Chalice Gold Mines : Quarterly Activities Report and Cashflow

ASX Announcement

27 October 2017

Highlights

• A$7.5m exploration initiative now in full swing across high-potential gold and base metals projects in Canada and Australia:

  • East Cadillac Gold Project:

    • 7,700m diamond drilling program in progress ~35km east of the 20Moz Val-d'Or gold camp in Quebec

    • Increased ground position now totaling 132km2

    • Significant target generation activities nearing completion - to form the basis of ongoing drilling

  • West Pilbara Gold and Base Metals Project:

    • Up to 6,500m of RC and Aircore drilling commenced in early October at the West Pilbara Gold Project, following encouraging results from copper and gold rock chip sampling of up to 29% Cu and 9.5 g/t Au

    • Additional tenement applications increase total project area to 2,406 km2

    • Assessment of newly-secured areas underway to establish the presence of the basal conglomeratic unit of the Fortescue Group, which hosts recently reported high-profile gold discoveries in the Pilbara region, including those by Novo Resources, Artemis Resources, De Grey Mining and others

• Chalice well positioned to expand exploration activities based on success, with cash and liquid investments of A$50m at Quarter-end.

1. OVERVIEW

   Chalice Gold Mines Limited ("Chalice" or "the Company") (ASX: CHN) (TSX: CXN) is pleased to report on an active Quarter which saw drilling commence at its key gold projects in Canada and Australia as part of the multi-pronged, $7.5 million exploration initiative outlined last Quarter.

   At the East Cadillac Project Gold Project in Quebec, two rigs are now operating as part of an initial 7,700m drilling program following extensive field and geophysical program completed over the last few months.

   In addition, drilling has commenced at the West Pilbara Gold Project in Western Australia. The proposed program, comprising up to 6,500m of RC and aircore drilling, will follow-up on gold targets at Wyloo East, Urandy, Ken's Bore and Derek's Bore and on copper targets at Red Hill and Wyloo West.

   Following encouraging exploration results, Chalice has expanded its ground position in this highly prospective district to a total area of 2,406 km2 while it also embarks on an assessment of the newly-secured areas to establish the presence of the basal conglomeratic unit of the Fortescue Group - the targeted stratigraphic horizon which hosts a number of high- profile gold discoveries in the Pilbara region.

2. EXPLORATION ACTIVITIES

East Cadillac Gold Project, Quebec, Canada

The East Cadillac Gold Project ("ECG Project") covers an area of 132km2 and is located 35km east of the 20Moz Val-d'Or gold camp (Figure 1). With land holdings encompassing a strike length of 16km of the Larder Lake-Cadillac Fault - the most prolifically endowed gold trend in the southern Abitibi - the project is situated amongst some of the region's most significant mines, and is adjacent to the historical Chimo gold mine (owned by Cartier Resources (TSX: ECR)).

No modern surface geochemistry, geological mapping or structural analysis has been completed in the district. The Company has analysed historical exploration information and merged this data with results from recent exploration activities undertaken by Chalice. This compilation provides the basis for an integrated approach to exploration targeting over the Company's consolidated land position.

In late September 2017, the Company commenced an initial program of 14 holes for approximately 7,700m of diamond drilling to test four high priority gold targets identified from a review of historical exploration data and initial results from current field surveys. Two drill rigs are currently operating to expedite the drill program.

In addition, the Company has expanded its tenement holding around the ECG Project with the new tenure increasing the overall project area by 24.9km2 to 132km2 (Figure 1). The newly-acquired tenements (see Figure 1) contain three historical gold showings (Lac Villebon, McDonogh, and VC89-7), as recorded on the Quebec Government database (Sigeom). A field sampling program is due to commence shortly over the newly acquired tenements in an effort to complete an initial phase of surface geochemistry and prospecting during the current field season.

Figure 1. Updated outline of East Cadillac Gold Project showing new tenure

Surface geochemistry

Field activities have ramped up significantly over the current quarter and include a project-wide surface geochemical survey consisting of 1,261 Mobile Metal Ion (MMI) soil, 146 Black Spruce bark and 118 rock-chip samples. MMI soil samples were collected on a detailed 200m x 200m grid across a 3km wide corridor encompassing historical gold deposits and occurrences associated with the Larder Lake-Cadillac fault (Figure 2). The remainder of the property was sampled on a reconnaissance spacing of 400m x 400m. A program of in-fill 200m x 200m sampling was recently completed over a new anomalous trend located in the southern half of the property, and results are expected in November 2017.

Results from the MMI soil geochemical program show numerous gold (and pathfinder) anomalies associated with and along strike from known gold deposits and occurrences on the Larder Lake-Cadillac fault, as well as volcanic-sediment contacts to the immediate north and within the sediment sequence to the south of this gold trend (Figure 2). Of particular interest are four discrete MMI Au anomalies located west of the former Chimo gold mine which occur within and along the southern margin of the Piche Group volcanics. These anomalies are untested on the Chalice ground and occur in the same structural setting as two of the mineralised fault panels documented at the Chimo gold mine.

Figure 2: Surface geochemical sampling, East Cadillac Gold Project.

Black Spruce bark sampling was conducted over two test grids to ascertain its usefulness in supporting the MMI soil geochemistry, particularly in areas of low lying wetlands that are not conducive to soil sampling. The widespread distribution of this tree species allowed for more consistent sample spacing. The Nordeau West gold deposit responded well to Black Spruce bark geochemistry compared to the MMI soil geochemistry, which shows a smaller zone of anomalous gold due to a reduced number of effective samples.

Rock-chip sampling has reported a maximum value of 33.6g/t Au from the historical Marilynne showing, situated about 2km south of the Larder Lake-Cadillac fault (Figure 2). High-grade gold mineralisation is associated with a zone of sericite- pyrite-arsenopyrite alteration in sediments, in a setting potentially analogous to the Canadian Malartic gold deposit, located about 50km to the west in the Val-d'Or gold camp.

In addition, multi-element geochemical analysis of outcropping greenstone belt lithologies defined zones of gold pathfinder enrichment trends associated with the main strand of the Larder Lake-Cadillac fault, directly south of the Marilynne showing and within newly acquired ground in the north-west corner of the property.

IP Geophysics

A 3D-Induced Polarisation (IP) survey in progress since July 2017 is about 80% complete. On completion, the survey will cover a 16km long by 3km wide corridor on 200m spaced lines centered on the Larder lake-Cadillac Fault.

Interim results for lines completed between the former Chimo gold mine and the eastern tenement boundary show a series of strong chargeability anomalies, some of which are associated with known gold mineralisation within the Piche volcanics, and other chargeability anomalies which are broadly aligned with contacts between mafic and sediment packages (see Figure 3).

The chargeability anomalies range up to 133 mV/V, some of which are associated with the Nordeau West gold mineralisation. The Nordeau West deposit IP anomalies extend east within Piche Group volcanics (ultramafic to intermediate volcanics/tuffs) through Nordeau East and continue east on the current survey grid (Figure 3).

Figure 3. 3D IP survey showing chargeability anomaly trends. Note that surveying is incomplete for survey lines shown west of the Chimo gold mine.

Chargeability anomalies have been identified along other prospective trends and many appear to be localised along sub- parallel sediment-volcanic contacts. A prominent chargeability anomaly is associated with the main contact between the Cadillac sediments and the basement volcanics approximately 1km north of the Larder Lake-Cadillac fault.

Another chargeability anomaly occurs approximately 800m south of, and sub-parallel to, the Larder Lake-Cadillac fault, and three lines extended over the Marilynne showing have delineated three moderate-strength chargeability anomalies. The full survey is expected to be completed by the end of October 2017, at which time the data will be inverted and incorporated into the 3D model.

The Company is in the process of integrating the new exploration data collected this summer field season (geochemistry and IP) with aeromagnetics and interpreted geology in order to prioritise additional targets for drill testing.

Drilling

An initial program of 14 holes for approximately 7,700m diamond drilling is currently underway to test four high priority gold targets identified from a review of historical exploration data and initial results from current field surveys (see Figure 4).