Highlands Pacific Limited : Chairmans Address AGM

17 May 2012

Good morning ladies and gentlemen and welcome to the 2012 Annual General Meeting of Highlands
Pacific Limited. I am delighted that you have taken the time to attend today.
The past year I think I can characterise in some ways as being two steps forward and one back.
At the Ramu Nickel mine, the long-running court case is behind us at last and our partners, MCC Ramu NiCo Ltd, are proceeding with commissioning the three high pressure acid leach (HPAL) trains at the Basamuk process plant progressively and in a sensible and orderly fashion. We are advised that the progress being made on commissioning is very positive and that Ramu is now proceeding well and in accordance with expectations. Your company has taken one big step forward and is about to become a producer, with a small participation in one of the major nickel mines in the world.
In relation to the world-class Frieda Copper Gold Project, the past year has had its highs and lows. The significant expansion of resources in the last 12 months has further emphasised that Frieda River is one of the top undeveloped copper projects in the world. While it was disappointing that we did not complete and finalise an optimised feasibility study for the project by the end of last year, Xstrata has agreed to spend this year on further studies to optimise the project and its capital and operating costs. The project is big and requires a large capital investment and we live in troubled financial times. We must be realistic and patient in getting the project development parameters optimised for both the project and the times.
Nevertheless, Xstrata has agreed to carry Highlands' share of the additional feasibility costs until the project is ready for development, with repayment ultimately from operating cash flow from the project. This arrangement has significantly reduced the near term funding risks for the project for Highlands, enabling the Company to focus its resources on other growth options in the immediate future.
Xstrata's continuing feasibility work will include the study of using PNG's natural gas supply as a power generation option for the project, and we believe this could have many benefits for not only Frieda River but other regional projects in the longer term. The feasibility work to date has been monitored by our own consultants who join us in regular meetings with the study technical team. We await the outcome of this next phase of the study and continue to encourage Xstrata to be rigorous and realistic in its optimisation of the project for the sake of all the stakeholders including the PNG Government, which has a right to acquire up to 30% interest in the project when application is made for the Special Mining Licence.
We are hopeful that following the optimisation process this year, market conditions will enable the partners to move to the next stage of the development process as quickly as possible.
We believe Frieda River is a world-class deposit which can and should be successfully developed in a timely way, for the benefit of the shareholders, the Government and the people of Papua New

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Guinea. We believe the PNG Government shares our objective to have the Frieda River deposit developed into a mine as soon as possible.
Finally, at our Star Mountains Project, located to the northeast of the Ok Tedi Mine, results over the past year have been encouraging. We have identified a number of high quality targets for drill-testing and have really only tested one of these to date, with drilling now progressing on the next two targets. In the last week we have announced some exciting news on the latest drill-hole in the program, for that section of the hole for which we have results. It is clear from these results that we have discovered a copper-gold porphyry deposit at the Olgal prospect, with several other prospects at Star Mountains yet to be explored by drilling. Much more work needs to be completed before we can determine whether we have a resource that is capable of economic development, either at Olgal or elsewhere at one of the other, as yet untested, porphyry prospects. We are encouraged by the results of our drilling so far, but it is early days and we are yet to uncover the true potential of the Star Mountains property. In the three aspects to our strategy communicated at our previous Annual General Meetings we have taken another big step forward with Star Mountains.
If, as I say, we have taken two big steps forward and one back, you might legitimately ask why our share price has taken only backward steps over the last year.
There is no doubt that part of the reason must be attributed to market disappointment at Frieda not being immediately ready to go, a disappointment which is understandable and indeed shared by us.
Another factor is that there has been a considerably diminished appetite in equity markets for resource stocks in general, from the large to the small, but it is more pronounced at the smaller end of the market. The appetite for risk in the equity markets is very fragile.
There is however, a third reason which we hear regularly in discussions with the investment community. The issue of country risk for Papua New Guinea has become a significant talking point. The lack of constitutional and political certainty, threats to judicial independence and conflicting policy statements, some of which would be seriously detrimental to investment in this country, are issues which need to be resolved. In our respectful view, it is important for all stakeholders in this wonderful and exciting country to be able to look ahead to a clear outcome from an early election, the end of political and constitutional uncertainty and the recognition of the independence of the judiciary. I strongly believe that these issues need to be quickly resolved in the interests of all Papua New Guinea people. They certainly need to be resolved in the interests of shareholders in Highlands Pacific Limited.
I would like to take this opportunity to thank your Managing Director, John Gooding, and his staff for their continuing hard work in supporting the objectives of Highlands. John will be taking you through a detailed explanation of the status of our projects at the end of the formal business of this meeting.
Finally I would like to thank you, our loyal shareholders, for your continued support of our company and look forward to it continuing.

For further information, please contact:

John Gooding or Craig Lennon

Highlands Pacific - 07 3239 7800

Media Enquiries to:

Simon Jemison

Collins St Media - 03 9224 5319

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ASX Code: HIG PoMSox Code: HIG

Shares on Issue: 686 million Options on Issue: 23 million Performance Rights: 3.5 million

Market Capitalisation ~ A$106m

Cash on Hand (31/03/12) A$12m

Directors

Ken MacDonald, Chairman

John Gooding, Managing Director

Mike Carroll

Dan Wood

Drew Simonsen

Fiu Williame-lgara

Management

Craig Lennon, CFO & Co.Sec Larry Queen, Chief Geologist Terry Smith, GM Mining & BD Peter Jolly, GM Projects

Ron Gawi, GM Port Moresby

For further information, please contact:

John Gooding or Craig Lennon

Highlands Pacific - 07 3239 7800

Media Enquiries to:

Simon Jemison

Collins St Media - 03 9224 5319

Website:

www.highlandspacific.com

Highlands Pacific is a PNG incorporated and registered mining and

exploration company listed on the ASX and PoMSox exchanges. Its major development assets include the US$1.5bn Ramu nickel cobalt project, the Frieda River copper gold project and exploration on the highly prospective Star Mountains (Nong River, Mt Scorpion and Tifalmin) licenses approximately 20km north of the Ok Tedi Mine. Highlands also holds exploration ground in the Wau/Bulolo close to the new Hidden Valley and Wafi gold projects.

The Frieda copper gold project is one of the Asia-Pacific's largest undeveloped copper/ gold resources. The Project is 175kms north- west of the giant Porgera gold mine and 75km north-east of the Ok Tedi mine. The project owners are Xstrata (81.82% and manager) and Highlands (18.18%). The pre-feasibility study released in November

2010 indicated a 60Mtpa throughput for the first eight years with output averaging 246,000tpa of copper and 379,000 ozpa of gold. The multi-decade life mine will have an average throughput of 50Mtpa.

Star Mountains leases, which include Nong River EL1312, Mt Scorpion

EL1781 and Tifalmin EL 1392, are located approximately 20km north of the Ok Tedi Mine. These prospects lie within the highly prospective New Guinean Orogenic Belt, home to deposits like Grasberg, Ok Tedi, Frieda, Porgera and Hidden Valley. A drilling program is underway with some significant copper gold intersections reported.

The Ramu nickel mine is located 75km west of the provincial capital of

Madang, PNG and will produce an annual output of 31,150 tonnes of nickel and 3,300 tonnes of cobalt contained in high grade concentrate over a 20 year mine life. The mine is currently being commissioned and the mineral resources at Ramu have the potential to increase the mine life by a further 15-20 years. Highlands 8.56% interest in Ramu will increase to 11.3% at no cost after repayment of the project debt (estimated to be 8 years). From commissioning, Highlands has access to its pro-rata 8.56% share of Ramu's post-debt servicing net cash flow. Highlands also has an option to acquire an additional 9.25% at fair market value which could increase its interest to 20.55%.

* Subject to the right of the Independent State of Papua New Guinea to acquire up to a 30% equity interest in any mining development in the country.

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