22nd Sep 2005 07:02
Highland Gold Mining Limited22 September 2005 Highland Gold Mining Ltd INTERIM RESULTS FOR THE FIRST HALF OF 2005 Moscow, 22 September 2005 - Highland Gold Mining Limited ("Highland Gold", orthe "Company") announces its interim results for the first half ended 30 June2005. The results reflect operating challenges but good progress has been madesince 30 June, and the Company expects to post improved results for the secondhalf of 2005. SUMMARY+---------------------------------+------------+------------+------------+| | H1 2005| H1 2004| 2004|+---------------------------------+------------+------------+------------+|Financial (US$ millions; UK GAAP)| | | |+---------------------------------+------------+------------+------------+|Turnover | $28.3| $38.2| $82.1|+---------------------------------+------------+------------+------------+|Cash flow from trading (before w/| $0.9| $13.9| $25.6||c) | | | |+---------------------------------+------------+------------+------------+|Net profit/(loss) | ($6.9)| $6.5| $5.0|+---------------------------------+------------+------------+------------+|Earnings/(loss) per share (cents)| (4.6)| 5.5| 4.2|+---------------------------------+------------+------------+------------+|Capital expenditure and | $25.3| $30.5| $107.8||investments | | | |+---------------------------------+------------+------------+------------+|Operating | | | |+---------------------------------+------------+------------+------------+|Gold sold (ounces) | 63,333| 94,055| 195,313|+---------------------------------+------------+------------+------------+|MNV - Cash operating cost ($/ | $318| $184| $187||ounce) | | | |+---------------------------------+------------+------------+------------+|MNV - Total cash cost ($/ounce) | $349| $212| $215|+---------------------------------+------------+------------+------------+ HIGHLIGHTS • Implemented new procedures and controls at MNV, resulting in improved recoveries of gold production in July and August • Resolved start-up issues at Darasun and reached designed milling rates for an extended period in August • Completed resource updates on Mayskoye and Taseevskoye to JORC standards • Initiated an in-fill drilling program at Mayskoye • Formalised the Taseevskoye Joint Venture, receiving $13.3 million from Barrick Gold for their 50% equity stake • Placed $49.3 million in new ordinary shares with Barrick Gold at a price of £2.30 per share, increasing their stake to 20% • Improved the balance sheet with longer term debts and $78.9 million in cash Commenting on today's announcement Dmitry Korobov, Managing Director, said: "Despite a difficult first half of 2005, our strategy remains firmly focused onimproving existing operations and advancing our development projects to ensuregrowth and that we meet high level international standards. Our operating teamhas made good progress in recovering from a disappointing first half at MNV withAugust production already achieving a more normalised rate of 16,500 ounces ofgold. At Darasun, reaching the designed milling capacity for the first time isalso a noteworthy achievement. I am optimistic that with these operatingimprovements we will be able to deliver a stronger second half of 2005." Highland Gold will hold a conference call hosted by Dmitry Korobov, ManagingDirector and Scott Yelland, Chief Operating Officer to discuss these latestoperating and financial results and progress at the Company's developmentprojects. The call will take place at 1:00 pm UK time (8:00 am EST; 4:00 pmMoscow) on Thursday, 22 September 2005. Participants may access the call tollfree from the UK on 0800 694-1562 or from the USA on 1 (866) 245-0744.International callers may use +44 1452 583-043. A replay of the conference willbe available for one week at +44 1452 550 000 by using the access code 9382082#. MANAGING DIRECTOR'S STATEMENT Highland Gold has had to address many challenging issues during the first halfof 2005 as it endeavoured to return MNV to a stable level of production, resolvestart-up difficulties at Darasun and make progress towards growing for thefuture. These challenges have required changes in the organisation and in theway we conduct our business. We are beginning to see positive effects and wecontinue to target improvements to our operations. FINANCIAL REVIEW Ernst & Young, the Company's independent auditor, has performed a review ofHighland Gold's financial statements. Revenue from gold sales in the first half of 2005 was $28.3 million compared to$38.2 million in the same period of the previous year. The 26.0% decrease inrevenue was attributable to lower production at MNV caused by lower grades,recoveries and mill throughput volumes, offset slightly by a $3.4 millioncontribution from Darasun and higher realised gold prices. Highland Gold sold63,333 ounces of gold in the first half at an average realised price of $425 perounce compared to the sale of 94,055 ounces in the corresponding period of 2004at an average realised price of $395 per ounce. Highland Gold's gold productionremains un-hedged. Highland Gold reported a net loss of $6.9 million or $0.046 per share for thefirst half of 2005 compared to net income of $6.5 million or $0.055 per share inthe first half of the prior year. The decrease in net income was primarily dueto a $13.5 million drop in MNV revenues and higher net interest expenses relatedto larger outstanding debt balances. Costs of sales increased by 11% to $25.4 million compared to $22.8 million inthe previous reporting period. In addition, during the first half of 2005 theCompany incurred $3.8 million of costs of sales relating to Darasun operationswith no corresponding amount in the previous period as the test production onDarasun only commenced in the second half of 2004. Furthermore, during the firsthalf of 2005, the Company wrote off $0.8 million of VAT balances related toyears prior to 2001 as those balances are no longer considered recoverable. Operating costs at MNV decreased by 1.2% to $16.0 million in the first half of2005 which compares with $16.2 million in the previous period. The relativelyflat cost performance associated with an 18.4% drop in tonnes processed duringthe first half of 2005 is largely explained by lower grades, recovery rates andcost pressures on certain consumable items such as fuel ($0.37 per litre versus$0.31 per litre); calcium hydro chloride ($0.88 per kilogram versus $0.75 perkilogram); and electricity ($0.06 per KWh versus $0.05 per KWh). As a result, atMNV cash operating costs increased from $184 per ounce in the first half of 2004to $318 per ounce in the first half of 2005. Further, a foreign exchangeloss of $0.7 million has been recorded to reflect theeffect of a 3.3% weakening of the rouble during the first half of 2005 on ourrouble denominated net monetary asset base of $20 million. These net monetaryassets are largely related to VAT receivable. Despite the loss on ordinary activities for the first half of 2005, a $1.4million profit tax charge was recorded in the Profit and Loss account for thecurrent period. This tax consists of three basic elements including nil Russianstatutory tax, a reversal credit on timing differences of $3.5 million andunrecognized tax losses in the amount of $4.9 million arising during the currentperiod. Total unrecognized tax losses as at 30 June 2005 amounted to $8.7million. Highland Gold's policy is to only recognise those losses that areexpected to be utilised within a reasonable period. Under newly adopted Russian tax rules the Company will be able to offsetaccumulated tax losses against future taxable profits over a 10 year period, butthe recovery in each year will be restricted to 30% of taxable profits for 2006,50% of taxable profits of 2007 and 100% thereafter. Given the early stage ofDarasun's development and in line with general accounting practice, managementdoes not consider it is prudent to carry the full amount of the deferred taxasset. Consequently the portion of the asset which is not expected to berecovered within three years has been provided for. Similar provisions totalling$2.2 million related to deferred tax assets accumulated at Mayskoye andNovoshirokinskoye were made in the first half of 2005. Management will continue to monitor the deferred tax assets arising in differentdevelopment projects and assess the timing and certainty of their recoverabilityin line with general accounting practice. The application of this policy maylead to deferred tax assets previously written off being recognised again infuture, or further write offs of deferred tax assets, notably in the case ofprojects at early stages of development. Cash generated from operating activity (before working capital changes) in thefirst half was $0.9 million compared to $13.9 million in the first half of theprior year. Net of changes in working capital, the Company's operatingactivities used $3.6 million of cash in the first half of 2005 compared with ageneration of $3.6 million in the year earlier. The decrease in net cash fromoperating activity was offset from a $5.7 million lower cash outflow relating toworking capital movements. Capital expenditure and investments for the 6 months ended 30 June 2005 were$25.3 million against $30.5 million in the period a year earlier. Capitalexpenditures at Mayskoye and Novoshirokinskoye were much lower than our initialplans for the year due to slower than anticipated progress on feasibilitystudies and will continue to be monitored closely. CAPEX AND INVESTMENTS+--------------------+-----------------+-----------------+-----------------+|(In US$ millions) | 6 months ended| 6 months ended| 12 months ended||(UK GAAP) | 30 Jun 2005| 30 Jun 2004| 31 Dec 2004|+--------------------+-----------------+-----------------+-----------------+|MNV | 4.9| 3.5| 6.1|+--------------------+-----------------+-----------------+-----------------+|Darasun | 10.1| 12.4| 25.9|+--------------------+-----------------+-----------------+-----------------+|Novoshirokinskoye | 6.2| 2.1| 13.6|+--------------------+-----------------+-----------------+-----------------+|Taseevskoye | -| -| 26.8|+--------------------+-----------------+-----------------+-----------------+|Mayskoye | 3.9| 12.1| 34.5|+--------------------+-----------------+-----------------+-----------------+|Other | 0.2| 0.4| 0.9|+--------------------+-----------------+-----------------+-----------------+|Total | 25.3| 30.5| 107.8|+--------------------+-----------------+-----------------+-----------------+ Highland Gold received $13.3 million from Barrick Gold as a consideration for a50% stake in the Taseevskoye project. The consideration will be carried on ourbalance sheet as a short term liability until such time as the Taseevskoyelicense has been duly transferred into our jointly owned company, "OOOTaseevskoye". In the first half of 2005 the Company placed $49.3 million in new ordinaryshares (net of expenses) to Barrick Gold at a price of £2.30 per share. Thisplacement raised Barrick Gold's equity interest in Highland Gold to 20%. Also in the first half of 2005, the Company drew down an additional $39.0million ($25.0 million at 31 December 2004) under the 3.5 year Commerzbankfacility arranged in December 2004 and issued $27.0 million of 3 year, roubledenominated bonds (subsequently partly hedged back into dollars over theperiod). Longer term debt allowed the Company to re-finance shorter termobligations. At 30 June 2005, the balance outstanding on the Commerzbankfacility was $59.7 million and $16 million of the initial $80 million facilitywas cancelled by the Company. Whilst a breach of one of the loan covenantsoccurred as at 30 June 2005, a full waiver was subsequently received by theCompany. Despite the receipt of the waiver, to comply with UK GAAP, the $41.0million long term portion of the outstanding balance was reclassified as a shortterm liability. The Company is confident that this loan will remain a long termobligation and has no reason to believe that the syndicate of the Banks intendsto call for early repayment. At the start of the year the Company had net debt of $37.7 million. During thesix months to 30 June 2005 the Company raised $63.2 million of new debt net offinance costs, part of which was used to repay $50.7 million of opening shortterm debt. Lease liabilities and other long term payables were also reduced by$1.5 million. Net debt at the end of the first half of 2005 totalled $10.6million after an increase in cash of $38.1 million. The net debt position hasimproved from $37.7 million at the beginning of the year and from $62.3 millionat 30 June 2004. As a result of the debt restructuring and new equity placements completed at theend of 2004 and in early 2005, the Company has significantly improved its netcurrent asset position to $60.2 million from $6.9 million at 30 June 2004.With $78.9 million in cash and a longer term debt structure, the Company'sfinancial position remains favourable. OPERATING REVIEW Gold sold for the first half of 2005 was 63,333 ounces compared with 94,055ounces of gold in the first half of the prior year. The decrease in productionwas due to operating issues at MNV. These issues were first highlighted in anews release on 24 June 2005 and were elaborated on in a further news release on5 August 2005. Production statistics for the period are presented on page 5. MNOGOVERSHINOYE MINE (MNV) - Khabarovsk Region, Russia During the first half of 2005, gold sold from MNV was 55,426 ounces at a totalcash cost of $349 per ounce. This was a deterioration from the same period in2004 when sales reached 94,055 ounces of gold at a total cash cost of $212 perounce. This decrease in production and increase in total cash cost resulted fromlower mined volumes, mill feed grades, recovery rates, as well as higher royaltypayments which were triggered by improved gold prices. Production at MNV is expected to improve in the second half of 2005 due toimprovements already evident in the critical areas of underground developmentand open-pit stripping rates. Underground production grades have increased from 5.3g/t Au in the first half ofthe year to an average grade of 7.4g/t Au in August. The grades in the open pitoperations have also increased, to 5.5g/t Au from 4.7g/t Au. These increases aredue to better mining controls and a reduction in dilution. July and August have shown encouraging signs with respect to improved millthroughput and grades. While I have outlined above some early evidence of our actions to return MNV toa steady state, we are continuing our efforts to strengthen management, improveplanning, and advance development rates further. Our estimate for the full year gold production for MNV falls within a range of140,000 to 150,000 ounces. As a result of the increased production, cashoperating costs per ounce for the full year should show a significant reductionon those for the first half of 2005. DARASUN MINE - Chita Region, Russia In August our volume of waste stripping was approximately 190,000 cubic metersoutpaced July by just 10,000 cubic meters and did not meet our expectations.This was because the two new excavators became operational only near the end ofthe first week of the month. In the coming months, we expect these volumes toincrease to 250,000 - 280,000 cubic meters per month. Open pit ore mined in Julyand August totalled 19,000 tonnes at a grade of 6.45 g/t, a significantimprovement against the planned grade of 5.1 g/t. Underground development at Darasun has continued to run approximately 25% aheadof schedule, ensuring that stoping blocks can be prepared in a timely andproductive manner. During July and August, more than 26,000 tonnes ofunderground ore was mined as the underground miners continue to gain experience. At the time of our 5 August 2005 production update, the Darasun mill had justcome off a lengthy two week shut down to allow for the installation of new millmotors and other improvements. During the final two weeks of July, the millprocessed 8,500 tonnes of ore at a grade of 5.7 g/t. In August, the millprocessed 24,000 tonnes of ore at an average grade of 7.0 g/t, despite a fewunplanned lost days needed to resolve a series of smaller mechanical issues. Bythe end of the month the mill had operated for extended periods at a rate inexcess of 60 tonnes per hour (450,000 tonnes per year) and has produced roughly5,800 ounces since it came off the July planned shut down. The Company's investment at Darasun increased by $10.1 million in the first halfof 2005, including commissioning costs in the amount of $7.1 million. Theremaining $3.0 million of investment was incurred on fixed assets such as openpit equipment and mill motors. Due to the late commissioning of the mine this month, full year production isnow estimated at 30,000 - 40,000 ounces. HIGHLAND GOLD - PRODUCTION STATISTICS MNV+-----------------------------------------+---------------------------------+| | For the first half year ended|| | 30 June|| +----------------+----------------+| Unit| 2005| 2004|+---------------------------+-------------+----------------+----------------+|Mine development | | | |+---------------------------+-------------+----------------+----------------+|Waste stripping | Cubic Meters| 640,609| 856,298|+---------------------------+-------------+----------------+----------------+|Underground development |Linear Meters| 4,363| 4,095|+---------------------------+-------------+----------------+----------------+|Mining | | | |+---------------------------+-------------+----------------+----------------+|Open pit | Tonnes| 156,615| 173,961|+---------------------------+-------------+----------------+----------------+| | g/tonne| 4.70| 6.24|+---------------------------+-------------+----------------+----------------+|Underground | Tonnes| 180,619| 213,880|+---------------------------+-------------+----------------+----------------+| | g/tonne| 5.37| 8.33|+---------------------------+-------------+----------------+----------------+|Total ore mined | Tonnes| 337,234| 387,841|+---------------------------+-------------+----------------+----------------+| | g/tonne| 5.06| 7.39|+---------------------------+-------------+----------------+----------------+|Ore processed | Tonnes| 371,403| 466,262|+---------------------------+-------------+----------------+----------------+| | g/tonne| 4.81| 7.04|+---------------------------+-------------+----------------+----------------+|Including from stockpile | Tonnes| 34,169| 78,421|+---------------------------+-------------+----------------+----------------+| | g/tonne| 2.33| 5.29|+---------------------------+-------------+----------------+----------------+|Recovery rate | %| 90.5| 91.9|+---------------------------+-------------+----------------+----------------+|Gold recovered | Ounces| 51,979| 96,986|+---------------------------+-------------+----------------+----------------+|Gold sold | Ounces| 55,426| 94,055|+---------------------------+-------------+----------------+----------------+|Gold price received | US$/ounce| $425| $397|+---------------------------+-------------+----------------+----------------+|Cash operating cost | US$/ounce| $318| $184|+---------------------------+-------------+----------------+----------------+|Total cash cost | US$/ounce| $349| $212|+---------------------------+-------------+----------------+----------------+|Total production cost | US$/ounce| $402| $247|+---------------------------+-------------+----------------+----------------+DARASUN+-----------------------------------------+---------------------------------+| | For the first half year ended|| | 30 June|| +----------------+----------------+| Unit| 2005| 2004|+---------------------------+-------------+----------------+----------------+|Mine development | | | |+---------------------------+-------------+----------------+----------------+|Waste stripping | Cubic Meters| 730,072| -|+---------------------------+-------------+----------------+----------------+|Underground development |Linear Meters| 2,125| 2,753|+---------------------------+-------------+----------------+----------------+|Mining | | | |+---------------------------+-------------+----------------+----------------+|Open pit | Tonnes| 17,425| -|+---------------------------+-------------+----------------+----------------+| | g/tonne| 6.43| -|+---------------------------+-------------+----------------+----------------+|Underground | Tonnes| 55,084| 39,875|+---------------------------+-------------+----------------+----------------+| | g/tonne| 12.37| 8.15|+---------------------------+-------------+----------------+----------------+|Total ore mined | Tonnes| 72,509| 39,875|+---------------------------+-------------+----------------+----------------+ DEVELOPMENT PROJECTS Highland Gold has three projects in the process of undergoing feasibilitystudies. The development of these projects will be a key driver of the Company'sgrowth in the coming years. TASEEVSKOYE - Chita Region, Russia During the first half of 2005, we entered a formal joint venture on theTaseevskoye project with Barrick Gold. We have created a new company, OOOTaseevskoye, to eventually hold the deposit license. During the period the Company received an updated resource estimate from SnowdenMining Industry Consultants, an independent engineering firm. A copy of the fullSnowden report is available from our website. This update, reported inaccordance with JORC guidelines, estimated the following resource at a 1 g/tcutoff grade: +-------------------------------+-------------+-------------+-----------------+|Taseevskoye Resource - 1 g/ | Tonnes| Gold| Gold||tonne | (000)| (g/tonne)| (Ounces)|+-------------------------------+-------------+-------------+-----------------+|Indicated | 25,211| 3.35| 2,715,350|+-------------------------------+-------------+-------------+-----------------+|Inferred | 4,774| 4.20| 644,650|+-------------------------------+-------------+-------------+-----------------+ The two partners are now conducting an internal scoping study. The results ofthis study and the next steps to be taken in the development of the project willbe announced by the end of 2005. Planning and permitting for a 2006 explorationprogram is being finalised. Barrick Gold has also notified the Company that they intend to exercise their50% participation rights on the Sredne-Golgotayskoye project, which HighlandGold acquired in February 2005. This project, located 13 kilometres southwest ofTaseevskoye has Russian C1+C2 resources of 646,000 tonnes grading 15.5 g/t gold. MAYSKOYE - Chukotka Region, Russia During the first half of 2005, capital expenditures of $3.9 million wereincurred at Mayskoye. These expenditures included work relating to thefeasibility study, upgrades of the site infrastructure and the construction of acamp facility. In July 2005, the Company received an independent resource estimate from MiconInternational Co Limited (Micon). This estimate, prepared by Competent Person P.Gribble, C.ENG, has been reported in accordance with JORC guidelines. Theresource uses a 5 g/t cut-off grade and is reported below. +----------------------------------+-------------+-------------+--------------+|Mayskoye Resource - 5 g/tonne | Tonnes| Gold (g/| Gold|| | (000)| tonne)| (Ounces)|+----------------------------------+-------------+-------------+--------------+|Measured | 1,742| 16.25| 910,100|+----------------------------------+-------------+-------------+--------------+|Indicated | 5,151| 9.92| 1,643,040|+----------------------------------+-------------+-------------+--------------+|Measured and Indicated | 6,893| 11.52| 2,553,141|+----------------------------------+-------------+-------------+--------------+|Inferred | 15,020| 9.88| 4,768,800|+----------------------------------+-------------+-------------+--------------+ Highland Gold has initiated an in-fill drill program to begin the process ofupgrading Inferred resource into the Measured and Indicated classification andthe first phase of this in-fill program will consist of 4,000 meters of drillingthrough to the end of 2005. A parallel channel sampling program will also becarried out in the underground to obtain additional representative samples fromall exposed ore bodies for metallurgical test work. We are in the process of preparing a feasibility study on the Mayskoye project.This work has been slower than anticipated due to the process of integratingwork of the Russian institutes and our in-house engineers with internationalconsultants from Micon, the independent engineering firm chosen for the study.The work program is moving forward and the study will be released once it iscompleted. Concurrent with this work, the Russian feasibility study has beensubmitted to the state authorities for their review and public hearings on theecological and social aspects of the project have been held in Chukotka. NOVOSHIROKINSKOYE - Chita Region, Russia During the first half of 2005, capital expenditures of $6.2 million wereincurred at Novoshirokinskoye. These expenditures included work on the projectdesign for the smelter, mill, site infrastructure as well as the construction ofnew office and staff accommodation. Highland Gold is in the process of reviewing and optimising sections of thefeasibility and project design works that have recently been completed byRussian institutes. In addition, an independent review of this work by aninternationally recognised engineering firm, covering all aspects of theproject, has been commenced. The Novoshirokinskoye geological resources, calculated at a 3 g/t goldequivalent cutoff grade, have been submitted to the Russian State Committee forReserves (GKZ) and are in the process of review. We expect to receive the fullcomments and opinions of GKZ by October 2005. EXPLORATION AND NEW ACQUISITIONS Highland Gold continues its efforts towards creating a pipeline of explorationand development projects. Our strategy is focused on acquiring projects that canbe readily advanced towards a production decision. MANAGEMENT CHANGES During the first half of 2005, the Company announced the appointment of ScottYelland to the position of Chief Operating Officer and the resignation ofGennady Nevidomi from his board and executive position as the Company'sProduction Director. Gennady played an important role in the formation ofHighland Gold and we wish him well in his future activities. Mr. Yelland holds a Masters degree in mining engineering from the CamborneSchool of Mines and has a broad, practical experience in mining based on a 22year career in the industry. This experience has been gained around the worldand includes postings at mines in the UK, Ghana, Spain, Brazil, Australia andRussia where he has been employed by companies such as Rio Tinto, AshantiGoldfields and Kinross Gold. Mr. Yelland's most recent position has been GeneralManager at Kinross Gold's Kubaka operation in the Magadan Region of North EastRussia. DIVIDEND The Board has decided to suspend the payment of dividends until there has been amarked improvement in the financial results and therefore, will not pay aninterim dividend. OUTLOOK The Company continues to focus on reducing costs and stabilising production.With the recent management and operational changes, good progress has been madesince 30 June and the Company expects to post improved results for the secondhalf of 2005. For further information please contact: Enquiries: London: +44 (0) 207 851 6400Moscow: +7 (095) 777 5529E-mail: [email protected] Korobov, Managing DirectorDmitry Yakushkin, Director of CommunicationsGrant Sinitsin, Director of Investor Relations HIGHLAND GOLD MINING LIMITED Consolidated Profit and Loss Account +------------------------------+-------+-----------+-----------+-----------+| | | Six months| Six months| 12 months|| | | ended 30| ended 30| ended 31|| | | June 2005| June 2004| December|| | Notes | | | 2004|+------------------------------+-------+-----------+-----------+-----------+| | | US$000| US$000| US$000|+------------------------------+-------+-----------+-----------+-----------+|Turnover | 2| 28,251| 38,159| 82,062|+------------------------------+-------+-----------+-----------+-----------+|Cost of sales | | (25,395)| (22,800)| (51,810)|+------------------------------+-------+-----------+-----------+-----------+|GROSS PROFIT | | 2,856| 15,359| 30,252|+------------------------------+-------+-----------+-----------+-----------+|Administrative costs | | (4,280)| (4,540)| (11,468)|+------------------------------+-------+-----------+-----------+-----------+|GROUP OPERATING PROFIT | | (1,424)| 10,819| 18,784|+------------------------------+-------+-----------+-----------+-----------+|Bank interest receivable | | 634| 39| 56|+------------------------------+-------+-----------+-----------+-----------+|Interest payable and similar | | (4,052)| (2,568)| (5,843)||charges | | | | |+------------------------------+-------+-----------+-----------+-----------+|Foreign exchange gains/ | | (671)| 16| 1,232||(losses) | | | | |+------------------------------+-------+-----------+-----------+-----------+|PROFIT ON ORDINARY ACTIVITIES | | (5,513)| 8,306| 14,229||BEFORE TAXATION | | | | |+------------------------------+-------+-----------+-----------+-----------+|Tax on profit on ordinary | 3| (1,439)| (1,818)| (9,218)||activities | | | | |+------------------------------+-------+-----------+-----------+-----------+|PROFIT FOR THE FINANCIAL | | (6,952)| 6,488| 5,011||PERIOD | | | | |+------------------------------+-------+-----------+-----------+-----------+| | | | | |+------------------------------+-------+-----------+-----------+-----------+|Dividends | | -| (1,199)| (2,672)|+------------------------------+-------+-----------+-----------+-----------+|PROFIT RETAINED FOR THE | | (6,952)| 5,289| 2,339||FINANCIAL PERIOD | | | | |+------------------------------+-------+-----------+-----------+-----------+|RETAINED EARNINGS BROUGHT | | 22,999| 20,660| 20,660||FORWARD | | | | |+------------------------------+-------+-----------+-----------+-----------+|RETAINED EARNINGS CARRIED | | 16,047| 25,949| 22,999||FORWARD | | | | |+------------------------------+-------+-----------+-----------+-----------+| | | | | |+------------------------------+-------+-----------+-----------+-----------+|Basic earnings per share (US$)| | (0.046)| 0.055| 0.042|+------------------------------+-------+-----------+-----------+-----------+|Diluted earnings per share | | (0.046)| 0.055| 0.042||(US$) | | | | |+------------------------------+-------+-----------+-----------+-----------+ There is no material difference between the reported profit and the historicalcost profit for the period to 30 June 2005. Consolidated Statement of Total Recognised Gains and Losses +------------------------------+--------------+-------------+--------------+| | Six months| Six months| 12 months|| | ended 30 June|ended 30 June| ended 31|| | 2005| 2004| December 2004|+------------------------------+--------------+-------------+--------------+| | US$000| US$000| US$000|+------------------------------+--------------+-------------+--------------+|Profit before dividends for | (6,952)| 6,488| 5,011||the period attributable to | | | ||members of the parent company | | | ||and total recognized gains and| | | ||losses relating to the period | | | |+------------------------------+--------------+-------------+--------------+ Consolidated Balance Sheet +-----------------------------------+-------+--------------+---------------+| | Notes| At| At|| | | 30 June 2005| 31 December|| | | | 2004|+-----------------------------------+-------+--------------+---------------+| | | US$000| US$000|| | | | |+-----------------------------------+-------+--------------+---------------+|FIXED ASSETS | | | || | | | |+-----------------------------------+-------+--------------+---------------+|Intangible assets - negative | | (8,796)| (8,796)||goodwill | | | |+-----------------------------------+-------+--------------+---------------+|Tangible assets | | 247,657| 224,214|+-----------------------------------+-------+--------------+---------------+| | | 238,861| 215,418|+-----------------------------------+-------+--------------+---------------+|CURRENT ASSETS | | | || | | | |+-----------------------------------+-------+--------------+---------------+|Stocks | | 41,032| 41,953|+-----------------------------------+-------+--------------+---------------+|Debtors | | 38,914| 37,356|+-----------------------------------+-------+--------------+---------------+|Deferred costs | | 1,279| 1,526|+-----------------------------------+-------+--------------+---------------+|Cash at bank and in hand | | 78,872| 40,764|+-----------------------------------+-------+--------------+---------------+| | | 160,097| 121,599|+-----------------------------------+-------+--------------+---------------+| | | | |+-----------------------------------+-------+--------------+---------------+|CREDITORS: amounts falling due | | (99,934)| (83,931)||within one year | | | |+-----------------------------------+-------+--------------+---------------+|NET CURRENT ASSETS /(LIABILITIES) | | 60,163| 37,668|| | | | |+-----------------------------------+-------+--------------+---------------+| | | | || | | | |+-----------------------------------+-------+--------------+---------------+|TOTAL ASSETS LESS CURRENT | | 299,024| 253,086||LIABILITIES | | | || | | | |+-----------------------------------+-------+--------------+---------------+| | | | |+-----------------------------------+-------+--------------+---------------+|CREDITORS: amounts falling due | | (24,994)| (23,098)||after more than one year | | | |+-----------------------------------+-------+--------------+---------------+|PROVISIONS FOR LIABILITIES AND | | (21,375)| (19,714)||CHARGES | | | || | | | |+-----------------------------------+-------+--------------+---------------+|MINORITY INTERESTS - EQUITY | | (338)| (338)|+-----------------------------------+-------+--------------+---------------+| | | 252,317| 209,936|+-----------------------------------+-------+--------------+---------------+| | | | || | | | |+-----------------------------------+-------+--------------+---------------+|CAPITAL AND RESERVES | | | || | | | |+-----------------------------------+-------+--------------+---------------+|Called up share capital | | 255| 233|+-----------------------------------+-------+--------------+---------------+|Share premium | | 236,015| 186,704|+-----------------------------------+-------+--------------+---------------+|Profit and loss account | | 16,047| 22,999|+-----------------------------------+-------+--------------+---------------+| | 8| 252,317| 209,936|+-----------------------------------+-------+--------------+---------------+ Approved by the Board on 21 September 2005 James CrossChairman Dmitry KorobovManaging Director Consolidated Cash Flow Statement +----------------------------------+-------+---------+---------+----------+| | Notes| Six| Six| 12 months|| | | months| months| ended 31|| | | ended 30| ended 30| December|| | |June 2005|June 2004| 2004|| | | US$000| US$000| US$000|+----------------------------------+-------+---------+---------+----------+|CASH GENERATED FROM OPERATING | | 896| 13,885| 25,610||ACTIVITY | | | | || | | | | |+----------------------------------+-------+---------+---------+----------+|Changes in working capital | 6| (4,457)| (10,262)| (15,155)|| | | | | |+----------------------------------+-------+---------+---------+----------+|NET CASH INFLOW FROM OPERATING | 6| (3,561)| 3,623| 10,455||ACTIVITIES | | | | || | | | | |+----------------------------------+-------+---------+---------+----------+|RETURNS ON INVESTMENT AND | | | | ||SERVICING OF FINANCE | | | | |+----------------------------------+-------+---------+---------+----------+|Interest received | | 634| 39| 56|+----------------------------------+-------+---------+---------+----------+|Interest paid on bank loans | | (2,032)| (1,855)| (4,386)|+----------------------------------+-------+---------+---------+----------+|Interest paid on finance leases | | (243)| (259)| (468)|+----------------------------------+-------+---------+---------+----------+|NET CASH OUTFLOW FROM RETURNS ON | | (1,641)| (2,075)| (4,798)||INVESTMENT AND SERVICING OF | | | | ||FINANCE | | | | |+----------------------------------+-------+---------+---------+----------+| | | | | || | | | | |+----------------------------------+-------+---------+---------+----------+|TAXATION | | | | || | | | | |+----------------------------------+-------+---------+---------+----------+|Russian profits tax paid | | (1,484)| (1,907)| 491|+----------------------------------+-------+---------+---------+----------+| | | | | |+----------------------------------+-------+---------+---------+----------+|CAPITAL EXPENDITURE AND FINANCIAL | | | | ||INVESTMENT | | | | |+----------------------------------+-------+---------+---------+----------+|Payments to acquire tangible fixed| | (24,800)| (30,391)| (69,168)||assets | | | | |+----------------------------------+-------+---------+---------+----------+|NET CASH OUTFLOW ON CAPITAL | | (24,800)| (30,391)| (69,168)||EXPENDITURE AND FINANCIAL | | | | ||INVESTMENT | | | | |+----------------------------------+-------+---------+---------+----------+|ACQUISITIONS AND DISPOSALS | | | | |+----------------------------------+-------+---------+---------+----------+|Cash received for partial disposal| | 13,340| -| -||of Taseevskoye | | | | |+----------------------------------+-------+---------+---------+----------+|Purchase of subsidiary | 4| (466)| (154)| (11,885)||undertakings | | | | |+----------------------------------+-------+---------+---------+----------+|Acquisition of Taseevskoye rights | | | -| (26,785)|+----------------------------------+-------+---------+---------+----------+|NET CASH OUTFLOW ON ACQUISITIONS | | 12,874| (154)| (38,670)||AND DISPOSALS | | | | |+----------------------------------+-------+---------+---------+----------+| | | | | || | | | | |+----------------------------------+-------+---------+---------+----------+|Equity dividends paid | | (1,477)| (1,798)| (2,997)|| | | | | |+----------------------------------+-------+---------+---------+----------+| | | | | || | | | | |+----------------------------------+-------+---------+---------+----------+|NET CASH OUTFLOW BEFORE MANAGEMENT| |(20,089) | (32,702)| (104,687)||OF LIQUID RESOURCES AND FINANCING | | | | || | | | | |+----------------------------------+-------+---------+---------+----------+| | | | | |+----------------------------------+-------+---------+---------+----------+|FINANCING | | | | || | | | | |+----------------------------------+-------+---------+---------+----------+|Issue of ordinary share capital | | 50,094| 40,000| 140,515|+----------------------------------+-------+---------+---------+----------+|Share issue costs | | (1,687)| (2,000)| (7,261)|+----------------------------------+-------+---------+---------+----------+|Receipt of short term loans | | | | 105,788|+----------------------------------+-------+---------+---------+----------+|Receipt of long term loans | | 65,153| 6,000| 31,000|+----------------------------------+-------+---------+---------+----------+|Receipt from sale and lease-back | | -| 2,774| 5,264||transactions | | | | |+----------------------------------+-------+---------+---------+----------+|Loan arrangement fee | | (1,912)| -| -|+----------------------------------+-------+---------+---------+----------+|Repayment of borrowings | | (50,662)| (15,873)| (131,770)|+----------------------------------+-------+---------+---------+----------+|Repayment of capital element of | | (2,789)| (1,277)| (3,485)||finance leases | | | | |+----------------------------------+-------+---------+---------+----------+|CASH INFLOW FROM FINANCING | | 58,197| 29,624| 140,051|+----------------------------------+-------+---------+---------+----------+|INCREASE/(DECREASE) IN CASH | | 38,108| (3,078)| 35,364|+----------------------------------+-------+---------+---------+----------+| | | | | |+----------------------------------+-------+---------+---------+----------+|RECONCILIATION OF NET CASH FLOW TO| | | | ||MOVEMENT IN NET DEBT | | | | |+----------------------------------+-------+---------+---------+----------+|Increase/(Decrease) in cash | | 38,108| (3,078)| 35,364|+----------------------------------+-------+---------+---------+----------+|Repayment of capital element of | | 2,789| 1,277| 3,485||finance leases and lease back | | | | ||transactions | | | | |+----------------------------------+-------+---------+---------+----------+|Movements in loans | | (12,579)| 9,873| (5,018)|+----------------------------------+-------+---------+---------+----------+|MOVEMENTS IN NET DEBT ARISING FROM| | 28,318| 8,072| 33,831||CASH FLOWS | | | | |+----------------------------------+-------+---------+---------+----------+| | | | | |+----------------------------------+-------+---------+---------+----------+|Other movement in long term | | (864)| 477| 1,717||payables | | | | |+----------------------------------+-------+---------+---------+----------+|New finance leases and other | | (414)| (4,490)| (6,844)|+----------------------------------+-------+---------+---------+----------+|Exchange differences | | | 39| 39|+----------------------------------+-------+---------+---------+----------+|MOVEMENT IN NET DEBT | | 27,040| 4,098| 28,743|| | | | | |+----------------------------------+-------+---------+---------+----------+|NET CASH/(DEBT) AT BEGINNING OF | 7| (37,694)| (66,437)| (66,437)||PERIOD | | | | |+----------------------------------+-------+---------+---------+----------+|NET DEBT AT END OF PERIOD | 7| (10,654)| (62,339)| (37,694)|+----------------------------------+-------+---------+---------+----------+ Notes to the Group Financial Statements 1. Accounting policies Basis of preparation The Interim Financial Statements have been prepared in accordance with theaccounting policies set out in Highland Gold Mining Limited's FinancialStatements for the year to 31December 2004. Comparatives The financial information for the year ended 31 December 2004 has been extractedfrom the full Financial Statements of the Group for that period. The Auditor'sReport on those financial statements was unqualified. Russian political and economic risks Over the past decade Russia has undergone substantial political, economic andsocial changes. As an emerging market, Russia does not possess a fully developedbusiness and regulatory infrastructure that would generally exist in a moremature market economy. The current Government is attempting to address theseissues; however, it has not yet fully implemented the reforms necessary tocreate banking, judicial and regulatory systems that usually exist in moredeveloped markets. As a result, and as reflected in the Government's debtdefault and rouble devaluation in 1998, operations in Russia involve risks thatare not typically associated with those in more developed markets. Such riskspersist in the current environment with results that include but are not limitedto, a currency that is not freely convertible outside of the country, variouscurrency controls, low liquidity levels for debt and equity markets, andcontinuing inflation. Furthermore, substantially all privatisations in Russia inthe early 1990s were flawed in some manner, and even the most minor andadministrative flaw in the privatisation documents may be invoked as a basis forchallenging the validity of the privatization process as a whole and thus thetitle to assets acquired as a result of privatisation. The environment is suchthat the state, local authorities and administration, the former owners ofproperty and other interested parties can attempt to obstruct normal businessoperations of a company. Accordingly, the stability and success of the Russianeconomy, and the Group's business, will depend upon the Government's ability toinstitute supervisory, judicial and other regulatory reforms. Foreign Currencies The principal exchange rates against US dollars were: +-----------------------+----------------+----------------+----------------+| | 6 months ended| 6 months ended| 12 months ended|| | 30 June 2005| 30 June 2004|31 December 2004|+-----------------------+----------------+----------------+----------------+|Average | | | |+-----------------------+----------------+----------------+----------------+|RUR | 27.98| 28.76| 28.81|+-----------------------+----------------+----------------+----------------+|GBP | 0.534| 0.55| 0.546|+-----------------------+----------------+----------------+----------------+|Closing | | | |+-----------------------+----------------+----------------+----------------+|RUR | 28.67| 29.03| 27.75|+-----------------------+----------------+----------------+----------------+|GBP | 0.554| 0.55| 0.519|+-----------------------+----------------+----------------+----------------+ 2. Turnover and segmental analysis The Group operates in one principal area of activity, that of exploration andproduction of gold. Starting from April 2005 the Group made export sales toWestern Europe countries using agent agreements with Russian banks. There wereno discontinued operations during the period. +-----------------------------+--------------+--------------+--------------+| |6 months ended|6 months ended| 12 months|| | 30 June 2005| 30 June 2004| ended|| | | | 31 December|| | | | 2004|+-----------------------------+--------------+--------------+--------------+|Turnover: | | | |+-----------------------------+--------------+--------------+--------------+|Domestic sales | 19,853| 38,159| 82,062|+-----------------------------+--------------+--------------+--------------+|Export sales | 8,398| -| -|+-----------------------------+--------------+--------------+--------------+| | 28,251| 38,159| 82,062|+-----------------------------+--------------+--------------+--------------+ 3. Tax on profit on ordinary activities The taxation charge on ordinary activities is calculated by applying thedirectors' best estimate of the effective taxation rate, to the profit for thesix months to 30 June 2005. Profit tax charge consists of the following:+------------------------------------+--------------+------------+-------------+| | 6 months | 6 months | 12 months || | ended | ended | ended || | 30 June 2005 | 30 June |31 December || | US$000 | 2004 | 2004 || | | US$000 | US$000 |+------------------------------------+--------------+------------+-------------+|Current tax: | | | ||Russian profit tax for the period | - | - | 2,212 |+------------------------------------+--------------+------------+-------------+|Total current tax | - | - | 2,212 || | | | ||Deferred tax: | | | ||Adjustment to prior period | 186 | - | 196 ||Derecognition of prior year tax | - | - | 987 ||losses | | | ||Unrecognised tax losses arising | 4,909 | 79 | 3,353 ||during current year | | | ||Origination and reversal of timing | (3,656)| 1,739 | 2,470 ||differences | | | |+------------------------------------+--------------+------------+-------------+Total deferred tax | 1,439 | 1,818 | 7,006 |+------------------------------------+--------------+------------+-------------+Tax on profit on ordinary | 1,439 | 1,818 | 9,218 |+------------------------------------+--------------+------------+-------------+ 4. Acquisition of Serdne-Golgotayevskoe and Malo-Fedorovskoe On February 24 and June 9, 2005 the Group won, in open auction, the license forexploration and production rights for Sredne-Golgotaevskoe and Malo-Fedorovskoedeposits in Chita region of Siberia. Cash paid as consideration for theseacquisitions is $383,000 and $83,000 respectively. The provisional assessment offair value of these deposits is consistent with the consideration paid. 5. Ordinary dividends on equity shares The Board has made a decision not to declare any interim dividends for 6 months2005 (30 June 2004: US$0.01 per ordinary share). 6. Reconciliation of operating profit to net cash inflow from operatingactivities +-----------------------------+--------------+--------------+--------------+| |6 months ended|6 months ended| 12 months|| | 30 June 2005| 30 June 2004| ended|| | | | 31 December|| | | | 2004|+-----------------------------+--------------+--------------+--------------+| | US$000| US$000| US$000|+-----------------------------+--------------+--------------+--------------+|Operating profit | (1,424)| 10,819| 18,784|+-----------------------------+--------------+--------------+--------------+|Depreciation, depletion and | 3,075| 3,066| 6,826||amortisation | | | |+-----------------------------+--------------+--------------+--------------+|Other non-cash items | (755)| | |+-----------------------------+--------------+--------------+--------------+|Cash generated from trading | 896| 13,885| 25,610|+-----------------------------+--------------+--------------+--------------+|Changes in working capital: | | | |+-----------------------------+--------------+--------------+--------------+|(Increase)/decrease in | (3,401)| (1,061)| (2,426)||debtors | | | |+-----------------------------+--------------+--------------+--------------+|(Increase)/decrease in stock | 717| (6,320)| (8,637)|+-----------------------------+--------------+--------------+--------------+|(Increase)/decrease in | 247| 432| 225||deferred costs | | | |+-----------------------------+--------------+--------------+--------------+|Increase/(decrease) in | (1,520)| (51)| (186)||creditors | | | |+-----------------------------+--------------+--------------+--------------+|(Increase)/decrease in VAT | (1,357)| (3,262)| (5,032)|+-----------------------------+--------------+--------------+--------------+|(Increase/(decrease) in | 857| -| 901||provisions | | | |+-----------------------------+--------------+--------------+--------------+|Total changes in working | (4,457)| (10,262)| (15,155)||capital | | | |+-----------------------------+--------------+--------------+--------------+|Net cash inflow from | (3,561)| 3,623| 10,455||operating activities | | | || | | | |+-----------------------------+--------------+--------------+--------------+ For cash flow purposes the amounts of cash paid for materials and advances tosuppliers related to capital construction are included in payments to acquiretangible fixed assets 7. Reconciliation of net debt +-----------------------------+-----------+----------+----------+----------+| | As at 31| Cash flow| Other non| As at 30|| | December| | cash| June 2005|| | 2004| | | |+-----------------------------+-----------+----------+----------+----------+| | US$000| US$000| US$000| US$000|+-----------------------------+-----------+----------+----------+----------+|Cash in bank and in hand and | 40,764| 38,108| -| 78,872||short term deposits | | | | |+-----------------------------+-----------+----------+----------+----------+|Capital element of finance | (6,587)| 2,789| (414)| (4,212)||leases | | | | |+-----------------------------+-----------+----------+----------+----------+|Loans and other long term | (71,871)| (12,579)| (864)| (85,314)||creditors | | | | |+-----------------------------+-----------+----------+----------+----------+| | (37,694)| 28,318| (1,278)| (10,654)|+-----------------------------+-----------+----------+----------+----------+ 8. Reconciliation of shareholders' funds +--------------------------------+-----------------+-----------------+| | 6 months ended| 12 months ended|| | 30 June 2005| 31 December 2004|+--------------------------------+-----------------+-----------------+| | US$000| US$000|+--------------------------------+-----------------+-----------------+|Shareholders' funds at the | 209,936| 75,557||beginning of period | | |+--------------------------------+-----------------+-----------------+|Share issues during the period | 50,094| 140,000|+--------------------------------+-----------------+-----------------+|Share issue costs | (761)| (7,960)|+--------------------------------+-----------------+-----------------+|Profit/(loss) retained for the | (6,952)| 2,339||period | | |+--------------------------------+-----------------+-----------------+|Shareholders' funds at end of | 252,317| 209,936||period | | |+--------------------------------+-----------------+-----------------+ On 10 May 2005 the Company issued 11,377,937 new ordinary shares at a price of230p per share to Barrick Gold Corporation ("Barrick") of Canada. The shareissue took Barrick's total shareholding from approximately 17% to approximately20% of the company's enlarged issued share capital. On 16 May 2005 50,000 ordinary shares were issued to WH Ireland Limited inrespect of their warrant agreement for up to 276,315 ordinary shares in theCompany under terms agreed at the time of the Company's admission to AIM inDecember 2002. The Issued Share capital of the Company is now 158,764,793ordinary shares. 9. Post Balance Sheet events Employee stock option plan On July 7, 2005 the Group approved an employee share option scheme in line withthe statement made at the time of Admission to the Alternative Investment Marketin December 2002. There are no participants at present and it will run inconjunction with the Company's Share Appreciation Rights scheme to allowflexibility when considering the employment incentives for executives. Thescheme will be managed by the Remuneration Committee. The Group also approved that as part of James Cross's remuneration asnon-executive Chairman he will be granted an option over 500,000 new ordinaryshares in the Company exercisable at par after 9 December 2005 and a further500,000 new ordinary shares in the Company at a price based on their currentmarket value and exercisable after 9 December 2007. Waiver of breach of loan covenant As at the 30th of June 2005, the Group was in breach of one of the loancovenants attached to its long-term loan facility, and accordingly the US$41.0million long-term portion of the facility was reclassified to "creditors:amounts falling due within one year". On the 19th of September 2005, a waiverof the breach was obtained for the relevant period ended 30th June 2005 Unaudited Historic Summary +-------------------+-----------+-----------+-----------+-----------+-----------+| | 6 months| 6 months| 6 months| 6 months| 6 months|| | ended| ended| ended| ended| ended|| | 30 June|31 December| 30 June|31 December| 30 June|| | 2005| 2004| 2004| 2003| 2003|+-------------------+-----------+-----------+-----------+-----------+-----------+| | US$000| US$000| US$000| US$000| US$000|+-------------------+-----------+-----------+-----------+-----------+-----------+|Balance Sheet | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+| | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Non-current assets | 238,861| 215,418| 154,977| 137,943| 60,618|+-------------------+-----------+-----------+-----------+-----------+-----------+|Current assets | 160,097| 121,599| 76,691| 58,532| 44,463|+-------------------+-----------+-----------+-----------+-----------+-----------+|Total assets | 398,958| 337,017| 231,668| 196,475| 105,081|+-------------------+-----------+-----------+-----------+-----------+-----------+| | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Non-current | 46,369| 42,812| 42,027| 42,956| 19,730||liabilities | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Current liabilities| 99,934| 83,931| 69,771| 76,517| 17,245|+-------------------+-----------+-----------+-----------+-----------+-----------+|Minority interests | 338| 338| 1,024| 1,445| 347|+-------------------+-----------+-----------+-----------+-----------+-----------+|Equity | 252,317| 209,936| 118,846| 75,557| 67,759|+-------------------+-----------+-----------+-----------+-----------+-----------+|Total liabilities | 398,958| 337,017| 231,668| 196,475| 105,081||and equity | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+| | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Production (Oz) | 63,749| 102,910| 96,986| 103,866| 90,133|+-------------------+-----------+-----------+-----------+-----------+-----------+| | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Profit and Loss | | | | | ||Account | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+| | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Sales | 28,251| 43,903| 38,159| 40,199| 31,379|+-------------------+-----------+-----------+-----------+-----------+-----------+|Operating profit | (1,424)| 7,965| 10,819| 15,651| 12,241|+-------------------+-----------+-----------+-----------+-----------+-----------+|Other gains/ | (4,089)| (2,042)| (2,513)| (2,757)| (503)||(losses) including | | | | | ||interest net | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Profit (loss) | (5,513)| 5,923| 8,306| 12,894| 11,738||before taxation | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Tax | (1,439)| (7,400)| (1,818)| (3,337)| (3,246)|+-------------------+-----------+-----------+-----------+-----------+-----------+|Profit (loss) after| (6,952)| (1,477)| 6,488| 9,557| 8,492||taxation | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Dividends | -| (1,473)| (1,199)| (1,798)| (1,658)|+-------------------+-----------+-----------+-----------+-----------+-----------+|Retained earnings | (6,952)| (2,950)| 5,289| 7,759| 6,834|+-------------------+-----------+-----------+-----------+-----------+-----------+| | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Statistical | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+| | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|Shares issued, |150,618,363|122,528,340|118,149,741|110,525,821|110,525,821||average | | | | | |+-------------------+-----------+-----------+-----------+-----------+-----------+|EPS | (0.046)| (0.012)| 0.055| 0.086| 0.077|+-------------------+-----------+-----------+-----------+-----------+-----------+|Dividends per share| -| 0.01| 0.01| 0.02| 0.02|+-------------------+-----------+-----------+-----------+-----------+-----------+|Dividend cover | -| (1.00)| 5.41| 5.31| 5.12|+-------------------+-----------+-----------+-----------+-----------+-----------+|Interest cover | (0.35)| 2.71| 5.60| 6.93| 10.94|+-------------------+-----------+-----------+-----------+-----------+-----------+ RECONCILIATION OF TOTAL CASH COST PER OZ TO FINANCIAL STATEMENTS +-----------------------+---------+---------+---------+---------+---------+| | 6 months| 6 months| 6 months| 6 months| 6 months|| | ended| ended| ended| ended| ended|| | 30 June| 31| 30 June| 31| 30 June|| | 2005| December| 2004| December| 2003|| | | 2004| | 2003| |+-----------------------+---------+---------+---------+---------+---------+| | US$000| US$000| US$000| US$000| US$000|+-----------------------+---------+---------+---------+---------+---------+|Cost of sales | 25,395| 29,010| 22,800| 19,662| 15,738|+-----------------------+---------+---------+---------+---------+---------+|Administrative expenses| 4,280| 6,928| 4,540| 4,886| 3,400|+-----------------------+---------+---------+---------+---------+---------+|Depreciation, depletion| (3,075)| (3,760)| (3,066)| (2,423)| (1,949)||and amortisation | | | | | |+-----------------------+---------+---------+---------+---------+---------+|Management expenses not| (2,593)| (5,377)| (3,545)| (3,219)| (1,401)||related to production | | | | | |+-----------------------+---------+---------+---------+---------+---------+|Non cash adjustments | | 901| -| 2,103| -||(Fair Value, movement | | | | | ||in provisions) | | | | | |+-----------------------+---------+---------+---------+---------+---------+|Total operating cash | 24,007| 25,900| 20,729| 21,009| 15,789||expenses including | | | | | ||production taxes | | | | | |+-----------------------+---------+---------+---------+---------+---------+|Operating costs other | (797)| (481)| (683)| (992)| (95)||than gold production | | | | | |+-----------------------+---------+---------+---------+---------+---------+|Operating costs of | (3,758)| (3,236)| | | ||Darasun mine | | | | | |+-----------------------+---------+---------+---------+---------+---------+|Silver Credits | (129)| (91)| (99)| (102)| (72)|+-----------------------+---------+---------+---------+---------+---------+|Total cash costs | 19,323| 22,092| 19,947| 19,915| 15,622|+-----------------------+---------+---------+---------+---------+---------+|Ounces sold | 55,426| 101,258| 94,055| 103,950| 88,928|+-----------------------+---------+---------+---------+---------+---------+|Total cash costs per | 349| 218| 212| 192| 176||ounce | | | | | |+-----------------------+---------+---------+---------+---------+---------+ For further information please contact: Enquiries: London: +44 (0) 207 851 6400Moscow: +7 (095) 777 5529E-mail: [email protected] Korobov, Managing DirectorDmitry Yakushkin, Director of CommunicationsGrant Sinitsin, Director of Investor Relations 26 New Street, St Helier, Jersey, Channel Islands JE2 3RA tel: +44 (0) 1534 814202 fax: +44 (0) 1534 814815 http://www.highlandgold.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HGM.L