Highland Gold Mining to acquire LLC Klen

Highland Gold Mining has reached an agreement to acquire LLC Klen, which holds the mining and exploration rights to the Klen gold deposit and the surrounding Verkhne-Krichalskaya property located in the Chukotka autonomous region in north eastern Russia.

The total consideration is $69m less any assigned loans. The consideration will be in cash and will be funded from the company's cash resources. The acquisition is subject to approval by the Russian anti-monopoly authorities which is a condition precedent.

The assets are located in west-central Chukotka, approximately 250 km southwest of Bilibino. Chukotka is one of the fastest growing, investment friendly gold producing regions in Russia with immense exploratory potential.

Eugene Shvidler, Chairman of Highland Gold Mining, commented: "The Klen addition is an important extension of Highland's asset base and will have an immediate impact on the company's resources. Production is scheduled to commence in 2015 and will benefit prospective output. We believe that the Klen operation could benefit significantly from the exploration potential of the Verkhne-Krichalskaya area." The Klen gold deposit will be mined by open pit method, while production will employ conventional gravity and cyanidation processing technology. The Klen licence area encompasses approximately two square kilometres and hosts an epithermal vein-type gold deposit with similar geological characteristics to other gold deposits in the region.

A total volume of 36,000 metres of drilling and 13,000 metres of trenching were completed during the principal exploration period between 1982 and 2011. Based on the results of this activity a C1+C2 reserve of 18.6 tonnes of gold at an average ore grade of 6.3 g/t was registered with the Russian GKZ. A JORC compliant resource audit (MICON, 2012) evaluated the deposit as containing potentially mineable gold resources of approximately 0.51 moz of indicated and 0.04 moz of inferred resources at an average ore grade of 5.14 g/t for the combined resources.

The Verkhne-Krichalskaya exploration and mining licence incorporates the Klen licence and encompasses an area of approximately 996 square kilometres, hosting a number of small placer gold deposits. Historic exploration work on the property recognised numerous other geological features, including wide areas of hydrothermal alteration and geochemical anomalies, which are indicative of the gold prospectivity of the property.

Several exploration targets have been identified which the company believes have the potential to substantially contribute to Klen's current resource base. In the course of the development of the Klen deposit the Company plans to systematically explore the prospects on the Verkhne-Krichalskaya licence.

LLC Klen is a subsidiary of an entity that is associated with Primerod International, a substantial shareholder in the company.

At 10:29am: (LON:HGM) Highland Gold Mining share price was -3.37p at 100.63p

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