Highlands Pacific believes the appointment of John Gooding as managing director will help it reach its potential after a year of mixed results.

After the excitement of the commissioning of the Kainantu Gold Mine and the formal launching of the Ramu development program there was then frustration and disappointment over operational problems and the slow ramp-up of gold production at Kainantu.

At the company's recent annual general meeting shareholders were told that the Kainantu issues are being confronted and addressed and that the appointment of John Gooding, an experienced mining engineer, will help in this process as his wide underground mining experience is utilized.

To cover additional costs incurred at Kainantu, Highlands recently raised a further US$20 million as new equity with associated options, from Resource Capital Fund IV. This equity injection, when combined with the re-scheduled gold forwards, is giving the company the breathing space it needs to get the Kainantu performance back on track.

The Highlands Pacific bankers have also agreed to re-schedule the gold forward sales tied to the Kainantu production. Led by ABN AMRO, the banks worked with Highlands to restructure the forward sales program out to 2010, relieving much of the immediate pressure.

One aspect of the rescheduling of the gold forward sales is that it recognizes that the gold resource base has been increased substantially.

The Kainantu gold resource is estimated to contain 2 million ounces of gold and Highlands Pacific intends to step up exploration within the mine area at Kainantu and on other gold-bearing structures within the goldfield to further extend mine life as well as increasing the level of production.

Highlands Pacific has an interest in the Ramu nickel-cobalt project, also in PNG. The senior partner and operator of the project, China Metallurgical Construction Corporation (MCC), is keen to bring on production at Ramu as soon as possible and despite the very tight timetable, MCC is targeting a 2009 start of nickel and cobalt production.

Good progress has also been made on the Frieda River copper project, where Xstrata has assumed management of all operations, following its earlier takeover of Falconbridge. Xstrata has exercised its option to earn 73% equity in the Frieda River project but has deferred the exercising of the Nena option. Especially pleasing from Highlands' standpoint was the decision by Xstrata to spend US$12 million during the current year at Frieda River to carry the project forward to the point of identifying the appropriate project execution model, to enable the project to be advanced into pre-feasibility.

Given the shortage of world-class copper deposits identified for development, the prospects for Frieda River have improved markedly in recent years.