12 Aug 2008 07:00
FIRST HALF 2008 TRADING UPDATE
12 August 2008 - Highland Gold Mining Limited ("Highland Gold", or the "Company") provides its trading update for the half year ended 30 June 2008. Full financial results for this period will be released on 25 September 2008.
HIGHLIGHTS
Mnogovershinnoye produced 68,813 oz of gold, an 18% increase compared to H1 2007 and on course to achieve target range of 155,000 to 165,000 oz for 2008
Novoshirokinskoye on schedule for commissioning at the end of 2008 and due to enhance Company cash flows in 2009 from an additional 30,000 gold-equivalent oz with an estimated 50,000 oz on average per annum thereafter
Construction works at the Company's flagship development project Mayskoye to start in September 2008 leading to production from 2011 with estimated 250,000 + oz on average per annum
Taseevskoye - technical studies underway to prepare feasibility study and license requirements for start-up extended to 2013 allowing for a more favorable development programme
Duncan Baxter, recently appointed Chairman said:
"In the first half of 2008 we have achieved the two important goals of bringing more structure to our development programme and maintaining our production profile. We have also restructured our Board which now has additional depth of experience of both the mining industry and of Russia. I wish to thank the previous board members for their contribution throughout this period. I look forward to working closely with the new board and the executive management team."
Commenting on today's announcement Henry Horne, Chief Executive Officer said:
"We have made strong progress with production performance at Mnogovershinnoye and have increased output whilst continuing to take steps to improve these further.
The commissioning of Novoshirokinskoye towards the end of this year is a significant milestone making it our second producing mine and one that will make a contribution to revenues early next year. The start of construction works in September at Mayskoye, one of Russia's largest undeveloped gold resources, is of equal importance to the future of Highland Gold."
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| For further information please contact: Highland Gold - Henry Horne, Chief Executive Officer, Moscow - +7 495 777 5529 Dmitry Yakushkin, Head of Communications - +7 495 777 3155 Fin Public Relations - Alex Glover - +44 (0) 207 608 2280 Smith's - Dominic Palmer-Tomkinson - +44 (0) 207 239 0140 JPMorgan Cazenove (Nominated Adviser) - Michael Wentworth-Stanley, Managing Director Sam Critchlow - +44 (0) 207 588 2828 www.highlandgold.com
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PRODUCTION
MNOGOVERSHINNOYE MINE (MNV) - Khabarovsk Region, Russia
Strong production was realised from MNV for H1 2008, with significant increases in mined tonnage, metal production, and gold sales when compared to H1 2007.
MNV gold output for the first six months of 2008 was 68,813 oz Au, which represents an 18% increase over H1 2007 and which is in accordance with the production plan to achieve 155,000 to 165,000 oz of gold production for 2008.
Gold sales of 81,036 oz Au for the period were 29% higher than sales for H1 2007, and the price received per ounce sold of US$909 represents a 39% increase over H1 2007.
| MNV | 6 months ended | ||
| 30 June | |||
|
| Unit | 2008 | 2007 |
| Mining | |||
| Open pit waste stripping | M3 | 1 293 831 | 867 000 |
| Underground development | Metres | 4 752 | 4 740 |
| Total ore mined | Tonnes | 492 079 | 402 275 |
| Average grade | g/tonne | 5.0 | 5.1 |
| Processing | |||
| Ore processed | Tonnes | 484 092 | 381 201 |
| Average grade | g/tonne | 5.0 | 5.2 |
| Recovery rate | % | 88.1 | 91.26 |
| Metal Production | |||
| Gold recovered | Ounces | 68,813 | 58 196 |
| Gold sold | Ounces | 81 036 | 62 643 |
| Gold price received | US$/oz | 909 | 655 |
The upgrades to the mobile equipment fleets for both the open pit and underground operations that were made in the second half of 2007 continued to pay off, as evidenced by the increases in the tonnages mined in both venues. In total, mining operations produced 492,079 tonnes of ore containing 79,100 oz Au at an average grade of 5.0 g/t Au - a 22% increase over the tonnes mined in H1 2007. In addition, waste stripping in the open pit for H1 2008 tallied 1,293,831 cubic metres, which was an increase of 49% over the volume stripped in H1 2007.
Greater production from the open pit is forecast for the second half of the year as the operation reaches areas containing higher grade ore. Capital projects currently in progress for the underground operation include development of the Intermediate Ore Body, which will be an important source of higher grade ore throughput for the second half of the year; upgrading and automation of the ventilation and compressed-air systems, which is expected to yield measurable cost savings both in power consumption and labour; and the construction of new water treatment facilities, which will conserve water resources and protect the environment. In addition, development of the Flank Ore body has been brought forward from 2009 to maintain tonnage and gold production in the years ahead.
DEVELOPMENT PROJECTS
NOVOSHIROKINSKOYE DEVELOPMENT PROJECT - Transbaikalia Region, Russia
All major infrastructure facilities are already in place, and all major personnel accommodation will be completed in Q3. Key equipment for the processing plant has been delivered on site; the rest is due to arrive shortly. Infrastructure completed during H1 2008 includes: site electrical distribution, buried services, explosives warehouse, mine rescue building, heating boilers, standby electrical supply, two apartment blocks and the backup main ventilation fan. Tailings storage and water reclaim lines are in place, too.
Underground operations are proceeding as planned and 55,600 tonnes of development ore has been stockpiled for the mill startup. Almost 4,500 metres of development mining have been completed and stopes are now available for mining. Stoping operations are scheduled to start during Q4 2008 following commissioning of the skip shaft.
Progress is being made on the marketing of lead and zinc concentrate. Initial feedback is that the lead and zinc concentrates have few impurities and can be expected to attract market prices.
MAYSKOYE DEVELOPMENT PROJECT - Chukotka Region, Russia
The Final Feasibility Study was received from Aker Solutions and envisages an underground mining operation feeding an 850,000 tonne per year plant which will start up by the end of 2010. Initial plant feed will be oxide ore and in 2011 the underground will start to mine sulphide ore. A flotation and bio-oxidation plant, using Biomin's BIOX process, will be completed by the end of 2011 to treat the sulphide material. Financing options for the project are being considered. The mine is projected to have a mine life of greater than 12 years and to produce between 250,000 and 275,000 ounces of gold per year.
Aker Solutions has been appointed as the EPCM contractor. The contractor for civil works has been selected and is currently mobilising a batch plant, an aggregate crushing plant, and excavating and earthmoving equipment.
The longest lead item, the SAG mill, has been ordered with delivery scheduled for Q3 2009. Other long lead plant equipment items will be ordered in Q3 and Q4 2008. For the 2008/2009 construction season, the main site activities will be site excavations and construction of the plant and major infrastructure foundations.
All major bulk commodities (cement, rebar, etc.) for the upcoming construction season have been ordered and are in the process of being delivered. It is anticipated that 30,000 tonnes of cargo will be shipped into Pevek and onward to Mayskoye and a 200 man construction camp has been ordered and will be delivered during the 2008 shipping season.
TASEEVSKOYE DEVELOPMENT PROJECT - Transbaikalia Region, Russia
The cutoff study is currently under review with GKZ (State Committee on Reserves). The preparation of the feasibility study is advancing with confirmatory metallurgical testwork currently underway.
An extension to the Mining License for Taseevskoye has been granted, moving the requirement for plant start up to 1 June 2013. Other License agreement milestones have been proportionally adjusted. In light of the License extensions, the overall schedule is currently being re-evaluated to ensure that project development is advanced in the most appropriate manner and allows Highland Gold to prioritise and manage its development programme in a more structured and financially favorable way.
EXPLORATION
Highland Gold exploration teams have made encouraging progress during H1 at a number of the Company's sites, the highlights of which include:
BELAYA GORA - Khabarovsk Region, Russia
The pre-feasibility study including block modelling, pit optimisation and reserve calculation is progressing well and the report is on track to be submitted by year-end 2008 for state approval in compliance with the license agreement.
LYUBOV - Transbaikalia Region, Russia
Completion of the drilling programme and evaluation of final results is expected by the end of Q3. At the Khaverga ore field in the northern license area, final assay results and interpretation are expected for Q3.
UNKURTASH - Kyrgyzstan
In Q2 the Company started drilling programmes at three prospects Unkurtash, Sarytube and Karatube. Final assays with evaluation of results are expected to be completed by mid Q4.
HEALTH AND SAFETY
In 2008 the Company continued its efforts to ensure a safe working environment at all of its sites for its employees as well as for contractor employees. Progress has been achieved by the Company in its safety programmes. Since January 2008 more than 1,000 employees have attended safety training courses. Lost time Incident rate (the LTI rate is the number of the lost time incidents for every 200,000 man hours worked) for H1 2008 was 0.58 which is in line with the result for H1 2007 (0.54).