HGM.L Regulatory News (HGM)

13 Feb 2007 07:01

Highland Gold Mining Limited13 February 2007 HIGHLAND GOLD MINING LIMITEDSECOND HALF 2006 TRADING UPDATE Moscow, 13 February 2007 - Highland Gold Mining Limited ("Highland Gold", or the"Company") produced a total of 167,544 ounces of gold in 2006, a 4.6% increaseover 2005. +--------------------+-------+---------------+---------------+---------------+|SUMMARY | Unit|6 months ended |6 months ended |12 months ended|| | +---------------+---------------+---------------+| | | 30 June | 31 December | 31 December |+--------------------+-------+-------+-------+-------+-------+-------+-------+|Group | | 2006| 2005| 2006| 2005| 2006| 2005|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Gold recovered | Ounces| 91,205| 63,749| 76,339| 96,467|167,544|160,216|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Gold sold | Ounces| 85,567| 63,333| 73,278| 98,846|158,845|162,179|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Gold sales | US$m| 52.0| 27.0| 46.6| 46.1| 98.6| 73.1|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Gold price received | US$/oz| 607| 427| 636| 467| 621| 451|+--------------------+-------+-------+-------+-------+-------+-------+-------+|MNV | | | | | | | |+--------------------+-------+-------+-------+-------+-------+-------+-------+|Ore processed | Tonnes|485,561|371,403|448,008|503,958|933,569|875,361|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Average grade |g/tonne| 5.60| 4.81| 5.44| 6.03| 5.52| 5.51|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Gold recovered | Ounces| 79,444| 51,979| 71,702| 88,059|151,146|140,038|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Gold sold | Ounces| 75,594| 55,426| 67,268| 88,945|142,862|144,371|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Darasun | | | | | | | |+--------------------+-------+-------+-------+-------+-------+-------+-------+|Ore processed | Tonnes|158,085| 86,700| 80,199|120,893|238,284|207,593|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Gold recovered | Ounces| 11,761| 11,770| 4,637| 8,408| 16,398| 20,178|+--------------------+-------+-------+-------+-------+-------+-------+-------+|Gold sold | Ounces| 9,973| 7,907| 6,010| 9,901| 15,983| 17,808|+--------------------+-------+-------+-------+-------+-------+-------+-------+ SECOND HALF OPERATING RESULTS •Barrick Gold transaction. Increased shareholding to 34% provides a stronger platform for further development and growth. •MNV. Produced 151,146 oz Au in 2006, an 8% increase on gold production compared to 2005. There was a significant increase in the open pit grades in 2006, averaging 6.24g/t Au during the year, an increase of 15% from 2005. •Darasun. After the tragic fire in September, the production at Darasun mine continued at a reduced rate and rehabilitation studies are currently underway. •Taseevskoye. Completion of phase 1 exploration drilling programme and in-house scoping study, site preparation work ongoing with implementation of environmental and social responsibility programmes for the Baley community. •Novoshirokinskoye. Partnership with Kazzinc optimizes production and sales opportunities. •Mayskoye. Progress made on feasibility study; metallurgical testwork on biooxidation has shown favorable results; exploration drilling and facility construction ongoing. •Exploration projects. Drilling completed at Belaya Gora and Lyubov and remains in progress at Sovinoye; preparatory work for drilling completed at Unkurtash. •Financial position. At 31 December, the Group held $29 million of cash and $81 million of debt. Commenting on today's announcement, Henry Horne, Managing Director, said: "The months which have passed since the fire at Darasun have not erased thisenormous disaster from our minds. Today our efforts are focused on helping therelatives of the deceased to cope with this tragedy. We are committed tomaintaining the highest standards in occupational health and safety. At the end of last year our Company completed two major transactions withBarrick Gold and Kazzinc both of which have provided us with a stronger platformto develop and grow our mining business in the Former Soviet Union. Our production at MNV was within the forecasted range and with this stableproduction level at our core mine we expect further improvements and higherresults in 2007. During H2 2006, our development and exploration projectsprogressed at a steady pace, which we will accelerate during 2007 to build asolid base for future growth and success". CONFERENCE CALLHighland Gold will hold a conference call hosted by Henry Horne, Managingdirector, Rene Marion, COO, and Scott Perry, CFO to discuss this trading update.The conference call will take place at noon UK time (15:00 Moscow time) onTuesday, 13 February 2007. To participate in the conference call, please dialone of the following numbers: +44 (0) 1452 54 23 00 International dial in number 8108 0021 651 012 Russia toll-free number 0800 953 1444 U.K. toll-free number 1866 220 1452 USA toll-free number Participants will be asked of their full name and Conference ID which is9024365. A replay of the conference will be available after the call's completion for aperiod of one week by calling one of the numbers below and quoting Conference ID9024365#: +44 (0) 1452 55 00 00 International Dial In 0800 953 1533 U.K. Free Call Dial In 1866 247 4222 USA Free Call Dial In A Wav file of the recorded conference call will be available atwww.highlandgold.com. For further information please contact: Henry Horne, Managing Director Dmitry Yakushkin, Director of Communications Moscow: + 7 (495) 777 31 55 Dominic Palmer-Tomkinson, Head of Investor Relations London: +44 (0) 207 851 64 00 Or, WMC Communications, Alex Glover on +44 (0) 207 930 90 30 H&S, Environment and Corporate Social Responsibility The September disaster at Darasun has become a painful reminder of theimportance of health and safety practices in our industry. The fire had atremendous impact on our Company but still more tragic is the suffering enduredby family and friends of the 25 deceased miners. We continue to review ourcurrent policies and procedures to ensure the best technologies and practicesare in place at each of the operations. Our ongoing commitment to health and safety was demonstrated by the 16% increasein the total number of hours of safety trainings in 2006 compared with 2005. Asa result, the January-August 2006 lost-time frequency was 30% lower than in2005. Following the Darasun tragedy in September, we conducted additional training ofescape procedures in the event of an emergency for all underground employees atMNV. As the Board confirmed in September, the families of the victims and the injuredduring the fire at Darasun continued to be supported by the Company. Over andabove the compensation paid to the families in September, we have continuedto provide monthly financial support to the under age children. Also, as westated earlier, we are committed to providing and funding primary collegeeducation to all the children of the deceased. At the moment we are supportingthree students. In 2006, we held 115 internal environmental inspections compared to 38 in 2005.Our environmental activities in 2006 included development of a water treatmentplan for MNV which is currently under review for approval and rehabilitation ofthe land used to lift the MNV tails impoundment. Previously, safety, health, and environment were combined in one department. Recently, an environmental manager was put in place and filling the position ofDirector is currently underway. This will help the Company concentrate improvedperformance in both important areas. The Environmental and Social Impact Assessment (ESIA) and Resettlement ActionPlan for the Taseevskoye project are being developed by Golder Associates andare planned to be completed in 2008. A comprehensive corporate social responsibility programme aimed at addressingkey social issues in the Baley community was started in summer 2006 inpartnership with the US Agency for International Development (USAID). OPERATING REVIEW MNOGOVERSHINNOYE (MNV) - Khabarovsk Region, Russia In the second half of 2006, MNV gold production was within the forecasted rangeresulting in the annual amount of 151,146 oz Au. During the second half of theyear, the mill processed 448,008 tonnes at an average of 74,668 tonnes permonth, at an average grade of 5.44 g/t Au and recovery of 91.53%. Waste stripping in the open pit was slightly up on 2005, and ore productionshowed a 4% increase compared to 2005, but most significant was the 15% increasein grades from 5.42g/t Au in 2005 to 6.24g/t Au in 2006. Grades from the Upperore body averaged over 7.6g/t Au in the final quarter of 2006. Underground production was 3% higher than the corresponding prior year perioddue to increased mining rates partially offset by lower mine grades in theCentral and North zones, attributable to increased dilution. Undergrounddevelopment was in line with expectations and only marginally below ratesachieved in 2005. +---------------------------+---------------+---------------+-----------------++|MNV |6 months ended |6 months ended | 12 months ended ||| +-------+-------+-------+-------+-------+---------++| | | 30 June | 31 December | 31 || | | | | December |+-------------------+-------+-------+-------+-------+-------+-------+---------++| |Unit | 2006| 2005| 2006| 2005| 2006| 2005||| | | | | | | | ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Mine development ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Waste stripping |000 M3 | 751| 641| 717| 823| 1,468| 1,464||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Underground |Metres | 4,609| 4,363| 3,729| 4,098| 8,338| 8,461||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Mining ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Open pit | Tonnes|205,896|156,615|183,140|217,772|389,036| 374,387||+-------------------+-------+-------+-------+-------+-------+-------+---------++| |g/tonne| 5.90| 4.70| 6.62| 5.94| 6.24| 5.42||| | | | | | | | ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Underground | Tonnes|209,255|180,619|198,581|215,711|407,836| 396,330||+-------------------+-------+-------+-------+-------+-------+-------+---------++| |g/tonne| 5.90| 5.37| 5.22| 7.24| 5.57| 6.39||| | | | | | | | ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Total ore mined |Tonnes |415,151|337,234 |381,721|433,483 |796,872| 770,717 ||+-------------------+-------+-------+-------+-------+-------+-------+---------++| |g/tonne | 5.90| 5.06 | 5.87| 6.59 | 5.90| 5.92 ||| | | | | | | | ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Ore processed |Tonnes |485,561|371,403 |448,008|503,958 |933,569| 875,361 ||+-------------------+-------+-------+-------+-------+-------+-------+---------++| |g/tonne | 5.60| 4.81 | 5.44| 6.03 | 5.52| 5.51 ||| | | | | | | | ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Incl. from | Tonnes| 70,410| 34,169| 66,287| 70,475|136,697| 104,644|||stockpile | | | | | | | ||+-------------------+-------+-------+-------+-------+-------+-------+---------++| |g/tonne| 3.83| 2.33| 2.96| 2.57| 3.30| 2.49||| | | | | | | | ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Recovery rate | %| 90.9| 90.5 | 91.53| 90.2 | 91.18| 90.3 ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Gold recovered |Ounces | 79,444|51,979 | 71,702|88,059 |151,146| 140,038 ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Gold sold |Ounces | 75,594|55,426 | 67,268|88,945 |142,862| 144,371 ||+-------------------+-------+-------+-------+-------+-------+-------+---------++|Gold price received |US$/oz | 599| 425 | 639| 466 | 609| 450 ||+-------------------+-------+-------+-------+-------+-------+-------+---------++ DARASUN - Chita Region, Russia Following the tragedy at Darasun on 7th September, production in the finalquarter of the year continued at a reduced rate in the Talatui open pit. In thesecond half of the year, 80,199 tonnes were processed from surface stockpilesand the Talatui open pit ore. The management has undertaken various studies investigating the cost ofrehabilitation, and is currently evaluating these options in order to make adecision on steps moving forward. The mine is currently being kept on a care andmaintenance basis, while stripping in the Talatui open pit is continuing. +----------------------------+--------------+--------------+---------------+|DARASUN |6 months ended|6 months ended|12 months ended|| +--------------+--------------+---------------+| | 30 June | 31 December | 31 December |+--------------------+-------+-------+------+------+-------+-------+-------+| | Unit| 2006| 2005| 2006| 2005| 2006| 2005|+--------------------+-------+-------+------+------+-------+-------+-------+|Mine development |+--------------------+-------+-------+------+------+-------+-------+-------+|Waste stripping | 000 M3| 541| 730| 598| 816| 1,139| 1,546|+--------------------+-------+-------+------+------+-------+-------+-------+|Underground | Metres| 2,242| 2,125| 676| 1,797| 2,918| 3,922|+--------------------+-------+-------+------+------+-------+-------+-------+|Mining |+--------------------+-------+-------+------+------+-------+-------+-------+|Open pit | Tonnes| 47,369|17,425|52,743| 29,861|100,112| 47,286|+--------------------+-------+-------+------+------+-------+-------+-------+| |g/tonne| 3.11| 6.43| 2.14| 5.95| 2.6| 6.13|+--------------------+-------+-------+------+------+-------+-------+-------+|Underground | Tonnes| 64,523|55,084|19,312| 71,987| 83,835|127,071|+--------------------+-------+-------+------+------+-------+-------+-------+| |g/tonne| 6.73| 12.37| 5.3| 10.0| 6.4| 11.04|+--------------------+-------+-------+------+------+-------+-------+-------+|Total ore mined | Tonnes|111,892|72,509|72,055|101,848|183,947|174,357|+--------------------+-------+-------+------+------+-------+-------+-------+| |g/tonne| 5.17| 10.94| 3.03| 8.83| 4.33| 9.71|+--------------------+-------+-------+------+------+-------+-------+-------+|Ore processed | Tonnes|158,085|86,700|80,199|120,893|238,284|207,593|+--------------------+-------+-------+------+------+-------+-------+-------+| |g/tonne| 3.4| 5.84| 2.90| 3.61| 3.32| 4.54|+--------------------+-------+-------+------+------+-------+-------+-------+|Recovery rate | %| 68.1| 72.3| 61.9| 64.7| 62.65| 68.8|+--------------------+-------+-------+------+------+-------+-------+-------+|Gold recovered | Ounces| 11,761|11,770| 4,637| 8,408| 16,398| 20,178|+--------------------+-------+-------+------+------+-------+-------+-------+|Gold sold | Ounces| 9,973| 7,907| 6,010| 9,901| 15,983| 17,808|+--------------------+-------+-------+------+------+-------+-------+-------+|Gold price received | US$/oz| 671| 437| 606| 474| 646| 457|+--------------------+-------+-------+------+------+-------+-------+-------+ DEVELOPMENT PROJECTS TASEEVSKOYE - Chita Region, Russia Formerly a 50:50 joint venture between Highland Gold and Barrick, Taseevskoye isnow 100% owned by Highland Gold. The drilling programme to confirm earlier drilling programmes, providemetallurgical and geotechnical samples and locate underground workings startedin the first half of the year and was completed by the end of the year. A totalof 26,500 metres was drilled. We received assay results from over 33,000samples, of which 29,000 were assayed by an Alex Stuart laboratory. The first stage of direct leaching tests has been completed. This testwork hasallowed the development team to categorize various ore types required to designthe next phase of testing which will include mineralogical testwork, grinding,pressure oxidation and bio-leach. Predictive modeling of the dewatering of the current pit was completed inpreparation for dewatering efforts during operation. In addition, pre-designwork was completed for a sewage water purification facility for the town ofBaley. A Scoping Study was completed in-house in September, providing focus anddirection for the Pre-Feasibility Study. Mayskoye - Chukotka Region, Russia The Mayskoye Feasibility Study is progressing well, although delays in thedevelopment of the geological model due to data validation will delay the studyto mid year. Lakefield Researches preliminary testing indicates an 89% recovery of gold inthe sulphide material using conventional CIL in combination with a Biox plant. Aker Kvaerner completed base case plant designs for production levels at 600,000tpy, 700,000 tpy and 750,000 tpy. Infill drilling to raise the confidence level of the resource is in progresswith a 23,000 metre drilling program of which 2,900 metres were completed byyear end. Site construction work completed during the year consisted of 17 km of allseason road between Komsomolsky and Mayskoye with 6 creek crossings, a heatedmaintenance shop for light vehicles, the foundations for heavy equipment shopand the first stage of a 360-person camp. Novoshirokinskoye - Chita Region, Russia A joint venture agreement is now in place with Joint Stock Company (AO) Kazzincas a 50% partner with Highland Gold to develop the Novoshirokinskoye mine.Kazzinc will bring significant metallurgical and plant operating expertise tothe partnership to ensure optimization of the processing plant. A revised Russian cut-off grade study was filed with GKZ (Russian StateCommittee of Reserves and Resources) and has been reviewed at a hearing inNovember to resolve outstanding issues. Approval is expected shortly. A geological data base was completed in October and development of a block modelis in progress and scheduled for completion in the first quarter of 2007. Oncompletion of the model a new mine design will be developed before the end ofthe first quarter 2007. In coordination with Kazzinc, the final design work for the process plant andtailings facility is being completed. Start up of development mining is scheduled for 2007 with plant start upscheduled for 2008. Once the block model is completed and a mining schedulefinalized more specific dates will be available. Exploration Belaya Gora - Khabarovsk Region, Russia A total of 4,200 metres of diamond drilling has been completed on schedule andassaying of 3,000 core samples is in progress. Based on previous and Barrick'sexploration data, a 3D geological and exploration model of the deposit has beenconstructed which indicates gold-mineralization in altered host rocks down to300 metres from surface with an estimated resource of circa 108 M tonnes gradingmore than 0.5 g/t gold. A 12,000 metres drilling program has been designed forthe 2007 exploration season with the objective of defining average grades anddelineating resources for the two areas - the Stockwork and Pologaya zones, onthe property. Lyubov - Chita Region, Russia The multi-disciplinary field programme of 2006 has been completed on scheduleincluding 1,500 metres of diamond drilling, 850 metres of trenching, 3,500 coreand trench samples, and geophysical surveys (IP, resistivity, magnetics)covering a 10 sq. km area. Drilling at the Malo-Fedorovsky prospect visuallyconfirmed previous results and identified additional wide intersects of visiblesulfide mineralization; all assaying is in progress. The geophysical surveysidentified several well-defined broad anomalies over an area of 6 sq. km incontinuity of known zones of significant gold mineralization. The new anomaliesare to be tested in 2007 with a 3,500 metres diamond drilling programme inaddition to resource delineation drilling at the Malo-Fedorovsky prospect. Sovinoye - Chukotka Region, Russia The evaluation of the main 2,400 metres x 500 metres gold-mineralized zone witha known vertical extent of 300 metres is in progress and includes large-diameterpneumatic percussion drilling, trenching and sampling. To date 600 metresdrilling out of a 3,000 metres total programme and 1,900 metres trenching hasbeen completed, and 1,800 samples selected. Sample preparation has been tailoredto avoid losses of coarse gold, 370 samples (21% of total collected) have beenprocessed to date. The programme is to be completed in Q2 2007. Maya-Inikan - Khabarovsk Region, Russia The two adjoining property licences with a combined 3,733 sq. km area arelocated in a highly prospective geological setting which is similar to that ofother world-class Russian gold deposits. The 2006 grass root explorationprogramme completed in Q4 2006 covered the entire licence area and was aimed atidentifying targets for follow-up work. 2,200 samples were collected during adetailed stream-sediment geochemical and hydrological survey, an early-stageexploration method used successfully by other major mining companies elsewhere.Analytic work is in progress and should be completed by the end of Q1 2007 fordata assessment and target selection for further exploration. Unkurtash - Kyrgyzstan All preparatory works (access roads, drill pads) have been completed for a 4,000metre large-diameter reverse-circulation drilling programme planned to commencein Q2 2007. The objective is to constrain the potential of three adjacentgold-mineralized zones (Unkurtash, Sarytube and Karytube) for hosting a combinedbulk-mineable gold resource of more than 5 M oz with an average gold gradeexceeding 1.5 g/t. Previous bulk sampling done by Barrick (3 samples of 30tonnes each) demonstrated that diamond core drilling underestimates average goldgrade. An evaluation of the mineralized zones is expected to be completed in Q22007. This information is provided by RNS The company news service from the London Stock Exchange