Highland Gold Announces Closure of Novoshirokinskoye Deal

29.12.2011

Further to the announcement made by the Company on 23 November 2011, Highland Gold Mining Limited ("Highland Gold" or the "Company") is pleased to announce that the transaction between Stanmix Holding Limited (a wholly owned subsidiary of the Company) and its joint venture partner LLP Kazzinc ("Kazzinc") for the acquisition of Kazzinс's 48.3% share in the Open Joint Stock Company Novo-Shirokinskiy Rudnik the owner of the Novoshirokinskoye mine ("Novo") has completed following  approval by the Russian anti-monopoly authorities.

This acquisition will result in the Company's stake in Novo increasing to 96.6%. Stanmix Holding Limited will shortly notify the remaining minority Novo shareholders of their right to redeem the 3.4% of the voting shares owned by them. Highland Gold acquired the Kazzinc 48.3% share in Novo for US$47.5 million and US$62.5 million as repayment of Kazzinc's share of intercompany debt. The acquisition and the repayment were financed through the Company's existing cash reserves.

Novo is located in the Zabaikalsky region of Russia. The processing plant was commissioned in October 2009 and produced 59,403 ounces of gold and gold equivalents during 2010. Revenue over the same period was US$70.8 million and profit after tax was US$36.6 million, excluding impairment reversals (in each case, representing a 100% ownership share of Novo). The acquisition will increase Highland Gold's current gold and gold equivalents production by an estimated 16%, in addition to improving the proven and probable reserve base (JORC compliant) by approximately 800,000 ounces of gold and gold equivalents.

Under the terms of the transaction, the existing offtake arrangements with Kazzinc will continue throughout 2012 and the Company expects to renegotiate the offtake agreement after that period. Novo's existing management team will remain in place and continue to receive ongoing assistance from Highland Gold's Moscow office.

Commenting on this announcement, Duncan Baxter, Chairman of Highland Gold, said: "With the Novo transaction we are seizing the opportunity presented by favorable base and precious metal market conditions. The Novo project is an efficient and profitable operation that we know well and will provide an immediate positive impact to our annual production and reserves base."

Mr. Werner Klemens, Head of Exploration at Highland Gold has reviewed and verified the information contained in this release with respect to reserves matters. Mr. Klemens holds a Ph.D. in Geology from the University of Toronto. He has 14 years' experience in mineral exploration and is a fellow of the Geological Association of Canada.

For further information please contact:

Highland Gold Dmitry Yakushkin, Head of Communications - + 7 495 424 95 21
  Duncan Baxter, Chairman - + 44 (0) 1534 814 202
   
Numis Securities Limited Alastair Stratton / Stuart Skinner, Corporate Finance - +44 (0) 207 260 1000
  James Black, Corporate Broking - +44 (0) 207 260 1000