I am pleased to report on another very active year for
Chalice as we continued to progress towards our goal of
becoming a low cost North African?focused gold
producer.
Our strategy this year was simple: to move the
high?grade Koka gold mine toward production as soon as
possible, while ensuring that our ongoing exploration efforts
in Eritrea generate a strong pipeline of prospective drill
targets with the potential to grow our reserve inventory over
time. These exploration targets are now starting to generate
tangible results at Koka South as we continue a significant
diamond drilling campaign.
While market conditions have again been volatile this
year - with a significant disconnect emerging globally
between the value of gold equities and the rising gold price
- I am confident that the underlying value of Chalice's
flagship asset will be reflected in our share price as we
increase our reserves and resources and move to development
and production.
In this regard, I am pleased to report that we achieved
several important milestones during the year, including a
final agreement with the Eritrean National Mining Corporation
("ENAMCO") for their right to acquire an additional
30 per cent interest in the Koka Project for approximately
US$34 million, including the reimbursement of certain
costs.
The signing of a shareholder's agreement together
with ongoing permitting activities, including the signing of
the Mining Agreement, should now, subject to obtaining
finance, enable Chalice to commence development of the Koka
gold mine in 2012. With ENAMCO now on board, we can look
forward to a long and successful partnership.
We also believe that the Mining Licence will be granted
in the near future. Our attention will now turn to financing
the project - I believe that a suitable debt financing
arrangement is very achievable and we will be progressing
this in the coming few months as we work through the many
alternatives.
As we are now rapidly approaching the development phase
of the Koka mine, we have strengthened our management team
with the recent appointment of Juan Jeffery to the position
of Chief Operating Officer. We have also appointed key
management personnel to the Joint Venture Company, Zara
Mining, in Eritrea to oversee the permitting process, build
the development team and undertake construction of the
mine.
Aside from the planned development of the Koka mine,
our exploration team in Eritrea has put in an enormous effort
to build an inventory of exploration targets in and around
the Koka deposit, as well as on the Zara North and Zara South
licences.
Bearing in mind that little, if any, exploration has
been undertaken on the majority of Chalice's licences
prior to our involvement, work undertaken to date has
included detailed mapping, stream sediment sampling and soil
sampling. While this on?ground work was being completed, we
conducted an aeromagnetic survey over all of our licences in
Eritrea. A ground IP survey was also conducted over the
Koka?Konate corridor to target possible repetitions of the
Koka deposit.
This extensive groundwork is now beginning to pay off
with high grade gold results now being received from the Koka
South prospect. The strike length of this high grade
extension to Koka is now some 250 metres and is open both to
the south and at depth with drilling continuing. This
prospect has the potential to materially increase the size
and profitability of the Koka deposit.
In addition, results received from near mine drilling
at Debre Konate, indicate the potential for high tonnage,
lower grade mineralisation, something which we have not yet
come across at Zara until now.
Further drilling at these prospects over the next few
months will further define the size and extent of these
opportunities.
At Mogoraib North, which is also rapidly becoming a key
focus, first?pass stream sediment sampling,
helicopter?supported mapping and a rock chip sampling program
was completed. The surface sampling program identified areas
anomalous in base metals, some of which are associated with
geophysicallyidentified basement conductors.
Airborne geophysics, including VTEM, was also flown
over the Mogoraib North tenement, targeting volcanichosted
massive sulphide deposits. Our target area has similar
geology to that of the world?class Bisha deposit which lies
10 km to the south of our tenement. Geophysical
interpretation of the VTEM work combined with geochemistry
has identified over 40 targets which we expect to drill in
early 2012.
I am confident that Chalice has a very bright future as
we move ahead and deliver positive news regarding the
financing and development of the Zara Project, and as we
continue to generate tangible results from our exploration
efforts.
Our Managing Director Dr Doug Jones will provide a
short corporate presentation outlining our strategy at the
conclusion of the formal meeting.
TIM GOYDER
Chairman