RNS Number:0976Q
Highland Gold Mining Limited
24 September 2003

24 September 2003

                    Highland Gold announces Interim Results
                       for the six months to 30 June 2003

Financial Highlights

   *   Turnover was up 14.6% at US$31.4m  (H2 2002: US$27.4m)

   *   Net profit was up 57.4% to US$8.5 m (H2 2002: US$5.4m*)

   *   Earnings per share grew by 48.1% to 7.7 US cents (H2 2002: 5.2 US cents)

   *   Net operating cash flow decreased by 18.6% to US$5.7m (H2 2002: US$7.0m)

   *   Capital expenditure increased 56% to US$13.1m (H2 2002: US$8.4m)

   *   Interim dividend up to 1.5 US cents per share (H2 2002: 1.0 US cents)

 (*) Net profit for H2 2002 has been restated, a reduction of US$1.7 million,
     due to a change in accounting policy in respect of stripping costs.

Business Highlights

   *   Total gold production up 3.4% to 90,133 oz (H2 2002: 87,281oz)

   *   Cash operating costs down by 4.4% to US$152 per oz (H2 2002: US$159 
       per oz)

   *   Darasun construction on track for initial production H1 2004

   *   Purchase of outstanding assets at MNV for US$26.7m, previously leased
       from the Khabarovsk Administration

   *   Resource based doubled by Mayskoye deposit - 9 million oz - acquired for

Commenting on the results, Ivan Koulakov, Managing Director, Highland Gold,

"In the first half Highland Gold comfortably met its production targets while
successfully executing the planned transition to new ore bodies at the MNV mine.
At the same time, management made further progress on our two development
projects, Darasun and Novoshirokinskoye, and these remain on course for initial
production in the first half of 2004 and 2005 respectively".

Peter Daresbury, Executive Chairman, Highland Gold, said,

"This has been an impressive first half for Highland Gold, with the Group
developing momentum following its flotation in December 2002.

"Since the period end we have announced a major acquisition, the high grade
Mayskoye deposit, which will double the resource base of the Group to 17 million
oz.  We have also successfully purchased the operating assets at MNV that were
previously leased.

"Highland Gold is well positioned to deliver its production and development
programme for the rest of 2003, and to develop further its position as a low
cost gold producer with sound growth prospects.  The Board's confidence is
reflected in the decision to raise the interim dividend to 1.5 US cents per

Enquiries:                020 7404 5959

Highland Gold             Peter Daresbury, Executive Chairman
                          Ivan Koulakov, Managing Director

Brunswick                 Patrick Handley
                          Alison Howard

                              CHAIRMAN'S STATEMENT

                   Highland Gold Mining Limited (the "Group")

               Interim Results for the six months to 30 June 2003

I am pleased to announce a solid set of results, good operational progress and
further growth by acquisition at the Group level. At MNV, the Group's producing
asset, we have increased production and efficiency and strengthened our position
through purchasing assets previously leased. Development projects at Darasun and
Novoshirokinskoye are progressing according to plan.  Production at Darasun is
planned to start in the first half of 2004 on time and within budget, and we are
finalising the feasibility study for Novoshirokinskoye. The acquisition of the
Mayskoye deposit will more than double our resource base and our business
development team continues to review new acquisition opportunities.

Acquisition of the Mayskoye deposit

The Group has entered into a legal agreement to acquire 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 payable over
two years.  It is expected that the acquisition will be finalised by October
2003.  The current license is valid until 2023.  The deposit has been
extensively explored and has estimated mineable reserves in the C1-C2 category
of 3.7 million oz of gold at an average gold grade of 11.5 g/tonne. Resources at
the deposit are calculated at 9 million oz of gold at an average grade of 11.4 g
/tonne.  It is anticipated that the ore will be processed with direct leaching
technology for the first three years of production and proven bioxidation
technology thereafter. On current estimates, capital expenditure to production
will amount to US$88.5 million. Production at Mayskoye will come on stream in
2006 to reach 180,000 oz of gold per year at full production. Current estimates
of the total cash costs per ounce lie in the region of US$160-170, subject to
the completion of the feasibility study in October 2004.

This acquisition increases Highland Gold's total mineable gold reserves to 5.8
million ounces of gold equivalents (B and C1 under the Russian classification
system) and B, C1 and C2 resources to 17 million ounces of gold equivalents.

Securing of assets at MNV

I am pleased to confirm that on 22 September 2003, MNV signed the sale &
purchase agreement to acquire for US$26.7 million all those production assets it
had previously leased from the Khabarovsk Administration.  Furthermore, the
process of registration of all assets owned at MNV is approaching completion.
The Board looks forward to developing MNV's presence in Khabarovsk and
sustaining its contribution to the local community.

Strong financial performance

In the six months to 30 June 2003, the Group reported revenues of US$31.4
million compared with US$27.4 million for the six month period to 31 December
2002. Production at the MNV mine during H1 2002 pre-dated the incorporation of
the Highland Gold Mining Limited and consequently financial performance figures
for this period are not comparable, although production performance data for H1
2002 is stated below.

The average gold price achieved was US$346/oz compared to US$298/oz for the
previous reporting period. The Group continues to operate an unhedged policy.

The Group continues to improve the efficiency of operations. Costs of sales
decreased by 11% to US$15.7 million compared to US$17.6 million in the previous
six month period due to non-recurring fair value adjustments of US$2.0 million
and to lower stripping costs. Stripping charges have decreased by almost US$1.0
million as MNV is mining more underground ore than open-pit and in addition, a
proportion of the stripping costs are now deferred in line with industry
practice. Administrative expenses remained flat at US$3.4 million.

The Group reported a net profit of US$8.5 million for the first half of 2003,
which represents a 57% increase over US$5.4 million for the six month period to
31 December 2002. Earnings per share for the period amount to 7.7 US cents,
compared to 5.2 US cents over the previous six month reporting period.

Cash flow from trading operations increased from US$8.9 million to US$14.5
million.  However, increases in working capital of US$8.8 million (H2 2002:
US$1.9 million) led to a net operating cash flow of US$5.7 million (H2 2002:
US$7.0 million). The changes in working capital were due to the seasonality of
supplies at MNV, an overall increase in stock to ensure the smooth running of
the operations, and cash costs associated with the London listing.

For the first half of 2003, MNV cash operating costs (calculated on the basis of
UK GAAP figures and in line with US Gold Institute guidelines) were US$7 lower
at US$152/oz, due to the decrease in stripping costs. Total cash costs for the
first half of 2003 were US$3/oz lower at US$176/oz.  This takes into account an
increase in taxes, linked to higher gold prices. Total production costs,
including depreciation and other non-cash items, increased by US$4/oz to US$198/
oz versus US$194/oz in the previous period. This reflected higher depreciation
charges linked to the construction of additional mining assets and to the
purchase of equipment.

In line with production plans and budgets, the Group has spent US$13.1 million
in capital expenditure and plans to spend an additional US$17.9 million by
year-end for the improvement of operations at MNV and the development at

As at 30 June 2003, the company had utilised US$7.1 million out of a total
facility of US$30 million. Interest cover was 13.4 times and gearing was 21%.
Since that date, the Group has successfully negotiated new borrowing facilities
of USS$37 million bringing the total to USS$67 million.  These lines will be
used to support the development of Mayskoye and the purchase of the MNV assets.

In line with the Group's progressive dividend policy, and whilst maintaining a
prudent approach to the Group's financing requirements, the Board announces an
interim dividend of US$0.015 per share totaling US$1.65 million.

MNV production performance continuously improving:

                                                 H1 2002                   H2 2002                   H1 2003
Total ore milled (tonnes), of which:             388,571                   417,458                   426,942
                                Open pit         198,774                   189,138                   116,773
                             Underground         174,545                   200,307                   267,938
                               Stockpile         15,252                    28,013                    42,231
Head grade (g/tonne)                              7.90                      7.10                      7.14
Recovery (%)                                      91.9                      91.57                     92.03
Gold production                                  90,671                    87,281                    90,133

In the first half of 2003, the average head grade was 7.8g/tonne from
underground mines and 6.3g/tonne from open pit mines. The head grade from
underground and open pit ores currently mined varies between 7.0g/tonne to 12.0g
/tonne and 5.0g/tonne to 8.0g/tonne respectively. The head grade from stockpiles
is currently 4.8g/tonne.

In optimising the performance of its operations the Group achieved a successful
transition to new ore bodies during the first six months of 2003. As a result,
MNV produced 267,938 tonnes of ore from underground mines, an increase of 67,631
tonnes or 34% over the second half of 2002. Head grade of ore produced from
underground mines during the first half of 2003 was 7.8 g/tonne, an increase of
10% over the second half of 2002. Consequently, gold in ore produced from
underground mines increased by 47% over the second half of 2002, representing
67,169 oz during the first half of 2003 against 45,638 oz in the second half of
last year.

The Group spent a total of US$2.3 million in capital expenditure during the
period at MNV and plans to spend approximately US$3.8 million through to the end
of 2003, mainly in the upgrading of mining equipment, the construction of a
back-up power station to ensure reliability of supply and in the construction of
an additional layer at the tailings dam to allow for increased production.

Development of mining assets on track

The construction of the Darasun project is proceeding in accordance with the
projected timetable.  US$10.7 million in capital expenditure was spent on
reconnecting and upgrading the electricity supply, commissioning of satellite
communications, initiating development and production exploration in three of
the four existing shafts, and beginning the construction of the new mill
facilities.  An additional US$11.9 million will be spent by year end to further
develop the mine, to purchase mining equipment and to complete the construction
of the mill, the tailings dump and the first stage of the sludge storage.
Production at Darasun is planned to start during the first half of 2004, with
full production of an estimated 450,000 tonnes of ore in 2005.  At these
production rates the Group anticipates that an additional 40,000 oz and 120,000
oz of gold will be produced at Darasun in 2004 and 2005, respectively.

At Novoshirokinskoye, reserves re-estimation work is progressing and is due for
completion by year end, as is a full feasibility study.  Gold production is
planned to commence in 2005.

Board appointments

The Board welcomed the appointment of Dmitri Korobov, Commercial Director, and
Gennady Nevidomi, Production Director, as Executive Directors on 22 May 2003.
Their commercial and technical expertise in gold mining in Russia and hands-on
knowledge of operations will further strengthen the Board's experience.

Business Outlook

The Group is targeting total production of 194,000 oz of gold in 2003 compared
with 178,000 oz of gold produced in 2002. It also intends to sustain its firm
control of production costs within the parameters of Russian inflation.

We look forward to the first gold production at Darasun in the first half of
2004, and with Novoshirokinskoye and Mayskoye coming on stream sequentially. The
Group is targeting production of an estimated 500,000 oz of gold in 2006.

The increase in the interim dividend underlines the Board's confidence in the
Group's ability to develop a platform for further growth and consolidation in
the Russian gold mining industry.

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

1. Consolidated profit and loss account
                                                                           Six months to       Six months to
                                                                            30 June 2003    31 December 2002
                                                                               Unaudited            Restated
                                                                                  US$000              US$000
Continuing operations                                                             31,379              27,420

Cost of sales                                                                   (15,738)            (17,571)

GROSS PROFIT                                                                      15,641               9,849

Administrative costs                                                             (3,400)             (3,479)

GROUP OPERATING PROFIT - ONGOING                                                  12,241               6,370
Bank interest receivable                                                             152                  41
Gain on loan renegotiation                                                             -               2.032
Bank interest payable and similar charges                                        (1,166)             (1,192)
Foreign exchange gains/(losses)                                                      511                (59)

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION                                     11,738               7,192

Tax on profit on ordinary activities                                             (3,246)             (1,840)

PROFIT FOR THE FINANCIAL PERIOD                                                    8,492               5,352
Dividends                                                                        (1,658)             (1,105)

PROFIT RETAINED FOR THE FINANCIAL PERIOD                                           6,834               4,247

RETAINED EARNINGS BROUGHT FORWARD                                                  6,067               1,820

RETAINED EARNINGS CARRIED FORWARD                                                 12,901               6,067

                                                                           Six months to       Six months to
                                                                            30 June 2003    31 December 2002
                                                                               Unaudited            Restated
                                                                                  US$000              US$000
Profit for the period attributable to the members of the parent
company and total gains and losses relating to the period                         6,834               4,247

Prior year adjustment                                                            (1,744)


3. consolidated balance sheet
                                                                       At 30 June 2003   At 31 December 2002
                                                                             Unaudited              Restated
                                                                                US$000                US$000
Tangible assets                                                                 60,618                51,779

                                                                                60,618                51,779

Stocks                                                                          16,467                13,355
Debtors                                                                         19,811                10,931
Deferred stripping costs                                                         1,217                   501
Cash at bank and in hand                                                         6,968                26,525
                                                                                44,463                51,312
CREDITORS: amounts falling due within one year                                (17,245)              (24,242)

NET CURRENT ASSETS                                                              27,218                27,070

TOTAL ASSETS LESS CURRENT LIABILITIES                                           87,836                78,849

CREDITORS: amounts falling due after more than one year                        (9,131)               (8,570)

PROVISIONS FOR LIABILITIES AND CHARGES                                        (10,599)               (8,872)

MINORITY INTERESTS - EQUITY                                                      (347)                 (482)

                                                                                67,759                60,925

Called up share capital                                                            162                   162
Share premium                                                                   54,696                54,696
Profit and loss account                                                         12,901                 6,067
                                                                                67,759                60,925

4. Consolidated cash flow STATEMENT
                                                                       Six months to 30         Six months to
                                                                              June 2003      31 December 2002
                                                                              Unaudited              Restated
                                                                                 US$000                US$000

NET CASH INFLOW FROM OPERATING ACTIVITIES                                         5,717                 6,950

Interest received                                                                   152                    41
Interest paid on bank loans                                                       (217)                 (686)
Interest paid on finance leases                                                   (602)                     -

RETURNS ON INVESTMENT AND SERVICING OF FINANCE                                    (667)                 (645)

Russian profits tax paid                                                        (2,815)               (3,913)
Payments to acquire tangible fixed assets                                      (13,056)               (8,350)
Receipts from sale of tangible fixed assets                                           -                   350
Payments to acquire investments                                                       -                 (541)
Receipts from repayment of investments                                                -                   768

CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT                                   (13,056)               (7,773)

Purchase of subsidiary undertakings                                                (28)               (2,430)

NET CASH OUTFLOW ON ACQUSITIONS AND DISPOSALS                                      (28)               (2,430)

EQUITY DIVIDENDS PAID                                                           (1,105)                     -


Increase in short term deposits                                                   5,000                     -
Issue of ordinary share capital                                                       -                31,838
Share issue costs                                                                     -               (7,045)
New loans                                                                             -                 8,932
Loans repaid                                                                    (7,171)                     -
Repayment of capital element of finance leases                                    (452)               (1,379)

CASH (OUTFLOW)/INFLOW FROM FINANCING                                            (7,623)                32,346

(DECREASE)/INCREASE IN CASH                                                    (24,577)                24,535

5. Consolidated cash flow STATEMENT (continued)


(Decrease)/increase in cash                                                   (24,577)                 24,535
Repayment of capital element of finance leases                                     452                  1,379
Cash outflow/(inflow) from decrease/(increase) in loans                          7,171                (8,932)
Cash outflow from short term deposits                                            5,000                      -
MOVEMENTS IN NET DEBT ARISING FROM CASHFLOWS                                  (11,954)                 16,982
Re-negotiation of loan                                                               -                  2,032
New finance leases and fair value adjustments                                  (2,606)                  (585)
Exchange differences                                                                20                    208

MOVEMENT IN NET DEBT                                                          (14,540)                 18,637
NET CASH/(DEBT) AT BEGINNING OF PERIOD                                           2,311               (16,326)

NET (DEBT)/CASH AT END OF PERIOD                                              (12,229)                  2,311

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