Trading Update for the Second half of 2013

TRADING UPDATE FOR THE SECOND HALF OF 2013

29 January 2014 - Highland Gold Mining Limited ("Highland Gold" or the "Company") announces its trading update for the half year ended 31 December 2013.

HIGHLIGHTS

· Production of gold and gold equivalents rose 8% to a record 233,696 oz in 2013, in line with guidance. This encompassed the respective outputs of the Mnogovershinnoye (MNV), Novoshirokinskoye (Novo) and Belaya Gora mines

· First gold poured at Belaya Gora

· 35,000 metres resource conversion drilling completed at Kekura on schedule

· Lost Time Incident (LTI) rate fell to 0.28 in H2 2013

· Production for the year to 31 December 2014 (MNV, Novo and Belaya Gora) is expected to increase to between 300,000 - 320,000 oz of gold and gold equivalents

OPERATIONAL REVIEW

Production

Mnogovershinnoye (MNV) - Khabarovsk region, Russia

In H2 2013, a total of 76,263 ounces of gold was produced in line with the Company's targets. Process plant throughput amounted to 657,527 tonnes of ore, while the recovery rate remained strong at 92%. The plant's cyanidation process was improved through the installation and commissioning of a mechanical agitator.

Mined volumes, from both open-pit and underground operations, increased to 811,811 tonnes in H2 2013, thereby exceeding volumes achieved during H1 2013 by 33%.

The open-pit operational focus in 2013 was on optimising the stripping process at the south and south-west pit walls of the Flank's ore body in preparation for mining in 2014.

Novoshirokinskoye (Novo) - Zabaikalsky region, Russia

Production in H2 2013 amounted to 44,727 oz of gold equivalents which represents a solid 22% increase compared to the first half of the year. An upgrade of the milling circuit during the period served to increase efficiency.

In H2 2013 the average processed grades were 25% higher compared to H2 2012 and 14% higher compared to H1 2013. This increase was in line with the mining plan and was achieved following the successful completion of the required development work.

In H2 2013 underground development totalled 3,993 metres with full year 2013 development exceeding the comparable figure for 2012 by 14%.

* approximate Au equivalent 

mined ore metal content breakdown = Au 3.4 g/t, Ag 66.5 g/t, Pb 2.2%, Zn 1.1%

Belaya Gora - Khabarovsk region, Russia

During H2 2013, plant construction was completed, followed by commencement of ramp-up, including testing to determine optimum operating conditions. While operating in testing mode the plant produced 7,077 oz of gold. Open-pit operations focused on the Pologaya zone in order to prepare ground for mining in 2014 and optimise haulage.

* Ore toll processed at the MNV plant

DEVELOPMENT AND EXPLORATION PROJECTS

Klen - Chukotka region, Russia

Activity in H2 2013 at Klen largely focused on further development and completion of design documentation, which is now under review by the state and environmental examination agencies. The project-related capex estimates are also under review. Site preparation work gathered momentum during the second part of the year: roads were constructed to facilitate vehicle access and transportation around the site, storage facilities were created, foundation works in relation to the future plant were completed, work commenced on the development of a water reservoir, accommodation was provided for builders and a reliable data network was established.

Kekura - Chukotka region, Russia

Work on the construction of a pilot plant, with a capacity of 150,000 tonnes per annum, continued during H2 2013. Construction of the pilot plant is nearing completion, with preparations for testing currently under way. Further metallurgical studies of a number of samples from throughout the ore body were initiated with the objectives of defining ore characteristics and its spatial distribution, and developing of an optimal processing route. The end of the year also witnessed site layout proposals accompanied by preliminary project work designed to ensure efficient development of the asset.

Taseevskoye - Zabaikalsky region, Russia

At Taseevskoye, project design documentation for first and third ore bodies was completed in H2 2013. Following approval by various regulatory bodies the project design is now under review by the State Examination Board. The cut-off grade study for the Baley ZIF 1 tailings was prepared.

Lyubov - Zabaikalsky Region, Russia

Based on the reserves approved in Q4 2012, the design documents were completed for the Evgraf prospect. The project was approved by various regulatory bodies and is currently being reviewed by the State Examination Board.

EXPLORATION

Mnogovershinnoye - Khabarovsk region, Russia

Throughout 2013 the Company continued to pursue its near-mine exploration efforts at MNV designed to identify additional resources in order to enhance the life of the open-pit mine. In the course of these efforts new resources were successfully delineated at the Pebble, Quiet and Watershed prospects. While mining at Pebble started earlier in the year, the second half of 2013 saw the commencement of mining at the Watershed prospect.

Diamond core drilling activity in respect of underground resource conversion totalled 6,152 metres during H2 2013, in line with budget.

At the Western Flank Mnogovershinnoye licence, immediately adjacent to the mine operations and hosting the Chaynoye prospect, the Company completed 2,440 metres of diamond core drilling in H2 2013. Results corroborate historic exploration data and geological modelling currently underway indicates the potential for an open-pit mineable resource.

Verkhne-Krichalskaya - Chukotka region, Russia

The Verkhne-Krichalskaya (VK) exploration and mining licence incorporates the Klen licence and holds upside potential with regard to the Klen operation. The Company's previous exploration programme defined several gold anomalies and exploration targets at VK. In H1 2013 the Company focused on two targets and completed an initial shallow-depth reconnaissance drilling programme totalling 7,350 metres. Drilling results were received in H2 2013 and delineate several zones with an elevated grade of gold mineralisation in part comparable to the Klen deposit grade. A follow-up drilling programme planned for 2014 at several zones is designed to define continuity of mineralisation along strike and depth. Samples from a detailed geochemical survey also completed in H2 2013 at selected targets are being assayed with results expected in Q1 2014.

Kekura - Chukotka region, Russia

Following the acquisition of the Kekura project in Q2 2013, the Company completed a 35,000 metre diamond core drilling programme in 2013, including 26,876 metres during the second half, designed to upgrade resources and complete requirements for future additional reserve registration with the Russian GKZ. Preliminary drilling results received are in line with the previous resource model in terms of average grade and width of gold intersects. Comprehensive "metallic screen" fire assaying is in progress with final results expected in Q1 2014 to be followed by an independent JORC-compliant resource audit.

Unkurtash - Kyrgyzstan

The Unkurtash project includes three distinct prospects, Unkurtash, Sarytube and Karatube, located within the Company's single Kassan licence (63 km²). An independent JORC compliant resource audit undertaken earlier in 2013 updated the project's total resource by ca. 0.68 Moz to approximately 3.7 Moz.

In order to facilitate registration of the entire Unkurtash project's C1+C2 category reserves with the Kyrgyz GKZ, the Company completed a reserve calculation update during H2 2013. Project economics will be refined through additional metallurgical studies in 2014 and, in agreement with the regulatory authorities, submission of the necessary documentation for reserve registration to GKZ is targeted for Q4 2014.

Belaya Gora Flanks - Khabarovsk region, Russia

The Belaya Gora Flanks licence encapsulates the Belaya Gora deposit and represents near-mine exploration potential which could serve to increase Belaya Gora's open-pit resource base. In 2013 the Company resumed field-based exploration at the property and allocated 1,000 metres of trenching and 350 metres of diamond core drilling at two exploration targets (Pavlovsky, Kolchanka). Results of field work completed at the Pavlovsky target in H1 2013 yielded non-economic gold mineralisation which does not warrant further exploration. No field work was conducted at the Kolchanka target or at the nearby Blagodatnoye licence during the reporting period. Exploration work at Belaya Gora Flanks and Blagodatnoye in 2014 will encompass data analysis and report compilation.

HEALTH, SAFETY & ENVIRONMENT

The provision of a safe working environment, management of production risks, the training of personnel and the creation of a sense of responsibility for site safety are of primary importance to the Company. The Lost Time Incident ("LTI") rate (defined as the number of lost time incidents for every 200,000 man hours worked) was substantially reduced to the lowest ever level of 0.28 in H2 2013 (0.36 in H1 2013). During H2 2013 four lost time injuries were reported Group wide, including one third-party LTI. A total of 454 employees underwent introductory (one day) safety training, 248 employees attended a safety work performance / production safety course (3-5 days) and 198 employees completed industrial safety certification training courses (7-30 days). To ensure the maintenance of skills required to operate specific equipment a further 32 employees completed a vehicle driving skills course (22 hours), while 21 employees were trained in the use of appropriate personal protective equipment.

The Company's environmental compliance practices remained in good standing with the regulatory authorities. In September 2013, the first ISO 14001 compliant external audit was successfully applied to the operating environmental management system at MNV and RDM, thereby confirming the Company's compliance. The Company continued to work towards the implementation of an accredited environmental management system (ISO 14001 compliant) at Belaya Gora with final auditing and compliance expected in September 2014. To this end, 24 Belaya Gora and MNV employees received in-house environmental audit training developed by an external environmental consultant. A total of 57 MNV and Belaya Gora employees received environmental safety training including three MNV specialists who attended a five-day course at the University of Khabarovsk.

New appointments

Colin Belshaw was appointed an Independent Non-Executive Director. Mr Belshaw has held numerous operating and corporate positions, including responsibility for Kinross Gold Corporation's Kubaka and Birkachan mining operations in Russia.

Following the expiry of Brent Horochuk's contract with the Company, management wishes to place on record its thanks to Mr Horochuk for his valuable input as Chief Operating Officer since 2009. Yury Ryabov, who joined the Company in 2009 as Technical Director, has been appointed First Deputy Chief Executive Officer. Mr Ryabov studied mining engineering at the Kazakh Polytechnic Institute and qualified as a specialist in metallurgical equipment at the Leninogorsk Technical School. He has held various management positions during his career and is a proven specialist within the Company.

For further information please contact:

Highland Gold Dmitry Yakushkin, Head of Communications

+ 7 495 424 95 21

Duncan Baxter, Non-Executive Director

+ 44 (0) 1534 814 202

Numis Securities Limited

(Nominated Adviser and Joint Broker)

Stuart Skinner / John Prior, Nominated Adviser

+44 (0) 207 260 1000

James Black, Corporate Broking

+44 (0) 207 260 1000

Peat & Co Charlie Peat

(Joint Broker) +44 (0) 207 104 2334