Chalice Gold Mines : 27/10/2016 - Quarterly Activities Report and Cashflow

• Agreement with Red Hill Iron Limited (ASX: RHI) to explore the prospective West Pilbara Gold Project located in the Ashburton Basin in WA's Pilbara region through a Farm-in and Joint Venture.
• Binding option and farm-in term sheet with Globex Mining Enterprises Inc. (TSX: GMX) to acquire Globex's interest in the Nordeau Gold Project, located in the highly endowed Abitibi region of Quebec, Canada.
• Agreement with Traka Resources Limited (ASX: TKL) to explore the prospective Latitude Hill Project located in the West Musgrave Province of Western Australia through a Farm-in and Joint Venture. Latitude Hill represents a counter-cyclical investment opportunity in a greenfields nickel-copper-PGE sulphide project in an under-explored frontier igneous province in central Western Australia.
• Chalice completed first-pass surface geochemical sampling over the Kinebik Gold project.
• Low-cost and potentially high-impact exploration initiative continues to ramp-up with drilling planned to commence as soon as possible following the receipt of various access permissions.
• Chalice remains well funded with cash of A$31.2 million and 32.3 million shares held in First Mining Finance Corp (TSX-V: FF).
• Chalice continues to target additional high-potential opportunities globally.

Chalice Gold Mines Limited (ASX: CHN: TSX: CXN - "Chalice" or "the Company") is pleased to report on an active period in the September Quarter that saw the Company execute three prospective exploration joint ventures in Australia and Canada.

The West Pilbara Gold Project Farm-in and Joint Venture with Red Hill Iron Limited (ASX: RHI) ("Red Hill") opens up an exciting new gold and base metal exploration opportunity for Chalice. The tenements are located in the highly prospective Ashburton Mineral Field in the Western Australia Pilbara region, which is significantly under-explored for gold and base metals and are located just 8km from the Paulsens Gold Mine, owned by Northern Star Resources (ASX: NST).

The Nordeau Gold Project option agreement with TSX-listed Globex Mining Enterprises ("Globex") secures rights to a highly prospective advanced exploration asset showing strong indications of high grade gold mineralisation in the world class Abitibi gold district in Quebec, Canada.

The Latitude Hill Project Farm-in and Joint Venture with Traka Resources Limited (ASX: TKL) ("Traka") in the west Musgrave province of Western Australia is considered prospective for massive and disseminated nickel-copper-PGE sulphide mineralisation in Giles Complex mafic to ultramafic intrusives. This investment provides Chalice with a counter-cyclical investment opportunity in an under-explored frontier province where there is excellent potential to make substantial new discoveries, similar to the discovery of the Nova-Bollinger nickel-copper sulphide deposit in the Albany-Fraser orogen.

These exploration initiatives are consistent with one of Chalice's core strategies, which is to identify and pursue innovative and low-cost generative exploration opportunities which have the potential to deliver significant upside. With minimum

committed expenditures totaling A$2 million over a 12-month period, these opportunities can be advanced without detracting from the Company's focus of acquiring a substantial resource asset.

1. West Pilbara Gold Project Farm-in Agreement

   During the Quarter, Chalice and Red Hill entered into a binding Heads of Agreement allowing Chalice to farm-in to all minerals other than iron ore within Red Hill's West Pilbara Gold Project (the "WPG Project").

   The Project area, covering 1,390km² (Figure 1), is located approximately 160km south-southwest of Karratha, and extends almost continuously some 90km north from the northern margin of the Wyloo Dome, an important regional geological feature which hosts the +3Moz Paulsens gold deposit. The Paulsen gold mine, which is owned and operated by successful mid-tier gold miner Northern Star Resources (ASX: NST), is located 8km south-west of the southern extent of the Project.

   Figure 1. Location of West Pilbara Gold Project.

   Chalice can earn up to 70% interest in the West Pilbara Gold Project by funding A$3 million worth of exploration with a minimum commitment of A$500,000 within the first 12 months. Chalice may spend an aggregate of A$1 million within the first two years (including the minimum commitment) to earn 51%, at which point Red Hill has a one-off election to contribute to its 49% pro rata interest. If Red Hill elects not to contribute, Chalice may then spend further A$2 million to earn a further 19% within no set time period, or withdraw and retain no interest.

   The WPG Project lies in the north-western sector of the Ashburton Basin and is dominated by volcanic and sedimentary successions comprising the Lower Wyloo Group. The eastern extent of the Project area is coincident with the western margin of the Hamersley Basin.

   2

   The contact between the two basins is referred to as the Paraburdoo Hinge Zone, defined by major fault/shear structures paralleling the contact (including the Nanjilgardy Shear), proximal to the multi-million ounce gold deposits at Paulsens and Mt Olympus. The west-northwest orientation of the Nanjilgardy Shear on the southern margin of the Hamersley Basin flexes north-northwest at the Wyloo Dome where similar defining structures, the Urandy Shear and Bitherabooga Shear, pass through the Project area (see Figure 2), creating a potentially fertile area for the development of gold deposits.

   Figure 2. Regional geological setting.

   Exploration for gold and base metals across the Project has been carried out in various periods since the 1980s, with the most recent work undertaken by Red Hill completed between 2006 and 2009. No gold or base metal exploration has been undertaken on the project since 2009.

   Red Hill identified a number of targets, primarily Carlin-style and vein/shear-hosted gold mineralisation through regional soils and RAB drill programs, many of which require further exploration. Of the prospects identified, Derek's Bore and Urandy are the most advanced, with Red Hill completing widely spaced follow-up RC drilling at both prospects.

   At the Urandy Prospect, RC drilling returned a best intercept of 9m at 4.52 g/t Au from 46m in drill hole RCW007 and 9m at

   1.79 g/t Au from 14m in drill hole RCW006, the up-dip projection of the RCW007 mineralised zone. Drill sections 50m to the north and south of drill holes RCW006 and 007 returned intercepts of 5m at 0.2 g/t Au from 14m (RCW005) and 4m at 0.8 g/t Au from 41m (RCW009) respectively.

   Gold mineralisation at Urandy is associated with a zone of strong silicification within sediments of the Mt McGrath Formation (Wyloo Group) adjacent to major structures associated with the Bitherabooga Fault / Shear zone. RC drilling has defined the mineralised zone over 100 metres to date with surface mapping identifying the extent of silicification to over 1 km.

   3

   Drilling at Derek's Bore returned broad low-grade gold intersections associated with strong silica ± minor sulphide alteration within carbonaceous sediments in close proximity to the NNW trending Bitherabooga shear zone. Better drill intercepts include 20m at 0.47 g/t Au from surface including 1m at 2.2 g/t Au from 5m, in drill hole RBI009 and 5m at 0.64 g/t Au from surface in drill hole RB011. Broad spaced (400m x 400m) soil sampling, completed as part of a larger regional program returned disperse low level coincident Au, As, Ag and Sb results across a broader area requiring further work.

   Refer to the announcements dated 20 and 21 September 2016 "Chalice and Red Hill to explore highly prospective WA gold exploration opportunity through farm-in agreement over West Pilbara Gold Project" for further details on previous drilling.

   Planned Exploration

   Chalice plans to complete an analysis of all data and undertake field work on the identified targets including prospect-scale mapping and rock-chip sampling. Drill programs will follow the field mapping program at the earliest opportunity. The Urandy and Kens Bore prospects will be prioritised for follow-up RC drilling.

2. Latitude Hill Project Farm-in Agreement

During the Quarter, Chalice and Traka entered into a binding Heads of Agreement to earn up to a 70% interest in the Latitude Hill Nickel-Copper-PGE Project, located in the west Musgrave Province of Western Australia. The Project covers an area of 1,007 km² and is centered approximately 40km south-west of the Wingellina nickel deposit (Figure 3).

Under the terms of the farm-in agreement, Chalice may earn up to 70% interest in the Latitude Hill Project, which consists of five tenement applications (Figure 4) by funding A$10 million worth of exploration with a minimum commitment of A$1 million within the first 12 months. Chalice may spend A$5 million within three years (including the minimum commitment) to earn 51%, at which point Traka have a one-off election to contribute to its 49% pro rata interest. If Traka elects not to contribute, Chalice may then spend another $5 million to earn a further 19% within an additional three years. If Chalice earns a 70% interest (or 51%, as the case may be), both parties will contribute proportionally to all expenditures going forward.

Latitude Hill Project

Figure 3. Location of the Latitude Hill Project.

The Latitude Hill Project represents an exciting opportunity for Chalice to capitalise on a high quality airborne Spectrum Electromagnetic (EM) survey completed in 2012, which identified seven priority conductors that are modelled as high-

4