Highland Gold Advances Its Mayskoye Project

18.06.2008

Highland Gold Mining Limited ("Highland Gold") announces that, following the review of the Mayskoye Feasibility Study, it is proceeding with the construction of its Mayskoye project in the Chukotka region of Russia.

The Feasibility Study envisages an 850,000 tonne per year underground mining operation, with adit access to the upper levels and twin decline access to the lower levels of the deposit. At full production levels Mayskoye is anticipated to produce between 250,000 and 275,000 oz of gold per year over a mine life of greater than 12 years from 2010. The capital cost of the project, to be financed from current cash, retained group operational cash flows and other financing initiatives, is expected to be between US$500 and US$550 million.

In the first year of operation, standard cyanide leaching will be utilised to process the Mayskoye oxide ore which will be mined from surface trenching and the upper levels of the deposit.

After the first full year of ore production, the underground operation will begin to mine sulphide ores which will be made amenable to cyanide leaching by pre-treating the ore using bio-oxidation. To accomplish this, a flotation circuit will be added to the mill and the flotation concentrate will be oxidised with the use of Biomin's BIOX® technology.

Highland Gold has selected Aker Solutions to undertake the engineering, procurement and construction management for the Mayskoye project. Aker Solutions brings international experience in gold processing, bio-oxidation, and construction in Arctic conditions to the project. Aker Solutions has commenced engineering and procurement in their Melbourne office. The development will also bring opportunities for local contractors, employment and economic support for the region.

Immediate plans for the project are to begin site preparation and excavation work during Q3 2008, followed by foundation work for the process plant and infrastructure. Major long lead-time equipment, including the SAG mill and initial mining equipment has already been ordered.

Commenting on today's announcement, Henry Horne, CEO of Highland Gold, said: "This Mayskoye development marks the beginning of an important and challenging stage in Highland Gold's growth strategy. In 2010 Mayskoye is scheduled to become the third producing asset of Highland Gold after Mnogovershinnoye and Novoshirokinskoye. As one of the largest undeveloped gold deposits in Russia, this will transform Highland Gold, resulting in higher gold output, higher production volumes and higher cash contributions."