HGM.L Regulatory News (HGM)

BELAYA GORA PROJECT PROGRESS UPDATE

27 July 2011 - Highland Gold Mining Limited ("Highland Gold" or the "Company" (AIM: HGM)) is pleased to announce that it has submitted the final design documents for approval for the second stage of development of the Belaya Gora Project. First phase mining at the Belaya Gora project was started in November 2010 with delivery of select oxide ore to the MNV processing plant. Progressing to the second important stage in accordance with previously declared timelines underpins the Company's commitment to launch the stand-alone gold processing plant at Belaya Gora during H2 2012.

The design documentation for the second stage of the Belaya Gora Project development was prepared by Zabaikalzolotoproekt (ZZP) Institute (Highland's in-house engineering group), in conjunction with selected consultants. It was submitted for review to the Federal GlavGosExpertise Agency. The anticipated design process capacity averages 1.5 million tonnes of ore per annum with an associated expected gold production ranging from 75,000 to 110,000 oz per annum. Project capex spent to date is approximately US$11.0 million out of a total budget of US $101.1 million planned over the period 2011/12.

Based on comprehensive metallurgical studies completed by the consultancy firm TOMS Research Institute (author of the design process regulation) conventional metallurgical processing based on gravity concentration and whole ore cyanidation technology has proven optimal for gold recovery. CJSC Mekhanobr Engineering, responsible for the design of the tailings storage facility, and LLC Agrospetskompleks, responsible for the design of the water treatment facility, have both provided the expertise to develop comprehensive plans that will ensure that the project remains in compliance with the environmental requirements and guidelines.

The Belaya Gora Project is located 66 kilometers south of the Mnogovershinnoye mine (MNV) and is accessed by an all weather road. In July 2009, the State Committee on Reserves of the Russian Federation (GKZ) registered 820,000 oz of C1+C2 reserves onto the state balance. In order to enhance project economics the Company commenced selective mining of ore with processing via the MNV facilities in November 2010. This first stage of production is expected to continue through to commissioning of the stand alone process plant.

Belaya Gora's management team is in the process of finalising the detailed construction schedule and work plans in order to commence site specific activities. Land clearing and preparation for construction have already commenced and site construction will immediately follow the receipt of the construction permit. The Company's capital construction team has already initiated the selection of a general contractor as well as preparation of tendering documents for the supply of capital equipment.

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