Drilling Report

Positive Results at Highland Gold's Exploration Projects.

21 December 2010 - Highland Gold Mining Limited ("Highland Gold", or the "Company") is pleased to announce positive exploration results from its Mnogovershinnoye, Unkurtash, Lyubov and Blagodatnoye properties. Building on the success of advancing the Belaya Gora Project from initial acquisition in 2005 through to production in just five years, the Company continues to create value through ongoing organic growth.

Mnogovershinnoye (MNV)

At the Company's main producing mine, encouraging drilling results have been achieved from a near-mine exploration programme intended to discover additional reserves for open-pit exploitation over the short term. The focus in 2010 has been on surface exploration which includes more than 6,200 metres being drilled at 4 exploration targets, Pebble (Valunistoye), Pebble (Valunistoye) north east extension, Quiet (Tikhoye) and Upper (Verkhnoye), within the license area.

Pit optimisation is now underway at the Pebble (Valunistoye) prospect which is part of the 2 kilometre long Quiet (Tikhoye) - Pebble zone estimated to host 190,000 oz of gold contained in open-pit mineable ore grading between 3.0 - 5.0 g/t. A previously untested mineralised zone at north-eastern Pebble returned near surface high-grade drilling intersects which are being further delineated by a 1,000 metre trenching programme. Positive drilling intersects have also been received from the Quiet (Tikhoye) prospect to the southwest of Pebble and from step-out drilling at the Upper open-pit.

These latest drilling results highlight the considerable exploration potential that still remains at MNV. A reconciliation of reserves compliant to JORC standards is underway and results are expected in Q1 2011. During 2011 the near-mine exploration budget anticipates 8,000 metres of surface drilling with an additional 16,000 metres allocated to underground.

Unkurtash (Kyrgyzstan)

At Unkurtash (Kyrgyzstan) a preliminary application for registration of (C1+C2) category reserves of 1.71 million oz is scheduled for submission to the State Committee on Reserves of the Kyrgyz Republic (GKZ) prior to the year-end 2010 and represents a major step towards future mine development. The initial audit in compliance with JORC standards is planned to be completed by mid-2011.

Exploration activities continue at three adjoining prospects - Unkurtash, Sarytube and Karatube which all form part of an elongated gold mineralised belt approximately 4,000 metres on strike, 250-500 metres in width and with a vertical extent of at least 350 metres. In 2010 over 12,350 metres of reverse circulation (RC) and core drilling has been completed at the three prospects in addition to underground exploration at Unkurtash where 430 metres of old workings were rehabilitated and 142 new metres developed.

Drilling results continue to support the potential for hosting a large open-pit mineable stockwork-type resource at Unkurtash in addition to a smaller satellite deposit at Karatube:

A substantial increase in budgeted annual exploration expenditure underpins the Company's confidence in realising the potential of this project. Over 30,000 metres of RC and core drilling has been allocated at three targets in addition to 3,000 metres of underground exploration development planned at Unkurtash during 2011.

Lyubov

At Lyubov, 12,000 metres of resource definition drilling has been completed, targeting stockwork-type gold mineralisation hosted within the Evgraf granitic stock and its surrounding shales. The objective of this drilling programme was to increase the C1+C2 reserves potential through conversion of adjacent prognostic P1 resources.

As previously reported to the regulatory authorities, the Evgraf target (exclusive of Evgraf West) was estimated to contain C2+P1 resources of 43.3 tonnes of gold (1.67 million oz) at an average grade of 1.83 g/t and a cut-off grade of 0.75 g/t (unaudited in-house estimate). To date 90% of drilling results have been obtained which are in-line with the Company's own resource model. Final assays with evaluation of results are expected to be completed by Q1 2011:

Previous test work has indicated favourable metallurgy and gold recovery levels via conventional processing methods. During 2011 the Company plans to complete additional infill and geotechnical drilling as well as hydro-geological tests which fulfil critical requirements of the pre-feasibility study. A reserve calculation will be submitted for approval to the State Committee on Reserves of the Russian Federation (GKZ) in H2 2011 and followed by a JORC compliant resource audit which is also expected prior to the year end 2011.

Blagodatnoye

At Blagodatnoye, (acquired Q1 2010) located in strategic proximity to Belaya Gora, a resampling programme of 200 metres of old trench workings within a 200 x 500 metres zone has been completed. Blagodatnoye has a reported prognostic resource estimate of 161,000 oz of gold and features stockwork-type gold mineralisation with reported average gold grades in the range of 1.5-2.0 g/t. The resampling returned overall positive results, which defined several continuous intercepts of gold mineralisation. The results underscore the Company's expectation that it will be able to increase the reported mineral resource:

The exploration programme planned for 2011 at central Blagodatnoye includes 10,000 metres of drilling to confirm continuity of mineralisation at depth. A geochemical survey in adjacent areas is to be undertaken to validate historical data with a reported gold anomaly suggestive of additional potential.

Mr. Werner Klemens, Head of Exploration at Highland Gold has reviewed and verified the information contained in this release with respect to drilling and resource/reserves matters. Mr. Klemens holds a Ph.D. in Geology from the University of Toronto. He has 12 years experience in mineral exploration and is a fellow of the Geological Association of Canada. A rigorous quality assurance programme complying with international standards is in effect at all exploration projects and includes duplicate sampling, insertion of standards and check assaying at external laboratories.

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