CHALICE GOLD MINES LIMITED

ABN 47 116 648 956

ANNUAL FINANCIAL

REPORT

30 JUNE 2016

Corporate Directory Directors

Anthony Kiernan Non-executive Chairman Timothy (Tim) Goyder Managing Director Stephen Quin Non-executive Director

Morgan Ball Non-executive Director

Company Secretary

Leanne Stevens

Principal Place of Business & Registered Office

Level 2, 1292 Hay Street WEST PERTH WA 6005

Tel: (+61) (8) 9322 3960

Fax: (+61) (8) 9322 5800

Web: www.chalicegold.com Email: info@chalicegold.com

Auditors

HLB Mann Judd

Level 4, 130 Stirling Street

PERTH WESTERN AUSTRALIA 6000

Home Exchange

Australian Securities Exchange Limited Level 40, Central Park

152-158 St Georges Terrace PERTH WESTERN AUSTRALIA 6000

Toronto Stock Exchange

The Exchange Tower

P.O Box 421

130 King Street West Toronto, Ontario M5X 1J2

Share Registry Australia

Computershare Investor Services Pty Limited Level 11, 172 St Georges Terrace

PERTH WESTERN AUSTRALIA 6000 Tel: 1300 787 272

Canada

Computershare Investor Services 100 University Avenue, 8th Floor Toronto, Ontario M5J 2Y1

ASX

Share Code: CHN

TSX

Share Code: CXN

Contents Chairman's letter 1 Operating and Financial Review 2 Tenement Schedules 8 Directors' Report 15 Corporate Governance Statement 30 Auditor's Independence Declaration 31 Consolidated Statement of Comprehensive Income 32 Consolidated Statement of Financial Position 33 Consolidated Statement of Changes in Equity 34 Consolidated Statement of Cash Flows 36 Notes to the Consolidated Financial Statements 37 Directors' Declaration 68 Independent Auditor's Report 69 ASX Additional Information 71

Chairman's Letter

Dear Shareholders

I am pleased to report to you on what has been a positive year for Chalice on several fronts. Achievements include the successful sale of the Cameron Gold Project in Ontario, Canada, to emerging North American gold development company First Mining Finance Corp, the continued rigorous and disciplined assessment of numerous cornerstone investment opportunities, and the establishment of a high-quality portfolio of exploration projects.

Since acquiring the Cameron Gold Project from Coventry Resources in 2014, the Company upgraded the Cameron resource, consolidated a regional tenement position and identified a number of promising targets both proximal to the deposit and regionally. As a result of the transaction with First Mining, the Company received 32.3 million shares in First Mining and a one percent Net Smelter Return royalty over certain exploration licences at Cameron. This transaction has allowed us to crystallise significant value from our investment in the Cameron Project, giving shareholders exposure both to First Mining's diversified portfolio of advanced gold exploration projects in central and eastern Canada and the upside of the Cameron Project.

In addition to the Company's cash balance of A$32 million and the current market value of the shares in First Mining of approximately A$26.4 million at the time of writing, our strong balance sheet provides the Company with an opportunity to deploy its capital at the lower end of the resource cycle.

The Board is committed to actively managing the Company's capital requirements, and taking into account the Company's cash backing per share, the Company announced a discretionary on-market share buy-back facility on 16 June 2016. To date, under the share buy- back facility, the Company has acquired 12.8 million shares for approximately $2.4 million.

We will continue to apply a disciplined and analytical approach in the search for new business development opportunities and, while this process has not yet resulted in a transaction that meets our investment criteria, we are determined to ensure that any such transaction provides shareholders with significant upside while minimizing risk.

With this in mind, the Board has endorsed a strategy whereby, in addition to targeting more advanced resource opportunities where Chalice's capital could provide a funding solution to development assets, it will also allocate a small percentage of its overall funds to target high quality, high potential base and precious metal exploration assets, preferably in lower risk mining jurisdictions.

As a result of this strategy, Chalice has executed three exploration joint venture agreements in recent months - with Meteoric Resources, Red Hill Iron and Traka Resources. In combination, these three joint ventures have minimum obligations to spend A$2 million within approximately the next 12 months.

A disciplined assessment of exploration results at each key decision point will be made, ensuring that we remain focused on our exploration goals and upside potential - when we see the upside has diminished below our expectations, we will withdraw. With our in-house technical capability, Chalice is able to take advantage of these types of opportunities as they arise; however, we will not lose sight of our main objective of securing a cornerstone asset.

In conclusion, I would like to acknowledge the efforts and drive of our Managing Director, Tim Goyder - who has been relentless in the pursuit of adding value for shareholders - as well as the Board, management team and staff for their efforts. To our shareholders generally, thank you also for your ongoing support.

With a strong balance sheet, a highly skilled and disciplined team and a clear corporate strategy, I am confident that Chalice is well placed for growth and success at a time of renewed opportunity in the resource sector.

Kind Regards

Anthony (Tony) Kiernan Chairman

1 CHALICE GOLD MINES | ANNUAL REPORT 2016

Chalice Gold Mines Limited published this content on 13 October 2016 and is solely responsible for the information contained herein.
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