Highland Gold Awarded Licence for Taseevskoye Deposit

02.12.2004

Highland Gold is pleased to announce that on 30 November 2004 it was awarded the licence for the Taseevskoye Deposit by the Russian Ministry of Natural Resources. This award follows the public auction held on 23 September 2004, where Highland Gold acquired the rights for 100% of the Taseevskoye Deposit with a bid of 742.35 million roubles (US$26.5) million. The licence provides Highland Gold with the rights to develop and mine the deposit for an initial term of 20 years.2005 Plans Highland Gold’s immediate plans for Taseevskoye include re-estimating the resources and financial parameters in accordance with current standards and economic conditions.

Highland Gold has engaged Snowden Associates of Perth, a company specialising in ore reserve definition, to complete the resource re-estimation. On completion of this work, which is expected during the first half of 2005, Highland Gold plans to engage a new mining consultant to assist the company in defining the appropriate scope and size of the project that will be the subject of a new, detailed feasibility study. As announced on 23 September, the resources currently approved by The State Committee for Resources are 1.7 million ounces of gold (C1 and C2).

Following completion of the study by Snowden Associates, a revised resource statement will be submitted for approval by The State Committee for Resources.

Barrick Participation

In January 2004, Highland Gold and Barrick Gold exchanged reciprocal participation rights on certain new acquisitions, which includes Highland Gold's acquisition of the Taseevskoye licence. Barrick has expressed its intention to exercise its 50% right to the Taseevskoye deposit.

Taseevskoye Overview

The Taseevskoye gold deposit is located two kilometres south of the town of Baley (Population: 15,000) 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 285 kilometres to the west of Baley. The deposit was discovered in 1941 and during the period 1948 to 1994 the Taseevskoye mine produced 6.4 million ounces of gold from 16.3 million tonnes of ore at an average grade of 12.2 g/t Au. 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.

Historical Production from the Taseevskoye Deposit

Period Location Ore
(000t)
Grade
(g/t)
Gold
(tonnes)
Gold
(k ozs)
1948 – 1992 Underground 14,372 13.6 195.0 6,270
1984 – 1994 Open pit 1,918 1.8 3.4 109
Total   16,290 12.2 198.4 6,379

Historic Bankable Feasibility Study

Between 1995 and 1997, Kvaerner Metals was commissioned to deliver a bankable feasibility study on the Taseevskoye project. The scope of this study covered Geology/Ore Reserves, Geotechnical/Hydrology, Survey Control, Mine Design, Metallurgical Testwork, Environmental, Mine Waste Management, Process Design, Engineering, Cost Estimates and Scheduling. The mine process facilities and infrastructure were to be developed for a process plant with a throughput rate of 1.75 million tonnes per year over 16 years, while mine production was optimised at 2.5 million tonnes per year with selective stockpiling of mine production for treatment of higher grade ore in the initial 10 years and lower grade ore to be treated in the last 6 years. The study was completed in October 1997 and is summarised briefly below.

1997 JORC Resource Estimates

In addition to The State Committee for Resources’ estimates, as shown above, Snowden Associates prepared an historic geological resource study for the Taseevskoye deposit in June 1997. The resource classifications assigned were based on underground channel sampling on drifts, cross cuts and “orts” on the levels at a maximum spacing of 40 m and more frequently 20 m or less. Drill hole spacing, both underground and surface, was basically 40 to 50 m on section and from 40 to 80 m down dip. The database contains assay results from approximately 23,000 underground channel samples, 1,113 (643 from Surface; 470 from Underground) historical Russian holes and a further 82 holes drilled in 1996-97.1997 JORC Resource estimates

  0.3 g/t Cutoff 1.0 g/t Cutoff 2.0 g/t Cutoff
  Ore
Mt
Au
g/t
Ounces
Million
Ore
Mt
Au
g/t
Ounces
Million
Ore
Mt
Au
g/t
Ounces
Million
Measured 13.8 4.76 2.11 13.7 4.80 2.11 11.1 5.55 1.98
Indicated 104.8 1.05 3.54 28.1 2.38 2.15 9.9 4.34 1.38
Sub total 118.6 1.48 5.65 41.8 3.17 4.26 21.0 4.98 3.36
Inferred 20.8 1.53 1.02 7.8 3.14 0.79 4.0 4.84 0.62
Total 139.4 1.49 6.67 49.6 3.17 5.05 25.0 4.96 3.98

1997 JORC Reserve

An historical pit optimization analysis by Snowden defined an optimum shell with dimensions of 1,100 metres by 1,200 metres with a maximum depth of 260 metres containing 232 million tonnes of ore and waste. Using a cutoff grade of 0.88 g/t Au and a gold price of US$380 per ounce, diluted, recoverable, proven and probable reserves totalled 28.2 million tonnes of ore at an average grade of 3.23 g/t Au and containing 2.9 million ounces of gold. The stripping ratio to recover these reserves is 7.25 t of waste per tonne of ore. Within this pit design is 3.6 million tonnes of Inferred Resource grading 3.66 g/t Au that has been treated as waste.

1997 Process

The grinding circuit was to consist of a jaw crusher, a semi-autogenous grinding (SAG) mill and a ball mill operating in closed circuit with cyclones. After grinding 80% of the ore coming in, 53 microns, the slurried ore was to flow by gravity to the flotation circuit where a gold rich sulphide concentrate containing about 85% of the gold values would be produced and thickened before being pumped to a pressure oxidation circuit. The oxidized sulphides would then be leached in a carbon-in-leach (CIL) circuit to recover about 97% of the gold contained in the concentrate, thus 82% of the total contained gold was to be recovered in the concentrate circuit. Flotation tailings were to be thickened and leached with cyanide in a second CIL circuit to recover an additional 5% of the gold. Loaded, activated carbon from both CIL circuits was to be treated separately by elution in a single carbon stripping vessel, followed by electrowinning to recover the gold in a sludge which was then to be refined in a furnace to produce doré bullion. Tailings from both CIL circuits after cyanide destruction and the neutralized solution from pressure oxidation were to be pumped to the tailing impoundment area in a natural valley, located about 4 kilometres from the plant. Overall recovery of gold in the first 10 years was to be about 87% of the values contained in mill feed reducing to 82% in the last six years.1997 Estimated Capital and Operating Costs Total capital costs of the project were estimated to be US$170 million as of the third quarter of 1997. Total estimated operating costs for the first 10 years of the project were to average US$20.94/t of ore milled. For the last 6 years of the project, total operating costs were expected to reduce to an average of $9.84/t milled.

Commenting on today’s announcement Ivan Koulakov, Managing Director, said:

“Given that Taseevskoye is a very well known and well developed deposit that was subjected to a full Bankable Feasibility Study in 1997, we view it as an acquisition that is complementary to our existing assets and that fits firmly within our core strategy.

“Taseevskoye will create new economic opportunities for the people of the Chita region and will create value for Highland Gold shareholders as our company continues its impressive record of growth in Russia and takes yet another step closer to an annual production goal of 1 million ounces of gold.”

Enquiries: +44 (0) 20 7404 5959
Highland Gold Peter Daresbury, Executive Chairman
Ivan Koulakov, Managing Director
Denis Alexandrov, Finance Director
Dimitry Yakushkin, Director of Communications
Brunswick Andrew Garfield
Mark Antelme
Pavla Kazbundová