Highland Gold Agrees to Sell the Mayskoye Development Project
The Board of Highland Gold Mining Limited ("Highland Gold", or the "Company") announces today that following a detailed review of the Company’s Mayskoye Development Project ("Mayskoye") it has agreed to sell the issued share capital of its subsidiary Zolotrudnaya Kompaniya Mayskoye Limited Liability Company, which owns the asset, for a cash consideration of US $105 million to a group of Russian companies, one of which is JSC Polymetal and none of which is connected with any of Highland Gold’s directors or major shareholders. The transaction was completed on 28 April 2009.
Mayskoye is located in the Chukotka region of North East Russia and was acquired by Highland Gold in 2003. Mayskoye contributed a US$6 million loss to the Company in the financial year ended 31 December 2007, being the last reported full year financial period. The Company completed a feasibility study for the project in the second quarter of 2008 and the project cost estimate was anticipated at US$500 million. Shortly after the completion of this study, the Company decided to reduce work activity and conduct a detailed review of the project under current market conditions. Following this review of Mayskoye, including preparation for construction, the capital cost and the overall challenges of the asset, the Board concluded that the sale of Mayskoye for US$105 million was in the best interest of the Company.
The unaudited carrying value of Mayskoye as at 31 December 2008 was US$210 million. There is anticipated to be an impairment charge of approximately US$110 million which will be recorded as a result of this transaction. However, the Company expects cost savings principally in the form of capital expenditure. These capital cost reductions combined with the proceeds from the sale of Maskoye will improve further the Company’s liquidity position, helping Highland Gold to continue to pursue its growth strategy of investing in further early production assets, strategic exploration in Russia and the CIS countries and utilising cash resources in developing its other assets.
For further information please contact:
Highland Gold –
Dmitry Yakushkin, Head of Communications – +7 495 777 3155
Duncan Baxter, Chairman – +44 (0) 1534 814202
Fin Public Relations –
Alex Glover - +44 (0) 207 608 2280
Dominic Palmer-Tomkinson - +44 (0) 207 239 0140
J.P. Morgan Cazenove (Nominated Adviser) –
Michael Wentworth-Stanley, Managing Director
Sam Critchlow - +44 (0) 207 588 2828