HGM.L Regulatory News (HGM)

2 Nov 2005 07:00

Highland Gold Mining Limited02 November 2005 NEW ACQUISITIONS IN THE KHABAROVSK, CHUKOTKA AND CHITA REGIONS Moscow, 2 November 2005 - Highland Gold Mining Limited ("Highland Gold", or the"Company") is very pleased to announce a series of new acquisitions in theKhabarovsk, Chukotka and Chita regions of Russia. These acquisitions are animportant part of the Company's strategic development as they provide a mix ofquality exploration targets, resource enhancements to existing projects, andadditional leverage off our existing management and infrastructure in thesethree important regions. BELAYA GORA DEPOSIT (Khabarovsk Region)Highland Gold has acquired a 25 year licence to develop and mine the Belaya Goragold deposit. The acquisition was made pursuant to a public auction at a priceof Rb16.5 million (US$580,000). This acquisition falls under our participationagreement with Barrick, and accordingly Highland Gold will offer Barrickparticipation of up to 50% in the project. The Belaya Gora licence area covers approximately 1 square kilometre and islocated in the Khabarovsk region, 55 kilometres north of the town ofNikolaevsk-na-Amur and 66 kilometres to the south of Highland Gold's MNVoperation. The deposit also lies within 5 kilometres of an existing high voltagepower line and is accessible all year around by a well maintained road thatconnects MNV to the town of Nikolaevsk-na-Amur and its port and airportfacilities. Exploration of the Belaya Gora deposit began in the early 1900s and led to asmall scale milling operation through the 1930s and early 1940s. Total goldproduction for this period has been reported at approximately 30,000 ounces fromore grading 5.8 g/t Au. The deposit received additional exploration during the late 1970s and early1980s, as Belaya Gora was considered a prime candidate for the introduction ofheap leaching technology into the Soviet Union. During this period the depositwas explored to a depth of 120 meters, though limited drilling also showed themineralisation continued to a depth of 312 meters. This exploration workincluded geophysical studies, trenching, a large amount of drilling andunderground development on three horizons. Metallurgical testing was alsoconducted on several bulk samples and confirmed that the deposit was amenable toheap leaching since gold is not associated with sulphides and there are lowlevels of copper and other preg robbing components in the mineralisation.Recovery rates in the range of 70 - 75% were achieved. The C2 resources of the deposit, estimated in accordance with Russianmethodologies at a cutoff grade of 2.73 g/t Au, amount to 466,000 ounces of goldgrading 3.0 g/t. Highland Gold considers this resource to be highly sensitive tothe choice of cutoff grade. In the coming months, the Company will compile allhistoric exploration data on the deposit and develop an exploration program for2006. SOVINOYE DEPOSIT (Chukotka Region)Highland Gold has acquired a 20 year licence to develop and mine the Sovinoyedeposit. The acquisition was made pursuant to a public auction at a price ofRb5.0 million (US$177,000). This acquisition falls under our participationagreement with Barrick, and accordingly Highland Gold will offer Barrickparticipation of up to 50% in the project. The Sovinoye deposit covers an area of 9 square kilometres and is located in theChukotka region, 100 kilometres west of the village of Shmidt Cape (Population:570) and 350 kilometres to the east of Pevek. Regional geology in the area began in the early 1950s and this work led to theearly identification of the Sovinoye deposit during the 1970s, though moredetailed exploration of the deposit did not occur until the mid 1980s. Thiswork, primarily focused on identifying high grade veins, consisted ofapproximately 8,000 metres of trenching, 25,000 metres (96 holes) of drilling,and 2,700 metres of underground development. As a result, five main ore bodieswere identified with gold grades ranging from 3.4 to16.5 g/t over widths of 0.9to 9.3 metres. Metallurgical test work completed on ore samples showedrecoveries of more than 95%, including roughly 88% recovered from a gravitycircuit. Highland Gold has reviewed a limited amount of the historic geological data onthe Sovinoye deposit. This review has resulted in a re-interpretation of theprimary target into a bulk tonnage, open pittable model. In the coming months,the Company will continue its evaluation of prior exploration results anddevelop an exploration program to test its new re-interpretation of the Sovinoyemineralisation. LUBOV DEPOSIT (Chita Region)Highland Gold has acquired a 25 year licence for the exploration and mining ofthe Malo Fedorovskoye deposit. Barrick has also acquired a similar license forthe Lubavinskoye deposit. These deposits, together are referred to as the LubovProject, are contiguous and the related license acquisitions fall under ourparticipation agreements with Barrick. Accordingly, Highland Gold has offeredBarrick up to 50% in the Malo Fedorovskoye project. Similarly, Highland Gold hasreceived an offer from Barrick for up to 50% in the Lubavinskoye project.Highland Gold intends to accept this offer in the coming weeks. Theseacquisitions were made pursuant to public auctions at a total cost of Rb66.4million (US$2.33 million), and assuming each party exercises their participationrights Highland Gold's 50% share will amount to Rb33.2 million (US$1.16million). The Lubov project covers an area of approximately 130 square kilometres and islocated in the Chita region, 400 kilometres to the southwest of the city ofChita and 25 kilometres north of the Mongolian border. The project is accessibleby road and links to the state electrical power grid. Intermittent gold exploration and mining has taken place in the area since thelate 1800s, though until recently the focus of this work had always beenoriented on high-grade veins. Historic gold production from the Lubavinskoyemill has been reported at roughly 22,000 ounces at a grade of 21 g/t and an 82%recovery rate (80.7% recovered from gravity). In the late 1990s, the explorationfocus on the property was shifted towards developing a near surface, bulktonnage resource that would be amenable to heap leaching. This work began on theMalo Fedorovskoye deposit and resulted in Russian C2+P1 resources over a 350metre strike length and to a depth of 120 metres of 230,000 ounces of gold at agrade of 2.1 g/t Au. Metallurgical testing was also conducted on two 5-tonnebulk samples and confirmed that these resources are amenable to heap leachingsince gold is not associated with sulphides and there are low levels of pregrobbing components in the mineralisation. Heap leach recovery rates of 68% wereachieved. As the Malo Federovskoye zone represents a small portion of a 10 kilometrestrike length, Highland Gold considers the Lubov project is a highly prospectiveexploration target with good potential to develop into a bulk tonnage, openpittable resource that is amenable to heap leaching. This conclusion is furthersupported by prior exploration data that has identified at least 7 prospects onthe licence area that warrant further investigation. An exploration program for2006 is being planned. BALEY ZIF-1 TAILINGS (Chita Region)Highland Gold has acquired a 25 year licence for the development andre-processing of tailings initially accumulated from the Baley ZIF-1 processingplant. The acquisition was made pursuant to a public auction at a price ofRb15.75 million (US$550,000). This acquisition falls under our participationagreement with Barrick, and accordingly Highland Gold will offer Barrickparticipation of up to 50% in the project. These tailings are situated approximately 2 kilometres from the Taseevskoye openpit and have been acquired to provide additional mill feed for the Taseevskoyeproject. The Baley ZIF-1 plant operated from 1934 to 1972 and processed ore mined fromthe Baley and Taseevskoye mines. Over this period, these mines provided largevolumes of very high grade mill feed (12.6 g/t Au), which when combined with theinefficient processing technologies (89% recovery) of the time resulted in thebuild-up of substantial mill tailings that carried gold values in excess of 1 g/t. The gold resource contained within the tailings is estimated at 485,000ounces at a gold grade of 1.02 g/t. For a map showing the locations of the new acquisitions, please visit ourwebsite www.highlandgold.com. Commenting on today's announcement Ivan Koulakov, Deputy Chairman withresponsibilities for Corporate Development, said: "The acquisitions that we have announced today represent the first importantsteps in the execution of an exploration strategy that was defined at the startof the year. We have put a lot of effort into prioritising many potentialacquisitions across the country, and we are very pleased to have acquired thesequality projects that have already been subjected to significant amounts ofexploration that we could analyze and re-interpret. We are now planning our nextsteps on each of these projects and look forward to a busy year of explorationin 2006." About Highland GoldHighland Gold is a Russian focused, intermediate gold producer with twooperating mines and 3 advanced projects at the feasibility study stage. HighlandGold shares are quoted under the symbol "HGM" on the Alternative InvestmentMarket (AIM) of the London Stock Exchange. Barrick Gold is the Company's largestshareholder, holding a 20% equity stake. Enquiries: London: +44 (0) 207 851 6400 Moscow: +7 (095) 777 5529 E-mail: info@highlandgold.com Dmitry Korobov, Managing Director Dmitry Yakushkin, Director of Communications Grant Sinitsin, Director of Investor Relations 26 New Street, St Helier, Jersey, Channel Islands JE2 3RA tel: +44 (0) 1534 814202 fax: +44 (0) 1534 814815 http://www.highlandgold.com This information is provided by RNS The company news service from the London Stock Exchange