Acquisiton

RNS Number:3663P
Highland Gold Mining Limited
04 September 2003

                                                                4 September 2003


                 Agreement to acquire the Mayskoye Gold Project


The Board of Highland Gold Mining Limited today announces that its subsidiary
Stanmix Holding Limited has entered into a conditional agreement with Deerfield
Universal Inc to acquire a 100% interest in JSC Mayskoye, the holder of the
licence for the high grade Mayskoye gold deposit in the Chukotka region of North
East Russia, for a total consideration of US$34.9 million. On completion, the
acquisition will increase the Group's total gold reserves to 5.8 million ounces
(B and C1 under the Russian classification system) and B, C1 and C2 resources to
16.9 million ounces of gold and gold equivalents.

The acquisition is expected to be completed within approximately one month and
is conditional upon receiving the appropriate regulatory approvals and consents
and finalisation of due diligence. Title to shares representing 100% of JSC
Mayskoye will transfer to Stanmix Holding Limited on completion. The
consideration will be paid in three instalments, an initial payment of $11.9
million on completion followed by two equal instalments of $11.5 million to be
paid on the first and second anniversary of completion respectively.

The Mayskoye deposit has been extensively explored since its discovery in 1972
and has estimated mineable reserves in the C1-C2 category of 3.7 million ounces
of gold at an average gold grade of 11.50g/t. Furthermore, resources at the
deposit are calculated at 9 million oz of gold at an average grade of 11.4g/t at
an average cut off grade of 5.0g/t. The current licence, initially granted in
1999, is valid until 2024.

Based on current estimates the Company expects that the capital requirement to
bring the deposit into full production will be approximately $90 million with
full production of approximately 180,000 ounces of gold per year from 2007
onwards at a mining rate of 550,000 tonnes of ore. Highland Gold intends to
commission a full independent feasibility study post-completion and believes
that, subject to the successful completion of this, the project can be brought
into production before the end of 2006. Although there will be some open pit
mining over the first three years, the majority of the ore will be extracted by
underground development.

The majority of the ore at Mayskoye is of a refractory nature and it is
anticipated that the ore will be processed by the established method of gravity
flotation, with further bioxidation of the concentrate, although the Company is
looking at a range of potential processing options. Previous metallurgical
testwork has indicated a potential recovery rate of between 86% and 90% using
bioxidation methods.

Highland Gold estimates that, together with its existing operations at MNV and
development projects at Darasun and Novoshirokinskoye, it is well placed to
achieve a target annual production of 500,000 ounces in 2006. On current
estimates, the Company expects total cash costs per ounce at Mayskoye to be in
the region of $160-170 per ounce.

It is intended that both the acquisition costs and the costs of the feasibility
study will be funded from a combination of the Company's available debt
facilities and cash generated from the Company's ongoing operations.  A range of
options in respect of the capital development of the Mayskoye project is
available to the Company. Highland Gold intends to review these options during
the preparation of the feasibility study before making its final decision.

Peter Daresbury, Chairman, Highland Gold said:

"The acquisition of Mayskoye is a transforming transaction for the Group. We are
acquiring a world class, long life, low cost deposit in a transaction which
doubles the Group's resource base. The acquisition of long term production
potential complements the Group's existing mining operations and ongoing
production profile. Together with the development projects due to come on stream
over the next two years, Mayskoye affords a clear path to a target production of
500,000 ounces of gold by 2006."

Ivan Koulakov, Managing Director, Highland Gold said:

"The Mayskoye project provides a tremendous opportunity for the Highland Gold
management team to apply its proven development skills to a world class deposit.
Our team of geologists, mining engineers and technical specialists have examined
Mayskoye in detail and are excited about developing the mine and look forward to
developing our business in the Chukotka region."


Enquiries:
Highland Gold          Ivan Koulakov                       [phone]
                       Dmitri Korobov

W.H. Ireland           David Youngman                      [phone]
                       Laurie Beevers

Brunswick              Alison Howard                       [phone]
                       Mark Antelme

Notes to editors:

Mayskoye

The Mayskoye project is located in the Chaunski District of the Chukotka
Autonomous Territory, in North East Russia, approximately 180km south of the
port town of Pevek. At a latitude of 68.6 degrees north, the region has an
Arctic climate with permafrost conditions.  The population of the local area is
approximately 6,000.  Despite the remote location, there is good access to the
deposit by road and there is access to Pevek by both air and sea.

The Mayskoye deposit was discovered in 1972 after many years of mapping and
prospecting activities in the region.  It is one of the more extensively
explored deposits in Russia with more than 400km of drill holes and nearly 27km
of underground workings completed between 1972 and 1986.

Results from these exploration programs led to a 1986 ore resource calculation
of nearly 9 million ounces of gold at an average grade of 11.4g/t.  This
calculation was approved by the State Committee on Mineral Reserves.  In 2002
the State Committee on Mineral Reserves approved an updated geological reserves
estimate of 4.4 million ounces of gold in the C1 and C2 category an at an
average grade of 16.3g/t based on an average cut off grade of 5g/t. The Company
has calculated mineable reserves of 3.7 million ounces of gold at an average
grade of 11.5g/t as indicated in the table below.

Mayskoye - Geological Reserves Calculated and Approved by GKZ in 2002

Russian classification of ore reserves
                                        Ore, kt        Au, g/t           Au, koz
C1                                        2,949           15.1             1,432
C2                                        5,412           16.9             2,941
Total - undiluted                         8,361           16.3             4,373
Total - mineable *                        9,950           11.5             3,680

* calculated by the Company

Additional exploration work at depth is required in order to reclassify C2
reserves to the C1 category and this will be carried out whilst mining continues
at shallower depths. It is Highland Gold's intention that ore reserves will be
reclassified to the B category during the preparation of ore blocks for mining.

Highland Gold

Highland Gold, admitted to AIM in December 2002, is a leading Russian gold
producer whose objective is to acquire and develop a portfolio of high quality
gold mining projects with growth potential in the Russian Federation. The
Company owns and operates the Mnogovershinnoe mine (MNV) which was Russia's
third largest producing mine in 2002. It also owns two advanced development
projects, Darasun and Novoshirokinskoye, that are planned to be in production by
2004 and 2005 respectively.

Prior to completion of the Mayskoye acquisition, the Group has an aggregate
resource base of 8.0 million oz of gold, comprising 7.2 million oz of gold and a
further 0.8 million oz of gold equivalents at the Novoshirokinskoye gold and
polymetallic deposit. On completion, the Group will have an aggregate resource
base of 16.9 million oz of gold and gold equivalents (B, C1 and C2).

MNV is situated near to Nikolaevsk-na-Amur in the Khabarovsk Region of far-east
Russia, approximately 650km north of the city of Khabarovsk.  MNV was Russia's
third largest gold producing mine in 2002 and has reserves of 2.3 million oz of
gold in the B-C1 category at an average grade of 8.9 g/t and resources of 3.0
million oz of gold at an average grade of 9.7 g/t. The Company owns 100% of ZAO
MNV which owns the gold mining licence valid until the end of 2018.  Operations
at MNV consist of both underground and open-pit mining of several high grade
gold deposits.

The Darasun project is situated in the Chita Region of Eastern Russia and
consists of an existing, but currently non-operational, gold mining complex
having open-pit and underground mining development and mineral processing
facilities. It consists of three deposits, Darasun, Teremky and Talatui and has
C1 reserves of 1.1 million ounces of gold at an average grade of 10.3g/t and
resources of 3.1 million ounces of gold at an average grade of 10.3g/t.  The
Company holds a 100% interest in OOO Darasun which holds certain assets at the
Darasun project including the gold mining licences at Darasun and Teremky which
expire in 2023, and for the Talatui deposit, expiring in 2012. It is anticipated
that mining production will commence in May 2004 with full production of an
estimated 450,000 tonnes of ore and 120,000 ounces of gold in 2005.

The Novoshirokinskoye gold and polymetallic mining project, also located in the
Chita region, contains a total of 1.8 million resource ounces of gold and gold
equivalents at a gold equivalent grade of 6.1g/t.  The Group holds an 87.08%
interest in OAO Novoshirokinskoye, which holds certain key assets essential to
the future development of this project. The remaining minority interests in the
share capital of the company are held by a number of private individuals.
Highland Gold continues to work with the local administration in Chita to ensure
that the Group fully complies with all aspects of the gold mining licence at
Novoshirokinskoye. The Company currently estimates that Novoshirokinskoye will
be brought into production in 2005 and will mine approximately 350,000 tonnes of
ore in 2006.


Forward looking statements

Certain statements within this announcement constitute forward looking
statements. Such forward looking statements involve risks and other factors
which may cause the actual results, achievements or performance of the Group to
be materially different from any future results, achievements or performance
expressed or implied by such forward looking statements. Such risks and other
factors include, but are not limited to, general economic and business
conditions, changes in government regulation, currency fluctuations (including
the US$/RUR rate), the gold price, the Group's ability to recover its reserves
or develop new reserves, competition, changes in development plans and other
risks. There can be no assurance that the results and events contemplated by the
forward looking statements contained in this announcement will, in fact, occur.
These forward looking statements are correct or represent honestly held views
only as at the date of this announcement. The Company will not undertake any
obligation to release publicly any revisions to these forward looking statements
to reflect events, circumstances or unanticipated events occurring after the
date of this announcement except as required by law or by any regulatory
authority.




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