AGM Trading Update

20.05.2004

At Highland Gold’s Annual General Meeting being held today, Peter Daresbury, Executive Chairman, will give the following update on trading:

Introduction

Highland Gold has enjoyed a very strong start to the year. Production from MNV has risen by 23% compared to the same period last year. Darasun will commence production next week and is on track to produce 40,000 ounces by the year end. The Board remains confident of meeting the company’s full year production target of 235,000 ounces.

Mnogovershinnoye (MNV)

The transition to the new ore body is progressing well. The quantity of ore milled is up by nearly 10% and the average head grade increased to 7.33 g/t from 6.63 g/t for the equivalent period in 2003. The amount of gold produced is up 23% for the first quarter, on a year-on-year basis, and the Board maintains the production target for MNV for the full year of 195,000 ounces.

  1Q 2004 1Q 2003 Percentage change YOY
Tonnes of ore mined      
Underground 106,218 118,440 -10.32%
Open pit 47,357 41,640 +13.73%
Total: 153,575 160,080 -4.4%
Tonnes released from stockpile 75,987 51,334 +48.0%
Tonnes of ore milled at MNV's processing plant 229,562 209,512 +9.57%
Average head grade, g/t 7.33 g/t 6.63 g/t  
Gold produced 49,801 oz 40,568 oz +22.70%
Average recovery rate 92.06% 90.95%  

Darasun

Construction works and commissioning at the Darasun gold extraction plant are being completed and within budget; production is due to begin next week. The Board is confident of achieving forecast production of 40,000 ounces for the remainder of 2004. Once into full production, Darasun is expected to reach its projected full capacity of 120,000 ounces a year in 2005. The long-term mining license for Talatui has been tendered and the results will be announced on 24th June.Novoshirokinskoye The long term mining licence for Novoshirokinskoye has been tendered and the results will be announced on 24th June.

Mayskoye

Work on the feasibility study is progressing satisfactorily towards completion by the end of 2004. It is being formulated on a base case of 550,000 tonnes of ore producing 180,000 ounces of gold, with an upscaled case of 1 million tonnes of ore. Construction of the camp at Mayskoye has begun and the buildings, including accommodation for 500 staff, will be delivered this summer. We have commissioned Micon International Limited, a western engineering company, to carry out the bankable feasibility study and the reclassification to JORC standards. We are entering negotiations with several banks on finance.Finance As announced at the preliminary results in April, the company has been and continues to be in discussions with banks to finalise a further $60 million of debt facilities, over and above the $35 million in place at the beginning of the year. The company has, since April, secured additional finance of US$27m, through a one year rolling facility.

-Ends-

For further information:

Enquiries: 020 7404 5959
   
Highland Gold Peter Daresbury, Executive Chairman
  Ivan Koulakov, Managing Director
  Denis Alexandrov, Finance Director
   
Brunswick Andrew Garfield
  Mark Antelme