Highland Gold Announces Award of Mining Licences at Darasun and Teremky

12.03.2003

The Board of Highland Gold Mining Limited ("Highland Gold" or the Company) today announces the award of the long term mining licences at the Darasun and Teremky deposits.

The Darasun, Teremky and Talatuy deposits (together "the Darasun Project") are located in the Tungokochensky District of the Chita Region in Eastern Russia approximately 260km from the city of Chita. It was indicated at the time of the admission of the Company's shares to AIM in December 2002 that the tender process for the award of these licences was underway. This process has now been concluded and at the end of February 2003 the Ministry of Natural Resources of the Russian Federation and the Administration of the Chita Region formally granted the long term licences expiring in 2023 (with the possibility of further extension) to OOO Darasunsky Rudnik, a 100% subsidiary of Highland Gold, to use the mineral resources for the purpose of mining gold and accompanying components at the Darasun and Teremky deposits.

Furthermore, Highland Gold can confirm that all major mining and surface infrastructure assets have now been registered with the Company. Darasun has measured, indicated and inferred resources of 1.8 million oz of gold at an average grade of 15.1g/t and proven and probable reserves of 749,000 oz of gold at an average grade of 12.5g/t. Teremky has measured, indicated and inferred resources of 97,000 oz of gold at an average grade of 11.8 g/t and proven and probable reserves of 32,000 oz of gold at an average grade of 18.5 g/t. Resources are sufficient to support production for in excess of 18 years although further development of gold existing in the P category, comprising some 4.5 million oz of gold, should allow production well beyond that.

Both deposits have significant underground development and surface infrastructure in place. The Company now expects to be able to bring the deposits into production during the first quarter of 2004, with target full production of 225,000 tonnes of ore in that year. Target annual production at the Darasun Project is expected to be approximately 100,000oz of gold per year with operating costs broadly in line with the Group's current levels.

Lord Daresbury, Executive Chairman of Highland Gold, said:"This is an extremely important milestone in the development of the Company. At the time of Admission, we stated that the Company was committed to the expansion of the Group's production base. The acquisition of the Darasun Project in 2002 and now the successful award of the licences at Darasun and Teremky further underpin the Group's resource base and underscores the ability of the management team to secure the ownership of significant development assets. The award of the licences allows the Group to make significant financial commitment to the Project, and the Board and management team are now confident that it can be brought into production during the first quarter of 2004 adding an estimated 100,000oz of gold to existing annual production and a meaningful contribution to Group profits."

Enquiries:

Patrick Handley Brunswick Group +44 20 7404 5959

Information about the Darasun Project

The Darasun, Teremky and Talatuy deposits (together "the Darasun Project") are located in the Tungokochensky District of the Chita Region in Eastern Russia approximately 260km from the city of Chita. In total, the Darasun Project has measured, indicated and inferred resources of 3.1 million oz of gold and probable reserves of 1.1 million oz of gold. Prior to today's announcement, the Company has already secured the long term licence until 2012 to develop the Talatuy deposit although additional work is required to enable it to fully comply with the terms of that licence. Darasun has been the site of gold mining activity for over 100 years. Shafts were first sunk in 1905 to exploit near surface oxidised ore zones and subsequently deepened to explore un-oxidised ore zones. Approximately 3.9 million oz of gold has already been extracted from the Darasun deposits until 2000 when mining activities were halted. Since then the underground infrastructure has been kept on a care and maintenance basis until its acquisition by the Company in 2002.

Since acquisition, the Company has invested in the assets and infrastructure at the Darasun Project, acquiring all the underground mining equipment and the majority of surface equipment including lifting machinery, maintenance facilities, infrastructure and buildings, whilst conducting advanced feasibility studies on the deposits and the design of the infrastructure for economic extraction. Russian technical institute Irgiridmet have already conducted feasibility studies which have indicated that annual production of 375,000 tonnes of ore per year are feasible from the three deposits with average recovery rates of 89.5%. The Darasun Project was examined by SRK and included in the scope of their work as competent person for the purpose of the Company's admission to AIM in December 2002. The summary of mineral resources and ore reserves at the Darasun Project included below are extracted from that report.

Darasun Tonnage (kt) Au Grade (g/t) Au Content (koz)
B (Measured) 170 13.0 71
C1 (Indicated) 2,080 14.5 966
Sub-Total 2,250 14.3 1,037
C2 (Inferred) 1,490 16.3 780
Total 3,740 15.1 1,817
 
Teremky Tonnage (kt) Au Grade (g/t) Au Content (koz)
B (Measured) - - -
C1 (Indicated) 98 15.1 48
Sub-Total 98 15.1 48
C2 (Inferred) 158 9.7 49
Total 256 11.8 97
 
Darasun Tonnage (kt) Au Grade (g/t) Au Content (koz)
B (Proved) - - -
C1 (Probable) 1,820 12.8 749
Total 1,820 12.8 749
 
Teremky Tonnage (kt) Au Grade (g/t) Au Content (koz)
B (Proved) - - -
C1 (Probable) 54 18.5 32
Total 54 18.5 32

Talatuy, the third deposit at the Darasun Project, has both open pit and underground development and has further measured, indicated and inferred resources of 1.2 million oz and proven and probable reserves of 289,000 oz of gold. The Company continues to address compliance issues relating to the mining license before being able to bring the deposit into full production. Further details will be provided on this in due course. In addition, a total of 4.5 million oz of gold exist in the P category in all three deposits which is not sufficiently explored to be considered a mineral resource under the JORC code but nevertheless provides an indication of the exploration potential of the deposit.

Information on Highland Gold Mining Limited

Highland Gold was incorporated on 23 May 2002 for the purposes of acquiring, consolidating and developing a portfolio of gold mining projects in the Russian Federation with good growth potential. Highland Gold owns and operates the Mnogovershinnoye mine, Russia's fourth largest gold producing mine in 2001, situated in the Far East of the Russian Federation. It also owns two development projects - Darasun and Novoshirokinskoye - in the Chita Region of Eastern Russia. Highland Gold produced 178,000oz of gold in 2002 and has an aggregate resource base of 8.0 million oz, comprising 7.2 million oz of gold and 0.8 million oz of gold equivalents, upon the successful resolution of outstanding issues relating to the Talatuy and Novoshirokinskoye projects. It's shares trade on the Alternative Investment Market of London Stock Exchange plc and has a market capitalisation of approximately US$390 million.