CHALICE MINING LIMITED — Interim / Quarterly Report 2008

Mar 13, 2008

CHALICE GOLD MINES LIMITED

ABN 47 116 648 956

Half Year Report 31 December 2007

Chalice Gold Mines Limited Contents

Contents	Page
Directors’ Report	3
Auditor’s Independence Declaration	5
Condensed Income Statement	6
Condensed Balance Sheet	7
Condensed Statement of Changes in Equity	8
Condensed Cash Flow Statement	9
Notes to the Financial Statements	10
Directors’ Declaration	13
Independent Auditor’s Review Report	14

2

Chalice Gold Mines Limited Directors’ report

DIRECTORS’ REPORT

Your directors submit the financial report of the Company for the half year ended 31 December 2007. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

Directors

The names of directors who held office during or since the end of the half year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Andrew R Bantock	Executive Chairman
Timothy R B Goyder	Non-executive Director
Bryan W Alexander	Non-executive Director (Resigned 29 November 2007)
Anthony W Kiernan	Non-executive Director

Review of Operations

During the period, the Company:

• continued exploration activities at its Yandeerarra Gold Project where a detailed mapping and sampling program was completed at the Nevada Prospect to follow up on anomalous gold and uranium mineralisation in reconnaissance rock-chip sampling;

• received encouraging results at the Gnaweeda Gold Project (Teck Cominco earning 70%) following completion of six RC holes drilled for a total of 1,546m;

• completed the first tranche of the sale of its Chalice and Higginsville Gold Projects to Avoca Resources Limited (Avoca) receiving 3.5 million ordinary Avoca shares and 2.0 million 3-year, $1.79 unlisted Avoca options;

• sold 3.5 million Avoca shares for net proceeds of approximately $6.9 million which represents a 38% premium to the original Avoca transaction value of $1.43 per share;

the Company now holds approximately $8.7 million of cash, together with 2 million, $1.79, 3- year unlisted Avoca options and the right to receive a further $0.8 million of Avoca shares upon completion of certain tenement registration matters associated with the sale of tenements to the south of the Chalice Gold Mine;

• entered into a joint venture agreement with De Grey Mining Limited (‘De Grey’). De Grey is to spend $1.67 million over 3 years to earn 80% of rights to all minerals over the Yandeearra Gold Project, other than iron ore and uranium;

• entered into an option agreement with Atlas Iron Limited (‘Atlas Iron’), whereby Atlas Iron may acquire the iron ore rights over the Yandeearra Gold Project for a total of $1.25 million; and

• made a profit of $1.1 million for the period, predominantly as a result of the profit from the sale of Avoca shares of $1.9 million, the revaluation of the options in Avoca at balance date of $0.8 million and the write-down of the Yandeearra and Gnaweeda projects.

3

Chalice Gold Mines Limited Directors’ report

Auditor’s Independence Declaration

Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the directors of the company with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is set out on page 5 and forms part of this directors’ report for the half-year ended 31 December 2007.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to s.306(3) of the Corporations Act 2001.

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ANDREW R BANTOCK Executive Chairman

Dated at Perth this 14[th] day of March 2008

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Auditor’s Independence Declaration

As lead auditor for the review of the financial report of Chalice Gold Mines Limited for the half-year ended 31 December 2007, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• (a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• (b) any applicable code of professional conduct in relation to the review.

This declaration is in respect of Chalice Gold Mines Limited.

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Perth, Western Australia 14 March 2008

L DI GIALLONARDO Partner, HLB Mann Judd

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 of International and the HLB Mann Judd National Association of independent accounting firms

5

Chalice Gold Mines Limited Condensed Income Statement

For the half year ended 31 December 2007

Note Revenue Impairment losses on exploration and evaluation expenditure Fair value of options held through profit and loss 3a Profit on sale of shares 3b Corporate administrative expenses 3c Net finance income Profit/(Loss) before tax Income tax expense/benefit Profit (Loss) for the period Basic earnings/(loss) per share attributable to ordinary equity holders Diluted earnings/(loss) per share attributable to ordinary equity holders	2007 2006 $ $ 129,427 90,350 (1,355,640) (1,608,475) 789,032 - 1,894,518 - (565,326) (951,820) 186,691 119,760
	1,078,702 (2,350,185)
	- -
	1,078,702 (2,350,185)
	0.01 (0.03) 0.01 (0.03)

6

Chalice Gold Mines Limited Condensed Balance Sheet As at 31 December 2007

Note Current Assets Cash and cash equivalents Trade and other receivables Financial assets Assets held for sale Total current assets Non-current assets Financial assets Exploration and evaluation assets 4 Property, plant and equipment Total non-current assets Total assets Current Liabilities Trade and other payables Employee benefits Other Total current liabilities Non-current Liabilities Other Total non-current liabilities Total liabilities Net assets Equity Issued capital 5 Accumulated losses Reserves Total Equity	31 December 2007 30 June 2007 $ $ 8,722,905 2,323,949 110,673 5,919,204 1,615,725 20,701 162,601 153,189
	10,611,904 8,417,043
	70,193 70,193 1,918,872 3,134,600 229,460 208,491
	2,218,525 3,413,284
	12,830,429 11,830,327
	68,750 152,179 27,500 22,688 7,637 -
	103,887 174,867
	45,437 54,326
	45,437 54,326
	149,324 229,193
	12,681,105 11,601,134
	13,974,454 13,974,454 (1,796,500) (2,875,202) 503,151 501,882
	12,681,105 11,601,134

7

Chalice Gold Mines Limited Condensed Statement of Changes in Equity

For the half-year ended 31 December 2007

Note Balance at 30 June 2007 Employee share options vested Profit for the period Balance at 31 December 2007 5	Share capital Accumulated losses Share based payments reserve Total equity $ $ $ $
	13,974,454 (2,875,202) 501,882 11,601,134
	- - 1,269 1,269
	- 1,078,702 - 1,078,702
	13,974,454 (1,796,500) 503,151 12,681,105

8

Chalice Gold Mines Limited Condensed Cash Flow Statement

For the half year ended 31 December 2007

Cash flows from operating activities Cash receipts from operations Cash paid to suppliers and employees Interest paid Interest received Net cash used in operating activities Cash flows from investing activities Payments for mining exploration and evaluation Proceeds from the sale of investments Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment Net cash from investing activities Cash flows from financing activities Lodgement of guarantee Payment of finance lease liabilities Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at 31 December 2007	2007 2006 $ $ 146,180 75,350 (538,663) (575,503) (64) (1,750) 151,106 135,829
	(241,441) (366,074)
	(192,812) (2,142,605) 6,894,518 - 2,600 - (63,909) (46,943)
	6,640,397 (2,189,548)
	- (20,000) - (5,276)
	- (25,276)
	6,398,956 (2,580,898) 2,323,949 5,427,250
	8,722,905 2,846,352

9

Chalice Gold Mines Limited Notes to the Financial Statements

For the half year ended 31 December 2007

1. Significant accounting policies

(a) Statement of compliance

The half-year financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 , applicable accounting standards including AASB 134: Interim Financial Reporting and other authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’). Compliance with AASB 134 ensures compliance with IAS 34 ‘Interim Financial Reporting’.

It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2007 and any public announcements made by Chalice Gold Mines Limited during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001.

The half-year report does not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the group as in the full financial report.

For the purpose of preparing the half-year report, the half-year has been treated as a discrete reporting period.

(b) Basis of preparation

The half-year report has been prepared on a historical cost basis, except for land and buildings, derivative financial instruments and available-for-sale financial assets which are measured at fair value. Cost is based on the fair value of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the company’s 2007 annual financial report for the financial year ended 30 June 2007.

In the half-year ended 31 December 2007, 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 2007.

It has been determined by the Company that 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 Company accounting policies.

2. Segment reporting

The company continues to operate in one business segment and one geographical segment, being the mining and exploration industry in Australia.

10

Chalice Gold Mines Limited Notes to the Financial Statements

For the half year ended 31 December 2007

3. Profit/(loss) before income tax expense The following income and expense items are relevant in explaining the financial performance for the half-year: (a) Fair value of options held through profit and loss Unlisted options held in Avoca Resources Ltd (“Avoca”) are measured at fair value with the movement recorded in the income statement. The options are periodically re- valued using a binomial option-pricing model. The unlisted options were issued by Avoca in part consideration for the sale of the “tranche 1 tenements” in the Company’s Chalice and Higginsville gold projects in the 2007 financial year. (b) Profit on sale of shares 3,496,503 shares in Avoca were sold for net proceeds of $6,894,518 in September 2007. The shares were issued by Avoca in part consideration for the sale of the “tranche 1 tenements” in the Company’s Chalice and Higginsville gold projects in the 2007 financial year. (c) Corporate administrative expenses Accounting fees Annual Report costs ASX fees ASIC filing fees Audit fees Depreciation and amortisation Insurance Legal fees Loss on sale of assets Marketing Personnel expenses Share based payments expense Printing and stationery Rent and outgoings Share registry costs Travel and accommodation Recruitment Other

2007 2006 $ $ 789,032 - 1,894,518 - 6,750 800 16,550 20,892 15,750 27,725 1,000 - 8,500 7,000 33,044 30,148 7,733 8,563 19,980 8,713 - 3,007 - 2,250 354,458 382,505 1,269 256,889 5,425 5,513 35,996 61,601 9,584 15,359 2,075 11,350 - 25,549 47,212 83,956

565,326 951,820

11

Chalice Gold Mines Limited Notes to the Financial Statements

For the half year ended 31 December 2007

4 Exploration and evaluation expenditure Cost brought forward Expenditure incurred during the period Impairment of exploration and evaluation expenditure assets
	31 December 2007
	$
	3,134,600
	139,912
	(1,355,640)
	1,918,872

5. Issued capital Balance at 31 December 2007 and 30 June 2007	Share capital $
	13,974,454

There was no movement in the number of shares on issue during the period. There were 72,800,000 fully paid ordinary shares on issue at 31 December 2007 and 30 June 2007.

12

Chalice Gold Mines Limited Directors’ Declaration

The directors of the company declare that:

1. The financial statements and notes thereto, as set out on pages 6 to 12:

2. a. comply with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations; and

3. b. give a true and fair view of the Company’s financial position as at 31 December 2007 and of its performance for the half-year then ended.

4. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is signed in accordance with a resolution of the Board of Directors made pursuant to s.303(5) of the Corporations Act 2001.

Dated this 14[th] day of March 2008

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ANDREW R BANTOCK Executive Chairman

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INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of CHALICE GOLD MINES LIMITED

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report, which comprises the condensed balance sheet as at 31 December 2007, the condensed income statement, condensed statement of changes in equity, condensed cash flow statement and notes to the financial statements for the half-year ended on that date, and the directors’ declaration, of Chalice Gold Mines Limited (“the company”).

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that is 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.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001, including giving a true and fair view of the company’s financial position as at 31 December 2007 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Chalice Gold Mines Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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 of International and the HLB Mann Judd National Association of independent accounting firms

14

Independent Auditor’s Review Report

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001 has been provided to the directors of Chalice Gold Mines Limited on 14 March 2008.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half year financial report of Chalice Gold Mines Limited is not in accordance with the Corporations Act 2001, including:

• (a) giving a true and fair view of the company’s financial position at 31 December 2007 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

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HLB MANN JUDD Chartered Accountants

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Perth, Western Australia 14 March 2008

L DI GIALLONARDO Partner

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