re: Ann: Chalice and ENAMCO Execute Sharehold... Chalice Gold,...

re: Ann: Chalice and ENAMCO Execute Sharehold... Chalice Gold, Eritrea sign $32 mn agreement on Zara gold project

For junior Chalice Gold Mines a significant pay-day is now within its sights, as it and the Eritrean government sign a shareholder agreement over the Zara gold project.

Saturday , 30 Jul 2011



The Eritrean government, through its state mining company ENAMCO, has six months to pay Chalice Gold Mines (TSX: CXN, ASX: CHN) $32 million for its stake in the Zara gold project in northern Eritrea now that the two have signed a shareholder agreement governing their partnership.

The shareholder agreement builds on terms Chalice Gold and ENAMCO agreed to a month and a half ago when they set the purchase price for ENAMCO's 30 percent participating interest in the Zara project. The Eritrean government signaled in mid-November 2010 it intended to exercise its right to full, 40-percent participation in the mining project.

Under Eritrea's mining laws ENAMCO automatically gets a 10 percent free carried interest - that is a stake for which it pays nothing - and can then choose to pay for up to 30 percent more in any mining project, with the stipulation it be responsible for its share of project costs.

ENAMCO will owe a third of project costs at Zara, where, for the Koka deposit, Chalice Gold has outlined 840,000 ounces gold @ 5.3 g/t in JORC-compliant indicated and inferred resources and completed a feasibility study.

In its feasibility study Chalice Gold outlined an open pit mine that would produce 104,000 ounces gold a year over a seven-year mine life. With gold set at $900 per ounce, Chalice Gold estimated Zara's net present value at $99 million, after-tax and discounted by five percent.

Chalice's partnership with ENAMCO follows in the footsteps of Eritrea's pioneering miner Nevsun and its producing Bisha copper-gold-silver-zinc mine. At Bisha ENAMCO also took a 40-percent stake (10-percent free carried), though the value of its 30 percent participating interest there has yet to be decided.

Unlike in Chalice Gold's case and the Zara agreement, back in 2007 Nevsun and ENAMCO decided that the price of the government's stake in Bisha would be decided after first gold shipment. With commercial production at Bisha having begun earlier this year, Nevsun had set June 30 as the deadline for a decision.

Nevsun subsequently delayed that decision without setting a new deadline, however. It stated recently that it and ENAMCO are reviewing independent reports on the final pricetag, which the Eritrean government will pay with cashflow from the Bisha mine.