Trading Statement

Highland Gold Mining Limited

Trading Update for the Second Half of 2014

27 January 2015 - Highland Gold Mining Limited ("Highland Gold" or the "Company") announces its trading update for the half year ended 31 December 2014.

HIGHLIGHTS

· Total production at Mnogovershinnoye (MNV), Novoshirokinskoye (Novo), and Belaya Gora reached 258,937 oz of gold and gold equivalents for the full year 2014, a 10.8% increase from 233,696 oz in 2013.

· The average realised gold price for FY 2014 was 1,263 USD/oz.

· At Belaya Gora, the second stage gravity circuit was completed and an on-site assay laboratory was commissioned.

· A scoping study for the Kekura deposit, carried out by Hatch, is now being finalised.

· Advanced exploration stage completed at Kekura, thus fulfilling all technical requirements needed to submit documentation to regulatory authorities in Q1 2015 for registration of reserves.

· Total production for 2015 (MNV, Novo and Belaya Gora) is expected to increase to 270,000 - 285,000 oz of gold and gold equivalents.

OPERATIONAL REVIEW

Mnogovershinnoye (MNV), Khabarovsk region, Russia

In the second half of 2014, process plant throughput was 736,604 tonnes of ore, producing 60,559 oz of gold. The recovery rate was 91.1%.

Open-pit and underground ore production totalled 566,049 tonnes. Underground development was 4,015 metres.

The average ore grade was 2.94 g/t, which is 20% less than in the same period of 2013. The decrease is related to complications in mining and geological conditions at the open pit of the Flank ore body, resulting in the necessity to switch mining operations to lower grade areas.

Novoshirokinskoye (Novo), Zabaikalsky region, Russia

Ore mining and processing at Novo continued to meet or exceed expectations in the second half of 2014. Mine output increased to 302,485 tonnes of ore, or 110% of target for the six month period.

In accordance with the mine's long-term development plan, the Company is undertaking an underground expansion in order to gain access to new, lower horizons. The Central Commission of Reserves has already approved an intermediate mining stage with annual production of 600,000 tonnes of ore.

The installation of additional flotation facilities enabled existing crushing and grinding capacity to be fully utilised, resulting in H2 2014 mill throughputs increasing by 16% and recoveries improving by 1.3% compared to the same period in 2013.

*Approximate Au equivalent

(metal content in the mined ore = Au 3.53 g/t, Ag 75.81 g/t, Pb 2.54%, Zn 1.12%)

**Figures represent 100% of Novo output. Highland Gold share is 97.7%.

Belaya Gora, Khabarovsk region, Russia

The Company continued the process of ramping up production at Belaya Gora in H2 2014, with a focus on improving throughputs and recoveries. This included the commissioning of a second gravity stage, as well as the control gravity shaking tables.

Average monthly processing throughput increased to 127,000 tonnes (versus 77,000 tonnes in H1 2014), a level in line with the designed annual capacity of 1,500,000 tonnes. Ore mining was hindered by downtime at the end of the year due to extreme weather conditions. At the same time, the average grade of mined ore was 1.52 g/t, an 11% improvement on that achieved in 2013.

A state-of-the-art on-site assay laboratory was commissioned at Belaya Gora in the second half of 2014. Work was also carried out on the sorption and elution plant, which will be completed in Q1 2015.

The Company has reviewed options for advanced exploration at Belaya Gora. This process will continue in 2015 with the implementation of RC grade control drilling.

*ore processed at MNV

DEVELOPMENT PROJECTS

Kekura, Chukotka region, Russia

A major focus of work at Kekura in H2 2014 was the development of a Kekura scoping study, drafted by Hatch. This process included estimating open-pit, underground and combined development and reviewing four options for the positioning of facilities. In the vicinities of the reviewed options, topographical and geotechnical surveys were carried out along with preparations for drafting an environmental impact assessment.

The Hatch study, delivered in December 2014, is currently being updated internally and will be finalised by the end of January 2015.

Based on key figures from the scoping study, a technical design assignment was generated, a general design contractor appointed, and tenders carried out to select subcontractors for a number of infrastructure facilities. In November 2014, the general design contractor began work on a design study.

In H1 2015, work at Kekura will focus on:

· Relocating supplies and materials from Klen, Anyuisk, and Pevek to Kekura;

· Completing design studies;

· Developing project design documentation and preparing to submit it for public consultations, to the State Environmental Expertise, to the Main State Review Board, and to the Central Committee of the Federal Agency on Mineral Resources;

· Generating purchase requisitions for mining and processing equipment and beginning procurement; and

· Initiating construction and equipment installation at Kekura.

Taseevskoye and Sredniy Golgotay, Zabaikalsky region, Russia

The Company is conducting pilot tests on processing ore from the Sredniy Golgotay deposit at the Novoshirokinskoye mill. Ore samples are being transported from the site and testing will be monitored by Irgiredmet, which will also be responsible for drafting the flow sheet. This work will be completed in H1 2015.

Klen, Chukotka region, Russia

In H2 2014, the Company received a positive conclusion from the Main State Review Board regarding design documentation for the Klen deposit development project.

EXPLORATION

Mnogovershinnoye - Khabarovsk region, Russia

Near-mine exploration at MNV continued throughout H2 2014 as an operational priority, targeting additional resources in order to extend the life of the mine. In Q4, the Company acquired a licence for exploration and mining rights for the Lower Horizon of the Mnogovershinnoye deposit, thereby extending the Company's current licence for MNV to depths beyond the lower levels of existing state-approved reserves. The Lower Horizon of MNV represents untapped mineral potential within the mine's immediate vicinity which may deliver new resources at MNV in the medium-term utilising existing and extended underground infrastructure.

Diamond core drilling activity for underground resource conversion in H2 2014 totalled 5,533 metres.

At the MNV Western Flank licence, immediately adjacent to mining operations, the Company completed a detail geochemical survey over the entire licence revealing an area with significantly elevated gold grades. Potentially marking a near surface resource, this area has been earmarked for follow-up exploration including trenching and drilling.

Blagodatnoye - Khabarovsk region, Russia

The Blagodatnoye site is located 30 kilometres to the southwest of Belaya Gora and is targeting a near-surface bulk mineable gold resource for a potential open-pit mining operation. In H1 2014, regulatory authorities approved the Company's report on exploration results to date, including a calculation of prognostic resources and C2 category reserves with C2 of 18.6 tonnes at ca. 2.0 g/t. In H2 2014, the Company compiled and received regulatory approval for a new exploration project outlining follow-up work and technical requirements for future C1+C2 reserve registration with GKZ.

Kekura - Chukotka region, Russia

Exploration work in the second half of 2014 was focused on fulfilling all technical requirements for an updated pre-feasibility study, including a C1+C2 category reserve calculation, which the Company plans to submit to regulatory authorities (GKZ) for review in Q1 2015. By year-end 2014, all required technical studies were completed including metallurgical test work on multi-tonne composite ore samples and development of an optimal processing flow sheet. A response from GKZ is expected in April 2015.

The Company also concluded an exploratory prospecting programme on the greater licence area, which included geochemical surveys, mapping, and grab sampling at selected targets. Preliminary results indicate areas with significant gold mineralisation in the immediate vicinity of the Kekura deposit, highlighting near-mine upside potential and warranting future follow-up exploration.

Verkhne-Krichalskaya - Chukotka region, Russia

The Verkhne-Krichalskaya (VK) exploration and mining licence incorporates the Klen licence and is believed to hold upside potential for the Klen project. In H2 2014, the Company completed 3,100 metres of follow-up drilling at several targets including deeper levels of the Klen deposit and several gold prospects at VK identified during previous exploration programmes. Drilling results indicate limited potential at greater depths of the Klen deposit, while preliminary resource calculation for gold-mineralised vein structures at VK could provide additional resource potential for Klen.

Unkurtash - Kyrgyzstan

The Unkurtash project holds a total JORC-compliant resource of 3.7 Moz of gold within three distinct prospects, Unkurtash, Sarytube and Karatube, located within the Company's single Kassan licence (36 km²). In consideration of registering C1+C2 category reserves for the entire Unkurtash project, the Company compiled a pre-feasibility study and reserve calculation which is planned to be submitted to Kyrgyz GKZ in the medium-term.

In H2 2014, the Company completed a geochemical survey and 1,441 metres of exploratory drilling testing the resource potential of the Baikonur prospect, a potential extension of the Unkurtash prospect. While drilling returned several metres-long intersects grading up to 3.1 g/t, results from the survey indicate a geochemical gold anomaly which warrants further testing.

Qualified Persons Statement: Mr. Werner Klemens, Head of Exploration at Highland Gold, has reviewed and verified the information contained in this release with respect to reserve and resource matters. Mr. Klemens holds a Ph.D. in Geology from the University of Toronto. He has more than 17 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.

HEALTH, SAFETY & ENVIRONMENT

The Company continues to focus on occupational safety, risk management on site, staff training, and raising the level of personal responsibility for safety at the work place. In H2 2014, the Lost Time Incident ("LTI") rate (defined as the number of lost time incidents for every 200,000 man hours) decreased slightly to 0.27 from 0.28 in H2 2013.

In H2 2014, 4 accidents were recorded across the Group, for a total of 9 for the full year (including 1 accident for an employee of a contractor). One accident was considered serious and 1 accident resulted in a fatality at MNV.

For the full year, there was an increase in industrial injuries at MNV to 7 in 2014 versus 5 in 2013. At Novo, the number of LTIs decreased from 4 in 2013 to 1 in 2014.

The Company organised and tested auxiliary mine rescue crews at its mining areas during the year. Some 1105 employees received a safety induction course (1 day), 424 employees received work safety training for hazardous production risks (3-5 day courses), and 499 employees were trained and tested on industrial safety (7-30 day programmes).

In September 2014, the Company's management division and its MNV unit underwent successful audits to check the adherence of current environmental management systems to the ISO 14001 standard, and to confirm their compliance with environmental regulations. The audits were conducted by international consulting firm DNV.

Novo and Belaya Gora successfully completed similar audits in December 2014, with 52 employees receiving specialised training in internal environmental audit. Environmental safety training was provided for 120 employees at MNV, Belaya Gora and Novo.

NEW APPOINTMENTS

Highland Gold's Head of Communications Dmitry Yakushkin left the Company in October 2014 after ten distinguished years of service. Management wishes to place on record its thanks to Mr Yakushkin for his invaluable input over the years, and wishes him great success in his future endeavours.

Highland recently appointed John Mann to lead the Company's communications and investor relations activities. Mr Mann brings to the position 20 years of experience in public relations, public affairs, and corporate communications, much of it in Russia and the CIS.

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