HGM.L Regulatory News (HGM)

24 Jun 2005 13:32

Highland Gold Mining Limited24 June 2005 Highland Gold Mining Limited 24 June 2005 Production Update At the time of Highland Gold's full year results which were released to themarket on 19 April 2005, Highland Gold advised the market of the severe weatherconditions that had been experienced at its main operating mine, MNV, in theearly part of 2005 and mechanical problems at Darasun encountered atcommissioning. At the time, despite the short-term negative impact onproduction, the board expected that the shortfall experienced in the first partof the year would be made up later in the year. The Board of Highland Gold has engaged an independent international miningexpert to review the mining operations at both MNV and Darasun. Whilst the finalreport from this work has not yet been received, the preliminary reportindicates that the amount of underground development and overburden strippingundertaken at the two mines has not reached the level required to support theproduction targets and that additional development and stripping will need to beundertaken. In the light of this preliminary report and having now received the most recentproduction report, MNV will for the first time not reach its annual productiontarget. The board believes that the full year production for the group will fallsignificantly below its earlier expectations. Pending receipt of the full report, the board is not in a position to assess theimpact that this additional development will have on either the production plansor the associated costs. The board and management have taken the necessary stepsto address the issues identified in the report to ensure that production at MNVand Darasun return to the projected monthly capacity as soon as possible. Afurther update will be provided at the time of the half-year trading statementwhich will be released in early August 2005. Commenting on today's announcement Dmitry Korobov, Managing Director, said: "While the first half of 2005 has proved to be extremely difficult, I believe wehave taken the necessary steps to strengthen our operating management andcontrols in order to minimise the future recurrence of issues related to forwardplanning and ore development. MNV is an excellent operation and I have fullconfidence that our operating team, under the new leadership of Scott Yelland,will advance development work to a more normal state during the second half. AtDarasun, I am also confident that our team is improving the situation day-by-dayand, with new mill motors recently having arrived on site, we are entering thefinal phase of implementation needed to reach design capacity." Enquiries: London: +44 (0) 207 851 6400 Moscow: +7 (095) 777 3155Highland Gold Dmitry Korobov, Managing Director Dmitry Yakushkin, Director of Communications Grant Sinitsin, Director of Investor Relations www.highlandgold.com This information is provided by RNS The company news service from the London Stock Exchange