Darasun Update


Following the announcement on 10 November 2004, Highland Gold announces further information on current operations at Darasun, including:

  • Update on current technical issues at the Darasun plant
  • Further feasibility study results at Talatui leading to revised production estimates and a potential increase in reserve estimates

Technical issues at Darasun

In the interim results’ statement released on 21 September 2004, it was announced that, following initial production delays, the newly recommissioned Darasun mine was likely to produce 15,000 ozs of gold in 2004 and 120,000 ozs in 2005. Initial problems with pre-commissioning of the ore grinding equipment referred therein have been rectified but subsequent further technical difficulties have been encountered. During commissioning of the mill, technical problems with the mill driving gear have prevented the mills being run at more than 50% capacity so far.

The Company is seeking to rectify the problems and, to date, the mill has been kept running at this lower capacity. We now estimate that this reduced capacity will allow us to process 25,000–35,000 tonnes of ore and produce approximately 5,000-8,000 ozs of gold at Darasun by the end of 2004 rather than the 15,000 ozs as previously estimated.

We have appointed a working party, comprising company experts, engineers from Siemens (who produced the mill driving gear) and Tyazhmash (suppliers of the mill equipment), to investigate the problem and we expect to be able to inform shareholders of our conclusions shortly. This will allow us to determine the appropriate course of action and the estimated cost of restoring the mills to full production capacity.

We have continued to mine at the Darasun and Teremki deposits and, to date, more than 80,000 tonnes of ore have been mined at an average grade of 8.9g/t, including 46,300 tonnes of stoping at an average grade of 11.5 g/t.

At a group level, we currently estimate that any shortfall in production at Darasun is likely to be partially offset by higher production at MNV which, for the ten months to 31 October 2004, has produced 3,800 ozs more than had been planned.

New feasibility study results for the Talatui deposit

During 2004 we have recalculated the reserves and conducted an internal feasibility study for the Talatui deposit. The pre-feasibility study for Talatui completed in 2002 by Irgiridmet Scientific Institute specified only open pit mining at a stripping ratio of 6.7 m3/t. Estimates in that study indicated total reserves of 289,000 ozs of gold at a grade of 6.7 g/t. Further additional reserves located below the pit`s floor (of some 750,000 ozs of gold) were excluded at the time as underground mining had not been considered feasible.

In early 2004, during the application process for the long-term license at Talatui, we received additional geological data for the deposit. Based on this data Irgiridmet has since revised its original design for the open pit operation in a number of ways and their report concluded, inter alia, a significant increase in the stripping ratio. The Talatui license was secured on 24 June 2004.

Subsequently, we engaged Zabaikalzolotoproyect Institute, Highland Gold’s fully owned subsidiary in Chita, to develop plans for an alternative mine plan project based on both open pit and underground mining. The results of this work show that combined open pit and underground mining would be profitable at Talatui and hence the board proposes to adopt this plan. This new plan indicates a potential increase in reserves at Talatui from 289,000 to 790,700 ozs of gold assuming a cut off grade of 2g/t and a gold price of $400/oz, thereby increasing the potential mine life at Talatui from 6 to 16 years. The changes are summarized in Table 1 below.

The revised plans for Talatui have now been completed and will be submitted to the State Mining Committee for Reserves for approval and we would expect to be able to announce their conclusions early next year.

Table 1. Comparison of Talatui mine plans

  2002 2004 mine plan
  Irgiridmet submitted for
  estimates approval
Open pit    
- reserves (oz) 289 ,000 137,000
- average grade (g/t) 6.7 6.2
- cut off grade (g/t) 3.0 2.0
- reserves (oz)   653,700
- average grade (g/t)   7.6
- cut off grade (g/t)   3.0
Total (oz) 289,000 790,700
Stripping ratio (m 3 /t) 6.7 12.7

The new Talatui mine plan, which now incorporates this additional underground reserve as well as the revised open pit operating parameters, is likely to result in an overall increase in cash operating costs at the Darasun complex. Taking into account these new findings and, depending on the short term resolution of the technical issues at the mill, we estimate that the production contribution from Darasun will be significantly lower than previously estimated. Based on our revised estimates the company will be able to process in the region of 350,000-400,000 tonnes of ore at the Darasun complex and produce approximately 70,000-90,000 ozs of gold in 2005. We currently expect to subsequently achieve full production of 120,000 ozs of gold.

Ivan Koulakov, Managing Director, Highland Gold, said:

“In spite of the difficulties we are having in getting Darasun into full production, as a mine, Darasun is now operational and producing. Having now completed our own re-evaluation of the reserves, based on new geological data made available to us this year, we are confident that the long-term potential of the mine is greater than we previously envisaged.”

Enquiries:   +44 (0) 20 7404 5959
Highland Gold   Peter Daresbury, Executive Chairman
    Ivan Koulakov, Managing Director
    Denis Alexandrov, Finance Director
    Dmitry Yakushkin, Director of Communications
Brunswick   Andrew Garfield
    Mark Antelme
    Pavla Kazbundová