HGM.L Regulatory News (HGM)

ACQUISITION OF THE KEKURA GOLD DEPOSIT

2 April 2013 - Highland Gold Mining Limited ("Highland Gold" or the "Company") announces the acquisition of 100% of CJSC Bazovye Metally which holds the mining and exploration rights to the Kekura gold deposit and surrounding licence area, for a consideration of US$212 million. An additional US$11 million will be paid in H2 2013 to a contractor upon the successful launch of the pilot plant which is currently being completed. The consideration will be in cash and will be funded via a new debt facility of US$250 million with Gazprombank, which facility will also allow for additional group operational working capital. The acquisition has received approval to proceed from the Russian anti-monopoly authorities.

The Kekura deposit is located in the Chukotka region, approximately 120 km due south of Bilibino and 250 km east of the Company's Klen development project. Chukotka is one of the fastest growing, investment friendly gold producing regions in Russia with significant exploratory potential.

Based on historical exploration activity, a JORC compliant resource audit by Micon International in 2012 estimated the Kekura deposit resources at approximately 2.89 Moz (Indicated & Inferred) at an average ore grade of 8.69 g/t. Preliminary studies confirm that the asset can be mined by open pit method, while production will employ conventional gravity and CIL processing technology. Initial testwork indicates favourable ore metallurgy and yielded high metal recoveries by gravitational concentration alone. A summary of the Micon report will shortly be available on the Company's website (www.highlandgold.com).

Kekura is at an advanced stage of development and hosts construction camp facilities for employees and contractors with an independent diesel power supply and ancillary systems already installed. A 150,000 tonnes per annum pilot plant is currently under construction with commissioning expected during H2 2013. The pilot plant is expected to operate through to the end of construction and commissioning of the envisaged main processing facility. This is expected to be fully operational by 2017 with anticipated production ranging from 180,000 - 220,000 oz of gold per annum via 800,000 - 1,000,000 tonnes of ore being processed each year over a minimum ten year production life.

Kekura comprises an intrusion-related deposit where ore is associated with gently dipping zones of quartz veinlets within a berezite-altered granodioriteand gold mineralisation is non-refractory and free milling. The surrounding licence area encompasses approximately 1,497 square kilometres where several highly prospective exploration targets in the immediate vicinity of the Kekura deposit have been partly explored with positive results.

Kekura provides a large resource base with excellent potential to develop into a long life, low cost open pit mining operation. It is expected to be a substantial near-term pipeline contributor to Highland Gold's production. Several cost saving synergies are expected with the neighbouring Klen project in regards to future logistics and administration activities. An extensive diamond core drilling programme aimed at upgrading the Kekura resource is planned to commence in Q2 2013 and will see approximately 40,000 metres of core drilled in the first 12 months.

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 / reserve matters. Mr. Klemens holds a Ph.D. in Geology from the University of Toronto has over 15 years of 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.

Eugene Shvidler, Chairman of Highland Gold Mining, commented: "The acquisition of Kekura represents a strong addition for Highland. Kekura's resource base will contribute to the long-term production profile of Highland Gold and represents a solid foundation for the Company's further growth. Kekura, together with our Klen project, further cements Highland's significant presence in the Chukotka region and is expected to advance to the forefront of the Company's project development strategy".

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