOLE GBDD0003 ...............................................65
FIGURE 9.9: SECTION THROUGH DRILL HOLE GBDD0004 ...............................................66
FIGURE 9.10: SECTION THROUGH DRILL HOLE GBDD0005 AND GB89-6 ...........................67
FIGURE 9.11: PARTLY COMPLETED 3D MODEL OF TAECHANG MINE ....................................68
FIGURE 9.12: TAECHANG MINE LAYOUT AND UNDERGROUND SAMPLES ..............................68

TABLE OF TABLES

TABLE 1.1: SUMMARY OF TENEMENTS ......................................................................... 15
TABLE 4.1: MAIN ASPECTS OF THE MINING LAW BEFORE 2011 ...................................... 19
TABLE 7.1: GUBONG DRILL HOLE COLLARS AND SPECIFICATIONS ................................. 30
TABLE 7.2: GUBONG PRODUCTION HISTORY ................................................................ 37
TABLE 7.3 TAECHANG MINE HISTORICAL PRODUCTION ................................................ 38
TABLE 7.3 KOCHANG MINE HISTORICAL PRODUCTION ................................................. 39

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Technical Report – South Korea gold projects

1 EXECUTIVE SUMMARY
1.1 Overview
This competent Persons report is prepared at the request of Bluebird Merchant Ventures Ltd
(Bluebird) for the purpose of providing management and shareholders with an independent
review of the Korean Projects.

The author visited Korean from the 10th until the 15th September 2017 and visited the prospect
areas. The Gubong and Kochang projects were visited on 11 September 2017 and the
Taechang project was visited on 13th September. Various staff were spoken to and reports
and historical data were viewed.
1.2 Property Description, Location and Ownership
Gubong Project 2,484 ha 9 contiguous blocks of 276 ha. In Chungnam Province

Taechang Project 398 ha 2 contiguous blocks of 137 and 261 ha. In
Chungchongbuk province

Kochang Project 837 ha 3 contiguous blocks of 279 ha. In Gyoungnam Province.

All of the projects that are the subject of this report were granted prior to 2011 as Mining Rights
under the Korean mining law.

The tenements are held 100% by Southern Gold Korea (Southern Gold) which is in turn 100%
owned by Southern Gold Ltd of Australia. Bluebird Merchant Ventures Ltd, listed on the main
market of London Stock Exchange, have signed conditional agreements to farm-in to three of
Southern Golds gold projects in Korea, namely Gubong, Taechang and Kochang Fig 4.1).
Bluebird have agreed to spend USD500,000 per project on feasibility studies over a 12 month
period after which they will form a 50:50 Joint Venture and Bluebird will be the operator. In
addition, Bluebird is required to invest AUD250,000 into a placing of Southern Gold shares for
each mine. The placings can be made at any time between 90 and 120 days after Bluebird is
provided access by SAU to the respective mines.

There are no government royalties or excise taxes applicable in the Republic of Korea. Korea
receives its share of mine production as corporate and income taxes from the project.

Southern Gold Korea (Heesong Metals) bought 16 gold project areas off Mr Sim on 24th
December 2010. Under the sale agreement Mr Sim retains a royalty for each mining project
area of the following:

1. $500,000 1 month after commercial production begins on any project.
2. $500,000 1 year after the initial payment for 3 successive years
3. A 2% NSR royalty on each gold project area

1.3 Accessibility, Climate, Local Resources, Infrastructure and Physiography
All properties are easily accessible from main highways and are close to towns and cities that
will supply staff and materials easily. Each prospect is accessed from county concrete and
asphalt roads a short distance from main highways. At Gubong the outcropping quartz veins,
inclined shaft and adits are exposed in the top of the central hill and accessible by farm roads
and clay tracks. At Taechang, the mine is accessed from the village of Hanam-ni up a 1.2 km
gravel road. At Kochang, the main adit under current investigation is beside a concreted
county road and the vein outcrop is exposed on the lightly wooded hill above.

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Technical Report – South Korea gold projects

Gubong is located on a hill 160m above sea level and near the coast while Taechang and
Kochang are located at 360m and 290m above sea level and inland. All projects occur in a
temperate climate with rice cultivation in the valleys, crops on the rolling land and deciduous
forest on the hills. All may be subject to snow in winter although Taechang has the coldest
winter climate.

Periodic snowfall in winter is not expected to limit access. In fact, the dry deciduous vegetation
makes exploration easier in winter.

1.4 Project History
After a hiatus in mining since 1991, the tenements were applied for by Mr Jae Youl Sim in
2009. Mr Sim sold the tenements to Won Kwang Mines that was in turn controlled by
International Gold Limited, an ASX listed company), and started the process of translation of
prior data and understanding what resources remain at Gubong in the form of an Economic
Evaluation Study Report (Gubong Scoping Study).

Won Kwang Mines Inc changed its name to Heesong Metals Inc and International Gold Limited
was sold to Asiatic Gold Ltd, a private Australian company. In 2015 Asiatic Gold Ltd was
bought by Southern Gold, an ASX listed company, thus transferring control of the properties.
Heesong Metals changed its name to Southern Gold Korea. Mr Jae Youl Sim retains a royalty
and payment on first production from all projects.

Bluebird Merchant Ventures Ltd signed conditional agreements in March 2017 with Southern
Gold Ltd to spend $500,000 on each project and carry out feasibility studies on the three
projects mentioned in this report. Thereafter a Joint Venture (JV) will be signed giving 50:50
and control through development and mining. The joint venture allows for equal spending or
dilution to commercial production.

1.5 Summary of Geology and Mineralisation
Korea sits on the Pacific rim with affinities to gold producing belts in China and Japan. It
appears to be under represented in terms of world class deposits, possibly due to lack of
recent exploration and mining. Many small to medium sized mines in Korea closed during the
mid 80’s and exploration has been generally not carried out until the late 90’s.

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