CHALICE MINING LIMITED — Interim / Quarterly Report 2018

Mar 8, 2018

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CHALICE GOLD MINES LIMITED

ABN 47 116 648 956

Half Year Report 31 December 2017

Chalice Gold Mines Limited Contents

Directors’ Report	3
Auditor’s Independence Declaration	8
Condensed Consolidated Statement of Comprehensive Income	9
Condensed Consolidated Statement of Financial Position	10
Condensed Consolidated Statement of Changes in Equity	11
Condensed Consolidated Statement of Cash Flows	12
Notes to the Condensed Consolidated Financial Statements	13
Directors’ Declaration	21
Independent Auditor’s Review Report	22

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Chalice Gold Mines Limited Directors’ Report

For the half year ended 31 December 2017

Your directors submit the financial report for Chalice Gold Mines Limited (‘Chalice’ or ‘the Company’) and its subsidiaries (together ‘the Group’) for the half year ended 31 December 2017. 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.

Anthony W Kiernan	Chairman
Timothy R B Goyder	Managing Director
Morgan S Ball	Non-executive Director
Stephen P Quin	Non-executive Director

REVIEW OF OPERATIONS

1. Exploration Overview

Chalice Gold Mines Limited (“Chalice” or “the Company”) reports on an active first half of the year with major exploration programs continuing across its key gold and base metal projects in Canada and Australia.

Exploration activity at the East Cadillac Gold Project in Quebec has ramped up significantly, with an initial 7,700m diamond drilling program (Phase 1) increased by 21,000m to 28,700m (Phase 2). In additional to the East Cadillac Gold Project program, a 1,800m diamond drilling program also commenced at the Kinebik Gold Project .

The decision to significantly expand and extend the drilling program at East Cadillac reflects the Company’s commitment to aggressively explore this highly-endowed region. The aim of the program is to continue building a high-grade resource base, leveraging Chalice’s strong financial position and strong in-house technical expertise.

In Australia, drilling programs were undertaken at the Warrego North Project , Latitude Hill Project and the West Pilbara Project during the period. Results are currently being interpreted to determine the extent of future exploration at Warrego and Latitude Hill. The Company has recently withdrawn from the West Pilbara Project.

In addition, the Company has continued to assess numerous business development opportunities in Australia, Canada and other areas internationally with the objective of securing further high potential resource projects.

1.1 East Cadillac Gold Project, Quebec, Canada

During the period, the Company commenced an initial Phase 1 diamond drilling program of 14 holes for approximately 7,700m. Drilling has confirmed an extension of the mineralised structures at the Nordeau West deposit by a further 150m west and down to the -800m vertical level.

Regionally, an assessment of recently completed surface rock chip, Mobile Metal Ion (MMI) geochemical sampling and geophysical surveys including 3D Induced Polarization (3D IP), aeromagnetic and Lidar surveys resulted in 14 new highpriority targets being identified. These targets (”Phase 2”) have been prioritised based on regional structural position, surface geochemical results and 3D IP chargeability response. As a result, subsequent to the half year end, the Company commenced an additional 21,000m diamond drilling program, which will be completed in the second quarter of 2018.

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Chalice Gold Mines Limited Directors’ Report

For the half year ended 31 December 2017

The targets to be tested by the expanded Phase 2 drilling program have been grouped into three areas:

• Larder Lake – Cadillac Fault corridor ( the central mineralised trend). Targets in this area are considered lower risk with portions of the trend already assessed, and the focus of drilling will be on testing areas down-plunge of existing showings and untested anomalies;

• Hanging wall targets located north of the trend which are poorly tested to date – a similar area in the Val-d’Or district has delivered deposits such as Sigma Lamaque (owned by Eldorado Gold - ~9Moz of historical gold production); and

• Footwall targets to the south which are almost entirely untested – a similar area in the Malartic district has delivered deposits such as Canadian Malartic (owned by Agnico Eagle and Yamana Gold - total reserves and resources of >10Moz Au), however current data is widely spaced (400m) except for immediate area around the Marilynne showing.

To the date of this report, the Company has made significant progress toward the completion of the 29,000m diamond drill program at the East Cadillac Gold Project. Drilling to date has confirmed gold mineralisation along ~3.5km of strike of the Larder Lake-Cadillac Fault in the Simon West area and assay results to date have confirmed significant gold mineralisation intersections at the Simon West prospect and North Contact prospect. As at the date hereof, only ~ 40% of the 29,000m program has been assayed.

In addition to a number of direct greenfields acquisitions, the Company has taken a further step towards consolidating a significant ground position at East Cadillac after entering into a binding option and farm-in agreement to acquire up to a 70% interest in the Forsan Gold Project from Khalkos Exploration Inc. The Company may acquire the interest through total option payments of C$375,000 and incurring exploration expenditures of C$1.75m within five years and shall grant a 1% Net Smelter Royalty to Khalkos on the claims. Chalice now has 145km[2] in this highly endowed region of the Abitibi greenstone belt under various agreements.

1.2 Kinebik Gold Project, Quebec, Canada (100% owned)

Geochemical sampling completed in 2016 and 2017, including MMI soil and Black Spruce bark geochemical surveys have defined numerous overlapping anomalies located in a region dominated by meta-sediments and banded Iron Formation. A 3D-IP and ground magnetic survey was completed and combined with the historical geochemistry to define several reconnaissance drill targets.

A maiden drill program of nine holes for 1,800m (200m hole depth) has recently been completed with assays pending.

1.3 Warrego North Project, Northern Territory, Australia (earning up to 70%)

One Reverse Circulation (“RC”) and three diamond drill holes with RC pre-collars for 1,575m were drilled to follow-up a previous encouraging result from drill hole WND17-001 (8m @ 1.74% Cu and 0.42g/t Au) central to the Parakeet anomaly. Follow-up drilling successfully identified two additional ironstone units in diamond hole WND17-006, located approximately 150m east of WND17-001. Diamond hole WND17-004, drilled directly beneath the previous intersection in diamond hole WND17-001 intersected a zone of intense chlorite alteration with accompanying elevated copper and gold values, which is interpreted to have narrowly missed a prospective ironstone.

Results are considered to be encouraging and a project wide assessment (including new adjacent tenement applications) is being undertaken to determine the extent of future exploration programs.

1.4 Latitude Hill Project, Western Australia (earning up to 70%)

A 3,576m RC drilling program was completed in the period to test the nine priority moving-loop electro-magnetic (MLEM) targets. A total of 15 RC drill-holes targeted and successfully tested each of the nine targets.

Results from drilling show that the interpreted MLEM conductors represent zones of strongly graphitic gneiss or metasediments hosted within either basement gneiss or dominantly metasedimentary sequences, both of which are poorly exposed in the region. Although minor disseminated sulphides are recognised at each locality, the MLEM conductors are explained by the strong abundance of graphite. Unfortunately, no significant nickel results were observed.

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Chalice Gold Mines Limited Directors’ Report

For the half year ended 31 December 2017

A zone of copper mineralisation was identified at the Manyas target in drill hole LHRC010, which returned 19m at 0.45% Cu from 214m including 1m @ 2.23% Cu. The mineralisation was immediately followed-up with four additional holes to test potential strike and dip extensions, resulting in similar intersection of low-grade mineralisation to the west and up-dip of LHRC010. The Company is continuing to assess the results from the drilling.

1.5 West Pilbara Gold Project, Western Australia (earning up to 70%)

During the period, a total of 335 holes for 9,259m were drilled including 276 air-core (“AC”) holes for 5,685m and 59 RC holes for 3,574m. While anomalous results were returned from several of the prospects, they are not considered sufficiently encouraging to warrant follow-up exploration. Accordingly, the Company has provided notification to Red Hill Iron Limited of its withdrawal from the farm-in and joint venture agreement, subsequent to half year end.

1.6 Generative Exploration

During the period, the Company applied for two Exploration Licences in Victoria (EL006661 and EL006669) which cover a combined area of 1300km[2] . These applications are situated within the Murray Basin, west of the prospective WhitelawTandarra Fault Corridor, with the southern tenement positioned approximately 10km north-west of the highly-fertile Bendigo Goldfield.

In addition, the Company continued to define targets for drilling at several of its 100% owned tenements in the Yilgarn region of Western Australia.

2. Nyanzaga Project, Tanzania (Entitlement to payment upon commercial mining)

Following Chalice’s merger with Sub-Sahara Resources NL in 2009, Chalice became entitled to a payment of A$5 million upon commercial production at the Nyanzaga Project in Tanzania. Orecorp Limited (ASX: ORR), which is currently earning a 51% interest in Nyanzaga, has completed a positive Scoping Study.

3. Investments

The Company holds 11.68 million shares (~23%) in unlisted diamond explorer GeoCrystal Limited after subscribing to a further 2 million shares in July 2017. The Company also holds 66 million shares (~12%) in ASX listed Ausgold Limited and 10 million options exercisable at 3.5 cents, as well as several other listed investments.

4. Corporate

4.1 Financial Review

At 31 December 2017, the Group had net assets of $47,566,848 (30 June 2017: $52,115,756) and an excess of current assets over current liabilities of $46,281,172 (30 June 2017: $51,309,812). At 31 December 2017, the Group’s cash at bank totaled $42,535,170 (30 June 2017: $46,819,151).

The Group reported a net loss for the period of $6,642,488 (31 December 2016: net loss of $1,892,115) which has arisen primarily due to the increase in exploration and evaluation costs in the period and net gains/losses from the sale of exploration and evaluation assets and financial assets.

The Group has restated the prior year accounts due to a voluntary change in accounting policy in relation to exploration and evaluation expenditure. The new accounting policy was adopted to provide stakeholders with more relevant and transparent information and is considered a more conservative approach. In previous years, costs incurred in relation to exploration of areas with current rights of tenure were reported as assets, with costs written off as the asset was abandoned. The new policy requires the Group to expense all exploration costs in the year it is incurred. Therefore shareholders will notice and increase in expenses incurred in current and future periods.

The Group’s focus during the half year period was on exploration and evaluation activities in Canada and Australia, with cash outflows of $5,499,768 (31 December 2016: $1,198,646). Total business development cash outflows to 31 December

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Chalice Gold Mines Limited Directors’ Report

For the half year ended 31 December 2017

2017 totaled $420,709 (31 December 2016: $1,007,652). In addition, the Company paid capital gains taxes of $1,077,920 in Canada primarily as a result of the profits on sale of First Mining Finance Corp shares.

EVENTS SUBSEQUENT TO REPORTING DATE

There have been no events subsequent to reporting date.

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 8 and forms part of this directors’ report for the half-year ended 31 December 2017.

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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TIM GOYDER Managing Director

Dated at Perth this 9[th] day of March 2018

COMPETENT PERSONS & QUALIFYING PERSONS STATEMENT

The information in this report that relates to the East Cadillac Gold Project is extracted from the announcements entitled “Chalice expands exploration drilling program at East Cadillac Gold Project after identifying new high-priority targets” dated 16 January 2018 and “Significant new gold intersections at East Cadillac Project” dated 6 March 2018. The information in this report that relates to the Warrego North Project, Latitude Hill Project and the West Pilbara Project is extracted from the announcement entitled “December 2017 Quarterly Report” and the “September 2017 Quarterly Report” dated 19 January 2018 and 27 October 2017 respectively.

These announcements are available to view on the Company’s website at www.chalicegold.com. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements and that all material assumptions in the market announcement continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person’s and Qualifying Persons findings are presented have not been materially modified from the original market announcements.

FORWARD LOOKING STATEMENTS

This report may contain forward-looking information within the meaning of Canadian securities legislation and forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, forward-looking statements). These forward-looking statements are made as of the date of this document and Chalice Gold Mines Limited (the Company) does not intend, and does not assume any obligation, to update these forward-looking statements.

Forward-looking statements relate to future events or future performance and reflect Company management’s expectations or beliefs regarding future events and include, but are not limited to, the estimation of mineral reserve and mineral resources at the East Cadillac Gold Project, the realisation of mineral reserve estimates; the likelihood of exploration success including results of future geophysical surveys, drilling at the East Cadillac Gold Project, the Kinebik Project, the Latitude Hill Project, the Warrego North Project and the West Pilbara Project and other exploration activities; the timing and costs of future exploration activities on the Company’s exploration projects; the potential to define future mineral resources and, if successful at any of the Company’s exploration projects, the potential viability of any mineral resource so defined; planned expenditures and budgets and the execution thereof; the timing and availability of drill results;

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Chalice Gold Mines Limited Directors’ Report

For the half year ended 31 December 2017

potential sites for additional drilling, the future share price performance of the Company’s listed investments, that general business and economic conditions will not change in a materially adverse manner; the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage.

In certain cases, forward-looking statements can be identified by the use of words such as plans, planning, expects or does not expect, is expected, will, may, would, potential, budget, scheduled, estimates, forecasts, intends, anticipates or does not anticipate, or believes, occur, or be achieved, or variations of such words and phrases or statements that certain actions, events or results may, could, would, might or will be taken, occur or be achieved or the negative of these terms or comparable terminology. By their very nature forwardlooking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors may include, among others, risks related to actual results of current exploration activities; changes in exploration programs based upon results of exploration; future prices of mineral resources; possible variations in mineral resources or ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in the Company’s interim and annual financial statements, all of which are filed and available for review on SEDAR at sedar.com. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

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AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the review of the consolidated financial report of Chalice Gold Limited for the halfyear ended 31 December 2017, 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.

Perth, Western Australia 9 March 2018

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L Di Giallonardo Partner

HLB Mann Judd (WA Partnership) ABN 22 193 232 714

Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533 Email: mailbox@hlbwa.com.au | Website: www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

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

Chalice Gold Mines Limited

Condensed Consolidated Statement of Comprehensive Income

For the half year ended 31 December 2017

Note Continuing Operations Revenue 3 (a) Net (loss)/gain on sale of available for sale financial assets 5 Net gain on sale of exploration and evaluation assets 3 (b) Net loss on sale of property, plant and equipment Foreign exchange (loss)/gain Share of associate’s loss Exploration and evaluation expenditures 6 Corporate and administrative expenses 3 (c) Share based payments Business development expenses 3 (d) Impairment of financial assets 3 (e) Depreciation and amortisation expense Loss for the period from continuing operations before income tax Income tax benefit /(expense) 4 Loss for the period from continuing operations Total loss for the period attributed to owners of the parent Other comprehensive income net of income tax Items that may be reclassified to profit or loss Net change in fair value of available for sale investments, net of tax Exchange differences on translation of foreign operations Items reclassified to profit or loss during the period Net change in fair value of available for sale investments sold Total other comprehensive income Total comprehensive (loss)/ income for the period attributable to owners of the parent Basic and diluted loss per share from continuing operations (cents)	31 December 31 December 2017 2016 (restated) $ $ 391,582 198,106 (1,215,258) 371,398 489,647 1,270,754 (31,697) - (66,026) 659,819 - (20,552) (5,932,785) (1,185,684) (920,768) (883,906) (228,515) (234,548) (331,079) (740,534) - (793,656) (29,616) (24,766)
	(7,874,515) (1,383,569) 1,232,027 (508,546)
	(6,642,488) (1,892,115)
	(6,642,488) (1,892,115)
	811,142 1,874,453 147,351 (334,944) 906,696 437,464
	1,865,189 1,976,973
	(4,777,299) 84,858
	(2.5) (0.7)

The accompanying notes form part of the financial statements.

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Chalice Gold Mines Limited

Condensed Consolidated Statement of Financial Position

As at 31 December 2017

Note Current assets Cash and cash equivalents Trade and other receivables and prepayments Financial assets 5 Income tax receivable 4 Total current assets Non-current assets Financial assets 5 Investment in associate Property, plant and equipment Total non-current assets Total assets Current liabilities Trade and other payables Employee benefits Income tax payable 4 Total current liabilities Non-current Liabilities Other Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital 7 Retained earnings Reserves Total equity	31 December 2017 30 June 2017 (restated) $ $ 42,535,170 46,819,151 800,658 315,798 3,336,973 5,807,628 1,209,188 389,338
	47,881,989 53,331,915
	319,659 224,968 584,167 484,167 421,018 308,600
	1,324,844 1,017,735
	49,206,833 54,349,650
	1,051,774 503,071 223,270 191,021 325,773 1,328,011
	1,600,817 2,022,103
	39,168 39,170 - 172,621
	39,168 211,791
	1,639,985 2,233,894
	47,566,848 52,115,756
	39,836,040 39,836,164 10,149,049 16,791,537 (2,418,241) (4,511,946)
	47,566,848 52,115,756

The accompanying notes form part of the financial statements.

10

Chalice Gold Mines Limited Condensed Consolidated Statement of Changes in Equity

For the half-year ended 31 December 2017

Restated balance at 30 June 2017 Loss for the period Other comprehensive income for the period Net change in fair value of available for sale investments Net change in fair value of available for sale investments sold Exchanges differences on translation of foreign operations Total comprehensive loss for the period Share issue costs Share based payments Balance at 31 December 2017 Restated balance at 30 June 2016 Loss for the period Other comprehensive income for the period Net change in fair value of available for sale investments Net Change in fair value of available for sale investments sold Exchanges differences on translation of foreign operations Total comprehensive income for the period Share buy-back Share based payments Restated balance at 31 December 2016	Issued capital Retained earnings Share based payments reserve Investment revaluation reserve Foreign currency translation reserve Total $ $ $ $ $ $
	39,836,164 16,791,537 508,678 (906,696) (4,113,927) 52,115,756
	- (6,642,488) - - - (6,642,488)
	- - - 811,142 - 811,142
	- - - 906,696 - 906,696
	- - - - 147,351 147,351
	- (6,642,488) - 1,717,838 147,351 (4,777,299)
	(124) - - - - (124)
	- - 228,515 - - 228,515
	39,836,040 10,149,049 737,193 811,142 (3,966,576) 47,566,848
	Issued capital Retained earnings Share based payments reserve Investment revaluation reserve Foreign currency translation reserve Total $ $ $ $ $ $
	43,622,887 21,572,003 179,559 (1,003,499) (3,718,216) 60,652,734
	- (1,892,115) - - - (1,892,115)
	- - - 1,874,453 - 1,874,453
	- - - 437,464 (321,908) 115,556
	- - - - (13,036) (13,036)
	- (1,892,115) - 2,311,917 (334,944) 84,858
	(2,562,072) - - - - (2,562,072)
	- - 234,548 - - 234,548
	41,060,815 19,679,888 414,107 1,308,418 (4,053,160) 58,410,068

The accompanying notes form part of the financial statements.

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Chalice Gold Mines Limited Condensed Consolidated Statement of Cash Flows

For the half year ended 31 December 2017

Cash flows from operating activities Cash receipts from operations Cash paid to suppliers and employees Payments for exploration and evaluation assets Business development related costs Interest received Interest paid Income tax paid Net cash used in operating activities Cash flows from investing activities Proceeds from sale of exploration and evaluation assets Proceeds from sale of available for sale financial assets Acquisition of available for sale financial assets Acquisition of property, plant and equipment Proceeds from sale of fixed assets Net cash from investing activities Cash flows from financing activities Share buy-back Bank guarantee costs Share issue costs Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effects of exchange rate fluctuations on cash held Cash and cash equivalents at the end of the financial period	31 December 31 December 2017 2016 (restated) $ $ 76,417 77,231 (1,156,841) (744,277) (5,499,768) (1,198,646) (420,709) (1,007,652) 301,768 131,711 (640) - (1,077,920) -
	(7,777,693) (2,741,633)
	- 25,249 4,639,421 9,710,369 (915,278) - (171,946) (36,333) - 3,086
	3,552,197 9,702,371
	- (2,551,667) (8,871) - (124) -
	(8,995) (2,551,667)
	(4,234,491) 4,409,071 46,819,151 35,733,786 (49,490) 905,986
	42,535,170 41,048,843

The accompanying notes form part of the financial statements.

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Chalice Gold Mines Limited Notes to the Condensed Consolidated Financial Statements For the half year ended 31 December 2017

1. Significant accounting policies

(a) Statement of compliance

These interim consolidated financial statements are general purpose financial statements prepared in accordance with the requirements of the Corporations Act 2001, applicable accounting standards including AASB 134 ‘Interim Financial Reporting’, Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’). Compliance with AASB 134 ensures compliance with IAS 34 ‘Interim Financial Reporting’.

This condensed 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.

It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2017 and any public announcements made by Chalice Gold Mines Limited (‘Chalice’ or ‘the Group’) and its subsidiaries during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001 and the rules of the Australian Securities Exchange and the Toronto Stock Exchange.

(b) Basis of preparation

The interim report has been prepared on a historical cost basis, except for the revaluation of certain financial instruments. Cost is based on the fair value of the consideration given in exchange for assets. The Company is domiciled in Australia and all amounts are presented in Australian dollars, unless otherwise noted. For the purposes of preparing the interim financial statements, the half year has been treated as a discrete reporting period.

(c) Accounting policies and methods of computation

The accounting policies and method of computation adopted are consistent with those of the previous financial year and corresponding half year except as mentioned below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

Voluntary Change in Accounting Policy – Exploration and evaluation expenditure

The financial report for the half year ended 31 December 2017 has been prepared on the basis of a retrospective application of a voluntary change in accounting policy relating to exploration and evaluation expenditure. In previous financial reporting periods, the costs incurred in connection with exploration of areas with current rights of tenure were capitalised in the Statement of Financial Position. The criteria for carrying forward the costs were:

• (i) Such costs were expected to be recovered through successful development and exploitation of the area of interest or alternatively by its sale; and

• (ii) Exploration and/or evaluation activities were continuing in the area of interest and had not yet reached a stage which permitted a reasonable assessment of the existence or otherwise of economically recoverable resources, and active and significant operations in, or in relation to, the area were continuing.

Costs carried forward in respect of an area of interest that was abandoned were written off in the year in which the decision to abandon was made.

The new accounting policy was adopted as of 1 July 2017 and has been applied retrospectively. Under the new policy, exploration and evaluation expenditure including the cost of acquisition is expensed to the Statement of Comprehensive Income in the year when it is incurred.

Directors are of the opinion that the change in accounting policy provides users with more relevant and no less reliable financial information as the policy is more transparent and less subjective. Both the previous and new accounting policies are compliant with AASB 6 Exploration for and Evaluation of Mineral Resources. The impact of this change in accounting policy is reflected below:

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Chalice Gold Mines Limited Notes to the Condensed Consolidated Financial Statements

For the half year ended 31 December 2017

The capitalised exploration and evaluation asset previously reported as at 30 June 2017 has decreased by $3,245,539. Retained earnings brought forward at 1 July 2017 decreased by $3,315,129. Net loss after tax previously reported at 31 December 2016 has increased by $533,530 to $1,892,115.

Basic and diluted loss per share have also been restated. The amount of the impact for the new result for the half year ended 31 December 2016 of the change in accounting policy is stated as follows:

Loss per share attributable to owners of the parent: 31 December 2017 Basic and diluted loss per share (cents) (0.3)

Exploration and evaluation expenditure that is expensed is included as part of cash flows from operating activities, whereas previously capitalised exploration and evaluation expenditure was included as part of cash flows from investing activities. As a result, for the half year ended 31 December 2016, net cash used in operating activities has increased from $535,335 to $2,741,633 and net cash from investing activities has increased from $7,496,073 to $9,702,371.

(d) Significant accounting judgments and key estimates

The preparation of interim financial reports requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

In preparing this interim report, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report for the year ended 30 June 2017.

(e) Adoption of new and revised Accounting Standards

Standards and Interpretations applicable to 31 December 2017

In the half-year ended 31 December 2017, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group and effective for the half-year reporting periods beginning on or after 1 July 2017.

As a result of this review, other than the potential effects of AASB 16 Leases , the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Group and therefore no material change is necessary to Group accounting policies.

Standards and Interpretations in issue not yet adopted

The Directors have also reviewed all of the new and revised Standards and Interpretations in issue not yet adopted that are relevant to the Group and effective for the half-year reporting periods beginning on or after 1 January 2018. As a result of this review, other than the potential effect of AASB 16 Leases below, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations in issue not yet adopted on the Group and therefore no material change is necessary to Group accounting policies.

AASB 16 Leases

AASB 16 Leases replaces the current AASB 17 Leases standard. AASB 16 removes the classification of leases as either operating leases or finance leases- for the lessee- effectively treating all leases as finance leases. Most leases will be capitalised on the balance sheet by recognising a ‘right-of-use’ asset and a lease liability for the present value obligation. This will result in an increase in the recognised assets and liabilities in the statement of financial position as well as a change in expense recognition, with interest and depreciation replacing operating lease expense. Lessor accounting remains similar to current practice, i.e. lessors continue to classify leases as finance and operating leases.

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Chalice Gold Mines Limited Notes to the Condensed Consolidated Financial Statements

For the half year ended 31 December 2017

2. Segment Reporting

The Group has identified its operating segments based on internal reports that are reviewed and used by the Board of Directors in assessing performance and in determining the allocation of resources.

The operating segments are identified by management based on the allocation of costs; whether they are exploration and evaluation costs, business development costs or corporate related costs. Results of those segments are reported to the Board of Directors at each Board meeting. The exploration and evaluation segment includes all of the Company’s exploration projects grouped into one combined segment. The business development segment represents the costs associated with the review of the new business opportunities and potential asset acquisitions.

Revenue Net gain on sale of exploration and evaluation assets Total Income Corporate and administrative expenses Business development costs Depreciation and amortisation Exploration expenditures written off Segment profit/(loss) before tax Unallocated income/(expenses) Other income Net financing income Net gain on sale of property, plant and equipment Net gain on sale of available for sale financial assets Impairment of financial assets Share based payments Share of associate’s loss Net profit from sale of tenements Foreign exchange gain/(loss) Total loss for the period before tax	Exploration and Evaluation Business Development Corporate 2017 2016 (restated) 2017 2016 (restated) 2017 2016 (restated) $ $ $ $ $ $ - 431 - - 76,800 76,800 - 1,270,754 - - - -	Total 2017 2016 (restated) $ $ 76,800 77,231 - 1,270,754
	- 1,271,185 - - 76,800 76,800 - - - - (920,768) (883,906) - - (331,079) (740,534) - - - - - - (29,616) (24,766) (5,932,785) (1,185,684) - - - -	76,800 1,347,985 (920,768) (883,906) (331,079) (740,534) (29,616) (24,766) (5,932,785) (1,185,684)
	(5,932,785) 85,501 (331,079) (740,534) (873,584) (831,872)	(7,137,448) (1,486,905)
		25,217 - 289,565 120,875 (31,697) - (1,215,258) 371,398 - (793,656) (228,515) (234,548) - (20,552) 489,647 - (66,026) 659,819
		(7,874,515) (1,383,569)

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Chalice Gold Mines Limited Notes to the Condensed Consolidated Financial Statements

For the half year ended 31 December 2017

Segment assets: Investment in Associate Other Unallocated assets Total assets Segment Liabilities Unallocated liabilities Total liabilities	Exploration and Evaluation Business Development Corporate 31 December 2017 30 June 2017 (restated) 31 December 2017 30 June 2017 (restated) 31 December 2017 30 June 2017 (restated) $ $ $ $ $ $ 584,167 484,167 - - - - 689,693 886,214 - - 838,939 311,494	Total 31 December 2017 30 June 2017 (restated) $ $ 584,167 484,167 1,528,632 1,197,708
	1,273,860 1,370,381 - - 838,939 311,494 (695,193) (350,256) - (10,488) (619,019) (402,963)	2,112,799 1,681,875 47,094,034 52,667,775
		49,206,833 54,349,650
		(1,314,212) (763,707)
	(695,193) (350,256) - (10,488) (619,019) (402,963)	(1,314,212) (763,707) (325,773) (1,569,567)
		(1,639,985) (2,333,283)

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Chalice Gold Mines Limited Notes to the Condensed Consolidated Financial Statements

For the half year ended 31 December 2017

3. Revenue and expenses

The following revenue and expense items are relevant in explaining the financial performance for the half-year:

(a) Revenue Corporate and administration service fees Net finance income Other	2017 2016 $ $ 76,800 76,800 289,565 120,875 25,217 431
	391,582 198,106

(b) Net gain on sale of exploration and evaluation assets

Net gain on sale of exploration and evaluation assets relates to the sale of Dumbleyung tenements to Ausgold Limited in September 2017. As consideration for the tenements, the Company received 15 million ordinary shares in Ausgold Limited and 10 million options exercisable at 3.5cents. The options expire in September 2019 and the shares are subject to an escrow period of 12 months from the date of issue. The gain calculated is the difference between the consideration received and the total carrying value of the Dumbleyung tenements.

In the prior year, net gain on sale of exploration and evaluation assets represents the net gain from the sale of the Company’s 12% interest in the Gnaweeda Project, Western Australia and the sale of the Company’s 51% interest in the Ardeen Project, Ontario, Canada in July 2016.

(c) Corporate and administrative expenses

Corporate and administrative expenses Insurance Travel costs Legal fees Head office costs Personnel expenses Regulatory and compliance Other	2017 2016 $ $ 15,486 5,781 329 409 10,386 5,280 56,552 74,865 549,049 590,051 197,257 189,683 91,709 17,837
	920,768 883,906

(d) Business development costs

Along with exploration and evaluation activities, the Company undertakes business development in order to review and potentially acquire new resource projects. Business development costs represent the costs associated with the review of these new business opportunities and potential asset acquisitions.

Personnel expenses Consultants and legal fees Travel and conferences Other	2017 2016 $ $ 165,378 516,263 89,659 37,034 20,622 46,224 55,420 141,013
	331,079 740,534

(e) Impairment of financial assets

The Company recorded an impairment in the fair value of the shares held in Doray Minerals Limited and Kesselrun Resources Limited for the period ended 31 December 2016 of $793,656. The impairment was recognised as part of continuing operations in the Statement of Comprehensive Income due to the prolonged decline in market prices for these financial assets.

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Chalice Gold Mines Limited Notes to the Condensed Consolidated Financial Statements

For the half year ended 31 December 2017

4. Income tax Income tax expense/benefit

Income tax
Income tax expense/benefit Current income tax (expense)/benefit Over/under provision of prior year tax (expense)/benefit Foreign exploration incentive tax credits Deferred income tax benefit/(expense) relating to available for sale investments Income tax receivable Current income tax expense/benefit Foreign exploration incentive tax credits Income tax payable R&D tax credit Current income tax expense/benefit Financial assets Current Available for sale investments	2017 2016 $ $ 729,105 (160,353) 67,756 - 127,492 - 307,674 (348,193)
	1,232,027 (508,546)
	31 December 2017 30 June 2017 811 - 1,208,377 389,338
	1,209,188 389,338
	259,951 259,951 65,822 1,068,060
	325,773 1,328,011
	31 December 2017 30 June 2017 $ $ 3,336,973 5,807,628
	3,336,973 5,807,628

5.

Available for sale investments represents investments in various companies listed on the ASX and TSX. During the half year ended 31 December 2017, the Company sold its remaining 6,960,836 shares held in First Mining Finance Corp for net proceeds of $3.9 million. Total net loss on sale of available for sale investments was approximately $1.2 million.

6.

Non-current Share options- listed entity Bonds and bank guarantees Exploration and evaluation expenditures West Pilbara Latitude Hill Warrego North East Cadillac Kinebik Australian Tenements Generative Exploration Other	31 December 2017 30 June 2017 $ $ 84,647 - 235,012 224,968
	319,659 224,968
	31 December 2017 31 December 2016 (restated) $ $ 841,316 42,903 632,224 42,987 433,394 36,203 3,084,650 328,015 432,680 437,869 41,937 23,954 475,804 - (9,220) 273,753
	5,932,785 1,185,684

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Chalice Gold Mines Limited Notes to the Condensed Consolidated Financial Statements

For the half year ended 31 December 2017

7. Issued capital

(a) Issued and fully paid ordinary shares

Movements in ordinary shares on issue: At 1 July Share issue costs Share buy-back	31 December 2017 30 June 2017 No. $ No. $ 261,210,294 39,836,164 282,710,802 43,622,887 - (124) - - - - (21,500,508) (3,786,723)
	261,210,294 39,836,040 261,210,294 39,836,164

In July 2016 the Company commenced a discretionary on-market share buy-back. The on market share buyback was completed on 4 July 2017.

(b) Share options

Movements in options over ordinary shares on issue: At 1 July Options granted Options lapsed Outstanding at the end of the period	31 December 2017 30 June 2017 No. No. 2,250,000 500,000 - 1,750,000 (500,000) -
	1,750,000 2,250,000

The fair value of options is estimated at the date of grant using a Black-Scholes option-pricing model. 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 rendered.

(c) Performance rights

Movements in performance rights: At 1 July Performance rights lapsed Performance rights issued(1) Outstanding at the end of the period	31 December 2017 30 June 2017 No. No. 8,541,744 5,817,236 - (2,232,664) 5,544,347 4,957,172
	14,086,091 8,541,744

(1) During the period ended 31 December 2017, 5,544,347 performance rights were issued to Key Management Personnel (‘KMP’) and employees of the Company on three separate dates- 27 July 2017, 9 November 2017 and 28 November 2017.

The following table gives the assumptions made in determining the fair value of the performance rights granted during the period:

	31 December
	2017
Share prices at grant dates	$0.16 to $0.205
Exercise price	Nil
Expected volatility	50%
Weighted average performance period (years)	2.82
Weighted average vesting period (years)	2.82
Expected dividends	-
Weighted average risk-free interest rate	1.92%

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Chalice Gold Mines Limited Notes to the Condensed Consolidated Financial Statements

For the half year ended 31 December 2017

The performance rights contain both market and non-market performance conditions. Non-market performance conditions are not taken into account in the grant date fair value measurement of the services rendered.

10. Commitments and contingencies

Exploration expenditure commitments

In order to maintain current rights of tenure to exploration tenements, the Group is required to perform minimum exploration work in order to meet the minimum expenditure requirements specified by various governments in order to maintain exploration tenements in good standing. Due to the nature of the Groups’ operations in exploration and evaluation areas of interest, it is difficult to accurately forecast the nature and amount of expenditure, and these obligations are subject to renegotiation when application for a mining lease is made and at other times. Therefore amounts stated are based on maximum commitments known within the next 1 to 2 years. The Group may in certain situations apply for exemptions under relevant mining legislation or enter in joint venture arrangements which significantly reduce working capital commitments. These obligations are not provided for in the financial report and are payable:

Within 1 year Within 2-5 years Later than 5 years ase commitments Within 1 year Within 2-5 years Later than 5 years	31 December 2017 30 June 2017 $ $ 310,619 1,152,272 - - - -
	310,619 1,152,272
	31 December 2017 30 June 2017 $ $ 240,751 259,260 438,851 566,284 - -
	679,602 825,544

Office lease commitments

Contingent asset

There are no contingent assets at 31 December 2017.

12.

Events subsequent to reporting date

There have been no events subsequent to reporting date.

13. Financial instruments

The directors consider the carrying value of financial assets and financial liabilities recognised in the consolidated financial statements to approximate their fair values. In particular, available for sale investments which comprise various ASX and TSX listed entities are measured at fair value using quoted market prices at the reporting date (Level 1 fair value measurement).

The directors have assessed the fair value of cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

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Chalice Gold Mines Limited Directors’ Declaration

For the half year ended 31 December 2017

In the opinion of the directors of Chalice Gold Mines Limited (‘the Company’):

1. The attached financial statements and notes thereto are in accordance with the Corporations Act 2001 including:

2. a. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

3. b. giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its performance for the half-year then ended.

4. 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 9th day of March 2018

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TIM GOYDER Managing Director

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INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of Chalice Gold Mines Limited

Report on the Condensed Interim Financial Report

Conclusion

We have reviewed the accompanying interim financial report of Chalice Gold Mines Limited (“the company”) which comprises the condensed consolidated statement of financial position as at 31 December 2017, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory notes, and the directors’ declaration, for the Group comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim 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 Group’s financial position as at 31 December 2017 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 .

Directors’ responsibility for the interim financial report

The directors of the company are responsible for the preparation of the interim financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the interim financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a 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 interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 31 December 2017 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 the company, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

HLB Mann Judd (WA Partnership) ABN 22 193 232 714

Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533 Email: mailbox@hlbwa.com.au | Website: www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers 22

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A review of an interim 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.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

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HLB Mann Judd L Di Giallonardo Chartered Accountants Partner

Perth, Western Australia 9 March 2018

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