Highland Gold Mining : Kekura Resource and Reserve Estimate and Pre-Feasibility Study

HIGHLAND GOLD MINING LIMITED

Kekura Resource and Reserve Estimate and Pre-Feasibility Study

19 May 2016

Highland Gold Mining Limited ('Highland Gold' or the 'Company') announces results from a JORC (2012) compliant mineral resource and ore reserve estimate for the Kekura project reported in the framework of a pre-feasibility study (PFS) recently completed by international consultancy Wardell Armstrong International (WAI). The results corroborate the previously-announced Russian-compliant reserves (C1+C2 category) approved by regulators last year. An executive summary of the WAI (2016) report will be available shortly on the Company's website (www.highlandgold.com).

The updated mineral resource estimate is based on a database comprised of 671 drill holes totalling 114,681 metres and incorporates data from the Company's drilling campaigns in 2013 and 2014. At a gold cut-off grade of 1.0 g/t Au, the following mineral resources were estimated for the Kekura project:

*Notes:

- Compliant to JORC Code 2012

- Mineral Resources are reported inclusive of any reserves.

- Mineral Resources have been constrained using a US$1488/oz conceptual open pit.

Relevant technical studies have been completed to the level of pre-feasibility facilitating the estimation of ore reserves for the Kekura project as tabulated below:

** Notes:

- A Gold price of US$1,150 per troy ounce has been applied.

- Cut-off Grade of 2.2 g/t Au is applied to the open pit and 4.2 g/t Au to the underground mine.

- Rounded figures may result in small tabulation errors. Ore Reserves have been estimated under the 2012 Edition of the JORC Code.

The current PFS envisages as a preferred economic option for the development of the project a sequential and combined open-pit and underground operation with an estimated mine life of 8 years, a maximum combined ore production rate of up to 830 ktpa, and a mill capacity of 800 ktps. Gold mineralization at Kekura is essentially non-refractory and can be recovered through a conventional gravity/flotation with respective cyanidation flowsheet, with expected total recoveries exceeding 85%. A conceptual economic analysis estimates capital expenditures of approximately US$188 million, significantly lower than previous evaluations.

*** Notes:

- A Gold price of US$1,150 per troy ounce has been applied.

- Further information on the PFS is available in the Executive Summary, to be released on the company website.

An infill drilling programme of 25,000 metres is currently in progress at the eastern flank of the deposit and is expected to be completed by Q3 2016. The programme is aimed at further upgrading and increasing the project's resource and reserve base through the conversion of Inferred category resources and areas with as-yet unclassified gold mineralization.

The license area also hosts several gold mineralised prospects in the immediate vicinity of the Kekura deposit, which are subject to further exploration and provide additional upside potential for the Kekura operation.

The Company has initiated processing plant design work and is undertaking additional studies with the objective of advancing the results of the PFS to a feasibility stage level.

Kekura, located in the Chukotka region in Russia's Far East, is the Company's flagship development project. Substantial exploration work and technical studies have already been completed at the site to date, with a view towards beginning production in 2018-2019.

Information contained in this release with respect to drilling and resource / reserves statements has been taken from the report 'Pre-Feasibility Study for the Kekura Gold Deposit'andprepared in compliance to the JORC Code 2012 by a panel of qualified industry experts of Wardell Armstrong International Ltd. (WAI) for Highland Gold Mining. The PFS report has been signed off by Mr. Mark Mounde, Technical Director WAI, and Mr. Phil Newall, Managing Director WAI, who have verified the information pertaining to the PFS in this release. They have sufficient experience relevant to the style of mineralisation and type of deposit under consideration to qualify as Competent Persons as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'.

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