ANNUAL REPORT 2009

DIRECTORST R B Goyder - Executive Chairman
D A Jones - Managing Director
M R Griffiths - Executive Director
A W Kiernan - Non-executive Director
COMPANY SECRETARYR K Hacker
PRINCIPAL PLACE OF BUSINESS& Registered Office
Level 2, 1292 Hay Street
WEST PERTH WA 6005
Tel: +618 9322 3960
Fax: +618 9322 5800
www.chalicegold.com
Email: info@chalicegold.com
AUDITORSHLB Mann Judd
15 Rheola Street
WEST PERTH WA 6005
SOLICITORS
Middletons
Level 2
6 Kings Park Road
WEST PERTH WA 6005
SHARE REGISTRY
Computershare Investor Services Pty Limited
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45 St Georges Terrace PERTH WA 6000
Tel: 1300 557 010
HOME EXCHANGE
Australian Securities Exchange Limited
Exchange Plaza
2 The Esplanade PERTH WA 6000
ASX CODE
Share Code: CHN

Letter to shareholders......................................02
Highlights.......................................................03
Review of operations.......................................04
Schedule of tenements....................................11
Director’s report..............................................13
Auditor’s independence declaration.................21
Income statement...........................................22
Balance sheet..................................................23
Statement of changes in equity........................24
Cash flow statement.......................................25
Notes to the financial statements....................26
Director’s declaration.......................................42
Independent auditor’s report..........................43
Corporate governance statement.....................45
Asx additional information..............................48

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Contents

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Chairman’s Letter To Shareholders
Dear Shareholder

I would like to thank my fellow Directors and staff for their efforts during

During the 2009 Financial Year your Directors have focused activities

the last 12 months as we continue to grow and develop your Company.

towards a transaction that would change the profile of the Company

I would also like to welcome Mike Griffiths who was formerly Managing

through the acquisition of a major asset. At the time of writing I am

Director of Sub-Sahara to the Board of Chalice. Mike brings to the Board

pleased to report that we have now completed such a transaction

considerable experience both in Eritrea and Africa generally and will be athrough the merger of your Company with ASX-listed Sub-Sahara

valuable member of our Board and management team.

Resources NL (“Sub-Sahara”).
This merger together with the acquisition of a direct interest in Sub-

Last but not least, I would like to thank you for your ongoing support andI welcome the Sub-Sahara Resources shareholders to our register.

Sahara’s main undertaking, being the Zara Gold Project in Eritrea, will
give the Company 80% of that project. The project is located in the East
African country of Eritrea and contains 944,000 oz at an average gradeYours faithfullyof 5.8 g/t at the Koka deposit.
This transaction provides shareholders with the opportunity to participate
in the development of a potentially highly profitable, high grade gold
project with untouched exploration opportunities near the current
resource and regionally.
The Company now holds a substantial land package of 615 km2.
This area has had little exploration, if any, and this provides a unique
opportunity for the discovery of additional gold and base metal
deposits. Full details of the project are disclosed in the following
Review of Operations.
With the merger now behind us, the Company has commissioned
Lycopodium Ltd to undertake a scoping study to be completed by October
2009 and then a detailed feasibility study to be completed by May 2010.
In parallel with this work, a 5,000 metre diamond drilling program using
two rigs will commence during November 2009 to upgrade the resourcefrom Inferred and Indicated to a Measured category.
In conjunction with the studies being undertaken at the Koka deposit,
the Company will also focus its attention towards the potential of further
gold discoveries at depth and along strike. A 2,500 metre diamond
drilling program has been planned to test these targets. Our preliminary
geological assessment of the region suggests that there is considerable
opportunity to locate additional ore bodies in similar geological settings
along strike from the main Koka deposit.
TSX-listed gold and base metals company Nevsun Resources Ltd has
recently secured US$235M of financing to develop the Bisha Project
which lies approximately 90km south of our project and will be Eritrea’s
first significant mining operation. We look forward to working with theGovernment and people of Eritrea to become the next mining operation
within the country, which, all going well, could be in production in 2011.

2

CHALICE GOLD ANNUAL REPORT 2009

Tim R B Goyder
Executive Chairman
22 September 2009

Corporate

Australian Exploration Projects

•

•

•

Chalice Gold Mines (“Chalice”) and Sub-Sahara Resources

Chalice entered into an agreement with AngloGold Ashanti(“Sub-Sahara”) completed a merger of the two companies inAustralia Ltd (“AngloGold”), whereby AngloGold has the rightAugust 2009.

to earn a 75% interest in Chalice’s Wilga Gold Project throughcompletion of $2 million of gold exploration expenditure at theThe merger combines Sub-Sahara’s high grade Zara Goldproject within the next four years.

Project in Eritrea with Chalice’s significant cash reserves which
will enable acceleration of the exploration and evaluation of•

Teck Australia Pty Ltd (“Teck”) has entered into an exclusivity

the Zara Gold Project in Eritrea as the focus of an international

agreement with TSX Venture Exchange listed company Kent

gold development strategy.

Exploration Inc. (“Kent”) which contemplates Kent earning 100%of Teck’s interest in the Gnaweeda Gold Project by spending

The Zara Gold Project•$3 million, subject to Teck retaining a 75% claw-back.

The Koka deposit has an indicated and inferred resource
estimate of 5.04 million tonnes at an average grade of 5.8 g/tgold for 944,000 ounces gold at a cut-off of 1.2g/t. Following
completion of the merger, Chalice now owns 80% of theZara Gold Project.

•

Major elements of an immediate work program have alreadycommenced to advance the Zara Gold Project (Koka deposit)
towards a detailed feasibility study by May 2010.

•

An internationally recognised consortium of consultants, led by
Lycopodium Minerals, who have extensive African experience,
have been appointed to conduct the Scoping Study andFeasibility Studies for the Koka deposit.

•

Planning is well advanced for 5,000 metres of infill diamond
drilling at the Koka deposit in the second half of 2009 to
upgrade the category of the resource from Indicated andInferred to Measured. A further 2,500 metres of diamond
drilling is also planned to test the Koka deposit below theexisting resource and other targets along strike.

•Preliminary geological assessment of the region surrounding
the Zara Gold Project suggests strong potential for additionalore bodies. Given limited exploration activity has been
undertaken outside of the immediate Koka deposit resource
area, the exploration upside of the project is considerable
and work has commenced to develop this potential.

“We look forward
to working with theGovernment and peopleof Eritrea to become thenext mining operationin the country, which, allgoing well, could be inproduction in 2011”
TIM R B GOYDER Executive chairman

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Highlights

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Review of Operations
1 Merger with Sub-Sahara Resources NL

On 14 August 2009, Chalice Gold Mines Limited (“Chalice”) and East

2 The Zara Gold Project, Eritrea(Chalice Gold Mines 80%)

Africa-focused gold explorer Sub-Sahara Resources NL

The Zara Gold Project consists of six contiguous granted licences covering(“Sub-Sahara”) merged by way of a Scheme of Arrangement (“Scheme”)

an area totalling 615 km2 situated in northern Eritrea, approximately 160

following approval by an overwhelming majority of Sub-Sahara shareholders

km northwest of the country’s capital, Asmara. Sub-Sahara has defined

and the Supreme Court of Western Australia.

a significant high grade gold deposit at the Koka deposit, with a JORC

The merger combines Chalice’s strong cash position with Sub-Sahara’s 69%
interest in the high grade Zara Gold Project in Eritrea, East Africa. The Zara
Gold Project (“Koka deposit”) currently comprises an Indicated and Inferred

Indicated and Inferred resource of 5.04 million tonnes at 5.8 grams per
tonne gold for 944,000 ounces of contained gold.
Geology and Mineralisation

Resource of 5.04 million tonnes at 5.8 g/t gold for 944,000 ounces ofcontained gold at a cut-off grade of 1.2 g/t (for further details on the Koka
deposit Resource, refer to page 5).
Chalice has also acquired an 11.12% interest in the Zara Gold Project fromAfrica Wide Resources Limited (“AWR”) for $1.6 million. This acquisition
results in the newly merged group holding 80% of the Zara Gold Projectwith ASX-listed gold producer Dragon Mining Limited owning theremaining 20%.

Figure 1:

The Upper Proterozoic Arabian-Nubian Shield (ANS) and major gold deposits.

Eritrea and the Zara Project

Key Terms of the Merger
Under the Scheme, Sub-Sahara shareholders have received 1 Chaliceshare for every 10.73 Sub-Sahara shares held at the Record Date. Other
security classes, comprising all partly paid shares and options were offered

The Zara Gold Project lies within the south-western part of the Late
Proterozoic Arabian–Nubian Shield, an emerging gold and base metal
province that hosts the ~13 million ounce Sukari gold deposit in Egypt, the~2 million ounce Ariab/Hassaï gold and base metal deposit in Sudan andthe ~1 million ounce Bisha gold and base metal deposit in Eritrea (Figure 1).

Chalice shares based on a valuation calculated in accordance with usual

The properties straddle the thrusted contact between two geologicalvaluation methods.

terranes where it shows a flexure from northeast to north-northeast (Figure

Following implementation of the merger and a recent placement of 16.3
million shares, Chalice now has approximately 137.4 million shares on issue.

4

CHALICE GOLD ANNUAL REPORT 20092). Gold mineralisation is associated with this terrane boundary along its
length, with the main prospect identified to date, the Koka deposit, being
the focus of past exploration by Sub-Sahara.

The Koka deposit’s mineralised zone has a total strike length of more

Resource Estimate

than 700 metres and is developed principally within an elongate,

The independent resource estimate and report was prepared bylensoidal body of microgranite intruded along the sheared and altered

Coffey Mining Pty Ltd (“Coffey”) in accordance with the guidelines

contact between a sequence of sedimentary and basaltic rocks to theof the Australasian Code for Reporting of Exploration Results, Mineralwest (footwall) and a felsic volcanic and volcaniclastic sequence to the

Resources and Ore Reserves (the JORC Code; 2004). Mineralised zones

east (hanging wall) (Figures 8 and 4).

were defined using both geological and assay data. Multiple Indicator

There is a considerable competency contrast between the microgranite

Kriging (MIK) was used as the estimation method.

and the sedimentary and volcanic rocks across this contact and this has

The Mineral Resource Statement as of February 2009 for in-situ

resulted in the steeply dipping western contact of the microgranite being

Koka gold mineralisation using a 60 g/t Au upper cut is tabulated instrongly brecciated, quartz stockwork veined and altered over a width

Table 1 below:

averaging around 20 metres (Figures 5 and 6). Gold is present in thequartz veins mostly as inclusions in pyrite, but also as discrete grains ingalena, quartz and carbonate (Figure 7). Preliminary metallurgical testwork by Ammtec Ltd indicates high gold recoveries by gravity (>40%)
with total gravity plus cyanide recoveries exceeding 95% over 24 hours
leach time and with low reagent consumptions.

Category
Indicated

Lower grade
cut-off (g/t)
1.2

Tonnes
(Mt)

Gold
(g/t)

Metal (Koz)

4.55

5.9

867

Inferred

1.2

0.49

4.9

77

TOTAL

1.2

5.04

5.8

944

The Coffey estimate is based on a geological interpretation from109 diamond drill holes completed by Sub-Sahara for approximately
18,000 metres. The bulk of the resource is shallower than 150 metresand the mineralization is open at depth in the deepest holes drilled(approximately 250 metres below surface).

Figure 2:

Regional geology of the Zara Gold Project showing known
artisanal gold sites and BLEG drainage anomalies

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Review of Operations

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Review of Operations

3D Representation of Koka Ore Body
Figure 3:

Koka looking northeast

Figure 5:

Section 9840N

6

CHALICE GOLD ANNUAL REPORT 2009

Figure 4:

3D representation of the Koka Gold Deposit showing location of sections

Figure 6:

Section 9520N

Figure 7:

Drill core sample from Koka deposit showing coarse gold associated with pyrite and galena (lead sulphide) in quartz-carbonate vein.

Regional Potential

over at least 800 metres of strike to the southeast (Figure 8) and further

The Zara Gold Project lies within an auriferous province that waswork is required to test its potential.

unknown before 1998 when the first prospects were located by artisanalminers. Since then, numerous other gold prospects have been identified
and several of these have seen considerable past and present artisanalmining activity. However, exploration has so far focused on the Koka
deposit with very little drilling outside this target, offering significant
exploration upside in the largely unexplored 615 km² of licences
surrounding the Koka deposit (Figure 2).

Induced Polarisation (IP) surveys at the Koka deposit have revealed thatthe mineralisation is associated with a strong resistivity anomaly, causedby the silica alteration associated with the mineralisation. Extension ofthis survey to the south revealed another strong zone of IP resistivity
around 500 metres south of the Koka deposit. Prospecting of this zone,
now called Koka South Extension, revealed another body of quartzstockworked microgranite with surface gold anomalism (Figure 8). Two

The most prominent of the regional prospects is the Konate prospectholes drilled into the northern end of this zone in 2008 confirmed Koka-

located 7 kilometres south of the Koka deposit where extensive artisanalstyle gold mineralisation at depth and this prospect represents a highworkings have exploited a 300 metre long zone of microgranite-hosted

priority target for future drilling.

quartz-stockwork gold mineralisation very similar in style to that at
the Koka deposit. Five diamond drill holes have been drilled at Konate
designed to test the deposit at depth and although mineralisation
was intersected the results were not consistent with the strong
surface indications. Further drilling at this site is required once a better
understanding of the structural controls on the mineralisation is obtained.

A program of geological mapping, rock chip sampling and BLEG stream
sediment sampling undertaken over the original Zara Gold Project
tenements has identified several previously unknown areas of interest
that will require priority follow-up. Extension of these surveys to theequally prospective northern and southern permits is expected to identify
further prospects of interest.

Closer to the Koka deposit itself artisanal miners are exploiting a highgrade quartz vein at Koka East just 200 metres east of the main Koka
deposit. Soil sampling and prospecting have confirmed this zone extends

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Review of Operations

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Review of Operations

Licence Extension
The four original exploration licences covering the Zara Gold Project havebeen extended by the Government of Eritrea. The extension requires Chalice
to complete a Pre-Feasibility Study by the end of October 2009 and adetailed Feasibility Study by 25 May 2010.
In addition, the Eritrean Government has advised that applications by SubSahara for additional tenements totalling 400 square kilometres have been
approved. This increases the total Chalice tenure at the Zara Gold Project toapproximately 615 km2.
On application for a mining licence, the Eritrean Government is entitled toa 10% free carried interest and, in addition, the Government has the right,
by agreement, to purchase a further 30% equity participation interest in any
mining project and up to a negotiable 5% royalty on mined precious metals.
Scoping Study Awarded to Lycopodium
Chalice has appointed Lycopodium Minerals Pty Ltd (“Lycopodium”) in
association with AMC Consultants (“AMC”) and Knight Piésold to complete
development studies for the Zara Gold Project.
Lycopodium will complete all metallurgical process design, infrastructure
and project development components and is responsible for overall study
coordination. AMC will complete geology, resource modelling, mining
and mine related geotechnical study aspects. Knight Piésold will
undertake infrastructure geotechnical studies, hydrogeology, tailings
disposal and environmental and social impact management in
consultation with local Eritrean consultants Global Resources
Development and Management Consultants.
These consultants have demonstrated African gold project development
credentials and bring an international approach to the Zara Gold Project.
Outlook
Major elements of an immediate work program have commenced to
rapidly advance the Zara Gold Project to feasibility by May 2010. This work
program includes water drilling and hydrological studies, metallurgicaltest-work, preparation for further resource definition drilling and ongoingenvironmental, geological and topographic data collection.
A percussion drilling program to investigate potential water-bearing structures
identified by targeted geophysical surveys and drainages has commenced andinitial indications are that sufficient sub-surface water can be obtained.
Drill core from seven metallurgical holes drilled at the Koka deposit in 2008
is currently undergoing test work with preliminary results indicating highly
favorable comminution characteristics and gold recoveries (>95%).
A further 5,000 metres of drilling is required to infill the Koka deposit
resource and upgrade it from its current Indicated and Inferred status. It isplanned that this drilling will commence immediately drill rigs arrive on site
in November 2009.
Figure 8:

Koka Gold Deposit - geology and prospects

8

CHALICE GOLD ANNUAL REPORT 2009

3 Gnaweeda Gold Project (Teck earning 70%)
The Gnaweeda Gold Project tenure covers almost an entire Archaean
greenstone belt in the northern Murchison Province of Western Australia,
with proven gold mineralisation potential. Turnberry, the most advanced

Chalice entered into an agreement with AngloGold Ashanti Australia Ltd(“AngloGold”), whereby AngloGold has the right to earn a 75% interestin Chalice’s Wilga Gold Project through expenditure of $2 million at the
project within the next four years.

gold prospect, has received limited deep RC and diamond drilling, which

AngloGold has the right to withdraw prior to earning its interest and will

has intersected significant gold mineralisation in most of the holes. The

be manager of the project and the joint venture.

mineralisation remains open at depth and laterally in every direction.
Exploration conducted on the Wilga Gold Project during the year involved
Geologically and structurally the deposit at Turnberry is not yet wellsurface rock chip sampling and gold analyses (35 samples), 1:5,000 scale

understood and there is an opportunity to expand on the current

geological mapping, and a program of aircore drilling.

understanding with further RC/diamond drilling and locate additionalfavourable sites for mineralisation both at Turnberry, and along the ~The geological mapping has revealed a north northwesterly striking

15km strike of anomalous gold and arsenic within the lineatedstratigraphy of banded iron formation (BIF), basalt, pyroxenite, high-Mg

magnetic package which hosts the anomalous geochemistry.

basalt and ultramafic units. Structure is dominated by shearing andisoclinal folding of the stratigraphy. Initial indications from surface

During the year Chalice received notification from Teck Australia Pty Ltd

sampling show that gold mineralisation is strongly associated with a(“Teck”) that Teck has entered into an exclusivity agreement with TSX

north northwesterly striking BIF ridge.

Venture Exchange listed company Kent Exploration Inc. (“Kent”) which
contemplates Kent earning 100% of Teck’s interest, subject to Teck

Two zones of anomalous gold-in-soil values were identified from previous

retaining a 75% claw-back.

exploration activities. This includes a north-south striking area overlying
a BIF and overlying mafic and ultramafic lithologies in the west, within

Kent has paid Teck a non-refundable $50,000 deposit which provides

the central portion of E39/1003. Surface rock chip sampling verifies the

Kent with a three month exclusive period during which time Teck andpresence of these low order gold anomalies with seven samples yielding

Kent plan to negotiate and formalise the proposed arrangement. To

gold values above 0.03 ppm (see Table 2 and Figure 10).

earn its interest in the Gnaweeda Gold Project, Kent is required to fund$3 million in exploration expenditures over 4 years, with a $200,000

Sample
ID

MGA E

MGA N

Au (ppm)

Sample TypeWILRK018

4543616773691

0.103

In Situ

WILRK019

4546236773163

0.093

In SituOnce Kent has earned its interest in the Gnaweeda Gold Project, Teck

WILRK022

45462867734210.268

In Situ

has the right to claw back 75% of Kent’s interest by spending 2.5 times

WILRK023

4546356773545

0.043

In Situ

Kent’s exploration expenditures. Teck is currently earning up to 70% in

WILRK024

4545566773711

0.109

In Situ

the Gnaweeda Gold Project by spending $1.5 million. To date, Teck has

WILRK029

4542546774624

0.039

In Situearned 51% in the Gnaweeda Gold Project and has elected to spend an

WILRK032

4542846774384

1.083

In Situ(includes deposit) first phase exploration program to be completed by
31 December 2009.

additional $0.75 million to earn a further 19%.
Teck has advised that Kent has planned a detailed aeromagnetic
survey to be flown over the southern half of the project in thesecond half of 2009.

4 Wilga Gold Project(Anglogold Ashanti earning 75%)
The Wilga Gold Project comprises two tenements located about 55km
south of Laverton. The area is situated within the Laverton greenstone
belt and is adjacent to the eastern margin of the Laverton Tectonic Zone,

Analysis on 1-3kg surface rock chip samples by Genalysis Laboratory Services, Perth.
Gold assays were carried out by Method FA25/SAAS to a detection limit of 1ppb (Au):
Lead collection fire assay with Au Analysis by solvent extration & flame AAS finish.

Table 2: Wilga Project - Surface rock chip samples gold values greater than 0.03 ppm.

Anglogold has also undertaken an air core drilling program consistingof blanket coverage at 160 x 400 metre spacing with 80 x 200 metre
spacing over infill areas to the east and central BIF ridge, in order tofollow up anomalies previously identified in soil and surface rock chipdata discussed above (Figure 10).

which hosts the world class gold deposits at Cleo/Sunrise Dam and which

To date, 180 holes, for a total of 7,726 metres have been drilled andlie about 15km to the northwest of the project.

logged. Results received have yielded some gold anomalism which
will be followed up in the next phase of drilling.

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Review of Operations

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Review of Operations

Yandeearra Soil Sampling Surveys
Follow-up work identified several new gold and base metal occurrences,with assays up to 42.3g/t gold, 2.43% copper, 29g/t silver and 1.68%
lead in different rock samples, however infill soil sampling and geologicalreconnaissance have indicated they have limited size potential.
Soil and rock chip sampling at the Seven G Prospect has identified a new
gold-lead-copper-barium occurrence with soil samples collected containing
up to 7.24g/t gold accompanied by elevated levels of lead (210ppm) silver(0.45g/t) and barium (566ppm). Initial reconnaissance rock sampling ofa ferruginous gossan returned an encouraging base and precious metal
geochemical signature of up to 5.10g/t gold, 0.28% copper, 5g/t silver,
1.64% lead and 3,860ppm barium.
Reconnaissance soil sampling (400 x 40 metre) has also identified a newhigh tenor gold anomaly 2.4km north of Seven G. Gold values up to332ppb occur within the anomaly which extends over a strike length of
1.2km and is open to the north.
Cleaverville Chert Hills Stream Sediment Sampling
Stream sediment sampling (275 sample sites) was completed over a 13km
strike length of complexly folded and faulted Cleaverville Chert (whichhosts the Wingina Well gold deposit at Turner River) in the northeast of the
Yandeearra Project area.

Figure 10:

Schematic geological map of the Wilga Gold Project showing major units andstructures interpreted from aeromagnetic survey and geological mapping.

A spatially coherent high tenor gold anomaly defined by the BLEG and/or
Aqua Regia results occurs over a 2.8km strike length, covering a structurally
controlled chert ridge in the centre of the hills. The BLEG results range up to
235ppb gold (background less than 8ppb) and the Aqua Regia results range
up to 254ppb gold (background less than 4ppb).

5 Yandeearra Project(100% Chalice Gold Mines Limited)
Chalice’s interest in the Yandeearra Project comprises a large tenement

Follow-up soil sampling over the southern portion of the Cleaverville Chert
did not identify any gold in soil anomalism.

package, contiguous with the Indee Gold Project and the Turner River Gold

Iron Ore Exploration

Belt. Exploration continued at the Yandeearra Project during the year withAtlas Iron Limited (“Atlas”) has an option to acquire the iron ore rights forsoil geochemistry, stream sediment sampling, geological reconnaissance andthe Yandeerarra Project for $1 million. Ongoing interpretation of regionalrock chip sampling programs.

aeromagnetic data coupled with helicopter reconnaissance ground truthing
has delineated several distinct BIF-hosted magnetite targets. Under the
option agreement, Atlas has until October 2009 to exercise their option toacquire the iron ore rights.

Competent Persons 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 consents to the release of information in the form and context in which it appears here.
The Independent Resource Estimate for the Koka deposit was prepared by Mr Brian Woolf, whilst employed as a Specialist Resource Geologist for Coffey Mining Pty Ltd. Mr Woolf,
who is a Member of the Australasian Institute of Mining and Metallurgy, has sufficient experience in the field of Resource Estimation to qualify as a Competent Person as definedin the 2004 edition of the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves, and consents to the release of information in the form andcontext in which it appears here.

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CHALICE GOLD ANNUAL REPORT 2009

Yandeearra
Tenement #Gnaweeda
Nature of Interest

Current Equity

Tenement #Nature of Interest

Current Equity

E47/590

Owned

100%

E47/591

Owned

100%

E51/926

Owned

49%

E51/927

Owned

49%

E47/755

Owned

100%

E47/1041

Owned

100%

E47/1161

Owned

100%

E47/1162

Owned

100%

Tenement #Nature of Interest

Current Equity

E47/1163

Owned

100%

E47/1164

Owned

100%

E39/1003

Owned

100%

P39/4890

Owned

E47/1165

Owned

100%

100%

E47/1166

Owned

100%

M47/561

Owned

100%

P47/1245

Owned

100%

P47/1298

Owned

100%

P47/1299

Owned

100%

E47/1207

Application

0%

E47/1748

Application

0%

E47/1749

Application

0%

M47/560

Application

0%

M47/783

Application

0%

M47/784

Application

0%

M47/785

Application

0%

M47/994

Application

0%

M47/995

Application

0%

M47/996

Application

0%

M47/997

Application

0%

M47/998

Application

0%

M47/999

Application

0%

M47/1000

Application

0%

M47/1001

Application

0%

M47/1002

Application

0%

M47/1003

Application

0%

M47/1004

Application

0%

M47/1005

Application

0%

M47/1114

Application

0%

M47/1115

Application

0%

M47/1116

Application

0%

M47/1117

Application

0%

M47/1118

Application

0%

M47/1119Application

0%

M47/1120

Application

0%

M47/1121

Application

0%

M47/1122

Application

0%

M47/1123

Application

0%

M47/1124

Application

0%

M47/1125

Application

0%

Wilga

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Schedule of Tenements as at 30 June 2009

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
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RT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPO

Chalice Gold Mines Limited
Financial Report
Directors’ report .............................................13
Auditor’s independence declaration.................21
Income statement...........................................22
Balance sheet..................................................23
Statement of changes in equity........................24
Cash flow statement.......................................25
Notes to the financial statements....................26
Directors’ declaration......................................42
Independent auditor’s report...........................43
Corporate governance report...........................45
ASX additional information..............................48

12

CHALICE GOLD ANNUAL REPORT 2009

The Directors present their report together with the financial report of Chalice Gold Mines Limited (‘Chalice Gold Mines’ or ‘the Company’) for thefinancial year ended 30 June 2009 and the independent auditor’s report thereon. In order to comply with the provisions of the Corporations Act, theDirectors report as follows:

1. Directors
The Directors of the Company at any time during or since the end of the financial year are:
T R B Goyder
Executive Chairman
Tim has over 30 years experience in the resource industry. Tim has been involved in the formation and management of a number of publicly-listedcompanies and is currently a Director of Uranium Equities Limited and Chairman of Liontown Resources Limited.
D A Jones
PhD, AusIMM, RPGeo
Managing Director(appointed 11 November 2008)
Doug is a Geologist with over 30 years experience in international mineral exploration, having worked extensively in Australia, Africa, South America
and Europe. His career has covered exploration for volcanic and sediment-hosted zinc-copper-lead, gold in a wide range of geological settings and
IOCG style copper-gold. He is also a director of Liontown Resources Limited and AIM-listed Minera IRL Limited.		
A W Kiernan
LLB
Non-executive Director
Tony is a lawyer and general corporate advisor with extensive experience in the administration and operation of listed public companies. Tony
is Chairman of BC Iron Limited and Uranium Equities Limited and is a director of Liontown Resources Limited. Tony was also a director of North
Queensland Metals Limited and Solbec Pharmaceuticals Limited (now named Freedomeye Limited) in the last three years.
A R Bantock
B.Com, ACA
Non-executive Chairman(resigned 11 November 2008)
Andrew has extensive professional, corporate and commercial experience in the resources, resource contracting and infrastructure sectors. He iscurrently a Director and chairs the Audit Committee of Water Corporation, Western Australia’s water utility. Andrew was also a director of Liontown
Resources Limited and Uranium Equities Limited in the last three years.
T M Clifton
BSc (Hons), B. Juris LLB, FAus IMM
Alternate Director for D A Jones (20 March to 14 April 2009)
Tim is a Geologist with over 35 years experience in the Australian mining industry at both a technical and corporate level. He was co-founder of Perilya
Limited and is currently a Director of Uranium Equities Limited and Strike Oil Limited.

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Directors Report

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
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Directors Report
2. Company Secretary
R K Hacker
B.Com, ACA, ACIS

(resigned 7 April 2008, re-appointed 1 August 2008)
Richard has significant professional and corporate experience in the energy and resources sector in Australia and the United Kingdom. Richard has previously
worked in senior finance roles with global energy companies including Woodside Petroleum Limited and Centrica Plc. Prior to this, Richard worked withleading accounting practices. Richard is a Chartered Accountant and Chartered Secretary and is also Company Secretary of Liontown Resources Limited.
AM Reynolds(Resigned 1 August 2008)

3. Directors’ meetings
During the year six Directors’ meetings were held. The number of meetings attended by each of the Directors of the Company during the year are:Director

Number of board
meetings attended

Number of meetings held
during the time the director
held office during the year

T R B Goyder

66

D A Jones

3

3

A W Kiernan

66

A R Bantock

3

3

T M Clifton

00

4. Principal activities
The principal activities of the Company during the course of the period were mineral exploration and evaluation.

5. Review of Operations
5.1 Merger Between Chalice Gold Mines and Sub-Sahara Resources NL
On 14 August 2009, Chalice Gold Mines Limited (“Chalice”) and East Africa-focused gold explorer Sub-Sahara Resources NL (ASX: SBS; “Sub-Sahara”)
merged the two companies by way of a Scheme of Arrangement (“Scheme”) following Scheme approval by Sub-Sahara shareholders and court approval.
The merger has combined Chalice’ strong cash position with Sub-Sahara’s 69% interest in the high grade Zara Gold Project in Eritrea,
East Africa.
Chalice will also pay $1.664 million for the acquisition of 100% of the shares of Yolanda International Limited, a wholly owned subsidiary of Africa Wide
Resources Limited (“AWR”), which holds an 11.12% joint venture interest in the Zara Gold Project. This acquisition results in the newly merged groupholding 80% of the Zara Gold Project with ASX-listed gold producer Dragon Mining Limited owning the remaining 20%.
Key Terms of the Merger
The Scheme required Sub-Sahara shareholder approval and Court approval. Under the Scheme, Sub-Sahara shareholders will receive 1 Chalice Share forevery 10.73 Sub-Sahara Shares.
Other security classes, comprising all partly paid shares and options were offered Chalice shares based on a valuation calculated in accordance with theBlack & Scholes valuation model. No offer was made for Sub-Sahara’s listed options given these options expired before the merger was completed.

14

CHALICE GOLD ANNUAL REPORT 2009

Overview of Merged Group
Following completion of the merger, Chalice Gold Mines will have approximately 121.2 million shares on issue and a strong funding position,
which will enable acceleration of the exploration and evaluation of the Zara Gold Project in Eritrea as the focus of an international gold
development strategy.
Project Background
The Zara Gold Project lies within an emerging gold and base metal province in East Africa which includes the ~13Moz Sukari Gold Project in Egypt,the ~2Moz Ariab/Hassai gold and base metal deposit in Sudan and the ~1Moz Bisha gold and base metal deposit in Eritrea. The 615 km2 project
area covers a significant portion of the Zara goldfield and offers significant exploration upside for the definition of additional resources.
5.2 Gnaweeda Gold Project
Chalice has received notification from Teck Australia Pty Ltd (“Teck”) that Teck has entered into an exclusivity agreement with TSX Venture Exchange
listed company Kent Exploration Inc (“Kent”) which contemplates Kent earning 100% of Teck’s interest, subject to Teck retaining a 75% claw-back, in
the Gnaweeda Gold Project in the northern Murchison province of Western Australia.
To earn its interest in the Gnaweeda Gold Project, Kent is required to fund $3 million in exploration expenditures over 4 years, with a $200,000(includes deposit) first phase exploration program to be completed by 31 December 2009.
Once Kent has earned its interest in the Gnaweeda Project, Teck has the right to claw back 75% of Kent’s interest by spending 2.5 times Kent’s
exploration expenditures. Teck is currently earning up to 70% in the Gnaweeda Gold Project by spending $1.5M. To date, Teck has earned 51% in the
Gnaweeda Project and has elected to spend an additional $0.75M to earn a further 19%.
5.3 Yandeearra Project
Chalice received formal notification from De Grey Mining Limited (“De Grey”) of its withdrawal from the Yandeearra Project in the West Pilbara. Under
the joint venture agreement, De Grey was to spend $1.67 million to earn up to 80% of the rights to gold and base metals. De Grey has spent inexcess of $600,000 on the project, which exceeded their minimum commitment of $417,000 under the joint venture agreement.
Under a separate agreement, Atlas Iron Limited (which has an option to acquire 100% of the iron ore rights for $1 million – subject to a 30% clawback provision) is continuing a regional exploration program to investigate the iron ore potential of the project.
5.4 Wilga Gold Project
Chalice entered into an agreement with AngloGold Ashanti Australia Ltd (AngloGold), whereby AngloGold has the right to earn a 75% interest in
Chalices’ Wilga Project through completion of $2 million of gold exploration expenditure at the project within the next four years.
Upon earning its 75% interest, a joint venture will be established as between AngloGold and Chalice, with respective participating interests being
AngloGold 75%: Chalice 25%.
AngloGold is currently undertaking an air core drilling program as a possible prelude to RC drilling.
5.5 Termination of Agreement to acquire the Mount Oxide Copper-Cobalt Project
Following the execution of an agreement to acquire the Mount Oxide Copper-Cobalt Project from Perilya Limited (and an associated option to acquire
the subsidiary of Perilya Limited which holds a 50% interest in the Tampang Copper-Gold Project), the directors of Chalice advised Perilya Limited on
24 October 2008 that, due to the severe downturn in capital markets and the substantial fall in the copper price, in exercising their respective fiduciary
duties, the Board could not recommend that shareholders approve the acquisition in the current form.
Under the circumstances, Perilya Limited consented to the request to terminate the agreement and a Deed of Termination and Release was executed.

6. Significant changes in the state of affairs
Other than referred to in section 5, there are no significant changes in the state of affairs of the Company.

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Directors Report

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
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Directors Report
7. Remuneration report - auditedThis report outlines remuneration arrangements in place for directors and executives of Chalice Gold Mines.
7.1 Principles of compensation
The broad remuneration policy of the Company is to ensure that remuneration levels for executive directors, secretaries and other key management
personnel are set at competitive levels to attract and retain appropriately qualified and experienced personnel. This is particularly important in view of thesignificant impact that each individual can make within a small executive team for an exploration and development company such as Chalice Gold Mines.
However, with the impact of recent global economics the board has acted appropriately by reviewing salaries for directors, executives and staff and has
made changes to salaries accordingly.
Remuneration offered by Chalice Gold Mines is therefore geared to attracting talented employees through a combination of fixed remuneration and longterm incentives, calibrated and individually tailored to be competitive in the external market to offer incentive to join and remain with the Company.
Fixed compensation
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges related to employee benefits), as
well as employer contributions to superannuation funds.
Remuneration levels are reviewed annually through a process that considers the person’s responsibilities, expertise, duties and personal performance.
Long-term incentives
Options may be issued under the Employee Share Option Plan to directors, employees and consultants of the Company and must be exercised within 3months of termination. The ability to exercise the options is usually based on the option holder remaining with the Company for at least one year. Other
than the vesting period, there is no performance hurdle required to be achieved by the Company to enable the options to be exercised.
The Company believes that the issue of share options in the Company aligns the interests of directors, employees and shareholders alike.
Performance-related compensation
The Company currently has no formal performance-related remuneration policy which governs the payment of annual cash bonuses upon meeting predetermined performance targets. However, the Board may consider performance related remuneration in the form of cash or share options when they
consider these to be warranted.
Non-executive directors
The Board recognises the importance of attracting and retaining talented non-executive Directors and aims to remunerate these Directors in line with fees
paid to Directors of companies in the mining and exploration industry of a similar size and complexity.
Total compensation for all non-executive Directors is not to exceed $150,000 per annum.

16

CHALICE GOLD ANNUAL REPORT 2009

7.2 Directors’ and executive officers’ remuneration (audited)(appointed 11 November 2008)

D A Jones (1)

2009

2008

2009

2008

2009

2008

2009

178,899--

27,52330,275--45,87273,394

2,369

4,701

-

-

3,364

5,137

-

-

3,364

5,137

-

118,043

29,027

134,048

183,600--

30,88735,412--

49,23678,532

1,101

1,032

-

10,321

2,443

11,337

16,101

-

-

2,477

2,725

-

-

4,128

6,605

-

41,404---92,367

-

-

-

-

-

-

-

-

-

-

Termination
benefits$

1,284(1,284)

-

-

-

-

-

37,559--54,929

-

-

-

-

-

Options (A)$49,16953,904

13,901-

128,364

123,836

145,385

237,259--

88,29338,137--53,36485,137

3%

(2%)

-%

-%

-%

-%

-%

16%

62%

-%

-%

-%

-%

-%

Share-based payments

A W Kiernan

2008

131,679

3,364

1,886

12,8693,862

Post-employment payments

T M Clifton

2009

27,141-

12,682

Short-term payments(Alternate Director) (2)2008

114,679

1,401

44,023

Value of optionsas proportionof remuneration(%)

R K Hacker

2009

-

450

478,476

538,273

T R B Goyder

Executive

Former Directors

Former Executive

Total
$

(appointed 1 August 2008)

2008

11,468

1,115

56,21336,275

Superannuation
benefits$

A R Bantock
2009

12,232-

133,771

Total$(resigned 11 November 2008)
2008

42,90833,15728,975Non-monetary
benefits$

B W Alexander

2009

389,106

339,252

Salary & fees$

(resigned 30 November 2007)2008

14,977

17,311KeyManagement
Personnel

A M Reynolds

374,129

321,942

Directors(resigned 1 August 2008)

2008

2009

-

-

Total CompensationNote:(1)	Dr Jones has his remuneration paid by Liontown Resources Limited. Chalice is charged, at cost, by Liontown Resources for the services provided by Dr Jones to Chalice. Refer to note 25 forfurther details.
(2) Mr Clifton did not receive remuneration in his role as Alternate Director.

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Directors Report

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Directors Report

Notes in relation to the table of directors’ and executive officers’ remuneration
A.	The fair value of the options are calculated at the date of grant using a binomial option-pricing model and allocated to each reporting period evenly over theperiod from grant date to vesting date. The value disclosed is the portion of the fair value of the options allocated to this reporting period. In valuing the options,market conditions have been taken into account. The following factors and assumptions were used in determining the fair value of options on grant date:

Grant Date
01.08.08

Expiry Date

Fair value
per option

31.07.13$0.08

Exercise pricePrice ofordinary shareson grant date

$0.20

Expected
volatility$0.125

Risk freeinterest rate

85%

Dividend yield

7.5%

0

Details of performance-related remuneration
Details of the Company’s policy in relation to the proportion of remuneration that is performance-related are discussed at 7.1 above.
7.3 Equity instruments
7.3.1  Options and rights over ordinary shares granted as compensation
Details of options over ordinary shares in the Company that were granted as compensation to key management personnel during the reporting period anddetails of options that vested during the reporting period are as follows:

Numberof options granted
during 2009

Grant date

Fair value
per option
at grant date$

Number of options
vested during 2009

Exercise priceExpiry date

Executive
R K Hacker

500,000

01.08.08

125,000

$0.08

$0.20

31.07.13

7.3.2  Exercise of options granted as compensation
During the reporting year and the prior year, no shares were issued on the exercise of options previously granted as compensation.
Analysis of options and rights over ordinary shares granted as compensation
Details of the vesting profile of the options granted as remuneration to each director of the Company and each of the named Company executives are outlined below.
NumbergrantedDate
granted% vestedin yearForfeitedin year

Period in which
grant vests

Executive
R K Hacker

125,000

01.08.08

100%

-

2009

375,000

01.08.08

-

-

2010

The movement during the reporting period, by value, of options over ordinary shares in the Company held by each Company director and each of the named
Company executives is detailed below.
Granted in year
$ (A)Exercised in year
$ (B)Forfeited in year
$ (C)Executive
R K Hacker
A M Reynolds

40,114-

10,717

-

-

7,590

(A)	The value of options granted in the year is the fair value of the options calculated at grant date using a binomial option-pricing model. The total value ofthe options granted is included in the table above. This amount is allocated to remuneration over the vesting period.
(B)	The value of options exercised during the year is calculated as the market price of shares of the Company on ASX as at close of trading on the date theoptions were exercised after deducting the price paid to exercise the option.
(C)	The value of options that lapsed during the year represents the benefit foregone and is calculated at the date the option lapsed using a binomial optionpricing model with no adjustments for whether the performance criteria have or have not been achieved.
18

CHALICE GOLD ANNUAL REPORT 2009

8. Dividends
No dividends were declared or paid during the period and the directors recommend that no dividend be paid.

9. Likely developments
The Company will continue activities in the exploration and evaluation of minerals tenements with the objective of developing a significant
minerals business.

10. Subsequent events
On 14 August 2009, the Scheme of Arrangement between Sub-Sahara Resources NL (“Sub-Sahara”) and its shareholders received court approval tomerge with Chalice Gold Mines. Fully paid ordinary shareholders of Sub-Sahara will receive approximately 46.7 million Chalice Gold Mines shares inexchange for all the fully paid ordinary shares of Sub-Sahara.
In addition, unlisted partly paid shareholders and unlisted option holders in Sub-Sahara will receive a further 1.6 million Chalice Gold Mines shares as
consideration for these securities.
Following completion of the merger, Chalice Gold Mines will also pay $1.664 million for the acquisition of 100% of the shares of Yolanda
International Limited, a wholly owned subsidiary of Africa Wide Resources Limited (“AWR”), which holds an 11.12% joint venture interest in the Zara
Gold Project.
Other costs associated with the merger, including redundancy costs, corporate advisory fees and other liabilities inherited from Sub-Sahara are
estimated to be approximately $877,000.

11. Directors’ interests
The interest of each Director in the shares, rights or options over such instruments issued by the Company and other related bodies corporate, as
notified by the Directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
Ordinary shares

Options over ordinary shares

T R B Goyder

17,828,030

2,000,000

D A Jones (1)135,000-

A W Kiernan

820,074

500,000(1)	Subject to shareholder approval at the Company’s next General Meeting, Dr Jones will be issued 1,250,000 unlisted share options with an exercise
price of $0.35 expiring on 31 March 2014 and 1,250,000 unlisted share options with an exercise price of $0.45 expiring on 31 March 2014.

12. Share options
Options granted to directors and officers of the company
During or since the end of the financial year, the Company granted options for no consideration over unissued ordinary shares in the Company to thefollowing directors and officers of the Company as part of their remuneration.
Number of options granted
Executives
R K Hacker

500,000

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Directors Report

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Directors Report
Unissued shares under options

At the date of this report 6,825,000 unissued ordinary shares of the Company are under option on the following terms and conditions:
Expiry date

Exercise price

Number of shares

21.03.11$0.25

5,575,000

01.12.12$0.25

500,000

11.12.12$0.20

250,000

31.07.13$0.20

500,000

These options do not entitle the holder to participate in any share issue of the Company or any other body corporate.
Shares issued on exercise of options
During or since the end of the period, the Company has not issued any ordinary shares as a result of the exercise of options.

13. Indemnification and insurance of directors and officers
The Company has agreed to indemnify all the directors and officers who have held office of the Company during the year, against all liabilities to anotherperson (other than the Company or a related body corporate) that may arise from their position as directors and officers of the Company, except where theliability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities,
including costs and expenses.
During the year the Company paid insurance premiums of $17,311 in respect of directors and officers indemnity insurance contracts, for current and former
Directors and officers. The insurance premiums relate to:costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and	other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or
position to gain a personal advantage.
The amount of insurance paid is included in Directors and executives remuneration on page 17.

14. Non-audit services
During the year HLB Mann Judd, the Company’s auditors, performed no other services in addition to their statutory duties.

15. Auditor’s independence declaration
The auditor’s independence declaration is set out on page 21 and forms part of the Directors’ report for the year ended 30 June 2009.
This report is made in accordance with a resolution of the Directors:

Tim R B Goyder
Executive Chairman
Dated at Perth this day 25 August 200920

CHALICE GOLD ANNUAL REPORT 2009

Auditor’s Independence Declaration                 
                  
            





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


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HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 2 15 Rheola Street West Perth 6005 PO Box 263 West Perth 6872 Western Australia. Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation


HLB Mann Judd (WA Partnership) is a member ofInternational, a world-wide organisation of accounting firms and business advisers
21

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Income Statement
For the year ended 30 June 2009Note
Net gain/ (loss) on sale of exploration and evaluation assets

3

Net gain on sale of securities

2009
$

2008
$

674,486(1,681)56,003556,852

Changes in fair value of available-for-sale investments

4

12,463

1,996,631

Other income

5824,333

748,586

1,567,285

3,300,388-(1,355,640)(129,862)(41,783)(1,474,525)(1,168,055)(527,434)

-

-

(64)

(564,536)

734,846--(564,536)

734,846

Total income
Impairment losses on exploration and evaluation expenditure
Exploration costs not capitalised
Corporate administrative expenses

6

Costs of business combinations expensed
Finance costs

9

Profit/ (loss) before tax
Income tax expense/benefit

10

Profit/ (loss) for the period
Basic earnings/ (loss) per share attributable to ordinary equity holders

11(0.01)

0.01

Diluted earnings/ (loss) per share attributable to ordinary equity holders

11(0.01)

0.01

The income statement is to be read in conjunction with the notes to the financial statements set out on pages 26 to 41.

22

CHALICE GOLD ANNUAL REPORT 2009

As at 30 June 2009

Note

2009
$

2008
$

Cash and cash equivalents

129,623,637

9,972,766

Trade and other receivables

13

162,000

84,085

Assets held for sale15-

164,064

9,785,637

10,220,915

Current assets

Total current assets
Non-current assets
Financial assets

14

174,827

74,698

Exploration and evaluation assets

16

1,950,775

2,033,937

Property, plant and equipment

17

232,566

207,781

Total non-current assets

2,358,168

2,316,416

Total assets

12,143,805

12,537,331

Current liabilities
Trade and other payables

18

151,640

60,782

Employee benefits

19

18,196

19,565

Other

20

3,182

-

173,018

80,347

47,20751,976

Total non-current liabilities

47,20751,976

Total liabilities

220,225

132,323

11,923,580

12,405,008

Total current liabilities
Non-current liabilities
Other

20

Net assets
EquityIssued capital

21

13,974,454

13,974,454

Accumulated losses

21(2,704,892)(2,140,356)

Reserves

21

654,018

570,910

11,923,580

12,405,008

Total Equity

The balance sheet is to be read in conjunction with the notes to the financial statements set out on pages 26 to 41.

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Balance Sheet

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
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For the year ended 30 June 2009

Share capital$

Accumulated
losses$Share based
payments
reserve$

Investment
revaluation
reserve$

Total equity$

13,974,454(2,140,356)

570,910-

12,405,008

Employee share options vested--

47,108-47,108Fair value gain available for sale investments

-

-

-

36,00036,000Loss for the period-(564,536)--(564,536)

13,974,454(2,704,892)

618,018

36,00011,923,580

Share capital$

Accumulated
losses$Share based
payments
reserve$

Investment
revaluation
reserve$

Total equity$

13,974,454(2,875,202)

501,882-

11,601,134

Employee share options vested--

69,028-69,028

Profit for the period-

734,846--734,846

13,974,454(2,140,356)

570,910-

12,405,008

Note
Balance at 1 July 2008

Balance at 30 June 200921

Balance at 31 July 2007

Balance at 30 June 2008

21

The statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 26 to 41.

24

CHALICE GOLD ANNUAL REPORT 2009

For the year ended 30 June 2009

2009
$

2008
$

288,734

275,180(1,388,115)(1,060,139)

-

(64)

522,328

476,546(577,053)(308,477)

Payments for mining exploration and evaluation(320,890)(360,083)

Acquisition of property, plant and equipment(94,329)(87,809)

Proceeds from sale of investments

897,003

11,960,176

Proceeds from option fee received for sale of exploration and evaluation assets

250,000-

Payments for costs of business combinations(503,860)-

Amounts paid to exercise options-(3,580,000)

Proceeds from sale of property, plant and equipment

-

5,010

227,924

7,937,294

Lodgement of bank guarantee and security deposits-

20,000Net cash from financing activities-

20,000Net increase/(decrease) in cash and cash equivalents(349,129)

7,648,817

Cash and cash equivalents at the beginning of the period

9,972,766

2,323,949

9,623,637

9,972,766

NoteCash flows from operating activities
Cash receipts from operations
Cash paid to suppliers and employees
Interest paid
Interest received
Net cash used in operating activities

24

Cash flows from investing activities

Net cash from investing activities
Cash flows from financing activities

Cash and cash equivalents at 30 June

12

The cash flow statement is to be read in conjunction with the notes to the financial statements set out on pages 26 to 41.

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Cash Flow Statement

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Notes to the financial Statements
For the year ended 30 June 2009

1. Significant accounting policies
Chalice Gold Mines is an ASX listed public company domiciled in Australia at Level 2, 1292 Hay Street, Perth, Western Australia. The financial report of the Company
is for the year ended 30 June 2009.
The financial report was authorised for issue by the Directors on the 25th day of August 2009.

(a) Statement of compliance
The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (‘AIFRS’).
Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial ReportingStandards (‘IFRS’).

(b) Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, AccountingStandards and Interpretations and complies with other requirements of the law. The financial report has also been prepared on a historical cost basis, except forderivative financial instruments and available-for-sale investments, which have been measured at fair value. The financial report is presented in Australian dollars.
In the year ended 30 June 2009, the Company has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its
operations and effective for annual reporting periods beginning on or after 1 July 2008. It has been determined by the Company that other than the election to early
adopt AASB 3 Business Combinations, there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore,
no change is necessary to its accounting policies.
The company has elected to early adopt AASB 3 Business Combinations (March 2008) for the reporting period commencing 1 July 2008. The following changes toaccounting policies are adopted in the preparation of this financial report:	Acquisition costs incurred in a business combination will no longer be recognised in goodwill but will be expensed unless the cost relates to issuing debt orequity securities;
	Contingent consideration will be measured at fair value at the acquisition date and may only be provisionally accounted for during a period of 12 months after
acquisition;
	A gain or loss of control will require the previous ownership interests to be remeasured to their fair value;	There shall be no gain or loss from transactions affecting a parent’s ownership interest of a subsidiary with all transactions required to be accounted for throughequity (this will not represent a change to the Group’s policy);	Dividends declared out of pre-acquisition profits will not be deducted from the cost of an investment but will be recognised as income;	Impairment of investments in subsidiaries; joint ventures and associates shall be considered when a dividend is paid by the respective investee; and	Where there is, in substance, no change to Group interests, parent entities inserted above existing Groups shall measure the cost of its investments at thecarrying value of its share of the equity items shown in the balance sheet of the original parent at the date of reorganisation.
During the current financial year, costs of $527,434 incurred to 30 June 2009 on the Sub-Sahara Resources NL business combination, which was completed
subsequent to balance date, have been expensed.

(c) Significant accounting judgements, estimates and assumptions
The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are basedon historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making thejudgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These
accounting policies have been consistently applied by the Company.
The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within thenext annual reporting period are:(i)	Recoverability of exploration expenditure
The carrying amount of exploration and evaluation expenditure is dependent on the future successful outcome from exploration activity or alternatively thesale of the respective areas of interest.
(ii)	Share-based payment transactions
The Company measures the cost of equity-settled share-based payments at fair value at the grant date using a binomial formula taking into account theterms and conditions upon which the instruments were granted.

(d) Segment reporting
A segment is a distinguishable component of the Company that is engaged either in providing products or services (business segment), or in providing products orservices within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

26

CHALICE GOLD ANNUAL REPORT 2009

For the year ended 30 June 2009(e) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
(i)	Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be
incurred in respect of the transaction can be reliably measured. Risks and rewards of ownership are considered passed to the buyer at the time ofdelivery of the goods to the buyer.
(ii)	Services rendered
Revenue from services rendered is recognised in the income statement in proportion to the stage of completion of the transaction at the balance sheet
date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognised if there are significant uncertainties
regarding recovery of the consideration due, the costs incurred or to be incurred cannot be measured reliably.
(iii)	Interest received
Interest income is recognised in the income statement as it accrues, using the effective interest method. The interest expense component of financelease payments is recognised in the income statement using the effective interest method.

(f) Expenses(i)	Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives
received are recognised in the income statement as an integral part of the total lease expense and spread over the lease term.
(ii)	Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocatedto each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
(iii)	Financing costs
Financing costs comprise interest payable on borrowings calculated using the effective interest method and interest receivable on funds invested.

(g) Depreciation
Depreciation is charged to the income statement on a diminishing value basis over the estimated useful lives of each part of an item of property, plant andequipment. Land is not depreciated. The estimated useful lives in the current and comparative periods are as follows:plant and equipment

7%-40%

fixtures and fittings

11%-22%Motor Vehicles		18.75%The residual value, if not insignificant, is reassessed annually.

(h) Income tax
Income tax in the income statement comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates toitems recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisationor settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(i) Goods and Services Tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (‘GST’), except where the amount of GST incurred is not recoverablefrom the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.
 eceivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the Australian Taxation OfficeR(‘ATO’) is included as a current asset or liability in the balance sheet.
 ash flows are included in the cash flow statement on a gross basis. The GST components of cash flows arising from investing and financing activities whichC
are recoverable from, or payable to, the ATO are classified as operating cash flows.

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Notes to the financial Statements

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
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Notes to the financial Statements
For the year ended 30 June 2009(j) Impairment
At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Company
makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and iswritten down to its recoverable amount.
 ecoverable amount is the greater of fair value less costs to sell and value in use. Value in use is the present value of the future cash flows expected to be derived
Rfrom the asset or cash generating unit. In estimating value in use, a pre-tax discount rate is used which reflects current market assessments of the time value ofmoney and the risks specific to the asset. For an asset that does not generate largely independent cashflows, the recoverable amount is determined for the cash
generating unit to which the asset belongs.
Impairment losses are recognised in the income statement unless the asset has previously been revalued, in which case the impairment loss is recognised
as a reversal to the extent of that previous revaluation with any excess recognised through the income statement. Receivables with a short duration are
not discounted.

(k) C ash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of six months or less. Bank overdrafts that are repayable on demandand form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement.

(l) Trade and other receivables
Trade and other receivables are stated at cost less impairment losses (see accounting policy (j)).

(m) Non-current assets held for sale and discontinued operations
Immediately before classification as held-for-sale, the measurement of the assets (and all assets and liabilities in a disposal group) is brought up to date in accordancewith applicable AIFRS. Then, on initial classification as held-for-sale, non-current assets and disposal groups are recognised at the lower of carrying amount and fairvalue less costs to sell.
Impairment losses on initial classification as held-for-sale are included in profit or loss, even when there is a revaluation. The same applies to gains and losses onsubsequent re-measurement.
 discontinued operation is a component of the Company’s business that represents a separate major line of business or geographical area of operations or is aA
subsidiary acquired exclusively with a view to resale.

(n) Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are
eligible for capitalisation when the cost of replacing the parts is incurred.
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.
 ny gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is
Aincluded in profit or loss in the year the asset is derecognised.

(o) Financial assets
Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit
or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they aremeasured at fair value, plus, in the case of investments not at fair value, through profit or loss, directly attributable transactions costs. The Company determines theclassification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year end.
(i)	Financial assets at fair value through profit or loss
Financial assets classified as held-for-trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified
as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held-for-trading unless they aredesignated as effective hedging instruments. Gains or losses on investments held- for-trading are recognised in profit or loss.
(ii)	Held-to-maturity investments
If the Company has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity
investments are measured at amortised cost using the effective interest method, less any impairment losses.
(iii)	Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets
are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are
derecognised or impaired, as well as through the amortisation process.

28

CHALICE GOLD ANNUAL REPORT 2009

For the year ended 30 June 2009(iv) 	Available-for-sale investments
Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale or are not classified as any of thethree preceding categories. After initial recognition available-for sale investments are measured at fair value with gains or losses being recognised as aseparate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative
gain or loss previously reported in equity is recognised in profit or loss.
		The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the closeof business on the balance sheet date. For investments with no active market, fair value is determined using valuation techniques. Such techniques
include using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same;
discounted cash flow analysis and option-pricing models.

(p) Exploration, evaluation, development and tenement acquisition costs
Exploration, evaluation, development and tenement acquisition costs in relation to separate areas of interest for which rights of tenure are current, arecapitalised in the period in which they are incurred and are carried at cost less accumulated impairment losses. The cost of acquisition of an area of interest andexploration expenditure relating to that area of interest is carried forward as an asset in the balance sheet so long as the following conditions are satisfied:1) the rights to tenure of the area of interest are current; and2) at least one of the following conditions is also met:(i)	the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or
alternatively, by its sale; or(ii)	exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of
the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest
are continuing.
Exploration and evaluation expenditure is assessed for impairment when facts and circumstances suggest that their carrying amount exceeds their recoverable
amount and where this is the case an impairment loss is recognised. Should a project or an area of interest be abandoned, the expenditure will be written off
in the period in which the decision is made. Where a decision is made to proceed with development, accumulated expenditure will be amortised over the lifeof the reserves associated with the area of interest once mining operations have commenced.

(q) Trade and other payables
Trade and other payables are stated at cost.

(r) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in profit and loss when the liabilities are derecognised.
(i)	Leases
Finance leases, which transfer substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of thelease at the fair value of the leased property or, if lower, at the present value of minimum lease payments.

(s) Employee benefits(i)	Superannuation
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.
(ii)	Share-based payment transactions
The Company provides benefits to employees (including Directors) in the form of share-based payment transactions, whereby employees renderservices in exchange for shares or rights over shares (‘equity-settled transactions’).
		The Company currently provides benefits under an Employee Share Option Plan.
		The cost of these equity-settled transactions with employees and Directors is measured by reference to the fair value at the date at which
they are granted.
		In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of
the Company (‘market conditions’). The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over theperiod in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award(‘vesting date’).

29

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ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL

Notes to the financial Statements

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09
RT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPO

Notes to the financial Statements
For the year ended 30 June 2009		The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:(i) the extent to which the vesting period has expired; and(ii)	the number of awards that, in the opinion of the Directors, will ultimately vest. This opinion is formed based on the best available information atbalance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in thedetermination of fair value at grant date.

		No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

		Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an
expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.
		Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award
is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it isgranted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.
		The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.
(iii)	Wages, salaries, annual leave, sick leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting from employees’ services provided
to reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the Company expects to pay as at reporting dateincluding related on-costs, such as, workers’ compensation insurance and payroll tax.

(t) Provisions
A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an
outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability.

(u) Share capital(i)	Ordinary share capital
Ordinary shares and partly paid shares are classified as equity.
(ii)	Transaction costs
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit.

2. Segment reporting
The Company currently only operates in one business segment and one geographical segment being the mining and exploration industry in Australia.

3. Net gain on sale of exploration and evaluation assets
2009$

Net (loss)/ gain on sale of exploration and evaluation assets

674,486

2008$(1,681)

On 30 April 2007, Chalice Gold Mines reached an agreement for the sale of its Chalice and Higginsville tenements to Avoca Resources Limited (“Avoca Resources”),
for shares in Avoca Resources to a value of $5,841,000 and 2,000,000 unlisted options over ordinary shares in Avoca Resources.
Pursuant to the Avoca Resources sale agreement, the transaction was completed in two tranches. Tranche 1 settled on 25 July 2007 and consideration for thecompletion of Tranche 1 was recorded in the 30 June 2007 reporting period. Tranche 2, which comprises a package of tenements south of the Chalice Gold Mine,
completed upon grant of an Exploration Licence and then amalgamation of the same with certain Prospecting Licences already held by Chalice Gold Mines.
During the year, the conditions for completion of Tranche 2 were satisfied and the sale has been recorded with settlement occurring via the receipt of $841,000 of
Avoca Resources shares in February 2009. The cost of the tenements sold were $166,515 which resulted in a profit on sale of $674,486.

30

CHALICE GOLD ANNUAL REPORT 2009

For the year ended 30 June 2009

Note

2009
$

2008
$

4. Fair value of available-for-sale investments
Net change in fair value of available-for-sale investments

12,463

1,996,631

545,099

488,479

5. Other income
Interest received
Gain on sale of plant and equipment
Corporate and administration service fees

-

2,107

279,234

258,000

824,333

748,586

6. Corporate administrative expenses
Depreciation and amortisation

71,54374,213

Insurance

26,84627,924

Legal fees

80,70647,181

Office costs

242,707

117,780

Personnel expenses

745,200

745,742

Regulatory and compliance

117,908

86,340Other

189,615

68,875

1,474,525

1,168,055

Wages and salaries

490,086

428,598

Directors’ fees

45,94884,862Other associated personnel expenses

35,21067,440Defined contribution superannuation fund contributions

132,665

98,937(5,817)(3,123)17

7

7. Personnel expenses(Decrease)/increase in liability for annual leave
Equity-settled transactions

21

47,10869,028745,200

745,742

27,37019,360-64

8. Auditor’s remuneration
Audit services
HLB Mann Judd:
Audit and review of financial reports

9. Finance costs
Interest expense

31

NUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL RERT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPOR
ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL

Notes to the financial Statements

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09
RT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPO

Notes to the financial Statements
For the year ended 30 June 2009

Note

2009
$

2008
$

10. Income tax
Current tax expense(64,548)257,593

Deferred tax expense relating to the origination and reversal of temporary differences

57,3812,060,329

Tax losses not brought to account as deferred tax assets

7,167(2,317,922)--

Profit/(Loss) from continuing operations before income tax expense(564,536)

734,846

Tax at the Australian corporate rate of 30%(169,361)

220,454

Total income tax expense reported in the income statement
Numerical reconciliation of income tax expense to prima facie tax payable

Tax effect of amounts which are not tax deductible (taxable) in calculating taxable income:Non-deductible expenses

30,61937,139Blackhole expenditure tax deductible(35,133)(35,133)

57,3812,060,329

Origination and reversal of temporary differences
Current year tax benefits not recognised(116,494)

2,282,789

116,494(2,282,789)--

Income tax expense reported in the income statement
Deferred income tax

Deferred tax liabilities
Delayed revenue recognition for tax purposes(19,744)(2,438)

Exploration and evaluation expenditure

74,168326,936(57,381)(2,060,329)-

1,748,008

Deferred tax assets
Revenue (profits)/ losses available for offset against future taxable income
Current receivables
Employee benefits

(411)

(937)

Accrued expenses

3,368(11,240)--

Unused tax losses for which no deferred tax asset has been recognised

4,072,330

3,931,332

Potential tax benefit at 30% tax rate

1,221,699

1,179,400

Net deferred tax assets recognised
Tax Losses

11. Earnings per share
Basic and diluted earnings per share
The calculation of basic and diluted earnings per share for the year ended 30 June 2009 was based on the loss attributable to ordinary shareholders of $564,536 [2008:
profit of $734,846] and a weighted average number of ordinary shares outstanding during the year ended 30 June 2009 of 72,800,000 [2008: 72,800,000].
Profit/ (loss) attributable to ordinary shareholders (diluted)
Profit/ (loss) attributable to ordinary shareholders(564,536)

734,846

Profit/ (loss)attributable to ordinary shareholders (diluted)(564,536)

734,846

Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at 30 June
Effect of share options on issue
Weighted average number of ordinary shares (diluted) at 30 June

32

CHALICE GOLD ANNUAL REPORT 2009

No.

No.

72,800,000

72,800,000--

72,800,000

72,800,000

For the year ended 30 June 2009

Note

2009
$

2008
$

12. Cash and cash equivalents
Bank balances

1,543,318

1,541,571-

1,185,135

8,079,930

7,245,860

389

200

9,623,637

9,972,766

Other trade receivables

101,763

51,416

Prepayments

60,23732,669162,000

84,085--

Bank bills
Term deposits
Petty cash
Cash and cash equivalents in the cash flow statement

13. Trade and other receivables
Current

14. Financial assets
Current
Loans receivable (A)Non-current
Available for sale investments

94,709-Bond in relation to office premises

51,62448,09428,49426,604

174,827

74,698Bank guarantee and security deposits(A) A loan facility of $450,000 has been made available to Sub-Sahara Resources NL (“Sub-Sahara”) by Chalice Gold Mines to fund further development of the Zara Gold
Project (Koka deposit) and to advance time-critical elements of a scoping and feasibility study. At balance date, no draw down for this facility had been made.
Funds advanced under the facility, together with interest (accrued at a rate of 10%), are repayable if the merger is not implemented by 30 September 2009 (or such later
date as Chalice Gold Mines may agree). In this event, the loan must be repaid either in cash or, at Sub-Sahara’s election, by the issue of Sub-Sahara shares at an issue
price of 1.3 cents per share. The facility is secured by a fixed and floating charge over the assets and undertakings of Sub-Sahara.

15. Assets held for sale
Exploration and evaluation expenditure-

164,064

2,033,937

3,134,600

16. Exploration and evaluation expenditure
Costs carried forward in respect of areas of interest in the exploration and evaluation phase (at cost)
Expenditure incurred during the year

342,946

307,635-(1,355,640)

Exploration costs not capitalised(129,862)(41,783)

Disposals of tenements(296,246)--(10,875)

1,950,775

2,033,937

Impairment of exploration and evaluation expenditureTransfer to assets held for sale15

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases are dependent on the successful development andcommercial exploitation or sale of the respective areas.

33

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ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL

Notes to the financial Statements

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09
RT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPO

Notes to the financial Statements
For the year ended 30 June 2009

2009
$

2008
$

At cost428,609332,281Less: accumulated depreciation(196,043)(124,500)

232,566

207,781

Carrying amount at beginning of financial year

207,781

208,491

Additions

96,32876,147

Depreciation(71,543)(74,213)-(2,644)

232,566

207,781

Trade payables

129,534

46,402

Accrued expenses

22,106

14,380151,640

60,782

18,196

19,56518,196

19,565Note

17. Property, plant and equipment

Plant and equipment

Disposals/write offs
Carrying amount at end of period

18. Trade and other payables

19. Employee benefits
Liability for annual leave

Share based payments(a) Employee Share Option PlanT he Company has an Employee Share Option Plan (‘ESOP’) in place. Under the terms of the ESOP, the Board may offer options for no consideration to full-time orpart-time employees (including persons engaged under a consultancy agreement), executive and non-executive Directors.
E ach option entitles the holder, on exercise, to one ordinary fully paid share in the Company. There is no issue price for the options. The exercise price for the options
is determined by the Board.
 n option may only be exercised after that option has vested and any other conditions imposed by the Board on exercise satisfied. The Board may determine theAvesting period, if any.
The number and weighted average exercise prices of share options is as follows:

Weighted average
exercise price$2009
Outstanding at the beginning of the period$0.25

6,725,000

Forfeited during the period$0.23

400,000

Exercised during the period--

Granted during the period$0.20

500,000

Outstanding at the end of the period$0.25

6,825,000

Exercisable at the end of the period$0.25

6,325,000

Weighted average
exercise price$2008
Outstanding at the beginning of the period
Forfeited during the period

34

Number ofoptions
2009

Number ofoptions
2008

0.25

5,825,000--

Exercised during the period--

Granted during the period

0.23

900,000

Outstanding at the end of the period

0.25

6,725,000

Exercisable at the end of the period

0.25

500,000

CHALICE GOLD ANNUAL REPORT 2009

For the year ended 30 June 2009

The options outstanding at 30 June 2009 have an exercise price of $0.25 [2008: $0.25] and a weighted average contractual life of 5 years.
During the period, no share options were exercised.
The fair value of the options is estimated at the date of grant using the binomial option-pricing model.
The following table gives the assumptions made in determining the fair value of the options granted in the year to 30 June 2009.

2009

Fair value of share options and assumptions

2008

Share price at grant date

$0.12

$0.19

Exercise price

$0.20

$0.23

Expected volatility (expressed as weighted average volatility used in the modelling under binominal optionpricing model)

85%

81%

Option life (expressed as weighted average life used in the modelling under binomial option-pricing model)

5 years

5 years

Expected dividends
Risk-free interest rate

-

-

7.5%

5.43%

Share options are granted under service conditions. Non-market performance conditions are not taken into account in the grant date fair value measurement of
the services received.

2009
$

2008
$

Share options granted in 2009 - equity settled

47,10869,028

Total expense recognised as personnel expenses

47,10869,028

3,182

-

3,182

-

-

10,82047,207

41,15647,20751,976

Investment
revaluation
reserve$

Total equity$

20. Other liabilities
Current
Lease incentive

Non-current
Lease incentive
Make good provision

21. Capital and reserves
Reconciliation of movement in capital and reserves attributable to equity holders of the parent
2009

Balance at 1 July 2008

Share capital(a)$

Accumulated
losses$Share based
payments reserve$

13,974,454(2,140,356)

570,910-

12,405,008

Available for sale investments

-

-

-

36,00036,000

Employee share options vested--

47,108-47,108Loss for the period
Balance at 30 June 2009-

(564,536)--(564,536)

13,974,454(2,704,892)

618,018

36,00011,923,580

35

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ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL

Notes to the financial Statements

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09
RT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPO

Notes to the financial Statements
For the year ended 30 June 20092008

Balance at 1 July 2007
Employee share options vested
Loss for the period
Balance at 30 June 2008

Share capital(a)$

Accumulated
losses$13,974,454(2,875,202)--

Investment
revaluation
reserve$

Total equity$

501,882-

11,601,134

69,028-69,028-12,405,008

Share based
payments reserve$-734,846-

13,974,454(2,140,356)

570,910

734,846(a) Share capital
There were 72,800,000 shares on issue at 30 June 2009 and 30 June 2008.
O
 rdinary shares
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’meetings. In the event of winding up of the Company, the ordinary shareholders rank after all other shareholders and creditors and are fully entitledto any proceeds on liquidation.
(b) Share options
2008
No.

2009
No.

On issue at 1 July

6,725,000

5,825,000

Options forfeited(400,000)-

Options issued during the year

500,000

900,000

6,825,000

6,725,000

On issue at 30 June

At 30 June 2009 the Company had 6,825,000 unlisted options on issue under the following terms and conditions:
NumberExpiry Date

Exercise Price

5,575,000

21.03.11$0.25

500,000

01.12.12$0.25

250,000

11.12.12$0.20

500,000

31.07.13$0.20

22. Financial instruments(a) Capital risk management
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders.
The capital structure of the Company consists of equity attributable to equity holders, comprising issued capital, reserves and accumulated losses as
disclosed in note 21.
The Board reviews the capital structure on a regular basis and considers the cost of capital and the risks associated with each class of capital. The
Company will balance its overall capital structure through new share issues as well as the issue of debt, if the need arises.
(b) Market risk exposures
Market risk is the risk that changes in market prices such as foreign exchange rates, equity prices and interest rates will affect the Company’s
income or value of its holdings of financial instruments.
Foreign exchange rate risk
The Company currently has no significant exposure to foreign exchange rates.
E quity prices
The Company currently has no significant exposure to equity price risk.
I nterest rate risk
The Company’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities
is set out as follows:

36

CHALICE GOLD ANNUAL REPORT 2009

For the year ended 30 June 200930 June 2009Note

1 year or less$Over
1 to 5 years$

Floating
interest$

Non-interest
bearing$

Weighted
averageint. rate

Total$

Financial assets
Bank balances

12

-

-

1,543,318-

1,543,318

0.41%Bank bills

12

-

-

-

-

-

-

Term deposits

12

8,079,930---

8,079,930

3.18%Bank guarantees
and security deposits

14

80,118---80,118

3.70%

Petty cash

12

-

-

-

389

389

-

Trade and otherreceivables

13

-

-

-

101,763

101,763-

Financial liabilities
Trade payables andaccrued expenses

18

-

-

-

151,640

151,640-

Employee benefits

19

-

-

-

18,196

18,916-Over
1 to 5 years$

Floating
interest$

30 June 2008

Note

1 year or less$

Non-interest
bearing$

Total$

Weighted
averageint. rate

Financial assets
Bank balances

12

-

-

1,541,571-

1,541,571

1.04%Bank bills

12

1,185,135---

1,185,135

7.26%

Term deposits

127,245,860---

7,245,860

7.71%Bank guarantees
and security deposits

14

74,698---74,698

8.05%

Petty cash

12

-

-

-

200

200

-

Trade and otherreceivables

13

-

-

-

51,416

51,416-

Trade payables andaccrued expenses

18

-

-

-

60,78260,782-

Employee benefits

19

-

-

-

19,565

19,565-

Financial liabilities

A change of 100 basis points in interest rates on bank balances and term deposits at the reporting date would have increased profit and loss by $96,232.
(c)	Credit risk exposure
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
The Company’s exposure to credit risk is not significant and currently arises principally from sundry receivables (see note 13) which represent an
insignificant proportion of the Company’s activities.
		The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance sheet date to recognised financial assets is the
carrying amount, net of any provision for doubtful debts, as disclosed in the notes to the financial statements.
(d)	Liquidity risk exposure
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Board actively monitors the Company’s
ability to pay its debts as and when they fall due by regularly reviewing the current and forecast cash position based on the expected future activities.
		The Company has non-derivative financial liabilities which include trade and other payables of $151,640 (2008: $60,782) all of which are due
within 60 days.
(e)	Net fair values of financial assets and liabilities
The carrying amounts of all financial assets and liabilities approximate the net fair values

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Notes to the financial Statements

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Notes to the financial Statements
For the year ended 30 June 2009

23. Capital and other commitments
Exploration expenditure commitments
In order to maintain current rights of tenure to exploration tenements, the Company is required to perform minimum exploration work to meet theminimum expenditure requirements specified by various State governments. These obligations are subject to renegotiation when application for amining lease is made and at other times. The amounts stated are based on the maximum commitments. The Company may in certain situations apply
for exemptions under relevant mining legislation or enter into joint venture arrangements which significantly reduce working capital commitments.
These obligations are not provided for in the financial report and are payable:
2009
$

2008
$

Within 1 year

596,060

1,012,820

Within 2 – 5 years

82,5001,748,180

Later than 5 years--

678,560

2,761,000

Remuneration commitments
Commitments for the payment of salaries and other remuneration under long-term employment contracts in existence at balance date but notrecognised as liabilities:
2009
$

2008
$

within 1 year-

125,000

within 2-5 years

-

-

-

125,000

within 1 year

148,346

82,596

within 2-5 years

560,353

36,016708,699

118,612

2009
$

2008
$

(564,536)

734,846

71,54374,213Operating lease commitments
Non-cancellable operating lease rentals are payable as follows:

24. Reconciliation of cash flows from operating activities

Profit/ (Loss) for the period
Adjustments for:
Depreciation and amortisation(Profit)/ Loss on sale of exploration and evaluation assets(674,486)

1,681

Net gain on sale of securities(56,003)(556,852)

Profit on sale of other assets

38-(2,108)Changes in fair value of available-for-sale investments(12,463)(1,996,631)

Provision for make good lease fit out (office premises)

-

5,289

Impairment losses on exploration and evaluation expenditure-

1,355,640

Costs of business combinations

527,434-

Exploration costs not capitalised

129,862

41,783Equity-settled share-based payment expenses

47,10869,028Operating loss before changes in working capital and provisions(531,541)(273,111)(Increase)/decrease in trade and other receivables(61,311)

15,126

Increase/(decrease) in trade creditors and other liabilities

25,200(35,927)

Increase in provisions(6,050)(10,761)(Decrease) in non-current financial assets(3,351)(3,804)

Net cash used in operating activities(577,053)(308,477)

CHALICE GOLD ANNUAL REPORT 2009

For the year ended 30 June 2009

25. Key management personnel
The following were key management personnel of the Company at any time during the reporting period and unless otherwise indicated were key
management personnel for the entire period:
Executive Directors
T R B Goyder (Executive Chairman)
D A Jones (Managing Director)			

(appointed 11 November 2008)

T M Clifton (Alternate Director for D A Jones)		

(for period 20 March to 14 April 2009)

A R Bantock (Former Chairman)			

(resigned 11 November 2008)

Non-executive Directors
A W Kiernan
Executives
R K Hacker (Company Secretary)			

(re-appointed 1 August 2008)

A M Reynolds (Company Secretary)			

(resigned 1 August 2008)

The key management personnel compensation included in ‘personnel expenses’ (see note 7) are as follows:
2009
$

2008
$

Short-term employee benefits

473,023

389,106

Post-employment benefits

28,97533,157

Equity settled transactions

36,27556,213538,273

478,476Individual director’s and executive’s compensation disclosures
The Company has transferred the detailed remuneration disclosures to the Directors’ Report in accordance with Corporations Amendment Regulations
2006 (No. 4). These remuneration disclosures are provided in the Remuneration Report section of the Directors’ Report under Details of Remuneration
and are designated as audited.
Loans to key management personnel and their related parties
No loans were made to key management personnel and their related parties.
Other key management personnel transactions with the Company
A number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence
over the financial or operating policies of those entities.
A number of these entities transacted with the Company in the reporting period. The terms and conditions of the transactions with management persons
and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to
non-Director related entities on an arm’s length basis.

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Notes to the financial Statements

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Notes to the financial Statements
For the year ended 30 June 2009

The aggregate amounts recognised during the year relating to key management personnel and their related parties were as follows:
2009
$

2008
$

Key management persons

Transaction

Note

A W Kiernan

Legal services(i)79,20437,005

Liontown Resources Limited

Corporate services(ii)(217,725)(258,000)

Uranium Equities Limited

Corporate services(iii)(49,369)-

Plato Prospecting Pty Ltd

Property, plant & equipment(v)

29,145-

Liontown Resources Limited

Corporate services(iv)

74,405-

Other related parties(i)	The Company used the consulting and legal services of Mr Kiernan during the course of the financial year. Amounts were billed based on normal market
rates for such services and were due and payable under normal payment terms.
(ii)	The Company supplies corporate services including accounting and company secretarial services under a Corporate Services Agreement to Liontown
Resources Limited. Messrs Bantock, Goyder and Kiernan were all Directors of Liontown Resources Limited during the year and Messrs Reynolds and Hacker
were the Company Secretaries. Amounts were billed on a proportionate share of the cost to the Company of providing the services and are due and payable
under normal payment terms.
(iii)	The Company supplied company secretarial services during the year to Uranium Equities Limited. Messrs Bantock, Goyder and Kiernan were all Directors of
Uranium Equities Limited and Messrs Reynolds and Hacker were the Company Secretaries. Amounts were billed at cost to the Company and are due andpayable under normal payment terms.
(iv)	During the year, the Company utilised the services of Dr Jones in the role of Managing Director. Dr Jones is also the Managing Director of Liontown
Resources Limited. Amounts were billed by Liontown Resources Limited based on a proportionate share of its cost of employing Dr Jones and are due andpayable under normal payment terms.
(v)	The Company acquired office furniture, fixtures and fittings from Plato Prospecting Pty Ltd. Mr Goyder is the sole director and shareholder of Plato
Prospecting Pty Ltd. Amounts were billed at market rates and were due and payable under normal payment terms.
Amounts payable to key management personnel at reporting date arising from these transactions were as follows:
Assets and liabilities arising from the above transactions

2009
$

2008
$

Current payables(26,333)(6,110)Trade debtors

14,91721,500(11,416)

15,390	Options and rights over equity instruments granted as compensation
The movement during the reporting period in the number of options over ordinary shares in the Company held, directly, indirectly or beneficially, by each key
management person, including their related parties, is as follows:2009

Held at
1 July2008

Granted ascompensation

Exercised/
Forfeited

Held at
30 June2009

Vestedduring the year

Vested andexercisable at
30 June 2009

T R B Goyder

2,000,000--

2,000,000-

2,000,000

A W Kiernan

500,000--

500,000-

500,000

-

-

-

-

-

-

2,000,000--

2,000,000-

2,000,000

250,000

500,000(250,000)

500,000

125,000

125,000

150,000-(150,000)---D A Jones
Former Director
A R Bantock
Executive
R K Hacker
Former Executive
A Reynolds

	Movements in ordinary shares
The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by each key management
person, including their related parties, is as follows:

40

CHALICE GOLD ANNUAL REPORT 2009

For the year ended 30 June 2009

Held at
1 July2008

Additions

Received on
exercise of
Options

T R B Goyder

14,474,491

2,765,967-

17,240,458-

17,240,458

A W Kiernan

270,074

550,000-

820,074-820,074

-

-

-

-

-

-

2,531,772--

2,531,772

1,060,000

1,471,772-

51,982-

51,982-

51,982

-

-

-

-

-

-

2009

D A Jones

Held at
30 June2009

Held at
30 June
2009

Sales

Former Director
A R Bantock
Executive
R K Hacker
Former Executive
A Reynolds

No shares were granted to key management personnel during the reporting period as compensation.

26. Subsequent events
 n 14 August 2009, the Scheme of Arrangement between Sub-Sahara Resources NL (“Sub-Sahara”) and its shareholders received court approval to mergeOwith Chalice Gold Mines. Fully paid ordinary shareholders of Sub-Sahara will receive approximately 46.7 million Chalice Gold Mines shares in exchange forall the fully paid ordinary shares of Sub-Sahara.
In addition, unlisted partly paid shareholders and unlisted option holders in Sub-Sahara will receive a further 1.6 million Chalice Gold Mines shares as
consideration for these securities.
F ollowing completion of the merger, Chalice Gold Mines will also pay $1.664 million for the acquisition of 100% of the shares of Yolanda International
Limited, a wholly owned subsidiary of Africa Wide Resources Limited (“AWR”), which holds an 11.12% joint venture interest in the Zara Gold Project.
 ther costs associated with the merger, including redundancy costs, corporate advisory fees and other liabilities inherited from Sub-Sahara are estimatedO
to be approximately $877,000.

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Notes to the financial Statements

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
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Directors’ Declaration

1. In the opinion of the directors of Chalice Gold Mines Limited (the ‘Company’):a. the financial statements and notes of the company and of the consolidated entity are in accordance with the Corporations Act 2001 including:i.	giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2009 and of their performance for theyear then ended; andii.	complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;
andb. there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
2.	This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the
Corporations Act 2001 for the financial year ended 30 June 2009.
This declaration is signed in accordance with a resolution of the Board of Directors.
Dated at Perth the 25th day of August 2009.
Signed in accordance with a resolution of the Directors:

TIM R B GOYDER
Executive Chairman

42

CHALICE GOLD ANNUAL REPORT 2009

Independent Auditor’s Report

INDEPENDENT AUDITOR’S REPORTTo the members of Chalice Gold Mines Limited
Report on the Financial Report
We have audited the accompanying financial report of Chalice Gold Mines Limited (“the company”),
which comprises the balance sheet as at 30 June 2009, the income statement, statement of changes inequity, cash flow statement and notes to the financial statements for the year ended on that date, and the
directors’ declaration.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing andmaintaining internal controls relevant to the preparation and fair presentation of the financial report thatis free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note1(a), the directors also state, in accordance with Accounting Standard AASB101 Presentation of
Financial Statements, that compliance with the Australian equivalents to International Financial
Reporting Standards ensures that the financial report, comprising the financial statements and notes,
complies with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that wecomply with relevant ethical requirements relating to audit engagements and plan and perform the audit
to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal controls relevant to the entity’s
preparation and fair presentation of the financial report in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.

HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 2 15 Rheola Street West Perth 6005 PO Box 263 West Perth 6872 Western Australia. Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation


HLB Mann Judd (WA Partnership) is a member ofInternational, a world-wide organisation of accounting firms and business advisers

40

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Independent Auditor’s Report
Auditor’s Opinion
In our opinion:(a) the financial report of Chalice Gold Mines Limited is in accordance with the Corporations Act
2001, including:(i) giving a true and fair view of the company’s financial position as at 30 June 2009 and of its
performance for the year ended on that date; and(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and(b) the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1(a).
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2009. The directors of the company are responsible for the preparation and presentation of theRemuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted inaccordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Chalice Gold Mines Limited for the year ended 30 June
2009, complies with section 300A of the Corporations Act 2001.

HLB MANN JUDD
Chartered Accountants

Perth, Western Australia
25 August 2009

L DI GIALLONARDO
Partner

41

44

CHALICE GOLD ANNUAL REPORT 2009

Chalice Gold Mines is committed to a high level of corporate governance in accordance with the Corporations Act and ASX Listing Rules.
The Company’s Corporate Governance Statement details the principles and practices adopted and can be found on the Company website(www.chalicegold.com).
The following information is supplementary to the Corporate Governance Statement and addresses the principles which are not met:
Directors and Management
Details of each director’s qualifications, experience and special responsibilities, their attendance at board meetings and the company secretary’s
qualifications and experience are disclosed on pages 13 and 14.
During the year the Company undertook reviews of the Board composition and executive management in accordance with sections 1.1 and 1.2 of
the Corporate Governance Statement.
Anthony Kiernan, non-executive director, was considered independent at the time of publishing the 2008 Annual Report. During the year, Mr Kiernan
has provided extensive consulting and legal services to the company and is therefore no longer considered to be independent. As a result, there are
no independent directors as specified in the ASX Corporate Governance Principles.
The Board believes that the individuals on the Board can make, and do make, quality and independent judgements in the best interests of theCompany on all relevant issues. The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify theappointment and further expense of an independent non-executive chairman and independent non-executive directors.
Committees
The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of any separate or special
committees, such as an audit committee, nomination committee or remuneration committee, at this time. The Board as a whole is able to address thegovernance aspects of the full scope of the Company’s activities and to ensure that it adheres to appropriate ethical standards.
The requirement to establish special committees will be reviewed as and when the nature and scale of the company’s operations changes.
Risk Management
The Managing Director and Chief Financial Officer (or equivalent) have assured the Board that the declaration provided in accordance with s295A of
the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material
respects in relation to financial reporting risks.
Management has also reported to the Board that the Company’s management of material business risks is effective.

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Corporate Governance Report

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Corporate Governance Report
ASX Corporate Governance Council Recommendations

CGS
Reference*Principle 1: Lay solid foundations for management and oversight
1.1 Companies should establish the functions reserved to the Board and those delegated to senior
executives and disclose those functions.
1.2 Companies should disclose the process for evaluating the performance of senior executives.

1.1
1.1

1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1.
Principle 2: Structure the Board to add value
2.1 A majority of the Board should be independent directors.

1.2

2.2 The chair should be an independent director.

1.2

2.3 The roles of chair and chief executive officer should not be exercised by the same individual.

1.2

2.4 The Board should establish a nomination committee.

1.3

2.5 Companies should disclose the process for evaluating the performance of the board, its committees
and individual directors.

1.1

2.6 Companies should provide the information indicated in the Guide to reporting on Principle 2.
Principle 3: Promote ethical and responsible decision-making
3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to:• the practices necessary to maintain confidence in the Company’ integrity.
• the practices necessary to take into account their legal obligations and the reasonable expectationsof their Shareholders.

2.1
2.2

• the responsibility and accountability of individuals for reporting and investigating reports of
unethical practices.
3.2 Companies should establish a policy concerning trading in Company securities by directors, senior
executives and employees and disclose the policy or a summary of that policy.

2.3

3.3 Companies should provide the information indicated in the Guide to reporting on Principle 3.
Principle 4: Safeguard integrity in financial reporting
4.1 The board should establish an audit committee.

1.3

4.2 The audit committee should be structured so that it:• consists only of non-executive directors• consists of a majority of independent directors

1.3• is chaired by an independent chair, who is not chair of the board• has at least three members
4.3 The audit committee should have a formal charter.

1.3

4.4 Companies should provide the information indicated in the Guide to reporting on Principle 4.
Principle 5: Make timely and balanced disclosure
5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Ruledisclosure requirements and to ensure accountability at a senior level for that compliance and disclose
those policies or a summary of those policies.
5.2 Companies should provide the information indicated in the Guide to reporting on Principle 5.

46

CHALICE GOLD ANNUAL REPORT 2009

3.1

ComplyPrinciple 6: Respects and rights of shareholders
6.1 Companies should design a communications policy for promoting effective communication withshareholders and encouraging their participation at general meetings and disclose their policy or a

3.2

summary of that policy.
6.2 Companies should provide the information indicated in the Guide to reporting on Principle 6.
Principle 7: Recognise and manage risk
7.1 Companies should establish policies for the oversight and management of material business risks anddisclose a summary of those policies.

4.1

7.2 The board should require management to design and implement the risk management and internal
control system to manage the company’s material business risks and report to it on whether thoserisks are being managed effectively. The board should disclose that management has reported to it as

4.2

to the effectiveness of the Company’s management of its material business risks.
7.3 The board should disclose whether it has received assurance from the chief executive officer (orequivalent) and the chief financial officer (or equivalent) that the declaration provided in accordancewith section 295A of the Corporations Act is founded on a sound system of risk management and

4.2

internal control and that the system is operating effectively in all material respects in relation tofinancial reporting risks.
7.4 Companies should provide the information indicated in the Guide to reporting on Principle 7.
Principle 8: Remunerate fairly & responsibly
8.1 The board should establish a remuneration committee.
8.2 Companies should clearly distinguish the structure of non-executive directors’ remuneration from thatof executive directors and senior executives.

1.3
5, Rem.
Report8.3 Companies should provide the information indicated in the Guide to reporting on Principle 8.

*

Refer Corporate Governance Statement on the Company’s website at www.chalicegold.com.

47

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Corporate Governance Report

09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORTREPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL
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RT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPORT 09 ANNUAL REPO

ASX additional information

Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below.

Shareholdings
Substantial shareholders
The number of shares held by substantial shareholders advised to the Company and their associated interests as at 21 August 2009 were:
Number ofordinary shares
held

Percentage ofcapital held%

Timothy R B Goyder

16,790,024

23.06

Balfes (QLD) Pty Ltd

5,260,470

7.23

Shareholder

Class of Shares and Voting Rights
At 21 August 2009 there were 844 holders of the ordinary shares of the Company.
The voting rights to the ordinary shares set out in the Company’s Constitution are:
“Subject to any rights or restrictions for the time being attached to any class or Classes of shares a) at meetings of members or classes of members each member entitled to vote in person or by proxy or attorney: andb)	on a show of hands every person who is a member has one vote and on a poll every person in person or by proxy or attorney has one vote for eachordinary share held.”
Holders of options do not have voting rights.
Distribution of equity security holders as at 21 August 2009:
Number of equity security holders
Category

Ordinary Shares

Unlisted
Share Options

1 – 1,000

67-

1,001 – 5,000

254-

5,001 – 10,000

183-

10,000 – 100,000

258

1

100,001 and over

82

5

Total

844

6

The number of shareholders holding less than a marketable parcel at 21 August 2009 was 115.

48

CHALICE GOLD ANNUAL REPORT 2009

Twenty largest Ordinary Fully Paid Shareholders
as at 21 August 2009
Name

Number of ordinary shares held

Percentage of capital held %Plato Prospecting Pty Ltd

16,790,024

23.06

Balfes (QLD) Pty Ltd

5,260,470

7.23

Lujeta Pty Ltd

3,304,591

4.54

Colbern Fiduciary Nominees Pty Ltd

3,000,000

4.12

Calm Holdings Pty Ltd (Clifton Super Fund A/C)

2,946,170

4.05

Nefco Nominees Pty Ltd

2,500,000

3.43

HSBC Custody Nominees (Australia)

1,502,426

2.06

Define Consulting Pty Ltd (The Define Consulting A/C)

1,331,772

1.83

Mrs Helen Joy Alexander

1,280,000

1.76

Lost Ark Nominees Pty Ltd

1,200,000

1.65

Mr Philip Scott Button & Mrs Philippa Anne Nicol (Christopher Jordan A/C)

1,169,876

1.61

Tara Management Pty Ltd

1,132,012

1.55

Plato Prospecting Pty Ltd (TRB Goyder Super Funds A/C)

1,018,006

1.40

Greenslade Holdings Pty Ltd

1,000,000

1.37

Mr Terrence Peter Williamson & Ms Jonine Maree Jancey (The Wiljan Super Fund)

909,791

1.25

Penally Management Limited

881,338

1.21

Methuen Holdings Pty Ltd (PB Family A/C)

751,667

1.03

Central Manhattan Pty Ltd (A W Kiernan Super Fund A/C)

717,444

0.99

Mr Jamie Phillip Boyton

700,000

0.96

Archaean Exploration Services Pty Ltd

590,000

0.81

47,985,587

65.91

Total

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ASX additional information

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