30th Jun 2005 07:00
Highland Gold Mining Limited30 June 2005 HIGHLAND GOLD MINING LIMITED 29 June 2005 Taseevskoye Resource Update and Initiation of Scoping Study Highland Gold Mining Limited ("Highland Gold") is pleased to announce an updatedresource estimate for the Taseevskoye project and the initiation of a scopingstudy to determine the parameters of a revised feasibility study. We alsoannounce the formalisation of our 50-50 Joint Venture Arrangements with BarrickGold Corporation ("Barrick") on the project. Resource estimateThe updated resource estimate was completed by independent engineering firm,Snowden Mining Industry Consultants Inc. ("Snowden") of Vancouver, B.C., Canadaand has been reported in accordance with JORC (2004) guidelines. Snowden hadcompleted an earlier resource estimate in 1997. The current measured, indicatedand inferred resource of 3.37 million ounces at a grade of 3.49 g/t is reportedat a cut-off grade of 1 g/t and is lower than the comparable estimates reportedin 1997 of 5.05 million ounces at a grade of 3.17 g/t. The updated estimate ishigher than the 1.41 million ounces at a grade of 3.1 g/t reported on thecompany's resource statement at 31 December 2004 and approved by Russia's StateCommittee for Reserves. Resource Comparison, 1 g/t Au cutoff (100%) 1997 (1996 JORC) 2005 (2004 JORC) Tonnage Au Ounces Tonnage Au Ounces Mt g/t Million Mt g/t Million Measured 13.7 4.80 2.11 - - -Indicated 28.1 2.38 2.15 25.2 3.35 2.72Inferred 7.8 3.14 0.79 4.8 4.20 0.65 Total 49.6 3.17 5.05 30.0 3.49 3.37 The resource differences can be explained by changes in reporting requirementsadopted by JORC in 2004 and by the application of current standards of dataverification. Specifically, Snowden has made two new judgements that account forthe classification changes and the reduction in reported resources. First, itwas judged that the deeper levels of the mine that were uneconomic for open pitmining in the 1997 feasibility study did not have reasonable prospects foreventual economic extraction and could not be included as a resource. Thisexcluded all estimated blocks below the 1997 open pit design, though Snowdenalso noted that additional resource could be defined provided access to thelower levels can be achieved and underground economics can be demonstrated.Second, a classification modification was judged to be necessary to reflect theuncertainty in the stope models and the grades assigned to the stope fillbecause it is not possible to verify the historic underground sample data due tolack of access. This is despite the fact that historic records show thatsampling practices were of high quality. Therefore, Snowden has downgraded theMeasured component of the resource to the Indicated category. A thorough analysis of mining and processing costs is required to determine anappropriate cut-off grade for resource reporting. In the interim, Snowden hasdetermined a cut-off grade of 1 g/t of gold is a reasonable basis for resourcereporting at this stage of the project. Variations to the resource at differingcutoff grades can be seen in the following table. 2005 Indicated and Inferred Resource estimates (100%) 0.7 g/t Cutoff 1.0 g/t Cutoff 2.0 g/t Cutoff Tonnage Au Ounces Tonnage Au Ounces Tonnage Au Ounces Mt g/t Million Mt g/t Million Mt g/t Million Indicated 35.6 2.6 3.00 25.2 3.4 2.72 13.3 5.1 2.21Inferred 6.3 3.4 0.69 4.8 4.2 0.65 3.0 5.9 0.56 Total 41.9 2.7 3.69 30.0 3.5 3.37 16.3 5.3 2.77 The independent resource estimates reported by Snowden were prepared byCompetent Person A.F. Ross MSc, FAusIMM (CP), Snowden Mining IndustryConsultants Inc., Vancouver, B.C., Canada. Scoping StudyHighland Gold is now in the process of initiating work on a scoping studydesigned to re-examine prior work done on the project, including the results ofthe 1997 Feasibility Study. The initial step will be to review the selection ofprocess technology and to optimise the plant capacity based on the new resourcebase. In parallel, new estimates of operating and capital costs will bedeveloped taking into account current labour productivities and costs. Theresults of this scoping work will be available in the last quarter of 2005 andwill contribute towards a decision on an updated feasibility study. Barrick Joint Venture ArrangementIn February 2005, we announced that Barrick had confirmed its intention toexercise its early participation rights on the Taseevskoye project under theParticipation Agreement entered into in early 2004. This early participation byBarrick further confirmed our confidence in this quality asset. Under theParticipation Agreement, Barrick is only required to pay for its share ofHighland Gold's acquisition costs associated with acquiring the project once ajoint venture corporation has been established to own and operate theTaseevskoye project. While this legal work is progressing, in an effort toadvance the scoping study and other aspects of the project, Highland Gold andBarrick have reached an agreement whereby Barrick will make an advance paymentof US$13.3 million (representing half of the original purchase price paid byHighland Gold) for its 50% interest in the project and will also contribute toits share of future project related expenditures. As the payments by Barrick arebeing made in advance of the final ownership structure for the project beingestablished, Highland Gold has agreed to grant Barrick warrants to purchaseunissued shares at an exercise price of US$3.10 per share covering the fullvalue of the payments. The warrants are exercisable at the option of Barrick ifthe ownership structure is not established by 1 June 2006 (or such later date asBarrick may determine) and Highland Gold has not repaid the full value of thepayments in cash. The warrants expire on 1 June 2011. As Barrick's shareholding in Highland Gold is in excess of 10%, Barrick istreated as a related party under the AIM Rules. The Directors of Highland Goldconsider that, having consulted with JPMorgan Cazenove, its Nominated Adviser,the arrangement above with Barrick is fair and reasonable insofar asshareholders in Highland Gold are concerned. About the Taseevskoye ProjectThe Taseevskoye gold deposit is located two kilometres south of the town ofBaley (Population: 15,000) in the Chita region, Eastern Siberia. It lies 56kilometres south by paved road from the Trans Siberian Railway station atPriiskovaya. Chita, the regional capital, is located 320 kilometres to the westof Baley. The deposit was discovered in 1941 and during the period 1948 to 1994produced 6.4 million ounces of gold from 16.3 million tonnes of ore at anaverage gold grade of 12.2 g/t. Highland Gold acquired 100% of the project in September 2004 at a cost ofUS$26.6 million. Commenting on today's announcement Dmitry Korobov, Managing Director, said: "While the new resource estimate and the initiation of scoping work on theTaseevskoye project is our first step towards advancing this exceptionalproject, it is also an important step in the development of Highland Gold. Onthe resource side, it represents our commitment to providing full restatementson all of our resources and reserves in accordance with the widely recognisedJORC guidelines. On the scoping study, we will be working closely with ourpartners and international consultants to ensure the project receives thebenefits of each party's extensive experiences in Russia and other parts of theworld." Enquiries: London: +44 (0) 20 7851 6400 Moscow: +7 (095) 777 3155 Highland Gold Dmitry Korobov, Managing Director Dmitry Yakushkin, Director of Communications Grant Sinitsin, Director of Investor Relations www.highlandgold.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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