HGM.L Regulatory News (HGM)

7 Feb 2008 12:00

Highland Gold Mining Limited07 February 2008 07 February 2008 HIGHLAND GOLD MINING LTD ANNOUNCES SECOND HALF 2007 TRADING UPDATE HIGHLIGHTS •Millhouse LLC completes the purchase of 130,100,000 new ordinary shares at a price of 151 pence per share providing approximately US$400 million in new equity capital •MNV production of 156,490oz Au - within the forecasted range for the year •Strong Q4 production results at MNV with 67,143oz Au recovered underline the efficiencies gained from the initiatives implemented •At Novoshirokinskoye, construction is well underway at the processing plant, and the majority of infrastructure facilities have been built and commissioned •Draft Feasibility Study completed at Mayskoye, presently under internal review and will be finalised during Q1 2008 •Steady progress made at all exploration sites in the Highland Gold portfolio Commenting on today's announcement, Henry Horne, Managing Director, said: "We have continued to upgrade the operations at MNV successfully and as a resultthe mine finished 2007 with a total production of 156,490oz Au, which was withinthe forecasted range. We have concluded an important agreement with MillhouseLLC who is now our largest shareholder. We have achieved steady progress on allof our development and exploration projects and we also have successfullydivested Darasun. The Group is now well positioned and we are looking withconfidence to the future". CONFERENCE CALL Highland Gold will hold a conference call hosted by Henry Horne, ManagingDirector, John McDonough, COO, Chris Bostwick, Director Capital Projects andWerner Klemens, Director Exploration to discuss this trading update. Theconference call will take place at 14:00 UK time (17:00 Moscow) on Thursday, 7February 2008. To participate in the conference call, please dial one of thefollowing numbers: +44 (0) 1452 555 566 International dial in number 8108 0020 972 044 Russia free call 0800 6940 257 U.K. free call 1866 966 9439 USA free call Participants will be asked of their full name and Conference ID which is34403428. 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 replay accessnumber 34403428#: +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: Highland Gold Mining Henry Horne, Managing Director, Moscow - +7 495 777 5529 Dmitry Yakushkin, Director of Communications - +7 495 777 3155 Duncan Baxter, Corporate Affairs Director - +44 (0)1534 814 202 Dominic Palmer-Tomkinson - +44 (0) 207 239 0149 JPMorgan Cazenove Michael Wentworth-Stanley, Managing Director(Nominated Adviser) Sam Critchlow - +44 (0) 207 588 2828 Fin Public Relations Alex Glover - +44 (0) 207 608 2280 * * * HEALTH, SAFETY AND ENVIRONMENT AND CORPORATE RESPONSIBILITY In H2 2007 the Company continued its activities aimed to ensure a safe workingenvironment at all of its sites. This work resulted in a 29% improvement (0.46actual versus a target of 0.65) of our Lost Time Incident rate (the LTI rate isthe number of lost time incidents for every 200,000 man hours worked). This isalso a significant improvement if compared to the previous year's actual. Havingachieved good results it is however with regret we announce that on 9 January wehad a fatal underground accident at Novo involving a drift miner. This incidentis currently under investigation.An anti-alcohol and anti-drug policy was introduced as well as a Safetyaward and incentive programme. More than 1500 employees went through safetytraining courses which included field level risk assessments, first aidtraining, training for drivers and fire fighting. As planned, the Health, Safetyand Environmental Department of the Company was reinforced with the hiring oftwo specialists at Novo and MNV. MILLHOUSE DEAL Millhouse LLC has now completed the purchase of 130,100,000 new ordinary sharesin Highland Gold at a price of 151 pence per share. These new ordinary shareswere admitted to trading on the AIM Market of the London Stock Exchange.Millhouse LLC shareholding represents 40% of the issued share capital of325,197,098 ordinary shares.Under the transaction Highland Gold welcomes three new directors proposed byMillhouse to the Board: Eugene Shvidler, Eugene Tenenbaum and Olga Pokrovskaya.With the Millhouse investment completed, Highland Gold has acquired a newstrategic shareholder and together with the successful partnership with BarrickGold this creates a strong platform for exploiting Highland Gold's assets. PRODUCTION MNOGOVERSHINNOYE MINE (MNV) - Khabarovsk Region, Russia.MNV total gold production for 2007 was 156,490oz Au, which was within theforecasted range for the year and includes a strong fourth quarter performancewith 67,143oz Au being recovered.The upgrade to the grinding circuit for the processing facility at MNV wascompleted ahead of schedule during the second half of August. The upgradeenabled the operation to increase its average daily mill throughput to 3,236tonnes per day, which represents a 53% improvement over the average daily rateexperienced for the first half of the year. In total, the mill processed 595,398tonnes of ore at an average head grade of 5.77g/t Au and achieved an overallgold recovery of 88.9% during the second half of 2007.In October, MNV completed the installation of a gravity circuit (KnelsonConcentrators and flotation cells) for the recovery of coarse gold prior to theore entering the resin-in-leach (RIL) circuit. Results thus far have shown thecircuit to be effective in capturing as much as 30% of the total contained gold,which in turn allows greater residence time of the remaining fine gold in theRIL circuit leading to higher overall recoveries.Additional upgrades to the processing facility are scheduled for implementationin 2008 which will include the installation of a third thickener to increasegold recovery and reduce reagent consumption, automation of the grinding circuitfor greater efficiency and further improvements to the adsorption andregeneration circuits. In order for MNV to meet its ounce production target for 2007, it was necessaryto access and mine the relatively high-grade B3 ore zone of the Upper Ore Body.In turn, this required an aggressive waste stripping programme, which wasinitiated for the open pit in the second quarter. This stripping programmecontinued to accelerate during the succeeding months with the arrival ofadditional equipment and labour, both from external sources and via transferfrom the Darasun Mine. Despite the time required to achieve final agreement on the terms of the sale ofthe Darasun Mine, which had delayed the redeployment of mining equipment to MNV,all of the equipment from Darasun was in operation at MNV by 1 November. Alsoduring November, favourable terms were secured with a contractor for waste andore haulage. The additional haulage trucks supplied by the contractor augmentedour existing fleet and enables increased daily waste tonnage haulage. The twoHitachi EX1200 excavators transferred from Darasun will facilitate theretirement of three older, high-cost electric shovels in 2008. During the lastsix months of 2007, waste stripping totaled 1,119,000m3, which was an increaseof 29% over the volume stripped in the first half of the year. In October, the open pit operation was successful in reaching the B3 ore zone.Ore production from the B3 ore body during the fourth quarter totaled 234,000tonnes at an average grade of 8.63g/t Au. In total, 344,000 tonnes of orecontaining 80,200oz at an average grade of 7.25g/t Au were mined from the UpperOre Body during the second half of 2007. A portion of December's production(88,000 tonnes at 10.10g/t) has been stockpiled for processing in January 2008. During the second and third quarters, ore feed to the mill was providedprimarily from underground and stockpile sources. In total, 339,000 tonnes ofore having an average grade of 3.68g/t Au were produced from the undergroundoperations during the last six months of 2007. Underground development advanced5,059 metres during the last six months of the year. The daily production ratesfor underground mining (1,842 tonnes per day) and development (27.5 metres perday) were lower than forecast due to a shortage of equipment, primarily loaders.However, this shortage has been addressed through the addition of one new loaderthat was placed into service in early October and a second loader that isscheduled for delivery in February 2008. In 2007, the underground operationproduced a total of 600,000 tonnes of ore containing 80,300oz Au at an averagegrade of 4.16g/t. MNV 6 months ended 6 months ended 12 months ended 30 June 31 December 31 December Unit 2007 2006 2007 2006 2007 2006 Mine development Waste stripping M3 867 000 751 000 1 119 000 717 000 1 986 000 1 468 000 Underground Metres 4 740 4 609 5 059 3 729 9 799 8 338 Mine production Open pit ore Tonnes 141 086 205 896 344 061 183 140 485 147 389 036 g/tonne 5.74 5.90 7.25 6.62 6.81 6.24 Underground ore Tonnes 261 189 209 255 339 250 198 581 600 439 407 836 g/tonne 4.79 5.90 3.68 5.22 4.16 5.57 Total ore mined Tonnes 402 275 415 151 683 311 381 721 1 085 586 796 872 g/tonne 5.12 5.90 5.48 5.87 5.35 5.90 Processing Ore processed Tonnes 381 201 485 561 595 938 448 008 977 139 933 569 Average grade g/tonne 5.20 5.60 5.77 5.44 5.54 5.52 Recovery rate % 91.26 90.90 88.91 91.53 89.84 91.18 Gold recovered Ounces 58 196 79 444 98 294 71 702 156 490 151 146 Gold sold Ounces 62 643 75 594 86 768 67 268 149 411 142 862 Gold price US$/oz 655 599 747 639 708 609received DEVELOPMENT PROJECTS NOVOSHIROKINSKOYE - Chita Region, Russia. The company continues to work in partnership with Kazzinc to optimise productionand sales opportunities at the site. Detailed engineering continues on portionsof the process plant and has been completed on all other parts of the project.The main contractor has a full work force on site and has completed work on anumber of infrastructure facilities, including buried services, powerdistribution, explosives magazine, phase one permanent accommodation, temporaryconstruction camp, standby power generation, potable water supply, and heatingplant. Work is currently underway and on schedule to complete the backupventilation fan complex, administration complex, mine rescue complex,procurement base, shift camp, and apartment complex. Earth work on the tails damand water storage dam is underway, and the tailings pipe line and water returnlines are currently being placed. All equipment for the plant has been orderedand installation is proceeding as it arrives at site. The coarse ore handlingsystem is currently being installed in the mill. A total of 22,594 metres of surface diamond drilling and 8,265 metres ofunderground core drilling were completed in 2007. Assays are currently beingreceived from Alex Stewart Laboratories in Moscow and SGS Lakefield Laboratoriesin Chita. An updated block model will be completed in the second quarter of 2008after all assays have been received and the geology has been updated. Underground definition drilling is continuing with three drills in operation.The site began underground development work in July and development is currentlyproceeding on three levels, at 850 metres, 800 metres, and 750 metreselevations. As planned, 3,630 metres of level development and 250 metres ofraise development were completed in 2007. Development work began in January 2008on the adit (933 mertre level). Work is currently underway on refurbishment ofthe skip shaft and the ore handling systems. The cage shaft is being used tohoist development muck. The mine currently has 300 underground employees andstoping is expected to begin in the second quarter of 2008. The project currently has 650 employees on site and ore processing is scheduledto commence during the fourth quarter of 2008. MAYSKOYE - Chukotka Region, Russia. A draft of the Mayskoye Feasibility Study, completed by Aker Kvaerner (Toronto)in December, is currently undergoing internal review and will be finalisedduring the first quarter. The study is centered on an underground operation thatwill feed an 850,000 tonnes per year flotation plant and a Biomin Biox leachplant. Basic engineering has been completed and Aker Kvaerner has commenceddetailed engineering work on the process plant. GOT (Magadan) has commenceddetailed engineering on the infrastructure. Construction is scheduled tocommence after the opening of the navigation season in the second half of 2008.Variability testwork for sulphides as well as other confirmatory testwork arecurrently being undertaken at SGS Lakefield Laboratories in Chita. The Mining License for Mayskoye was successfully extended and operationalstartup is now scheduled for 31 December 2010. Infill drilling continued through the year with a total of 21,855 metres ofdiamond drilling completed with three rigs active. Assays are currently beingcarried out at Alex Stewart Laboratories in Moscow, and an update to theresource model will be completed during the first half of 2008. Final surface capping of the all-season access road is expected to be completein May, after which the earthmoving equipment will be mobilised to the sitepreparation works. Rehabilitation of the existing underground facilitiescommenced in the second half of 2007 with approximately 180 metres of aditre-commissioned during the year. The first set of mining equipment (LHD andtwin-boom jumbo) has been ordered and underground development will commence inJuly 2008 upon their delivery. TASEEVSKOYE - Chita Region, Russia. The resource block model was updated during the fourth quarter and was used asthe basis for an internal pre-feasibility study that was completed at year end.Findings from this study will be used as the basis for a feasibility study tocommence in the first half of 2008. Additional metallurgical testwork focusingon LeachOX is being undertaken at SGS Lakefield Laboratories in Chita.The baseline environmental study continued during the second half and additionalpublic meetings and consultations were held regarding the Resettlement ActionPlan to move the portion of the Taseev village impacted by the proposed openpit. EXPLORATION BELAYA GORA - Khabarovsk Region, Russia. In the second half of the year drilling focused on the Stockwork target where atotal of 7,500 metres of diamond drilling has been completed, concluding the2007 drilling programme of 13,000 metres on schedule. An additional 715 metresof drilling have been completed also in December as part of the 7,500 metreresource delineation drilling programme planned for 2008 which is to becompleted by the end of April. More than 8,000 drill core samples were assayedin the second half of 2007 and positive results confirm the property's potentialestimated within the C1+C2 Russian reserve category at 22 million tonnes grading1.68g/t of gold. Two bulk samples of 300kg each have been taken from theStockwork and Pologaya targets. Preliminary results point to high recovery ratesand final results are expected by second quarter 2008. A pre-feasibility studyhas been started with NBL Gold (Moscow) including a reserve calculation which isto be submitted for state approval by year-end 2008 in compliance with thelicense agreement. LYUBOV - Chita Region, Russia. At Lyubov, 1,500 metres of diamond drilling were completed, which concluded the3,500 metres drilling programme in 2007 aimed at testing several prospects alongthe entire Lyubov gold trend. To the east, the programme successfully identifiedgold-bearing stockwork mineralisation within the Evgraf zone which is estimatedto host a potential resource of (C1+C2) of 28 million tonnes grading 1.5g/t ofgold, based on analysis of previous data and current results. A resourcedelineation drilling programme totalling 9,500 metres is planned for 2008 inorder to delineate the overall resource potential of the entire Evgraf zone. Atthe Khaverga ore field in the northern license area, soil-sampling andgeophysical surveys were completed over a 6 sq km area. Results revealed a 4kmlong and 1.5km wide zone of distinct gold anomalies with high gold grades of0.03-8.0g/t. The anomalous zone is to be tested by a trenching and samplingprogramme planned for 2008. As reported in the H1 update, our 2006 exploration results from the smallMalo-Fedorovsky license, a small sublicense within the Lyubov property, did notconform to officially quoted resource parameters and it was concluded thatfurther exploration on this property was not warranted. The Malo-Fedorovskylicense is therefore being returned. SOVINOYE - Chukotka Region, Russia. A total of 1,286 metres of large-diameter drilling were completed in the secondhalf of 2007, concluding the total drilling programme of ca.2,800 metres whichtested a 1.2sq km gold-mineralised zone within the hinge region of a large fold.1,393 samples have been collected, of which 80% have been analysed. Results todate indicate stockwork-type gold mineralisation in the 1g/t range down to adepth of 250 metres. Final assay results and their evaluation are expected bythe end of the first quarter 2008. UNKURTASH - Kyrgyzstan. In the second half of 2007, 1,700 metres of large-diameter reverse-circulationdrilling were completed, which concluded a 3,500 metre drilling programme atthree prospects (Unkurtash, Sarytube and Karatube). A total of 1,700 samplesweighing 25kg each have been collected for assaying, of which 300 are alsoundergoing assaying of concentrates. At Unkurtash and Sarytube, stockwork-typegold mineralisation has been identified as part of a steeply dipping zone 4,000metres long and 250-500 metres wide with a vertical extent of at least 350metres. In addition, gold-bearing skarn mineralisation in the 3-4g/t range hasbeen identified at the Karatube prospect to the east. Based on results to date,a total mineral resource potential (C1+C2+P1) of 200 million tonnes grading 1.5g/t of gold has been estimated for the exploration properties. In compliancewith regulatory requirements, a new "Exploration Project" has been formulatedthat includes 12,000 metres of resource delineation drilling in 2008. ISKA - Khabarovsk Region, Russia. In the course of an open auction in the second half of 2007, the Companyacquired the 920km sq Iska license located 20km to the south of the Belaya Goraproperty. Iska features strong geological similarities with Belaya Gora andseveral occurrences of known gold prospects underline the good potential of theproperty. Archival work involving digital compilation and analysis of previousdata is in progress. As per regulatory requirement, a new "Exploration Project"is now being formulated that outlines a multidisciplinary exploration programmefor 2008 including geophysical and geochemical surveys and selected trenching ofpromising prospects. MAYA-INIKAN - Khabarovsk Region, Russia. A detailed exploration programme has been formulated for testing the pronouncedgeochemical gold anomaly identified during the course of the grassrootsexploration programme conducted in 2006/2007. The main anomaly of 15sq km is tobe explored by 1:25,000 scale geochemical soil-sampling and geophysical surveysand geological mapping, while the wider anomaly covering 60sq km is to be mappedand sampled on the 1:50,000 scale. Mr. Werner Klemens, Director Exploration at Highland Gold has reviewed andverified the information contained in this release in respect of drilling andresource matters. Mr. Klemens holds a Ph.D. in Geology from the University ofToronto. He has 11 years of experience in mineral exploration and is a fellow ofthe Geological Association of Canada. This information is provided by RNS The company news service from the London Stock Exchange