High River Gold Mines Ltd. announced Wednesday 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

Historical C2 Reserves:
4,989,000 (t), grading 875.5 (g/t), for 141,000,000 oz of contained silver

Historical P1 Resource:
2,346,399 (t), grading 708.3 (g/t), for 53,000,000 oz of contained silver

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.

Below are the average grades for silver, lead and zinc for the Glavnoye deposit:

Silver, averaging 930.00 (g/t)
Lead, averaging 3.30%
Zinc, averaging 0.68%

The Boloto Zone hosts the second most important deposit on the Prognoz property based on Russian records. The Boloto deposit is located in the central part of the mineralized area south of the Glavnoye deposit. It has been traced along strike for 2400 metres and remains open along strike.

The down dip extension as determined by drilling so far is 320 metres. The thickness along strike varies from 0.2 metres to 7.2 metres and down-dip varies from 0.2 metres to 3.7 metres. The deposit is steeply dipping northward between 50 degrees and 80 degrees.

Below are the average grades for silver, lead and zinc for the Boloto deposit:

Silver, averaging 451.30 (g/t)
Lead, averaging 2.04%
Zinc, averaging 0.87%

Limited exploration has been conducted on the 28 other anomalies and veins known to exist in proximity to the Glavnaya and Boloto Zones.

At the Prognoz property, silver is associated with siderite-ankerite-quartz veins and breccia zones. Lead is one of the components of the mineralized zones with an average grade of 2.9%. Zinc is associated with the lead of the galena-sphalerite and sulphide-sulphosalt mineralization. The average zinc grade within the deposit is 0.7% based on the sampling.
Metallurgical testing

No metallurgical testing has been conducted recently; however, in 1988 the state mining-geological company, Yangeologia, collected a 358 kilogram sample composed of channel samples from trenches from the Glavnoye deposit. The sample was composed of veinlets – dissemination and breccia types of silver-lead mineralization. The metallurgical test work was carried out at the Scientific Research Institute in the City of Magadan.

The Research Institute tests included crushing and grinding the sample and silver recovery by gravity separation, flotation and cyanide leaching.

According to historical metallurgical testwork, gravity and flotation recovered 92.3% of the silver, 89.2% of the lead and 73.0% of the zinc. Recovery of silver can be increased by an additional 5.7% through cyanidation of the flotation concentrate.
Aggressive exploration planned

The geological potential of the Prognoz property is excellent; further exploration is expected to significantly increase the silver reserves and resources. An aggressive three year exploration programme is being undertaken by Buryatzoloto and its partner with a total budget of approximately US $15 million. The initial phase, to be carried out in 2006, plans for an expenditure of approximately US $6 million and consists of trenching and diamond drilling to confirm, upgrade and expand the known Russian classified resources contained within the two main zones. The first phase will also include a trenching programme and limited drilling on the secondary zones to determine the nature and extent of the mineralization in these areas. The second phase of exploration in 2007/2008 will be dependent on the results of the initial phase. The objective of the two-phase exploration programme is to increase the total resource to 275 – 325 million ounces of silver.
Independent assessment

Prior to entering into the agreement with Buryatzoloto, the vendor arranged the services of Micon International Limited ("Micon") to review the project. Micon visited the Prognoz property in October 2005. Micon reviewed and analyzed data provided by the vendor, its consultants and previous operators of the property and has drawn its own conclusions therefrom, augmented by its direct field examination. Micon has not carried out any independent exploration work, drilled any holes or carried out an extensive programme of sampling and assaying on the property. However, during the field visit Micon collected eight grab/chip samples from the Prognoz project which confirmed the presence of the relevant mineralization at the site.
About High River

High River is currently constructing two open pit gold mines which are scheduled to commence production in the first half of 2007, the Taparko-Bouroum Project in Burkina Faso and the Berezitovy Project in Russia. Annual gold production from Taparko-Bouroum is planned at 100,000 ounces in year one increasing to over 140,000 ounces in the third year of operation, with annual production from Berezitovy averaging more than 100,000 ounces. Combined with gold production from High River's 85%-owned Russian subsidiary, OJSC Buryatzoloto, High River's attributable annualized gold production rate is expected to exceed 350,000 ounces by mid-2007, establishing the Company as a mid-tier gold producer.