High grade gold intercepts at the Zara Project

PERTH, Western Australia, Nov. 7, 2011 /PRNewswire/ - Chalice Gold Mines (ASX: CHN; TSX: CXN) and its 60% owned subsidiary Zara Mining Share Company are pleased to report that further high-grade gold intercepts have been received from diamond drilling at the Koka South and Debre Konate prospects, located immediately south of the flagship Koka Gold Deposit at its Zara Project in northern Eritrea (see Figure 1).

Diamond drilling in the second half of 2011 (see Figure 2) has focused on testing of high priority targets within a 7.5km long corridor encompassing the Koka deposit (Probable Mineral Reserve of 760,000oz @ 5.1g/t gold), where Chalice and its partner ENAMCO are planning to commence development of an open-pit mine in early 2012 (ASX announcement - November 2, 2011).

The new results have confirmed and extended previously intersected high-grade mineralization at Koka South and identified a significant new mineralized zone at Debra Konate, ~2.5km south of the Koka Deposit.

Koka South

The Koka South prospect, which adjoins the Koka Main deposit to the south, was drilled in 2010, returning intersections of up to 1m at 92 g/t gold (see ASX announcement - July 21, 2010). A further 17 diamond drill holes were drilled in the current campaign for 3,034 metres (see Figure 3). High-grade gold intervals were encountered in most of the holes that intersected the prospective microgranite/porphyry host, including:

• 1m @ 168.8g/t Au from 144m (ZARD 219)
• 5m @ 86.2g/t Au from 98m including 1m @ 401g/t Au (repeat assay 341g/t) and 1m @ 25.7g/t Au from 113m (ZARD 221)
• 1m @ 44.4g/t Au from 145m (ZARD 202)*
• 4m @ 29.6g/t Au from 116m including 1m @ 101.6g/t Au (ZARD 215)
• 1m @ 15.9g/t Au from 164m (ZARD 209)*
• 8m @ 7.36g/t Au from 162m including 1m @ 20g/t Au and 2m @ 12.7g/t Au from 178m (ZARD 223)
• 3m @ 4.5g/t Au from 134m (ZARD 210)*
• 2m @ 13.1g/t Au from 53m and 1m @ 8.6g/t Au from 80m (ZARD 222)
• 2m @ 12.8g/t Au from 103m (ZARD 211)*
• 5m @ 5.9g/t Au from 138m including 1m @ 15g/t Au and 1m @ 13.1g/t Au (ZARD 217)
• 1m @ 11.7g/t Au from 148m (ZARD 213)
• 1m @ 16.5g/t Au from 32m and 3m @ 8.7g/t Au from 48m (ZARD 216)
• 2m @ 7.4g/t Au from 117m (ZARD 218)

*  Previously reported - see ASX announcement - October 26, 2011

A full tabulation of all significant assays is appended to this Announcement.

The latest results from Koka South confirm that previously reported high-grade mineralization extends to depth and remains open to the south and at depth (see Figure 4). Mineralization is hosted by a mixed microgranite and porphyry intrusive body which shows various degrees of brecciation and quartz stockworking. The mineralization is invariably accompanied by accessory amounts of galena and sphalerite (lead and zinc sulphides) which are increasingly recognized as critical pathfinder minerals in the Koka gold camp.

The widths and grades of mineralization encountered have the potential to provide a significant extension to the Koka deposit and will be explored by further drilling in the coming months.

Debre Konate

The previously undrilled Debre Konate prospect, located ~2.5km south of Koka, was initially targeted as an IP resistivity anomaly supported by minor artisanal workings and a significant gold and lead soil geochemical anomaly. ZARD 227 (see Figure 2) was the first hole drilled into this prospect and has intersected an extensive low-grade mineralised system grading 0.93g/t Au (uncut) over 199 metres (83m to  282m downhole).

The mineralization is hosted by microgranite with numerous zones of narrow, higher grade mineralization contained within the low-grade envelope.  Better intersections (uncut) included:

• 1m @ 38.4g/t Au from 146m
• 1m @ 10.3g/t Au from 180m
• 2m @ 14.7g/t Au from 223m
• 4m @ 21g/t Au from 256m

Assays are pending from two additional holes completed into this zone.

The intersection of significant new gold mineralization at Debre Konate is particularly encouraging, as this opens up a previously unrecognized zone of mineralization that appears to have potential for larger, bulk-tonnage styles of mineralization compared with the smaller-tonnage, high-grade style of deposit at Koka.

Chalice Gold's Managing Director, Dr Doug Jones, said the Company was very encouraged by the new results, which highlighted the prospectivity of the Zara Project and the potential for discovering additional Koka-style orebodies, as well as now a potential new style of bulk tonnage mineralization such as that found at Debra Konate.

"With project development and production now fast-approaching at Koka, we will increasingly turn our attention to exploration to continue to grow our resource inventory," Dr Jones said. "These results have confirmed two priority targets for follow-up drilling, and there are many more to follow next year and beyond."

Doug Jones
Managing Director

Table 1:  Significant Intercepts - Zara Gold Project

About Chalice
Chalice Gold Limited is an exploration and development company which owns a 60% beneficial interest in the high grade, open-pittable Koka Gold Deposit and a substantial, largely unexplored, land package in Eritrea. The Koka Gold Deposit consists of an "in-pit" JORC and NI 43-101 compliant Indicated Mineral Resource of 5.0 million tonnes grading 5.3 grams of gold per tonne, containing 840,000 ounces of gold. This Mineral Resource includes a Probable Mineral Reserve of 4.6 million tonnes grading 5.1 grams of gold per tonne, containing 760,000 ounces of gold. The Company is focused on developing the Koka Gold Deposit into a low cost gold mine which is expected to produce 104,000 ounces of gold per year over a 7 year mine life at an average cash cost of US$338/oz gold (refer to the 43-101 Technical Report on the Koka Gold Deposit, Eritrea dated 27 July 2010).  Chalice also holds a substantial strategic ground position of 1,372 km² consisting of licences along strike of the Koka Gold Deposit, and proximal to Nevsun's Bisha Mine. These exploration concessions host numerous, high potential, early and advanced stage gold and base metal exploration targets.  Chalice is undertaking a systematic exploration effort on these exploration concessions with the aim of discovering significant new deposits.

Competent Persons and Qualified Person Statement

The information in this report that relates to Exploration Results is based on information compiled by Dr Doug Jones, a full-time employee and Director of Chalice Gold Mines Limited, who is a Member of the Australasian Institute of Mining and Metallurgy and is a Chartered Professional Geologist. Dr Jones has sufficient experience in the field of activity being reported to qualify as a Competent Person as defined in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves, and is a Qualified Person under National Instrument 43-101 - 'Standards of Disclosure for Mineral Projects'. The Qualified Person has verified the data disclosed in this release, including sampling, analytical and test data underlying the information contained in this release. Dr Jones consents to the release of information in the form and context in which it appears here.

The Mineral Resource estimate was prepared by Mr. John Tyrrell who is a Member of the Australasian Institute of Mining and Metallurgy. Mr. Tyrrell is a full time employee of AMC and has sufficient experience in gold resource estimation to act as Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code)' and was a Qualified Person under National Instrument 43-101 - 'Standards of Disclosure for Mineral Projects' at the date the National Instrument 43-101 was filed with the Toronto Stock Exchange. Mr Tyrrell consents to the inclusion of this information in the form and context in which it appears.

The statement of Ore Reserves is based on information compiled by Mr David Lee who is a Member of the Australasian Institute of Mining and Metallurgy and a full time employee of AMC. Mr Lee has sufficient relevant experience to be a Competent Person as defined in the JORC Code and was a Qualified Person under National Instrument 43-101 - 'Standards of Disclosure for Mineral Projects' at the date the National Instrument 43-101 was filed with the Toronto Stock Exchange. Mr Lee consents to the inclusion of this information in the form and context in which it appears. All samples have been sent and assayed by Genalysis Labs located in Perth, Australia.

Forward Looking Statements

This document may contain forward-looking information within the meaning of Canadian securities legislation and forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, forward-looking statements).  These forward-looking statements are made as of the date of this document and Chalice Gold Mines Limited (the Company) does not intend, and does not assume any obligation, to update these forward-looking statements.

Forward-looking statements relate to future events or future performance and reflect Company management's expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and mineral resources, the realization of mineral reserve estimates, the likelihood of exploration success, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage.  In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results may, could, would, might or will be taken, occur or be achieved or the negative of these terms or comparable terminology.  By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.  Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of mineral resources and gold; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; imposition of trade embargos or sanctions; as well as those factors detailed from time to time in the Company's interim and annual financial statements and management's discussion and analysis of those statements, all of which are filed and available for review on SEDAR at sedar.com.  Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended.  There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.

Accordingly, readers should not place undue reliance on forward-looking statements.

Cautionary Note

For readers to fully understand the information in this news release, they should read the Technical Report for the Koka Gold Deposit dated July 27,  2010  (available at www.chalicegold.com) in its entirety, including all qualifications, assumptions and exclusions that relate to the information set out in this news release which qualifies the Technical Information.  Readers are advised that mineral resources that are not mineral reserves do not have demonstrated economic viability.  The Technical Report is intended to be read as a whole, and sections should not be read or relied upon out of context.  The technical information in the report is subject to the assumptions and qualifications contained in the Technical Report.

SOURCE Chalice Gold Mines Limited