Chalice Gold Mines Strikes Deal with Eritrea

Signing ceremony of the agreement between Zara Mining Share Company (ZMSC) and Eritrea on the development of the Zara project

By Proactive Investors,

Chalice Gold Mines (ASX:CHN)(TSX:CXN) has moved closer to development of its Koka Gold Mine at the Zara Project after executing an agreement with the Government of the State of Eritrea.

Chalice’s 60 per cent-owned Eritrean joint venture company, Zara Mining Share Company (ZSMC), struck the deal with Eritrea which governs the future development and operation of the Zara Project.

ZMSC has also applied for a Mining License for a period of 18 years, which the Government has advised will be issued shortly.

Tenders for the construction of the plant and mine are being received and assessed, with final selection of the contractor expected to occur before the end of the year.

This should enable Chalice to move ahead with financing and development of the high-grade Koka Gold Mine at the Zara Project.

With the granting of all necessary permits and licences and other such matters, this could enable Chalice to begin production at Koka in late 2013.

Koka has a Probable Mineral Reserve of 760,000 ozs at a grade of 5.1 g/t gold and an Indicated Mineral Resource of 840,000 ozs at a grade of 5.3 g/t gold.

The project feasibility study is based on annual average production of approximately 104,000 ounces of gold per year at a cash cost of US$338 per ounce of gold.

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ERITREA AND ZARA MINING SHARE COMPANY CONCLUDE AGREEMENT

By Shabait, 1 November  2011

The Eritrean government and Zara Mining Share Company  today signed agreement  at Denden Hall here in the capital.

The agreement was signed by the Minster of Energy and Mines, Mr. Ahmed Haj Ali, and the Chairman of the Board of Directors of Zara Mining Share Company, Mr. Thimothy Gorder.

Speaking on the occasion, Mr. Ahmed Haji Ali said that recently Bisha managed to develop and commence commercial production, while Sundridge is doing pre-feasibility and feasibility studies for the Asmara project, and South Boulder Mines announced the completion of a scoping study for the Colluli potash deposit. The Minster further explained that the signing of the latest agreement for a Zara mine is a wonderful and important addition to mining sector in the country.

The Chairman of the Board of Directors in Zara Mining Share Company, Mr. Thimothy Gorder, said that given the significant progress already made and the strong support afforded to the project by the Eritrean government, construction will get underway in the first half of next year. Gold production is also targeted to commence in late 2013.

Zara Mining Share Company is jointly owned by the Eritrean National Mining Corporation (ENAMCO) and the Australian Gold Mining Company, Chalice.

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CHALICE TAKES KEY STEP TOWARDS GOLD PRODUCTION WITH SIGNING OF ERITREAN MINING AGREEMENT

ASX Announcement, 2 November 2011

Chalice Gold Mines Limited (ASX:CHN)(TSX:CXN) is pleased to announce that its 60 per cent-owned Eritrean joint venture company, Zara Mining Share Company (“ZSMC”), has executed a Mining Agreement with the Government of the State of Eritrea, paving the way for financing and development of the high-grade Koka Gold Mine at the Zara Project.

The Mining Agreement contains the provisions governing the future development and operation of the Zara Project. ZMSC has also applied for a Mining License for a period of 18 years, which the Government has advised will be issued shortly.

Tenders for the construction of the plant and mine are being received and assessed, with final selection of the contractor expected to occur before the end of the year. Subject to financing, granting of all necessary permits and licences and other such matters, this could enable Chalice to begin production at Koka in late 2013.

Koka has a Probable Mineral Reserve of 760,000 ozs at a grade of 5.1 g/t gold and an Indicated Mineral Resource of 840,000 ozs at a grade of 5.3 g/t gold. The project feasibility study is based on annual average production of approximately 104,000 ozs of gold per year at a cash cost of US$338 per oz of gold.

In June 2011, the Government of Eritrea, through the Eritrean National Mining Corporation (“ENAMCO”), purchased a 30 per cent participating interest in the Zara Project for US$32 million plus approximately US$2 million for the reimbursement of costs. The proceeds are due to be paid by ENAMCO prior to January 27, 2012.

INVESTMENT HIGHLIGHTS

  • High grade gold open pit
  • Mine permitting nearing completion
    – Low cash costs of $338/oz of gold
    – 7 year mine life at >100,000 oz average production per year
  • Large underexplored ground position in the Arabian Nubian
    Shield
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