Highland Gold Mining Limited (“Highland Gold”, or the “Company”) produced 101,737 ounces of gold in the second half of 2005, in-line with the same period of 2004 and a 59% increase over the first half of 2005. This result reflects the good progress made since 30 June 2005 and places the Company in a better position to continue its growth.

SECOND HALF HIGHLIGHTS

MNV. Recovered from the operating setbacks experienced in the first half of 2005 with second half gold production of 88,059 ounces, a 69% increase in comparison with the first

Darasun. Completed commissioning of the Darasun mill and strengthened the on-site management team, which we believe will relieve in the medium term the production problems experienced in 2005. Currently, the mill and underground mine are operating and the open pit operation has now been re-started after a 6-week shutdown for modifications to existing mine plans.

Taseevskoye. Continued work on a scoping study and acquired an additional 485,000 ounce resource at the ZIF-1 tailings. Planning for 2006 has resulted in an approved US$21 million budget, including significant drilling, pit de-watering activities, and the preparation of a pre-feasibility study.

Mayskoye. Revised the project’s first phase to approximately 500,000 tonnes per year and continued to progress the feasibility study with further underground sampling and the initiation of a twinning and in-fill drill program. The final $11.5 million acquisition instalment

Novoshirokinskoye. Continued to progress external technical project reviews and pursued optimisation alternatives, including the direct export of lead and zinc concentrate. Acquired the license for the Vozdvizhinskoye project, a formerly producing lead-zinc-silver mine.

Exploration. Acquired the Belaya Gora, Malo Fedorovskoye and Sovinoye projects.

Financial Position. At 31 December, held $33 million of cash and $81 million of debt.

Commenting on today’s announcement Dmitry Korobov, Managing Director, said: “Coming off a difficult first half of 2005, I am proud of the character our team demonstrated as it delivered improved second half operating results, progress on our development projects and additional high-quality asset acquisitions. This team is being continually strengthened to further improve our existing operations and to ensure our projects under development are planned to high standards and advanced in a timely manner. We are now moving into 2006 in a better position to capitalise on the current gold market and to create value for our shareholders.”

OPERATING REVIEW

Gold recovered for the second half of 2005 was 101,737 ounces compared with 102,910 ounces in the second half of 2004. The slight decrease was a result of continuing operating issues at MNV that carried over into the beginning of the second half of the current year, offset by a slightly better contribution from Darasun.

MNOGOVERSHINOYE MINE (MNV) – Khabarovsk Region, Russia

In the second half of 2005, Highland Gold was focused on re-establishing MNV as a stable producer with sufficient advanced development to support future production plans. This focus included an acceleration of our stripping in the Upper open pit. During the second half of 2005 the stripping operation moved 823,541 cubic meters of waste, a 28% increase in stripping against the same period of 2004. The additional stripping and a low availability of blast hole drills and haul trucks led to open pit ore mining of 217,772 tonnes during the second half of 2005, a reduction of 9.1% in comparison with the same period of 2004. Open pit grades deteriorated by 9.6% to 5.94 g/t in the second half of 2005 in comparison with same period of 2004, but these grades have improved by 26% when compared with the first half of 2005. It is also important to note that open pit grades have strengthened continuously through the year, with average grades in December exceeding 7.0 g/t.

The underground operation at MNV performed well during the second half of 2005 with mined ore volumes reaching 215,711 tonnes or 22.8% higher than in the second half of 2004 and 19.4% higher than in the first half of 2005. Underground ore grades have also improved during the year, averaging 7.24 g/t in the second half of 2005 – a 34.9% increase from the first half of 2005 but still 17.0% below grades achieved in the second half of 2004. As in the open pit, it is important to note that underground grades have strengthened continuously during the year, with average grades in December reaching 7.6 g/t. With our underground operators now trained on a new “Stopemaster” drill that was delivered to site during the second half of 2005, we see potential for further improvements in the underground operation.

During the second half of 2005 gold sold from MNV was 88,945 ounces a deterioration from the same period in 2004 when sales reached 101,258 ounces. This decrease resulted from lower mill feed grades and recovery rates, and was partly offset by a record mill throughput of 503,958 tonnes.

Despite adverse weather conditions resembling those of last year, January production has exceeded our expectations due to commendable efforts by our operating team at MNV. The 2006 outlook for MNV production is in the range of 150,000 to 160,000 ounces of gold.

DARASUN MINE – Chita Region, Russia

During the second half of 2005, Highland Gold completed commissioning of the Darasun mill and focused on strengthening overall mine supervision, particularly in the underground and open pit operations where poor adherence to mining standards and controls resulted in excessive unreported dilution and very poor mill reconciliations. For this reason, representations on grades and recovery rates at Darasun will be limited until the mill reconciliations improve. To improve these reconciliations, more effective sampling procedures have been introduced and are being strictly enforced by new mine management in co-operation with external consultants. At the open pit mine, excessive dilution and low equipment availability led to a decision at the end of November to suspend open pit mining pending an improved mine plan. Again, new management has been working with external consultants to optimise the open pit based on a newly developed block model and taking higher gold prices into account. Stripping and mining works at the open pit were re-started in January.

Mill throughput during the second half of 2005 totalled 119,835 tonnes of ore and was affected by shut downs throughout the period while new equipment was installed and other process improvements were made. The mill has run stably since January 2006.

Based on positive results witnessed in January, management expects that this trend will continue through the year and that production at Darasun will reach a range of 50,000 to 55,000 ounces of gold.

DEVELOPMENT PROJECTS

Highland Gold has three projects at the feasibility study stage and a growing portfolio of exploration projects, which together are expected to drive the Company’s future growth.

TASEEVSKOYE – Chita Region, Russia (HGM – 50%; Barrick – 50%)

During the second half of 2005, Highland Gold formally transferred the Taseevskoye license to OOO Taseevskoye, a company that will be jointly owned with Barrick. The Joint Venture also established an office in the town of Baley to manage community relations and project activities on a day to day basis.

The key project related events during the period involved scoping work and planning for 2006.

The Joint Venture has completed an internal scoping study, the results of which have been sent to Aker Kvaerner for further definition. Specifically, Aker Kvaerner has been instructed to provide a more detailed level of scope based on throughputs ranging from 2.1 – 4.2 million tonnes of ore per year using a process flow sheet based on either a direct leach or pressure oxidation. A budget for 2006 of $21 million has been approved by the Joint Venture partners. This budget includes funding for an exploration program, the initiation of pit de-watering, as well as the completion of a pre-feasibility study.

In addition to the Sredne Golgotayskoye acquisition made in the first half of 2005, Highland Gold acquired the rights to develop and re-process tailings that were initially accumulated from the Baley ZIF-1 processing plant. Fifty percent of this acquisition is being offered to Barrick and the rights are expected to be incorporated into the Tassevskoye Joint Venture. These tailings are physically located approximately 2 kilometres from the Taseevskoye pit and contain an estimated gold resource of 485,000 ounces at a grade of 1.02 g/t, and can potentially support early production at the Taseevskoye project.

MAYSKOYE – Chukotka Region, Russia

During the second half of 2005, Highland Gold and its consultants continued to advance work on the Mayskoye feasibility study. This work included the delivery by Micon International of a JORC resource of 2.6 million ounces in the measured and indicated categories and a further 4.8 million ounces in the inferred category. As this resource breakdown differs from recent Russian estimates that formed the basis of a one million tonne per year mining operation, the Company is evaluating the option of developing the project in two phases, with an initial production phase of approximately 500,000 tonnes per year. Highland Gold has also initiated a systematic drilling program that is twinning several existing drill holes and providing in-fill drilling to upgrade a portion of the near surface inferred resource. The drilling works are being performed by Highland Gold drill crews with two new drill rigs. In addition, a channel sampling program has collected samples from accessible ore bodies in the existing underground development at Mayskoye. All assays will be provided to Aker Kvaerner of Toronto, who has recently been appointed to manage the metallurgical components of the feasibility study.

In addition, Highland Gold has been actively pursuing alternatives to improve the project through optimisation of the June 2005 Russian feasibility study. This work includes an investigation of the benefits of locating the energy intensive bio-leaching plant in the town of Komsomolsk to take advantage of access to the existing power grid. We are also conducting tests on the use of XRay separation to limit the amount of waste introduced to the mill and tests on the use of dry tailings that can substantially reduce the expenses required for tailings dam construction.

Finally, during the second half of 2005, Highland Gold made the final instalment payment of $11.5 million relating to the 2003 acquisition of the Mayskoye project.

NOVOSHIROKINSKOYE – Chita Region, Russia

During the second half of 2005, Highland Gold has been actively pursuing alternatives to improve the Novoshirokinskoye project through internal optimisation and external review of the June 2005 Russian feasibility study. The key directions of the internal optimisation work have been oriented towards investigating the export potential for both lead and zinc concentrates. By exporting concentrates for the initial years of operation, the Company can begin generating cash flows while deferring significant capital expenditures relating to the Kivcet smelter. The external review of the project is being conducted by SNC Lavalin from Canada and Forni Engineering from Italy.

Finally, Highland Gold acquired the rights to develop and mine the Vozdvizhinskoye lead-zincsilver deposit, a formerly operating underground mine and milling operation located 60 kilometres from Novoshirokinskoye. The mine began operation in 1958 and was closed in 1995, although the mine’s resources had not been fully depleted. Remaining C1 Russian resources are 850,000 tonnes of ore grading 5.0% lead, 4.6% zinc, 100 g/t silver and 0.4 g/t gold.