High River Gold Mines Ltd. (TSX: HRG) ("High River", the "Company") is pleased to announce its 85%-owned Russian subsidiary, OJSC Buryatzoloto ("Buryatzoloto") through a subsidiary, has entered into an agreement to acquire a 50% equity interest in LLC Gazteck Industry ("Gazteck"), a private Russian company holding the licence for the high grade Prognoz Silver Project. The Prognoz Project is one of the few undeveloped, significant, silver-rich projects in the world. The agreement has been approved by the Board of Directors of Buryatzoloto and the transaction has received approval from the Anti-Monopoly Authorities of the Russian Federation. The Prognoz Project was the target of extensive exploration by the Russian State exploration company during the period 1987 through 2000, which included 317 trenches (17,756 metres) and 89 diamond drill holes (17,805 metres). Based on the results of this exploration and using the Russian Classification System for calculating mineral reserves and resources, the Prognoz deposit contains published:

Historical Prognoz Reserves and Resources

Tonnes (t) Grade (g/t) Contained Silver (oz)
Historical C2 Reserves 4,989,000 875.5 141,000,000
Historical P1 Resource 2,346,399 708.3 53,000,000

These estimates have been calculated according to standard Russian industry practice and do not conform to the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards and definitions for resource estimates, as set out in Canadian National Instrument 43-101 (NI43-101).

Gazteck acquired this project in 2005 through a state auction and the license was issued in October 2005. The exploration-mining license, covering 56 square kilometres, is valid for 20 years and allows the holder to carry out all exploration and mining activities.

Under the terms of the transaction, Buryatzoloto has acquired the interest and operatorship for a purchase price of US $7.3 million and settlement of certain Gazteck liabilities, bringing the cost of the transaction to US $22 million. The vendor has retained an option to re-purchase the Buryatzoloto interest, at a substantial penalty, with Buryatzoloto having the right to cancel this vendor option for an additional payment. Buryatzoloto is effectively paying approximately US $0.31 per C2 reserve ounce of silver or US $0.23 per ounce including the P1 values; if Buryatzoloto cancels the vendor re-purchase option the effective per ounce cost would be US$0.43 and US $0.31, respectively. Buryatzoloto has arranged the necessary funding with a Russian bank to finance this acquisition.

The Prognoz Silver Project is located in the central portion of the Republic of Sakha (Yakutia) of the Russian Federation, approximately 450 kilometres north of the capital city of Yakutsk. The property is in a mountainous area comprised of gently rolling terrain with elevations ranging from 300 metres to 1100 metres above sea level.

Geologically, the property is located within the Verkhoyansk mobile belt, a fold-and-thrust belt that forms part of one of the earth's great orogenic systems. The district where the Prognoz deposit is located covers the areas of junction of the Sartang sinclinorium at the west with the Adychan fold-and-block dome to the east. The boundaries of the majority of the mineralized deposits are determined by the intersection of longitudinal and lateral faults.

All of the mineralized zones on the Prognoz property are considered to be mineralized fracture zones which are identified as veins of quartz-carbonate-sulphide-sulphosalt composition. More than 30 mineralized fracture zones distributed between four areas have been discovered within the Prognoz project area where the host rocks are sandstone.

The Prognoz project has an extensive vein system containing silver mineralization with lesser amounts of lead and zinc mineralization and is considered to have significant economic potential. A great deal of the previous work was focused on two zones, the Glavnaya and the Boloto Zones. These two zones are extensive but remain open along strike, on surface and at depth. In addition, there are some 28 other geochemical/geophysical anomalies and veins which are known to exist in relatively close association with the two main zones but where limited exploration has been conducted.

The Glavnaya Zone is the largest and richest mineralized zone and has been traced with trenches and drill holes over 4060 metres with an inferred strike length of 5110 metres.

The vein is steeply dipping (700-800) to the south and reverses direction on the eastern flank. Drilling has traced the vein from surface to a depth of between 200 and 600 metres. The width of the vein varies between less than a metre to 25 metres with an average width of between 2 metres and 4 metres.

The following table tabulates the characteristic grade ranges for silver, lead and zinc for the Glavnoye deposit:

Grade Maximum Minimum Average
Silver (g/t) 10,155