Chalice Gold Mines Limited
TSX : CXN
ASX : CHN

Chalice Gold Mines Limited

January 25, 2011 07:19 ET

Chalice Gold Mines Limited: Quarterly Report for Period Ended December 31, 2010

HIGHLIGHTS

- Regional exploration ramps up at the Zara Gold Project, Eritrea with a focus on identifying new prospects to increase the current Indicated Mineral Resource of 840,000oz at 5.3g/t within the Koka deposit

- New "Koka-like" signatures identified by a deep penetration 3D IP survey over the Koka-Konate corridor-providing a priority drilling opportunity for early 2011

- Further results from Zara North confirm strong stream sediment anomalism over 10km strike length

- The Eritrean Government advises its intention to purchase, at fair value, a 30% paid participating interest in the Zara Project

- Chalice shares commence trading on the Toronto Stock Exchange (TSX) under the symbol CXN

PERTH, AUSTRALIA--(Marketwire - Jan. 25, 2011) -

Overview

During the Quarter, Chalice Gold Mines (TSX:CXN)(ASX:CHN) continued to ramp up its near-mine and regional exploration activities at the Zara Gold Project in Eritrea, East Africa, with a focus on identifying new prospects to increase resources in the vicinity of the high-grade Koka Gold Deposit, which hosts an indicated Mineral Resource of 840,000oz at a grade of 5.3g/t gold.

Early results from a key deep penetration Induced Polarisation (IP) survey over the Koka-Konate corridor reveal strong IP resistivity targets below the Koka Deposit and the Koka East prospect. Strong IP chargeability anomalies have also been identified to the west of the Koka Deposit. The results of the IP survey have provided exceptional targets for drilling in early 2011.

Follow-up geochemical sampling and geological mapping on the Zara North licence has continued to confirm previously reported gold anomalism. Identifying the source of this anomalism will be a key focus for intensive exploration planned over the coming months.

During the Quarter, the Eritrean Government advised its intention to purchase, at fair value, a 30% paid participating interest in the Zara Project through the Eritrean National Mining Corporation (ENAMCO). Discussions in relation to the acquisition are currently ongoing.

Overview

During the Quarter, Chalice Gold Mines (TSX:CXN)(ASX:CHN) continued to ramp up its near-mine and regional exploration activities at the Zara Gold Project in Eritrea, East Africa, with a focus on identifying new prospects to increase resources in the vicinity of the high-grade Koka Gold Deposit, which hosts an indicated Mineral Resource of 840,000oz at a grade of 5.3g/t gold.

Early results from a key deep penetration Induced Polarisation (IP) survey over the Koka-Konate corridor reveal strong IP resistivity targets below the Koka Deposit and the Koka East prospect. Strong IP chargeability anomalies have also been identified to the west of the Koka Deposit. The results of the IP survey have provided exceptional targets for drilling in early 2011.

Follow-up geochemical sampling and geological mapping on the Zara North licence has continued to confirm previously reported gold anomalism. Identifying the source of this anomalism will be a key focus for intensive exploration planned over the coming months.

During the Quarter, the Eritrean Government advised its intention to purchase, at fair value, a 30% paid participating interest in the Zara Project through the Eritrean National Mining Corporation (ENAMCO). Discussions in relation to the acquisition are currently ongoing.

1. 3D IP Survey

During the Quarter, the Company reported encouraging early results from the Induced Polarisation (IP) survey undertaken over the Koka-Konate corridor on the central Zara Project leases.

The state-of-the-art 3D deep-penetration IP survey covers an area of 15km2 within the highly prospective 6km long Koka-Konate structural corridor (see Figure 1).

The survey, which is designed to reveal new targets with the potential to host repeats of the Koka mineralisation, has already yielded some attractive targets, including resistivity anomalies below the currently defined Koka deposit and a second anomaly in an undrilled area under the Koka East trend. Resistivity anomalies are often associated with silicification that is associated with gold mineralisation.

In addition, the survey identified a large area of chargeability anomalies to the west of the Koka deposit which, while currently unexplained, could represent sulphide mineralisation.

To view "Figure 1: IP survey, Koka-Konate-Fah 'Corridor' with IP survey area outlined in red", please visit the following link:

http://media3.marketwire.com/docs/clcfig1.pdf

The survey comprises 26 double offset dipole-dipole arrays covering an area of approximately 15km2 (7.5km x 2km) with 64 Rx channels being read at 50m spacings to provide high resolution data to depths potentially exceeding 500 metres.

Analysis of initial results from the first four arrays of the survey indicates that good quality data is being produced with penetration to a depth of at least 600 metres being achieved.

Two very strong resistive zones are defined in the data, one at depth beneath the Koka deposit and another at depth on the Koka East trend (see Figure 2).

To view "Figure 2: IP resistivity Anomalies – Koka and Koka East (looking north)", please visit the following link:

http://media3.marketwire.com/docs/clcfig2.pdf

Previous shallow-penetration IP surveys conducted at Koka identified a strong resistivity anomaly which is believed to reflect the strong silicification associated with mineralisation. This signature continues and redevelops strongly at depth, potentially reflecting further silicification and mineralisation.

The anomalous zone extends for over 600 metres along strike, is open to the south and at depth, and has core cross-sectional dimensions of more than 100 x 100 metres. This zone lies beneath existing drill coverage and constitutes a priority target for exploration.

Koka East lies ~80 metres into the hangingwall of Koka and at surface consists of Koka-style quartz stockwork mineralisation. Limited drilling of this zone earlier this year returned generally disappointing results (best intercept 1 metre grading 13.67 g/t Au) despite intense quartz veining and silicification being encountered in most holes.

This appears to be reflected in a small IP resistivity anomaly evident in the current survey. The newly identified deep anomalous zone extends for more than 450 metres along strike, is open to the south and at depth and has core cross-sectional dimensions of greater than 100 x 100 metres. The anomaly lies north of the area previously drilled and is much stronger, implying that the silicification redevelops and intensifies at depth, representing a high priority drill target.

The survey has also identified a number of strong chargeability anomalies, mostly at depth to the west of Koka (see Figure 3). The origin of these anomalies is uncertain but they may reflect sulphide concentrations in sediments that lie to the west of the microgranite hosting the Koka mineralisation.

The smaller, more discrete, of these anomalies lies south along strike from known vein-hosted gold mineralisation in sediments at the Koka North prospect and could therefore represent a strengthening of this mineralisation reflected in higher levels of chargeable sulphides.

These anomalies will also require drill testing.

To view "Figure 3: IP Chargeability Anomalies – Koka and Koka West (looking north)", please visit the following link:

http://media3.marketwire.com/docs/clcfig3.pdf

The Company regards these early encouraging results as a strong validation of the use of this new generation of IP technology at Koka and is planning to commence drill testing in early April 2011.

2. Koka North Stream Sediment Geochemistry

Results from a reconnaissance Bulk Leach Extractable Gold (BLEG) drainage sampling program completed over the Zara North and Zara South Prospecting Licenses has outlined an extensive zone of gold anomalism in the western half of the Zara North tenement.

Follow-up in-fill sampling using conventional stream sediment sampling has confirmed that this gold anomalism extends over a strike length of ~10 km (see Figure 4) with values of up to 876ppb gold recorded.

Field checking has revealed artisanal workings in several of the anomalous drainages, often associated with a semi-continuous high-strain zone with intense carbonate-sericite alteration and quartz veining over a 30-50m wide zone that extends the length of the anomalous zone (see Figure 5). Such shearing and alteration is often related to gold systems such as Koka. Reconnaissance rock chip sampling along this zone has returned assays of up to 11 g/t gold in a grab sample. 

Chalice has commenced a program of detailed geological mapping and soil sampling to identify both the source and extent of the anomalism in the Zara North tenements. This program will be a major focus over the coming months and the Company has assigned additional technical staff to expedite its progress.

To view "Figure 4: Anomalous BLEG and -80 mesh gold values – northern Zara Project", please visit the following link:

http://media3.marketwire.com/docs/clcfig4.pdf

To view "Figure 5: Zara North prospect – carbonate-sericite alteration associated with veining in source area of BLEG and Conventional -80 mesh drainage geochemistry gold anomalism", please visit the following link:

http://media3.marketwire.com/docs/clcfig5.pdf

3. Konate Drilling Results

Further results were received from diamond drilling completed at the Konate prospect last Quarter. Some 20 holes were drilled for ~3,600 metres over a strike length of around 600 metres with a focus on the southern 200 metres of the system, where intensive artisanal workings were developed historically on a Koka-style quartz stockwork in microgranite.

Initial conclusions are that the Konate system warrants further drilling; however, this work will await the completion of the 3D deep-penetration IP survey currently underway in the Koka-Konate-Fah corridor.

An updated table presenting results from all visually mineralised intersections is presented in Table 1 below:

Drillhole ID From To Width Au_ppm
ZARD175 13 14 1 1.10
ZARD176 No significant intersections
ZARD177 120 123 3 12.79
incl 121 122 1 34.05
ZARD177 133 139 6 1.61
ZARD177 141 142 1 2.25
ZARD178 22 23 1 2.91
ZARD178 37 38 1 1.70
ZARD178 44 50 6 2.24
ZARD179 62 64 2 1.22
ZARD179 94 95 1 2.69
ZARD179 101 104 3 3.60
ZARD179 111 112 1 11.38
ZARD180 No significant intersections
ZARD181 86 89 3 1.16
Incl 86 87 1 1.57
Incl 88 89 1 1.44
ZARD181 98 99 1 2.83
ZARD182 71 72 1 6.87
ZARD182 85 86 1 1.73
ZARD182 89 90 1 5.43
ZARD183 No significant intersections
ZARD184 52 59 5 30.36
ZARD185 109 113 4 11.65
ZARD185 119 139 20 1.39
Incl 119 122 3 3.28
Incl 124 125 1 1.24
Incl 127 128 1 2.31
Incl 130 131 1 1.12
Incl 133 134 1 1.51
Incl 135 136 1 4.65
Incl 138 139 1 6.25
ZARD185 152 153 1 1.66
ZARD186 No significant intersections
ZARD187 119 120 1 1.44
ZARD187 160 161 1 1.39
ZARD187 174 175 1 3.81
ZARD188 88 89 1 1.60
ZARD188 97 98 1 4.53
ZARD189 115 116 1 1.06
ZARD189 120 121 1 9.81
ZARD190 72 73 1 2.32
ZARD190 83 84 1 1.44
ZARD191 193 194 1 1.43
ZARD191 202 203 1 1.21
ZARD191 205 206 1 1.08
ZARD192 188 189 1 1.07
ZARD193 45 50 1 0.70
ZARD193 65 68 3 2.77
ZARD193 85 86 1 1.00
ZARD193 91 92 1 3.69
ZARD193 93 94 1 0.73
ZARD193 109 111 2 0.54
ZARD193 139 140 1 0.69
ZARD194 121 122 1 0.69
ZARD194 124 127 3 7.42
incl 124 125 1 20.62
ZARD194 137 138 1 0.79
ZARD194 140 141 1 2.85
ZARD194 144 146 2 1.95
incl 145 146 1 3.36
Note: The metres quoted are down hole metres and gold grades are uncut with up to 2 metres of internal dilution (<0.25g/t gold). All samples were saw split and shipped as half core direct to Genalysis Laboratories in Perth, Western Australia for assay.
 
Table 1: Significant Konate Prospect Diamond Drill Assay Intercepts  

To view "Figure 6: Konate Prospect – Drillhole Locations", please visit the following link:

http://media3.marketwire.com/docs/clcfig6.pdf

4. Aeromagnetic and Radiometric Survey

An extensive airborne magnetic and radiometric survey covering the Zara North, South and Central properties has commenced and is nearing completion.

This 12,750 line kilometre survey will help define the regional geological structure, alteration patterns and granitoid suites/phases that may be associated with gold (and possibly other) mineralisation.

5. Fah Soil Sampling

Results from a geochemical survey over the Fah prospect, located 5km southeast of Koka (see Figure 4), have been received. They reveal a robust gold-in-soil anomaly extending over a strike length exceeding 1 kilometre and exceeding 100ppb gold (see Figure 7).

It encompasses the main historical artisanal workings at Fah and overlies an intensely altered and finely quartz stockworked microgranite suggestive of a strong mineralising system. Two scout holes drilled beneath the main artisanal workings intersected disseminated sulphides associated with multiple narrow quartz stringers as well as several larger metre-scale quartz-sulphide veins. Assays from these holes are currently pending.

To view "Figure 7: Fah Prospect – gold anomalies in -80 mesh soil samples", please visit the following link:

http://media3.marketwire.com/docs/clcfig7.pdf

6. Eritrean Government Participation

In November 2010, the Eritrean Government advised Chalice of its intention to purchase, at fair value, a 30% paid participating interest in the Zara Project through the Eritrean National Mining Corporation (ENAMCO). This statutory right to acquire a further 30% paid participating interest is in addition to ENAMCO's 10% carried interest.

The method and timing of the valuation to determine the fair value of the paid participating interest is being discussed with ENAMCO, however, it is expected to follow the precedent set by the Bisha Project, which is 60% owned by Nevsun Resources Ltd .and 40% by ENAMCO. In the event the Company and ENAMCO are unable to agree the fair value, a mutually acceptable independent valuer will be appointed to determine the fair value.

ENAMCO will also be required to contribute its proportionate share of project development and capital expenditure.

Finalising the terms on which ENAMCO will acquire the 30% interest in the project will greatly assist Chalice's efforts to secure the necessary approvals to develop Koka and is a strong vote of confidence in the Project by the Eritrean Government.

7. TSX Listing

On 26 November 2010, Chalice commenced trading on the Toronto Stock Exchange ("TSX") under the symbol "CXN".

8. Cash at bank

As at 31 December 2010, the Company had cash on hand of approximately $7.4 million.

Doug Jones, Managing Director

25 January 2011

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 is a Qualified Person under National Instrument 43-101 – 'Standards of Disclosure for Mineral Projects'. Mr Tyrrell consents to the inclusion of this information in the form and context in which it appears.

The information in this 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 is a Qualified Person under National Instrument 43-101 – 'Standards of Disclosure for Mineral Projects'. Mr Lee consents to the inclusion of this information in the form and context in which it appears.

Sampling Procedures and Quality Assurance

Soil samples are collected from sites located using GPS. Soil material is collected from a depth of 5-20cm with a plastic trowel and sieved to 180um mesh using stainless steel sieves. Approximately 120 grams of material is placed into two small Kraft paper sample bags, sealed and tagged with a unique number, with both bags being numbered identically. One of these samples is sent to NATA-accredited Intertek-Genalysis Laboratories in Perth Western Australia for assay whilst the other sample is retained as a duplicate in the Chalice Eritrea sample storage.

Samples are analysed for multi-element suites using ICP-OES after aqua regia digest on a 25g sub-sample and vacuum filtering prior to voluming to preclude errors resulting from insoluble residues. Au is analysed as an additional element utilizing Graphite Furnace AAS. Chalice Gold Mines inserts field blanks, field duplicates, repeats and certified reference materials (CRMs) into its sample sequences sent to the routine and umpire laboratories to control the accuracy and reliability of the analytical results.

Blank samples are introduced at the rate of 1 per 20 to 25 routine samples to test contamination during sample preparation. Certified reference materials (CRMs) are submitted with all sample batches at the rate of 1 per 20-25 routine samples. The CRM's inserted have values ranging from very low to high grade. 5% of the returned coarse reject samples are routinely submitted to an umpire laboratory (Ultra-trace Laboratories, Perth, Western Australia) to test the analytical precision of the principal laboratory. Standard samples are included at a rate of 1 per 20 routine samples and there is at least one standard per submission. The Company monitors the QA/QC information to ensure there are no systematic biases or overall analytical quality issues.

Rock-chip samples are collected and assayed in essentially the same manner except that the sieving step is omitted and 1-2 kg of sample is collected and bagged in a heavy-duty plastic bag before dispatch to Intertek-Genalysis Laboratories.

Diamond drill core is logged and photographed prior to splitting with a core saw. One half of the core is retained on site whilst the other half is bagged and dispatched to Africa Horn Preparation facility (a division of NATA-accredited Intertek-Genalysis Laboratories) in Asmara for crushing to -2mm and splitting. As per the above, certified reference materials (CRMs) are submitted with all sample batches at the rate of 1 per 20-25 routine samples. The coarse reject is stored and the split sub-sample is pulverised to a nominal 95% passing -75 micron using an LM2 pulveriser.

The pulverised pulp is further spilt into two 100g to 150g sub-samples; a primary pulp sample is sent for analysis and a duplicate pulp sample is kept as a reference and the remaining fine (75 micron) reject is stored. A quartz wash is pulverized between samples and is stored for random testing of preparation contamination.

The sample pulps are transported by air to NATA-accredited Intertek-Genalysis Laboratories in Perth Western Australia for assay. For drill core and RC samples used for resource analysis the majority of gold assaying is completed using a lead collection of 50g fire assay method with an atomic absorption spectroscopy (AAS) finish. Additional specified multi-element assays are carried out by ICP-OES on 25g sub-sample prepared using aqua regia digest. Bulk density determinations using water immersion method are carried out on every metre of core within expected mineralisation and every 10m within waste zones. QA/QC monitoring is applied to all drill core assays as per the protocols described above.

Non GAAP Measures

Information in this news release marked with a "*" above represent non-IFRS (International Financial Reporting Standards) measures.

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 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; 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; 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 www.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.

Contact Information

  • Chalice Gold Mines Limited
    Mr Tim Goyder
    Executive Chairman
    (+618) 9322 3960
    or
    Chalice Gold Mines Limited
    Dr Doug Jones
    Managing Director
    (+618) 9322 3960
    or
    For media inquiries, please contact:
    Read Corporate
    Nicholas Read
    (+618) 9388 1474