Highland Gold Confirms MNV Asset Position

10.09.2003

On 11 August 2003 the Board of Highland Gold announced that it intended to participate in the auction for certain fixed assets at its principal operating mine, MNV, which are currently leased from the Khabarovsk Administration. The Board wishes to further clarify the Company’s position ahead of the auction on 16 September 2003.

Highland Gold’s subsidiary, ZAO MNV owns the freehold in the majority of the fixed assets used for mining at MNV. It also uses certain buildings and equipment required for the operation of the MNV mine which are leased under a 15 year agreement from the Khabarovsk Administration which expires in 2015. On 9 August, the Khabarovsk Administration announced that it would be offering the freehold in these assets for acquisition by way of public auction. Prior to this date, the Company had reached a basis of agreement with the Khabarovsk Administration in that it would be prepared to participate in an auction of the assets should the Administration decide on this course of action. As previously announced, the Company is intending to participate in the auction of these assets in accordance with the privatisation requirements, and will continue to evaluate the terms of its participation in this auction in the best interests of shareholders.

Highland Gold has confirmed with its legal advisers that the Company’s rights of access to the use of the assets under the terms of the lease would continue irrespective of a change of freehold ownership. Therefore in the event that the assets are not acquired by Highland Gold, Highland Gold would continue to lease these assets under the terms of the existing lease agreement for the duration of that lease.

The Board has received legal advice that any attempt to unilaterally cancel the lease agreement without a court ruling is illegal under Russian law and that any such attempt at cancellation is unenforceable. Furthermore, the Company’s position on this matter is supported by the Federal Ministry for Economic Development. The Company continues to reserve all its rights in respect of this.

The Khabarovsk Administration has included the tailings dump and associated assets in the list of assets to be auctioned. The Company has registered title to these assets and has filed a motion with the Khabarovsk Court to protect these ownership rights. The Board has received legal advice that any attempt to terminate MNV’s registered title to these assets without a court ruling is illegal and unenforceable. The inclusion of these assets in the single lot auction may give rise to additional legal remedies being available to the Company to protect its legal rights in relation to all the assets included in the auction.

Highland Gold has continued to operate the MNV mine under the terms of its long term mining licence, valid until 2018, without interruption throughout the recent period of negotiation with the Khabarovsk Administration. The Board is confident that it will continue to do so and that a mutually acceptable conclusion will be reached in its negotiations with the Administration.

The Company is a major contributor to the local economy by way of tax income and a significant employer in the region and the Board looks forward to maintaining MNV’s presence in and its contribution to the regional community.

Enquiries:

Highland Gold Peter Daresbury +44 (0) 20 7409 5631
Brunswick Alison Howard / Mark Antelme +44 (0) 20 7404 5959