HGM.L Regulatory News (HGM)

5 Oct 2006 07:00

Highland Gold Mining Limited05 October 2006 HIGHLAND GOLD MINING LIMITED News Release - 5 October 2006 Proposed sale of 50% of the DEVELOPMENT PROJECT at Novoshirokinskoye Highland Gold Mining Limited ("Highland Gold", or the "Company") is pleased toannounce that it has agreed in principle to the sale of an interest of 48.3% inits development project at Novoshirokinskoye ("Novo") to Kazzinc, for aconsideration of US$ 36 million in cash. The appropriate legal documents areexpected to be signed next week and the agreement will be subject to receipt ofRussian anti-monopoly clearance. The deal is expected to close by the end of2006. This interest being sold represents 50% of Highland Gold's current holding of96.6% If further shares in Novo are purchased, they will be acquired equallybetween Highland Gold and Kazzinc. Kazzinc is based in Kazakhstan and is a large integrated zinc producer as wellas a producer of copper, gold, silver and lead and develops deposits mostly inEastern Kazakhstan. Pursuant to the proposed joint venture agreement Highland Gold and Kazzinc willwork together to optimise the revenue from the production and sale of productsfrom the Novo gold-polymetallic deposit. The net book value of the interest of 96.6% in Novo in the consolidated balancesheet of Highland Gold at 31 December 2005 was US$ 41 million. The capital expenditure required to bring the development project to production,which is expected to be in 2008, is relatively modest, forecast currently atapproximately US$ 40 million for 2006-2008 inclusive. Half of this requiredcapital will be funded by Kazzinc. For further information please contact: Enquiries: London: +44 (0) 207 851 64 00 Moscow: + 7 (495) 777 31 55 E-mail: info@highlandgold.com Henry Horne, Managing Director Dmitry Yakushkin, Director of Communications Dominic Palmer-Tomkinson, Head of Investor Relations Or, WMC Communications, Alex Glover on +44 20 7930 9030 * * * The deposit at Novoshirokinskoye ("Novo"), located in the Chita Region ofEastern Russia, was discovered in 1951 and extensively explored between 1956 and1962. A development plan for a base metal mine was formulated in 1969 andconstruction of the project began in 1970. The construction work progressedslowly and was suspended in the 1970s. A modified development plan whichproposed a production rate of 450,000 tonnes per annum of ore was approved in1988, but construction was again suspended in 1994, after the majority of theconstruction work was complete, due to the prevailing economic conditions andthe termination of centralised state funding. An extensive amount of mining infrastructure already exists on this projectincluding equipped haulages and shafts (with winders) and a partially completedmill and processing facility. Novoshirokinskoye Mineral Resource Statement ________________________________________________________________________________ Tonnage Au Grade Au Eq. (kt) (g/t) Ounces attributable to Highland Gold________________________________________________________________________________ B (Measured) 680 9.1 192,000________________________________________________________________________________ C1 (Indicated) 5,200 5.1 827,000________________________________________________________________________________ C2 (Inferred) 3,480 3.3 357,000________________________________________________________________________________ Total 9,360 4.7 1,376,000________________________________________________________________________________ Notes: Novoshirokinskoye is a polymetallic deposit containing Gold, Silver,Lead, and Zinc in commercial quantities. For resource and reserve reporting andfor future production accounting, only Gold and Silver will be included as goldequivalents. Lead and Zinc will be treated as by-products. In addition to 1.4million ounces of gold equivalents adopted in the table above, the deposit alsocontains Resources of 349,650 tonnes of lead at a grade of 3.7 per cent and165,900 tonnes of zinc at a grade of 1.8 per cent. Similar figures for theResources recently submitted to GKZ for approval are 375,000 tonnes of lead at agrade of 4.1 per cent and 166,000 tonnes of zinc at a grade of 1.8 per cent. ________________________________________________________________________________ Tonnage Au Grade Au Eq. (kt) (g/t) Ounces attributable to Highland Gold________________________________________________________________________________ B (Proved) 820 6.7 171,000________________________________________________________________________________ C1 (Probable) 4,700 4.5 650,000________________________________________________________________________________ Total 5,520 4.8 821,000________________________________________________________________________________ Notes: Novoshirokinskoye is a polymetallic deposit containing Gold, Silver,Lead, and Zinc in commercial quantities. For resource and reserve reporting andfor future production accounting, only Gold and Silver are included as goldequivalents. Lead and Zinc will be treated as by-products. In addition to821,000 of gold equivalents adopted in the table above, the deposit alsocontains Reserves of 170,000 tonnes of lead at a grade of 3.1% and 75,000 tonnesof zinc at a grade of 1.4%t. This information is provided by RNS The company news service from the London Stock Exchange