Ann: Koka Gold Deposit Feasibility Study Update , page-2

re: Ann: Koka Gold Deposit Feasibility Study ...
a good progress

Chalice Gold Mines Limited (ASX: CHN) is pleased to provide an update on progress
of the Feasibility Study for the high-grade Koka Gold Deposit, part of its 80%-
owned Zara Gold Project in Eritrea, East Africa.
The Feasibility Study, which is scheduled to be completed by July 2010, follows the
Scoping Study completed in October 2009 (see ASX Release 30 October 2009).
The Scoping Study was an interim analysis designed to provide guidance on the
financial and technical viability of the Koka Gold Deposit based on the data
available at the time (to an accuracy of +/- 35%) and identify the key steps required
to progress the development of a profitable mining operation.
As part of the Scoping Study, Terms of Reference for the Social & Environmental
Impact Assessment (SEIA) for the Koka Deposit were developed and submitted to
the Eritrean Government for feedback as part of an iterative process for completion
of both the Feasibility Study and SEIA leading to Mining License and Project
Approval.
In recent months work has progressed rapidly on several key components of the
Feasibility Study including completion of:

5,000 metres (30 holes) of in-fill diamond drilling to confirm the high-grade
mineralisation at Koka and provide the basis for a revised resource estimate.
Overall, these additional drill holes have increased the level of confidence in
the resource and enabled the development of a better understanding of the
structural controls on mineralisation;

Geotechnical drilling and test work which has confirmed that the proposed pitwall
angles can be steepened from those used in the Scoping Study;

Cost benefit analysis of Contract Mining versus Owner Mining which has
demonstrated Owner Mining will significantly reduce the life of mine
operating costs. The cost of the mine fleet (estimated at approximately US$20
million) will be incorporated in the Project Capital Cost;

Detailed metallurgical test work which indicates that the plant design can be
simplified to single-stage crushing followed by a single-stage SAG mill, with
recoveries in excess of 95% and very low reagent consumption. In addition, a
Counter-current Decantation (CCD) circuit for removal and recovery of cyanide
from tailings is proposed in place of cyanide destruction. These changes will
result in reductions in operating costs for these components of the Project;
INVESTMENT HIGHLIGHTS
Feasibility study scheduled for
completion by July, 2010
Medium term production
potential
Large underexplored ground
position with potential for
discovery of additional resources
www.chalicegold.com
Chalice Gold Mines Limited, Level 2, 1292 Hay Street, West Perth, Western Australia T: +618 9322 3960 F: +618 9322 5800 E: [email protected]

Identification of underground water supplies by exploratory hydrological drilling in the nearby
Zara Valley. The water supplies will be more than adequate for the project development,
therefore removing a major risk for the Koka Project; and

The near-completion of environmental and socio-economic field studies with preparation of
reports for incorporation into the SEIA, which is now well advanced.
The Koka Deposit Feasibility Study is on track to be completed in July 2010.