Trading Update for the Second Half of 2005

08.02.2006

Moscow. – Highland Gold Mining Limited (“Highland Gold”, or the “Company”) produced 101,737 ounces of gold in the second half of 2005, in-line with the same period of 2004 and a 59% increase over the first half of 2005. This result reflects the good progress made since 30 June 2005 and places the Company in a better position to continue its growth.

SUMMARY Unit 6 months ended 6 months ended 12 months ended
30 June 31 December 31 December
Group   2005 2004 2005 2004 2005 2004
Gold recovered Ounces 63,749 96,986 101,737 102,910 165,486 199,896
Gold sold Ounces 63,333 94,055 98,846 103,251 162,179 197,306
Gold sales US$m 27.0 37.1 46.1 43.0 73.1 80.1
Gold price received US$/oz 427 395 467 416 451 406
MNV              
Ore processed Tonnes 371,403 466,262 503,958 461,107 875,361 927,369
Average grade g/tonne 4.81 7.04 6.03 7.14 5.51 7.09
Gold recovered Ounces 51,979 96,986 88,059 98,040 140,038 195,026
Gold sold Ounces 55,426 94,055 88,945 101,258 144,371 195,313
Darasun              
Ore processed Tonnes 86,700 - 119,835 31,909 206,535 31,909
Gold recovered Ounces 11,770 - 13,678 4,870 25,448 4,870
Gold sold Ounces 7,907 - 9,901 1,993 17,808 1,993

SECOND HALF HIGHLIGHTS

  • MNV. Recovered from the operating setbacks experienced in the first half of 2005 with second half gold production of 88,059 ounces, a 69% increase in comparison with the first half of 2005.
  • Darasun. Completed commissioning of the Darasun mill and strengthened the on-site management team, which we believe will relieve in the medium term the production problems experienced in 2005. Currently, the mill and underground mine are operating and the open pit operation has now been re-started after a 6-week shutdown for modifications to existing mine plans.
  • Taseevskoye. Continued work on a scoping study and acquired an additional 485,000 ounce resource at the ZIF-1 tailings. Planning for 2006 has resulted in an approved US$21 million budget, including significant drilling, pit de-watering activities, and the preparation of a pre-feasibility study.
  • Mayskoye. Revised the project’s first phase to approximately 500,000 tonnes per year and continued to progress the feasibility study with further underground sampling and the initiation of a twinning and in-fill drill program. The final $11.5 million acquisition instalment was paid.
  • Novoshirokinskoye. Continued to progress external technical project reviews and pursued optimisation alternatives, including the direct export of lead and zinc concentrate. Acquired the license for the Vozdvizhinskoye project, a formerly producing lead-zinc-silver mine.
  • Exploration. Acquired the Belaya Gora, Malo Fedorovskoye and Sovinoye projects.
  • Financial Position. At 31 December, held $33 million of cash and $81 million of debt.

Commenting on today’s announcement Dmitry Korobov, Managing Director, said:“Coming off a difficult first half of 2005, I am proud of the character our team demonstrated as it delivered improved second half operating results, progress on our development projects and additional high-quality asset acquisitions. This team is being continually strengthened to further improve our existing operations and to ensure our projects under development are planned to high standards and advanced in a timely manner. We are now moving into 2006 in a better position to capitalise on the current gold market and to create value for our shareholders.”

CONFERENCE CALL

Highland Gold will hold a conference call hosted by Ivan Koulakov, Deputy Chairman, Scott Yelland, Chief Operating Officer and Denis Alexandrov, Finance Director to discuss these latest operating and financial results and progress at the Company’s development projects. The call will take place at 1:00 pm UK time (8:00 am EST; 4:00 pm Moscow) on Wednesday, 8 February 2006. Participants may access the call toll free from the UK on 0800 953 1444 or from the USA on 1 (866) 220 14521. International callers may use +44 (0) 1452 542 300. A replay of the conference will be available for one week at +44 1452 55 00 00 by using the access code 5270895#.

For further information please contact:

Enquiries:   London: +44 (0) 20 7851 6400
Moscow: +7 (495) 777 5529
E-mail: info@highlandgold.com
Dmitry Korobov, Managing Director
Dmitry Yakushkin, Director of Communications
Grant Sinitsin, Director of Investor Relations