Trading Statement

HIGHLAND GOLD MINING LIMITED

12 August 2013 - Highland Gold Mining Limited ("Highland Gold," "Highland" or the "Company") announces its trading update in respect of the half year ended 30 June 2013. Full financial results for this period will be released on or around 18 September 2013. 

HIGHLIGHTS

·; Combined production of gold and gold equivalents from Mnogovershinnoye ("MNV") and Novoshirokinskoye ("Novo") (97.9% interest) came in at 105,630 oz - a 3.7% increase compared with H1 2012

·; Belaya Gora processing facility construction and wet testing completed with ore feed tests and process adjustments underway

·; Group JORC compliant resources improved by 25% to 16.5 Moz (compared with 13.2 Moz stated 31 December 2012) as a result of the Kekura license purchase and an independent resource audit update at Unkurtash

·; Novo production optimisation results in a 6% increase in processed tonnes compared with H1 2012.

·; Klen project equipment deliveries continued and preliminary construction works started

·; Kekura pilot plant construction making good progress with commissioning expected in Q4

·; MNV's Western Flank exploration programme underway targeting potential near surface resources adjacent to existing operations

·; Production guidance for FY2013 maintained at 225,000 - 240,000 oz of gold and gold equivalents

POST HALF YEAR EVENTS

·; The official opening of Belaya Gora's process plant by the Governor of the Khabarovsk Region and other dignitaries was held on 22 July with a full review of facilities and operations

·; SAG mill upgrade accomplished at Novo in July

OPERATIONS

Mnogovershinnoye (MNV) - Khabarovsk region, Russia

Overall production at MNV was in line with Company targets. Process plant throughput during the six months to 30 June 2013 achieved 670,654 tonnes of ore processed yielding 68,996 oz of gold. Plant recovery rates benefited from last year's major process upgrades and resulted in 91.9% which was in line with the second half of 2012. Open pit waste stripping rates were maintained during the first half of the year to ensure continued mining at the Flank pit as well as the commencement of mining operations at the Pebble satellite pit. Ore tonnes mined, in respect of both open pit and underground operations, were on target at 609,810 tonnes. Underground development at 3,833 metres recorded a 10% increase over the H1 2012 performance. New underground capital mining equipment, introduced during 2012, helped to maintain production targets and to keep maintenance costs in check. The 'near mine' surface exploration programme involving diamond core drilling adjacent to existing mining operations continued throughout the half year with a focus on the Western Flank license which was purchased at an open auction during December 2012. Underground exploration continued with the goal of converting existing resources into reserves and to discover new resources to help offset depletion. An independent audit of resources and reserve calculations is currently underway with the expected completion during Q3 2013.

Novoshirokinskoye (Novo) - Zabaikalsky region, Russia

During the first half underground ore production and processed ore throughput both achieved their respective targets. The improvements in both ore mining and processing seen during the half is expected to provide annualised production of ca. 500,000 tonnes of ore by the year end. With regard to underground development, record development metres were reported providing access to additional stoping blocks and will provide flexibility in respect of ongoing ore supply to the plant. The mine deepening project to access three additional levels was commenced during the half and is making good progress. The upgrade of one grinding mill in order to duplicate the milling streams and provide maintenance efficiencies and improved plant throughput capacity was achieved during the second half.

*approximate Au equivalent

(mined ore metal content breakdown = Au 2.9g/t, Ag 68.9g/t, Pb 2.3%, Zn 1.1%)

DEVELOPMENT PROJECTS

Belaya Gora - Khabarovsk region, Russia

*Ore toll processed at the MNV plant

**All ore mined during the half has been strategically stockpiled in anticipation of future plant feed requirements.

At Belaya Gora, construction and wet testing of the stand-alone process plant was completed for all major components. Ore testing and processing regulation adjustments are currently underway with ramp up to design capacity expected in the second half of the year. Open pit waste stripping operations increased substantially in preparation of accessing ore zones in accordance with plans. Much of this waste continued to be utilised for various construction activities such as roadways and dam construction.

Kekura - Chukotka region, Russia

The Kekura project purchase was finalised in April 2013 and provides a large resource base of 2.89 Moz having an average grade of 8.69 g/t Au with expected production by 2018. Future indicators envisage ca. 800,000 - 1,000,000 tonnes per annum of ore feed with recovery levels at 90% with a resultant 180,000 - 220,000 ounces of gold being poured annually. Construction of the partially completed 150,000 tonne per annum pilot plant has also made progress during the first half and is now expected to reach the commissioning stage during the fourth quarter. Site personnel remain focused on the delivery of the pilot plant which will serve to test the optimal ore process methodology on a large scale in advance of finalising process plant engineering designs.

Klen - Chukotka region, Russia

The Klen project saw the delivery of mobile and fixed equipment and materials from the Pevek seaport to project site being accomplished by winter roadway during the first quarter of 2013. As a result of these deliveries initial ground works, surveying and vertical planning commenced. Preliminary construction of building foundations and roadways between the pit and infrastructural links also made progress during the latter part of the half. The Klen purchase in 2012 provides Highland with an opportunity to expand its production profile through additional resource ounces (0.63 Moz). Preliminary studies indicate a 300,000 to 400,000 tonnes per annum open pit operation allied to a conventional gravity and cyanidation process plant with anticipated production of ca. 50,000 to 60,000 ounces of gold per annum.

Taseevskoye - Zabaikalsky region, Russia

Development activities and design documentation continued during the half with the goal of advancing the project within the regulatory mandated timelines for state review. This included geotechnical and hydrogeological studies, general infrastructural layouts, pit dewatering process, relocation plans and environmental impact assessments.

Lyubov - Zabaikalsky Region, Russia

The Company's previous exploration activities at the Evgraf prospect defined a total JORC compliant gold resource of approximately 0.48 Moz for a potential open-pit mining operation. Following GKZ approval for a C1+C2 category in-pit reserve the Lyubov project has entered the development stage. Engineering studies in relation to conventional processing options, including heap leaching, continued during the first half of 2013.

EXPLORATION

Mnogovershinnoye - Khabarovsk region, Russia

Throughout 2013 the Company will continue with its near-mine exploration efforts at MNV targeting additional resources in order to enhance existing open-pit mine life.

In H1 2013 mining commenced at the Pebble prospect while at the Quiet and Watershed prospects work towards completion of technical and administrative requirements for future mining was initiated.

Diamond core drilling activity in respect of underground resource conversion in H1 2013 totalled 9,438 metres in line with budget.

All exploration prospects within the MNV license area are currently undergoing an independent JORC compliant audit with results expected in H2 2013.

At the Western Flank Mnogovershinnoye license, immediately adjacent to the mine operations and hosting the Chaynoye prospect, the Company has allocated 2,900 metres of diamond core drilling of which 460 metres have been completed during H1 2013. Final results are expected in Q4 2013.

Verkhne Krichalskaya - Chukotka region, Russia

The Verkhne-Krichalskaya (VK) exploration and mining licence incorporates the Klen license and hosts a number of historic small placer gold deposits. The 2012 exploration programme defined several gold anomalies and exploration targets at VK. In H1 2013 the Company focussed on two targets and completed an initial shallow-depth reconnaissance drilling programme totalling 7,350 metres with final results expected in Q4 2013. A detailed geochemical survey at a selected gold anomaly is expected to be completed in Q3 with final results in Q4 2013.

Kekura - Chukotka region, Russia

Following the acquisition of the Kekura project in Q2 2013 the Company has initiated an exploration programme allocating 40,000 metres of diamond core drilling aimed at upgrading resources and completing requirements for future additional reserve registration with the Russian GKZ. In H1 2013 the Company completed 8,124 metres of core drilling. Preliminary results are in line with the previous resource model, final results are expected in Q1 2014.

Unkurtash - Kyrgyzstan

The Unkurtash Project includes three distinct prospects: the Unkurtash, Sarytube and Karatube located within the Company's single Kassan license (63 km²) which in H1 2013 was merged with the previous Unkurtash-Andagul (12 km²) license following an application to regulatory authorities.

By the end of H1 2013 an independent JORC compliant resource audit (IMC Montan) updated the total resource of the project by ca. 0.68 Moz to a total of approximately 3.7 Moz which includes the deeper level of the Unkurtash prospect and is based on results of the 2012 drilling and underground development programmes. In consideration of registering C1+C2 category reserves of the entire Unkurtash project with the Kyrgyz GKZ the Company initiated in H1 2013 a reserve calculation and compilation of required document package which is targeted to be submitted to regulatory authorities in H2 2013.

Belaya Gora Flanks - Khabarovsk region, Russia

The Belaya Gora Flanks license encapsulates the Belaya Gora deposit and represents near-mine exploration potential to increase the open-pit resource base for the Belaya Gora mining operation.

In 2013 the Company resumed field-based exploration at the property allocating 1,000 metres of trenching and 3,500 metres of diamond core drilling at two exploration targets (Pavlovsky, Kolchanka). During H1 2013 field work was completed at the Pavlovsky target included 335 m of trenching and 300 m of drilling. Final results are expected in Q3 2013. No field work in the reporting period was conducted at the near-by Blagodatnoye license.

HEALTH, SAFETY & ENVIRONMENT

A major focus on Health and Safety operations, designed to achieve continuous improvement across all of the Company's sites, maintained safety awareness and training courses as primary objectives. As a result of the ongoing focus, the lost time incident (LTI) rate (based on the number of lost time incidents in respect of every 200,000 man hours worked) saw an improvement to 0.36 (0.42 in H1 2012) which equated to a 14% reduction. A total of 888 employees attended introductory (one day) safety training classes, 445 employees completed courses in safe working methods, labour protection and industrial safety training (3/5 days) while 322 employees participated in industrial safety certification through RosTechNadzor.

Environmentally, Highland is pleased to note the successful implementation of ISO 14001 Environmental Management Systems (EMS) certification at its MNV operations and the RDM corporate office. This achievement is the culmination of over two years of focused environmental compliance activities from the preliminary gap analysis audits in 2010 through implementation and final compliances late in 2012. The Company is now reviewing additional steps necessary to achieve the same compliance at the Novo and Belaya Gora operations. Group wide environmental compliance remained in good standing with all the relevant regulatory authorities. Environmental safety training was provided to 64 employees at MNV, Novo, Belaya Gora and Taseevskoye. Of these trainees, 5 employees at Novo mine completed their environmental safety skills improvement courses at the Trans Baikal State University.