Sydney, Feb 6, 2006 (ABN Newswire) - The potential to identify and develop a new gold resource and mine adjacent South Australia's existing Challenger gold mine has been enshrined in a new agreement involving the current mine owner and the listed Southern Gold Limited (ASX: SAU).

Southern Gold announced today it had entered in to an exclusive option agreement with Dominion Mining Limited (ASX: DOM) to develop a gold-only Joint Venture on DOM's Exploration Licences around the Challenger Gold Mine in South Australia.

The JV includes the Golf Bore 54,000oz gold Resource (Indicated plus Inferred), 50 kilometres northeast of the mine.

Southern Gold will issue Dominion with 250,000 fully paid SAU shares (closing price Friday 3 February 2006 of A$0.20 per share) to earn the exclusive right, for a three month period effective until 3 May, to conduct due diligence on the advanced exploration gold prospects and gold resources around the existing mine, and to formalise exploration and development agreements.

The package of tenements includes eight Exploration Licences (EL) in the Challenger region covering 3000km2 on the Gawler Craton (refer table and map).

"We are attracted to the advanced gold exploration ground around Challenger and are looking to build on intercepts of 14m @ 4.2 g/t at two targets within 40 kilometres of the mine, Campfire Bore north of the mine and 6m @ 9.2 g/t at Typhoon, south of the mine," Southern Gold's Managing Director, Mr Stephen Biggins, said today.

"Southern Gold is also assessing the potential to develop the Golf Bore gold resource as a satellite mining operation to Challenger," Mr Biggins said.

"The Golf Bore resource comprises a shallow Indicated Resource of 117,000 tonnes at 2.7g/t for 10,000oz, within a total Resource (Indicated plus Inferred) of 800,000 tonnes at 2.1g/t for 54,000oz."

Dominion's Challenger gold mine produced 29,280 oz at A$258oz during the December 2005 quarter and had reserves of 292,000 oz as of 31 December 2005. The agreement announced today excludes the area immediately surrounding the Challenger mine on EL 3270 which is subject to Dominion's own near-mine exploration activities.

The information in this report has been compiled by Stephen Biggins who is a member of the Australasian Institute of Mining and Metallurgy and is bound by and follows the Institute's codes and recommended practices. He has a minimum of 5 years experience in the types of activities being reported.