Highland Gold - Taseevskoye

Introduction MNV Novoshirokinskoye Mayskoye Taseevskoye Exploration

Taseevskoye

Overview
2004 Resource Update
Scoping Study
Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan
Corporate Social Responsibility Programme

Highland Gold acquired the Taseevskoye project in September 2004 at a cost of US$26.6 million. Taseevskoye became first major project that started to be jointly developed under our strategic partnership with Barrick Gold. Since the transaction in the end of 2006, in which Barrick raised its shareholding in Highland from 20 to 34% and our assets in Russia and Central Asia were unified, Taseevskoye is 100% owned by Highland Gold.

Overview

The Taseevskoye deposit is located two kilometres south of the town of Baley (Population: 13,800) in the Chita region, Eastern Siberia. It lies 56 kilometres south by paved road from the Trans Siberian Railway station at Priiskovaya. Chita, the regional capital, is located 320 kilometres to the west of Baley. The deposit was discovered in 1941 and during the period 1948 to 1994 produced 6.4 million ounces of gold from 16.3 million tonnes of ore at an average gold grade of 12.2 g/t. This was produced from a swarm of epithermal gold bearing quartz fissure veins located within a circular area 1000m in diameter. The predominantly underground mining operation concentrated on three principal vein systems, leaving un-mined a large lower grade mineralized envelope contained within an argillic alteration halo surrounding the fissure veins. Highland Gold’s acquisition of Taseevskoye is rooted in the potential for open pit mining of this large lower grade resource, which was also the subject of a 1997 bankable feasibility study commissioned by the former licence holders.

Taseevskoye location map

Resource Update

We re-evaluated prior resource estimation work that was completed in 1997 to ensure it meets today’s JORC standards. The updated resource estimate was completed by independent engineering firm, Snowden Mining Industry Consultants Inc. (“Snowden”) of Vancouver, B.C., Canada and has been reported in accordance with JORC (2004) guidelines. Snowden had completed an earlier resource estimate in 1997. The current measured, indicated and inferred resource of 3.37 million ounces at a grade of 3.49 g/t is reported at a cut-off grade of 1 g/t and is lower than the comparable estimates reported in 1997 of 5.05 million ounces at a grade of 3.17 g/t. The updated estimate is higher than the 1.41 million ounces at a grade of 3.1 g/t reported on the company’s resource statement at 31 December 2004 and approved by Russia’s State Committee for Reserves.

Resource Comparison, 1 g/t Au cutoff (100%)

	1997 (1996 JORC)			2005 (2004 JORC)
	Tonnage Mt	Au g/t	Ounces Million	Tonnage Mt	Au g/t	Ounces Million

Measured	13.7	4.80	2.11	-	-	-
Indicated	28.1	2.38	2.15	25.2	3.35	2.72
Inferred	7.8	3.14	0.79	4.8	4.20	0.65

Total	49.6	3.17	5.05	30.0	3.49	3.37

The resource differences can be explained by changes in reporting requirements adopted by JORC in 2004 and by the application of current standards of data verification.

2005 Indicated and Inferred Resource estimates (100%)

	0.7 g/t Cutoff			1.0 g/t Cutoff			2.0 g/t Cutoff
	Tonnage Mt	Au g/t	Ounces Million	Tonnage Mt	Au g/t	Ounces Million	Tonnage Mt	Au g/t	Ounces Million

Indicated	35.6	2.6	3.00	25.2	3.4	2.72	13.3	5.1	2.21
Inferred	6.3	3.4	0.69	4.8	4.2	0.65	3.0	5.9	0.56

Total	41.9	2.7	3.69	30.0	3.5	3.37	16.3	5.3	2.77

The independent resource estimates reported by Snowden were prepared by Competent Person A.F. Ross MSc, FAusIMM (CP), Snowden Mining Industry Consultants Inc., Vancouver, B.C., Canada.

Download full version of Snowden report "Taseevskoye Resource Estimate Update", February 2005 (pdf, 590 kb)

Scoping Study

Highland Gold is now working on a review of the 1997 feasibility study results. This study was conducted by Kvaerner Metals and resulted in an average annual production of 220,000 ounces over the initial ten year mine life. This level of primary production and a subsequent six year period of low grade processing was based on a 2.9 million ounce mineable reserve of 28.2 million tonnes grading 3.23 grams per tonne.

The drilling programme to confirm earlier drilling programmes, provide metallurgical and geotechnical samples and locate underground workings started in the first half 2006 and was completed by the end of the year. A total of 26,500 metres was drilled. We received assay results from over 33,000 samples, of which 29,000 were assayed by an Alex Stuart laboratory.

The first stage of direct leaching tests has been completed. This testwork has allowed the development team to categorize various ore types required to design the next phase of testing which will include mineralogical testwork, grinding, pressure oxidation and bio-leach.

Predictive modelling of the dewatering of the current pit was completed in preparation for dewatering efforts during operation. In addition, pre-design work was completed for a sewage water purification facility for the town of Baley.

A Scoping Study was completed in-house in September, providing focus and direction for the Pre-Feasibility Study.

Taseevskoye long section

Taseevskoye final pit outline

Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan

The Environmental and Social Impact Assessment (ESIA) and Resettlement Action Plan for the Taseevskoye project are being developed by Golder Associates and are planned to be completed in 2008.

Corporate Social Responsibility Programme

A comprehensive corporate social responsibility programme aimed at addressing key social issues in the Baley community was started in summer 2006 in partnership with the US Agency for International Development (USAID).