Kekura Feasibility Study and Resource Update

06.02.2018

Highland Gold Mining Limited ("Highland Gold" or the "Company", AIM: HGM) today announces results from a Definitive Feasibility Study (“DFS”) and updated JORC-compliant Mineral Resource and Ore Reserve estimates (“Resource Update”) completed by international consultancy Fluor with input from SRK. An executive summary of the report is available here.

Kekura, located in the Chukotka region in Russia's Far East, is the Company's flagship development project. Substantial exploration work and technical studies have already been completed to date, with production targeted to commence in 2021.

DFS HIGHLIGHTS

  • Resource Update for Kekura with total gold reserves of 2.0 Moz at a grade of 7.0 g/t versus the previously reported 1.7 Moz at a grade of 10.7 g/t (1 January 2017).
  • The DFS envisages a sequential and combined open-pit and underground operation with an estimated total mine life of 16 years, compared to eight years projected in the preliminary feasibility study.
  • Expected mill head grade of 7.49 g/t for the first nine years of plant operation, and 5.58 g/t for the final seven years.
  • Open-pit mining planned for the first four years, with combined open-pit and underground operations starting from year five.
  • Mining and processing plant capacity of 800 ktpa, with volumes dropping to 300 ktpa in the final seven years as mining operations move completely underground.
  • Gold mineralisation at Kekura is primarily non-refractory and can be recovered through a conventional gravity with respective cyanidation flowsheet, with expected total recoveries exceeding 85%.
  • Power supply from the regional electrical grid, versus previously-planned self-generation.
  • Expected capital costs of US$ 229 million.
  • Average annual gold production of 172 koz for the first eight years of operation and 46 koz for the final eight years.
  • Total life of mine production of 1.744 Moz at an average total cash cost of US$ 511/oz and all-in sustaining costs of US$ 541/oz.
  • Post-tax NPV@10% of US$ 311 million and IRR of 38%, excluding historical costs and based on a gold price of US$ 1250/oz.

Kekura enjoys a high-grade mineral resource base. The Resource Update contained in the DFS was prepared using data collected from geological exploration in the period from 2006 to 2017, including exploration drilling and pilot mining.

Mineral Resources of the Kekura Deposit*

In accordance with the JORC Code (2012) as of 01 January 2018

.

Ore

(MT)

Au

(g/t)

Contained Au

(tonnes)

Contained Au

(Moz)

Measured

0.58

11.0

6.5

0.206

Indicated

8.72

8.0

69.5

2.231

Inferred

0.16

3.3

0.5

0.017

Total

9.46

8.1

76.5

2.454

* Notes:
- Mineral Resources are reported inclusive of ore reserves.
- Cut-off grade of 1.0 g/t

Ore Reserves of the Kekura Deposit**

In accordance with the JORC Code (2012) as of 01 January 2018

.

Ore

(MT)

Au

(g/t)

Contained Au

(tonnes)

Contained Au

(Moz)

Proven

Open Pit

0.65

9.24

6.0

0.193

 

Underground

-

-

-

-

 

Total

0.65

9.24

6.0

0.193

Probable

Open Pit

5.10

7.82

39.9

1.282

 

Underground

3.13

5.31

16.6

0.534

 

Total

8.23

6.86

56.5

1.815

Total

 

8.88

7.03

62.5

2.008

** Cut-off grade of 1.6 g/t Au is applied to the open pit and 2.0 g/t for vertical zones and 3.0 g/t for horizontal zones Au at the underground mine.

Preliminary construction work is already underway at Kekura, with the bulk of construction due to take place in 2019-2020. Key equipment will be selected and ordered this year for delivery to site in early 2019. Pre-commissioning is scheduled for late 2020 or early 2021, with ramp-up to full production in the second half of 2021.

The broader Kekura licence area covers nearly 1,500 square kilometres and hosts 11 additional prospects that could provide further resources for the Kekura mill. The Company has already initiated exploration drilling on the Granat prospect with results expected later this year.

Information contained in this release with respect to drilling and resource / reserves statements has been taken from the report “Kekura Gold Project Feasibility Study” and prepared in compliance to the JORC Code 2012 by a panel of qualified industry experts of SRK for Highland Gold Mining. The Competent Person for the estimation of Mineral Resources is Liubov Egorova, MAusIMM, who has more than 10 years relevant experience. The Competent Person for the open pit ore reserves is David Pearce, FAusIMM who has 30 years’ experience in open pit mining. The Competent Person for the underground ore reserves is Michael Beare, MIMMM who has more than 20 years’ experience in underground mining. Together they have verified the information pertaining to the DFS in this release. They have sufficient experience relevant to the style of mineralisation and type of deposit under consideration to qualify as Competent Persons as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”.

FOR FURTHER INFORMATION PLEASE CONTACT:

Highland Gold Mining Ltd.

 

John Mann, Head of Communications

+ 7 495 424 95 21

Duncan Baxter, Non-Executive Director

+ 44 (0) 1534 814 202

Numis Securities Limited

(Nominated Adviser and Joint Broker)

John Prior, James Black, Paul Gillam

+44 (0) 207 260 1000

 

BMO Capital Markets

(Joint Broker)

Jeffrey Couch, Neil Haycock, Pascal Lussier Duquette

+44 (0) 207 236 1010

Peat & Co

(Joint Broker)

Charlie Peat

+44 (0) 207 104 2334

Glossary

JORC – Widely accepted standard for reporting mineral resources and ore reserves established by the Australasian Joint Ore Reserves Committee.

Mineral Resource – concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.

Inferred Mineral Resource - that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

Indicated Mineral Resource – that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.

Measured Mineral Resource - that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

Mineral Reserve – the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.

Probable Mineral Reserve – the economically mineable part of an Indicated and, in some circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.

Proven Mineral Reserve – is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.