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. Last Updated: 07/27/2016

Highland Unit Under Review

Government inspectors said Wednesday that they had opened a probe into Maiskoye, a unit of Highland Gold Mining working at a deposit of the precious metal in the Chukotka region in the Far East.

The "spot check" was started after the Natural Resources Ministry's environment watchdog received information that the unit might not be fulfilling its license obligations, the ministry said in a statement.

Highland Gold, the country's third-largest gold producer, acknowledged that it had not fulfilled its obligations but said it would remain "committed" to the project after investing upward of $100 million in it.

"The notice from [the agency] refers to the start of an inspection and [Highland] has not been found to be in breach of its license terms," managing director Henry Horne said in a statement late Wednesday. "We will be responding to any requests made by the agency."

Under the license Highland acquired in 2003, the Maiskoye deposit is to produce 1,000 kilograms of gold in 2007. But following numerous delays due to additional tests and reconstruction, the mine is only now undergoing a feasibility study and is not schedule to go into production until 2010.

The state's environmental watchdog has composed a list of eight companies, including Highland, that have overstated their reserves or not followed through on their production commitments and pledged to review their licenses.

"It has nothing to do with environmental protection," said Rob Edwards, metals and mining analyst at Alfa Bank. "These guys are running all over the country looking at people's licenses."

Horne said his company was renegotiating the license terms and will meet next week with a Chukotka deputy governor to discuss the future of the project.

Shares of Jersey-based Highland Gold dropped 8.5 pence, or 6.9 percent, to 115 pence in London, their lowest closing price since they started trading in 2002, valuing the company at ?224 million ($452 million).

MT, Bloomberg