Highland Gold Corporate Development Update

10.12.2008

As announced in the Company’s interim results in September, Highland Gold’s new executive management team has now undertaken an extensive review of the Company’s assets. The purpose of the review has been to conserve cash and in doing this we will continue to derive maximum benefit from the Company's producing Mnogovershinnoye mine (MNV) and to maintain the required flexibility in expenditures at our development projects until such time as markets improve and project financing becomes more readily available.

At MNV we are pleased to report that we have achieved strong results in the fourth quarter as a consequence of the high-grade ore currently being mined from the B3 Zone in the open pit, an average daily mill throughput of better than 3,000 tons per day and increased equipment utilisation for both the open pit and underground fleets. We remain on target to achieve our 2008 production goal of 155,000 to 165,000 ounces of gold.

At the development projects, the Board of Directors of Highland Gold has taken a decision to delay the commissioning of the Novoshirokinskoye mine, which was due to take place in December this year, with production starting in Q1 2009. This decision has been made jointly with Kazzinc our project partner. Under the current license terms, the Company is required to begin production at Novoshirokinskoye by 1 October 2009. Although the majority of the preparatory works for the launch of the mine have been completed, an analysis of the recent dramatic fall in world metal prices and the resulting impact upon the profitability of the project has caused the joint venture partners to conclude that a postponement in proceeding to production is prudent and appropriate. In the interim, the mine will be placed under care and maintenance.

The Company has also undertaken a review of the ongoing activities leading to construction at its Mayskoye development project. It has been decided to defer the majority of construction work at the project site until economic conditions and financing opportunities improve. Limited construction and pre-production underground mine development work will be carried out at the site during 2009. In addition, the detailed engineering design of the hydrometallurgical plant will continue to be advanced. The Company is also in the process of updating the economic model of the entire project.

With regard to our Taseevskoye development project, it is expected that the cut-off study will be approved by the Russian State Committee for Mineral Reserves (GKZ) by the end of 2008. The bench-scale metallurgical testing programme, which has been completed recently, shows positive results that corroborate earlier pre-feasibility test work and set the stage for metallurgical pilot plant testing. However, immediate steps are also being taken at Taseevskoye to minimise project expenditures.

Commenting on this announcement Chairman, Duncan Baxter said, -

“The world economic climate has changed dramatically since our positive interim results reported in September 2008. This has led the Board and management to take aggressive action to protect the strength of our balance sheet. Slowing down the development process of our projects is a logical decision in these circumstances. The Board considers that the actions they have taken are in the best commercial interests of Highland Gold and its shareholders.”

For further information please contact:
Highland Gold –
Dmitry Yakushkin, Head of Communications - +7 495 777 3155

Fin Public Relations –
Alex Glover - +44 (0) 207 608 2280

Smith’s –
Dominic Palmer-Tomkinson - +44 (0) 207 239 0140
JPMorgan Cazenove (Nominated Adviser) –
Michael Wentworth-Stanley, Managing Director
Sam Critchlow - +44 (0) 207 588 2828

www.highlandgold.com