HGM.L Regulatory News (HGM)

HIGHLAND GOLD MINING LIMITED

Trading Update for the First Half of 2015

14 August 2015

Highland Gold Mining Limited ("Highland Gold" or the "Company") announces its operational update for the half-year ending June 30, 2015. The Company expects to release a full report of the interim results, including financial results for the period, on or about September 23, 2015.

HIGHLIGHTS

• Total H1 2015 production of 121,242 oz of gold and gold equivalents at Mnogovershinnoye ("MNV"), Novoshirokinskoye ("Novo"), and Belaya Gora, a 1% increase from 120,121 oz in H1 2014.

• Continued optimisation of operations at the Belaya Gora processing plant, with gold recovery rates reaching 76% on average (21% higher than in H1 2014) and 80.9% in June.

• Steady operations at Novo, with ore processing volumes set to rise to an annual rate of 630,000 - 650,000 tonnes by year-end.

• Work on Kekura progressing as planned, including state approval of Russian-compliant reserves, finalisation of processing studies; and initiation of work on technical design documentation.

• Guidance for full-year 2015 output of gold and gold equivalents unchanged at 270,000 - 285,000 ounces.

OPERATIONS

Mnogovershinnoye (MNV) - Khabarovsk Region, Russia

Processing plant throughput for the first six months of 2015 was 705,493 tonnes of ore, yielding 42,451 oz of gold. Recovery rates averaged 89%, a slight decrease from the same period in 2014. The dip was due to changes in the mineral composition of the ore and a decline in gold grades.

Open-pit and underground ore production totalled 619,749 tonnes. Underground development recorded a 7% increase to 4,287 metres from the previous six months.

The average ore grade was 2.15 g/t, which is 37% less than the same period of 2014. The reduction is due to the commencement of mining at the Verkhneye, Tikhoye, and Valunistoye ore bodies, which have slightly lower gold grades.

Novoshirokinskoye (Novo) - Zabaikalsky Region, Russia

Novo continued to meet expectations in terms of ore production. Work was carried out over the reporting period to optimise mining and processing technology, the result of which will be an increase in ore processing to an annual rate of 650,000 tonnes by the end of the year. Furthermore, the Company is successfully implementing a project for the extension of underground operations, and stoping operations have commenced at the 700 metre horizon.

In order to handle increased throughput, a new flotation circuit will be installed in H2 with the goal of maintaining the 85.3% recovery rate achieved in the first half, which is 1.1% higher than in the same period last year.

* Approximate Au equivalent

Mined ore metal content breakdown = Au 2.92 g/t, Ag 67.48 g/t, Pb 2.12%, Zn 0.84% **

** The Company has re-estimated the Novo deposit's ore reserves based on the results of mining and grade control drilling as of January 01, 2014. The recalculation has received approval from Russian regulatory authorities, however, updated JORC Ore Reserves have not yet been determined. Total Russian-classification reserves increased by 77% from 9.42 million tonnes of ore to 16.69 million tonnes. The figure includes lower reserves of Pb (down 4% from 348.7 kt to 334.8 kt) and Zn (down 4% from 169.9 kt to 159.1 kt), but increased reserves of Au (up 24% from 30.8 kt to 38.4 kt) and Ag (up 18% from 811.1 kt to 959.7 kt).

Belaya Gora - Khabarovsk Region, Russia

First-half ore production at Belaya Gora reached 885,314 tonnes, an increase of 91% from the same period of 2014 and in line with project forecasts. The average ore grade was 1.63 g/t, a 4% increase over the same period last year.

The Belaya Gora plant saw the full commissioning of its first processing stage in H1, with nameplate production parameters achieved at most of the plant's equipment. Ore processing reached 674,985 tonnes, which is 46% higher than in the same period last year. The average recovery rate was 76%, which is 21% higher than in H1 2014 and also in line with project parameters. The recovery rate reached 80.9% in June of this year.

The process of commissioning the plant's second stage continues, with all equipment in place and optimisation of the process flow underway. Design documentation and a tender process have been completed for the installation of automated process control systems. Additional Knelson separators were also delivered to site.

RC grade control drilling was introduced for the first time at Belaya Gora during the first half of the year. This will allow the Company to reduce dilution as well as to clarify ore contours, thus providing improved production forecasting accuracy going forward.

The government's Main Ecological Expert Review Panel issued a positive ruling on design documentation for the construction of a solid waste landfill in the vicinity of the nearby village of Chlya. Project materials are currently undergoing the Main State Expert Review, and a construction contractor is being selected.

DEVELOPMENT PROJECTS

Kekura - Chukotka Autonomous District, Russia

The Kekura project site took delivery of 6,300 tonnes of materials and equipment in the first half of 2015, ensuring supplies for ongoing activities and preparations for construction.

A scoping study was completed in H1, and work is now being finalised on a process study by Irgiridmet, including the selection of an optimal system for processing Kekura ores and subsequent delivery of a Processing Flow Sheet. Furthermore, VNIMI has completed calculations for the ideal parameters for dump location and open pit wall stability.

Work has also commenced on drafting technical design documentation for mining the Kekura deposit. The general engineering contractor is Zabaikalzolotoproyekt LLC. Design documentation is expected to be submitted to the Main State Expert Review by the end of 2015.

Preparation for large-scale construction work during the 2016 construction season is currently in progress.

Taseevskoye - Zabaikalsky Region, Russia

In H1 2015, Zabaikalzolotoproyekt worked on the Technical and Economic Calculation (TEC) of the viability of mining and processing ores from the Taseevskoye deposit, Sredny Golgotay deposit, and Baley ZIF-1 tailings. The TEC is being carried out as per recommendation from regulators Rosnedra in order to update the conditions of subsoil use licences for these deposits. TEC-related deliverables are currently being reviewed.

Preparation work for the development of a scoping study for joint development of the Baley area ore deposits is currently underway. A tender was completed and a contractor, Amec Foster Wheeler, selected. A service agreement is currently being finalised.

In the first half of 2015, the Company received regulatory permission and conducted a pilot test for batch processing of ores from Sredny Golgotay and Novo using the existing gravity-flotation process at Novo. Based on these test results, a flowsheet for processing the two types of ore at the Novo processing plant has been developed.

The Company also received mining schedule approval for Sredny Golgotay from Rosnedra, along with an extension in license terms.

Lyubov - Zabaikalsky Region, Russia

In order to maintain compliance with licence requirements, the Company submitted technical design for the Lyubov project for state review. In the first half of the year, Rosnedra approved the documentation and extended licence terms.

EXPLORATION

Mnogovershinnoye - Khabarovsk region, Russia

Throughout 2015, the Company is focused on near-mine exploration at MNV to clarify existing resources and target additional resources in order to enhance life of mine for both underground and open-pit operations.

At the Lower Horizon Mnogovershinnoye licence, the Company received regulatory approval for an underground exploration drilling programme of 9,300 metres at the lower horizons of Severnoye ore body to delineate additional resources in the vicinity of existing underground infrastructure. Drilling commenced in late Q2 2015 and will be completed in H2 2015.

At the Western Flank Mnogovershinnoye license, immediately adjacent to the mine operations (Chaynoye prospect), a follow-up exploration programme of 2,000 metres of trenching was designed in H1 2015, with plans to execute in H2 2015 in order to investigate a potential open pit resource at the site of a prominent gold anomaly identified in 2014.

Kekura - Chukotka region, Russia

In Q1 2015, the Company submitted a TEO study to the State Committee on Reserves (GKZ) for registration of reserves with the state. In Q2 2015, GKZ approved (C1+C2) category reserves of 62.1 tonnes (1.99 million oz) of gold, including open-pit mineable reserves of 45.6 tonnes (1.47 million oz) and 16.5 tonnes (0.53 million oz) destined for underground mining. The reserve approval marks significant progress in the mine's development, facilitating detailed project design according to Russian mining regulations

In H1 2015, the Company also initiated an updated independent JORC-compliant resource/ reserve evaluation by an international consultancy, with final results expected in Q3 2015.

Final results from an exploratory prospecting programme completed in 2014 were received in H1 2015 and indicate areas with significant gold mineralization in the immediate vicinity of the Kekura deposit, highlighting near-mine upside potential which the Company plans to pursue with follow-up exploration in the future.

In addition, the Company also initiated a small exploration programme for alluvial gold at selected prospects on the license area which is planned to be completed in autumn 2015.

Other Projects

No field work was conducted in H1 2015 at the Belaya Gora Flanks, Blagodatnoye, Verkhne-Krichalskaya and Unkurtash projects as the Company prioritised other projects.

Qualified Persons Statement: Mr. Werner Klemens, Head of Exploration at Highland Gold, has reviewed and verified the information contained in this release with respect to reserve and resource matters. Mr. Klemens holds a Ph.D. in Geology from the University of Toronto. He has more than 17 years' experience in mineral exploration and is a fellow of the Geological Association of Canada. A rigorous quality assurance programme complying with international standards is in effect at all exploration projects and includes duplicate sampling, insertion of standards, and check assaying at external laboratories.

HEALTH, SAFETY, AND ENVIRONMENT

The Company remains dedicated to ensuring the safety of its employees and to managing production risks as well as training staff and encouraging employee responsibility for work safety.

The Lost Time Incident ("LTI") rate (defined as the number of lost time incidents for every 200,000 man hours worked) fell by 16% to 0.25 in H1 2015 compared to 0.30 in H1 2014. A total of four lost time incidents were recorded across the Company during the period versus five incidents in H1 2014.

Some 932 employees attended a one-day safety induction course, 190 employees received workplace safety training regarding hazardous production risks (3-5 day courses), and 166 employees were trained and tested on industrial safety (7-30 day programmes).

Incoming inspection of overalls, footwear, and personal protective equipment was carried out at Mnogovershinnoye JSC (MNV) and Novoshirokinsky Rudnik OJSC (Novo) with the involvement of a specialized organization to check their compliance with the Company's PPE Standard. A company-wide standard, entitled "Key Rules of Behavioural Safety", was enacted.

The Company's environmental practices remain fully compliant with regulatory and legislative requirements. The ISO 14001 accredited environmental management system has been successfully implemented at the management company offices and the Mnogovershinnoye, Belaya Gora and Novoshirokinskoye mines. Certificates have been obtained to confirm the Company's compliance with environmental requirements. Environmental safety training was given to 160 employees at MNV, Belaya Gora and Novo, and 122 employees received training relating to safe methods for handling production waste.

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