HGM.L Regulatory News (HGM)

5 Aug 2005 07:00

Highland Gold Mining Limited05 August 2005 HIGHLAND GOLD MINING LIMITED PRODUCTION UPDATE FOR THE FIRST HALF OF 2005 Moscow, 5 August 2005 - Following our 24 June 2005 production update where weadvised that the full year production for the group will fall significantlybelow earlier expectations, Highland Gold Mining Limited ("Highland Gold", orthe "Company") announces its operating results for the 2005 first half ended 30June 2005. Full financial results for the period and a complete update on ourdevelopment projects will be released on 20 September 2005. Highland Gold will hold a conference call hosted by Dmitry Korobov, ManagingDirector and Scott Yelland, Chief Operating Officer to discuss this productionupdate at 10:00 am (UK time) on Friday, 5 August 2005. Participants may accessthe call at +44 (0) 1452 561 263. FIRST HALF HIGHLIGHTS• Produced 63,749 ounces of gold• MNV implemented actions to address short-term operating issues that limited the availability of ore for the mill• Planned modifications completed on the Darasun mill• Strengthened operating management team MNV MINEThe MNV mine produced a total of 51,979 ounces of gold during the first half of2005, down from 96,986 ounces in the same period of 2004. The major short-termoperating factors contributing to the lower gold output for the period werereduced ore deliveries to the mill and reduced gold grade. These factors werethe result of inadequate development in both the open pit and undergroundoperations with a consequential reduction in the availability of high grade oresources. This situation was exacerbated by adverse weather conditionsexperienced in the first quarter. To respond to the current problems, the Company strengthened the managementteam, welcomed the recommendations of independent international experts, startedto implement new planning and control procedures and provided new or additionalequipment where necessary. Highland Gold is confident that these actions areproperly addressing the development issues at MNV. MNV Operating Statistics Unit For the first half year ended June 30, 2005 2004Mine developmentWaste stripping Cubic Meters 640,609 856,298Underground development Linear Meters 4,363 4,095MiningOpen pit Tonnes 156,615 173,961 g/tonne 4.70 6.24Underground Tonnes 180,619 213,880 g/tonne 5.37 8.33Total ore mined Tonnes 337,234 387,841 g/tonne 5.06 7.39Ore processed Tonnes 371,403 466,262 g/tonne 4.81 7.04Including from stockpile Tonnes 34,169 78,421 g/tonne 2.33 5.27Recovery rate % 90.5 91.9Gold recovered Ounces 51,979 96,986Gold sold Ounces 55,426 94,055Gold price received US$/ounce $426 $397 DARASUN MINEHaving been commissioned at the end of the first half of 2004, the Darasun mineproduced a total of 4,870 ounces of gold in its first half year to December 2004and 11,770 ounces in the first half of 2005. Notable improvements were made inunderground mining that raised the average mined grade to 10.94 g/t for thefirst half of 2005 and to 13.21 g/t for the second quarter. In addition, openpit mining at the Talatui deposit intensified during the second quarter and thebeginning of the third quarter with the commissioning of two new excavators. Whilst the processing plant has been experiencing sub standard performance interms of throughput and recovery, the high grade ore from underground has beenstockpiled and the mill feed has been from lower grade sources. Once the plantperformance is optimised the high grade stockpile will be treated. Thisoptimisation process has been proceeding according to schedule, and recentlyincluded a planned shut-down for the installation of new mill motors,improvements to the circulation process, a re-construction of the sorptioncolumns and the implementation of new sampling procedures. We expect to beginprocessing higher grade ores in mid-August and to achieve design capacity inSeptember. Darasun Operating Statistics Unit For the first half year ended June 30, 2005 2004Mine developmentWaste stripping Cubic Meters 730,072 -Underground development Linear Meters 2,125 2,753MiningOpen pit Tonnes 17,425 - g/tonne 6.43 -Underground Tonnes 55,084 39,875 g/tonne 12.37 8.15Total ore mined Tonnes 72,509 39,875 g/tonne 10.94 8.15Ore processed Tonnes 86,700 - g/tonne 5.84 -Recovery rate % 72.3 -Gold recovered Ounces 11,770 -Gold sold Ounces 7,907 -Gold price received US$/ounce $437 - NEW APPOINTMENTS AND RESIGNATIONThe Company has recently recruited Russell Tremayne to the position of DeputyOperations Director. Alexander Ivanov has also been appointed as the new ChiefEngineer at the MNV mine. Russell Tremayne has been appointed to the position of Deputy OperationsDirector for the group and will report to the Chief Operating Officer. Initiallyhis time will be devoted to the MNV and Darasun mines, where he will assist themine managers and their teams as they work towards the implementation of westernbest practices at the mines. Russell is a mining engineer with over 30 yearsexperience, and has held positions at mines in the UK, Portugal, Zimbabwe,Greece, Bulgaria and Brazil. His most recent position has been Manager of Miningat Kinross Gold's Kubaka gold mine in the Magadan region of North East Russia. Alexander Ivanov has been appointed to the position of Chief Engineer at the MNVmine. Alexander received his degree in mine engineering from the KrasnoyarskInstitute of Non-Ferrous Metals. His 25 years of experience in Russian miningincludes positions at the underground mines in Norilsk and in the Ural copperbelt. His most recent position was as manager of the Dukat silver mine in theMagadan region of North East Russia. As previously reported, Gennady Nevidomi has resigned his board and executiveposition as the group's Production Director effective from 2 August 2005.Gennady played an important role in the formation of Highland Gold and we wishhim well in his future activities. EMPLOYEE STOCK OPTION PLANThe Company advises that in line with the statement made at the time ofAdmission to the Alternative Investment Market in December 2002, it has nowimplemented an employee share option scheme. There are no participants atpresent and it will run in conjunction with the Company's Share AppreciationRights scheme to allow flexibility when considering the employment incentivesfor executives. The scheme will be managed by the Remuneration Committee. At anyone time no more than 10% of the issued Share Capital of the Company may be thesubject of unexercised subscription options in aggregate and the total value ofunexercised subscription options which an executive may hold at any one timemust not exceed four times their remuneration package. The Company also announces that the Board have agreed that as part of JamesCross's remuneration as non-executive Chairman he will be granted an option over500,000 new ordinary shares in the Company exercisable at par after 9 December2005 and a further 500,000 new ordinary shares in the Company at a price basedon their current market value and exercisable after 9 December 2007. Commenting on today's announcement Dmitry Korobov, Managing Director, said:"This first half of 2005 does not reflect the performance our assets are capableof delivering. The combination of short-term operating issues at MNV andremaining start-up issues at the new Darasun mill have severely impacted ourresults. While we are addressing these issues and making steady progress, I amnot satisfied with our current performance and fully appreciate how difficult ithas been for our shareholders. I am, however, confident that our efforts willsoon translate into improved operating results." Enquiries: London: +44 (0) 207 851 6400 Moscow: +7 (095) 777 5529 E-mail: info@highlandgold.com Dmitry Korobov, Managing Director Dmitry Yakushkin, Director of Communications Grant Sinitsin, Director of Investor Relations This information is provided by RNS The company news service from the London Stock Exchange