A US$6.5 MILLION drilling campaign commenced at Star Mountains copper gold project led by joint venture partners Highlands Pacific and Anglo American Plc in April.

Drilling has commenced at the first hole, located at the Olgal prospect, but the initial campaign will involve four diamond drill holes, for a total 3,000 metres.

Managed by Highlands, the drilling campaign is expected to be completed by the end of September, with assay results from this first hole by the end of July.

Aimed at testing the first two priority targets identified through previous drilling by Highlands, the campaign follows an aeromagnetic survey carried out over the previous three months.

Highlands said an exploration camp has been established at Tifalmin, where an airstrip for fixed wing aircraft provides logistics support.

Highlands executed a joint venture and farm-in agreement with a wholly owned subsidiary of Anglo American during the March quarter with regards to Star Mountains.

Outlined in the agreement is a US$10 million payment made by Anglo American in two tranches of US$5 million, the first payment was received in February and the second payment is due in February 2016.

Phase one of the agreement outlines Anglo American can earn a 51 per cent interest in the joint venture by spending US$25 million on exploration over four years and declaring a 43-101/JORC compliant inferred recourse of 3 million tonnes of contained copper equivalent within five years.

Anglo American can move to an 80% interested as part of Phase two by completing and funding a bankable feasibility study within 15 years of the execution of the agreement.

Highlands reported Anglo American will provide the company with up to US$150 million in project development funding as a deferred free-carry following completion of the bankable feasibility study.

Highlands will continue to manage the project, but Anglo American will have the right to take over management when it has invested US$25 million in project expenditure.

The Ramu nickel project, which Highlands currently holds an 8.56% interest in, continued to ramp up towards full capacity during the March quarter.

Basamuk process plant on the north coast of PNG achieved record performance, with ore processed increasing 11% compared with the prior December quarter, resulting in a throughput rate of 79% of nameplate.

Highlands said throughput continues to improve steadily and is on track to achieve 83% of nameplate capacity in the current year, rising to full capacity in 2016.

Total nickel produced in the quarter was 6,212 tonnes, up by 11% on the prior three month period.

Highlands said the increase following the installation of a fourth washing plant at the Kurumbukari mine site in December 2014, which boosted slurry production.

Improved operating efficiencies and continued de-bottlenecking of the plant resulted in increased production, Highland said.

Sales contracts are in place for the full 2015 forecast production with Chinese and international buyers.The PanAust-operated Frieda Rover copper-gold project, in which Highlands holds a 20% stake, continued to advance work on its feasibility study during the March quarter.

Highlands said a program of drilling was undertaken to provide additional geotechnical and hydrogeological data at the proposed locations for the integrated storage facility, process plant site and areas of the open pit.

PanAust is targeting completion of the feasibility study by the end of 2015.

Highlands said the quantity and quality of the existing geological data set for the Frieda River project deposit means no further resource drilling is required.

Cash at bank for the March quarter increased to $13.2 million from $8.7 million at December 2014, following receipt of US$5 million from Anglo American in February 2015 in relation to the Star Mountains project.

Highlands reported Trafigura Group announced in late March it had increased its holding in Highlands to 16.03%.