HGM.L Regulatory News (HGM)

2 Aug 2006 09:39

Highland Gold Mining Limited02 August 2006 First Half 2006 Trading Update Moscow, 02 August 2006 - Highland Gold Mining Limited ("Highland Gold", or the"Company") announces an update on its trading for the half year ended 30 June2006. Financial results for the period will be released on 21 September 2006. Highland Gold will hold a conference call hosted by Ivan Koulakov, DeputyChairman, Henry Horne, Managing Director and Scott Yelland, Chief OperatingOfficer to discuss this trading update. The conference call will take place at2:00pm UK time (5:00 pm Moscow) on Wednesday, 02 August 2006. To participate inthe conference call, please dial one of the following numbers: 0800 953 1444 U.K. toll-free number8108 0021 651 012 Russia toll-free number1866 220 1452 USA toll-free number+44 (0) 1452 542 300 International dial in number Participants will be asked of their full names and the Conference ID which is3946520#. 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 ID3946520#: 0800 953 1533 U.K. toll-free number1866 247 4222 USA toll-free number+44 (0) 1452 550 000 International dial in number A Wav file of the recorded conference call will be available atwww.highlandgold.com. FIRST HALF HIGHLIGHTS* • HGML's total attributable production of 91,205 ounces of gold is a 43% increase on the first half of 2005 (63,749 ounces) • MNV produced 79,444 ounces of gold, 53% up on the same period for 2005 • Unit costs at MNV were contained during the first six months of the year despite the upward pressure on operating costs • The restructuring of Darasun mine and the reduction of costs is ongoing. We will also embark on a drilling programme to delineate the deposit and further verify and increase the reserves • Further strengthening of our operating management team by employing quality Russian and expatriate specialists • The Management Company restructuring process was successfully completed • Further progress achieved on all our Development Projects and we are on target to complete the scoping study for Taseevskoye by end of this year and the bankable feasibility study for Mayskoye by the first quarter 2007 • Ongoing progress on all our Exploration Projects with exploration drilling and trenching started • Improved efficiencies • Taseevskoye Barrick joint venture finalized Commenting on today's announcement Ivan Koulakov, Deputy Chairman, said: "We consider these first half year results as a very important contribution tothe further development of the Company enabling it to pursue successfully itslong term growth strategy". Henry Horne, Managing Director, said: "We are satisfied with the production results at MNV, which demonstratesoperational stability of this mine and confirm the choice of recovery measuresimplemented by the Company's management since the second half of last year. Unitoperating costs at MNV were generally contained despite the above averageincreases in energy costs and the real Rouble appreciation. This serves as proofof the focused efforts and dedication of our management and all employees atMNV. We are also encouraged by the progress achieved during the first half of thisyear at our Development Projects all of which remain on target as per theCompany's expectations. Drilling and trenching is progressing to plan at therecently acquired exploration sites. Due to the restructuring at Darasun, our combined forecasted annual goldproduction from both operations for this year is now in the range of 180,000 -185,000 ounces of gold. It is essential that the pace of development of ourprojects is maintained and that the agreed restructuring process at Darasun becontinued as defined by the Company". MNOGOVERSHINNOYE MINE (MNV) - Khabarovsk Region, Russia The MNV mine produced a total of 79,444 ounces of gold during the first half of2006 (53% up from 51,979 ounces in the same period of 2005) and above theCompany's 2006 forecast. Due to technological improvements in the mill, the gold in process was reducedby 4,534 oz Au during the first half of the year. Mill throughput treatedaveraged 2,823 tonnes per day. Despite adverse weather conditions, whichresulted in a number of production delays in the open pit and restricted accessto the underground operations, production and associated development in thefirst half of the year were in line with the mining plan. We view this as anexcellent outcome. Cash Operating Costs were US$304 per ounce at MNV, in linewith the Company's expectations. In the first half of 2006, over 5,100m of exploration drilling was completed atMNV, increasing the reserve. In the Upper ore body of the open pit two holesidentified grades of 18.1g/t Au and 10.6g/t Au, over widths of 16.1m and 40.8mrespectively. In the underground in the Northern ore body there wereintersections of 15.4m and 14.0m grading 19.2g/t Au and 15.7g/t Au, and in theFlank zone, one hole intersected mineralization over 22m, with an average gradeof 39.1g/t Au. The Company expects that the performance in the first half of 2006 will followthrough into the second half and reach the top end of the MNV productionguidance for 2006 of 150,000 to 160,000 ounces of gold. MNV Operating Statistics: For the first half year ended June 30, Unit 2006 2005Mine developmentWaste stripping Cubic Metres 751,845 640,609Underground development Linear Metres 4,609 4,363MiningOpen pit Tonnes 205,896 156,615 g/tonne 5.90 4.70Underground Tonnes 209,255 180,619 g/tonne 5.90 5.37Total ore mined Tonnes 415,151 337,234 g/tonne 5.90 5.06Ore processed Tonnes 485,561 371, 403 g/tonne 5.60 4.81Including from stockpile Tonnes 70,410 34,169 g/tonne 3.83 2.33Recovery rate % 90.9 90.5Gold recovered Ounces 79,444 51,979Gold sold Ounces 81,235 55,426Gold price received US$/ounce $599 $426 DARASUN MINE - Chita Region, Russia Gold production for the first half of 2006 was below the Company's plan due tothe production shortfalls from both the underground and open pit operations.This shortfall was partly made up by processing over 46,193 tonnes of low grade,historical stockpiled material. Mill throughput during the second quarter 2006improved averaging over 30,700tpm, an improvement of over 53% on the firstquarter 2006 production results. The shortfall in underground production can be attributed to inadequate stopedevelopment and a shortage of experienced development miners. Underground gradeswere lower, due to higher than planned dilution in undulating, irregular orebodies. The shortfall in the open pit waste stripping was due to thenon-availability of the three drill rigs, a result of a shortage of spares andpoor maintenance. A service and maintenance agreement has now been signed withthe equipment supplier, which should ensure equipment availability. During the latter part of the first half of 2006, the management team at Darasunwas strengthened with the appointment of an experienced Mine Manager,Underground Manager, Chief Geologist and a number of experienced managers/supervisors from the MNV operation. We have also managed to attract skilled andexperienced Russian specialists from other Russian mining operations. Darasun Operating Statistics: For the first half year ended June 30,Unit 2006 2005Mine development Waste stripping Cubic Metres 541,754 730,072 Underground Linear 2,242 2,125 development MetresMining Open pit Tonnes 47,369 17,425 g/tonne 3.11 6.43 Underground Tonnes 64,523 55,084 g/tonne 6.73 12.37Total ore mined Tonnes 111,892 72,509 g/tonne 5.17 10.94Ore processed Tonnes 158,085 86,700 g/tonne 3.40 5.84Including fromstockpile Tonnes 46,193 14,191 g/tonne 0.90 1.10Recovery rate % 68.1 72.3Gold recovered Ounces 11,761 11,770Gold sold Ounces 8,028 7,907Gold price received US$/ounce $671 $437 The continuing restructuring and the economic viability of certain shafts havebeen reviewed and, as a result, the following actions are being taken: 1. Cease production at the marginal shafts, South West and Teremky, whilemaintaining them on a care and maintenance basis. 2. Commence with an exploration drilling programme to confirm and extendthe underground geological resources, verify the reserves and delineate theorebody. An estimated 600,000oz Au of C1 and C2 Resources are situated below the717 level in the South West Shaft and the 646 level in the East Shaft. Theseresources have been interpolated in line with Russian classifications, from thelevels above and diamond drill information. 3. The drilling programme will allow time to prepare and developunderground mining blocks 4. Maintain production from the Central underground section 5. Optimize production from the Talatui Open Pit. 6. Reduce the potential cash drain, by decreasing manpower and operatingcosts 7. Continue the implementation of the previously identified cost savinginitiatives (e.g. back filling of waste underground, introduction of mechanizedsupport, change of explosive types, purchase of suitable equipment andconsumables etc.) 8. To attract skilled and experienced Russian specialists to Darasun TASEEVSKOYE DEVELOPMENT PROJECT - Chita Region, Russia The first assay results from the drilling programme at Taseevskoye are in linewith our expectations, and will be announced in due course. The sampling of theZIF-1 tailings dam was completed in March of this year. A total of 908 metres ofauger samples were taken which confirmed the average grade of the tailings damto be in the order of 1.12g/t. A detailed exploration programme to confirm the Taseevskoye mineral resourcescommenced in March with one drill rig. At present there are five drill rigs onsite and it is planned to start the sixth drill rig in early August. To date,nearly 11,000 metres have been drilled out of the planned drilling programme of28,500 metres. Hydrology studies are well advanced to determine the source of water which isflowing into the Taseevskoye pit and the most suitable way of de-watering thepit. Negotiations are underway to commence the Environmental Impact Assessment andResettlement Action Plan studies for the Taseevskoye Site. We expect the scoping study to be completed by the end of this year. MAYSKOYE DEVELOPMENT PROJECT - Chukotka Region, Russia The Mayskoye Feasibility Study is progressing satisfactorily and completion isanticipated by the end of the first quarter of 2007. Variability tests have commenced in Lakefield Laboratories in South Africa. Theinitial flotation tests on these samples, taken from various parts of theMayskoye multiple orebodies, confirmed the previous findings that the Mayskoyeores respond favourably to flotation and that a high percentage of the gold inthe sulphide ore will be recovered to a float concentrate. Lakefield Laboratories have also commenced a comprehensive test programme onsamples from Mayskoye's oxidised ore zone, in order to find a process that couldimprove gold recovery from the oxidised ore. Biox innoculem is now being prepared and Biox tests, under the direction ofGoldfields, will commence towards the middle of August. Essential site construction is continuing at a controlled pace. An improved camphas now been completed for the workers and site management. A workshop and avehicle shelter have also been built. Preliminary work has started on anall-weather road from Komsomolsky to Mayskoye. A survey for the high-voltagepower line construction linking Komsomolsky and the Mayskoye mine has commenced. Novoshirokinskoye DEVELOPMENT project - Chita Region, Russia We have reviewed several options for the future development of theNovoshirokinskoye polymetallic deposit. Economic evaluations of theNovoshirokinskoye gold, silver, lead, zinc project have shown that the projectwould be viable if a solution could be found to sell the gold rich leadflotation concentrates that will be produced by the mine on the internationalmetal market. Having studied these options we are holding discussions with a prospectivepartner to jointly develop this polymetallic asset. This potential partner iscurrently in the process of carrying out a technical and legal due diligence.Other companies, which would bring synergy to the Project, have also expressedinterest in entering into a joint venture to exploit the Novoshirokinskoyedeposit. Exploration Sovinoye - Chukotka Region, Russia During the first half of 2006, a camp has been established at Sovinoye,trenching is underway and drilling will start in August. The agreements withBarrick on a joint venture are being finalized. Lubov - Chita Region, Russia Accommodation and site facilities have been established at Lubov during thefirst half of 2006 and magnetic surveys have been completed. Drilling andtrenching operations are scheduled to start in August 2006. Belaya Gora - Khabarovsk Region, Russia Construction of the accommodation and site facilities was started in June 2006.Topographical mapping has been completed and drilling pads established. Drillingand trenching has started. The agreements with Barrick on a joint venture arebeing finalized. New People The Company has continued to strengthen its management team. Mr. Sergei Lysakov was appointed the new Managing Director of MNV. He graduatedfrom the Technical Institute of Irkutsk as a surveyor. Prior to joining ZAOMnogovershinnoye in 1998 he worked for a number of Russian mining companies anduntil March 2006 was the Chief Surveyor at MNV. Mr. Paul Clarke joined us as a Group Technical Director. He has a bachelordegree in mining engineering from Cardiff University, Wales, with 32-yearsworldwide mining experience. He held the position of mine manager at Kumtor minein Kyrgyzstan and was also instrumental in the design and construction of themine. Mr. Alexander Arisanov joined us as Group Ore Reserve Manager. He has a master'sdegree in geology and has been the Chief Geologist at Chelopech Mining EAD - acopper-gold operation situated in central Bulgaria. Mr. Vladimir Milekhin joined us as Chief Geologist at Darasun. Prior to joiningDarasun he worked for more then 10 years as geologist and then as ChiefGeologist with Omolon Gold Mining Company at its Kubaka operation in the Magadanregion of Russia. We have also managed to attract skilled Russian specialists from other Russianoperations, who will contribute to the increase of the overall skills level inthe Company. Gold Price The average realized gold price for the period was US$ 608/oz. The Company has apolicy not to hedge or to sell forward long term. For further information please London: +44 (0) 207 851 6400contact: Moscow: +7 (495) 777 5529 E-mail: info@highlandgold.com Henry Horne, Managing Director Dmitry Yakushkin, Director of Communications 26 New Street, St Helier, Jersay, Channel Islands JE2 3RA Tel: +44 (0) 1534 814202 fax: +44 (0) 1534 814815 http://www.highlandgold.com This information is provided by RNS The company news service from the London Stock Exchange