Trading Update for the First Half of 2003


The Board of Highland Gold Mining Limited today issues the following trading update ahead of the Company's interim results for the six month period ended 30 June 2003, which the Board expects to announce in mid-September 2003.


During the period ended 30 June 2003, the Company's main operating subsidiary ZAO Mnogovershinnoye ("MNV") milled a total of 427,000 tonnes of ore, an increase of 9.8% against the same period in 2002, at an average recovered grade of 6.6g/t (7.3g/t in H1 2002). The lower grade reflects the Company's planned transition of its open pit mining operation to the Upper Ore Body and the grade is expected to increase in the second half of 2003. Of this, a total of 120,000 tonnes of ore were mined from MNV's open pit operations and 264,000 tonnes from underground operations. A further 43,000 tonnes were released from the stockpile. The average recovery rate of 92.03% during the period represents a marginal improvement on the recovery rate for the equivalent six month period in 2002 and for the full year to 31 December 2002. MNV produced a total of 90,100 ounces of gold in the period.

Open pit mining operations are now conducted at the Upper Ore Body. This contains approximately 20% of MNV's total reserves and will be mined over the next seven years. Underground development work to access the Northern Ore Body, containing, approximately, a further 23% of MNV's reserves, has now started. Mining will commence there in the latter part of 2004 and continue for the following eight years. Construction has now commenced on the new diesel power plant at MNV and this is expected to be in operation by the end of the year. Thereafter, MNV will be self-sufficient in this respect, reducing reliance on the local grid which is undergoing significant renovation in 2004.

The Company announced on 28 July 2003 that it was in discussions with representatives of the Khabarovsk regional administration over the acquisition of certain fixed assets at the Mnogovershinnoye mine. The Board remains confident that it will be able to acquire these assets which, to date, have been leased from the Khabarovsk administration. The sale process will be governed by the legal framework for the privatisation of assets in the Russian Federation and the Board expects that details of the sale process will be announced by the Khabarovsk administration in due course and that these details will include the proposed acquisition price of the assets concerned. In the meantime, the Company continues to lease these assets under the terms of the original agreement.


The Company continues to make good progress with the construction at the Darasun project and expects that the mine will be commissioned in May 2004. The Company expects to extract a total of 100,000 tonnes of ore and produce in the region of 40,000 ounces of gold from the Darasun deposit in 2004. It also expects that the Talatui and Teremky deposits will be brought into production soon thereafter and the Darasun project as a whole will reach full production at a mining rate of 450,000 tonnes of ore and production of 120,000 ounces of gold in 2005. The Company estimates that, in full production, total cash costs per ounce at the Darasun project will be approximately $190 per ounce. A total of US$9.4 million was spent on capital expenditure at Darasun in the period, completing the construction of a 35 kilovolt power line from Kholbon to the Southwestern mine, a substation at the Central mine and the construction and renovation of various office and administrative buildings. The foundations for the mill have now been laid and approximately 50% of construction works for the tailings dump have now been completed. The Company continues to reconstruct and upgrade existing facilities and expects to spend a further US$13 million on this in the second half of the year. The Company owns the freehold for all fixed assets at Darasun.


As reported in the final results statement issued on 29 April 2003, the Company increased its ownership interest in OAO Novoshirokinskoye to 87.08%. The Company continues to work closely with the Chita Scientific Research Institute on the project feasibility study and expects to complete this work by the end of the calendar year. The facilities at Novoshirokinskoye are presently being kept on a care and maintenance basis and there are no significant capital expenditure requirements planned at Novoshirokinskoye until the completion of the project feasibility study.

Peter Daresbury, Executive Chairman, Highland Gold, said:"The Board is very pleased with the continued progress at the Group's main operation, MNV, which further increased it's production volume to 427,000 tonnes of ore in the period, and where new open pit operations have made a successful transition to the Upper ore body. Our development team has made tremendous progress with our new projects, particularly at Darasun which is on track for initial production in May 2004."


W.H. Ireland Laurie Beevers / David Youngman +44 (0) 161 832 2174
Brunswick Patrick Handley / Mark Antelme +44 (0) 20 7404 5959