Positive Exploration Results at Unkurtash Project in Kyrgyzstan

18.07.2011

Highland Gold Mining Limited ("Highland Gold", or the "Company") is pleased to announce positive results from its ongoing exploration programme located at Unkurtash in Kyrgyzstan. These latest results continue to underline the Company's intention to substantially increase the initial 42.9 tonnes (1.38 million oz) of gold reserves (C1+C2 category) which were recently approved by the regulatory authorities and are consistent with the Company's expectations of developing a world class gold deposit at Unkurtash. The Unkurtash project includes three distinct prospects: the Unkurtash, Sarytube and Karatube located within the Company's exploration licenses.

At the Unkurtash prospect the new drilling results corroborate the recently established reserve estimate (C1+C2 category), which was based on results from the 2009 drilling campaign. The current results are expected to significantly improve key parameters of the resource model and respective resource categories.

Unkurtash Prospect - RC Drilling Highlights 2011
Drill Hole Id Drill Hole Length
[m]
From
[m]
To
[m]
Intersect Length
[m]
Au [g/t]
U-RD-101* 160.0 142.00 154.00 12.00 1.69
U-RD-102* 249.0 131.00 133.00 2.00 19.23
U-RD-106* 134.0 67.00 87.00 20.00 1.15
U-RD-114* 202.0 114.00 127.00 13.00 2.70
U-RD-115* 224.0 121.00 134.00 13.00 1.95
U-RD-124* 230.0 200.00 205.00 5.00 4.07
U-RD-17A* 201.0 142.00 149.00 7.00 3.85
U-RD-62* 205.0 25.00 36.00 11.00 1.92
U-RD-75* 210.0 0.00 14.00 14.00 2.68
U-RD-79* 192.0 88.00 115.00 27.00 1.02
U-RD-88* 215.0 57.00 68.00 11.00 2.12
U-RD-92* 252.0 17.00 24.00 7.00 2.93
235.00 246.00 11.00 2.01
U-RD-11A 240.0 131.0 145.0 14.0 2.15
U-RD-13A 208.0 53.0 64.0 11.0 5.07
68.0 83.0 15.0 1.75
U-RD-19 206.0 22.0 48.0 26.0 1.95
63.0 73.0 10.0 3.05
U-RD-56 205.0 111.0 125.0 14.0 6.56
130.0 140.0 10.0 6.09
U-RD-65 241.0 15.0 22.0 7.0 3.73
102.0 116.0 14.0 1.49
U-RD-67 250.0 231.0 249.0 18.0 1.54
U-RD-68 230.0 48.0 66.0 18.0 1.23
94.0 109.0 15.0 4.64
U-RD-74 205.0 128.0 192.0 64.0 4.31
U-RD-77 222.0 12.0 15.0 3.0 7.12
U-RD-78 220.0 23.0 37.0 14.0 3.41
62.0 80.0 18.0 1.68
144.0 170.0 26.0 2.07
U-RD-83 227.0 29.0 46.0 17.0 1.87
U-RD-86 205.0 113.0 127.0 14.0 3.16
U-RD-87 250.0 171.0 189.0 18.0 1.22
Reverse circulation drilling. - Drill hole inclination from surface: 50 - 60 degrees; Intersects defined by cut-off grade of 0.7 g/t, 3 metre maximum waste interval, and 3 metre or 2.1 gram*metre minimum ore interval. Fire assays completed by Alex Stewart Group laboratories, Kara Balta, Kyrgyzstan. Asterisks (*) denote drill holes drilled in late 2010 for which results were received in 2011.

Deep drilling from the surface to a maximum depth of 450 metres at the Unkurtash ridge is now underway. This aims to test the continuity of gold mineralisation through to the underground exploration development which is intended to delineate gold mineralisation over a strike length of 800 metres by means of a main drift and a systematic grid of crosscuts spaced at 80 metre intervals.

The initial results received from wall channel-sampling of underground crosscuts are in accordance with the Company's in-house geological model and highlight the potential to increase the vertical extent of the current resource model by an additional 100 to 250 metres:

Unkurtash Prospect - Underground Sampling - Highlights 2011
Crosscut Id Cross Cut Length
[m]
From
[m]
To
[m]
Intersect Length
[m]
Au [g/t]
A4C5_L 99.0 12.0 19.0 7.0 1.04
46.0 50.0 4.0 1.83
54.0 64.0 10.0 5.71
A4C5_R 69.0 70.0 1.0 11.40
77.0 84.0 7.0 1.27
14.9 16.3 1.4 7.66
46.0 59.5 13.5 1.45
80.2 84.0 3.8 1.97
Adit #4, 1650 m level asl. - Continuous channel sampling (3 x 5 cm channel cut by rock saw on left [L] and right [R] walls of crosscut) - Intersects defined by cut-off grade of 0.7 g/t, 3 metre maximum waste interval, and 3 metre or 2.1 gram*metre minimum ore interval. Fire assays completed by Alex Stewart Group laboratories, Kara Balta, Kyrgyzstan.

At the adjacent and geologically similar Sarytube prospect, initial results within a 900 by 500 metres wide drill zone corroborate the geological potential and continuity of gold mineralisation extending through from Unkurtash underlining the potential for Sarytube to host mineral resources comparable to that of the Unkurtash prospect:

Sarytube Prospect - RC Drilling Highlights 2010/2011
Drill Hole Id Drill Hole Length
[m]
From
[m]
To
[m]
Intersect Length
[m]
Au [g/t]
S-RD-09* 253.0 26.00 46.00 20.00 1.41
101.00 142.00 41.00 1.48
S-RD-10* 202.0 121.00 125.00 4.00 7.67
S-RD-13* 212.0 112.00 119.00 7.00 5.07
S-RD-14* 232.0 156.00 184.00 28.00 5.24
S-RD-42 244.0 185.0 193.0 8.0 3.46
S-RD-85 194.0 15.0 28.0 13.0 2.49
S-RD-113 232.0 112.0 130.0 18.0 5.02
189.0 198.0 9.0 3.58
S-RD-118 219.0 0.0 13.0 13.0 1.59
S-RD-119* 216.0 122.00 137.00 15.00 2.34
S-RD-120 247.0 80.0 82.0 2.0 12.24
S-RD-124* 201.0 45.00 51.00 6.00 4.01
S-RD-138 148.0 17.0 33.0 16.0 2.31
Reverse circulation drilling. - Drill hole inclination from surface: 50 - 60 degrees; Intersects defined by cut-off grade of 0.7 g/t, 3 metre maximum waste interval, and 3 metre or 2.1 gram*metre minimum ore interval. Fire assays completed by Alex Stewart Group laboratories, Kara Balta, Kyrgyzstan. Asterisks (*) denote drill holes drilled in late 2010 for which results were received in 2011.

At the Karatube skarn prospect, (located north east of Sarytube) final results from the 2010 drilling programme (received in 2011) are in line with previously reported results:

Sarytube Prospect - RC Drilling Highlights 2011
Drill Hole Id Drill Hole Length
[m]
From
[m]
To
[m]
Intersect Length
[m]
Au [g/t]
K-DD-05A 100.2 66.80 83.10 16.30 1.28
K-DD-36 100.2 9.00 24.00 15.00 2.13
K-DD-38 141.0 33.40 44.80 11.40 2.62
Diamond core drilling. - Drill hole inclination from surface: 50 - 60 degrees; Intersects defined by cut-off grade of 0.7 g/t, 3 metre maximum waste interval, and 3 metre or 2.1 gram*metre minimum ore interval. Fire assays completed by Alex Stewart Group laboratories, Kara Balta, Kyrgyzstan.

All three prospects: Unkurtash, Sarytube and Karatube are located within the Company's two licenses:Unkurtash-Andagul (12 km²) and Kassan (51 km²). The combined mineralised zone measures approximately 4,000 metres on strike, ranges from 250-500 metres in width and has a potential vertical extent of at least 350 metres. Intrusion-hosted stockwork type gold mineralisation characterises Unkurtash and Sarytube, while gold at Karatube is associated with skarn-type mineralisation. Previous test work has indicated favourable metallurgy and gold recovery levels via conventional processing methods.

The Company's ongoing 2011 drilling programme allocates over 50,000 metres of reverse circulation and diamond core drilling as well as advancing 3,000 metres of underground exploration development in order to test the continuity of the mineralisation across the three prospects. By the end of June 2011 more than 27,000 metres had been drilled at the Unkurtash and Sarytube prospects and more than 1,000 metres of new underground development completed.

The Company has committed to audit its GKZ reserves in compliance with JORC standards and this work related to the Unkurtash project is anticipated to be completed during H2 2011. In addition further metallurgical test work is earmarked for H2 2011 and negotiations with regulatory authorities for conversion of the current exploration license into a mining license have been initiated.

The Company is making excellent progress with its ongoing exploration programme towards unlocking the full potential of the three prospects and the latest results underline the Company's vision for developing a large open-pit mineable gold resource at Unkurtash. US$20 million of the Company's US$30 million planned 2011 exploration budget are earmarked for this project.

Mr. Werner Klemens, Head of Exploration at Highland Gold has reviewed and verified the information contained in this release with respect to drilling and resource / reserves matters. Mr. Klemens holds a Ph.D. in Geology from the University of Toronto. He has 13 years experience in mineral exploration and is a fellow of the Geological Association of Canada. A rigorous quality assurance programme complying with international standards is in effect at all exploration projects and includes duplicate sampling, insertion of standards and check assaying at external laboratories.

For further information please contact:

Highland Gold Dmitry Yakushkin, Head of Communications
+ 7 495 424 95 21
  Duncan Baxter, Chairman + 44 (0) 1534 814 202
Matrix Robin Henshall, +44 (0) 20 3206 7172
(Nominated Adviser and broker) Tim Graham, +44 (0)20 3206 7206
Fin Public Relations Alex Glover + 44 (0) 20 7608 2280