Highlands Pacific Limited : Chairman's Address

16 May 2013

HI G HL ANDS P ACI F I C L I M I T E D A R B N 07 8 11 8 65 3

Incorporated in Papua New Guinea

Registered Office Registered Office in Australia

PO B ox 1486, P ort Moresby N CD 121 GP O B ox 3086, Brisbane QLD 4001

Papua N ew Gui nea Australi a

Level 1 A ll otment 6, S ecti on 58 Level 4, 167 Eagl e S treet

Sir H ubert Murray Hi ghway Bri sbane Ql d 4000

Boroko NC D Australi a

Papua N ew Gui nea

T el ephone: ( 675) 323 596 6 T el ephone: ( 617) 3239 78 00

F a csi m i l e : ( 675) 323 5990 F a csi m i l e : ( 61 7) 3221 6727

W ebsi t e: w w w . hi g hl a nd sp aci fi c .c o m E ma i l :i nf o@ hi ghl a nds p aci fi c. co m
The Companies Announcements Office Mr Vincent Ivosa
The Australian Stock Exchange Limited Port Moresby Stock Exchange
20 Bond Street PO Box 1531
Sydney NSW 2000 Port Moresby NCD Australia Papua New Guinea
Dear Sirs

RE: ANNUAL GENERAL MEETING

As required by Listing Rule 3.13.3, attached is a copy of the Chairman's Address, which will be delivered at the Annual General Meeting of the Company being held today at 10.00am in Port Moresby, Papua New Guinea.
Yours faithfully

16 May 2013

C H AI R M AN ' S AD D R E SS

Good morning ladies and gentlemen. I am very pleased you have joined us at the 2013 Annual General Meeting of Highlands Pacific Limited. I would like to take this time to review the events since our last AGM, the position of our company today and how your board sees the future unfolding.
Let me start with our exploration campaign at Star Mountains. We have in our programme to date spent over US$25 million identifying and testing a number of exploration targets in our exploration ground in the Star Mountains. We have 17 targets identified and have conducted preliminary drilling at six of them. The majority of the targets have produced shows of porphyry style copper gold mineralisation. At Olgal, 12 of the 14 holes encountered copper and gold mineralisation with two significant successes. At Futik, two of the four holes encountered gold and copper mineralisation, the Rattatat prospect showed narrow intercepts of porphyry copper style mineralisation and one of the two holes drilled at Kum Kom encountered a significant intercept of skarn type alteration. Our Managing Director will talk more about these results in his presentation at the end of this meeting. With force majeure conditions requiring suspension of the Star Mountains exploration programme, we are now taking stock to determine the most appropriate further steps to explore our licences, which cover a total of 515 square kilometres and are situated only 25 kilometres from the Ok Tedi mine.
Commissioning of the Ramu nickel cobalt mine has continued, with 8,230 tonnes of nickel having been produced to date in a mixed hydroxide product. Mr Gooding will elaborate in his presentation on the ramp up of production from the Ramu project.
At Frieda River, I reported to you last year that Xstrata Copper ("Xstrata") had agreed to undertake, during the
2012 calendar year, further studies to optimise the project and its capital and operating costs, on the basis that Xstrata carries Highlands' share of the additional cost until the project is ready to develop, with repayment ultimately from operating cash flow from the project. As recently reported, Highlands has formed the view that the study work completed to date does not meet all of the obligations set out in the joint venture agreement that Xstrata Copper undertook to satisfy and that more work is required, while Xstrata has expressed the view that the study work it undertook is sufficient. I regret I cannot tell you today that we have a satisfactory resolution of this, but the company is exploring all options, including continuing discussions with Glencore Xstrata Inc., which has recently merged with Xstrata, with the objective of ensuring that necessary further work is undertaken so as to produce a fully-optimised feasibility study and, hopefully, permit a decision to undertake the development of this world class copper gold resource in a timely manner.
On the corporate front, we were very pleased to announce on the 25th of June last year that Highlands had entered into a share placement agreement with PNG Sustainable Development Program Limited ("PNG SDP"), under which PNG SDP subscribed for approximately 103 million shares to raise US$15 million and augment the cash reserves from which the Star Mountains programme has been funded. We continue to welcome and encourage the support of this very large investment company that has strong ties in PNG and is the majority shareholder of Ok Tedi Mining Limited.

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At this time, Highlands Pacific Limited sits at the threshold of great opportunities. I wish I could tell you we had crossed that threshold, or when we were going to do so in the immediate future; but, alas the world is not so simple, as my following comments will demonstrate.
At our Board meeting yesterday, the Board reviewed a report from our Managing Director on his observations from a visit last week to the mine site at Kurumbakari and the processing facilities at Basumuk, and a joint venture meeting with MCC. While we remain confident that Ramu can fully realise its potential, MCC's previous advice that name plate capacity will be achieved by the end of the year appears to us to be challenging.
On Frieda River we have to work our way through the current position. This needs us to seek to reach agreement with Glencore/Xstrata on how to address the challenges that the project faces with the present study, so as to fully explore all opportunities for reducing the capital cost of mine development and, just as importantly, to determine Glencore's level of desired future involvement in the project. At the same time we are promoting discussions with the PNG government as to its involvement in the project, as it can take up to a
30% interest in Frieda River. We are also seeking to ensure that what we and our technical adviser deem to be the necessary further commercial, technical and costing work associated with finalisation of the appropriate development model, mine plan, concentrator and waste storage options, are done expeditiously, while we await the renewal of licences due in May and November, and then seek to advance further discussions with the government and other stakeholders on necessary environmental and regulatory approvals.
Clearly this is not all going to fall into place overnight but Highlands Pacific, in conjunction with technical and financial advisers, is ensuring that no stone is left unturned to seek an early but optimal resolution of these issues for the benefit of shareholders and for PNG. The work we have done at Star Mountain is enough, we believe, to indicate that we have an exciting copper-gold mineralised province worthy of more detailed and focussed drilling and exploration. Bearing in mind the cost involved with defining and proving up a potentially commercial project at this remote location, we believe it now appropriate to look to all available options for the further exploration of this province, as clearly Highlands Pacific will not be able to undertake all of this on its own. It makes good commercial sense for Highlands to have a joint venture partner take what Highlands has discovered at Star Mountains and to carry this through the expensive next stage of resource definition and mine development decision making, as was done with Frieda River.
Highlands Pacific has a long history in PNG and I am proud of the company's level of engagement with and concern for the welfare of the local community in which it operates. I am also proud of the way we have contributed technically and commercially to projects in which we are involved but we don't control. In my opinion, this is a strong point of differentiation of Highlands as a company from other small to medium size resource companies, which are involved with major resource projects, in that we are truly punching above our weight. The influence we can bring to bear has been in my view to the clear advantage of Papua New Guinea and its people. I am also proud of my Board. The Non-Executive Directors all share in common a prior involvement in one form or another with this country, a long history of successful involvement in the resources industry and a passion and concern for the successful development of the company, and the consequent improvement of PNG and its people.

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I would like to thank your Managing Director, John Gooding, Chief Financial Officer and Company Secretary, Craig Lennon, and the staff of Highlands Pacific for their continuing dedication to the advancement of the fortunes of this company. With equity markets fleeing from resources stocks in general and from small resource exploration companies, in particular, and with some of the challenges we have to move our existing assets forward, times are tough for all of us. The share price tells us that, as if we needed reminding.
But with a fair wind, the dedication and determination of this company to move forward on each of its projects can when the time is right result in a quick re-evaluation of your company. Thank you, shareholders, for your continued support. While I remain as your chairman you can be assured I will leave no stone unturned to seek to advance to this outcome.
I would like to close by referring to the words of George Bernard Show who said, in lines that are often truncated and lose their true meaning - "life was not meant to be easy, but, take courage, it can be delightful". This is perhaps a motto for all of us in Highlands Pacific to adopt.

John Gooding or Craig Lennon
Highlands Pacific - 07 3239 7800

Simon Jemison
c/. Collins St Media - 03 9224 5319

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Market Capitalisation ~ A$65m
Cash on Hand (31/3/13) A$10.3m

Ken MacDonald, Chairman

John Gooding, Managing Director

Mike Carroll

Dan Wood

Drew Simonsen

Bart Philemon

Craig Lennon, CFO &Co.Sec

Larry Queen, Chief Geologist

Peter Jolly, GM Projects

Ron Gawi, GM Port Moresby

John Gooding or Craig Lennon
Highlands Pacific - 07 3239 7800

Simon Jemison
Collins St Media - 03 9224 5319

The resources, reserves and exploration results contained in this document are reported under the

2004 edition of the JORC Code

www.highlandspacific.com

Highlands Pacific is a PNG incorporated and registered mining and
exploration company listed on the ASX and PoMSoX exchanges. Its major development assets are the US$1.5bn Ramu nickel cobalt project and the Frieda copper gold project; with exploration in progress on the Star Mountains (Nong River, Mt Scorpion, Munbil and Tifalmin) licenses approximately 20km north of the Ok Tedi mine. Highlands also has exploration tenements in the Wau/Bulolo area, close to the new Hidden Valley and Wafi gold projects and Sewa Bay.

The Star Mountains exploration tenements, which include Nong River
EL1312, Mt Scorpion EL1781, Munbil EL2001 and Tifalmin EL1392, are located approximately 20km north of the Ok Tedi mine, in the West Sepik Province, PNG. They lie within the highly prospective New Guinean Orogenic Belt, which hosts the Grasberg, Ok Tedi, Porgera and Hidden Valley mines, as well as the Frieda deposit. An exploratory drilling programme is underway at Star Mountains.

The Ramu nickel mine is located 75km west of the provincial capital of
Madang, PNG. The mine is currently being commissioned with the first shipment of product having been completed in November 2012. Highlands 8.56% interest in Ramu will increase to 11.3% at no cost to Highlands after repayment of the project debt (estimated to take 8 years). From commissioning, Highlands has access to its pro-rata
8.56% share of Ramu's post-debt servicing, net cash flow. Highlands also has an option to acquire an additional 9.25% interest in Ramu at fair market value, which could increase the company's interest in the mine to 20.55%, if the option is exercised.

The Frieda copper gold project is located 175kms north-west of the
Porgera gold mine and 75km north-east of the Ok Tedi mine. The project owners are Xstrata (manager) and Highlands.

* Subject to the right of the Independent State of Papua New Guinea to acquire up to a 30% equity interest in any mining development in the country.

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