CHALICE MINING LIMITED — M&A Activity 2009

Jul 2, 2009

PERDM01_1228834_1

CONTENTS

LETTERFROMTHECHAIRMANOFSUB­SAHARARESOURCESNL...................................4	LETTERFROMTHECHAIRMANOFSUB­SAHARARESOURCESNL...................................4
WHATDOYOUNEEDTODO?.......................................................................................................6
IMPORTANTDATES ........................................................................................................................7
IMPORTANTNOTES ........................................................................................................................7
SUMMARYOFTHEPROPOSAL.................................................................................................. 11
FREQUENTLYASKEDQUESTIONS ........................................................................................... 14
1.	INTERPRETATION......................................................................................................... 18
2.	INTRODUCTION.............................................................................................................. 21
3.	ANALYSISOFPROPOSAL............................................................................................. 21
4.	BACKGROUNDINFORMATIONONSBS ................................................................... 23
5.	BASISOFTHESCHEME................................................................................................. 24
6.	PROCEDURALSTEPS..................................................................................................... 24
7.	RELEVANTTIME............................................................................................................. 24
8.	IMPLEMENTATIONOFTHESCHEME....................................................................... 25
9.	CLOSINGOFREGISTER................................................................................................. 25
10.	ASXQUOTATION............................................................................................................ 25
11.	FOREIGNSCHEMEPARTICIPANTS ........................................................................... 25
12.	TAXIMPLICATIONS....................................................................................................... 26
13.	ADMINISTRATOR........................................................................................................... 26
14.	DIRECTORS'RECOMMENDATIONS .......................................................................... 26
15.	CHALICE'SVOTINGPOWERINSBS .......................................................................... 26
16.	MARKETABLESECURITIESOFSBSHELDBYORONBEHALFOFDIRECTORS
	OFSBS……......................................................................................................................... 26
17.	MARKETABLESECURITIESOFCHALICEHELDBYORONBEHALFOF
	DIRECTORSOFSBS........................................................................................................ 27
18.	DEALINGSINMARKETABLESECURITIESOFSBS................................................ 27
19.	DEALINGSINMARKETABLESECURITIESOFCHALICE...................................... 27

1

20.	VOTINGINTENTIONSOFDIRECTORSANDOTHERS.......................................... 27
21.	PAYMENTSOROTHERBENEFITSTOOFFICERSOFSBS ................................... 27
22.	INTERESTSOFDIRECTORSANDOTHERS.............................................................. 27
23.	OTHERAGREEMENTSORARRANGEMENTSWITHDIRECTORS..................... 29
24.	MATERIALCHANGESINTHEFINANCIALPOSITIONOFSBS............................ 29
25.	OTHERMATERIALINFORMATION........................................................................... 29
26.	INDEPENDENTEXPERT'SREPORT .......................................................................... 29
27.	INFORMATIONINRELATIONTOCHALICESHARES ........................................... 29
28.	INTENTIONSOFTHESBSDIRECTORS .................................................................... 30
29.	ADDITIONALCONSENTS.............................................................................................. 30
30.	ACTIONTOBETAKENBYSCHEMEPARTICIPANTS ........................................... 31
APPENDICES
1.	SUMMARYOFMERGERIMPLEMENTATIONAGREEMENT…………...................32
2.	SCHEMEOFARRANGEMENT………………………………………………...........................34
1.	INTERPRETATION..............................................................................................................34
2.	THESCHEME.........................................................................................................................34
3.	DEALINGSINSCHEMESHARES....................................................................................35
4.	NOTICETOHOLDERSOFSCHEMESHARES............................................................35
5.	ISSUEOFCHALICESHARES............................................................................................36
6.	FOREIGNSCHEMEPARTICIPANTS..............................................................................36
7.	ISSUEANDTRADINGOFCHALICESHARES............................................................37
8.	WHENSCHEMEBECOMESBINDING..........................................................................38
9.	GENERAL.................................................................................................................................38
3.	TAXIMPLICATIONS…………………………………………………………………………………40
4.	SBSUNLISTEDSECURITIES…………………………………………………..........................42
5.	MARKETABLESECURITIESOFSBSHELDBYORONBEHALFOFDIRECTORS
	OFSBS………………………………………………………………………………………………........45

2

6.		DEALINGSINMARKETABLESECURITIESOFSBSANDCHALICE….................46
7.		INFORMATIONABOUTCHALICE……………………………………………………………...47
	1.	BACKGROUND.......................................................................................................................47
	2.	CHALICE'SPROJECTS ........................................................................................................47
	3.	CHALICEHISTORICALFINANCIALINFORMATION.............................................49
	4.	LITIGATION ...................................................................................................................... 49
	5.	OWNERSHIPOFCHALICE ..............................................................................................49
	6.	CHALICE'SDIRECTORSANDSENIORMANAGEMENT........................................49
8.		INFORMATIONABOUTTHEMERGEDGROUP…………………………………………..51
	1.	OVERVIEW..............................................................................................................................51
	2.	CONDUCTOFBUSINESSANDOTHERCORPORATEMATTERS......................51
	3.	SBS'SMANAGEMENTANDEMPLOYEES...................................................................51
	4.	COMBINEDGROUPCONSOLIDATEDPRO‐FORMABALANCESHEET..........51
	5.RISKS.....................…………………………………………………………………………………..53
	6.	CAPITALSTRUCTUREANDOWNERSHIPOFTHEMERGEDGROUP............57
	7.	RIGHTSATTACHINGTONEWCHALICESHARES .................................................57
9.		INDEPENDENTEXPERT'SREPORT…………………………………………………………..60
10.		NOTICEOFMEETINGANDPROXYFORM……………………………………………….198

3

LETTER
FROM
THE
CHAIRMAN
OF
SUB­SAHARA
RESOURCES
NL

3
JULY
2009

Dear
Sub‐Sahara
shareholders,

On
3
April
2009
the
board
of
Sub‐Sahara
Resources
NL
announced
a
proposal
to
merge with
Chalice
Gold
Mines
Limited,
a
company
listed
on
the
ASX
with
a
strong
balance
sheet and
resource
projects
in
Western
Australia.

The
 merger
 is
 to
 be
 implemented
 through
 a
 Scheme
 of
 Arrangement
 under
 which
 SBS shareholders
will
receive
Chalice
Shares
in
exchange
for
their
SBS
Shares.

Full
details
of the
proposal
are
contained
in
this
booklet,
which
I
encourage
you
to
read
carefully.

In summary,
under
the
merger:

• holders
of
SBS
Shares
will
receive
one
Chalice
Share
for
every
10.73
SBS
shares
held by
them;

• SBS
 shareholders
 will
 collectively
 have
 an
 interest
 of
 approximately
 39%
 in
 the Merged
Group;

• SBS
will
become
a
wholly‐owned
subsidiary
of
Chalice
and
will
be
de‐listed
from
the ASX;
and

• the Merged Group will continue to be listed on the ASX and will expedite the development
of
the
Zara
Gold
Project
in
Eritrea,
in
which
SBS
has
a
69%
interest.

Your
directors
believe
that
the
proposal
to
merge
with
Chalice,
which
is
subject
to
the approval
of
SBS
shareholders,
will
benefit
shareholders
by
enabling
Chalice's
substantial cash
 reserves
 to
 be
 utilised
 in
 developing
 the
 Zara
 Project.
 
 Under
 current
 market conditions
an
equity
raising
to
fund
that
development
would,
your
directors
believe,
only be
undertaken
on
terms
that
would
be
highly
dilutionary
to
SBS
shareholders.

In
addition,
a
merger
with
Chalice
will
diversify
investment
risk
for
SBS
shareholders
by giving
them
exposure
to
Chalice's
own
resource
projects
in
Western
Australia.

Further information
about
those
projects
is
contained
in
this
booklet.

Simultaneously
with
implementation
of
the
merger,
Chalice
will
acquire
a
company
which holds
a
further
11%
interest
in
the
Zara
Project,
with
the
result
that
the
Merged
Group will
emerge
with
an
80%
interest
in
that
project.

Your
directors
unanimously
support
the
merger
and
recommend
that
you
vote
in
favour of
it
(as
they
intend
to
do
in
respect
of
their
own
holdings
of
SBS
shares)
at
a
meeting
of SBS
shareholders
to
be
held
on
4
August
2009.

If
you
are
unable
to
attend
that
meeting, you
are
encouraged
to
vote
by
completing
the
proxy
form
enclosed
with
this
booklet
and returning
it
to
SBS
in
the
enclosed
reply‐paid
envelope
as
soon
as
possible
–
and
in
any event
not
later
than
10am
(WST)
on
2
August
2009.

4

If
you
are
in
doubt
as
to
the
action
you
should
take
in
relation
to
the
merger
proposal,
you should
consult
your
legal,
financial
or
other
professional
adviser
without
delay.

If
you need
 any
 assistance
 in
 completing
 the
 proxy
 form,
 please
 call
 1800
 649
 980
 (within Australia)

or
+61
2
8256
3386
(outside
Australia).

Yours
sincerely,

==> picture [79 x 46] intentionally omitted <==

Barry
Bolitho Chairman

5

WHAT
DO
YOU
NEED
TO
DO?

Your
vote
is
important

For
the
merger
with
Chalice
to
proceed,
it
is
necessary
that
sufficient
SBS
shareholders vote
in
favour
of
the
Scheme
of
Arrangement.

If
you
are
registered
as
a
SBS
shareholder
as
at
7.00pm
(WST)
on
2
August
2009,
you
will be
entitled
to
vote
on
the
resolution
to
approve
the
Scheme
at
the
Scheme
Meeting.

What
you
need
to
do

You
need
to:

• (a) decide
whether
or
not
you
support
the
Scheme;
and

• (b) either
attend
and
vote
in
person
at
the
Scheme
Meeting
on
4
August
2009
or return
 your
 Proxy
 Form
 to
 SBS's
 registered
 office
 at
 Ground
 Floor,
 288 Stirling
Street,
Perth,
WA
6000
(facsimile
(08)
9227
3271)
or
by
faxing
the Proxy
Form
to
SBS's
share
registrar,
Computershare
Investor
Services
Pty Ltd,
 on
 (08)
 9323
 2033
 (within
 Australia)
 or
 +61
 8
 9323
 2033
 (outside Australia).

Voting

You
may
vote
at
the
Scheme
Meeting
either
in
person
or
by
proxy,
attorney
or
(in
the
case of
a
company)
corporate
representative.

To
vote
by
proxy,
you
should
complete
and
return
to
SBS
as
soon
as
possible
the
Proxy Form
which
accompanies
this
Scheme
Booklet.

If
you
wish
to
vote
FOR
the
Scheme
of Arrangement,
you
must
place
an
X
in
the
FOR
box
for
the
resolution
on
the
Proxy
Form. To
ensure
that
your
Proxy
Form
is
valid,
you
should
return
it
to
SBS
by
no
later
than 10:00am
on
2
August
2009.

You
can
do
this
by
using
the
reply‐paid
envelope
enclosed with
this
Scheme
Booklet
or
by
faxing
the
Proxy
Form
to
SBS's
share
registrar, Computershare
Investor
Services
Pty
Ltd,
on
(08)
9323
2033
(within
Australia)
or
+61
8 9323
2033
(outside
Australia).

Queries

If
you
have
any
questions
in
relation
to
the
Scheme
of
Arrangement,
please
call
1800
649 980
(within
Australia)
or
+61
2
8256
3386
(outside
Australia)
Monday
to
Friday
between 9.00am
and
5.00pm
(WST),
or
consult
your
legal,
financial
or
other
professional
adviser.

6

IMPORTANT
DATES

IMPORTANTDATES
Proxiestobereceivednotlaterthan10.00am(WST)	2August2009
Meeting of Scheme Participants to approve the Scheme of	4August2009
Arrangement
If Scheme Participants approve the Scheme, the EXPECTED
timetableis:
CourthearingtoapprovetheScheme:	12August2009
LastdayforexercisingSBSOptionstoparticipateintheScheme	14August2009
(Cut‐offDate):
TheSchemebecomesbinding(EffectiveDate):	14August2009
LastdayofASXtradinginSBSShares:	14August2009
RecorddatefordeterminingentitlementstoNewChaliceShares	21August2009
(RecordDate):
SchemeSharestransferredtoChalice(ImplementationDate):	26August2009
Despatch of holding statements for New Chalice Shares and	1September2009
tradinginNewChaliceSharesontheASXcommences:

IMPORTANT
NOTES

Purpose
of
this
Document

This
document
provides
information
to
SBS
shareholders
necessary
for
them
to
make
a decision
as
to
how
to
vote
on
the
resolution
to
approve
the
Scheme
to
be
considered
at the
Scheme
Meeting.

It
has
been
prepared
pursuant
to
section
412(1)
of
the
Corporations Act
to
explain
the
effect
of
the
Scheme
and
to
disclose
such
other
information
in
relation to the Scheme as is required by the Corporations Act, the Regulations, and ASIC Regulatory
Guides.

The
Scheme
forms
Appendix
2
to
this
Scheme
Booklet.

This
Scheme
Booklet
contains
all
of
the
information
that
would
be
required
under
section 710
of
the
Corporations
Act
as
if
the
booklet
were
a
prospectus
offering
for
subscription the
Chalice
Shares
to
be
issued
to
Scheme
Participants
under
the
Scheme.

Your
directors
recommend
that
you
read
this
Scheme
Booklet
in
its
entirety
(including
its Appendices)
before
making
your
decision
as
to
how
to
vote
at
the
Scheme
Meeting.

Supplementary
Information

A
 supplementary
 scheme
 booklet
 will
 be
 prepared
 and
 issued
 if
 either
 SBS
 or
 Chalice becomes
 aware,
 between
 the
 date
 of
 this
 Scheme
 Booklet
 and
 the
 date
 on
 which
 the Chalice
Shares
to
be
issued
to
Scheme
Participants
under
the
Scheme
are
quoted
on
the ASX,
that:

7

• (a) a
material
statement
in
the
Scheme
Booklet
is
false
or
misleading;

• (b) there
is
a
material
omission
from
the
Scheme
Booklet;

• (c) there
 has
 been
 a
 significant
 change
 affecting
 a
 matter
 included
 in
 the
 Scheme Booklet;
or

• (d) a
 significant
 new
 matter
 has
 arisen
 which
 would
 have
 been
 required
 to
 be included
in
the
Scheme
Booklet.

Responsibility
for
Information

The information concerning SBS contained in this Scheme Booklet, excluding the Independent
 Expert's
 Report
 ( SBS
 Information ),
 has
 been
 compiled
 by
 SBS
 and
 its directors
and
is
the
responsibility
of
SBS.

The
information
concerning
Chalice
contained in this Scheme Booklet, excluding the Independent Expert's Report ( Chalice Information ),
has
been
provided
by
Chalice
and
its
directors
and
is
the
responsibility
of Chalice.

The
information
concerning
the
Merged
Group
contained
in
this
Scheme
Booklet has
 been
 prepared
 jointly
 by
 SBS
 and
 Chalice,
 based
 on
 the
 SBS
 Information
 and
 the Chalice
Information.

SBS
assumes
no
responsibility
for
the
accuracy
or
completeness
of the Chalice Information, and Chalice assumes no responsibility for the accuracy or completeness
of
the
SBS
Information.

BDO
 Kendalls
 Corporate
 Finance
 (WA)
 Pty
 Ltd
 has
 prepared
 the
 Independent
 Expert's Report
contained
in
Appendix
9
and
takes
responsibility
for
that
report.

ASIC

A
copy
of
this
Scheme
Booklet
has
been
provided
to
ASIC
for
review
in
order
that
ASIC may
provide
a
statement,
in
accordance
with
section
411(17)(b)
of
the
Corporations
Act, that ASIC has no objection to the Scheme. Notwithstanding the making of such a statement,
neither
ASIC
nor
any
of
its
officers
takes
any
responsibility
for
the
contents
of this
Scheme
Booklet.

ASX

A
copy
of
this
Scheme
Booklet
has
been
lodged
with
the
ASX.

Neither
the
ASX
nor
any
of its
officers
take
any
responsibility
for
the
contents
of
this
Scheme
Booklet.

Court
Order

The order made by the Court pursuant to section 411(1) of the Corporations Act convening the Scheme Meeting to approve the Scheme does not constitute an endorsement
by
the
Court
of,
or
any
expression
of
opinion
on,
the
Scheme
or
this
Scheme Booklet.

The
notice
convening
the
Scheme
Meeting,
together
with
a
proxy
form
for
that meeting,
accompanies
this
Scheme
Booklet.

Foreign
Scheme
Participants

If
you
are
a
Foreign
Scheme
Participant,
you
should
refer
to
Section
11
of
this
Scheme Booklet.

8

Forward­looking
Statements

This
 Scheme
 Booklet
 includes,
 or
 may
 include,
 forward‐looking
 statements
 including, without
 limitation,
 forward‐looking
 statements
 regarding
 SBS's
 and
 Chalice's
 financial position,
 business
 strategy,
 and
 plans
 and
 objectives
 for
 future
 operations
 (including development
plans
and
objectives),
which
have
been
based
on
SBS's
and
Chalice's
current expectations about future events. These forward‐looking statements are, however, subject
 to
 known
 and
 unknown
 risks,
 uncertainties
 and
 assumptions
 that
 could
 cause actual
 results,
 performance
 or
 achievements
 to
 differ
 materially
 from
 future
 results, performance
or
achievements
expressed
or
implied
by
such
forward‐looking
statements. Such
 forward‐looking
 statements
 are
 based
 on
 numerous
 assumptions
 regarding
 SBS's and
Chalice's
present
and
future
business
strategies
and
the
environment
in
which
SBS and
Chalice
will
operate
in
the
future.

Matters
not
yet
known
to
SBS
and
Chalice
or
not
currently
considered
material
to
SBS
and Chalice
may
impact
on
these
forward‐looking
statements.

The
statements
reflect
views held
 only
 as
 at
 the
 date
 of
 this
 document.
 
 In
 light
 of
 these
 risks,
 uncertainties
 and assumptions,
the
forward‐looking
statements
discussed
in
this
document
might
not
occur. Scheme Participants are therefore cautioned not to place undue reliance on these statements.

Subject
to
any
continuing
obligations
under
applicable
law
or
the
Listing
Rules,
SBS
and Chalice
expressly
disclaim
any
liability
or
obligation
to
disseminate
after
the
date
of
this Scheme
Booklet
any
updates
or
revisions
to
such
forward‐looking
statements
to
reflect changes in expectations or events, conditions or circumstances on which any such statements
are
based.

Risk
Factors

By
 participating
 in
 the
 Scheme
 of
 Arrangement,
 SBS
 shareholders
 will
 be
 investing
 in Chalice.

That
investment
involves
risks
normally
associated
with
mining
and
exploration, as
well
as
risks
specific
to
Chalice.

These
risks
are
explained
in
more
detail
in
Appendix
8.

Investment
Decisions

This
 Scheme
 Booklet
 contains
 general
 advice
 only
 and
 does
 not
 take
 into
 account
 the objectives,
 financial
 situation
 or
 needs
 of
 any
 particular
 SBS
 shareholder
 or
 any
 other person.

The
Scheme
Booklet
should
therefore
not
be
relied
on
as
the
sole
basis
for
any decision
in
relation
to
the
Scheme.

Independent
financial
and
taxation
advice
should
be sought
before
making
any
investment
decision
in
relation
to
the
Scheme.

Privacy

SBS
may
collect
personal
information
in
the
process
of
implementing
the
Scheme.

This information
 may
 include
 the
 names,
 contact
 details
 and
 security
 holdings
 of
 Scheme Participants
and
the
names
of
persons
appointed
by
Scheme
Participants
to
act
as
proxy, corporate
 representative
 or
 attorney
 at
 the
 Scheme
 Meeting.
 
 The
 primary
 purpose
 of collecting
this
information
is
to
assist
SBS
in
the
conduct
of
the
Scheme
Meeting
and
to enable
 the
 Scheme
 to
 be
 implemented
by
SBS
in
the
manner
described
in
this
Scheme Booklet.

Without
this
information,
SBS
may
be
hindered
in
its
ability
to
carry
out
these

9

purposes
to
full
effect.

The
collection
of
certain
personal
information
is
authorised
by
the Corporations
Act.

Personal
information
may
be
disclosed
to
SBS's
share
registry,
to
print
and
mail
service providers,
to
authorised
securities
brokers,
and
to
related
bodies
corporate
of
SBS
and Chalice.

Scheme
Participants
have
the
right
to
access
personal
information
that
has
been
collected. They
should
contact
SBS's
share
registry
in
the
first
instance
if
they
wish
to
exercise
this right.

Scheme Participants who appoint a named person to act as their proxy, corporate representative
 or
 attorney
 at
 the
 Scheme
 Meeting
 should
 ensure
 that
 they
 inform
 that person
of
the
matters
outlined
above.

Definitions

Capitalised
terms
used
in
this
Scheme
Booklet
are
defined
in
Section
1.

10

SUMMARY
OF
THE
PROPOSAL

This
summary
should
be
read
in
conjunction
with
the
remainder
of
the
Scheme
Booklet.

The
merger

The
proposal
to
merge
SBS
and
Chalice
involves
the
transfer
of
all
SBS
Shares
to
Chalice
in exchange
 for
 the
 issue
 to
 SBS
 shareholders
 of
 one
 Chalice
 Share
 for
 every
 10.73
 SBS Shares.

SBS
will
then
become
a
wholly‐owned
subsidiary
of
Chalice
and
be
de‐listed
from the
 ASX.
 
 SBS
 shareholders,
 collectively,
 will
 initially
 hold
 approximately
 39%
 of
 the enlarged
Chalice,
which
will
continue
to
be
listed
on
the
ASX.

How
the
merger
will
affect
you

Under
the
Scheme
of
Arrangement,
SBS
Shares
will
be
transferred
to
Chalice
in
exchange for
an
issue
of
Chalice
Shares
to
SBS
shareholders,
on
the
basis
of
one
Chalice
Share
for every
10.73
SBS
Shares
held
on
the
Record
Date.

Foreign
Scheme
Participants
may
not
be
able
to
directly
receive
Chalice
Shares
and
should refer
to
Section
11
of
this
Scheme
Booklet
for
further
information.

Future
of
SBS
and
Chalice

The
 merger
 of
 SBS
 and
 Chalice
 will
 provide
 a
 platform
 for
 developing
 the
 companies' respective
 projects
 in
 Africa
 and
 Australia
 and
 should
 provide
 the
 Merged
 Group
 with improved
access
to
the
funding
necessary
to
pursue
that
development.

Advantages
of
the
merger

The
merger
will
benefit
SBS
shareholders
by
enabling
Chalice's
substantial
cash
reserves to
be
utilised
in
developing
SBS's
principal
asset,
a
69%
interest
in
the
Zara
Gold
Project in
Eritrea.

These
benefits
are
explained
in
more
detail
in
Section
3.2
and
elsewhere
in
this
Scheme Booklet.

Potential
disadvantages
which
may
result
from
the
merger
are
set
out
in
Section 3.3
 of
 this
 Scheme
 Booklet.
 
 SBS's
 directors
 believe
 that
 the
 advantages
 of
 the
 Scheme significantly
outweigh
the
disadvantages.

What
does
the
Independent
Expert
say?

SBS
commissioned
BDO
Kendalls
Corporate
Finance
(WA)
Pty
Ltd
to
prepare
a
report
on the
Scheme
of
Arrangement
to
ascertain
whether
the
Scheme
is
in
the
best
interests
of Scheme
Participants.

The
Independent
Expert
has
concluded
that
the
Scheme
is
in
the best
interests
of
Scheme
Participants,
noting
that
the
advantages
of
the
Scheme
outweigh the
likely
disadvantages.

Your
directors
recommend
you
vote
in
favour

SBS's
directors
unanimously
recommend
shareholders
to
vote
in
favour
of
the
Scheme. Each
SBS
director
intends
to
vote
his
own
shares
in
favour
of
the
Scheme.

11

Interests
of
SBS
directors

The
 interests
 of
 the
 SBS
 directors
 in
 SBS
 securities
 are
 set
 out
 in
 Appendix
 5
 to
 this Scheme
Booklet.

Shareholder
approval

For
the
Scheme
of
Arrangement
to
proceed,
a
resolution
to
approve
the
Scheme
must
be passed
 by
 more
 than
 50%
 of
 the
 SBS
 shareholders
 present
 and
 voting
 at
 the
 Scheme Meeting
(in
person
or
by
proxy,
attorney
or
corporate
representative)
and
by
at
least
75% of
the
votes
cast
on
the
resolution.

Court
approval

If
 shareholder
 approval
 of
 the
 Scheme
 of
 Arrangement
 is
 obtained,
 the
 application
 for Court
approval
of
the
Scheme
is
expected
to
be
heard
on
12
August
2009.

Conditionality

In
 addition
 to
 the
 approval
 of
 SBS
 shareholders
 and
 the
 Court,
 implementation
 of
 the Scheme
is
conditional
on
a
number
of
matters
which
are
described
in
Section
8.1
of
this Scheme
Booklet.

Tax
implications

Details
 of
 the
 tax
 consequences
 of
 the
 Scheme
 for
 SBS
 shareholders
 are
 set
 out
 in Appendix
 3.
 
 In
 summary,
 no
 Australian
 tax
 should
 be
 payable
 by
 Australian‐resident Scheme
Participants
who
hold
their
SBS
Shares
on
capital
account
and
elect
for
capital gains
tax
rollover
relief
to
apply.

Australian‐resident
Scheme
Participants
who
hold
their SBS
Shares
on
revenue
account
or
as
trading
stock
will
be
assessed
on
any
gain
on
the exchange
of
those
shares
for
Chalice
Shares
as
ordinary
income,
and
rollover
relief
will not
apply.

The
 Australian
 tax
 implications
 for
 non‐Australian
 resident
 Scheme
 Participants
 will depend
on
a
number
of
factors,
and
in
some
circumstances
Australian
tax
may
be
payable on
any
gain
arising
on
the
exchange
of
SBS
Shares
for
Chalice
Shares.

There
may
also
be tax
implications
in
the
Scheme
Participant's
country
of
residence.

As
the
comments
in
Appendix
3
are
general
in
nature
and
do
not
consider
the
specific circumstances
of
each
Scheme
Participant,
Scheme
Participants
should
seek
independent advice
regarding
the
tax
implications
applicable
to
their
circumstances.

How
to
vote

Details
of
how
to
vote
on
the
Scheme
are
contained
in
the
notice
convening
the
Scheme Meeting
set
out
in
Appendix
10
and
in
the
accompanying
Proxy
Form.

Merger
Implementation
Agreement

SBS
 and
 Chalice
 entered
 into
 a
 Merger
 Implementation
 Agreement
 on
 29
 April
 2009. Pursuant
 to
 this
 agreement
 SBS
 and
 Chalice
 agreed
 to
 use
 their
 best
 endeavours
 to implement
the
Scheme
of
Arrangement,
subject
to
the
satisfaction
of
certain
conditions.

12

A
summary
of
the
Merger
Implementation
Agreement
is
set
out
in
Appendix
1.

Implementation
and
timing

The
 key
 dates
 are
 set
 out
 on
 page
7
of this Scheme Booklet.
 The steps necessary to implement
the
merger
include
the
following:

• SBS
shareholders
will
be
asked
to
vote
on
the
Scheme
at
a
meeting
to
be
held
on 4
August
2009.

• If
the
resolution
put
to
SBS
shareholders
at
the
Scheme
Meeting
is
passed
by
the requisite
majorities,
the
Court
will
be
asked
to
approve
the
Scheme.

• If
Court
approval
is
received
and
the
other
conditions
of
the
Scheme
are
satisfied, SBS
will
apply
for
suspension
of
trading
in
SBS
Shares
on
the
ASX
on
the
Effective Date.

• Chalice
will
issue
Chalice
Shares
to
Scheme
Participants
in
exchange
for
their
SBS Shares
approximately
two
weeks
after
the
Court
approves
the
Scheme.

• If
 the
 merger
 is
 implemented,
 SBS
 will
 become
 a
 wholly‐owned
 subsidiary
 of Chalice
and
the
Merged
Group
will
continue
to
be
listed
on
the
ASX.

13

FREQUENTLY
ASKED
QUESTIONS

Set
out
below
are
answers
to
some
basic
questions
that
SBS
shareholders
may
have
in relation
 to
 the
 Scheme
 of
 Arrangement.
 
 These
 answers
 should
 be
 read
 in
 conjunction with
the
remainder
of
the
Scheme
Booklet.

Question
1: What
is
proposed?

Chalice,
a
company
listed
on
the
ASX,
proposes
to
acquire
SBS
by
means
of
a
scheme
of arrangement
between
SBS
and
its
shareholders.

Question
2: Why
have
I
received
this
booklet?

This
booklet
has
been
sent
to
you
because
you
are
an
SBS
shareholder
and
the
proposal for
 Chalice
 to
 acquire
 SBS
 requires
 SBS
 shareholder
 approval.
 
 The
 booklet
 contains information
to
help
you
decide
how
to
vote
on
the
resolution
to
approve
that
acquisition.

Question
3: What
is
a
scheme
of
arrangement?

A scheme of arrangement is a legal arrangement between a company and its shareholders.
If
shareholders
vote
in
favour
of
the
scheme
of
arrangement,
the
scheme becomes binding on the company and the shareholders. Approval of a scheme of arrangement
 requires
 a
 50%
 majority
 of
 the
 shareholders
 present
 and
 voting
 at
 the Scheme
Meeting
on
the
resolution
to
approve
the
scheme
and
a
75%
majority
of
the
total votes
cast,
as
well
as
approval
by
the
Court.

Question
4: What
will
I
receive
if
the
Scheme
is
approved?

If
 you
 are
 a
 holder
 of
 Scheme
 Shares
 (other
 than
 a
 Foreign
 Scheme
 Participant;
 see Question
11),
you
will
receive
one
Chalice
Share
for
every
10.73
of
your
SBS
Shares.

The
Record
Date
for
determining
the
SBS
shareholders
entitled
to
receive
Chalice
Shares will
be
the
fifth
Business
Day
after
the
Effective
Date.

Question
 5: Why
 will
 I
 only
 receive
 one
 Chalice
 Share
 for
 every
 10.73
 of
 my
 SBS Shares?

The
ratio
reflects
the
relative
values
of
Chalice
and
SBS
immediately
prior
to
the
merger proposal
being
publicly
announced.

Question
6: Who
is
Chalice?

Chalice
 is
 an
 Australian
 company
 listed
 on
 the
 ASX.
 
 Its
 principal
 activities
 comprise exploration
for,
and
the
development
of,
resource
projects
in
Western
Australia.

Further information
about
Chalice
is
set
out
in
Appendix
7.

Question
7: What
is
the
opinion
of
the
Independent
Expert?

The
 Independent
 Expert
 has
 concluded
 that
 the
 Scheme
 of
 Arrangement
 is
 in
 the
 best interests
 of
 SBS
 shareholders,
 noting
 that
 the
 advantages
 of
 the
 Scheme
 for
 Scheme Participants
 outweigh
 the
 likely
 disadvantages.
 
 The
 complete
 Independent
 Expert's Report
is
set
out
in
Appendix
9.

You
are
encouraged
to
read
this
report
in
full.

14

Question
8: How
will
fractional
entitlements
be
treated?

If
pursuant
to
the
Scheme
you
become
entitled
to
a
fraction
of
a
Chalice
Share,
the
number of
Chalice
Shares
you
will
receive
will
be
rounded
down
to
the
next
whole
number.

Question
9: Will
I
have
to
pay
brokerage
fees
or
stamp
duty?

If
 you
 are
 a
 holder
 of
 Scheme
 Shares
 (other
 than
 a
 Foreign
 Scheme
 Participant;
 see Question
11)
no
brokerage
or
stamp
duty
will
be
payable
by
you
in
connection
with
the Scheme.

Question
10: When
will
I
receive
my
Chalice
Shares?

If
 you
 are
 a
 holder
 of
 Scheme
 Shares
 (other
 than
 a
 Foreign
 Scheme
 Participant;
 see Question
11),
you
will
receive
your
Chalice
Shares
no
later
than
9
Business
Days
after
the Record
Date
(this
is
anticipated
to
be
no
later
than
3
September
2009).

Question
11: What
if
I
am
a
Foreign
Scheme
Participant?

If
 you
 are
 an
 SBS
 shareholder
 whose
 address
 in
 the
 Register
 is
 a
 place
 outside
 the Commonwealth
of
Australia,
New
Zealand,
the
Philippines
and
Hong
Kong,
then
unless Chalice
is
satisfied
that
the
laws
of
that
country
do
not
prevent
the
issue
of
Chalice
Shares to
you
(or
do
not
prevent
their
issue
except
after
compliance
with
conditions
that
Chalice, acting
reasonably,
regards
as
unduly
onerous),
you
will
be
a
Foreign
Scheme
Participant for
the
purposes
of
the
Scheme.

The
Chalice
Shares
to
which
a
Foreign
Scheme
Participant
would
otherwise
be
entitled under
the
Scheme
will
be
issued
to
a
nominee
appointed
for
this
purpose
by
Chalice.

The nominee
will
then
sell
those
shares
and
pay
the
proceeds
received,
after
deducting
any applicable
 brokerage
 and
 other
 expenses,
 to
 the
 Foreign
 Scheme
 Participant.
 
 Foreign Scheme Participants should refer to Section 11 of this Scheme Booklet for further information.

Question
12: Will
the
Scheme
be
a
taxable
transaction
for
Australian
tax
purposes?

Details
 of
 the
 tax
 consequences
 of
 the
 Scheme
 for
 SBS
 shareholders
 are
 set
 out
 in Appendix
3
to
this
Scheme
Booklet.

As
the
comments
in
Appendix
3
are
necessarily
general
in
nature
and
do
not
consider
the specific circumstances of each shareholder, you should seek independent advice regarding
the
tax
implications
applicable
to
your
circumstances.

Question
13: How
can
I
trade
my
Chalice
Shares?

The
Chalice
Shares
to
be
issued
under
the
Scheme
will
be
quoted
on
the
ASX
and
will
be tradeable
in
the
same
way
that
your
SBS
Shares
are
currently
tradeable.

Question
14: When
and
where
will
the
Scheme
Meeting
be
held?

The
Scheme
Meeting
will
be
held
on
4
August
2009
at
the
Holiday
Inn
City
Centre,
788 Hay
Street
Perth,
Western
Australia
6000
commencing
at
10.00am.

15

Question
15: Am
I
entitled
to
vote?

If
you
are
registered
as
an
SBS
shareholder
as
at
7:00pm
(WST)
on
2
August
2009,
you will
be
entitled
to
vote
at
the
Scheme
Meeting.

You
may
vote
at
the
meeting
in
person,
or by
completing
and
lodging
the
Proxy
Form
accompanying
this
Scheme
Booklet.

Question
16: What
voting
majority
is
required
to
approve
the
Scheme?

For
 the
 Scheme
 of
 Arrangement
 to
 be
 approved,
 votes
 in
 favour
 of
 the
 resolution
 to approve
the
Scheme
must
be
cast
by:

• a
 majority
 in
 number
 of
 SBS
 shareholders
 present
 and
 voting
 at
 the
 Scheme Meeting (in person, by proxy, by attorney or, in the case of corporate shareholders,
by
corporate
representative);
and

• SBS
shareholders
together
holding
at
least
75%
of
the
total
number
of
votes
cast on
the
resolution.

Question
17: Do
I
have
to
vote?

You
do
not
have
to
vote.

However,
SBS's
directors
believe
that
the
proposed
merger
with Chalice
is
important
to
all
SBS
shareholders
and
recommend
that
you
vote
in
favour
of
the Scheme.

Question
18: Do
I
have
to
accept
Chalice
Shares
if
the
Scheme
is
approved?

If
 SBS
 shareholders
 and
 the
 Court
 approve
 the
 Scheme,
 all
 SBS
 shareholders
 will
 be obliged
to
accept
Chalice
Shares
in
exchange
for
their
SBS
Shares.

SBS
will
then
become
a wholly‐owned
subsidiary
of
Chalice
and
cease
to
be
listed
on
the
ASX.

SBS
shareholders
not
wishing
to
accept
Chalice
Shares
may
elect
to
sell
their
SBS
Shares on
the
ASX
prior
to
the
Scheme
coming
into
effect.

Question
19: What
happens
if
I
do
not
vote,
or
if
I
vote
against
the
Scheme?

If
you
are
a
holder
of
Scheme
Shares
and
the
Scheme
is
approved,
your
SBS
Shares
will
be transferred
to
Chalice
and
(unless
you
are
a
Foreign
Scheme
Participant)
you
will
receive Chalice
Shares
in
exchange
for
your
SBS
Shares.

This
will
be
so
even
if
you
did
not
vote
or voted
 against
 the
 Scheme.
 
 If
 the
 Scheme
 is
 not
 approved,
 you
 will
 remain
 an
 SBS shareholder.

Question
20: When
will
the
result
of
the
Scheme
Meeting
be
known?

The result of the Scheme Meeting will be announced to the ASX shortly after the conclusion of the meeting. The result will also be published on SBS's website (www.subsahara.com.au)
as
soon
as
possible
after
the
meeting.

The
Scheme
is
also
subject
to
the
approval
of
the
Court.

The
Court
hearing
to
approve
the Scheme
is
expected
to
be
held
on
12
August
2009.

16

Question
21: What
happens
if
the
requisite
majorities
do
not
vote
in
favour
of
the Scheme?

If
 the
 requisite
 majorities
 (see
 Question
 16)
 do
 not
 vote
 in
 favour
 of
 the
 Scheme,
 the Scheme
will
not
proceed,
you
will
remain
an
SBS
shareholder,
SBS
will
remain
listed
on the
ASX,
and
the
benefits
of
the
merger
with
Chalice
outlined
above
will
not
be
realised.

Question
22: What
will
happen
to
SBS
if
the
Scheme
proceeds?

The
acquisition
by
Chalice
of
100%
of
SBS
will
not
impact
SBS's
projects.

However,
the Company's
future
strategic
direction
will
thereafter
be
determined
by
Chalice.

Question
23: Who
can
answer
any
other
questions
I
may
have
about
the
Scheme?

If
you
have
any
other
questions
about
the
Scheme,
or
if
you
would
like
additional
copies
of this
Scheme
Booklet
or
the
Proxy
Form,
please
call
1800
649
980
(within
Australia)

or +61
2
8256
3386
(outside
Australia),
or
consult
your
legal,
financial
or
other
professional adviser.

17

1. INTERPRETATION

• 1.1 In
this
Scheme
Booklet
(including
the
Appendices,
other
than
Appendices
7,
8
and 9),
except
where
the
context
otherwise
requires:

"ASIC" means
the
Australian
Securities
and
Investments
Commission;

"ASX" means
ASX
Limited
(ACN
008
624
691);

"Board" means
the
board
of
directors
of
SBS;

"Business
Day" has
the
meaning
given
to
that
expression
in
the
Listing
Rules;

"Chalice" means
Chalice
Gold
Mines
Limited
(ACN
116
648
956);

"Chalice
Options" means
options
to
subscribe
for
Chalice
Shares;

"Chalice
Shares" means
fully
paid
ordinary
shares
in
Chalice
with
the
rights
and liabilities
set
out
in
Appendix
8;

"Constitution" means
the
constitution
of
SBS,
as
amended
or
replaced
from
time to
time;

"Corporations
Act" means
the
Corporations
Act
2001
(Cth.);

"Court" means
the
Supreme
Court
of
Western
Australia;

"Cut­off
Date" means
5pm
WST
on
the
date
which
is
2
Business
Days
after
the date
of
the
Second
Court
Hearing;

"Effective
Date" means
the
date
on
which
the
Court
order
approving
the
Scheme becomes
effective
in
accordance
with
section
411(10)
of
the
Corporations
Act;

"Excluded
Shareholder" means
Chalice
or
any
subsidiary
of
Chalice;

"Foreign
Scheme
Participant" means
a
holder
of
Scheme
Shares
whose
address as
shown
in
the
Register
is
a
place
outside
the
Commonwealth
of
Australia,
New Zealand,
 the
 Philippines,
 and
 Hong
 Kong
 unless
 Chalice
 (acting
 reasonably)
 is satisfied
 before
 the
 Implementation
 Date
 that
 the
 laws
 of
 the
 place
 of
 that address
permit
the
issue
of
Chalice
Shares
to
that
holder,
either
unconditionally or
after
compliance
with
conditions
which
Chalice
(acting
reasonably)
regards
as acceptable
and
not
unduly
onerous;

"Implementation
Date" means
the
third
Business
Day
after
the
Record
Date;

"Independent
 Expert" means
 BDO
 Kendalls
 Corporate
 Finance
 (WA)
 Pty
 Ltd (ABN
27
124
031
045);

"Independent
 Expert's
 Report" means
 the
 report
 by
 the
 Independent
 Expert set
out
in
Appendix
9;

"Listing
Rules" means
Official
Listing
Rules
of
the
ASX,
as
amended
from
time
to time;

"Lodgement
Date" means
the
date
on
which
a
draft
of
this
Scheme
Booklet
was lodged
with
ASIC;

"Merged
Group" means
Chalice
and
its
controlled
entities
(including
SBS)
after implementation
of
the
Scheme;

"Merger
 Implementation
 Agreement" means
 the
 agreement
 dated
 29
 April 2009
between
SBS
and
Chalice,
a
summary
of
which
is
set
out
in
Appendix
1;

18

"New Chalice Shares" means the Chalice Shares to be issued to Scheme Participants
pursuant
to
the
Scheme;

"Nominee" means
a
nominee
for
the
Foreign
Scheme
Participants
appointed
by Chalice;

"Record
Date" means
7:00pm
WST
on
the
date
which
is
5
Business
Days
after the
Effective
Date;

"Register" means
the
SBS
register
of
members;

"Regulations" means
the
Corporations
Regulations
2001;

"Relevant
 Time" means
 7:00pm
 WST
 on
 the
 date
 which
 is
 2
 Business
 Days before
the
despatch
of
the
notice
convening
the
Scheme
Meeting;

"SBS" or "Company" means
Sub‐Sahara
Resources
NL
(ACN
061
104
158);

"SBS
Group" or "Group" means
SBS
and
its
controlled
entities
(which,
for
the avoidance
of
doubt,
excludes
Chalice);

"SBS Listed Options" means
options
to
subscribe
for
SBS
Shares
exercisable
at 15
cents
per
share
and
expiring
on
30
June
2009
and
listed
for
quotation
on
the ASX;

"SBS
Options" means
SBS
Listed
Options
and
SBS
Unlisted
Options;

"SBS
Partly
Paid
Shares" means
partly
paid
ordinary
shares
in
SBS,
details
of which
are
set
out
in
Appendix
4;

"SBS
Shares" means
fully
paid
ordinary
shares
in
SBS;

"SBS
 Unlisted
 Options" means
 options
 to
 subscribe
 for
 SBS
 Shares,
 details
 of which
are
set
out
in
Appendix
4;

"SBS Unlisted Securities" means SBS Partly Paid Shares and SBS Unlisted Options;

"Scheme
Booklet" means
this
document,
including
its
appendices;

"Scheme" or "Scheme
 of
 Arrangement" means
 the
 scheme
 of
 arrangement under
section
411
of
the
Corporations
Act
described
in
the
document
set
out
in Appendix
2
(or,
if
the
context
so
requires,
that
document
itself);

"Scheme Consideration" means the allotment and issue to each holder of Scheme
Shares
of
one
Chalice
Share
for
every
10.73
Scheme
Shares
held
as
at
the Record
Date
(fractional
entitlements
being
rounded
down);

"Scheme
 Meeting" means
 the
 meeting
 of
 Scheme
 Participants
 ordered
 by
 the Court
 under
 section
 411(1)
 of
 the
 Corporations
 Act
 to
 be
 convened
 for
 the purposes
of
the
Scheme;

"Scheme
Participants" means
the
holders
of
Scheme
Shares;

"Scheme
 Shares" means
 the
 SBS
 Shares
 on
 issue
 as
 at
 5.00pm
 WST
 on
 the Effective
Date
(other
than
those
held
by
an
Excluded
Shareholder);

"Second
Court
Hearing" means
the
first
hearing
of
the
application
made
to
the Court
for
an
order
pursuant
to
section
411(4)
of
the
Corporations
Act
approving the
Scheme;

"WST" means
Perth,
Western
Australia
time;
and

19

"Zara
Project" means
the
Zara
Gold
Project
in
Eritrea,
in
which
SBS
has
a
69% interest
as
at
the
date
of
this
Scheme
Booklet.

• 1.2 In
this
Scheme
Booklet
(including
the
Appendices,
other
than
Appendices
7,
8
and 9),
except
where
the
context
otherwise
requires:

• (a) a reference to any legislation or legislative provision includes any statutory modification or re‐enactment of, or legislative provision substituted for, and any statutory instrument issued under, that legislation
or
legislative
provision;

• (b) a
 word
 denoting
 the
 singular
 number
 includes
 the
 plural
 number
 and vice
versa;

• (c) a
 word
 denoting
 an
 individual
 or
 person
 includes
 a
 corporation,
 firm, authority,
government
or
governmental
authority
and
vice
versa;

• (d) a
word
denoting
a
gender
includes
all
genders;

• (e) a
reference
(other
than
in
the
appendices)
to
a
Section
is
to
a
section
of this
Scheme
Booklet;

• (f) a
reference
to
an
Appendix
is
to
an
appendix
to
this
Scheme
Booklet,
and appendices
to
this
Scheme
Booklet
form
part
of
this
Scheme
Booklet;

• (g) a
 reference
 to
 any
 agreement
 or
 document
 is
 to
 that
 agreement
 or document
 (and,
 where
 applicable,
 any
 of
 its
 provisions)
 as
 amended, novated,
supplemented
or
replaced
from
time
to
time;

• (h) a reference to any party to the Scheme, or any other document
 or arrangement,
includes
that
party's
executors,
administrators,
substitutes, successors
and
permitted
assigns;

• (i) a
reference
to
a
"subsidiary"
of
a
body
corporate
is
to
a
body
corporate which is a subsidiary of the first‐mentioned body corporate under section
46
of
the
Corporations
Act;

• (j) a
reference
to
"dollars"
or
"A$"
or
to
"cents"
or
"¢"
is
(unless
otherwise specified)
to
an
amount
in
Australian
currency;

• (k) a
 reference
 to
 the
 "holder"
 of
 an
 SBS
 Share
 or
 an
 SBS
 Option
 at
 a particular
 time
 includes
 a
 reference
 to
 a
 person
 who,
 as
 a
 result
 of
 a dealing
received
by
SBS
or
its
share
registry
on
or
before
that
time,
is entitled
to
be
entered
in
the
Register
as
the
holder
of
that
SBS
Share
or SBS
Option;

• (l) words
 and
 phrases
 defined
 elsewhere
 in
 this
 document
 shall
 have
 the meaning
there
ascribed
to
them;

• (m) words and phrases defined in the Corporations Act shall have the meaning
there
ascribed
to
them;

20

• (n) headings are for convenience of reference only and do not affect interpretation;
and

• (o) where
an
expression
is
defined,
another
part
of
speech
or
grammatical form
of
that
expression
has
a
corresponding
meaning.

2. INTRODUCTION

The
 directors
 of
 SBS
 have
 resolved
 to
 recommend
 to
 shareholders
 a
 proposal under
which
the
Company
will
merge
with
Chalice
Gold
Mines
Limited,
an
ASX‐ listed
company
with
mineral
exploration
projects
in
Western
Australia.

Subject
to
obtaining
all
of
the
necessary
approvals
from
shareholders,
ASIC
and the
 Court,
 it
 is
 intended
 to
 implement
 this
 proposal
 by
 way
 of
 a
 scheme
 of arrangement
under
section
411
of
the
Corporations
Act
under
which
all
existing SBS
 Shares
 will
 be
 transferred
 to
 Chalice
 in
 exchange
 for
 an
 issue
 of
 Chalice Shares.

Under
the
Scheme,
SBS
shareholders
will
receive
one
New
Chalice
Share
for
every 10.73
SBS
Shares
held
by
them.

Upon the Scheme being implemented, SBS will become a wholly‐owned subsidiary
of
Chalice
and
be
de‐listed
from
the
ASX,
and
Chalice
will
continue
to be
listed
on
the
ASX.

Holders
of
SBS
Options
who
exercise
those
options
prior
to
the
Cut‐off
Date
will be eligible to participate in the Scheme and receive New Chalice Shares in exchange
for
the
SBS
Shares
issued
to
them
on
the
exercise
of
their
options.

3. ANALYSIS
OF
PROPOSAL

3.1 Background
Information

SBS

SBS
was
incorporated
on
17
September
1993
under
the
name
Maiden
Gold
NL and
was
listed
on
the
ASX
on
30
March
1994.

It
changed
its
name
to
Sub‐Sahara Resources
NL
on
30
May
2001.

As well as the ASX, SBS securities are traded on over‐the‐counter markets conducted
by
the
Berlin,
Frankfurt,
Munich
and
Stuttgart
stock
exchanges.

On
 17
 February
 2009,
 SBS
 announced
 to
 the
 ASX
 that
 it
 had
 agreed
 to
 sell
 its exploration
interests
in
Tanzania
to
Western
Metals
Limited
(now
called
Indago Resources
Ltd),
and
that
sale
was
completed
on
3
March
2009.

Following
the
sale of
its
Tanzanian
interests,
the
principal
activities
of
the
SBS
Group
comprise
gold and
 mineral
 exploration
 in
 Eritrea,
 principally
 through
 its
 69%
 interest
 in
 the Zara
Project.

On
27
May
2009
Chalice
made
available
to
SBS
a
loan
facility
of
$450,000.
This facility
 is
 to
 be
 used
 by
 SBS
 to
 fund
 further
 development
 of
 the
 Zara
 Project pending
implementation
of
the
Scheme.

21

Funds
advanced
under
the
facility,
together
with
accrued
interest,
are
repayable if
the
Scheme
is
not
implemented
by
30
September
2009
(or
such
later
date
as Chalice
may
agree).
In
this
event,
the
loan
must
be
repaid
either
in
cash
or,
at SBS’s
election,
by
the
issue
of
SBS
Shares
at
an
issue
price
of
1.3
cents
per
share. The
facility
will
be
secured
by
a
fixed
and
floating
charge
over
all
of
SBS’s
assets and
undertaking.

Chalice

Chalice
was
incorporated
on
13
October
2005
and
was
listed
on
the
ASX
on
24 March
 2006.
 
 Its
 principal
 activities
 comprise
 mineral
 exploration
 in
 Western Australia.

Further
information
about
Chalice
and
the
Merged
Group
is
set
out
in
Appendices 7
and
8.

3.2 Advantages
of
the
Proposal

In
the
view
of
the
SBS
directors,
the
principal
benefit
of
merging
with
Chalice
will be the ability to utilise Chalice's substantial cash reserves (amounting to approximately
$10
million
as
at
the
date
of
this
Scheme
Booklet)
to
develop
the 0.94
million
oz
Zara
Gold
Project
in
Eritrea,
in
which
SBS
currently
has
a
69% interest.
 
 Should
 the
 merger
 be
 completed,
 the
 Merged
 Group
 will
 also
 hold
 a further
 11%
 of
 the
 Zara
 Project,
 taking
 its
 total
 interest
 in
 the
 project
 to
 80% (refer
to
Section
3.6).

In
addition,
the
merger
will
enable
SBS
shareholders
to
diversify
their
investment risk
 by
 giving
 them
 exposure
 to
 Chalice's
 own
 resource
 projects
 in
 Western Australia.

Further
information
about
those
projects
is
set
out
in
Appendix
7.

3.3 Disadvantages
of
the
Proposal

Under
the
merger,
the
exposure
of
SBS
shareholders
to
SBS's
assets
(principally, its
 69%
 interest
 in
 the
 Zara
 Project)
 will
 be
 diluted
 to
 approximately
 39%. Against this, however, they will gain a corresponding exposure to Chalice's mineral
exploration
projects
in
Western
Australia
and
have
the
ability
to
utilise Chalice's
cash
reserves
to
develop
the
Zara
Project.

The
costs
to
SBS
of
implementing
the
Scheme
of
Arrangement
(including
legal, accounting,
independent
expert
and
corporate
advisory
fees,
as
well
as
ASIC
and Court
filing
fees)
are
estimated
to
be
in
the
region
of
$565,000.

Approximately $200,000
 of
 these
 costs
 will
 be
 payable
 regardless
 of
 whether
 the
 Scheme
 is successfully implemented. In addition, under the Merger Implementation Agreement
a
break
fee
of
$100,000
is
payable
to
Chalice
in
certain
circumstances if
the
Scheme
does
not
proceed.

Further
information
about
this
fee
is
contained in
Appendix
1.

22

3.4 Terms
of
the
Merger

Under
the
merger
proposal
SBS
shareholders
will
exchange
their
SBS
Shares
for Chalice
Shares
and
will
initially
have,
collectively,
a
39%
interest
in
Chalice.

Upon
 implementation
 of
 the
 merger,
 Chalice
 is
 expected
 to
 have
 the
 following capital
structure
(refer
to
Appendix
8
for
further
details):

	ChaliceShares
Presentissuedcapital:	72,800,000
TobeissuedtoSBSshareholderspursuanttothe Scheme	46,703,766*
TobeissuedtoholdersofSBSUnlistedSecurities	1,613,727
Total:	121,116,619*

*These
figures
have
been
calculated
on
the
basis
that
there
will
be
no
fractional
entitlements
to Chalice
 Shares
 upon
 implementation
 of
 the
 Scheme
 and
 that
 no
 SBS
 or
 Chalice
 Options
 are exercised
between
the
Lodgement
Date
and
the
Cut‐Off
Date.

Accordingly,
the
actual
number
of Chalice
Shares
issued
pursuant
to
the
Scheme
may
differ.

3.5 Acquisition
of
SBS
Unlisted
Securities

Outside
the
terms
of
the
Scheme
of
Arrangement,
but
conditional
on
the
Scheme coming
 into
 effect,
 Chalice
 has
 agreed
 to
 acquire
 SBS
 Unlisted
 Securities
 from various
parties,
including
directors
of
SBS
and
parties
associated
with
them.

The terms
of
those
acquisitions
are
summarised
in
Appendix
4.

3.6 Acquisition
of
additional
interest
in
the
Zara
Project

Simultaneously
with,
and
conditional
on,
implementation
of
the
Scheme,
Chalice will
 acquire
 Yolanda
 International
 Limited
 ( "YIL" ),
 a
 company
 which
 holds
 an additional
 11%
 interest
 in
 the
 Zara
 Project,
 for
 a
 cash
 consideration
 of
 $1.2 million
plus
the
reimbursement
of
past
exploration
expenditure
of
$454,503.

The latter
payment
will
settle
a
debt
owed
by
SBS
which
would
have
been
due
for payment
upon
a
decision
to
mine
the
Zara
Project.

YIL
is
a
company
associated
with
Mr
H
D
Kennedy,
who
through
his
interest
in Rockfield
Investments
Limited
and
associated
companies
is
a
14.6%
shareholder in
SBS.

4. BACKGROUND
INFORMATION
ON
SBS

As
 a
 disclosing
 entity
 under
 the
 Corporations
 Act,
 SBS
 is
 subject
 to
 regular reporting
and
disclosure
obligations.

Copies
of
documents
lodged
by
SBS
with ASIC
may
be
obtained
from
or
inspected
at
any
ASIC
office.

Prior
to
the
Scheme
Meeting,
Scheme
Participants
have
the
right
to
obtain,
free
of charge,
copies
of
the
most
recent
annual
report
of
SBS
as
well
as
the
half‐yearly

23

report
and
continuous
disclosure
notices
that
have
been
lodged
since
that
annual report
was
lodged
with
ASIC.

To
obtain
a
copy
of
these
documents,
please
call
1800
649
980
(within
Australia) or
+61
2
8256
3386
(outside
Australia).

Alternatively,
copies
of
the
reports
can be
downloaded
from
SBS's
website
at
www.subsahara.com.au.

5. BASIS
OF
THE
SCHEME

Under
the
Scheme,
all
Scheme
Shares
will
be
transferred
to
Chalice.

In
return:

• (a) a
holder
of
Scheme
Shares
will
receive
one
Chalice
Share
for
every
10.73 Scheme
Shares
held
by
him
at
the
Record
Date;
and

• (b) all rights and obligations pertaining to the Scheme Shares will be transferred
to
Chalice.

The
 formula
 to
 be
 applied
 in
 determining
 the
 number
 of
 Chalice
 Shares
 to
 be issued
 to
 Scheme
 Participants
 was
 developed
 by
 reference
 to
 the
 respective values
 of
 Chalice's
 and
 SBS's
 underlying
 assets,
 as
 determined
 by
 arm's
 length negotiations
between
Chalice
and
SBS.

6.

PROCEDURAL
STEPS

• 6.1 For
the
Scheme
to
take
effect,
section
411(1)
of
the
Corporations
Act
requires
a meeting
of
the
holders
of
Scheme
Shares
to
be
held,
at
which
the
Scheme
must
be agreed
to
by
a
majority
in
number
of
the
holders
of
Scheme
Shares
representing in
aggregate
not
less
than
75%
in
nominal
value
of
all
the
Scheme
Shares
held
by those
holders
present
at
that
meeting
and
voting
either
in
person
or
by
proxy.

This
meeting
is
being
convened
by
SBS
in
accordance
with
an
order
made
by
the Court.

The
Scheme
Meeting
will
be
held
at
the
Holiday
Inn
City
Centre,
788
Hay
Street, Perth,
Western
Australia
6000
on
4
August
2009
at
10:00am.

If
the
holders
of Scheme Shares do not approve the Scheme by the requisite majorities, the Scheme
will
not
proceed.

• 6.2 SBS
will
ensure
that
SBS
Shares
to
which
an
optionholder
is
entitled
in
respect
of SBS
Options
exercised
on
or
prior
to
the
Cut‐off
Date
will
be
issued
on
or
prior
to the
Effective
Date
and,
as
a
result,
will
constitute
Scheme
Shares.

7.

RELEVANT
TIME

7.1 For
 the
 purpose
 of
 establishing
 the
 holders
 of
 the
 Scheme
 Shares
 entitled
 to receive
 notice
 of
 the
 Scheme
 Meeting,
 the
 Register
 was
 closed
 at
 the
 Relevant Time
and
was
re‐opened
on
the
Business
Day
following
the
day
of
dispatch
of
the notice
convening
the
Scheme
Meeting.

That
notice
is
set
out
in
Appendix
10.

• 7.2 Any
dealings
in
Scheme
Shares
not
recorded
in
the
Register
at
the
Relevant
Time were
entered
in
the
Register
after
the
Register
was
re‐opened.

24

8. IMPLEMENTATION
OF
THE
SCHEME

• 8.1 Implementation
of
the
Scheme
is
subject,
amongst
other
things,
to:

• (a) approval of the Scheme by the requisite majorities at the meeting described
in
Section
6.1;

• (b) making
 of
 an
 order
 by
 the
 Court
 approving
 the
 Scheme
 under
 section 411(4)(b)
of
the
Corporations
Act;
and

• (c) the
 Merger
 Implementation
 Agreement
 not
 having
 been
 terminated
 by SBS
or
Chalice.

• 8.2 Application
to
the
Court
for
the
order
referred
to
in
Section
8.1(b)
will
be
made
as soon
as
possible
after
the
Scheme
Meeting
has
been
held.

• 8.3 The
Scheme
will
become
binding
on
SBS
and
each
Scheme
Participant
upon
the Court
making
an
order
under
section
411(4)(b)
of
the
Corporations
Act
and
that order
becoming
effective
under
section
411(10).

• 8.4 On
the
Implementation
Date
(but
with
effect
from
the
Effective
Date),
the
Scheme Shares
will
be
transferred
to
Chalice.

9. CLOSING
OF
REGISTER

• 9.1 To
 enable
 the
 Scheme
 to
 be
 implemented,
 the
 Register
 will
 be
 closed
 at
 the Record Date. No dealing in Scheme Shares (whenever effected) will be recognised
if
received
by
SBS
or
its
share
registry
after
the
Record
Date.

• 9.2 On
the
Effective
Date,
official
quotation
of
Scheme
Shares
on
the
ASX
will
cease.

10. ASX
QUOTATION

Application
will
be
made
within
7
days
after
the
date
of
this
Scheme
Booklet
for quotation
by
the
ASX
of
the
New
Chalice
Shares.

It
is
a
condition
of
completion
of the
merger
that
the
New
Chalice
Shares
be
listed
for
quotation
on
the
ASX.

Upon the
Scheme
coming
into
effect,
application
will
be
made
for
SBS
to
be
removed from
the
official
list
of
the
ASX.

SBS's
securities
will
at
the
same
time
cease
to
be traded
on
the
Berlin,
Frankfurt,
Munich
and
Stuttgart
stock
exchanges.

11. FOREIGN
SCHEME
PARTICIPANTS

Neither
 this
 Statement
 nor
 the
 Scheme
 of
 Arrangement
 constitutes
 an
 offer
 of securities
in
any
place
in
which,
or
to
any
person
to
whom,
the
making
of
such
an offer would not be lawful under the laws of any jurisdiction outside the Commonwealth
of
Australia,
New
Zealand,
the
Philippines
and
Hong
Kong.

Chalice
will
be
under
no
obligation
to
issue
Chalice
Shares
to
a
Foreign
Scheme Participant.

Chalice
will
instead
issue
the
Chalice
Shares
in
respect
of
the
Scheme Shares
held
by
the
Foreign
Scheme
Participant
to
the
Nominee.

25

The
Nominee
will
sell
the
Chalice
Shares
as
soon
as
reasonably
practicable
and account
to
the
Foreign
Scheme
Participants
for
the
net
proceeds
of
sale
(on
an averaged
basis
so
that
all
Foreign
Scheme
Participants
receive
the
same
price
per Chalice
 Share,
 subject
 to
 rounding
 to
 the
 nearest
 cent),
 after
 deduction
 of
 any applicable
brokerage,
taxes
and
charges,
at
the
Foreign
Scheme
Participants'
risk, in
full
satisfaction
of
the
Foreign
Scheme
Participants'
rights
under
the
Scheme.

12. TAX
IMPLICATIONS

The
receipt
of
Chalice
Shares
under
the
Scheme
in
exchange
for
Scheme
Shares
is likely
 to
 have
 tax
 consequences
 for
 Scheme
 Participants.
 
 Scheme
 Participants may
 in
 certain
 circumstances
 be
 able
 to
 take
 advantage
 of
 the
 scrip‐for‐scrip rollover
relief
provided
for
in
the
tax
legislation
to
defer
any
tax
liability
arising from
 the
 Scheme.
 
 It
 should
 be
 emphasised
 that
 as
 tax
 consequences
 can
 vary according to a Scheme Participant's particular circumstances, each Scheme Participant should consult his own tax adviser as to the consequences of participating
in
the
Scheme.

Scheme
Participants
who
are
resident
or
domiciled
outside
Australia,
or
who
are citizens of countries other than Australia, are reminded of the possible implications
of
the
Scheme
under
the
tax
laws
of
their
place
of
residence,
domicile or
citizenship
and
are
advised
to
also
seek
independent
advice
in
this
respect.

13. ADMINISTRATOR

It
 is
 not
 proposed
 that
 any
 person
 be
 appointed
 to
 manage
 or
 administer
 the Scheme.

14. DIRECTORS'
RECOMMENDATIONS

After
considering
all
relevant
factors,
the
SBS
directors
recommend
that
Scheme Participants
 vote
 in
 favour
 of
 the
 Scheme
 to
 enable
 the
 benefits
 described
 in Section
3.2
to
be
realised.

15. CHALICE'S
VOTING
POWER
IN
SBS

As
 at
 the
 Lodgement
 Date,
 Chalice
 did
 not
 have
 a
 relevant
 interest
 in
 any
 SBS Shares,
SBS
Options
or
other
marketable
securities
of
SBS,
apart
from
38,590,000 SBS
Partly
Paid
Shares
and
3,800,000
SBS
Unlisted
Options.

These
securities
will be
acquired
by
Chalice
pursuant
to
the
agreements
summarised
in
Appendix
4.

16. MARKETABLE
SECURITIES
OF
SBS
HELD
BY
OR
ON
BEHALF
OF
DIRECTORS OF
SBS

The
number,
description
and
amount
of
marketable
securities
of
SBS
held
by
or on
 behalf
 of
 each
 director
 of
 SBS
 as
 at
 the
 Lodgement
 Date
 are
 set
 out
 in Appendix
5.

26

17. MARKETABLE
SECURITIES
OF
CHALICE
HELD
BY
OR
ON
BEHALF
OF DIRECTORS
OF
SBS

No
marketable
securities
of
Chalice
are
held
by
or
on
behalf
of
any
director
of SBS.

18. DEALINGS
IN
MARKETABLE
SECURITIES
OF
SBS

Except
as
set
out
in
Appendix
6,
none
of
SBS,
Chalice
or
any
person
associated with
SBS
or
Chalice
has
acquired
or
disposed
of
any
marketable
securities
of
SBS in
the
four
months
immediately
preceding
the
Lodgement
Date.

19. DEALINGS
IN
MARKETABLE
SECURITIES
OF
CHALICE

Except
as
set
out
in
Appendix
6,
none
of
SBS,
Chalice
or
any
person
associated with
 SBS
 or
 Chalice
 has
 acquired
 or
 disposed
 of
 any
 marketable
 securities
 of Chalice
in
the
four
months
immediately
preceding
the
Lodgement
Date.

20. VOTING
INTENTIONS
OF
DIRECTORS
AND
OTHERS

Each
director
of
SBS
by
whom
or
on
whose
behalf
Scheme
Shares
are
held
intends to
vote
in
favour
of
the
Scheme.

Details
of
the
Scheme
Shares
held
by
or
on
behalf of
each
director
of
SBS
are
set
out
in
Appendix
5.

21. PAYMENTS
OR
OTHER
BENEFITS
TO
OFFICERS
OF
SBS

It
is
not
proposed
that
any
payment
or
other
benefit
will
be
made
or
given
to
any director,
secretary
or
executive
officer
of
SBS,
or
of
any
body
corporate
related
to SBS,
as
compensation
for
loss
of,
or
as
consideration
for
or
in
connection
with
his retirement
from,
office
in
SBS,
or
in
any
body
corporate
related
to
SBS,
other
than the
following:

• (a) Barry
Bolitho
will
receive
$32,700
in
connection
with
his
retirement
as chairman
of
SBS;

• (b) Peter
Munachen
will
receive
$30,000
in
connection
with
his
retirement as
an
executive
director
of
SBS;
and

• (c) Resource
 Services
 International
 (Australia)
 Pty
 Ltd
 ( RSIA )
 will
 receive $138,000
as
a
result
of
the
termination
of
the
service
contract
between RSIA,
of
which
Ernest
Myers
(secretary
of
SBS)
and
Peter
Munachen
are directors,
and
SBS.

22. INTERESTS
OF
DIRECTORS
AND
OTHERS

• 22.1 No
 director
 of
 SBS
 has
 any
 interest
 in
 the
 Scheme
 other
 than
 as
 a
 holder
 of Scheme
Shares,
and
the
effect
of
the
Scheme
on
those
interests
is
the
same
as
its effect
on
the
like
interests
of
other
persons.

However,
it
should
be
noted
that
in connection
with
implementation
of
the
Scheme:

• (a) it
 is
 proposed
 that
 Michael
 Griffiths,
 the
 present
 managing
 director
 of SBS,
be
appointed
as
an
executive
director
of
Chalice
(see
Section
28);

27

• (b) Barry Bolitho, Peter Munachen and Ernest Myers will receive the amounts
described
in
Section
21;
and

• (c) certain of the SBS directors, or parties associated with them, have entered
into
agreements
with
Chalice
to
sell
their
SBS
Unlisted
Securities. The
terms
of
these
agreements
are
summarised
in
Appendix
4.

• 22.2 Other than the agreements to sell their SBS Unlisted Securities to Chalice (referred
to
in
Section
22.1(c))
and
the
proposed
appointment
of
Mr
Griffiths
as
a director
of
Chalice
(referred
to
in
Section
28),
no
director
of
SBS
has
any
interest in
any
contract
entered
into,
or
proposed
to
be
entered
into,
by
Chalice.

• 22.3 Other
than
as
set
out
elsewhere
in
this
Scheme
Booklet,
no:

• (a) director
or
proposed
director
of
Chalice;

• (b) person
 named
 in
 this
 Scheme
 Booklet
 as
 performing
 a
 function
 in
 a professional, advisory or other capacity in connection with the preparation
or
distribution
of
this
Scheme
Booklet;

• (c) promoter
of
Chalice;
or

• (d) financial
 services
 licensee
 named
 in
 this
 Scheme
 Booklet
 as
 a
 financial services
licensee
involved
in
the
Scheme,

holds,
or
has
held
within
two
years
before
the
date
of
this
Scheme
Booklet,
any interest
 in
 the
 formation
 or
 promotion
 of
 Chalice,
 in
 any
 property
 acquired
 or proposed
to
be
acquired
by
Chalice
in
connection
with
its
formation
or
promotion or
the
offer
of
Chalice
Shares
under
the
Scheme,
or
in
that
offer.

• 22.4 Other
than
as
set
out
in
Section
22.5,
no
amount
has
been
paid
or
agreed
to
be paid
(in
cash,
securities
or
otherwise),
and
no
benefit
has
been
given
or
agreed
to be
given:

• (a) to
a
director
or
proposed
director
of
Chalice
to
induce
him
to
become,
or to
qualify
him
as,
a
director
of
Chalice;
or

• (b) for
services
provided
in
connection
with
the
formation
or
promotion
of Chalice
or
the
offer
of
Chalice
Shares
under
the
Scheme
by
any
director
or proposed
director
of
Chalice,
any
person
named
in
this
Scheme
Booklet as
performing
a
function
in
a
professional,
advisory
or
other
capacity
in connection
with
the
preparation
or
distribution
of
this
Scheme
Booklet, any
promoter
of
Chalice,
or
any
financial
services
licensee
named
in
this Scheme
Booklet
as
a
financial
services
licensee
involved
in
the
issue
of Chalice
Shares
under
the
Scheme.

• 22.5 Minter Ellison will receive a fee of approximately $150,000 (plus GST and disbursements) for legal advice in relation to this Scheme Booklet and the Scheme.

BDO
Kendalls
Corporate
Finance
(WA)
Pty
Ltd
will
receive
a
fee
of
approximately $25,000
for
preparation
of
the
Independent
Expert's
Report.

In
the
period
of
two

28

years
ending
on
the
date
of
this
Scheme
Booklet,
Chalice
has
made
a
payment
of $30,300
to
BDO
Kendalls
Corporate
Finance
(WA)
Pty
Ltd
for
the
preparation
of an
Independent
Expert's
Report
for
an
unrelated
transaction.

Minter
Ellison
has not
received
any
fees
from
Chalice
during
that
period.

23. OTHER
AGREEMENTS
OR
ARRANGEMENTS
WITH
DIRECTORS

Other
than
the
proposed
appointment
of
Mr
Griffiths
as
an
executive
director
of Chalice
(referred
to
in
Section
28)
and
the
agreements
referred
to
in
Sections
21 and
22.1(c)
,
there
are
no
agreements
or
arrangements
made
between
a
director of
SBS
and
another
person
in
connection
with,
or
conditional
on,
the
outcome
of the
Scheme.

24. MATERIAL
CHANGES
IN
THE
FINANCIAL
POSITION
OF
SBS

Within
the
knowledge
of
the
directors
of
SBS,
the
financial
position
of
SBS
has
not changed
 materially
 since
 30
 June
 2008
 (this
 being
 the
 date
 of
 the
 last
 balance sheet
laid
before
SBS
in
general
meeting)
other
than
as
set
out
elsewhere
in
this Scheme
Booklet
or
in
the
Independent
Expert's
Report.

25. OTHER
MATERIAL
INFORMATION

There
is
no
information
material
to
the
making
of
a
decision
in
relation
to
the Scheme,
 or
 a
 decision
 by
 a
 Scheme
 Participant
 whether
 or
 not
 to
 agree
 to
 the Scheme,
being
information
that
is
within
the
knowledge
of
any
director
of
SBS
or of
 a
 related
 body
 corporate,
 that
 has
 not
 previously
 been
 disclosed
 to
 Scheme Participants
other
than
as
set
out
elsewhere
in
this
Scheme
Booklet
(including
its Appendices).

26. INDEPENDENT
EXPERT'S
REPORT

• 26.1 In
 accordance
 with
 clause
 3
 of
 Part
 3
 of
 Schedule
 8
 to
 the
 Regulations,
 the directors
 of
 SBS
 commissioned
 the
 Independent
 Expert
 to
 report
 to
 Scheme Participants
on
the
Scheme.

In
the
Independent
Expert's
Report
(a
copy
of
which is set out in Appendix 9), BDO Kendalls Corporate Finance (WA) Pty Ltd concludes
that
the
Scheme
is
in
the
best
interests
of
Scheme
Participants.

Scheme
Participants
should
read
the
Independent
Expert's
Report
in
its
entirety, including
the
assumptions
on
which
the
report's
conclusions
are
based.

• 26.2 BDO Kendalls Corporate Finance (WA) Pty Ltd has given, and before the lodgement
of
this
Statement
with
ASIC
has
not
withdrawn,
its
consent
to
the
issue of
 this
 Scheme
 Booklet
 with
 the
 Independent
 Expert's
 Report
 included
 in
 the form
and
context
in
which
it
is
included.

27. INFORMATION
IN
RELATION
TO
CHALICE
SHARES

A
summary
of
the
rights
and
liabilities
attaching
to
Chalice
Shares
is
set
out
in Appendix
8.

Chalice
 Shares
 are
 listed
 for
 quotation
 on
 the
 ASX.
 
 The
 highest
 and
 lowest recorded
 sale
 prices
 of
 Chalice
 Shares
 on
 the
 ASX
 during
 the
 three
 months

29

immediately
preceding
the
Lodgement
Date
were
$0.10
(on
27
March
2009)
and $0.26
(on
28
May
2009)
respectively.

The
 Scheme
 was
 the
 subject
 of
 a
 public
 announcement
 on
 3
 April
 2009.
 
 The latest
recorded
sale
price
of
Chalice
Shares
on
the
ASX
before
that
announcement was
$0.12.

The
latest
recorded
sale
price
of
Chalice
Shares
on
the
ASX
before
the
Lodgement Date
was
$0.26.

Application
will
be
made
to
the
ASX
within
7
days
after
the
date
of
this
Scheme Booklet
for
official
quotation
of
the
New
Chalice
Shares.

Quotation
of
the
New Chalice
Shares
is
not
guaranteed
or
automatic
but
will
depend
upon
compliance with
the
ASX's
requirements.

However,
SBS
has
no
information
to
suggest
that these
requirements
cannot
or
will
not
be
complied
with.

28. INTENTIONS
OF
THE
SBS
DIRECTORS

Following implementation of the Scheme, it is proposed that the business currently
carried
on
by
SBS
(as
described
in
Section
3.1)
will
continue,
but
as
part of
the
Merged
Group.

In
doing
so,
it
is
the
intention
of
SBS's
directors
that:

• (a) the
business
of
SBS
will
continue
in
the
same
manner
as
it
is
presently carried
on
but
reflecting
Chalice's
financial
capability
to
expedite
the
Zara Project;

• (b) there will be no major changes to that business (including the redeployment
of
fixed
assets);
and

• (c) except
for
possible
redundancies
resulting
from
a
scaling‐down
of
SBS's corporate
office
in
Australia,
the
employment
of
SBS's
present
employees will
continue.

Chalice
has
advised
SBS's
directors
that
Chalice
has
the
same
intentions
as
SBS's directors
with
respect
to
the
matters
referred
to
above.

Upon
 implementation
 of
 the
 Scheme,
 Michael
 Griffiths,
 the
 present
 managing director
of
SBS,
will
be
appointed
as
an
executive
director
of
Chalice.

29. ADDITIONAL
CONSENTS

Minter
Ellison
has
given,
and
before
the
signing
of
this
Scheme
Booklet
has
not withdrawn,
its
consent
to
be
named
as
legal
adviser
to
SBS
in
this
Scheme
Booklet in
 the
 form
 and
 context
 in
 which
 it
 is
 so
 named.
 
 Minter
 Ellison
 does
 not otherwise
 authorise
 or
 cause
 the
 issue
 of
 this
 Scheme
 Booklet
 and
 takes
 no responsibility
for
its
contents.

Middletons
 has
 given,
 and
 before
 the
 signing
 of
 this
 Scheme
 Booklet
 has
 not withdrawn,
 its
 consent
 to
 be
 named
 as
 legal
 adviser
 to
 Chalice
 in
 this
 Scheme Booklet
in
the
form
and
context
in
which
it
is
so
named.

Middletons
does
not otherwise
 authorise
 or
 cause
 the
 issue
 of
 this
 Scheme
 Booklet
 and
 takes
 no responsibility
for
its
contents.

30

30. ACTION
TO
BE
TAKEN
BY
SCHEME
PARTICIPANTS

Appendix
 10
 contains
 the
 notice
 convening
 the
 Scheme
 Meeting
 and
 a
 Proxy Form
for
the
Scheme
Meeting.

The
Proxy
Form
should
be
completed,
signed
and returned
 in
 accordance
 with
 instructions
 set
 out
 on
 the
 reverse
 of
 the
 Proxy Form.
 
 Lodging
 a
 Proxy
 Form
 will
 not
 preclude
 attendance
 or
 voting
 at
 the Scheme
Meeting.

BY
ORDER
OF
THE
BOARD

==> picture [105 x 37] intentionally omitted <==

ERNEST
MYERS Company
Secretary 18
June
2009

31

APPENDIX
1

SUMMARY
OF
MERGER
IMPLEMENTATION
AGREEMENT

Under
the
Merger
Implementation
Agreement
(MIA),
SBS
agrees
to
propose
the
Scheme
of Arrangement
to
its
members
and
Chalice
agrees
to
provide
reasonable
assistance
to
SBS for
that
purpose.

Specifically,
Chalice
agrees
to
issue
the
New
Chalice
Shares
comprising the
Scheme
Consideration
to
Scheme
Participants
in
return
for
the
transfer
of
their
SBS Shares
to
Chalice,
in
accordance
with
the
terms
of
the
Scheme.

SBS
for
its
part
agrees
to take
 all
 necessary
 steps
 to
 implement
 the
 Scheme,
 including
 convening
 the
 Scheme Meeting and obtaining all Court, regulatory and other approvals necessary for that purpose.

The
MIA
also
provides
for
SBS
and
Chalice
to
take
responsibility
for
the
information
about them
respectively
set
out
in
this
Scheme
Booklet.

The
parties'
obligations
under
the
MIA
are
subject
to
a
number
of
conditions
precedent, including:

• (a) the
obtaining
of
all
necessary
Court,
regulatory,
shareholder
and
other
approvals;

• (b) no Court or "Governmental Agency" (as defined) issuing any material legal restraint
or
prohibition
preventing
the
Scheme;

• (c) the
acquisition
by
Chalice
of,
or
a
call
being
made
by
SBS
for
the
unpaid
capital
on, all
outstanding
SBS
Partly
Paid
Shares;

• (d) the
acquisition
by
Chalice,
or
cancellation
by
SBS,
of
all
SBS
Unlisted
Options;

• (e) the
exercise
or
lapse
of
all
SBS
Listed
Options;

• (f) the
execution
of
the
"Zara
Project
Confirmation
Deed"
(as
defined)
before
8.00am on
 the
 date
 of
 the
 Second
 Court
 Hearing
 in
 terms
 acceptable
 to
 Chalice
 in
 its absolute
discretion;

• (g) SBS
receiving
the
"GED
assurance"
(as
defined)
in
terms
acceptable
to
Chalice
in its
absolute
discretion
before
8.00am
on
the
date
of
the
Second
Court
Hearing;

• (h) SBS
not
terminating
the
employment
of
certain
employees
or
consultants
(other than
as
agreed);

• (i) the
representations
and
warranties
of
SBS
in
the
MIA
being
materially
true
and correct
as
of
the
date
of
the
MIA
and
as
at
8:00am
on
the
date
of
the
Second
Court Hearing;

• (j) no
"SBS
Prescribed
Occurrence"
(as
defined)
occurring
before
8.00am
on
the
date of
the
Second
Court
Hearing;

• (k) the
execution
of
the
"AWR
Acquisition
Agreement"
(as
defined)
before
8.00am
on the
date
of
the
Second
Court
Hearing;

32

• (l) the
exploration
licences
for
the
Zara
Project
being
renewed
on
terms
satisfactory to
Chalice;

• (m) the
Chalice
Shares
to
be
issued
to
Scheme
Participants
being
approved
for
official quotation
on
ASX;

• (n) the
representations
and
warranties
of
Chalice
in
the
MIA
being
materially
true and
correct
as
of
the
date
of
the
MIA
and
as
at
8:00am
on
the
date
of
the
Second Court
Hearing;
and

• (o) no
"Chalice
Prescribed
Occurrence"
(as
defined)
occurring
before
8.00am
on
the date
of
the
Second
Court
Hearing.

The
conditions
in
paragraphs
(a)
and
(b)
are
for
the
benefit
of,
and
may
only
be
waived by,
both
Chalice
and
SBS.

The
conditions
in
paragraphs
(c)‐(l)
(inclusive)
are
for
the
sole benefit
 of,
 and
 may
 only
 be
 waived
 by,
 Chalice.
 
 The
 conditions
 in
 paragraphs
 (m)‐(o) (inclusive)
are
for
the
sole
benefit
of,
and
may
only
be
waived
by,
SBS.

Subject
to
certain
exceptions,
the
MIA
requires
the
parties
to
carry
on
their
respective businesses
in
the
ordinary
course
pending
implementation
of
the
Scheme.

Upon
 implementation
 of
 the
 Scheme,
 Chalice
 agrees
 to
 appoint
 a
 nominee
 of
 SBS
 to Chalice's
board
of
directors
(further
information
about
this
is
contained
in
Section
28).

Under
the
MIA,
each
party
makes
various
representations
and
gives
various
warranties
in favour
of
the
other
with
respect
to
the
first‐mentioned
party's
affairs
and
the
accuracy
of the
information
about
itself
contained
in
this
Scheme
Booklet,
and
agrees
to
indemnify
the other
party
against
any
loss
sustained
as
a
result
of
any
breach
of
those
representations and
warranties.

The
 MIA
 may
 be
 terminated
 by
 either
 party
 in
 the
 event
 of
 a
 material
 breach
 of
 the agreement
by
the
other
party
or
an
unremedied
breach
of
representation
or
warranty.

In addition,
either
party
can
terminate
the
MIA
if,
before
the
Scheme
is
implemented,
the other
party's
cash
and
working
capital
position
diminishes
by
more
than
$300,000
from its
position
as
at
31
March
2009.

Under
the
MIA,
SBS
agrees
to
grant
Chalice
exclusivity
for
a
period
of
six
months
from
the date
of
the
MIA
in
negotiating
a
merger
of
the
two
companies
and
agrees
not
to
engage
in any
discussions
or
negotiations
with
a
third
party
in
respect
of
a
"Competing
Proposal" (as
defined).

This
obligation
is
subject
to
SBS's
directors
not
receiving
legal
advice
that failure
to
respond
to
a
Competing
Proposal
would
be
likely
to
constitute
a
breach
of
their fiduciary
or
statutory
obligations.

If
the
Scheme
is
not
implemented
by
reason
of
a
Competing
Proposal
being
accepted
by either
party,
then
that
party
must
pay
the
other
party
a
break
fee
of
$100,000
by
way
of compensation
for
costs
incurred
in
attempting
to
implement
the
Scheme.

The
 parties
 further
 agree
 not
 to
 make
 any
 public
 announcements
 with
 respect
 to
 the Scheme
 other
 than
 in
 a
 form
 approved
 by
 both
 parties,
 and
 each
 party
 agrees
 to
 use reasonable
endeavours
to
provide
that
approval
as
soon
as
practicable.

33

APPENDIX
2

SCHEME
OF
ARRANGEMENT

Pursuant
to
Section
411
of
the
Corporations
Act
between
Sub­Sahara
Resources
NL
(ACN
061
104
158) and
its
shareholders

1. INTERPRETATION

In
this
Scheme,
except
where
the
context
otherwise
requires:

• (a) " Australian
Trading
Bank "
means
a
trading
bank
as
defined
in
section 5(1)
of
the Banking
Act
1959 (Cth)
having
an
office
and
carrying
on
the business
of
banking
in
Western
Australia;

• (b) " Registered
 Address "
 means
 in
 relation
 to
 a
 Scheme
 Participant,
 the address
shown
in
the
Register;

• (c) " SBS
Registry "
means
Computershare
Investor
Services
Pty
Ltd;

• (d) " Scheme
 Booklet "
 means
 the
 explanatory
 statement
 relating
 to
 this Scheme
 to
 be
 sent
 to
 holders
 of
 Scheme
 Shares
 in
 accordance
 with section
412(1)(a)
of
the
Corporations
Act;

• (e) terms
which
are
defined
in
the
Scheme
Booklet
have
the
same
meanings where
used
in
this
Scheme;
and

• (f) a
reference
to
a
paragraph
is
to
a
paragraph
of
this
Scheme.

2. THE
SCHEME

• 2.1 Subject
to:

• (a) all
the
conditions
in
clause
3.1
of
the
Merger
Implementation
Agreement other
than
the
conditions
in
clause
3.1(d)
(being
final
Court
approval
of the
 Scheme)
 and
 clause
 3.1(n)
 (being
 quotation
 of
 the
 New
 Chalice Shares)
having
been
satisfied
or
waived
in
accordance
with
the
terms
of the
Merger
Implementation
Agreement;

• (b) approval
of
the
Scheme
by
the
holders
of
the
Scheme
Shares
at
a
meeting of
those
holders
convened
by
the
Court
pursuant
to
section
411(1)
of
the Corporations
Act;

• (c) approval
of
the
Scheme
by
the
Court
pursuant
to
section
411(4)(b)
of
the Corporations
Act;

• (d) lodgement
with
ASIC
of
an
office
copy
of
the
order
of
the
Court
approving the
Scheme;
and

• (e) the
 Merger
 Implementation
 Agreement
 not
 having
 been
 terminated
 by SBS
or
Chalice,

the
 Scheme
 Shares,
 and
 all
 rights
 and
 entitlements
 attaching
 to
 the
 Scheme Shares,
 will
 be
 transferred
 to
 Chalice
 with
 effect
 from
 the
 Effective
 Date
 and without
the
need
for
any
further
act
by
the
holders
of
the
Scheme
Shares.

34

• 2.2 SBS
and
Chalice
will
provide
to
the
Court
at
the
Second
Court
Hearing
a
certificate stating
whether
or
not
the
conditions
referred
to
in
subparagraphs
2.1(a),
2.1(b) and
2.1(e)
have
been
satisfied
or
waived.

• 2.3 This
Scheme
will
lapse
and
be
of
no
further
force
or
effect
if
the
Effective
Date
has not
occurred
on
or
before
31
August
2009
(or
such
later
date
as
SBS
and
Chalice may
agree).

• 2.4 In
consideration
of
the
transfer
of
the
Scheme
Shares
to
Chalice,
and
subject
to the
other
terms
and
conditions
of
this
Scheme,
a
holder
of
Scheme
Shares
(other than
 a
 Foreign
 Scheme
 Participant)
 will
 receive
 the
 Scheme
 Consideration
 in respect
of
the
Scheme
Shares
held
by
him
as
at
the
Record
Date.

• 2.5 Notwithstanding
 any
 rule
 of
 law
 or
 equity
 to
 the
 contrary,
 holders
 of
 Scheme Shares
 will
 be
 entitled
 to
 exercise
 all
 voting
 and
 other
 rights
 attached
 to
 the Scheme
Shares
pending
their
transfer
pursuant
to
paragraph
2.1,
subject
to
the restrictions
on
dealing
in
Scheme
Shares
set
out
in
paragraph
3.

• 2.6 A
holder
of
Scheme
Shares
will
be
deemed
to
have
agreed
to
become
a
member
of Chalice
and
to
have
accepted
the
Chalice
Shares
issued
to
him
under
this
Scheme subject
to,
and
to
be
bound
by,
Chalice's
constitution.

• 2.7 On
the
Implementation
Date
(but
with
effect
from
the
Effective
Date)
SBS
must:

• (a) procure
the
delivery
of
a
transfer
in
respect
of
all
the
Scheme
Shares
to ASX Settlement and Transfer Corporation Pty Limited by a broker nominated
 in
 writing
 by
 Chalice
 to
 effect
 a
 valid
 transfer
 of
 all
 the Scheme
Shares
to
Chalice
pursuant
to
section
1074D
of
the
Corporations Act
 or,
 if
 such
 a
 procedure
 is
 not
 available
 for
 any
 reason,
 deliver
 to Chalice a duly completed and executed instrument of transfer transferring
all
of
the
Scheme
Shares
to
Chalice;
and

• (b) subject
to
Chalice
having
executed
that
instrument
of
transfer,
enter
the name
of
Chalice
in
the
Register
as
the
holder
of
the
Scheme
Shares.

3.

DEALINGS
IN
SCHEME
SHARES

• 3.1 No
 dealing
 in
 Scheme
 Shares,
 whenever
 effected,
 will
 be
 given
 effect
 to
 if
 it
 is received
after
the
Record
Date.

• 3.2 Any
purported
dealing
in
Scheme
Shares
after
the
Record
Date
will
be
void
and
of no
effect.

• 3.3 No
shares
or
options
to
subscribe
for
shares
will
be
allotted
or
issued
by
SBS
after the
Effective
Date.

4. NOTICE
TO
HOLDERS
OF
SCHEME
SHARES

• 4.1 If
the
Court
makes
an
order
approving
the
Scheme,
SBS
will
send
to
each
holder of
 Scheme
 Shares
 notice
 of
 that
 fact
 not
 later
 than
 9
 Business
 Days
 after
 the Record
Date.

35

• 4.2 The
notice
given
under
paragraph
4.1
will:

• (a) (except
in
the
case
of
a
Foreign
Scheme
Participant)
be
accompanied
by
a statement
 setting
 out
 the
 number
 of
 Chalice
 Shares
 to
 which
 they
 are entitled

pursuant
to
paragraph
2.4;
and

• (b) be
 sent
 in
 the
 manner
 provided
 in,
 and
 to
 the
 address
 determined
 in accordance
with,
paragraph
9.4.

• 4.3 In
 the
 case
 of
 joint
 holders
 of
 Scheme
 Shares,
 the
 notice
 to
 be
 given
 under paragraph
4.2
for
the
Chalice
Shares
will
be
sent
to
the
joint
holder
whose
name appears
first
in
the
Register.

• 4.4 If
the
Court
refuses
to
make
an
order
approving
the
Scheme,
then
SBS
will
send
to each
holder
of
Scheme
Shares
notice
of
that
fact
not
later
than
5
Business
Days after
the
date
of
such
refusal.

The
notice
will
be
sent
in
the
manner
provided
in, and
to
the
address
determined
in
accordance
with,
paragraph
9.4.

5.

ISSUE
OF
CHALICE
SHARES

• 5.1 Not
later
than
two
Business
Days
after
the
Implementation
Date,
SBS
will
give
to Chalice
a
notice
specifying
the
persons
to
whom
Chalice
Shares
are
to
be
issued pursuant
to
paragraph
2.4
and
the
numbers
of
Chalice
Shares
to
which
they
are respectively
entitled.

• 5.2 Chalice
 must,
 not
 later
 than
 two
 Business
 Days
 after
 receipt
 from
 SBS
 of
 the notice
referred
to
in
paragraph
5.1
but
with
effect
from
the
Effective
Date,
issue the
Chalice
Shares
in
accordance
with
that
notice.

The
issue
and
despatch
of
a holding
statement
for
those
Chalice
Shares
in
accordance
with
paragraph
9.4
will discharge
in
full
Chalice's
obligations
under
this
paragraph
5.2.

6.

FOREIGN
SCHEME
PARTICIPANTS

• 6.1 The
Chalice
Shares
that
would,
but
for
this
paragraph
6,
have
been
issued
to
a holder
of
Scheme
Shares
who
is
a
Foreign
Scheme
Participant
must
be
issued
by Chalice
to
the
Nominee.

• 6.2

• Chalice
must
procure
that
the
Nominee:

• (a) as
 soon
 as
 reasonably
 practicable
 sells
 those
 Chalice
 Shares
 for
 the benefit
of
the
Foreign
Scheme
Participants;

• (b) accounts
to
the
Foreign
Scheme
Participants
for
the
net
proceeds
of
sale (on
an
averaged
basis
so
that
all
Foreign
Scheme
Participants
receive
the same
price
per
Chalice
Share,
subject
to
rounding
to
the
nearest
whole cent),
and
any
income
referable
to
those
Chalice
Shares,
after
deduction of
any
applicable
brokerage,
taxes
and
charges,
in
full
satisfaction
of
the Foreign
Scheme
Participants'
rights
and
entitlements
under
the
Scheme; and

36

• (c) remits
the
net
proceeds
of
sale
to
the
Foreign
Scheme
Participants
in
the manner
provided
in,
and
to
the
address
determined
in
accordance
with, paragraph
9.4.

• 6.3 Foreign
Scheme
Participants
agree
that
the
amount
referred
to
in
paragraph
6.2 may
be
paid
by
the
Nominee
doing
any
of
the
following
at
the
Nominee's
election:

• (a) sending
 by
 pre‐paid
 post
 (or
 pre‐paid
 airmail
 if
 the
 address
 is
 outside Australia)
the
proceeds
to
the
Foreign
Scheme
Participants'
Registered Addresses
by
cheque
drawn
on
an
Australian
Trading
Bank
in
Australian currency;

• (b) depositing
or
procuring
the
Registry
to
deposit
it
into
an
account
with any
Australian
ADI
(as
defined
in
the
Corporations
Act)
notified
to
SBS (or
 the
 SBS
 Registry)
 by
 an
 appropriate
 authority
 from
 the
 Foreign Scheme
Participant;
or

• (c) in the event that a Foreign Scheme Participant does not have a Registered Address or the Nominee believes a Foreign Scheme Participant
is
not
known
at
the
Foreign
Scheme
Participant's
Registered Address,
and
no
account
has
been
notified
in
accordance
with
paragraph 6.3(b)
 or
 a
 deposit
 into
 such
 an
 account
 is
 rejected
 or
 refunded,
 the Nominee
may
credit
the
amount
payable
to
the
relevant
Foreign
Scheme Participant
to
a
separate
bank
account
of
SBS
to
be
held
until
the
Foreign Scheme
 Participant
 claims
 the
 amount
 or
 the
 amount
 is
 dealt
 with
 in accordance with unclaimed moneys legislation. SBS must hold the amount
on
trust,
but
any
interest
or
other
benefit
accruing
on
or
from
the amount
will
be
to
the
benefit
of
SBS.

An
amount
credited
to
the
account is
to
be
treated
as
having
been
paid
to
the
Foreign
Scheme
Participant when
credited
to
the
account.

SBS
must
maintain
records
of
the
amounts paid,
the
persons
who
are
entitled
to
the
amounts
and
any
transfers
of the
amounts,

in
each
case,
in
full
satisfaction
of
the
Foreign
Scheme
Participants'
right
to
the Scheme
Consideration.

• 6.4 Each
 Foreign
 Scheme
 Participant
 appoints
 SBS
 as
 his
 agent
 to
 receive
 on
 his behalf
any
financial
services
guide
or
other
notices
which
may
be,
or
be
required to
be,
given
by
the
Nominee
to
that
Foreign
Scheme
Participant.

7. ISSUE
AND
TRADING
OF
CHALICE
SHARES

• 7.1 Issue

• (a) Scheme
Participants
who
receive
the
Scheme
Consideration
agree
to
be bound
by
Chalice's
constitution.

• (b) Except
for
a
Scheme
Participant's
tax
file
number,
any
binding
instruction or
 notification
 between
 a
 Scheme
 Participant
 and
 SBS
 relating
 to
 the Scheme
Shares
(including,
without
limitation,
any
instructions
relating
to the
payment
of
dividends,
provision
of
annual
reports,
notices
of
meeting or
other
communications
from
SBS)
will
from
the
Implementation
Date

37

be
deemed
(except
to
the
extent
determined
otherwise
by
Chalice
in
its sole
 discretion),
 by
 reason
 of
 the
 Scheme,
 to
 be
 a
 similarly
 binding instruction
 or
 notification
 to
 and
 accepted
 by
 Chalice
 in
 respect
 of
 the New Chalice Shares issued to the Scheme Participant until that instruction
or
notification
is
revoked
or
amended
in
writing
addressed
to Chalice
at
its
share
registry.

7.2 Trading

SBS
will
procure
that
Chalice
will,
before
the
date
of
the
Second
Court
Hearing, seek
 confirmation
 from
 the
 ASX
 that,
 as
 from
 the
 Business
 Day
 following
 the Effective
Date
(or
such
later
date
as
the
ASX
requires),
the
New
Chalice
Shares will
be
listed
for
quotation
on
the
official
list
of
the
ASX,
initially
on
a
deferred settlement
basis
and
thereafter
on
an
ordinary
settlement
basis.

SBS
will
procure that
Chalice
takes
all
steps
necessary
or
expedient
to
obtain
that
quotation.

7A. SUSPENSION
OF
SBS
SHARES
AND
DE­LISTING

• 7A.1 SBS
will
apply
to
the
ASX
for
suspension
of
trading
of
SBS
Shares
on
the
ASX
with effect
from
the
close
of
trading
on
the
Effective
Date.

• 7A.2 On
a
date
after
the
Implementation
Date
to
be
determined
by
Chalice,
and
subject to
completion
of
all
obligations
to
occur
on
that
date,
SBS
will
apply:

• (i) for
 termination
 of
 the
 official
 quotation
 of
 SBS
 Shares
 on
 the ASX;
and

• (ii) to
have
itself
removed
from
the
official
list
of
the
ASX.

8. WHEN
SCHEME
BECOMES
BINDING

• 8.1 This
 Scheme
 will
 become
 binding
 on
 SBS,
 Chalice
 and
 each
 holder
 of
 Scheme Shares only if the Court makes an order under section 411(4)(b) of the Corporations
 Act
 approving
 the
 Scheme
 and
 that
 order
 becomes
 effective
 in accordance
with
section
411(10).

SBS
must
lodge
an
office
copy
of
that
order with
ASIC
not
later
than
20
Business
Days
after
the
order
has
been
made.

• 8.2 Where
this
Scheme
becomes
binding
as
provided
by
paragraph
8.1,
a
holder
of Scheme
Shares
(and
any
person
claiming
through
that
holder)
may
only
assign, transfer
or
otherwise
deal
with
those
Scheme
Shares
on
the
basis
that
the
rights so
assigned,
transferred
or
dealt
with
are
the
same
as
the
rights
that
the
holder held
 immediately
 prior
 to
 the
 Effective
 Date,
 if
 he
 had
 remained
 the
 holder
 of those
Scheme
Shares
until
the
Record
Date.

9.

GENERAL

• 9.1 SBS
may
by
its
counsel
or
solicitors
consent
to
any
modification
of
or
addition
to the
 Scheme,
 or
 to
 any
 condition,
 which
 the
 Court
 may
 think
 fit
 to
 approve
 or impose
and
to
which
Chalice
has
consented.

• 9.2 The
accidental
omission
to
give
notice
of
the
Scheme
Meeting
to
any
holder
of Scheme
 Shares
 or
 the
 non‐receipt
 of
 such
 a
 notice
 by
 any
 holder
 of
 Scheme

38

Shares
will
not,
unless
so
ordered
by
the
Court,
invalidate
the
Scheme
Meeting
or the
proceedings
at
the
Scheme
Meeting.

• 9.3 On
the
Effective
Date
and
until
SBS
registers
Chalice
as
the
holder
of
all
Scheme Shares
in
the
Register,
each
Scheme
Participant:

• (a) is
deemed
to
have
irrevocably
appointed
Chalice
as
attorney
and
agent (and
 directed
 Chalice
 in
 such
 capacity)
 to
 appoint
 an
 officer
 or
 agent nominated
by
Chalice
as
its
sole
proxy
and,
where
applicable,
corporate representative to attend shareholders' meetings, exercise the votes attaching
 to
 the
 Scheme
 Shares
 registered
 in
 his
 name
 and
 sign
 any shareholders'
resolutions,
whether
in
person,
by
proxy
or
by
corporate representative
(other
than
as
pursuant
to
this
paragraph
9.3(a));

• (b) undertakes
not
to
otherwise
attend
shareholders'
meetings,
exercise
the votes
attaching
to
the
Scheme
Shares
registered
in
his
name,
or
sign
any shareholders'
resolutions,
whether
in
person,
by
proxy
or
by
corporate representative;

• (c) must
 take
 all
 other
 actions
 in
 the
 capacity
 of
 a
 registered
 holder
 of Scheme
Shares
as
Chalice
reasonably
directs;
and

• (d) acknowledges
 and
 agrees
 that
 in
 exercising
 the
 powers
 referred
 to
 in paragraph
9.3(a),
Chalice
and
any
officer
or
agent
nominated
by
Chalice under
 paragraph
 9.3(a)
 may
 act
 in
 the
 best
 interests
 of
 Chalice
 as
 the beneficial
owner
and
intended
registered
holder
of
the
Scheme
Shares.

• 9.4 For
the
purpose
of
paragraph
4,
the
expression
"sent"
means:

• (a) sending
 by
 ordinary
 pre‐paid
 post
 to
 a
 holder
 at
 the
 Record
 Date
 of
 a Scheme
Share
at
the
address
of
that
holder
appearing
in
the
Register
at the
Record
Date;
or

• (b) delivery
to
that
address
by
any
other
means
at
no
cost
to
the
recipient.

• 9.5 Each
holder
of
Scheme
Shares
will
be
deemed
to
have
irrevocably
appointed
SBS and
 its
 officers
 as
 his
 attorney
 for
 the
 purpose
 of
 executing
 any
 document necessary
to
give
effect
to
this
Scheme.

• 9.6 SBS
must
execute
all
deeds
and
other
documents
and
do
all
acts
and
things
as may be necessary or expedient on its part to implement this Scheme in accordance
with
its
terms.

• 9.7 Neither
SBS
nor
any
of
its
officers
will
be
liable
for
anything
done
or
for
anything omitted
to
be
done
in
performance
of
this
Scheme
in
good
faith.

• 9.8 This
Scheme
overrides
the
Constitution
and
binds
SBS,
Chalice
and
the
holders
of Scheme
Shares.

• 9.9 The
proper
law
of
this
Scheme
is
the
law
of
Western
Australia.

39

APPENDIX
3

TAX
IMPLICATIONS

The
following
is
intended
only
as
a
general
guide
to
the
income
tax
position
under
current Australian
income
tax
law
and
administrative
practice
as
at
the
date
of
this
document. Income
 tax
 is
 a
 complex
 area
 of
 law
 and
 the
 income
 tax
 implications
 for
 a
 Scheme Participant
may
differ
from
those
detailed
below,
depending
on
the
Scheme
Participant's particular circumstances. As these statements are of a general nature only it is recommended that Scheme Participants obtain their own independent professional advice
in
respect
of
the
Australian
income
tax
implications.

The following is an overview of the likely Australian income tax implications as a consequence
of
the
Scheme
for
an
Australian
tax
resident
Scheme
Participant
who
hold their
Scheme
Shares
on
capital
account.

The
following
may
not
apply
to
certain
Scheme
Participants,
such
as
dealers
in
securities, Scheme
Participants
who
hold
shares
on
revenue
account
or
as
trading
stock,
insurance companies
 and
 collective
 investment
 schemes.
 Such
 persons
 may
 be
 subject
 to
 special rules
or
assessed
as
ordinary
income
on
any
gain
on
the
disposal
of
their
Scheme
Shares for
New
Chalice
Shares.

The
following
may
also
not
apply
to
non‐Australian
tax
resident
Scheme
Participants.

The Australian
income
tax
implications
for
non‐Australian
resident
Scheme
Participants
are complex
 and
 will
 depend
 upon
 their
 own
 specific
 circumstances.
 
 Non‐Australian
 tax resident
Scheme
Participants
may
also
have
tax
implications
in
their
country
of
residence.

Any
Scheme
Participant
who
is
in
any
doubt
as
to
their
tax
position,
or
who
is
subject
to tax
in
any
jurisdiction
other
than
Australia,
should
consult
their
own
professional
adviser.

Capital
gains
tax

The
transfer
of
Scheme
Shares
to
Chalice
pursuant
to
the
Scheme
will
trigger
a
capital gains
 tax
 ("CGT")
 event
 for
 a
 Scheme
 Participant.
 
 The
 income
 tax
 implications
 for
 a Scheme
 Participant
 will
 depend
 on
 whether
 the
 Scheme
 Participant
 chooses
 to
 obtain scrip
for
scrip
roll‐over
relief
under
Subdivision
124‐M
of
the
Income
Tax
Assessment
Act 1997
("ITAA
1997")
in
relation
to
the
disposal
of
their
Scheme
Shares.

Broadly,
a
Scheme Participant
may
choose
to
obtain
scrip
for
scrip
roll‐over
relief
where
they:

• hold
their
Scheme
Shares
on
capital
account;

• acquired
their
Scheme
Shares
on
or
after
20
September
1985;
and

• make
a
capital
gain
from
the
disposal
of
their
Scheme
Shares.

Where
scrip
for
scrip
rollover
relief
is
chosen

Where
the
above
conditions
are
met,
Scheme
Participants
who
wish
to
obtain
scrip
for scrip
roll‐over
relief
must
choose
to
obtain
the
roll‐over
relief.

40

Where
scrip
for
scrip
roll‐over
relief
is
chosen,
any
capital
gain
arising
from
the
disposal of
Scheme
Shares
will
be
disregarded
and
deferred
until
a
CGT
event
occurs
in
respect
of the
New
Chalice
Shares
acquired
by
the
Scheme
Participant
under
the
Scheme.

The
CGT cost
base
and
reduced
cost
base
of
each
New
Chalice
Share
received
will
be
determined
by apportioning,
on
a
reasonable
basis,
the
cost
base
and
reduced
cost
base
of
the
Scheme Shares
disposed
of
pursuant
to
the
Scheme.

For
Scheme
Participants
who
can
apply
the
discount
capital
gains
tax
rules
in
Division
115 of
the
ITAA
1997
and
who
choose
scrip
for
scrip
roll‐over,
their
New
Chalice
Shares
will be
taken
to
have
been
acquired
at
the
time
their
Scheme
Shares
were
originally
acquired for
the
purposes
of
applying
the
CGT
discount
rules.

Where
a
capital
loss
arises,
the
Scheme
Participant
will
not
be
eligible
to
obtain
scrip
for scrip
roll‐over.

Where
scrip
for
scrip
rollover
is
not
chosen

Where
 scrip
 for
 scrip
 roll‐over
 relief
 is
 not
 chosen,
 Scheme
 Participants
 will
 make
 a capital
gain
equal
to
the
market
value
of
the
New
Chalice
Shares
they
are
entitled
to
less the
CGT
cost
base
of
their
Scheme
Shares.

In
determining
a
Scheme
Participant's
capital gain,
the
market
value
of
the
New
Chalice
Shares
should
be
determined
using
the
market value
 of
 those
 shares
 on
 the
 date
 the
 Scheme
 Participant
 ceases
 to
 have
 ownership
 of their
Scheme
Shares.

Scheme
Participants
may
be
entitled
to
concessional
CGT
treatment
under
Division
115
of the
ITAA
1997.

This
will
depend
upon
their
individual
circumstances.

For
Scheme
Participants
whose
reduced
cost
base
is
greater
than
the
market
value
of
the New
Chalice
Shares
they
are
entitled
to,
the
Scheme
Participant
may
realise
a
capital
loss.

Where
scrip
for
scrip
roll‐over
relief
is
not
chosen,
the
cost
base
of
the
New
Chalice
Shares will
be
equal
to
the
market
value
of
the
Scheme
Shares
disposed,
as
determined
on
the date
the
New
Chalice
Shares
are
allotted
or
issued.

Where
scrip
for
scrip
roll‐over
relief
is
not
chosen,
the
acquisition
date
of
the
New
Chalice Shares
 for
 CGT
 purposes
 will
 be
 the
 date
 on
 which
 the
 Chalice
 shares
 are
 allotted
 or issued
to
the
Scheme
Participants.

41

APPENDIX
4

SBS
UNLISTED
SECURITIES

SBS
Unlisted
Options

Number	Exerciseprice Expirydate	Exerciseprice Expirydate
400,000	10cents 26.01.11
3,400,000	11cents 14.02.12
SBSPartlyPaidShares
Number	Issueprice Amountpaidup
4,500,000	10cents 0.01ofacent
2,850,000	11cents 0.01ofacent
450,000	13cents 0.01ofacent
7,290,000	9cents 0.01ofacent
5,750,000	6.5cents 0.01ofacent
5,750,000	15cents 0.01ofacent
4,000,000	10cents 0.01ofacent
4,000,000	15cents 0.01ofacent
4,000,000	20cents 0.01ofacent

– Acquisition
terms SBS
Unlisted
Options

Based
on
a
Black
Scholes
valuation
method,
the
SBS
Unlisted
Options
(of
which
there
are two
 different
 classes
 with
 different
 terms)
 have
 been
 determined
 as
 having
 a
 value
 of between
0.5
cents
and
0.8
cents
per
option,
using
the
following
assumptions:

Assumptions	Assumptions
Exerciseprices	10centsand11cents
ValueofunderlyingSBSShares	1.5cents
ValuationDate	27March2009
ExpiryDate	Various
Volatility	141%
Riskfreeinterestrate	4%
Annualiseddividendyield	Nil

42

Chalice
Shares
will
be
issued
to
holders
of
SBS
Unlisted
Options
in
accordance
with
the following
ratios
(assuming
a
value
of
14.08
cents
per
Chalice
Share):

1. For
options
exercisable
at
10
cents
and
expiring
on
26
January
2011
–
one
Chalice Share
for
every
28.94
options.

2. For
options
exercisable
at
11
cents
and
expiring
on
14
February
2012
–
one
Chalice Share
for
every
18.65
options.

– Acquisition
Terms SBS
Partly
Paid
Shares

Based
on
a
Black
Scholes
valuation
method,
the
SBS
Partly
Paid
Shares
(of
which
there
are 9
 different
 classes
 with
 different
 terms)
 have
 been
 determined
 as
 having
 a
 value
 of between
0.1
cents
and
0.9
cents
per
share,
using
the
following
assumptions:

Assumptions
Amounttobepaidup	Various,rangingbetween6.49cents and19.99cents
MarketvalueofunderlyingSBSShares	1.5cents
ValuationDate	27March2009
CallDate	Various
Volatility	141%
Riskfreeinterestrate	4%
Annualiseddividendyield	Nil

Chalice
Shares
will
be
issued
to
holders
of
SBS
Partly
Paid
Shares
in
accordance
with
the following
ratios
(assuming
a
value
of
14.08
cents
per
Chalice
Share):

1. For shares with an amount of 9.99 cents remaining unpaid and payable by 29/11/10
–
one
Chalice
Share
for
every
32.4
SBS
Partly
Paid
Shares

2. For
 shares
 with
 an
 amount
 of
 10.99
 cents
 remaining
 unpaid
 and
 payable
 by 29/11/10
–
one
Chalice
Share
for
every
34.3
SBS
Partly
Paid
Shares

3. For
 shares
 with
 an
 amount
 of
 12.99
 cents
 remaining
 unpaid
 and
 payable
 by 29/11/10
–
one
Chalice
Share
for
every
38.2
SBS
Partly
Paid
Shares

4. For shares with an amount of 8.99 cents remaining unpaid and payable by 21/11/09
or

29/11/09
–
one
Chalice
Share
for
every
142.3
SBS
Partly
Paid
Shares.

5. For shares with an amount of 6.49 cents remaining unpaid and payable by 29/11/10
–
one
Chalice
Share
for
every
25.5
SBS
Partly
Paid
Shares.

6. For
 shares
 with
 an
 amount
 of
 14.99
 cents
 remaining
 unpaid
 and
 payable
 by 02/03/11
–
one
Chalice
Share
for
every
33.9
SBS
Partly
Paid
Shares.

7. For shares with an amount of 9.99 cents remaining unpaid and payable by 30/11/12
–
one
Chalice
Share
for
every
15.0
SBS
Partly
Paid
Shares.

43

1. For
 shares
 with
 an
 amount
 of
 14.99
 cents
 remaining
 unpaid
 and
 payable
 by 30/11/12
–
one
Chalice
Share
for
every
16.4
SBS
Partly
Paid
Shares.

2. For
 shares
 with
 an
 amount
 of
 19.99
 cents
 remaining
 unpaid
 and
 payable
 by 30/11/12
–
one
Chalice
Share
for
every
17.6
SBS
Partly
Paid
Shares.

44

APPENDIX
5

MARKETABLE
SECURITIES
OF
SBS
HELD
BY
OR ON
BEHALF
OF
DIRECTORS
OF
SBS

SBSShares
NameofDirector	DirectInterest	IndirectInterest
BCBolitho	‐	‐
MRGriffiths	‐	614,500
PLMunachen	‐	734,375
SBSListedOptions
NameofDirector	DirectInterest	IndirectInterest
BCBolitho	‐	‐
MRGriffiths	‐	15,625
PLMunachen	‐	36,718
SBSUnlistedOptions
NameofDirector	DirectInterest	IndirectInterest
BCBolitho	‐	‐
MRGriffiths	‐	‐
PLMunachen	‐	‐
SBSPartlyPaidShares
NameofDirector	DirectInterest	IndirectInterest
BCBolitho	3,000,000	‐
MRGriffiths	‐	12,000,000
PLMunachen	‐	7,000,000

45

APPENDIX
6

DEALINGS
IN
MARKETABLE
SECURITIES
OF
SBS
AND
CHALICE

DEALINGS
IN
MARKETABLE
SECURITIES
OF
SBS

None
 of
 SBS,
 Chalice
 or
 any
 person
 associated
 with
 SBS
 or
 Chalice
 has
 acquired
 or disposed
of
any
marketable
securities
of
SBS
in
the
four
months
immediately
preceding the
Lodgement
Date.

DEALINGS
IN
MARKETABLE
SECURITIES
OF
CHALICE

None
 of
 SBS,
 Chalice
 or
 any
 person
 associated
 with
 SBS
 or
 Chalice
 has
 acquired
 or disposed of any marketable securities of Chalice in the four months immediately preceding
the
Lodgement
Date
other
than:

1. 1,384,000 Chalice Shares purchased by Plato Prospecting Pty Ltd (an entity associated
with
Timothy
Goyder,
a
director
of
Chalice);
and

2. 300,000
 Chalice
 Shares
 purchased
 on
 market
 by
 Central
 Manhattan
 Pty
 Ltd
 (an entity
associated
with
Anthony
Kiernan,
a
director
of
Chalice).

46

APPENDIX
7

INFORMATION
ABOUT
CHALICE

The
information
contained
in
this
Appendix
is
to
assist
Scheme
Participants
in
deciding how
to
vote
in
relation
to
the
Scheme
of
Arrangement.

Whilst
SBS
and
its
directors
have no
reason
to
believe
that
any
of
the
information
is
false
or
misleading
in
any
material respect,
to
the
fullest
extent
permitted
by
law
they
expressly
disclaim
any
responsibility for
 the
 completeness
 or
 accuracy
 of
 the
 information
 about
 Chalice
 contained
 in
 this Appendix.

1. BACKGROUND

Chalice
 was
 incorporated
 in
 Australia
 in
 2005
 and
 listed
 on
 the
 Australian
 Securities Exchange
in
March
2006.

It
is
headquartered
in
Perth,
Western
Australia
and
its
primary business
is
the
exploration
and
development
of
the
various
mineral
exploration
projects in
Western
Australia
referred
to
below.

The
 Chalice
 cash
 resources
 will
 be
 applied
 to
 the
 continued
 development
 of
 the
 Zara Project
in
Eritrea
if
the
merger
between
it
and
SBS
is
implemented.

2. CHALICE'S
PROJECTS

2.1 Murchison

The Gnaweeda Project is located in the Murchison Region of Western Australia, approximately
30
kilometres
northeast
of
Meekatharra
covering
190
square
kilometres of
tenements.

The
Gnaweeda
Project
is
subject
to
a
joint
venture
with
Teck
Australia
Pty
Ltd
( Teck ) which
 has
 the
 right
 to
 acquire
 a
 70%
 interest
 by
 the
 expenditure
 of
 $1.5M.
 
 Teck
 has currently
earned
51%
and
may
earn
a
further
19%
by
the
expenditure
of
an
additional $750,000.

Teck
has
advised
Chalice
that
it
is
reviewing
alternative
funding
for
its
interest in
the
project.

Historical
exploration
has
defined
an
extensive
gold
and
arsenic
anomalous
zone,
over
15 kilometres
long
and
up
to
750
metres
wide,
within
a
package
of
mafic
and
felsic
rocks (the
Fairway
Magnetic
Package,
or
FMP).

Recent RC drilling within the FMP by Teck has returned narrow high grade gold intercepts,
within
broader
zones
of
anomalous
gold
mineralisation,
in
7
of
the
10
holes drilled.

Better
gold
intercepts
include
1
m
@
11.06g/t
from
16
m,
1
m
@
37.60
g/t
from 50
m,
2
m
@
14.26
g/t
from
82
m,
2
m
@
33.94
g/t
from
168
m
and
3
m
@
11.87
g/t
from 277 m. Further RC and diamond drilling is planned to test the extent of known mineralisation
 and
 provide
 important
 structural
 information
 to
 aid
 understanding
 of mineralisation
controls
for
future
targeting
of
thicker
high‐grade
zones.

47

2.2 Laverton

Chalice's
Wilga
Project
covers
12
square
kilometres
located
15
kilometres
south
east
of the
Sunrise/Cleo
gold
mine
owned
by
AngloGold
Ashanti
Limited
( AngloGold
Ashanti ) and
is
approximately
55
kilometres
south
of
Laverton
in
the
highly
endowed
Laverton Tectonic
Zone,
which
also
hosts
the
Granny
Smith
and
Red
October
gold
deposits.

The Wilga Project is subject to a joint venture with AngloGold Ashanti whereby AngloGold
Ashanti
has
the
right
to
earn
a
75%
interest
by
the
expenditure
of
$2
million within
the
next
4
years.

Gold
mineralisation
in
the
area
is
hosted
by
BIF,
quartz
veining
and
shear
zones
within basaltic
 sequences.
 
 Past
 exploration
 defined
 an
 extensive
 gold
 anomalous
 zone,
 over 1,500 metres long and up to 500 metres wide, centred on the BIF and a second anomalous
 zone
 overlying
 mafic
 and
 ultramafic
 lithologies
 to
 the
 west.
 
 Broad
 spaced RAB
and
limited
RC
drilling
has
yielded
moderate
width
intercepts
with
significant
gold values
(>1
g/t)
in
several
holes.

Further
focussed
exploration
programs
are
planned
to
validate
and
verify
existing
gold anomalies
and
to
develop
an
understanding
of
the
geological
characteristics
and
controls on
 the
 gold
 mineralisation.
 
 This
 work
 will
 include
 systematic
 mapping
 and
 rock
 chip sampling
 of
 exposures,
 aircore
 drilling
 of
 gold‐in‐soil
 anomalies
 and
 follow
 up
 RC
 and diamond
drilling
of
selected
target
areas.

2.3 West
Pilbara

Chalice's
Yandeearra
Project
covers
some
1,300
square
kilometres
in
the
West
Pilbara
of Western
Australia,
located
approximately
100km
south
of
Port
Hedland
and
immediately south
of
Range
River
Gold
Limited's
Indee
and
west
of
De
Grey
Mining
Limited's
Turner River
Gold
Projects.

Atlas
 Iron
 Limited
 ( Atlas
 Iron )
 has
 an
 option
 to
 acquire
 the
 iron
 ore
 rights
 over
 the Yandeearra
Project
for
$1M
having
previously
paid
$250,000
for
the
grant
of
the
option. This
option
expires
in
November
2009.

Gold
mineralisation
in
the
project
area
is
present
within
the
Mallina
Basin
sediments
in the
north
and
Pilbara
Well
greenstones
in
the
southeast.

Base
metal
anomalies
are
also present
in
the
Pilbara
Well
rocks.

Recent
work
has
also
indicated
potential
for
bedded iron
deposits
associated
with
banded
iron
formation
(BIF)
units
within
the
project
area.

Gold
and
base
metal
exploration
within
the
Pilbara
Well
greenstones
by
Chalice's
former joint
venture
partner,
De
Grey
Mining
Limited,
has
included
soil
geochemistry,
geological reconnaissance and rock sampling programs. Several new gold and base metal occurrences
were
identified
by
this
work
with
high
gold,
copper,
lead
and
silver
grades obtained
 from
 rock
 samples.
 
 Most
 occurrences,
 however,
 were
 found
 to
 be
 related
 to wide‐spaced
 veins
 and
 narrow
 felsic
 dykes
 and
 were
 downgraded
 as
 having
 limited tonnage
potential.

The
most
recent
work
has
focussed
on
a
large,
previously
unexplored area
 near
 the
 Cleaverville
 Chert
 Hills
where
soil
sampling
identified
a
new,
high
tenor gold‐in‐soil
(up
to
2.64g/t)
anomaly,
which
remains
open
and
untested
to
the
north
and east.

The
anomaly
occurs
in
a
structurally
favourable
position
at
the
western
end
of
a large
 granite
 body
 that
 intrudes
 the
 greenstone
 rocks
 of
 the
 Cleaverville
 Chert
 and

48

underlying
 felsic
 volcanic
 lithologies.
 
 Data
 evaluation
 for
 planning
 of
 future
 work
 to define
the
limits
and
a
possible
bedrock
source
to
the
anomaly
is
being
undertaken.

Atlas
 Iron
 has
 undertaken
 interpretation
 of
 regional
 aeromagnetic
 data
 coupled
 with helicopter
reconnaissance
surveys
to
assess
the
project
for
both
direct
shipping
ore
and magnetite
potential.

A
relatively
small
area
of
surface
iron
enrichment
(with
values
of
55 to
60%
Fe,
but
relatively
high
phosphorus
values
of
0.15
to
0.29%)
has
been
delineated
in the
southwest
portion
of
the
project.

Three
distinct
BIF‐hosted,
magnetite
targets
have been
 delineated
 in
 other
 areas
 and
 these
 will
 be
 assessed
 for
 their
 potential
 to
 host economic
magnetite
mineralisation.

3. CHALICE
HISTORICAL
FINANCIAL
INFORMATION

Historical
financial
information
(unaudited)
in
respect
of
Chalice
as
at
31
March
2009
is included
in
Appendix
8.

4. OWNERSHIP
OF
CHALICE

As
at
the
Lodgement
Date,
Chalice
had
72,800,000
fully
paid
ordinary
shares
on
issue.

As
at
the
Lodgement
Date,
Chalice
also
had
the
following
6,825,000
unlisted
options
on issue:

issue:
NumberofOptions	ExpiryDate	ExercisePrice
5,575,000	21March2011	$0.25
500,000	21December2012	$0.25
250,000	11December2012	$0.20
500,000	31July2013	$0.20

As at the Lodgement Date, Chalice had received the following current substantial shareholder
notices
pursuant
to
the
Corporations
Act:

SubstantialShareholder	NumberofShares	%ofShares
TimothyRBGoyder	17,240,458	23.68
Balfes(Qld)PtyLtdas trusteefortheBalfesSuper Fund	5,000,000	6.87

5. LITIGATION

Chalice
is
not
currently
involved
in
any
litigation.

6. CHALICE'S
DIRECTORS
AND
SENIOR
MANAGEMENT

6.1 Timothy
R
B
Goyder
–
Executive
Chairman

Mr
 Goyder
 has
 over
 35
 years'
 experience
 in
 the
 resource
 industry
 as
 a
 prospector, investor,
 company
 director
 and
 as
 the
 owner
 and
 operator
 of
 a
 large
 contract
 drilling company.

49

Mr
Goyder
has
been
involved
in
a
range
of
exploration
and
development
projects
and
in the
formation
and
management
of
a
number
of
publicly
listed
companies.

He
is
currently a
director
of
Uranium
Equities
Limited
and
chairman
of
Liontown
Resources
Limited.

6.2 Douglas
Jones,
PhD,
AusIMM,
CPGeo
–
Managing
Director

Dr
Jones
has
30
years'
experience
in
international
mineral
exploration,
having
worked extensively in Australia, Africa, the Americas 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
the
 managing
 director
 of Liontown
Resources
Limited
and
a
director
of
AIM‐listed
Minera
IRL
Limited.

6.3 Anthony
W
Kiernan,
LLB
­
Non­executive
Director

Mr Kiernan is a solicitor with considerable experience in the administration and operation of listed public companies. In addition to his legal practice Mr Kiernan provides
 commercial
 and
 corporate
 advice
 to
 various
 entities,
 including
 those
 in
 the resources
sector.

He
is
chairman
of
BC
Iron
Limited
and
a
director
of
Uranium
Equities Limited
and
Liontown
Resources
Limited,
which
are
listed
on
the
ASX.

Mr
Kiernan
is
also Chairman
of
Anglicare
(WA).

6.4 Richard
Hacker,
B.Com,
ACA,
ACIS
­
Commercial
Manager
and
Company Secretary

Mr
 Hacker
 has
 significant
 professional
 and
 corporate
 experience
 in
 the
 energy
 and resources
 sector
 in
 Australia
 and
 the
 United
 Kingdom.
 
 He
 has
 previously
 worked
 in senior
finance
roles
with
global
energy
companies
including
Woodside
Petroleum
Limited and
Centrica
Plc.

Prior
to
that
he
worked
with
leading
international
accounting
practices. Mr
 Hacker
 is
 a
 Chartered
 Accountant
 and
 Chartered
 Secretary
 and
 is
 also
 Company Secretary
of
Liontown
Resources
Limited
and
Uranium
Equities
Limited.

50

APPENDIX
8

INFORMATION
ABOUT
THE
MERGED
GROUP

This
 Appendix
 sets
 out
 Chalice's
 intentions
 in
 relation
 to
 the
 continuation
 of
 SBS's business.

These
statements
of
intention
are
based
on
the
information
concerning
SBS,
its business
and
the
general
business
environment
which
is
known
to
Chalice
at
the
time
of preparation
of
the
Scheme
Booklet.

Final
decisions
may
only
be
reached
by
Chalice
in light
of
increased
knowledge
through
exposure
to
SBS's
business.

1. OVERVIEW

The
Merged
Group
will
be
known
as
Chalice
Gold
Mines
Limited
and
will
have
the
Zara Project
as
its
key
focus
along
with
the
mineral
exploration
projects
of
Chalice
outlined
in Appendix
7.

As
noted
elsewhere
in
the
Scheme
Booklet,
Chalice
will
also
be
purchasing
a company
which
holds
a
further
11%
in
the
Zara
Project.

This
acquisition
is
subject
to completion
of
the
Scheme
and
would
give
the
Merged
Group
an
80%
interest
in
the
Zara Project.

2. CONDUCT
OF
BUSINESS
AND
OTHER
CORPORATE
MATTERS

If
the
Scheme
is
implemented,
Chalice
intends
to
continue
the
development
of
the
Zara Project
expeditiously
with
a
view
to
completing
a
pre‐feasibility
study
in
the
second
half of
2009.

The
corporate
activities
of
SBS
will
be
assumed
by
Chalice
in
its
corporate
offices in
West
Perth,
Australia.

Chalice,
through
its
joint
venture
partners,
will
also
continue work
on
its
existing
projects,
particulars
of
which
are
provided
in
Appendix
7.

3. SBS'S
MANAGEMENT
AND
EMPLOYEES

The
current
managing
director
of
SBS,
Michael
Griffiths,
will
be
appointed
as
an
executive director
of
Chalice
to
ensure
continuity
in
relation
to
his
extensive
knowledge
of
the
Zara Project.

Subject
to
a
more
detailed
review
of
the
employees
of
SBS
in
Eritrea,
Chalice's
current intention
is
to
have
minimal
operational
job
losses
in
the
near
future,
particularly
as
the Zara
Project
advances
towards
feasibility.

4. COMBINED
GROUP
CONSOLIDATED
PRO­FORMA
BALANCE
SHEET

Set
out
below
is
the
unaudited
pro‐forma
consolidated
balance
sheet
of
the
Merged
Group which
is
based
on
the
balance
sheet
of
Chalice
as
at
31
March
2009
and
the
balance
sheet of
SBS
as
at
31
March
2009.

The
unaudited
pro‐forma
consolidated
balance
sheet
of
the
Merged
Group
is
provided
for illustrative
purposes
only
and
has
been
adjusted
for
material
events
which
have
occurred since
that
date
and
the
merger
adjustments
detailed
in
Section
4.1
below.

As
the
consolidated
pro‐forma
balance
sheet
is
as
at
31
March
2009,
it
may
not
represent the
financial
position
of
the
Merged
Group
following
implementation
of
the
Scheme.

The fair
value
of
the
net
assets
of
SBS
will
ultimately
be
determined
as
at
the
Effective
Date.

51

BalanceSheetsasat31March2009	Chalice GoldMines Proforma	Sub­Sahara Proforma	Merger adjustments	Proforma Merged Entity
CurrentAssets CashandEquivalents Trade&OtherReceivables FinancialAssets	10,022,642 125,486 0	1,124,320 606,772 42,500	(2,664,200) 0 0	8,482,762 732,257 42,500
TOTALCURRENTASSETS	10,148,127	1,773,592	(2,664,200)	9,257,520
Non­currentAssets FinancialAssets Property,Plant&Equipment Exploration&EvaluationAssets	144,407 247,605 2,023,146	0 421,357 7,162,983	0 0 935,424	144,407 668,962 10,121,552
TOTALNON­CURRENTASSETS	2,415,158	7,584,340	935,424	10,934,921
TOTALASSETS	12,563,285	9,357,932	(1,728,776)	20,192,441
Currentliabilities Trade&otherpayables Employeebenefits Other	55,562 15,748 50,711	459,208 21,372 0	0 0 0	514,770 37,120 50,711
TOTALCURRENTLIABILTIES	122,021	480,580	0	602,601
Non­currentLiabilities Otherliabilities Provisions	0 0	0 46,188	300,000 0	300,000 46,188
TOTALNON­CURRENTLIABILTIES	0	46,188	300,000	346,188
TOTALLIABILTIES	122,021	526,768	300,000	948,788
NETASSETS	12,441,264	8,831,164	(2,028,776)	19,243,652
Equity Issuedandpaidupcapital Reserves AccumulatedLosses	13,974,454 620,882 (2,154,072)	33,763,421 898,318 (25,830,575)	(26,961,033) (898,318) 25,830,575	20,776,842 620,882 (2,154,072)
TOTALEQUITY 12,441,264		8,831,164	(2,028,776)	19,243,652

4.1 Merger
adjustments

Cash
and
cash
equivalents
have
been
reduced
by
$2,664,200
to
reflect
payments
made contingent
upon
the
merger
completing
and
include:

(a) The
 payment
 of
 $1,210,000
 for
 the
 acquisition
 of
 a
 company
 which
 holds
 the additional
11%
interest
in
the
Zara
Project;

52

• (b) Reimbursement
of
approximately
$454,000
of
historical
exploration
costs
to
the vendor
of
the
interest
in
(a)
above;

• (c) Estimated
costs
of
the
merger
for
both
Chalice
and
SBS
of
$765,000;

• (d) Termination
 and
 redundancy
 costs
 in
 relation
 to
 SBS
 directors
 of
 $62,700
 as detailed
 under
 Section
 21
 of
 the
 Scheme
 Booklet
 and
 corporate
 employees
 of $34,500;
and

• (e) Termination
costs
of
$138,000
in
relation
to
the
service
contract
referred
to
in Section
21
of
the
Scheme
Booklet.

Exploration
and
evaluation
assets
have
been
increased
by
$935,424,
represented
by:

• (f) an
increase
of
$1,210,000
following
the
acquisition
of
a
company
which
holds
an additional
11%
interest
in
the
Zara
Project;

• (g) a
fair
value
adjustment
reducing
exploration
and
evaluation
assets
by
$574,576, calculated as the difference between the purchase price paid by Chalice (including
direct
costs
of
acquisition)
and
the
fair
value
of
the
identifiable
assets and
liabilities
of
SBS
(excluding
exploration
and
evaluation
assets);
and

• (h) an
increase
of
$300,000
representing
increased
costs
of
acquisition
of
the
Zara Project
 licenses
 due
 to
 potential
 tax
 implications
 in
 relation
 to
 post‐merger restructuring
 activities.
 A
 corresponding
 offset
 in
 other
 non‐current
 liabilities has
also
been
recorded.

4.2 Variation
in
accounting
policies

No
allowance
for
variations
in
accounting
policies
of
Chalice
and
SBS
have
been
made
to the pro‐forma balance sheet of the Merged Group set out above. Differences in accounting
policies
will
be
taken
into
account
following
an
assessment
of
fair
values
of the
identifiable
net
assets
of
SBS
following
implementation
of
the
Scheme.

The
Merged Group
will
report
its
financial
information
in
accordance
with
Australian
Equivalents
to International
Reporting
Standards,
adopting
the
accounting
policies
of
Chalice.

5. RISKS

5.1 Overview

This
section
sets
out
a
number
of
risks
associated
specifically
with
an
investment
in
the Merged
Group
following
implementation
of
the
Scheme.

These
risks
will
be
important
for Scheme
Participants
to
consider
when
deciding
whether
to
vote
in
favour
of
the
Scheme.

5.2 General
economic
risks
and
business
climate

Share market conditions may affect the listed securities regardless of operating performance.

Share
market
conditions
are
affected
by
many
factors
such
as:

53

• (a) general
economic
outlook;

• (b) movements
in
or
outlook
on
interest
rates
and
inflation
rates;

• (c) currency
fluctuations;

• (d) commodity
prices;

• (e) changes
in
investor
sentiment
towards
particular
market
sectors;
and

• (f) the
demand
and
supply
for
capital.

• 5.3 Key
Risks
Arising
from
the
Scheme

(a) Retention
of
New
Chalice
Shares

Chalice
will
issue
Chalice
Shares
as
consideration
under
the
Scheme.

Some
SBS shareholders
 who
 receive
 New
 Chalice
 Shares
 may
 not
 wish
 to
 retain
 their shareholdings
and
it
is
possible
that
they
may
sell
their
Chalice
Shares
shortly after
receiving
them.

If
a
significant
number
of
shareholders
do
this,
this
may have
an
adverse
effect
on
the
price
of
Chalice
Shares
on
the
ASX
in
the
short
term.

(b) Production
and
Other
Operational
Risks

Gold mining involves significant degrees of risk, including those related to mineral
 exploration
 success,
 unexpected
 geological
 or
 mining
 conditions,
 the development of new deposits, climatic conditions, sourcing mining and processing
inputs,
equipment
and/or
service
failures
and
other
general
operating risks.
 
 Many
 of
 these
 risks
 are
 outside
 the
 ability
 of
 Chalice's
 management
 to control.

(c) Exploration,
Development,
Mining
and
Processing
Risks

The
 business
 of
 mineral
 exploration,
 project
 development
 and
 mining
 by
 its nature
contains
elements
of
significant
risk.

Ultimate
and
continuous
success
of these
activities
is
dependent
on
many
factors
such
as:

• (i) the discovery and/or acquisition of economically recoverable ore reserves;

• (ii) the
successful
conclusion
of
bankable
feasibility
studies;

• (iii) access
to
adequate
capital
for
project
development;

• (iv) design and construction of efficient mining and processing facilities within
capital
expenditure
budgets;

• (v) securing
 and
 maintaining
 title
 to
 tenements
 and
 compliance
 with
 the terms
of
those
tenements;

• (vi) obtaining consents and approvals necessary for the conduct of exploration
and
mining;
and

54

• (vii) access to competent operational management and prudent financial administration,
including
the
availability
and
reliability
of
appropriately skilled
and
experienced
employees,
contractors
and
consultants.

Whether
 or
 not
 revenue
 will
 result
 from
 projects
 undergoing
 exploration
 and development programs depends on the successful establishment of mining operations. Factors including costs, actual mineralisation, consistency and reliability of ore grades and commodity prices affect successful project development
and
mining
operations.

Mining is an industry which has become subject to increasing legislative regulation,
including
but
not
limited
to
environmental
responsibility
and
liability. The
 potential
 for
 liability
 is
 an
 ever
 present
 risk.
 
 The
 use
 and
 disposal
 of chemicals in the mining industry is under constant legislative scrutiny and regulation. The introduction of new laws and regulations, or changes to underlying
policy,
may
adversely
impact
on
the
operations
of
Chalice.

(d) Joint
venture
parties,
agents
and
contractors

Chalice
is
unable
to
predict
the
risk
of
financial
failure
or
default
by
a
participant in
any
joint
venture
to
which
Chalice
is
or
may
become
a
party
or
the
insolvency or
 managerial
 failure
 of
 any
 of
 the
 contractors
 used
 by
 Chalice
 in
 any
 of
 its activities
 or
 the
 insolvency
 or
 other
 managerial
 failure
 of
 any
 other
 service providers
used
by
Chalice
for
any
activity.

(e)

Reliance
on
Key
Personnel

Chalice's success depends largely on the core competencies of its current directors
and
management,
and
their
familiarity
with,
and
ability
to
operate
in, the
metals
and
mining
industry
and
Chalice's
ability
to
retain
its
key
executives.

(f)

Resource
Estimate

Resource
estimates
are
expressions
of
judgment
based
on
knowledge,
experience and
 industry
 practice.
 
 Estimates
 which
 were
 valid
 when
 made
 may
 change significantly
 when
 new
 information
 becomes
 available.
 
 In
 addition,
 resource estimates
 are
 by
 their
 nature
 imprecise
 and
 depend
 on
 interpretations,
 which may prove to be inaccurate. Should Chalice encounter mineralisation or formations
different
from
those
predicted
by
past
sampling
and
drilling,
resource estimates
may
have
to
be
adjusted
and
mining
plans
may
have
to
be
altered
in
a way
which
could
have
either
a
positive
or
negative
effect
on
Chalice's
operations.

(g)

Political
Risk

As
the
Zara
Project
is
located
in
Eritrea,
it
is
subject
to
higher
degree
of
political risk
than
Chalice's
Australian
operations.

Chalice
is
therefore
subject
to
political, economic,
 social
 and
 other
 uncertainties,
 including
 the
 risk
 of
 civil
 rebellion, expropriation, nationalisation, landownership disputes, community disputes, renegotiation
or
termination
of
existing
contracts,
mining
licenses
and
permits
or other agreements, changes in laws or taxation policies, currency exchange restrictions, changing political conditions and international monetary fluctuations.

55

The
effects
of
these
factors
cannot
be
accurately
predicted
and
any
combination of
one
or
more
of
the
above
may
impede
the
operation
or
development
of
the Zara
Project
and
affect
its
economics.

(h) Zara
Project
exploration
licences

SBS
 was
 advised
 by
 the
 Ministry
 of
 Energy
 and
 Mines
 in
 Eritrea
 that
 SBS's application
for
renewal
of
the
Zara
Project
exploration
licences
for
a
term
of
1 year
from
25
May
2009
had
been
approved,
subject
to
SBS:

• (i) submitting
and
executing
an
appreciable
work
plan
so
as
to
advance
the exploration
work
to
a
bankable
project
stage;

• (ii) submitting
 a
 project
 pre‐feasibility
 study
 by
 the
 end
 of
 October
 2009; and

• (iii) submitting
 a
 feasibility
 study
 before
 the
 renewal
 anniversary
 date,
 25 May
2010.

The
Merged
Group's
ability
to
meet
these
conditions
may
be
affected
by
matters beyond
its
control.

Whilst
the
Department
of
Mines
and
Energy
has
previously renewed
the
Zara
Project
exploration
licences
where
conditions
attaching
to
the licences
have
not
been
complied
with
due
to
events
beyond
SBS's
control,
there can
be
no
guarantee
that
this
policy
will
continue
to
be
followed.

(i)

Gnaweeda,
Wilga
and
Yandeeara
Projects

Chalice's
 exploration
 projects
 in
 Western
 Australia
 are
 at
 an
 earlier
 stage
 of exploration
 compared
 to
 the
 Zara
 Project.
 
 Therefore
 no
 assurances
 can
 be provided
as
to
the
ultimate
discovery
of
an
economically
mineable
resource
from any
of
these
projects.

(j)

Gold
Price
Risk

All
of
the
Merged
Group's
production
revenues
would
be
derived
from
the
sale
of gold,
meaning
that
its
earnings
would
be
closely
related
to
the
price
of
gold.

Gold prices
 fluctuate
 widely
 and
 are
 affected
 by
 numerous
 industry
 factors
 beyond management's
control,
such
as
central
bank
sales,
demand
for
precious
metals, forward
selling
by
producers
and
purchasers
of
gold,
production
cost
levels
in major
gold
producing
regions,
and
macro‐economic
factors.

(k)

Environment

The
 Merged
 Group's
 projects
 are
 subject
 to
 laws
 and
 regulations
 regarding environmental
matters
and
the
discharge
of
hazardous
wastes
and
materials.

As with
all
mining
projects,
these
projects
would
be
expected
to
have
a
variety
of environmental
impacts
should
development
proceed.

The Merged Group intends to conduct its activities in an environmentally responsible manner and in accordance with applicable laws and industry standards.

Areas
disturbed
by
those
activities
will
be
rehabilitated
as
required by
applicable
laws
and
regulations.

56

(l) Title

Apart
from
the
exploration
licences
covering
the
Zara
Project,
tenements
which Chalice
holds
or
in
which
it
has
an
interest
may
be
the
subject
of
applications
for extension
in
the
future.

If
a
tenement
is
not
extended,
the
Merged
Group
may suffer
 significant
 damage
 through
 loss
 of
 the
 opportunity
 to
 discover
 and/or develop
any
mineral
resources
on
that
tenement.

In
addition,
the
Merged
Group
cannot
guarantee
that
those
tenements
that
are applications
for
tenements
will
ultimately
be
granted,
in
whole
or
in
part.

6. CAPITAL
STRUCTURE
AND
OWNERSHIP
OF
THE
MERGED
GROUP

As
 at
 the
 date
 of
 this
 Scheme
 Booklet,
 Chalice
 had
 72,800,000
 ordinary
 shares
 and 6,825,000
Chalice
Options
on
issue,
as
outlined
in
Appendix
7.

Should
the
Scheme
be
approved
at
the
Scheme
Meeting,
Chalice
will
issue
approximately 46,703,766
New
Chalice
Shares
to
acquire
100%
of
the
Scheme
Shares
and
approximately 1,613,727
New
Chalice
Shares
to
acquire
all
the
SBS
Unlisted
Securities.

At
the
Implementation
Date,
the
overall
interest
of
SBS
shareholders,
including
holders
of SBS
Unlisted
Securities,
in
Chalice
will
be
approximately
39%.

As described in Appendix 7, Chalice currently has two substantial shareholders. Following
 completion
 of
 the
 merger,
 the
 substantial
 shareholders
 in
 Chalice,
 based
 on their
shareholdings
at
the
Lodgement
Date
will
be:

SubstantialShareholder	NumberofShares	%ofShares
TimothyRBGoyder	17,240,458	14.23
AnvilMiningLimited	8,387,698	6.93
RockfieldInvestmentsLtd group	6,807,564	5.62

7. RIGHTS
ATTACHING
TO
NEW CHALICE
SHARES

Chalice
is
incorporated
in
Australia
and
is
subject
to
the
Corporations
Act.

As
a
company listed
on
the
ASX,
Chalice
is
also
regulated
by
the
Listing
Rules.

The
rights
attaching
to
ownership
of
Chalice
Shares
(including
New
Chalice
Shares)
are:

• described
in
the
Chalice's
constitution;

• regulated
by
the
Corporations
Act;
and

• the
Listing
Rules.

The
New
Chalice
Shares
will
rank
pari
passu
with
all
other
Chalice
Shares
presently
on issue.
 
 The
 following
 is
 a
 broad
 summary
 (though
 not
 necessarily
 an
 exhaustive
 or definitive
statement)
of
the
rights
attaching
to
Chalice
Shares:

57

(a) Voting
Rights

Subject
to
any
rights
or
restrictions
for
the
time
being
attached
to
any
class
or classes
of
shares
in
accordance
with
Chalice's
constitution:

• (i) each
 member
 entitled
 to
 vote
 may
 vote
 in
 person
 or
 by
 proxy
 or
 by representative;

• (ii) on
 a
 show
 of
 hands,
 every
 person
 present
 who
 is
 a
 shareholder
 or
 a proxy
or
representative
of
a
shareholder
has
one
vote;
and

• (iii) on
a
poll,
every
person
who
is
a
shareholder
or
a
proxy
or
representative of
a
shareholder
present
has
one
vote
for
each
Chalice
Share
held.

(b) Dividend
Rights

Chalice
 in
 general
 meeting
 may
 from
 time
 to
 time
 determine
 to
 distribute
 the profits
of
Chalice
by
way
of
dividend
but
no
amount
shall
be
declared
in
excess
of the
amount
recommended
by
the
board
of
directors
of
Chalice.

Subject
to
the
rights
of
holders
of
shares
issued
with
any
special
or
preferential rights (at present there are none), dividends will be declared and paid to shareholders
entitled
to
those
dividends
in
proportion
to
the
Chalice
Shares
held by
them
respectively,
according
to
the
amount
paid
up,
or
credited
as
paid
up,
on the
Chalice
Shares.

(c) Rights
on
Winding
Up

Subject
to
the
rights
of
holders
of
shares
with
special
rights
(at
present
there
are none),
if
Chalice
is
wound
up,
the
liquidator
may,
at
its
discretion
and
with
the authority of a special resolution and any other sanction required by the Corporations
Act,
divide
among
the
shareholders
in
specie
or
in
kind,
the
whole or
 any
 part
 of
 the
 assets
 of
 Chalice
 that
 may
 be
 legally
 distributed
 among
 the shareholders.

(d) Transfer
of
Shares

Subject
to
Chalice's
constitution,
the
Corporations
Act
and
the
ASX
Listing
Rules, Chalice
Shares
are
freely
transferable.

(e) Future
Issues

Subject
to
Chalice's
constitution,
the
Corporations
Act
and
the
ASX
Listing
Rules, Chalice's
directors
may
allot,
issue
or
grant
options
over,
or
otherwise
deal
with the
unissued
shares
in
Chalice
at
the
times
and
on
the
terms
and
conditions
that the
directors
think
proper
and
a
share
may
be
issued
with
preferential,
deferred, qualified
or
special
rights,
privileges
or
conditions
or
restrictions
including,
but not
limited
to,
restrictions
in
regard
to
dividends,
voting
or
return
of
capital
as the
directors
from
time
to
time
determine.

58

(f) Variation
of
Rights

Subject
 to
 Chalice's
 constitution
 and
 the
 Corporations
 Act,
 unless
 otherwise provided
by
the
terms
of
issue
of
shares
of
a
certain
class
(at
present
there
are
no such
 shares),
 the
 rights
 attached
 to
 shares
 of
 that
 class
 may,
 whether
 or
 not Chalice
is
being
wound
up,
from
time
to
time
be
varied,
modified
or
abrogated either
with
the
consent
in
writing
of
the
holders
of
three‐quarters
of
the
issued shares
of
the
relevant
class,
or
with
the
sanction
of
a
special
resolution
passed
at a
separate
general
meeting
of
the
holders
of
the
shares
of
that
class.

(g) Alteration
of
Chalice's
constitution

Chalice's
 constitution
 can
 only
 be
 amended
 by
 a
 special
 resolution
 (that
 is,
 a resolution
that
has
been
passed
by
at
least
three‐quarters
of
the
votes
cast
by shareholders
entitled
to
vote
on
the
resolution).

Full
details
of
the
rights
attaching
to
Chalice
Shares,
including
the
New
Chalice Shares,
are
set
out
in
Chalice's
constitution,
a
copy
of
which
can
be
inspected,
free of
charge,
at
Chalice's
registered
office,
at
Level
2,
1292
Hay
Street,
West
Perth, Western
Australia
6005
during
normal
business
hours.

59

APPENDIX
9

FINANCIAL SERVICES GUIDE AND INDEPENDENT EXPERT’S REPORT SUB-SAHARA RESOURCES NL 29 MAY 2009

==> picture [131 x 88] intentionally omitted <==

60

==> picture [174 x 36] intentionally omitted <==

BDO Kendalls Corporate Finance (WA) Pty Ltd Level 8, 256 St Georges Terrace Perth WA 6000 PO Box 7426 Cloisters Square Perth WA 6850 Phone 61 9360 4200 Fax 61 9481 2524

bdo@bdo.com.au www.bdo.com.au

ABN 27 124 031 045 AFS Licence No. 316158

Financial Services Guide

29 May 2009

BDO Kendalls Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (“ BDO Kendalls ” or “ we ” or “ us ” or “ ours ” as appropriate) has been engaged by Sub-Sahara Resources NL (“ Sub-Sahara ”) to provide an independent expert’s report on the proposal to merge via a scheme of arrangement with Chalice Gold Mines Limited. You will be provided with a copy of our report as a retail client because you are a shareholder of Sub-Sahara.

Financial Services Guide

In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (“ FSG ”). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

This FSG includes information about:

• ♦ Who we are and how we can be contacted;

• ♦ The services we are authorised to provide under our Australian Financial Services Licence, Licence No. 316158;

• ♦ Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;

• ♦ Any relevant associations or relationships we have; and

• ♦ Our internal and external complaints handling procedures and how you may access them.

Information about us

BDO Kendalls Corporate Finance (WA) Pty Ltd is a member firm of the BDO Kendalls network in Australia, a national association of separate partnerships and entities. The financial product advice in our report is provided by BDO Kendalls Corporate Finance (WA) Pty Ltd and not by BDO Kendalls or its related entities. BDO Kendalls and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and BDO Kendalls (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business.

Financial services we are licensed to provide

We hold an Australian Financial Services Licence that authorises us to provide general financial product advice for securities to retail and wholesale clients.

When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you.

General Financial Product Advice

We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs.

You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice.

61

Financial Services Guide

Page 62

Fees, Commissions and Other Benefits that we may receive

We charge fees for providing rep o rts, including this report. These fees are negotiated and agreed with the person who engages us to p r ovide the report. Fees are agreed on an hourly basis o r as a fixed amount depending on the terms of the agreement. The fee for this engagement is approximately $25,000.

Except for the fees referred to a b ove, neither BDO Kendalls, nor any of its directors, employees or related entities, receive any pecu n iary benefit or other benefit, directly or indirectly, for or i n connection with the provision of the report.

Other Assignments

We prepared an independent exp e rt’s report for Chalice Gold Mines Limited for an unrelate d transaction in October 2008. We received a f ee of approximately $30,000 for our report, however, o u r report was never released to the market.

Remuneration or other benefits received by our employees

All our employees receive a salary. Our employees are eligible for bonuses based on overa l l productivity but not directly in connection with a ny engagement for the provision of a report.

We have received a fee from Sub-Sahara for our professional services in providing this re p ort. That fee is not linked in any way with our opinion as expressed in this report.

Referrals

We do not pay commissions or pr o vide any other benefits to any person for referring custo m ers to us in connection with the reports that w e are licensed to provide.

Complaints resolution

Internal complaints resolution proc e ss

As the holder of an Australian Fin a ncial Services Licence, we are required to have a syste m for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Off i cer, BDO Kendalls Corporate Finance (WA) Pty Ltd, PO Box 7426 Cloisters Square, Perth WA 6850.

When we receive a written compl a int we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination.

Referral to External Dispute Resol u tion Scheme

A complainant not satisfied with th e outcome of the above process, or our determination, h a s the right to refer the matter to the Financial O m budsman Service (“ FOS ”). FOS is an independent org a nisation that has been established to provide fr e e advice and assistance to consumers to help in resolving complaints relating to the financial service ind u stry. FOS will be able to advise you as to whether or no t they can be of assistance in this matter. Our F O S Membership Number is 12561.

Further details about FOS are a v ailable at the FOS website www.fos.org.au or by con t acting them directly via the details set out belo w .

Financial Ombudsman S e rvice GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 639 9 Email: info@fos.org.au

Contact details

You may contact us using the details set out at the top of our letterhead on page 1 of this FSG.

SUB-SAHARA RESOURCES NL

INDEPENDENT EXPERT’S REPORT

TABLE OF CONTENTS

1.	I N TROD U C TI O N ........................................................................... 64
2.	S UM M A RY A ND OP I NI O N ............................................................... 64
3.	OU TLI NE O F S CH EM E ................................................................... 66
4.	RE P OR T RE QUI R EM EN TS ............................................................... 68
5.	BA S I S OF EV ALU ATI ON ................................................................. 69
6.	P ROFI LE OF S UB S AH AR A RE S OU RC ES N L ......................................... 69
7.	P ROFI LE OF C HA LI C E ................................................................... 73
8.	IND U STR YANA LYS I S ................................................................... 76
9.	V ALU ATI O N M ETH OD OL OGI ES ........................................................ 78
10.	V ALU ATI O N O F S UB S AH AR A PR I OR TO THE S CHE ME ........................... 81
11.	V ALU ATI O N O F C HA LI CE A FTE R TH E SC H EME ..................................... 85
12.	I S TH E SC HEM E FA I R? ................................................................. 88
13.	OTH ER C ON SI D E RA TI ONS .............................................................. 88
14.	I S TH E SC HEM E R EAS ONAB LE? ...................................................... 89
15.	AD V AN TAGE S A ND DI S AD VA NTA GE S I F TH E S CH EME I S AP P ROV E D .......... 89
16.	AD V AN TAGE S A ND DI S AD VA NTA GE S I F TH E S CH EME I S NOT AP P ROVE D .... 90
17.	CO NC LUS I O N ............................................................................. 91
18.	S OUR CE S OF I NFO RM A TI ON ........................................................... 91
19.	I N DE PEN DE N CE .......................................................................... 91
20.	QU ALI FI CA TI ON S ........................................................................ 92
21.	DI SC LAI M ERS AN D CO NS E NTS ........................................................ 92

APPENDIX 1 – Glossary

APPENDIX 2 – Independent valuation of Zara Gold Project prepared by Al Maynard and Associates Pty Ltd

APPENDIX 3 – Independent valuation of Chalice Gold Mines Limited’s exploration assets prepared by SRK Consulting (Australasia) Pty Ltd

63

==> picture [175 x 36] intentionally omitted <==

BDO Kendalls Corporate Finance (WA) Pty Ltd Level 8, 256 St Georges Terrace Perth WA 6000 PO Box 7426 Cloisters Square Perth WA 6850 Phone 61 9360 4200 Fax 61 9481 2524

bdo@bdo.com.au www.bdo.com.au

ABN 27 124 031 045 AFS Licence No. 316158

29 May 2009

The Directors Sub-Sahara Resources NL PO Box 8260 Perth Business Centre PERTH WA 6849

Dear Sirs

INDEPENDENT EXPERT'S REPORT – SCHEME OF ARRANGEMENT

1. INT RODUCTION

BDO Kendalls Corporate Finance (WA) Pty Ltd (“ BDO Kendalls ”) has been engaged by SubSahara Resources NL (“ Sub-Sahara ”) to prepare an Independent Expert’s Report (“ our Report ”) to express an opinion as to whether or not the proposal to merge with Chalice Gold Mines Limited (“ Chalice ”) via a scheme of arrangement (“ the Scheme ”) is in the best interests of non-associated shareholders (“ Shareholders ”) of Sub-Sahara.

Our Report is to be included in the Scheme Document for Sub-Sahara to be sent to all Shareholders to assist them in deciding whether to approve the Scheme.

2. SUMMARY AND OPINION

2.1 Opinion

We have considered the terms of the Scheme as outlined in the body of this report and have concluded that the Scheme is in the best interest of Shareholders in the absence of a higher offer.

In our opinion, if the Scheme had been in the form of a takeover bid we would have concluded that the proposal was not fair but reasonable. The Scheme is not fair because the value of 10.73 Sub-Sahara shares prior to the announcement of the Scheme is greater than the value of a Chalice share following the implementation of the Scheme. However, we consider the Scheme to be reasonable because the advantages of the Scheme to Shareholders are greater than the disadvantages. In particular, we have considered Sub-Sahara’s need for cash to fund the development of the Zara Project.

RG 111.18 states that if an expert concludes a scheme is not fair but reasonable then it is still open to the expert to conclude that the scheme is in the best interests of members. Given Sub-Sahara’s requirement for funding we consider that there are sufficient reasons for Shareholders to vote in favour of the Scheme.

We believe that the Directors would be justified in recommending that Shareholders vote in favour of the Scheme, in the absence of a higher offer.

64

The Directors Sub-Sahara Resources NL

Page 65 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

2.2 Fairness

In Section 12 we determined that the value of 10.73 Sub-Sahara shares prior to the Scheme compares to the value of a Chalice share following the Scheme, as detailed below.

		Ref	Low	Preferred	High
			$	$	$
Value of	a Chalice share	10	0.201	0.237	0.277
Value of	10.73 Sub-Sahara shares	11	0.247	0.311	0.365

The above valuation ranges are graphically presented as follows:

==> picture [341 x 125] intentionally omitted <==

----- Start of picture text -----

Valuation Summary
Value of a Chalice share
Value of 10.73 Sub Sahara
shares
0.19 0.24 0.29 0.34
$
----- End of picture text -----

The above pricing indicates that the Scheme is not fair for Shareholders.

2.3 Reasonableness

We have considered the analysis in Sections 13 to 16 of this report, in terms of both:

• advantages and disadvantages of approving or not approving the Scheme; or

• alternatives, including the position of Shareholders if the Scheme does not proceed.

In our opinion, the position of Shareholders if the Scheme proceeds is more advantageous than the position if the Scheme does not proceed. Accordingly, we believe that the Scheme is reasonable for Shareholders.

The respective advantages and disadvantages if the Scheme is approved are summarised below:

ADVANTAGES AND DISADVANTAGES IF THE SCHEME IS APPROVED	ADVANTAGES AND DISADVANTAGES IF THE SCHEME IS APPROVED	ADVANTAGES AND DISADVANTAGES IF THE SCHEME IS APPROVED	ADVANTAGES AND DISADVANTAGES IF THE SCHEME IS APPROVED
Section	Advantages	Section	Disadvantages
15.1.1	Access to substantial cash reserves	15.2.1	Dilution of Shareholders’ interest in Sub-Sahara
15.1.2	Exposure to additional exploration assets
15.1.3	Benefits of being a larger company

65

The Directors Sub-Sahara Resources NL

Page 66 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

The respective advantages and disadvantages if the Scheme is not approved are summarised below:

ADVANTAGES AND DISADVANTAGES IF THE SCHEME IS NOT APPROVED	ADVANTAGES AND DISADVANTAGES IF THE SCHEME IS NOT APPROVED	ADVANTAGES AND DISADVANTAGES IF THE SCHEME IS NOT APPROVED	ADVANTAGES AND DISADVANTAGES IF THE SCHEME IS NOT APPROVED
Section	Advantages	Section	Disadvantages
16.1.1	Retain current interest in Sub-Sahara and its assets	16.2.1	May not find a better offer
16.1.2	May find a better offer	16.2.2	Potential repayment of a loan from Chalice

3. OUT LINE OF SCHEME

Sub-Sahara and Chalice propose to merge via a scheme of arrangement. The Scheme involves Chalice acquiring all the issued shares of Sub-Sahara. Sub-Sahara Shareholders will receive shares in Chalice as consideration for their shares in Sub-Sahara. The Scheme provides for Sub-Sahara shareholders to receive one Chalice share for every 10.73 of their Sub-Sahara shares.

The options and partly paid shares of Sub-Sahara will be treated as follows:

Description	Treatment
Partly paid shares	Partly paid shareholders will be offered to convert to one Chalice
	share for the following Sub-Sahara partly paid shares:
	• $0.0899 unpaid – 142.3 Sub-Sahara partly paid shares
	• $0.0649 unpaid – 25.5 Sub-Sahara partly paid shares
	• $0.1499 unpaid (payable 2 March 2011) – 33.9 Sub-Sahara
	partly paid shares
	• $0.0999 unpaid (payable 30 November 2012) – 15.0
	Sub-Sahara partly paid shares
	• $0.0999 unpaid (payable 29 November 2011) – 32.4
	Sub-Sahara partly paid shares
	• $0.1099 unpaid – 34.3 Sub-Sahara partly paid shares
	• $0.1299 unpaid – 38.2 Sub-Sahara partly paid shares
	• $0.1499 unpaid (payable 30 November 2012) – 16.4
	Sub-Sahara partly paid shares
	• $0.1999 unpaid – 17.6 Sub-Sahara partly paid shares
Listed options	These options will be allowed to lapse.
Unlisted options	These options are held by Anvil Mining Limited. The options may be
exercisable at $0.15	cancelled for no consideration or Chalice could agree to purchase
	these options.
Unlisted options	These options will be converted to Chalice shares at a ratio of one
exercisable at $0.11	Chalice share for 18.65 Sub-Sahara options or will be cancelled.
Unlisted options	These options will be converted to Chalice shares at a ratio of one
exercisable at $0.10	Chalice share for 28.94 Sub-Sahara options or will be cancelled.

66

The Directors Sub-Sahara Resources NL

Page 67 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

The Scheme is subject to the following:

• The merger implementation agreement executed on 29 April 2009 not being terminated;

• Any third party consents and approvals are received;

• The Scheme is approved by Shareholders;

• The Scheme is approved by the court;

Sub-Sahara currently has 501,159,859 fully paid ordinary shares on issue. If the Scheme is approved then these shares will convert to approximately 46,702,892 Chalice shares (assuming there will be no fractional entitlements). Current Chalice shareholders hold 72,800,000 shares, which means Sub-Sahara shareholders will have an interest of approximately 39% in the merged entity. However, this does not take into account the possible effects of the Sub-Sahara partly paid shares and options being converted to Chalice shares. The table below demonstrates the potential shareholdings that Sub-Sahara shareholders will have in Chalice following the Scheme:

	Current	Proposed
	Sub-Sahara Shares Other Sub- Sahara Securities Chalice Shares	Conversion Rate Chalice Shareholders Percentage
Chalice shareholders Sub-Sahara Shareholders Options ($0.10) Options ($0.11) Options ($0.15) Partly paid shares ($0.0999) Partly paid shares ($0.1099) Partly paid shares ($0.1299) Partly paid shares ($0.0899) Partly paid shares ($0.0649) Partly paid shares ($0.1499) Partly paid shares ($0.0999) Partly paid shares ($0.1499) Partly paid shares ($0.1999) Total	- - 72,800,000 501,159,859 - 400,000 - - 3,400,000 - - 25,000,000 - - 4,500,000 - - 2,850,000 - - 450,000 - - 7,290,000 - - 5,750,000 - - 5,750,000 - - 4,000,000 - - 4,000,000 - - 4,000,000 -	- 72,800,000 60.11% 10.73 46,702,892 38.56% 28.9 13,820 0.01% 18.6 182,276 0.15% - - - 32.4 138,838 0.11% 34.3 82,994 0.07% 38.2 11,790 0.01% 142.3 51,246 0.04% 25.5 225,277 0.19% 33.9 169,626 0.14% 15.0 267,083 0.22% 16.4 243,851 0.20% 17.6 226,926 0.19%
	501,159,859 64,090,000 72,800,000	121,116,619 100.00%

67

The Directors Sub-Sahara Resources NL

Page 68 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

The changes in the shareholdings of Chalice and Sub-Sahara as a result of the implementation of the Scheme are set out graphically below:

Pre Scheme:

==> picture [299 x 69] intentionally omitted <==

----- Start of picture text -----

100% 100%
!"#$!%&%'% .&%+/0)
----- End of picture text -----

Post Scheme:

==> picture [248 x 103] intentionally omitted <==

----- Start of picture text -----

38.5% 1.4% 60.1%
.&%+/0)
100%
!"#$!%&%'%
----- End of picture text -----

The tables above assume that no Chalice options are exercised prior to the implementation of the Scheme.

Simultaneously with the implementation of the Scheme Chalice will acquire Yolanda International Limited (“ YIL ”) which owns an 11% interest in the Zara Gold Project.

4. REPORT REQUIREMENT S

The Scheme is to be implemented pursuant to Section 411 of the Corporations Act Regulations (“ Section 411 ”). Part 3 of Schedule 8 to the Corporations Regulations prescribes the information to be sent to shareholders in relation to members’ schemes of arrangement pursuant to Section 411.

Schedule 8 of the Corporations Regulations requires an independent expert’s report if:

• The corporation that is the other party to the Scheme has a common director or directors with the company which is the subject of the Scheme; or

• The corporation that is the other party is entitled to more than 30% of the voting shares in the subject company.

68

The Directors Sub-Sahara Resources NL

Page 69 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

The criteria above do not apply to the Scheme. Accordingly, there is no requirement for this report pursuant to Section 411.

Notwithstanding the fact that there is no legal requirement to engage an independent expert to report on the Scheme, the directors of Sub-Sahara have requested that BDO Kendalls prepare this report as if it were an independent expert’s report pursuant to Section 411, and to provide an opinion as to whether the directors of Sub-Sahara are justified in recommending the Scheme in the absence of a superior proposal.

5. BASIS OF EVALUAT ION

5.1 Regulatory Guidance

In determining whether the Scheme is in the best interests of Shareholders, we have had regard to the views expressed by the ASIC in Regulatory Guide 111: Content of Expert Reports. This Regulatory Guide suggests that an opinion as to whether transactions are fair and reasonable should focus on the purpose and outcome of the transaction, that is, the substance of the transaction rather than the legal mechanism to effect the transaction.

In our opinion the Scheme is a control transaction as defined by RG 111 because Chalice shareholders will retain 60.9% of the merged entity and the Chalice Board will only include one Sub-Sahara director. We have therefore assessed the Scheme to consider whether in our opinion it is in the best interests of Shareholders.

5.2 Adopted Basis of Evaluation

RG 111 requires that the form of analysis performed by the independent expert to be substantially the same as for a takeover bid. If the expert would conclude that the proposal was “fair and reasonable” if it was in the form a takeover bid, it will be able to conclude the scheme is in the best interest, of the members of the Company. Having regard to RG 111, BDO Kendalls has completed this comparison in two parts:

• A comparison between the value of a Sub-Sahara share prior to the Scheme and the value of a Chalice share following the Scheme (fairness – see Section 12 “Is the Scheme Fair?”); and

• An investigation into other significant factors to which Shareholders might give consideration, prior to approving the resolution, after reference to the value derived above (reasonableness – see Sections 13 to 16).

If the Scheme is considered to be “not fair” but reasonable if it was in the form of a takeover bid, it is still open to the expert to conclude that the Scheme is in the best interest of the Shareholders.

6. PROFILE OF SUB SAHAR A RESOURCES NL

6.1 History

Sub-Sahara is an Australian junior exploration company based in Perth, Western Australia focusing on exploration in Eritrea. Formerly known as Maiden Gold NL, the Company was formed in 1993 and listed on the ASX in 1994.

The Company’s interest in Eritrea is the Zara Gold Project Joint Venture (JV) with Dragon Mining Ltd and Africa Wide Resources Ltd comprising four licences covering an

69

The Directors Sub-Sahara Resources NL

Page 70 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

area of 147km[2] . Sub-Sahara’s interest is 69% and the primary focus of this JV is the Koka gold deposit, expected to yield approximately 0.94 million ounces of gold. The Eritrean government recently awarded its first mining license prompting confidence in the potential for economic development of the site.

On 3 March 2009 Sub-Sahara completed the sale of its Tanzanian assets to Western Metals Limited in exchange for the following:

• $900,000 in cash;

• $250,000 deferred payment by the end of 2009 subject to assessment of final liabilities;

• $100,000 payable subject to a pre-emptive right; and

• $5 million on commencement of production at the Nyanzaga gold project.

6.2 Capital Structure

The quoted share capital of Sub-Sahara as at 17 April 2009 is outlined below:

	Number
Total Ordinary Shares on Issue Top 20 Shareholders Top 20 Shareholders - % of shares on issue	501,159,859 307,014,115
	61.3%

Source: Computershare

The distribution of shareholdings in Sub-Sahara as at 31 March 2009 is as follows:

Range of Shares Held	No. of Ordinary Shareholders	No. of Ordinary Shares	%Issued Capital
1-1,000 53 18,083 0.0%
1,001-5,000 97 321,078 0.1%
5,001-10,000 241 2,049,900 0.4%
10,001-100,000 883 39,549,040 7.9%
100,001 – and over 385 459,221,758 91.6%
TOTAL 1,659 501,159,859 100.0%

Source: Computershare

The ordinary shares held by the most substantial shareholders as at 17 April 2009 is detailed below:

Name	No of Ordinary	**Percentage of **
	Shares Held	Issued Shares (%)
Anvil Mining Limited ANZ Nominees Limited Sundowner International Limited Merrill Lynch (Australia) Nominees Pty Limited Total Top 4 Others Total Ordinary Shares on Issue	90,000,000 18.0% 52,801,387 10.5% 39,260,808 7.8% 27,747,500 5.5%
	209,809,695 41.8% 291,350,164 58.2%
	501,159,859 100.0%

Source: Computershare

70

The Directors Sub-Sahara Resources NL

Page 71 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

6.3 Historical Balance Sheets

Balance Sheets	As at As at As at
	31 December 2008 $ 30 June 2008 $ 30 June 2007 $
CURRENT ASSETS Cash assets Trade and other receivables Other financial assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Deferred exploration, evaluation and development costs TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY	599,246 3,117,758 4,752,973 640,484 282,305 760,719 57,500 1,256,802 15,516,849
	1,297,230 4,656,865 21,030,541 564,168 644,845 252,555 8,245,582 14,491,237 10,216,566
	8,809,750 15,136,082 10,469,121
	10,106,980 19,792,947 31,499,662
	587,096 252,373 1,412,528 19,249 53,222 5,977,682
	606,345 305,595 7,390,210 44,331 - -
	44,331 - -
	650,676 305,595 7,390,210
	9,456,304 19,487,352 24,109,452
	33,763,421 33,763,421 31,049,982 898,318 898,318 854,829 (25,205,435) (15,174,387) (7,795,359)
	9,456,304 19,487,352 **24,109,452 **

Source: Source: Sub-Sahara Resources NL Financial Report for the year ended 30 June 2008 and reviewed financial report for the six months ended 31 December 2008.

Sub-Sahara wrote down the value of its exploration expenditure by approximately $7.5 million during the six months ended 31 December 2008. The value of financial assets was also written down by approximately $1.1 million for the same period. We note that Sub-Sahara’s cash was predominantly utilised on exploration expenditure.

71

The Directors Sub-Sahara Resources NL

Page 72 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

6.4 Historical Income Statements

Income Statement	Six months ended 31 December 2008 $ Year ended 30 June 2008 $ Year ended 30 June 2007 $
Revenue Management fees Profit from sale of investment Proceeds from sale of prospects Other Interest Received- other corporations Total Revenue Expenses Depreciation and amortisation expenses Salaries, directors and employee benefits expense Exploration expenditure written down Provision for diminution of investments Cost of prospects sold Annual report costs ASX fees Audit fees Consulting fees Insurance Administration and accounting costs Motor vehicle expenses Public relations and conferences Rent Security costs Telephone Travel-corporate and project Share registry costs Other expenses from ordinary activities Loss from sale of investment Profit before income tax expense Income tax expense Net profit	- 342,198 137,810 - - 14,884,570 - 647,415 - 135,751 41,932 10,822 - 77,148 130,683
	135,751 1,108,693 15,163,885 (98,112) (152,910) (137,066) (626,675) (1,336,637) (1,492,153) (7,495,520) (725,134) (2,254) (552,318) (42,892) (88,623) - (383,178) (48,427) - (16,693) (33,378) - (25,191) (26,856) - (38,074) (40,142) - (64,295) (96,081) - (30,852) (55,876) (505,560) (248,700) (206,514) - (3,862) (9,051) - (23,859) (23,706) - (88,961) (66,007) - (13,308) (13,884) - (31,552) (33,033) (58,091) (229,859) (169,346) - (37,094) (26,429) (277,892) (410,795) (319,149) (541,803) (5,624,357) -
	(10,020,220) (8,419,510) 12,275,910
	- 1,016,161 (5,953,828)
	(10,020,220) (7,403,349) **6,322,082 **

Source: Source: Sub-Sahara Resources NL Financial Report for the year ended 30 June 2008 and reviewed financial report for the six months ended 31 December 2008.

We note that some of the items included in the income statement for the six months ended 31 December 2008 have been classified differently to prior periods.

Approximately $14.9 million of revenue for the year ended 30 June 2007 was from the sale of a project in Eritrea during that financial year. Sub-Sahara wrote down a significant value of exploration expenditure during the six months ended 31 December 2008.

72

The Directors Sub-Sahara Resources NL

Page 73 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

7. PROFILE OF CHALICE

7.1 History

Chalice is a gold focused exploration and development company formed in 2005. The company commenced trading on the Australian Securities Exchange in March 2006 after a successful initial public offering raised $7.5 million.

The primary business objective of Chalice is to create shareholder wealth through the discovery and development of economic gold deposits, principally in Western Australia.

The company has both direct and joint venture interests in three major projects located in the West Pilbara, Laverton and Murchison Regions of Western Australia. Initially Chalice held the Chalice and Higginsville Projects in the Eastern Goldfields, however these were sold to Avoca Resources Limited in May 2007. Consideration comprised 3.5 million Avoca ASX listed shares and 2 million 3-year unlisted options with a second and final tranche of 483,335 shares settled in February 2009 upon finalisation of tenement matters.

The Board of Chalice consists of the following directors:

• Timothy Goyder – Executive Director

Tim has over 35 years experience in the resource industry and has been involved in the formation and management of a number of publicly listed companies.

• Douglas Jones – Non-Executive Director

Doug has 30 years experience in international mineral exploration in Australia, Africa, South America and Europe. Doug’s career has covered exploration for volcanic and sediment-hosted zinc-copper-gold, gold and IOCG style coppergold.

• Anthony Kiernan – Non-Executive Director

Anthony is a solicitor and is experienced in the administration and operation of listed public companies.

Chalice’s major projects are as follows:

Yandeearra Project

The Yandeearra Project is located in the West Pilbara and consists of a tenement package of around 1,300 km[2] contiguous with Range River Gold Limited’s Indee Gold Project and De Grey Mining Limited’s Turner Gold River Belt.

Atlas Iron Limited may acquire iron ore rights over the project for $1 million, having paid an option fee of $250,000.

Chalice’s ongoing field work at Yandeearra has included aircore, RAB, RC and vacuum drilling programs which have so far outlined 17 significant gold in soil anomalies. The bulk of this work was undertaken in the Mallina Basin. In addition to this, geological and reconnaissance sampling has confirmed high tenor gold in soil and multi element base metal anomalies across the tenement. These discoveries are of varying size potential and further sampling will be undertaken to ascertain development viability.

73

The Directors Sub-Sahara Resources NL

Page 74 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

Wilga Project

The Wilga Project covers approximately 20km[2] and is located 55km south of Laverton in the mineral rich Laverton Tectonic Zone. In September 2008 Chalice entered an agreement with AngloGold Ashanti Australia Limited whereby AngloGold may earn a 75% interest in the project for $2 million expenditure within the next 4 years.

The geological setting of the project area consists of outcropping Archaean basalts, peridotite and thin banded iron formation. Within the basaltic sequences the area is hosted by banded iron formations quartz veining and shear zones. Historic exploration of the area defined an extensive gold anomalous zone centred on the banded iron formation and as such Chalice considers further exploration warranted.

The project is still in its very early stages.

Gnaweeda Project

The Gnaweeda Project is located at Gnaweeda in the Murchison Region of Western Australia. Chalice has entered into a joint venture with Teck Cominco Australia Limited granting a 70% interest for $1.5 million expenditure over three years. At present Teck Cominco has earned 51% of the project which covers 190km2 of tenements.

To date Teck Cominco has completed ten RC holes, mostly intersecting coarse-grained mafic or dolerite rocks with pervasive carbonate alteration, localised quartz-carbonate veining and disseminated pyrite. Three holes returned narrow high grade gold intercepts within broader anomalous gold mineralisations. Additional diamond and RC drilling is planned to test the extent of mineralisations discovered to date and to provide further structural information.

7.2 Share Structure

The quoted share capital of Chalice as at 28 April 2009 is outlined below:

	Number
Total Ordinary Shares on Issue Top 20 Shareholders Top 20 Shareholders - % of shares on issue	72,800,000 41,232,581
	56.6%

Source: Computershare

The distribution of shareholdings in Chalice as at 31 March 2009 is as follows:

Range of Shares Held	No. of Ordinary Shareholders	No. of Ordinary Shares	%Issued Capital
1-1,000 66 27,359 0.0%
1,001-5,000 257 742,822 1.0%
5,001-10,000 181 1,532,197 2.1%
10,001-100,000 284 10,228,577 14.0%
100,001 – and over 92 60,269,045 82.8%
TOTAL 880 72,800,000 100.0%

Source: Computershare

74

The Directors Sub-Sahara Resources NL

Page 75 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

The ordinary shares held by the most substantial shareholders as at 28 April 2009 is detailed below:

Name	No of Ordinary	**Percentage of **
	Shares Held	Issued Shares (%)
Plato Prospecting Pty Ltd Balfes (QLD) Pty Ltd Calm Holdings Pty Ltd Nefco Nominees Pty Ltd Total Top 4 Others Total Ordinary Shares on Issue	16,202,452 22.2% 5,000,000 6.9% 2,842,170 3.9% 2,619,501 3.6%
	26,664,123 36.6% 46,135,877 63.4%
	72,800,000 100.0%

Source: Computershare

7.3 Historical Balance Sheets

Balance Sheets	As at As at As at
	31 December 2008 $ 30 June 2008 $ 30 June 2007 $
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 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 Accumulated losses Reserves TOTAL EQUITY	9,393,534 9,972,766 2,323,949 1,067,225 84,085 5,919,204 - - 20,701 - 164,064 153,189
	10,460,759 10,220,915 8,417,043 13,442 74,698 70,193 1,838,391 2,033,937 3,134,600 263,712 207,781 208,491
	2,234,545 2,316,416 3,413,284
	12,695,304 12,537,331 11,830,327
	159,839 60,782 152,179 21,710 19,565 22,688 51,104 - -
	232,653 80,347 174,867 - 51,976 54,326
	- 51,976 51,326
	232,653 132,323 229,193
	12,462,651 12,405,008 11,601,134
	13,974,454 13,974,454 13,974,454 (2,121,649) (2,140,356) (2,875,202) 609,846 570,910 501,882
	12,462,651 12,405,008 11,601,134

Source: Chalice Gold Mines Limited Financial Report for the year ended 30 June 2008 and reviewed financial statements for the six months ended 31 December 2008.

75

The Directors Sub-Sahara Resources NL

Page 76 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

During the year ended 30 June 2008 Chalice exercised its options and sold its shares in Avoca Resources Limited that it received following the sale of its Chalice and Higginsville projects. This resulted in a significant increase in cash at bank and a reduction in trade and other receivables.

7.4 Historical Income Statements

Income Statements	6 months ended 31 December 2008 Year ended 30 June 2008 Year ended 30 June 2007	6 months Ye
	$ $ $
Revenue Net gain/(loss) on sale of exploration/ evaluation assets Net gain on sale of securities Changes in fair value of available for sale assets Other income Total Revenue Expenses Impairment losses on exploration and evaluation expenditure Project transaction costs expensed Exploration costs not capitalised Corporate administrative expenses Finance costs Profit before income tax expense Income tax expense Net profit	674,486 (1,681) 1,581,271 - 556,852 - 1,499 1,996,631 - 524,911 748,586 452,305
	1,200,896 3,300,388 2,033,576 - (1,355,640) (1,556,950) (280,118) - - (74,414) (41,783) (68,211) (827,657) (1,168,055) (1,593,107) - (64) (2,784)
	18,707 734,846 (1,187,476)
	- - -
	18,707 734,846 (1,187,476)

Source: Chalice Gold Mines Limited Financial Report for the year ended 30 June 2008 and reviewed financial statements for the six months ended 31 December 2008.

The income statements above reflect the income generated from the sale of exploration assets. Exploration assets were impaired for the years ended 30 June 2007 and 30 June 2008, however, there was no impairment of exploration assets for the six months ended 31 December 2008.

8. I NDUSTRY ANALYSIS

8.1 Current Economic Conditions

It is of general consensus that the prolonged economic crisis will impact global economic activity beyond levels that were previously anticipated. According to a recent forecast from the International Monetary Fund (“ IMF ”), the global economy will shrink by between 0.5 and 1 percent on an annual average basis in 2009, before recovering gradually during the course of 2010. Following several years of strong economic conditions in the major global economies including the US, Europe and China, if forecasts eventuate it will be the first global contraction in 60 years.

Since the later months of 2007, the global economy has been characterised by sinking confidence and trade volumes, negative macroeconomic data and unrelenting financial turmoil. Governments and central banks have reacted with expansionary fiscal and monetary policy while the banking sector has been leveraging their balance sheets to

76

The Directors Sub-Sahara Resources NL

Page 77 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

reduce exposure the risky and emerging market assets. To date, the effect of expansionary monetary policy measures has been limited by the space available for reductions in the cash rate, stringent lending conditions by commercial banks, higher perceived default rates being priced into lending rates and the collapse of many traditional funding sources. Expansionary fiscal policy in the form of government stimulus packages have been well below the 2% of GDP that has been recommended by the IMF and this also looks to be the case in the immediate future.

The IMF has forecast that there is a real risk of deflationary pressures, especially in Japan and the US, potentially resulting in a further reduction in economic growth. Commodity and oil prices are expected to remain low while the current economic conditions persist.

In the past decade, growth in the Australian economy has been sustained predominantly by demand for commodities from developing countries such as China and India. Risk aversion has resulted in the global deleveraging of risky assets and assets in emerging markets due to the perceived risk associated with these economies. This is a concern for corporate entities sourcing funding in these economies. The IMF has anticipated that capital flows to emerging markets are likely to continue to be scaled back, meaning that entities in these economies will have to become proactive in sourcing funds domestically. Lower economic activity in these countries is likely to affect the demand for Australian commodities.

8.2 Gold Industry analysis

8.2.1 Supply and demand

Gold is both a commodity and a monetary asset. All gold that has been mined continues to exist indefinitely in some form. According to precious metals research house GFMS Limited, at the end of 2007 the above ground stocks of gold were approximately 161,000 tonnes.

Demand for gold is satisfied from both mine production and the recycling of previously mined gold. Approximately two-thirds of annual demand for gold is driven by jewellery fabrication, with the remainder driven by industrial use and investment.

Demand for gold increased considerably towards the end of 2008. The increase was triggered by a fall in gold prices which coincided with escalated levels of economic and financial uncertainty. The biggest contributor to the increase in demand was identifiable investment in gold, which increased by 56% relative to prior year levels.

Demand for gold consistently exceeds supply. World gold production in 2007 was approximately 2,476 tonnes. Production for the first three quarters of 2008 was 1,791 tonnes, down 3% on the corresponding period for 2007.

8.2.2 Gold prices

As Gold is an internationally traded commodity its price fluctuates daily based on global supply and demand. The gold price at 18 May 2009 was approximately USD$930 per ounce.

The turmoil in global capital markets in the latter half of 2008 has had an influence on the price of gold. Although volatility has increased as a result of the credit crisis, gold has remained less volatile than other commodities, and has been more resilient to the decline in commodity prices. The price of gold exceeded USD$1,000 per ounce in February 2009 and has traded between USD$850 and US$950 since February.

77

The Directors Sub-Sahara Resources NL

Page 78 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

8.2.3 Outlook

Despite the intensification of financial market turmoil which usually boosts demand for Gold, a strengthening US dollar and increased volatility in the gold price has decreased its attractiveness as an alternative investment. Global jewellery demand has increased and is set to continue and this is expected to offset the impact of the decrease in investment demand.

Consensus forecasts from the major broking houses predict the gold price will be in the region of US$855 to US$870 for the remainder of 2009.

Because gold has vast quantities of above-ground stocks, forward prices almost invariably (but not always) rise as the maturity of the contract extends. The table below summarises the gold future prices as at 18 May 2009:

Date	Future Gold Price ($USD/ounce)
May 2009	930.9
June 2009	931.3
July 2009	931.9
August 2009	933.1
October 2009	934.6
December 2009	936.0
Source: NYMEX.com

9. VALUATION METHODOLOGIES

9.1 Methodologies Commonly Used for Valuing Assets and Businesses

9.1.1 Capitalisation of future maintainable earnings (“FME”)

This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data.

The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and nonfinite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (“ EBIT ”) or earnings before interest, tax, depreciation and amortisation (“ EBITDA ”). The capitalisation rate or "earnings multiple" is adjusted to reflect which base is being used for FME.

78

The Directors Sub-Sahara Resources NL

Page 79 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

9.1.2 Discounted future cash flows (“DCF”)

The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present value at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start up phase, or experience irregular cash flows.

9.1.3 Net tangible asset value on a going concern basis (“NTA”)

Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

• Orderly realisation of assets method

• Liquidation of assets method

• Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity may not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs.

Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity’s valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on a going concern basis. This is particularly so for exploration and mining companies where investments are in finite life producing assets or prospective exploration areas.

These asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when entities are not profitable, a

79

The Directors Page 80 Sub-Sahara Resources NL 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

significant proportion of the entity’s assets are liquid or for asset holding companies.

9.1.4 Quoted Market Price Basis

Another alternative valuation approach that can be used in conjunction with (or as a replacement for) any of the above methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a “deep” market in that security.

9.2 Valuation Approach Adopted for Sub-Sahara

The value of Sub-Sahara is reflected in the value of its assets, therefore, we consider the net asset valuation methodology to be most appropriate for valuing the shares of Sub-Sahara. We have also considered the quoted market price valuation methodology as a comparison to the net asset value methodology. For the quoted market price valuation to be considered reasonable the shares of Sub-Sahara must demonstrate an adequate depth and liquidity in trading.

We do not consider the DCF and FME valuation methodologies to be appropriate for Sub-Sahara because the Company is not able to make reliable forecasts based on current projects and it does not have a history of trading profits.

9.3 Valuation Approach Adopted for Chalice after the Scheme

Following the Scheme, Sub-Sahara Shareholders will have an interest in Chalice, who will hold 100% of Sub-Sahara. Therefore, we have considered the value of Chalice and Sub-Sahara as a combined entity and have taken into account any transactions or changes in assets that will occur as a result of the Scheme and any transaction costs. We have utilised the net asset valuation methodology when considering the value of a Chalice share after the Scheme.

80

The Directors Sub-Sahara Resources NL

Page 81 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

10. VALUATION OF SUB SAH ARA PRIOR TO T HE SCHEME

10.1 Net Asset Value of Sub-Sahara Shares

The value of Sub-Sahara’s assets on a going concern basis is reflected in our valuation below:

Ref	Reviewed as at 31 December 2008 $ Low valuation $ Preferred valuation $ High valuation $
Assets Cash assets 10.1.1 Trade and other receivables Other financial assets Property, plant and equipment 10.1.2 Deferred exploration, evaluation and development costs 10.1.3 Total Assets Liabilities Trade and other payables 10.1.4 Provisions Total Liabilities Net Assets Shares on issue Value of a Sub-Sahara share	599,246 2,049,246 2,049,246 2,049,246 640,484 640,484 640,484 640,484 57,500 57,500 57,500 57,500 564,168 507,751 564,168 564,168 8,245,582 9,600,000 12,500,000 15,000,000
	10,106,980 12,854,981 15,811,398 18,311,398 587,096 1,037,096 1,037,096 1,037,096 63,580 63,580 63,580 63,580
	650,676 1,100,676 1,100,676 1,100,676
	9,456,304 11,754,305 14,710,722 17,210,722
	501,159,859 501,159,859 501,159,859 0.023 0.029 0.034

We have been advised that except for points noted below, there has not been a material change in the net assets of Sub-Sahara since 31 December 2008. The table above indicates the net asset value of a Sub-Sahara share is between $0.023 and $0.034, with a preferred value of $0.029.

The following adjustments were made to the net assets of Sub-Sahara as at 31 December 2008 in arriving at our valuation.

10.1.1 Cash

We have increased the cash balance of Sub Sahara by $1 million as a result of the proceeds from the conclusion of the sale of its Tanzanian assets. We have also increased cash by $450,000 as a result of the proceeds from a loan received from Chalice.

10.1.2 Property, plant and equipment

We have adjusted the low value of property, plant and equipment held by SubSahara by 10% to reflect a potential lower market value when compared to book value. We have not adjusted the preferred or high values as we consider the value of property, plant and equipment to be reasonable.

81

The Directors Sub-Sahara Resources NL

Page 82 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

10.1.3 Deferred exploration, evaluation and development costs

We instructed Al Maynard and Associates Pty Ltd (“ AMA ”) to provide an independent specialist market valuation of the exploration assets held by SubSahara. AMA considered a number of different valuation methods when valuing the mineral assets of Sub-Sahara. The valuation methodologies selected by AMA were the empirical method and the multiple of exploration expenditure method. The empirical method involves the application of the technical expert’s knowledge of the value of similar projects in arriving at a dollar value per inferred and indicated resource. The multiple of exploration expenditure method involves applying a multiple to historic expenditure that reflects the development stage of the assets and resource quality and amount of resource defined. Given the development stage of the exploration assets held by Sub-Sahara we consider these methods to be reasonable. AMA’s valuation is attached as Appendix 2.

AMA selected a range of values of between $9.6 million and $15 million, with a preferred value of $12.5 million.

10.1.4 Trade and other payables

On 26 May 2009 Sub-Sahara entered into a loan agreement with Chalice. Under the terms of the loan, Chalice has lent Sub-Sahara $450,000. Therefore, we have increased the value of trade and other payables by the amount of this loan.

10.2 Quoted Market Prices for Sub-Sahara Shares

10.2.1 Pre announcement share price

To provide a comparison to the Net Asset Valuation of Sub-Sahara in Section 10.1, we have also assessed the market price for Sub-Sahara shares.

The following chart provides a summary of the share price movement over the period from 3 April 2008 to 2 April 2009, being the last date prior to the announcement of the Scheme.

Source: Bloomberg

The daily price of Sub-Sahara shares has ranged from a high of $0.06 on 24 April 2008 to a low of $0.01 on 24 November 2008.

There was a substantial fall in the share price in November 2008. This fall coincided with a general fall in the value of shares listed on the ASX. There were no announcements around the period of the decline but we note that Sub-Sahara’s AGM was held on 28 November 2008.

82

The Directors Sub-Sahara Resources NL

Page 83 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

To provide further analysis of the market prices for Sub-Sahara shares, we have also considered the weighted average market price for 10, 30, 60 and 90 day periods to 2 April 2009.

	2 April 2009	10 Days	30 Days	60 Days	90 Days
Closing price	$0.014
Weighted Average price		$0.015	$0.015	$0.017	$0.017

Source: Bloomberg

The above weighted average prices are prior to the date of the announcement of the Scheme to avoid the influence of any increase in price of Sub-Sahara shares that has occurred since the offer was announced.

Our assessment of the pre announcement value of a Sub-Sahara share based on the quoted market price is between $0.014 and $0.017.

In order to demonstrate the liquidity of Sub-Sahara’s shares we have analysed the volume of trading in Sub-Sahara shares for the period to 2 April 2009 as set out below:

	Cumulative	% Issued
	volume	capital
1 Trading Day	-	0.00%
10 Trading Days	1,227,165	0.24%
30 Trading Days	2,756,665	0.55%
60 Trading Days	7,251,900	1.45%
90 Trading Days	19,633,114	3.92%
180 Trading Days	41,598,927	8.30%

Source: Bloomberg

This table indicates that Sub-Sahara shares display a low level of liquidity, with 3.92% of the Company’s current issued capital being traded over 90 trading days.

For the QMP method to be reliable there needs to be a ‘deep’ market in a company’s shares. We do not consider that there is a deep market in Sub-Sahara’s shares. As such, we believe it is not appropriate to rely on this valuation method considering the illiquidity of the shares.

83

The Directors Sub-Sahara Resources NL

Page 84 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

10.2.2 Post announcement share price

On 1 May 2009 Sub-Sahara announced a revision to the resource estimate for the Zara Project. This resulted in a significant increase in Sub-Sahara’s share price. The graph below demonstrates the movement in Sub-Sahara’s share price since the announcement of the Scheme.

==> picture [395 x 158] intentionally omitted <==

----- Start of picture text -----

34383 745
34375
743
34373
645
34365
'
643
34363
345
34335
34333 $
@$9%' 6?$9%' 78$9%' 83$9%' ?$=>' 68$=>' 73$=>' 7<$=>' ;$9%: 66$9%:
A+"B) .+-/CD(-&%')(>'/0)
!"##"$%&
----- End of picture text -----

Source: Bloomberg

The graph above shows that Sub-Sahara’s share price did not fluctuate greatly following the announcement of the Scheme. However, following the announcement on 1 May 2009 of the revised resource for the Zara Project, the share price increased significantly. We consider that this increase is reflective of the value of Sub-Sahara and does not include a material value of the potential for a combined Sub-Sahara and Chalice following the implementation of the Scheme. Therefore, we have considered it reasonable to consider the post announcement value of Sub-Sahara when considering the pre announcement value.

We have set out the weighted average share prices of Sub-Sahara to 11 May 2009 below:

	11 May 2009	10 Days	30 Days	60 Days	90 Days
Closing price	$0.025
Weighted Average price		$0.022	$0.021	$0.020	$0.020

Source: Bloomberg

The weighted average share price ranges between $0.020 and $0.022. We consider this to be a reasonable indication of the value of a Sub-Sahara share. However, we have provided a range of values that incorporates the high value of the price of a SubSahara share prior to the announcement of the Scheme. Therefore, our range is between $0.017 and $0.022, with a preferred value of $0.020.

84

The Directors Sub-Sahara Resources NL

Page 85 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

10.3 Conclusion of Value of Sub-Sahara Shares

In Sections 10.1 and 10.2 we have discussed the net asset value and quoted market price value of a Sub-Sahara share. These values are summarised below:

	Low value	Preferred value	High value
	per share	per share	per share
	$	$	$
Net asset value	0.023	0.029	0.034
Quoted market price value	0.017	0.020	0.022

The table above indicates that the net asset value of a Sub-Sahara share is greater than the quoted market price of a Sub-Sahara share. We have selected the net asset value as our preferred valuation methodology because the accuracy of the quoted market price value requires a deep and liquid market in shares, which we do not consider applicable in the case of Sub-Sahara. Therefore, we consider the value of a Sub-Sahara share to be between $0.023 and $0.034, with a preferred value of $0.029.

11. VALUATION OF CH ALI CE AFT ER T HE SCHEME

The value of Chalice on a going concern basis after the implementation of the Scheme is reflected below. Our valuation includes the assets and liabilities of Sub-Sahara and Chalice and also includes any other transactions that will affect the assets and liabilities of Sub-Sahara and Chalice that will occur as a result of the Scheme.

Ref	Consolidated as at 31 December 2008 $ Low valuation $ Preferred valuation $ High valuation $
Assets Cash assets 11.1 Trade and other receivables 11.2 Other financial assets Property, plant and equipment 11.3 Deferred exploration, evaluation and development costs 11.4 Total Assets Liabilities Trade and other payables 11.5 Provisions Other Total Liabilities Net Assets Shares on issue Value of a Chalice share	9,992,780 9,169,780 9,169,780 9,169,780 1,707,709 922,709 922,709 922,709 189,942 189,942 189,942 189,942 827,880 745,092 827,880 827,880 10,083,973 13,770,000 18,000,000 22,865,000
	22,802,284 24,797,523 29,110,311 33,975,311 746,935 292,935 292,935 292,935 85,290 85,290 85,290 85,290 51,104 51,104 51,104 51,104
	883,329 429,329 429,329 429,329
	21,918,955 24,368,194 28,680,982 33,545,982
	121,116,619 121,116,619 121,116,619 0.201 0.237 0.277

85

The Directors Sub-Sahara Resources NL

Page 86 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

The balance sheet above reflects the combination of Sub-Sahara and Chalice’s assets and liabilities. The consolidated balance sheet included in the first column does not reconcile to the Sub-Sahara and Chalice balance sheets included in Section 4 of Appendix 8 because subsequent event adjustments were made to the Sub-Sahara and Chalice balance sheets prior to making merger adjustments, however, we have included all adjustments in our low, preferred and high valuation columns and not in the consolidated accounts column.

Except for any changes included in the table above, we have been advised that there has not been a significant change in the net assets of either company since 31 December 2008. The table above indicates the net asset value of a Chalice share following the implementation of the Scheme is between $0.201 and $0.277, with a preferred value of $0.237.

The following adjustments were made to the net assets of the combined entity following the implementation of the Scheme based on the 31 December 2008 balance sheet.

11.1 Cash assets

We have reduced the combined entity cash balance by $0.8 million. These adjustments relate to the following:

Description	Amount $
Payment to YIL for additional 11% interest in the Zara Project Employee and contract termination and redundancy costs Proceeds from sale of Sub-Sahara’s Tanzanian assets Sale of Avoca Resources Limited shares Approximate expense costs of the merger Total	(1,664,000) (235,000) 1,000,000 841,000 (765,000)
	(823,000)

11.2 Trade and other receivables

Trade and other receivables have been adjusted to reflect the receipt of shares and options in Avoca Resources Limited to settle the amount that was recorded as a receivable as at 31 December 2008 in the accounts of Chalice.

11.3 Property, plant and equipment

We have adjusted the low value of property, plant and equipment held by the combined entity following the implementation of the Scheme by 10% to reflect a potential lower market value when compared to book value. We have not adjusted the preferred or high values as we consider the value of property, plant and equipment to be reasonable.

11.4 Deferred exploration, evaluation and development costs

In Section 10.1.2 we discussed the adjustments made to the value of the Zara Project as a result of the independent valuation prepared by AMA. This value has been included in the combined balance sheet. However, we have increased the value of the Zara Project to the combined entity because, as part of the Scheme, Chalice will acquire the 11% interest in the Zara Project held by YIL.

In addition to the Zara Project, we have also included the market value of the exploration assets held by Chalice. We have instructed SRK Consulting (Australasia) Pty Ltd (“ SRK ”) to prepare a specialist valuation of the exploration assets held by Chalice. SRK used a number of different methodologies to value the exploration assets. These methods include the comparable market value, the geoscience ratings method and the value per square kilometre method. The comparable market value

86

The Directors Sub-Sahara Resources NL

Page 87 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

method involves applying the cost of earning an interest in a joint venture as the value of that interest. This is because the cost of an earn in reflects the value paid for the interest earned. The cost per kilometre method involves applying a value to the square kilometres included in a tenement. The cost is based on comparable transactions and the specialist expert’s experience with similar tenements and is similar to the empirical method discussed in Section 10.1.2. The geoscience ratings method involves estimating the value that a project is expected to generate should it achieve production. This value is then discounted based on a number of different criteria such as the likelihood of sufficient resource existing, the characteristics of the ore and the stage of development. SRK’s independent specialist valuation report is attached as Appendix 3.

We consider that the methods used by SRK to be appropriate for valuing Chalice’s exploration assets. The table below summarises the value of Chalice’s exploration assets:

Project	Low Value $ Preferred Value $ High Value $
Yandeearra Gnaweeda Wilga Total	1,210,000 1,710,000 2,675,000 1,030,000 1,190,000 2,040,000 430,000 600,000 750,000
	2,670,000 3,500,000 5,465,000

SRK has indicated a range of value for the exploration assets of Chalice of between $2.7 million and $5.5 million, with a preferred value of $3.5 million. SRK’s report is attached as Appendix 3.

The table below summarises the value of the combined entity’s exploration, evaluation and development assets:

Project	Low Value $ Preferred Value $ High Value $
Sub-Sahara assets (Section 10.1.2) Value of Zara Project acquired from YIL Chalice assets Total	9,600,000 12,500,000 15,000,000 1,500,000 2,000,000 2,400,000 2,670,000 3,500,000 5,465,000
	13,770,000 18,000,000 22,865,000

The table above indicates a value of the exploration, evaluation and development assets for the combined entity following the implementation of the Scheme of between $13.8 million and $22.9 million, with a preferred value of $18.0 million.

11.5 Trade and other payables

We have adjusted trade and other payables by $454,000 which is the amount SubSahara owes to YIL for previous expenditure on the Zara Project and which was included in the accounts of Sub-Sahara. If the Scheme is implemented then this amount will be repaid to YIL.

87

The Directors Sub-Sahara Resources NL

Page 88 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

12. IS THE SCHEME FAIR ?

Chalice is offering one Chalice share for every 10.73 Sub-Sahara shares. Therefore, in order to assess fairness we need to compare the value of one Chalice share with the value of 10.73 Sub-Sahara shares. We have assessed the value of 10.73 Sub-Sahara shares below:

	Low $ Preferred $ High $
Value of a Sub-Sahara share(section 10.3) Shares exchanged Value of Sub-Sahara shares to be exchanged	0.023 0.029 0.034 10.73 10.73 10.73
	0.247 0.311 0.365

The value of Sub-Sahara shares to be exchanged for each Chalice share is compared below:

		Ref	Low	Preferred	High
			$	$	$
Value of	a Chalice share	10	0.201	0.237	0.277
Value of	10.73 Sub-Sahara shares	11	0.247	0.311	0.365

The above table indicates that the value of a Chalice share is less than the value of 10.73 Sub-Sahara shares. Therefore, the Scheme is not fair.

13. OT HER CONSIDERAT IONS

13.1 Alternative Proposal

We are unaware of any alternative proposal that might offer the non-associated shareholders of Sub-Sahara a premium over the value ascribed to that resulting from the Scheme.

13.2 Implications of the Scheme not being approved

If the Scheme is not approved then it is likely that Sub-Sahara will be required to source additional funding to continue exploration and development activities. Sourcing additional funds in the current market environment is difficult. It is likely that any additional finance would be raised at a cost to Shareholders. This is because an exploration company is unlikely to obtain debt finance. Therefore, funds would need to be raised through the issue of equity. Any equity issue is likely to be at a discount to share price, will take additional time and will dilute the interests of Shareholders in SubSahara.

The loan entered into between Sub-Sahara and Chalice on 26 May 2009 provides that if the Scheme is not approved by 30 September 2009 then Sub-Sahara can be required to repay the loan amount. The loan amount is $450,000. Sub-Sahara can elect to repay the loan in cash or shares. If Sub-Sahara elects to repay the loan in shares then the shares will be issued at a price of $0.013. Based on the loan amount of $450,000 this would result in approximately 34.6 million Sub-Sahara shares being issued to Chalice.

13.3 Tax Implications

The Scheme will be considered a taxable event by the Australian Taxation Office. This means that, depending on the circumstances of individual Shareholders, a capital gain may be realised during that financial year. However, depending on the circumstances

88

The Directors Page 89 Sub-Sahara Resources NL 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

of Shareholders, they may be able to access rollover relief which means that they will not be subject to capital gains tax as a result of the Scheme.

In brief, rollover relief is obtained when a company acquires more than 80% of another company and all of the shareholders of the company being acquired are entitled to receive shares in the acquiring company.

Shareholders are advised to seek expert taxation advice when considering the Scheme.

14. IS THE SCHEME REAS ONABLE ?

We have considered the position of Shareholders if the Scheme is approved and have taken into account the following advantages and disadvantages in this assessment.

15. ADV ANT AGES AND DISADV ANT AGES IF THE SCHEME IS AP PROVED

We have considered the following advantages and disadvantages to the Shareholders if the Scheme is approved.

15.1 Advantages

15.1.1 Access to substantial cash reserves

Sub-Sahara has limited cash reserves. It is likely that Sub-Sahara will be required to raise additional capital if the Company is to continue exploration activities.

It is likely that Sub-Sahara would not be able to raise debt funding to assist in exploration. This means that if Sub-Sahara needed to raise capital it would be through the issue of equity. It is likely that any capital raising would be at a discount to Sub-Sahara’s share price which would dilute Shareholders interest in Sub-Sahara. Our research has found that the average capital raising for 2009 was done at a discount of approximately 14%. Any share issue at a discount to a company’s share price will dilute the interests of that company’s shareholders. We note that the high value of a Chalice share following the implementation of the Scheme is within the range of the values for a SubSahara share prior to the Scheme.

Chalice had approximately $9.4 million in cash as at 31 December 2008. This cash will be made available to develop Sub-Sahara’s Zara Gold Project.

15.1.2 Exposure to additional exploration assets

Chalice owns a number of exploration assets. If the Scheme is approved then Shareholders will be exposed to any potential gain from successful exploration results from Chalice’s assets.

Chalice’s exploration assets are in early stages of exploration and development. However, Chalice has entered into earn in agreements with other parties to explore these assets.

15.1.3 Benefits of being a larger company

Following the merger Sub-Sahara Shareholders will have an interest in a company with a higher market capitalisation and sufficient cash to develop its exploration assets. This may result in improved negotiating abilities for the

89

The Directors Sub-Sahara Resources NL

Page 90 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

company and could also result in increased liquidity in the merged company’s shares.

15.2 Disadvantages

15.2.1 Dilution of Shareholders

Sub-Sahara shareholders currently own 100% of the Company. If the Scheme becomes effective Sub-Sahara shareholders will hold approximately 39% of Chalice. Shareholders’ control and influence on decisions in the merged entity will diminish. The original Chalice shareholders will hold more than 50% but less than 75% of the merged entity which means they will be able to pass general resolutions but will not be able to pass special resolutions without the support of the original Sub-Sahara shareholders.

16. ADV ANT AGES AND DISADV ANT AGES IF THE SCHEME IS NOT APPROVED

We have considered the following advantages and disadvantages to Shareholders if the Scheme is not approved.

16.1 Advantages

16.1.1 Retain current interest in Sub-Sahara

If the Scheme is not approved then Shareholders will retain their current interest in Sub-Sahara. This means that Shareholders will continue to be exposed to the full returns, if any, of the Zara Project.

16.1.2 Source a better offer

Sub-Sahara may be able to source a better offer than the Scheme. This may be in the form of a higher value provided for Sub-Sahara shares. However, there is no guarantee that Sub-Sahara would be able to source a better offer and we are not aware of any current better offer.

16.2 Disadvantages

16.2.1 May not find a better offer

If the Scheme is not approved then it is possible that Sub-Sahara may not find a better offer. A worse offer may provide a lower value for Sub-Sahara’s shares or have worse advantages and disadvantages. If the directors of SubSahara can’t find an alternative offer at all, then it is possible that Sub-Sahara could be forced into administration.

We note that our assessed high value of a Chalice share following the implementation of the Scheme is within the range of the values for a SubSahara share prior to the Scheme.

16.2.2 Potential repayment of loan from Chalice

Sub-Sahara has agreed to borrow $450,000 from Chalice. This loan is to assist Sub-Sahara in advancing the Zara Project to feasibility stage. The loan is repayable if the Scheme is not completed by 30 September 2009. The loan can be repaid in cash or shares at the discretion of Sub-Sahara. The repayment of the loan could result in Sub-Sahara requiring to raise additional funds to repay the loan if it is repaid in cash or the dilution of Shareholders if it

90

The Directors Sub-Sahara Resources NL

Page 91 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

repaid in shares. If Sub-Sahara elected to repay the loan in shares then it would be required to issue shares at $0.013 per share. Based on the $450,000 borrowed this would result in 34.6 million shares being issued.

17. CONCLUSION

We have considered the terms of the Scheme as outlined in the body of this report and have concluded that the Scheme is in the best interest of the non-associated shareholders.

18. SOURCES OF INFORMAT ION

This report has been based on the following information:

• Draft Scheme Document on or about the date of this report;

• Audited financial statements of Sub-Sahara and Chalice for the years ended 30 June 2007 and 30 June 2008;

• Reviewed financial statements of Sub-Sahara and Chalice for the six months ended 31 December 2008;

• Merger Implementation Agreement between Sub-Sahara and Chalice;

• Independent specialist geologist’s valuation prepared by SRK on the exploration assets held by Chalice;

• Independent specialist geologist’s valuation prepared by AMA on the Zara Gold Project;

• Share registry information

• Information in the public domain; and

• Discussions with Directors and Management of Sub-Sahara.

19. INDEPENDENCE

BDO Kendalls Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $25,000 (excluding GST and reimbursement of out of pocket expenses). Except for this fee, BDO Kendalls Corporate Finance (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report.

BDO Kendalls Corporate Finance (WA) Pty Ltd has been indemnified by Sub-Sahara in respect of any claim arising from BDO Kendalls Corporate Finance (WA) Pty Ltd's reliance on information provided by the Sub-Sahara, including the non provision of material information, in relation to the preparation of this report.

BDO Kendalls Corporate Finance (WA) Pty Ltd is wholly owned by BDO, a member of BDO International. Prior to accepting this engagement BDO Kendalls Corporate Finance (WA) Pty Ltd considered its independence with respect to Sub-Sahara and Chalice and any of their respective associates with reference to ASIC Regulatory Guide 112 “Independence of Experts”. In BDO Kendalls Corporate Finance (WA) Pty Ltd’s opinion it is independent of SubSahara and Chalice and their respective associates.

A draft of this report was provided to Sub-Sahara and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this report as a result of this review.

91

The Directors Sub-Sahara Resources NL

Page 92 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

20. QUALIFICAT IONS

BDO Kendalls Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance advice, particularly in respect of takeovers, mergers and acquisitions.

BDO Kendalls Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission for giving expert reports pursuant to the Listing rules of the ASX and the Corporations Act.

The persons specifically involved in preparing and reviewing this report were Sherif Andrawes, Matt Giles and Peter Gray of BDO Kendalls Corporate Finance (WA) Pty Ltd. They have significant experience in the preparation of independent expert reports, valuations and mergers and acquisitions advice across a wide range of industries in Australia.

Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Member of the Institute of Chartered Accountants in Australia. He has over twenty years experience working in the audit and corporate finance fields with BDO Kendalls and its predecessor firms in London and Perth. He has been responsible for around 100 public company independent expert’s reports under the Corporations Act or ASX Listing Rules. These experts’ reports cover a wide range of industries in Australia.

Matt Giles is a Fellow of the Chartered Association of Certified Accountants and an associate member of the Australian Institute of Chartered Accountants. Matt’s career spans 20 years in the Audit and Assurance and corporate finance areas.

21. DISCL AIMERS AND CONSENT S

This report has been prepared at the request of Sub-Sahara for inclusion in the Scheme Document which will be sent to all Sub-Sahara Shareholders. Sub-Sahara engaged BDO Kendalls Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider the merger with Chalice.

BDO Kendalls Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above Scheme Document. Apart from such use, neither the whole nor any part of this report, nor any reference thereto may be included in or with, or attached to any document, circular resolution, statement or letter without the prior written consent of BDO Kendalls Corporate Finance (WA) Pty Ltd.

BDO Kendalls Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the Scheme Document other than this report.

BDO Kendalls Corporate Finance (WA) Pty Ltd has not independently verified the information and explanations supplied to us, nor has it conducted anything in the nature of an audit of Sub-Sahara or Chalice. However, we have no reason to believe that any of the information or explanations so supplied are false or that material information has been withheld.

With respect to taxation implications it is recommended that individual Shareholders obtain their own taxation advice, in respect of the Scheme, tailored to their own particular circumstances. Furthermore, the advice provided in this report does not constitute legal or taxation advice to the Shareholders of Sub-Sahara, or any other party.

The taxation implications addressed are based on the Income Tax Assessment Act 1997 (Cth) (as amended), the Income Tax Assessment Act 1936 (Cth) (as amended), and the established interpretations of those Acts at the date of this report.

92

The Directors Sub-Sahara Resources NL

Page 93 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

BDO Kendalls Corporate Finance (WA) Pty Ltd has also considered and relied upon independent valuations for the exploration assets held by Sub-Sahara and Chalice.

The specialist valuers engaged for the valuations possess the appropriate qualifications and experience to make such assessments. The approaches adopted and assumptions made in arriving at their valuations are appropriate for this report. We have received consents from the valuers for the use of their valuation reports in the preparation of this report.

The statements and opinions included in this report are given in good faith and in the belief that they are not false, misleading or incomplete.

The terms of this engagement are such that BDO Kendalls Corporate Finance (WA) Pty Ltd has no obligation to update this report for events occurring subsequent to the date of this report.

Yours faithfully

BDO KENDALLS CORPORATE FINANCE (WA) PTY LTD

==> picture [117 x 24] intentionally omitted <==

Sherif Andrawes Director

==> picture [72 x 28] intentionally omitted <==

Matt Giles Director

93

The Directors Sub-Sahara Resources NL

Page 94 29 May 2009

==> picture [77 x 30] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

Appendix 1 – Glossary of Terms

Reference

Definition

The Act The Corporations Act AMA Al Maynard and Associates Pty Ltd ASIC Australian Securities and Investments Commission ASX Australian Securities Exchange BDO Kendalls BDO Kendalls Corporate Finance (WA) Pty Ltd The Company Sub-Sahara Resources NL DCF Discounted Future Cash Flows EBIT Earnings before interest and tax EBITDA Earnings before interest, tax, depreciation and amortisation FMD Future Maintainable Dividends FME Future Maintainable Earnings IMF International Monetary Fund NTA Net Tangible Assets Our Report This Independent Expert’s Report prepared by BDO Kendalls RG 111 Regulatory Guide 111 “Content of expert reports” The Scheme The proposal to merge with Chalice Section 411 Section 411 of the Corporations Act Shareholders Shareholders of Sub-Sahara not associated with the Scheme SRK SRK Consulting (Australasia) Pty Ltd Sub-Sahara Sub-Sahara Resources NL YIL Yolanda International Limited

94

The Directors Sub-Sahara Resources NL

Appendix 2 22 May 2009

==> picture [82 x 32] intentionally omitted <==

==> picture [57 x 13] intentionally omitted <==

Appendix 2

Independent valuation of Zara Gold Project prepared by Al Maynard and Associates Pty Ltd

95

AL MAYNARD & ASSOCIATES Pty Ltd Consulting Geologists

www.geological.com.au

www.geological.com.au ABN 75 120 492 435 9/280 Hay Street, Tel: (+618) 9388 1000 Mob: 04 0304 9449 SUBIACO, WA, 6008 Fax: (+618) 9388 1768 A/h: (618) 9443 3333 Australia al@geological.com.au Australian & International Exploration & Evaluation of Mineral Properties

INDEPENDENT VALUATION

OF THE

KOKA GOLD DEPOSIT,

ZARA GOLD PROJECT

IN

ERITREA

PREPARED FOR

BDO KENDALLS CORPORATE FINANCE (WA) PTY LTD

Authors: Brian J Varndell BSc(Spec Hons Geol), FAusIMM Allen J. Maynard BAppSc(Geol), MAIG, MAusIMM Company: Al Maynard & Associates Pty Ltd Date: 8[th] May, 2009: Revised 20[th] May, 2009

96

Koka Gold Deposit - Independent Appraisal – AM&A

EXECUTIVE SUMMARY

This independent valuation has been prepared by Al Maynard & Associates (“AM&A”) at the request of Mr. Sherif Andrawes, Director, of BDO Kendalls Corporate Finance (WA) Pty Ltd (“BDOK”) to provide an assessment of the market value of the Sub-Sahara Resources NL (“Sub-Sahara” or “SBS”) Eritrean tenement portfolio as described in Table 1.

The Koka Gold Deposit from within the Zara Project is situated in the State of Eritrea. The project is controlled by a joint venture between Sub-Sahara (69%), Dragon Mining Limited (“Dragon”) (20%) and Africa Wide Resources Limited (“AWR”) (11%).

The Koka Gold Deposit contains a high grade resource of approximately 0.94Moz grading 5.8g/tAu with no other economic minerals identified in the resource to date.

The Zara Gold project area is valued by AM&A at A$12.5 million from within a range of A$9.6 million to A$15.0 million.

==> picture [415 x 367] intentionally omitted <==

Figure 1: Koka Gold Project, Zara District, Eritrea - Location Map.

97

Koka Gold Deposit - Independent Appraisal – AM&A

Chalice Gold Mines Limited (“Chalice”) and Sub-Sahara propose a merger whereby Chalice is offering one of its shares for each 10.73 shares of SBS. Chalice has also entered into an agreement with AWR to acquire a company which holds its 11% interest in the Zara Gold Project, which will result in the newly merged group holding 80% of the Zara Gold Project.

Chalice will acquire the additional 11% interest in the project for $1.2 million plus a cash payment of $454,503 for reimbursement of previous expenditure.

Dragon will hold the balance of 20% and the combined group is considering the most effective method to form one united group that will further explore and evaluate the project area with the aim of elevating the resource status and conducting a bankable feasibility study on the Koka gold deposit.

There are other zones of gold anomalism within the project area that require further work to assess the mineralisation potential.

98

Koka Gold Deposit - Independent Appraisal – AM&A

TABLE OF CONTENTS

	TABLE OFCONTENTS
1.0	Introduction	101
1.1	Scope and Limitations	101
1.2	Statement of Competence	102
2.0	Valuation of the Mineral Assets – Methods and Guides	103
2.1	General Valuation Methods	103
2.2	Discounted Cash Flow/Net Present Value	103
2.3	Joint Venture Terms	104
2.4	Similar Transactions	104
2.5	Multiple of Exploration Expenditure	104
2.6	Ratings System of Prospectivity (Kilburn)	104
2.7	Empirical Methods (Yardstick – Real Estate)	105
2.8	General Comments	105
2.9	Environmental implications	105
2.10	Native Title Claims	105
2.11	Commodities-Metal prices	105
2.12	Resource/Reserve Summary	106
2.13	Previous Valuations	106
2.14	Encumbrances/Royalty	106
3.0	Background Information	106
3.1	Introduction	106
3.2	Specific Valuation Methods	106
4.0	Koka Gold Project	107
4.1	Introduction	107
4.2	Tenure	107
4.3	Property Location	109
5.0	Accessibility, Climate, Local Resources, Infrastructure and Physiography	109
6.0	History	110
6.1	Joint Venture Agreement: Dragon – Sub-Sahara	110
6.2	Joint Venture Sub-Sahara – AWR	110
7.0	Geology	111
7.1	Introduction	111
7.2	Regional Geology	111
7.3	Project Area Geology	112
7.4	Mineralisation	114
8.0	Recent Work	116
8.1	Drilling	116
8.2	Sampling	119
8.3	Bulk Density Measurement	119
8.4	Resource Estimate Calculations	119
9.0	Resource Estimate	120
10.0	Valuation of the Project	120
10.1	Valuation Method Selection	120
10.2	Empirical Method	120
10.3	Multiple of Exploration Expenditure Method	121
10.4	Valuation Conclusions	122
11.0	References	123

99

Koka Gold Deposit - Independent Appraisal – AM&A

List of Figures

Figure 1: Koka Gold Project, Zara District, Eritrea - Location Map. ...............................97 Figure 2: Zara Project Tenement over Geology............................................................108 Figure 3: Regional Geology Map of Eritrea...................................................................112 Figure 4: Zara Project Area Geology.............................................................................114 Figure 5: Koka Deposit Drillhole Collar Map. .................................................................117

List of Tables

Table 1: Tenement Information Summary.....................................................................109 Table 2: Summary of Drilling and Sampling Statistics...................................................116 Table 3: Significant Assay Results from Diamond Drilling............................................118 Table 4: Significant Assay Results from Diamond Drilling – Koka South. ...................118 Table 5: Resource Estimates.........................................................................................120 Table 6: Gold Resource Discounted Values..................................................................121 Table 7: Range of Values. .............................................................................................122

100

Koka Gold Deposit - Independent Appraisal – AM&A

The Directors 20[th] May, 2009 BDO Kendalls Corporate Finance (WA) Pty Ltd, Level 8, 256 St Georges Terrace, Perth, WA, 6000. Attn: Sherif Andrawes.

Dear Sirs,

1.0 Introduction

This report has been prepared by AM&A at your request to provide an independent appraisal of the current market value of Sub-Sahara’s Eritrean tenement portfolio as listed in Table 1.

1.1 Scope and Limitations

This independent valuation and its accompanying geological description have been prepared at the request of Mr. Sherif Andrawes, Director of BDOK to provide the writers’ opinion of the current value of the SBS licences in Eritrea as described in this report.

This valuation has been prepared in accordance with the requirements of the Valmin code (2005) as adopted by the Australian Institute of Geoscientists (‘AIG’) and the Australasian Institute of Mining and Metallurgy (‘AusIMM’).

This valuation is valid as at 20[th] May, 2009 and refers to the writers’ opinion of the value of the mineral assets at this date. This valuation can be expected to change over time having regard to political, economic, market and legal factors. The valuation can also vary due to the success or otherwise of any mineral exploration that is conducted either on the properties concerned or by other explorers on prospects in the near environs. The valuation could also be affected by the consideration of other exploration data, not in the public domain, affecting the properties which have not been made available to the author.

In order to form an opinion as to the value of any property, it is necessary to make assumptions as to certain future events, which might include economic and political factors and the likely exploration success. The writer has taken all reasonable care in formulating these assumptions to ensure that they are appropriate to the case. These assumptions are based on the writer’s technical training and experience in the mining industry. The opinions expressed represent the writers’ fair professional opinion at the time of this report. These opinions are not however, forecasts as it is never possible to predict accurately the many variable factors that need to be considered in forming an opinion as to the value of any mineral property.

The valuation methodology of mineral properties is exceptionally subjective. If an economic reserve or resource is subsequently identified then this valuation will be dramatically low relative to any later valuations, or alternatively if further exploration is unsuccessful it is likely to decrease the value of the tenements.

101

Koka Gold Deposit - Independent Appraisal – AM&A

The valuation presented in this document is restricted to a statement of the fair value of the tenement package. The values obtained are estimates of the amount of money, or cash equivalent, which would be likely to change hands between a willing buyer and a willing seller in an arms length transaction, wherein each party had acted knowledgeably, prudently and without compulsion. This is the required basis for the estimation to be in accordance with the provisions of the Valmin Code.

There are a number of generally accepted procedures for establishing the value of mineral properties with the method employed depending upon the circumstances of the property. When relevant, AM&A uses the appropriate methods to enable a balanced analysis. Values are presented as a range and the preferred value is identified.

The readers should form their own opinion as to the reasonableness of the assumptions made and the consequent likelihood of the values being achieved. The information presented in this report is based on technical reports provided by Sub-Sahara supplemented by our own inquiries. At the request of AM&A copies of relevant technical reports and agreements were made available.

Sub-Sahara will be invoiced and expected to pay a fee for the preparation of this report. This fee comprises a normal, commercial daily rate plus expenses. Payment is not contingent on the results of this report or the success of any subsequent public fundraising. Except for these fees, neither the writer nor his family nor associates have any interest neither in the property reported upon, nor in Sub-Sahara. Sub-Sahara has confirmed in writing that all technical data known to the public domain is available to the writer.

It should be noted that in all cases, the fair valuation of the mineral properties presented is analogous with the concept of “valuation in use” commonly applied to other commercial valuations. This concept holds that the properties have a particular value only in the context of the usual business of the company as a going concern. This value will invariably be significantly higher than the disposal value, where, there is not a willing seller. Disposal values for mineral assets may be a small fraction of going concern values.

In accordance with the Valmin Code, we have prepared the “Range of Values” as shown in Table 7, section 10.4. Regarding the project, it is considered that sufficient geotechnical data has been provided from the reports covering the previous exploration of the area to enable an understanding of the geology. This, coupled with knowledge of the area provides sufficient information to form an opinion as to the current value of the mineral assets.

1.2 Statement of Competence

This report has been prepared by Brian J. Varndell BSc (Spec. Hons. Geol) FAusIMM, a geologist with over 35 years experience in the exploration and mining industry and 25 years in mineral asset valuation and Allen J. Maynard BAppSc(Geol.), MAIG, MAusIMM, a geologist with over 30 years in the industry and 25 years in mineral asset valuation.

102

Koka Gold Deposit - Independent Appraisal – AM&A

The writers hold the appropriate qualifications, experience and independence to qualify as an “Independent Expert” under the definitions of the Valmin Code. Consulting geologist Mr G Blackburn (OAM) has conducted numerous field trips to the site and environs.

2.0 Valuation of the Mineral Assets – Methods and Guides

Without proven ore reserves it is not possible to realistically place a singular, unique dollar value on any mining tenement. However, with due regard to the guidelines for assessment and valuation of mineral assets and mineral securities as adopted by the AusIMM Mineral Valuation Committee on 17 February 1995 – the Valmin Code (updated 1998 & 2005) – we have derived the estimates listed below using the appropriate method for the current technical value of the mineral exploration properties as described. No market premium or discount is applied.

The following ASIC publications have also been duly referred to and considered in relation to the valuation procedure: ‘Regulatory Guidelines’ 111 & 112.

The subjective nature of the valuation task is kept as objective as possible by the application of the guideline criteria of a “fair value”. This is a value that an informed, willing, but not anxious, arms length purchaser will pay for a mining (or other) property in a transaction devoid of “forced sale” circumstances.

2.1 General Valuation Methods

The Valmin Code identified various methods of valuing mineral assets, including:-

• Discounted cash flow,

• Capitalisation of earnings,

• Joint Venture and farm-in terms for arms length transactions,

• Precedents from similar asset sales/valuations,

• Multiples of exploration expenditure,

• Ratings systems related to perceived prospectivity,

• Real estate value and,

• Rule of thumb or yardstick approach.

2.2 Discounted Cash Flow/Net Present Value

This method provides an indication of the value of a property with identified reserves. It utilises an economic model based upon known resources, capital and operating costs, commodity prices and a discount for risk estimated to be inherent in the project. The discount is very subjective but it is common to use a range from 2% to 7.5% of measured resources, 1.5% to 2.5% of indicated resources and 0.5% to 1.5% of inferred gold resources.

103

Koka Gold Deposit - Independent Appraisal – AM&A

The percentages used will vary according to the details of any particular deposit such as grade, waste:ore ratio, metallurgical recovery and other relevant factors. Alternatively a value can be assigned on a royalty basis commensurate with the in situ contained metal value.

Net present value (“NPV”) is determined from discounted cash flow (“DCF”) analysis where reasonable mining and processing parameters can be applied to an identified ore reserve. It is a process that allows perceived capital costs, operating costs, royalties, taxes and project financing requirements to be analysed in conjunction with a discount rate to reflect the perceived technical and financial risks and the depleting value of the mineral asset over time. The NPV method relies on reasonable estimates of capital requirements, mining and processing costs.

2.3 Joint Venture Terms

The terms of a proposed joint venture agreement may be used to provide a market value based upon the amount an incoming partner is prepared to spend to earn an interest in part or all of the property. This pre-supposes some form of subjectivity on the part of the incoming party when grass roots properties are involved.

2.4 Similar Transactions

When commercial transactions concerning properties in similar circumstances have recently occurred, the market value precedent may be applied in part or in full to the property under consideration.

2.5 Multiple of Exploration Expenditure

The multiple of exploration expenditure method (“MEE”) is used whereby a subjective factor (also called the prospectivity enhancement multiplier or “PEM”) is based on previous expenditure on a tenement with or without future committed exploration expenditure and is used to establish a base value from which the effectiveness of exploration can be assessed. Where exploration has produced documented positive results a MEE multiplier can be selected that takes into account the valuer's judgment of the prospectivity of the tenement and the value of the database. MEEs can typically range between 0 to 3 and occasionally up to 5.0 applied to previous exploration expenditure to derive a dollar value.

2.6 Ratings System of Prospectivity (Kilburn)

The most readily accepted method of this type is the modified Kilburn Geological Engineering/Geoscience Method and is a rating method based on the basic acquisition cost (“BAC”) of the tenement that applies incremental, fractional or integer ratings to a BAC cost with respect to various prospectivity factors to derive a value. Under the Kilburn method the valuer is required to systematically assess four key technical factors which enhance, downgrade or have no impact on the value of the property. The factors are then applied serially to the BAC of each tenement in order to derive a value for the property. The factors used are; off-property attributes on-property attributes, anomalies and geology. A fifth factor that may be applied is the current state of the market.

104

Koka Gold Deposit - Independent Appraisal – AM&A

2.7 Empirical Methods (Yardstick – Real Estate)

The market value determinations may be made according to the independent expert’s knowledge of the particular property. This can include a discount applied to values arrived at by considering conceptual target models for the area. The market value may also be rated in terms of a dollar value per unit area or dollar value per unit of resource in the ground. This includes the range of values that can be estimated for an exploration property based on current market prices for equivalent properties, existing or previous joint venture and sale agreements, the geological potential of the properties, regarding possible potential resources, and the probability of present value being derived from individual recognised areas of mineralisation. This method is termed a “Yardstick” or a “Real Estate” approach. Both methods are inherently subjective according to technical considerations and the informed opinion of the valuer.

2.8 General Comments

The aims of the various methods are to provide an independent opinion of a “fair value” for the property under consideration and to provide as much detail as possible of the manner in which the value is reached. It is necessarily subjective according to the degree of risk perceived by the property valuer in addition to all other commercial considerations. Efforts to construct a transparent valuation using sophisticated financial models are still hindered by the nature of the original assumptions where a known resource exists and are not applicable to properties without an identified resource.

The values derived for this report have been concluded after taking into account:-

• The general geological environment of the property under consideration is taken into account to determine the exploration potential;

• Current market values for properties in similar or analogous locations;

• Current commodity prices:

2.9 Environmental implications

Data collection for all matters required for Environmental assessment has been on going for over 18 months and final reports are being prepared by independent consultants.

2.10 Native Title Claims

There is no Native Title in Eritrea as all land is owned by the State and all land is leased from the government by tribal groups and individuals so there is no provision in the statutes for any “Native Title Claim”.

2.11 Commodities-Metal prices

Where appropriate, current metal prices used are sourced from the usual metal market publications. Current gold prices were considered during this valuation.

105

Koka Gold Deposit - Independent Appraisal – AM&A

2.12 Resource/Reserve Summary

JORC compliant resources have been identified. Further drilling for elevation to Measured Resource status is required.

2.13 Previous Valuations

No previous valuations have been declared within the last two years.

2.14 Encumbrances/Royalty

There is a NPI royalty of 4.0% payable to Mr. A. Perry and also a 1.0% NPI royalty to Mr. A. Woldu. State rates are apparently yet to be agreed but may be retained at 5%.

3.0 Background Information

3.1 Introduction

This valuation has been provided by way of a detailed study of information provided by SBS for the project.

The area under review comprises four granted Exploration Licences that host gold mineralisation at an advanced exploration stage.

3.2 Specific Valuation Methods

There are several methods available for the valuation of a mineral prospect ranging from the most favoured DCF analysis of identified Reserves/Resources to the more subjective rule-of-thumb assessments such as the Yardstick or Empirical methods or Comparative Value/Similar Transactions method. These methods are discussed above in Section 2.0.

For the Koka Gold Deposit, the Empirical and Multiple of Exploration Expenditure Methods are used to derive a current value range.

106

Koka Gold Deposit - Independent Appraisal – AM&A

4.0 Koka Gold Project

4.1 Introduction

The Koka Gold Deposit, part of the Zara Project is situated in the State of Eritrea. The project is controlled by a joint venture between Sub-Sahara (69%), Dragon (20%) and AWR (11%); both Sub-Sahara and Dragon are listed on the Australian Securities Exchange while AWR is a private company controlled by Mr H.D. Kennedy.

The Koka Gold Deposit contains a high grade resource of approximately 0.94Moz grading 5.8g/tAu with no other economic minerals identified in the resource to date. The resource is presently being worked by artisanal miners who mine near surface high grade shoots of the mineralisation.

The Joint Venture has agreed to the Government’s request to tolerate such mining on the understanding that the activity is illegal and that the JV accepts no liabilities for the actions of the artisanal miners. Furthermore, the Government has also agreed that as development proceeds they will re-locate the Artisanal miners. It is estimated that between 4-5kg of gold per month has been extracted from the deposit (<150 oz).

Eritrea has little mining history apart from some sporadic mining when it was an Italian colony (1896-1941) and a joint venture between the Japanese and the Government of Ethiopia before Eritrea became an independent state. Since independence in 1993 there has been renewed interest in the exploration potential of the country by Western, Chinese mining and other exploration companies which resulted in the discovery of world class VMS deposits such as the Bisha Au, Cu, Zn deposit by Nevsun Resources in 2000.

At the completion of the BFS, SBS will enter into negotiations with the Eritrean Government to determine the equity and participation of the Eritrean Government in the project. The Eritrean Government has the automatic right to a free carried interest of 10% in the project and can purchase an additional 30% of the project from the joint venture by agreement.

4.2 Tenure

The Zara Project is currently held in Trust for the Joint Venture by Dragon Mining (Eritrea) Ltd (“DME”).

The original prospecting license was issued by the Department of Mines at the Eritrean Ministry of Energy and Mines on the 2[nd] October 1998, and converted to 4 exploration licenses for a period of 5 years on the 20[th] October 2000 and reduced by 204km[2] to a total of 196km[2] . In November 2008, the JV reduced its holding to 147km[2] .

SBS on behalf of the JV has applied for and been granted a further 12 months extension expiring on the 25[th] May 2010. An additional 468km[2] is under application covering the northern and southern extensions.

107

Koka Gold Deposit - Independent Appraisal – AM&A

==> picture [383 x 550] intentionally omitted <==

Figure 2: Zara Project Tenement over Geology.

Sub-Sahara currently holds 69% of the Zara Project. On application for a mining license, the Eritrean Government is entitled to a 10% free carried interest and, in addition, the Government has the right, by agreement, to purchase a further 30% equity participation interest at market value in any mining project. The previous case where this occurred involved the State paying a substantial deposit ($40M) initially and then the balance upon production.

108

Koka Gold Deposit - Independent Appraisal – AM&A

The details of the Exploration Licences over the Koka Gold Deposit are listed in Table 1 below.

Project Name	Ten ID	Area km2	SBS Interest	Holder/ Applicant
Zara Gold Project	Zara 1	21	69%	Dragon Mining (Eritrea) Ltd
	Zara 2	28	69%	Dragon Mining (Eritrea) Ltd
	Zara 3	49	69%	Dragon Mining (Eritrea) Ltd
	Zara 4	49	69%	Dragon Mining (Eritrea)Ltd

Table 1: Tenement Information Summary.

4.3 Property Location

The Zara Project is situated approximately 165km to the north west of Asmara, the capital of the State of Eritrea in the north eastern corner of the African continent. The project is located in a range of mountains running parallel to the Zara River which drains north into Sudan.

The 147km² property comprises a block consisting of four unequal but contiguous exploration licences bounded by the following external UTM coordinates 386000E/1827000N, 397000E/1827000N, 397000E/1813000N, 387000E/1813000N, 387000E/1820000N and 386000E/1820000N (Figs 1 &2).

5.0 Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Zara Property is situated on the edge of the western lowlands in semi arid mountainous terrain approximately 165km north-north-west of the capital of Eritrea, Asmara. The project area varies in elevation from approximately 650m at the Zara River to over 1,700m at the summit of Debre Konate. Typically, rains fall between June to September (330-500 mm) and often cause flash floods on the numerous creeks and tributaries of the Zara River. Temperatures often exceed 40[0] C during the summer months.

Approximately 8km to the west of the Koka Gold Deposit is the town of Rikeb that accommodates a significant portion of the illegal artisanal miners working in the areas surrounding the Project and the JV allow these artisanal activities to continue on the basis that the government has agreed to assist the JV to relocate all illegal artisanal miners when their presence is dangerous or detrimental to the development of the project. Surrounding the project area are several small nomadic encampments that have been drawn to the area due to employment opportunities and the provision of potable water supplies.

109

Koka Gold Deposit - Independent Appraisal – AM&A

The project area has limited infrastructure with no reticulated power and limited access. The project can be accessed via two routes, the northern route which runs almost directly NNW to the Zara Property from Asmara via Keren or a longer western route. There is potential to construct an airstrip near the town of Rikeb.

6.0 History

6.1 Joint Venture Agreement: Dragon – Sub-Sahara

In February 2003, SBS entered into a Joint Venture Agreement with DME to acquire a 70% (65% of Zara) interest in the DME equity interest in the Zara Joint Venture (“JV”) detailed below:

• Stage 1: SBS had an exclusive option period of 9 months to evaluate the Zara property during which time it had a spend US$50,000.

• Stage 2: SBS could earn a 51% interest in DME equity portion of the JV by spending US$200,000 within a period of 18 months through to June 2005. At this time SBS would have a 39.99% interest in the Zara Property.

• Stage 3: SBS could earn a further 19% of DME interest in the project by producing a BFS or spending US$3.3M on the property ie: DME is carried through to the completion of the BFS.

• Therefore the total possible equity in the project which SBS could acquire through this agreement with DME is 46.66%.

As of June 2008, SBS exploration expenditure for Zara exceeds US$3.3M and SBS has acquired its 46.66% interest in the project.

6.2 Joint Venture Sub-Sahara – AWR

On the 26[th] September 2006, SBS entered into an agreement with AWR to acquire a 22.35% equity interest in the Zara property under the following conditions:

• SBS agreed to free carry AWR’s remaining 11% interest in the Zara property through to the completion of a bankable feasibility study.

• SBS agreed that if it failed to do this it would forfeit its rights to the 22.35% equity interest in the project and it would be returned to AWR.

• At a decision to mine SBS would pay to AWR a sum of US$454,503

• (AWR cost to the 30[th] January 2006).

• SBS will join AWR into any third party finance arrangements to develop the Zara Project.

• If AWR is required by a third party to contribute equity for the development of Zara then SBS will provide a loan to AWR to enable it to contribute its share of the required equity. The loan will be on commercial terms and payable out of 50% of AWR share of future earnings.

110

Koka Gold Deposit - Independent Appraisal – AM&A

If a BFS is completed on the Zara project then the final equity interests in the project will be SBS 69%, DME 20% and AWR 11%. Both AWR and DME are carried through to the completion of a BFS and AWR are effectively carried through to production since SBS is required to provide a loan to AWR to cover any equity interests in the development of the project.

If SBS does not complete a BFS on the project then the equity interest in the project for the various parties will be SBS 46.6%, DME 20% and AWR 33.4% which would be unworkable since the project is not big enough to support such an equity structure.

7.0 Geology

7.1 Introduction

Due to the amount of exploration work carried out by SBS and its predecessors, the regional and local geology of the Koka area is well understood. The Koka deposit is only part of a more extensive mineralised corridor and the exploration potential of the area is classed as significant.

7.2 Regional Geology

Eritrea is underlain by Neoproterozoic basement metamorphic rocks which are in turn overlain by Mesozoic and Quaternary sedimentary rocks. The basement Neoproterozoic rocks that are part of the Arabian-Nubian Shield, comprise at least four accretionary terrains separated by large regional shear zones. All these terrains have been sutured together and ‘welded’ to the African continent by plate tectonic processes associated with the collision of East and West Gondwana.

The configuration of the Barka, Hagar, Adobha Abiy and Nakfa terrains is illustrated in Figure 5. The western Barka terrain probably represents older continental crust onto which the other terrains have been tectonically welded.

As far as base metal and gold mineralisation potential is concerned, the most important of the terrains is the Nakfa Terrain that consists of continental-margin and juvenile, intra-oceanic and magmatic arc rocks. It contains assemblages of volcanic and sedimentary rocks formed in the ocean-floor and island arc environments in which VMS deposits typically form.

The Bisha deposit being developed by Nevsun Resources and related satellite deposits occur along the NE trending, western edge of the Nafka terrain, the Asmara VMS deposits occur along the NW trending, eastern edge of the Nakfa terrain. The Zara Property is situated astride the suture between the Adobha Abiy and the Nakfa terrains.

Beside the two known VMS camps of the western Bisha area and the eastern Asmara area there are also numerous occurrences of gold mineralisation associated with quartz veins in shear zones throughout the Nakfa Terrain. Historically these have generally proven to be small to medium scale prospects with erratically distributed, high grade, gold values. The total historical production of gold in Eritrea amounts to less than 100,000oz. The Koka Gold Deposit is a significant maiden deposit in what has been described as a new gold camp.

111

Koka Gold Deposit - Independent Appraisal – AM&A

==> picture [411 x 375] intentionally omitted <==

----- Start of picture text -----

Adobha Abiy Terrain
Nacfa Terrain
----- End of picture text -----

Figure 3: Regional Geology Map of Eritrea.

7.3 Project Area Geology

The Zara Property is situated approximately 165km north-northwest of Asmara, the capital of Eritrea, within rocks assigned to the Nacfa and Adobha Abiy terrains and contains a number of Gold prospects, of which Koka Prospect is currently the most important. Significantly this prospect lies close to a flexure in the Elababu Shear Zone, which separates the Adobha Abiy and Nacfa terrains, where there is an abrupt change in azimuth from NE to NNE.

The eastern and central portions of the property are underlain by meta-volcanic and meta-sedimentary rocks, metamorphosed to Greenschist Facies, together with post-tectonic granitoids, assigned to the Nacfa Terrain, whereas the western portion is underlain by predominantly siliciclastic rocks, together with minor meta-chemical sedimentary rocks, basalt and syn-tectonic granitoids, assigned to the Adobha Abiy Terrain.

The Koka mineralised zone has a total strike length of more than 700m and lies adjacent the sheared and altered contact between a sequence of metasedimentary and meta-basaltic rocks in the west (footwall) and a meta-volcanic and meta-volcaniclastic sequence, intruded by granitoid bodies, to the east (hangingwall) within to the Nacfa Terrain.

112

Koka Gold Deposit - Independent Appraisal – AM&A

The meta-sedimentary rocks comprise tuffaceous greywackes-siltstones-shales, logged in the diamond drillholes as GWK/STS/SHL, together with minor mafic intrusive rocks that are logged as basalt (“BAS”) and occasionally dolerite (“DOL”). This sequence is isoclinally folded.

The meta-volcanic and meta-volcaniclastic sequence comprises more massive, principally intermediate and acidic, pyroclastic rocks logged as FE/TUF and intrusions of microgranite/micrographic microgranite logged as MGT (altered microgranite) and PGT (pink microgranite – unaltered) together with minor rhyolite and dacite, logged as RHY and DAC respectively.

The contact between these two major sequences is linear, sharp and subvertical to steeply, easterly dipping and orientated approximately north-south. It is strongly sheared and mylonitised (“MYL”). This contact is sub-parallel to a pervasive regional fabric developed, particularly in the finer grained rocks, that also dips steeply to the east. A shallow, southerly plunging, regional lineation is also evident.

113

Koka Gold Deposit - Independent Appraisal – AM&A

==> picture [450 x 549] intentionally omitted <==

Figure 4: Zara Project Area Geology.

7.4 Mineralisation

Low-grade regional metamorphism in the lower Greenschist Facies is considered to have affected the volcanogenic rocks, producing foliated metamorphic assemblages dominated by mats of sericite, with micro-granular albite and quartz.

The mineralisation is developed principally within an elongate, lensoid body of microgranite intruded along the western margin of the meta-volcanic and meta-

114

Koka Gold Deposit - Independent Appraisal – AM&A

volcaniclastic succession. This unit has been strongly silicified and brecciated and is cut by a stockwork of quartz veins.

There is a considerable competence contrast between this unit and the metasedimentary and meta-basaltic sequence immediately to the west. This competence contrast is believed to be significant in locating both deformation and mineralisation. The meta-sedimentary rocks behave competently, whereas the meta-volcanic and meta-volcaniclastic sequence behaves incompetently, the latter resulting in brecciation and multiple phases of quartz veining.

The western contact of the microgranite is the conduit for a <20m wide zone of intense alteration, chiefly carbonation and sericitization.

Multi-element geochemical patterns indicate that this zone is enriched in Ca, Mg, K and Fe. 50-80m east of this major contact, the multi-element geochemical patterns outline a second zone of intense alteration, also enriched in Ca, Mg, K and Fe, within the microgranite, which is only 10m wide. To the east of this second zone of intense alteration the microgranite is pinkish in hue due to the appearance of K-spar and shows less evidence of alteration. It is cut by later basaltic intrusives.

The footwall contact of the microgranite, which hosts the gold mineralisation at Koka is, therefore, the contact between the meta-sedimentary rock and the microgranite. To date, no anomalous gold mineralisation has been intersected in any of the footwall rocks.

The hanging wall contact is taken as the first appearance of unaltered, pinkish, potash feldspar-bearing microgranite. The mineralisation lies within this 50-80m wide zone. It is preferentially located closer to the footwall contact and is intimately associated with a stockwork of quartz veins. In some of the wider intersections eg ZARD010, the higher grades and more contiguous mineralisation are found closer to the sharp footwall contact, whereas the hangingwall contact of the mineralisation is more diffuse.

Fracturing, veining and mineralisation particularly affected the microgranite, possibly because it behaved as a structurally competent unit which readily suffered fracturing in response to deformation. Thin brittle fractures and open fractures encouraged invasion of the rock body by abundant mineralising hydrothermal fluid composed mainly of H2O and CO2, with minor other dissolved components including S, Zn, Pb, Cu, Au and possible Sb.

Thin fracture networks were sealed by fine-grained foliated sericite ± carbonate (dolomite), and are now observed as thin pale yellowish green fracture fillings in white host rock which suffered selective pervasive replacement by the alteration assemblage albite + minor sericite + carbonate (dolomite) + opaques (pyrite ± inclusions of sphalerite, galena) + trace leucoxene (possibly rutile).

Primary quartz and zircon are invariably preserved, and primary potash-feldspar has survived in pale, pinkish-cream rocks that have suffered lower intensity of alteration. Rare small grains of native gold formed adjacent to veins.

In the open fractures, hydrothermal fluid crystallised to form massive vein assemblages of coarse grained quartz + sulphides (pyrite >> sphalerite > galena >> chalcopyrite >>tetrahedrite) ± carbonate (dolomite, calcite) ± native gold.

115

Koka Gold Deposit - Independent Appraisal – AM&A

The native gold formed mostly as inclusions in pyrite, but also as discrete grains in galena, in quartz and in calcite. In places, small ragged to ovoid fragments of host rock were captured in the veins, and have suffered strong replacement by albite, sericite, carbonate (dolomite), and minor pyrite.

The Koka Prospect is considered to represent a Greenschist Facies, lode-gold deposit in which most of the gold is hosted by quartz-sulphide veins, with only minor gold associated with the altered wall rocks.

8.0 Recent Work

8.1 Drilling

All drilling at Koka was supervised by SBS and carried out by a single contractor. The total number of holes drilled and metreage is summarized in Table 2 below:

Method	Number	Average Length	Total Metres
DDH -Koka	122*	96.4	11,763.5
DDH-Konate	5	146.3	731.7
Total	127		12,495.2

Table 2: Summary of Drilling and Sampling Statistics.

*Note: 8 of these holes (totalling 1,078m) not assayed as they were drilled for metallurgical test work.

The drill program was designed to test the mineralised zone on a 40 m x 20 m grid. The vast number of drillholes in the steeply east dipping Koka deposit were collared with an azimuth of approximately 100[0 ] (UTM). A smaller number of holes completed during the initial phase of exploration when the true dip of the deposit was unknown were collared at an azimuth of approximately 280[0] .

All drill hole collars were surveyed using a DGPS and down hole surveys have been completed on approximately 30m downhole intervals using a Reflex EZShot tool. All core was routinely orientated using the spear technique.

116

Koka Gold Deposit - Independent Appraisal – AM&A

==> picture [285 x 658] intentionally omitted <==

Figure 5: Koka Deposit Drillhole Collar Map.

117

Koka Gold Deposit - Independent Appraisal – AM&A

Hole	Depth (m)	North (UTM)	East (UTM)	Azimuth (°)	Dip (°)	From (m)	To (m)	Interval (m)	Gold (g/t)
ZARD067	151.45	1,824,392	390,230	102	-56	33	37	4	21.37
						134	138	4	59.89
ZARD068	147.40	1,824,043	390,156	102	-53	135	136	1	88.78
ZARD069	160.30	1,824,351	390,225	102	-53	148	159	11	172.95
ZARD070	101.50	1,824,469	390,251	102	-45	38	51	13	57.24
			including			40	43	3	170.94
			including			44	50	6	33.30
ZARD071	140.70	1,824,081	390,166	102	-52	130	134	4	41.62
ZARD073	154.00	1,824,431	390,241	102	-55	105	108	3	49.05
ZARD075	101.10	1,824,147	390,222	102	-53	31	61	30	38.01
						69	86	17	13.79
ZARD079	90.60	1,824,072	390,205	102	-50	75	76	1	78.19
ZARD081	96.90	1,824,110	390,217	102	-50	37	47	10	76.82
						65	69	4	28.71
ZARD083	115.00	1,824,190	390,226	102	-52	38	44	6	69.50
						48	49	1	76.82
ZARD084	155.25	1,824,160	390,181	102	-52	96	102	6	17.46
ZARD085	129.00	1,824,310	390,255	102	-50	10	14	4	20.55
ZARD088	105.00	1,824,229	390,240	102	-50	52	58	6	89.62
ZARD095	122.75	1,824,384	390,265	102	-50	8.5	11.5	3	34.98

Table 3: Significant Assay Results from Diamond Drilling.

Note: The metres quoted are down-hole metres and the gold grades are uncut with up to 2m of internal dilution (<0.25g/t gold). All samples are prepared at the Africa Horn Laboratory in Asmara, Eritrea and then analysed by Genalysis Laboratories in Perth, Western Australia. All samples are diamond drill core.

Drill holes ZARD107 and ZARD110 were used to test for a possible southerly strike extension to Koka Main. The holes intersected significant gold mineralisation up to 160m south of the existing drilling and confirm the potential to significantly increase the existing resource to the south from 600m to 760m. The most significant assay results returned from the Koka South drilling are given below (Table 4):

Hole	Depth (m)	North (UTM)	East (UTM)	Azimuth (°)	Dip (°)	From (m)	To (m)	Interval (m)	Gold (g/t)
ZARD107	160.00	1,823,878	390,144	102	-50	124	125	1	2.22
ZARD110	133.50	1,823,836	390,171	102	-50	66	67	1	12.51
						75	76	1	91.98

Table 4: Significant Assay Results from Diamond Drilling – Koka South.

Note: The metres quoted are down-hole metres and the gold grades are uncut. All samples are prepared at the Africa Horn Laboratory in Asmara, Eritrea and then analysed by Genalysis Laboratories in Perth, Western Australia. All samples are diamond drill core.

118

Koka Gold Deposit - Independent Appraisal – AM&A

8.2 Sampling

Sampling of the drill core was carried out on approximately 1.0m intervals under the supervision of SBS geologists. The core after being rotated away from the orientation line was cut in half with a diamond saw with half of the core retained for reference and half bagged for transportation to the sample preparation facility at Asmara prior to being shipped to internationally accredited labs for assay.

Sample recovery from the diamond drilling is reported to be good.

As part of the quality control procedures a blank sample was introduced for every 20 to 25 samples dispatched for analysis. Also certified reference samples were added at both the start and end of the sample batch to determine the accuracy of the analytical laboratory, these samples were sourced from Geostats in Perth. Other procedures implemented to check the quality of the analysis for the assay laboratories were:

• 5% of the returned coarse reject samples were submitted to an umpire laboratory as a check of relative precision.

• 5% of all returned pulps were resubmitted for assay.

• 5% of the returned pulps were wet sieved to test the consistency of the pulverization.

8.3 Bulk Density Measurement

A total of 2,310 bulk density measurements were collected from diamond drill core and vary from 2.05-4.33 t/m[3] (average 2.74). Bulk density measurements were determined on site by the water immersion method prior to submission to the laboratory for sample preparation and assay.

8.4 Resource Estimate Calculations

Coffey Mining Pty Ltd (“Coffey”) estimated the resource based on 114 diamond holes averaging 96m for a total of 10,990m drilled between August 2005 and late 2008. The resource model was derived via geological interpretation and modelling of the mineralised zone. Coffey staff did not complete a site visit to Koka and therefore relied on unpublished reports and data supplied by SBS and its consultants.

Multiple Indicated Kriging (“MIK”) estimation with direct log normal change of support to emulate mining selectivity was utilized as an appropriate estimation method based on the quantity and spacing of the available data, style of mineralisation, and interpreted geological controls.

The final “smallest mining unit” (“SMU”) model was generated from the MIK estimates to emulate assumed open pit grade control and mining selectivity and assumes a 5m E x 10m N x 5m RL SMU dimensions. A variance adjustment factor of 0.06 was applied to effect change of support.

119

Koka Gold Deposit - Independent Appraisal – AM&A

9.0 Resource Estimate

The Koka Gold Deposit Mineral Resource estimate is reported above a 1.2g/tAu lower cut-off and a high-grade cut of 60g/t Au has been applied to 3m downhole composites. The methodology employed MIK derived SMUs of 5x10x5m dimensions using a bulk density of 2.74t/m[3 ] to emulate assumed open pit mining selectivity.

Category	Tonnes (Mt)	Grade (g/t Au)	Au Metal (koz)
Indicated	4.55	5.9	867
Inferred	0.49	4.9	77
Totals	5.04	5.8	944

Table 5: Resource Estimates.

10.0 Valuation of the Project

10.1 Valuation Method Selection

To determine a fair market value several aspects need to be considered. As no JORC Reserves are available, only Inferred and Indicated Resources, the Discounted Cash Flow method is not applicable. The Kilburn method is considered to provide a range of values that is so wide that it is not realistic. Thus, the writer considers that the Empirical or Yardstick method is the most applicable with some weighting given to the MEE method.

10.2 Empirical Method

The resource mineralisation estimates have a suitable discount factor applied to them in order to derive a current cash value range. In this case a value range from A$20 to $30 per Indicated Resource ounce and $10 to $15 per Inferred Resource ounce is considered appropriate as we do not yet have any ounces in the Measured Resource category.

Further, as the percentage interest held by SBS will effectively be 69% then that fraction of the value range is applied to the initial number ranges to accurately reflect the Company’s interests.

Lastly, an additional discount factor of 20% is applied across this second range. This factor comprises the 10% attributable to the Eritrean State before mining commences plus 10% to allow for risk factors such as sovereign, geological, mining and price risks. The last four risks are allocated 2.5% each.

Future royalty payments do not affect this current valuation and cannot do so until mining actually commences. By the time mining begins then a much better understanding of all ‘Project Risks” will have been gained and may then be accounted for.

120

Koka Gold Deposit - Independent Appraisal – AM&A

May 09 Data	Sub Sahara Resources NL	Sub Sahara Resources NL	Sub Sahara Resources NL	Koka Gold Project Ind/Inf $/oz Au (A$M)	Koka Gold Project Ind/Inf $/oz Au (A$M)	Koka Gold Project Ind/Inf $/oz Au (A$M)
Zara Gold JV	Mt	**Aug/t **	Au oz	25/12.5	20/10	30/15
Indicated	4.55	5.9	867000	21.7	17.3	26.0
Inferred	0.49	4.9	77000	1.0	0.8	1.2
TOTAL	5.04	5.8	944000	22.6	18.1	27.2
**SBS Share A$M **				15.6	12.5	18.7
20% discount **(10% Gov + 10% Sov Risk) **				12.5	10.0	15.0
				Preferred	Low	**High **

Table 6: Gold Resource Discounted Values.

The "Preferred" or "Most Likely" current cash value by this method is the average of the Low & High which is $12.5 million.

10.3 Multiple of Exploration Expenditure Method

Approximately A$15 million have been expended on exploration on the project area in the last three years of activity to December 2008. There were several ‘gap periods’ when moratoriums were in place due to border wars with Ethiopia. As the majority of this work (80% = $12.0M) was effective in outlining gold resources an MEE factor range from 0.8 to 1.2 is deemed appropriate to apply to this effective expenditure ($12.0M) to derive a current cash value by this method.

Thus the value range by the MEE method is $9.6M to $14.0M and the preferred value is ascribed at A$12.5M. Because of the successful outlining of gold resources at the Zara Project the most likely or preferred value is adjusted slightly upwards from the mean figure of $11.8M to $12.5M.

121

Koka Gold Deposit - Independent Appraisal – AM&A

10.4 Valuation Conclusions

The final valuation is derived from within the ranges provided by the two different methods as listed in Table 7 below.

	Value as at	Value as at	May 2009
Method	Low A$M	High A$M	Preferred A$M
Discounted Indicated & Inferred Resources
	10.0	15.0	12.5
MEE	9.6	14.0	12.5
Range	9.6	15.0	12.5

Table 7: Range of Values.

Thus, it is the writers’ opinion that the current cash value of the SBS 69% share of the Koka Gold Deposit is A$12.5 million from within the ranges of $9.6 million to A$15.0 million.

Yours faithfully,

==> picture [132 x 74] intentionally omitted <==

Allen J. Maynard

BAppSc(Geol), MAIG, MAusIMM.

122

Koka Gold Deposit - Independent Appraisal – AM&A

11.0 References

AusIMM, (2004): "Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC Code), prepared by the Joint Ore Reserves Committee (JORC) of the AusIMM, the Australian Institute of Geoscientists (AIG) and the Minerals Council of Australia (MCA), effective December 2004.

AusIMM. (2005): "Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (the VALMIN Code)" 2005 Edition.

AusIMM, (1998): "Valmin 94 - Mineral Valuation Methodologies". Conference Proceedings.

Canadian Institute Of Mining, Metallurgy And Petroleum, (2000): "ClM Standards on Mineral Resources and Reserves-Definitions and Guidelines". Prepared by the CIM Standing Committee On Reserve Definitions. Adopted by CIM Council August 20, 2000.

CIM, (April 2001): "CIM Special Committee on Valuation of Mineral Properties (CIMVAL)" Discussion paper.

ClM, (2003): "Standards and Guidelines for Valuation of Mineral Properties. Final Version, February 2003". Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum on Valuation of Mineral Properties (CIMV AL).

Coffey Mining Pty Ltd 2009: Database Review, Geological Modelling and Grade Estimation Study for Sub-Sahara Resources NL; Koka Gold Deposit, Eritrea. Jan 2008 and Update May 2009.

Kilburn, LC, 1990: "Valuation of Mineral Properties which do not contain Exploitable Reserves" CIM Bulletin, August 1990.

Hamer R.D 2008: Status Report – May 2008 Zara Property, Northern Eritrea.

Sub-Sahara Resources NL: Various Annual Reports, Quarterly Reports and ASX Releases.

123

The Directors Sub-Sahara Resources NL

Appendix 3 22 May 2009

==> picture [82 x 32] intentionally omitted <==

==> picture [57 x 13] intentionally omitted <==

Appendix 3

Independent valuation of Chalice Gold Mines Limited’s exploration assets prepared by SRK Consulting (Australasia) Pty Ltd

124

==> picture [158 x 842] intentionally omitted <==

Valuation of the Yandeearra, Gnaweeda and Wilga Exploration Assets of Chalice Gold Mines Ltd

Report Prepared for

BDO Kendalls Corporate Finance (WA) Pty Ltd

Prepared by

==> picture [185 x 36] intentionally omitted <==

BDO001 May 2009

SRK Consulting (Australasia) Pty Ltd Reg’d No ABN 56 074 271 720 Trading as SRK Consulting

125

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Valuation of the Yandeearra, Gnaweeda, and Wilga Exploration Assets of Chalice Gold Mines Ltd

BDO Kendalls Corporate Finance (WA) Pty Ltd

Level 8, 256 St Georges Terrace PERTH WA 6000 PO Box 7426 Cloisters Square Perth WA 6850

SRK Consulting (Australasia) Pty Ltd Level 8, 20 Queen Street MELBOURNE VIC 3000

Dr Louis Bucci, lbucci@srk.com.au

BDO001 May 2009

Compiled by: Peer Reviewed by: Dr Louis Bucci Dr Peter Williams & Deborah Lord Principal Consultant Principal Consultants Authors: Deborah Lord, Dr Kate Bassano

126

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Executive Summar y

BDO Kendalls Corporate Finance (WA) Pty Ltd (BDO) contacted SRK Consulting (Australasia) Pty Ltd (SRK) to review SRK’s previous valuation report for Chalice Gold Mines Limited (Chalice) completed in October 2008. This reviewed report is intended to form part of an Independent Expert’s Report being compiled by BDO in relation to the proposed merger of Sub Sahara Resources NL (Sub Sahara) and Chalice.

SRK has considered a large exploration package incorporating tenements in the Pilbara Craton, Murchison Province and Laverton District, all in Western Australia, for this valuation, across projects deemed prospective for Au, Fe-ore, Cu, U and Ta.

The valuation is dated at 8 May 2009.

The main value of this project was contributed by Chalice’s Au exploration assets at Yandeearra and Gnaweeda.

Three different methods were utilised to determine an appropriate value for the Chalice assets, namely an analysis of joint venture (JV) conditions as applied to specific minerals for particular projects, Comparable Transactions valuation method, and a Geological Risk valuation method. The results of the valuation as based on these analyses are presented below.

Area	Unit	Low (A$)	Preferred (A$)	High (A$)
Yandeearra	Au	980,000	1,000,000	1,300,000
	Fe (BIF OR CID)	115,000	420,000	725,000
	Cu	115,000	290,000	650,000
	U	0	0	0
	Ta	0	0	0
	Sub-total	1,210,000	1,710,000	2,675,000
Gnaweeda	Au	860,000	1,000,000	1,800,000
	Cu	170,000	190,000	240,000
	Sub-total	1,030,000	1,190,000	2,040,000
Wilga	Au	430,000	600,000	750,000
Total		2,670,000	3,500,000	5,465,000

It is SRK’s opinion that the exploration assets, which are the subject of this review, should be valued between A$2.7M and A$5.5M, with an SRK preferred value of A$3.5M.

This estimation must be considered in the context of the caveats discussed in the Report.

127

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table of Contents

	Executive Summary .............................................................................................. 127	Executive Summary .............................................................................................. 127
	Disclaimer ............................................................................................................. 131
	List of Abbreviations ............................................................................................. 132
1	Introduction and Scope of Report ............................................................... 133
	1.1	Programme Objectives .............................................................................. 133
	1.2	Purpose of the Report ................................................................................ 134
	1.3	Reporting Standard .................................................................................... 135
	1.4	Statement of SRK Independence and Consents ........................................ 135
2	Background and Brief ................................................................................. 136
	2.1	Background of the Project .......................................................................... 136
	2.2	Nature of the Brief ...................................................................................... 136
3	Summary of Exploration Assets .................................................................. 137
	3.1	Yandeearra Project .................................................................................... 137
		3.1.1 Introduction ................................................................................................137
		3.1.2 Ownership .................................................................................................138
		3.1.3 Geological Setting of the Yandeearra Project Area ..................................142
		3.1.4 Exploration History ....................................................................................143
	3.2	Gnaweeda Project ..................................................................................... 152
		3.2.1 Introduction ................................................................................................152
		3.2.2 Ownership .................................................................................................153
		3.2.3 Geological Setting of the Gnaweeda Project ............................................153
		3.2.4 Exploration History ....................................................................................155
	3.3	Wilga Project ............................................................................................. 158
		3.3.1 Introduction ................................................................................................158
		3.3.2 Ownership .................................................................................................159
		3.3.3 Geological Setting of the Wilga Project .....................................................159
		3.3.4 Exploration History ....................................................................................160
4	Valuation ..................................................................................................... 164
	4.1	Valuation of Exploration Properties ............................................................ 164
	4.2	Comparable Transaction Valuations .......................................................... 167
		4.2.1 Joint Venture Terms ..................................................................................167
		4.2.2 Value per Square Kilometre ......................................................................167
	4.3	Geological Risk Valuation .......................................................................... 174
		4.3.1 Overview of the Geological Risk Method ..................................................174
5	Summary and Conclusions ......................................................................... 187
	5.1	Yandeearra ................................................................................................ 187
		5.1.1 Gold ...........................................................................................................187
		5.1.2 Fe Ore .......................................................................................................187
		5.1.3 Copper .......................................................................................................187
		5.1.4 Uranium .....................................................................................................187
		5.1.5 Tantalum ....................................................................................................187
	5.2	Gnaweeda ................................................................................................. 188
		5.2.1 Gold ...........................................................................................................188
		5.2.2 Copper .......................................................................................................188
	5.3	Wilga ......................................................................................................... 188
		5.3.1 Gold ...........................................................................................................188
6	References.................................................................................................. 190

128

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

List of Tables

Table 1-1: Commodities/Mineral Systems considered by Chalice as prospective in their project areas ...................................................................................... 134 Table 3-1: Chalice gold mines granted tenement schedule for the Yandeearra project as at 31 March 2009 ....................................................................... 138 Table 3-2: Chalice Gold Mines application tenement schedule for the Yandeearra project as at 31 March 2009 ....................................................................... 139 Table 3-3: Tenements included in the Chalice – Atlas Iron JV ...................................... 141 Table 3-4: Best Results of Chalice’s Aircore 2006 programme at Yandeearra .............. 144 Table 3-5: Significant Rock Chip Sampling Results from Yandeearra ........................... 145 Table 3-6: Rock chip sampling results from John Bull and Pilbara Well areas............... 148 Table 3-7: Reconnaissance rock sampling results >1.00g/t gold, 20g/t Au or 1% lead obtained by De Grey (Chalice, 2009). ........................................................ 148 Table 3-8: Chalice gold mines tenement schedule for the Gnaweeda project as at April 2009. ................................................................................................. 153 Table 3-9: Significant Drilling Results from Teck Drilling ............................................... 156 Table 3-10: Chalice Gold Mines Tenement Schedule for the Wilga Project as at April 2009 .................................................................................................. 159 Table 3-11: Summary of Exploration Results at Wilga .................................................. 161 Table 4-1: Points for Consideration in Estimating Current Values of Exploration Projects...................................................................................................... 166 Table 4-2: Implied Value of the Chalice Projects for Specific Minerals as a Function of the JV Agreements ................................................................................ 167 Table 4-3: Summary of Comparable Transactions involving Gold Exploration Projects in Western Australia ..................................................................... 168 Table 4-4: Range of Values for Chalice’s Gold Exploration Assets on a Value per Square Kilometre Basis ............................................................................. 170 Table 4-5: Summary of Comparable Transactions involving Copper Exploration Projects in Western Australia ..................................................................... 171 Table 4-6: Range of Values for Chalice’s Copper Exploration Assets on a Value Per Square Kilometre Basis ............................................................................. 171 Table 4-7: Summary of Comparable Transactions involving Uranium Exploration Projects in Western Australia ..................................................................... 173 Table 4-8: Range of Values for Chalice’s Uranium Exploration Assets on a Value per Square Kilometre Basis ....................................................................... 174 Table 4-9: Target Sizes used for Chalice’s Gold Exploration Assets ............................. 176 Table 4-10: Summary of Transactions involving Gold Resource Projects in Western Australia..................................................................................................... 176 Table 4-11: Summary of Transactions Involving Copper Resource Projects in Australia..................................................................................................... 177 Table 4-12: Allocation of Exploration Stage for Chalice Projects ................................... 180 Table 4-13: Risk Probability for Archean Lode Gold Mineralisation ............................... 181 Table 4-14: Risk Probability table for BIF Fe .................................................................. 182 Table 4-15: CID Fe ore Probability table ........................................................................ 182 Table 4-16: VHMS Risk Probability Table ..................................................................... 183 Table 4-17: Risk Probability Table for Chalice’s Au Projects ......................................... 183 Table 4-18: Risk probability table for Chalice’s Fe ore Projects ...................................... 184 Table 4-19: Risk Probability Table for Chalice’s Base Metals (Cu) Projects .................. 184 Table 4-20: Results of SRK Geological Risk Valuation of the Chalice’s Au Projects ..... 185 Table 4-21: Results of SRK Geological Risk valuation of Chalice’s Fe ore Project ......... 185 Table 4-22: Results of SRK Geological Risk Valuation of Chalice’s Base Metals (Cu) Projects .............................................................................................. 185 Table 4-23: Comparison between Valuation Methods for Chalice Projects ................... 186

129

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 5-1: SRK’s Estimate of the Value Range for the Yandeearra, Gnaweeda and

Wilga Projects ............................................................................................ 189

List of Figures

List	of Figures
Figure	1-1: Location of the exploration assets valued in this report ............................... 133
Figure	3-1: Location of the Yandeearra project ............................................................. 137
Figure	3-2: Location of the John Bull and Pilbara Well shear zones at Yandeearra ...... 146
Figure	3-3: Results from the John Bull shear zone ........................................................ 147
Figure	3-4: Results from the Pilbara Well shear zone rock chip sampling ..................... 147
Figure	3-5: Recent surface sampling results from Yandeearra (Chalice, 2009). ............ 149
Figure	3-6: Prospects within the Yandeearra Project tenements identified by
	Chalice and previous workers .................................................................... 150
Figure	3-7: Definition of area division for the purpose of Geological Risk valuation ....... 151
Figure	3-8: Location of the Gnaweeda project............................................................... 152
Figure	3-9: Distribution of the geological domains at Gnaweeda ................................... 154
Figure	3-10: Map showing exploration results at Gnaweeda ......................................... 157
Figure	3-11: Location of the Wilga Project .................................................................... 158
Figure	3-12: Local geology of the Wilga Project ............................................................ 160
Figure	3-13: Wilga Project schematic geological map showing major units and
	structures interpreted from aeromagnetic survey and higher grade gold
	values in rock chip samples (Chalice, 2009) .............................................. 162
Figure	3-14: Total Magnetic Intensity image at Wilga .................................................... 163
Figure	4-1: Area used for value per km2valuation for Au at Yandeearra ....................... 169
Figure	4-2: Location of U samples collected at Yandeearra to date .............................. 172
Figure	4-3: Schematic diagram of the Geological Risk Method (after Lord et al.,
	2001). ........................................................................................................ 175
Figure	4-4: LME chart of copper prices January 2003 - present in US Dollars
	(http://www.lme.co.uk/copper_graphs.asp ). ............................................... 178

List of Appendices

Appendix 1: BDO Kendalls’ Instruction Letter to SRK

Appendix 2: Costs and Default Probabilities Utilised in Geological Risk Method Calculations

130

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Disclaimer

The opinions expressed in this Report have been based on the information supplied to SRK Consulting (Australasia) Pty Ltd (SRK) by Chalice Gold Mines Ltd (Chalice) and Sub Sahara Resources NL (Sub Sahara). The opinions in this Report are provided in response to a specific request from BDO Kendalls (BDO) to do so. SRK has exercised all due care in reviewing the supplied information. Whilst SRK has compared key supplied data with expected values, the accuracy of the results and conclusions from the review are entirely reliant on the accuracy and completeness of the supplied data. SRK does not accept responsibility for any errors or omissions in the supplied information and does not accept any consequent liability arising from commercial decisions or actions resulting from them.

131

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

List of Abbreviations

Abbreviation	Meaning
Au	Chemical symbol forgold
BIF	Banded Iron Formation
BFS	Bankable Feasibility Study
DFS	Definitive FeasibilityStudy
Cu	Chemical symbol for copper
E	east
EW	east-west
Fe	Chemical symbol for Iron
ha	hectare
JORC Code	Australia Code for Reporting of Mineral Resources and Ore Reserves, prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC), September 1999. Internationally accepted.
k	thousand
kg	kilogram
km	kilometre
km2	square kilometre
m	metre
M	million
m RL	metres reduced level
mE	metre east
mN	metres north
Mt	million tonnes
NE	north-east
NPV	netpresent value
NW	north-west
OPEX	operating expenditure
oz	Ounce
pa	per annum
PGE	Platinum GroupElements
PFS	Pre-Feasibility Study
REE	Rare Earth Elements
SE	south-east
SRK	SRK Consulting
t	tonnes
Ta	Chemical symbol for tantalum
tpa	tonnesper annum
U	Chemical symbol for uranium
VHMS	Volcanic Hosted Massive Sulphide
W	west

132

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

1 Introduction and Scope of Report

1.1 Programme Objectives

BDO Kendalls Corporate Finance (WA) Pty Ltd (BDO) contacted SRK Consulting (Australasia) Pty Ltd (SRK) to review SRK’s previous valuation report for Chalice Gold Mines Limited (Chalice, ASX: CHN) completed in October 2008 (SRK, 2008). This reviewed report is intended to form part of an Independent Expert’s Report being compiled by BDO in relation to the proposed merger of Sub Sahara Resources NL (Sub Sahara, ASX: SBS, Frankfurt, Stuttgart Munich & Berlin Exchange Code: 895112) and Chalice.

SRK has undertaken a valuation of the following exploration assets:

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

• Yandeearra Project

• Gnaweeda Project

• Wilga Project

The assets are located in Western Australia, within the West Pilbara (Yandeearra), Murchison (Gnaweeda), and Laverton (Wilga) Districts (Figure 1-1).

==> picture [234 x 385] intentionally omitted <==

Figure 1-1: Location of the exploration assets valued in this report

133

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

SRK understands that no resources, as defined under the Joint Ore Reserves Committee (JORC) Code of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia, are defined on any of the exploration assets reviewed herein.

SRK will provide an opinion as to the value of the exploration potential of the tenements, based on the technical information provided by Chalice and Sub Sahara. Review of the provided data indicates that Chalice and their joint venture (JV) partners consider the projects prospective for the commodities/mineralisation style as presented in Table 1-1. This will be considered in the Geological Risk Method valuation (see Section 4.3).

Table 1-1: Commodities/Mineral Systems considered by Chalice as prospective in their project areas

	their project areas
Project	Mineralisation style	Commodity(ies)
Yandeearra	Orogenic Lode Gold	Au
	Intrusion-related	Ta, U
	Volcanic Hosted Massive Sulphide	Base metals
	BIF hosted or Channel Iron Deposit (CID)	Fe
Gnaweeda	Orogenic Lode Gold	Au
	Volcanic Hosted Massive Sulphide	Base metals
Wilga	Orogenic Lode Gold	Au
	Volcanic Hosted Massive Sulphide	Cu

No statement will be made by SRK on the effect of development capital expenses, tax or other statutory costs that may affect the project(s) value.

This valuation is dated at 8 May 2009.

1.2 Purpose of the Report

BDO contacted SRK to review SRK’s previous valuation report for Chalice completed in October 2008 (SRK, 2008). This reviewed report is intended to form part of an Independent Expert’s Report being compiled by BDO in relation to the proposed merger of Sub Sahara and Chalice. The Independent Expert’s Report will be a public document, and as such, this reviewed valuation report has been prepared in accordance with the VALMIN Code (2005).

A decision was made to not conduct a site visit to the Chalice tenements, as it was considered that the projects are at such an early stage of development that nothing of material geological interest could be identified on site.

The purpose of the Report is to provide BDO with an opinion on the value of the Yandeearra, Gnaweeda and Wilga Project assets as further described in the body of this Report. This valuation includes an outline of the approach adopted by SRK, including any assumptions involved in determining the value.

A summary of similar market transactions will be incorporated to ‘benchmark’ SRK’s methodology. SRK concentrated on the valuation aspects and has relied on project information and exploration data provided by Chalice on the tenements to support SRK’s valuation. The majority of this information was publically available on Chalice’s and their JV partners’ websites at the date of the valuation.

BDO’s Instruction Letter to SRK to undertake the Valuation update is presented as Appendix 1.

134

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

1.3 Reporting Standard

This Report is considered by SRK to be a Valuation Report under the guidelines of the VALMIN Code. The VALMIN Code is the code adopted by the Australasian Institute of Mining and Metallurgy and the standard is binding upon all AusIMM members. The VALMIN code incorporates the JORC Code for the reporting of Mineral Resources and Ore Reserves.

This Report is a Valuation Report and expresses an opinion as to the value of mineral assets, based on the technical aspects of the Projects. Aspects reviewed in this Report relate to the prospectivity of the areas under review for commodities related to the mineralisation styles as presented in Table 1-1, provided to SRK by Chalice as listed in the References section of this Report.

Note on Tenement Status and Material Contracts

Aspects of land tenure, environment, native title, sovereign risk and other socio-political issues have not been reviewed. SRK has not independently verified ownership and the current standing of the tenements and is not qualified to make legal representations in this regard. Instead, SRK has relied on information provided by Chalice. SRK has prepared this Report on the understanding that all Chalice tenements are currently in good standing and that there is no cause to doubt the eventual granting of any tenement applications. SRK has not attempted to establish the legal status of tenements with respect to Native Title or potential environmental and access restrictions.

Chalice also has a number of JV agreements with third parties on several of their project areas. SRK has not independently verified the terms of these agreements and is not qualified to make legal representations in this regard. SRK has however considered the conditions of the JV agreements in the valuation. Legal due diligence should be conducted by BDO on any material contracts in relation to these agreements.

1.4 Statement of SRK Independence and Consents

Neither SRK nor any of the authors of this Report have any material present or contingent interest in the outcome of this Report, nor do they have any pecuniary or other interest that could be reasonably regarded as being capable of affecting their independence or that of SRK. SRK has no beneficial interest in the outcome of the technical assessment and valuation being capable of affecting its independence.

SRK’s fee for completing this Report is based on its normal professional daily rates plus reimbursement of incidental expenses. The payment of that professional fee is not contingent upon the outcome of the Report.

SRK has been informed that Sub Sahara has been given access to SRK’s original report (SRK, 2008) and that Chalice has provided permission for this to be utilised by SRK for the purposes of this update.

SRK consents to this report being included in material supplied to Sub Sahara shareholders, within the context that it has been prepared.

135

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

2 Background and Brief

2.1 Background of the Project

The request to undertake the valuation was made to SRK by BDO, in response to Sub Sahara’s request of BDO to supply them with an Independent Experts Report. BDO’s Instruction Letter to SRK is presented as Appendix 1.

2.2 Nature of the Brief

This Report summarises Chalice’s exploration assets and their exploration history as a basis for our valuation as outlined below, rather than providing a detailed review. As such, it should be considered in conjunction with the technical reports reviewed to compile this Report, for a more thorough understanding.

The original report (SRK, 2008) was compiled over a limited number of days in September and October 2008. Exploration valuation work was undertaken by Dr Louis Bucci, Dr Kate Bassano and Ms Deborah Lord, with input by Dr Peter Williams all of SRK. Peer review was completed by Dr Peter Williams and Ms Deborah Lord. The report update was completed in late April / early May 2009 by the same SRK personnel.

136

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

3 Summary of Exploration Assets

3.1 Yandeearra Project

3.1.1 Introduction

The Yandeearra Project comprises 1,941 km[2] of tenements, located approximately 100 km south southwest of Port Hedland, Western Australia (Figure 3-1). This includes mining applications over granted tenements, and as such, there is approximately 1,400 km[2] of actual ground coverage. The project is largely within the Yandeearra Aboriginal Reserve, where a previous moratorium on exploration and mining has resulted in the area being under-exploration, with virtually no modern day exploration until Chalice’s acquisition of tenements in the area.

==> picture [411 x 472] intentionally omitted <==

Figure 3-1: Location of the Yandeearra project

Note: The exact overall tenement outline for the Yandeearra project as presented in this figure, has changed since production of this figure in the independent geological report provided in the Chalice prospectus (Cary, 2006). Refer to Table 3-2 and Figure 3-6 for the current tenement schedule.

137

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

3.1.2 Ownership

The Yandeearra Project comprises forty five (45) tenements, of which fourteen are granted tenements (Table 3-1), and thirty one (31) are applications (Table 3-2). Chalice currently has a joint venture with Atlas Iron at its Yandeearra Project.

Table 3-1: Chalice gold mines granted tenement schedule for the Yandeearra project as at 31 March 2009

Manager	Holder	ID No.	Area	Unit	Grant Date	Expiry Date	Rent Date	Rent
CGM	CGM	E47/0590	28	SB	30-Jul-99	29-Jul-08	29-Jul-09	A$12,745.04
CGM	CGM	E47/0591	45	SB	30-Jul-99	29-Jul-08	29-Jul-09	A$20,483.10
CGM	CGM	E47/0755	7	SB	30-Jul-99		29-Jul-09	A$3,186.26
CGM	CGM	E47/1041	12	SB	12-Jul-06	11-Jul-11	11-Jul-09	A$2,125.50
CGM	CGM	E47/1161	4	SB	16-Apr-03	15-Apr-10	15-Apr-10	A$961.40
CGM	CGM	E47/1162	8	SB	14-Mar-03	13-Mar-10	13-Mar-10	A$3,641.44
CGM	CGM	E47/1163	35	SB	23-Jan-06	22-Jan-11	22-Jan-11	A$6,198.50
CGM	CGM	E47/1164	39	SB	14-Mar-03	13-Mar-10	13-Mar-10	A$17,752.02
CGM	CGM	E47/1165	46	SB	14-Mar-03	13-Mar-10	13-Mar-10	A$20,938.28
CGM	CGM	E47/1166	63	SB	14-Mar-03	13-Mar-10	13-Mar-10	A$28,676.34
FMCM	CGM	M47/0561	502	HA	05-Jul-06	04-Jul-27	04-Jul-09	A$7,509.92
CGM	CGM	P47/1245	64	HA	27-Jan-06	26-Jan-10	26-Jan-10	A$140.80
CGM	CGM	P47/1298	150	HA	23-Aug-07	22-Aug-11	22-Aug-09	A$330.00
CGM	CGM	P47/1299	125	HA	23-Aug-07	22-Aug-11	22-Aug-09	A$ 275.00

CGM = Chalice Gold Mines Ltd; FMCM = Farno McMahan

138

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 3-2: Chalice Gold Mines application tenement schedule for the Yandeearra

project as at 31 March 2009

Manager	Holder	ID No.	Area	Unit	Rent
CHGM	UREL	E47/1207	35	SB	$3,984.75
CHGM	CHGM	E47/1748	70	SB	$7,969.50
CHGM	CHGM	E47/1749	7	SB	$796.95
FMCM	CHGM	M47/0560	676	HA	$10,112.96
CHGM	CHGM	M47/0783	958	HA	$14,331.68
CHGM	CHGM	M47/0784	319	HA	$4,772.24
CHGM	CHGM	M47/0785	958	HA	$14,331.68
CHGM	CHGM	M47/0994	640	HA	$9,574.40
CHGM	CHGM	M47/0995	825	HA	$12,342.00
CHGM	CHGM	M47/0996	777	HA	$11,623.92
CHGM	CHGM	M47/0997	957	HA	$14,316.72
CHGM	CHGM	M47/0998	960	HA	$14,361.60
CHGM	CHGM	M47/0999	901	HA	$13,478.96
CHGM	CHGM	M47/1000	978	HA	$14,630.88
CHGM	CHGM	M47/1001	969	HA	$14,496.24
CHGM	CHGM	M47/1002	991	HA	$14,825.36
CHGM	CHGM	M47/1003	984	HA	$14,720.64
CHGM	CHGM	M47/1004	999	HA	$14,945.04
CHGM	CHGM	M47/1005	959	HA	$14,346.64
CHGM	CHGM	M47/1114	959	HA	$14,346.64
CHGM	CHGM	M47/1115	991	HA	$14,825.36
CHGM	CHGM	M47/1116	991	HA	$14,825.36
CHGM	CHGM	M47/1117	959	HA	$14,346.64
CHGM	CHGM	M47/1118	991	HA	$14,825.36
CHGM	CHGM	M47/1119	991	HA	$14,825.36
CHGM	CHGM	M47/1120	998	HA	$14,930.08
CHGM	CHGM	M47/1121	959	HA	$14,346.64
CHGM	CHGM	M47/1122	985	HA	$14,735.60
CHGM	CHGM	M47/1123	982	HA	$14,690.72
CHGM	CHGM	M47/1124	959	HA	$14,346.64
CHGM	CHGM	M47/1125	1000	HA	$14,960.00
CGM = Chalice Gold Mines Ltd; FMCM = Farno McMahan,				UREL = Uranium Equities Ltd

Atlas Iron Ore Limited (Atlas) entered an option agreement with Chalice in November 2007 relating to the iron ore rights over certain leases at Yandeearra (Table 3-3). The terms of the agreement included Atlas Iron making an initial payment of $250,000 in cash or Atlas Iron shares to Chalice within 60 days of signing a formal agreement between parties. Thereafter Atlas Iron is required to:

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

• Make a further payment of $1,000,000 in cash or Atlas Iron shares upon exercising its option to purchase the iron ore rights, which will occur no later than 12 months after the date of the formal agreement.

• Atlas is also required to spend $200,000 on exploration for iron ore on this project within the option period.

139

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Chalice retain a one-off right to claw-back a 30% interest on definition of an iron ore resource exceeding 5 million tonnes at a cost of four times total exploration expenditure or in the absence of this claw-back, will retain a 2% Gross Sales Royalty.

As the Atlas Iron JV agreement has yet to pass the first earn in / option period, Chalice effectively retains 100% ownership at this time. It will be on this basis that the valuation of the Yandeearra Project will be estimated.

140

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 3-3: Tenements included in the Chalice – Atlas Iron JV

Manager	Holder	ID No.	Area	Unit	Rent (A$)
CGM	CGM	E47/0590	28	SB	12,745.04
CGM	CGM	E47/0591	45	SB	20,483.10
CGM	CGM	E47/0755	7	SB	3,186.26
CGM	CGM	E47/1041	12	SB	1,366.20
CGM	CGM	E47/1161	7	SB	1,682.45
CGM	CGM	E47/1162	25	SB	6,008.75
CGM	CGM	E47/1163	70	SB	12,397.00
CGM	CGM	E47/1164	70	SB	16,824.50
CGM	CGM	E47/1165	70	SB	16,824.50
CGM	CGM	E47/1166	70	SB	16,824.50
CGM	UREL	E47/1207	35	SB	3,984.75
CGM	UREL	E47/1318	1	SB	274.12
CGM	UREL	E47/1459	11	SB	1,252.35
CGM	CGM	E47/1748	70	SB	7,969.50
CGM	CGM	E47/1749	7	SB	796.95
FMCM	CGM	M47/0560	676	HA	10,112.96
CGM	CGM	M47/0783	958	HA	14,331.68
CGM	CGM	M47/0784	319	HA	4,772.24
CGM	CGM	M47/0785	958	HA	14,331.68
CGM	CGM	M47/0994	640	HA	9,574.40
CGM	CGM	M47/0995	825	HA	12,342.00
CGM	CGM	M47/0996	777	HA	11,623.92
CGM	CGM	M47/0997	957	HA	14,316.72
CGM	CGM	M47/0998	960	HA	14,361.60
CGM	CGM	M47/0999	901	HA	13,478.96
CGM	CGM	M47/1000	978	HA	14,630.88
CGM	CGM	M47/1001	969	HA	14,496.24
CGM	CGM	M47/1002	991	HA	14,825.36
CGM	CGM	M47/1003	984	HA	14,720.64
CGM	CGM	M47/1004	999	HA	14,945.04
CGM	CGM	M47/1005	959	HA	14,346.64
CGM	CGM	M47/1114	959	HA	14,346.64
CGM	CGM	M47/1115	991	HA	14,825.36
CGM	CGM	M47/1116	991	HA	14,825.36
CGM	CGM	M47/1117	959	HA	14,346.64
CGM	CGM	M47/1118	991	HA	14,825.36
CGM	CGM	M47/1119	991	HA	14,825.36
CGM	CGM	M47/1120	998	HA	14,930.08
CGM	CGM	M47/1121	959	HA	14,346.64
CGM	CGM	M47/1122	985	HA	14,735.60
CGM	CGM	M47/1123	982	HA	14,690.72
CGM	CGM	M47/1124	959	HA	14,346.64
CGM	CGM	M47/1125	1000	HA	14,960.00

CGM = Chalice Gold Mines Ltd; FMCM = Farno McMahan, UREL = Uranium Equities Ltd

141

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

3.1.3 Geological Setting of the Yandeearra Project Area

The Yandeearra Project is located in the Archean Pilbara Craton of Western Australia (Figure 3-1). The Pilbara Craton is divided into a northern granite-greenstone terrane, and the unconformably over-lying Hamersley Basin to the south. The granite-greenstone terrane has been further divided into the East and West Pilbara Terranes, which are separated by the Central Pilbara Tectonic Zone (CPTZ; Smithies and Farrell, 2000).

Thick sequences of turbidite and mass-flow deposits of the Mallina Basin form the major component to the CPTZ (Smithies and Farrell, 2000). The East and West Pilbara Terranes are characterised by large ovoid granitoid-gneiss complexes, which are partly surrounded by highly deformed belts of volcanic and sedimentary rocks. The Yandeearra Project is located at the boundary of the CPTZ and the East Pilbara Terrane.

The south eastern part of the Project area incorporates the north easterly trending Pilbara Well greenstone belt, which has undergone multiple phases of ductile deformation and metamorphism, and consists of basalts and ultramafic rocks, with silicified sedimentary rocks (Cary, 2006). Late stage brittle deformation has resulted in the formation of a series of north easterly trending faults with interpreted dextral offsets. The greenstone belt rocks are overlain by chert of the Cleaverville Formation to the northeast.

The north eastern part of the project area is predominately composed of Mallina Formation turbiditic sedimentary rocks, with numerous interbedded, differentiated mafic/ultramafic intrusives of the Millindinna Intrusion complex, and the Satirist Gabbro suite. Granitic rocks of the East Pilbara Granite-Greenstone Terrane occur to the south east of the Project area, and Hamersley Basin basaltic volcanic rocks outcrop to the south of the tenements.

3.1.3.1 Regional Endowment

In terms of endowment for the District, Range River Gold’s 529,000 ounce Indee Project is located immediately north of the project area. Main prospects for that Project are the Camel 1 and Withnell Prospects (combined Measured, Indicated and Inferred Resource of 7.6 Mt at 1.7 g/t Au containing 400,000 oz Au above a 0.5 g/t Au cut-off; Cary, 2006), and the Calvert and Towerana Prospects (combined Indicated and Inferred Resource of 2.8 Mt at 1.4 g/t Au for 129,000 oz Au; Cary 2006). The mineralisation is associated with the regional-scale Mallina Shear Zone, and is characterised by a gold-pyrite-arsenopyrite association developed within zones of shearing and quartz veining within Mallina Basin turbiditic sedimentary rocks.

Similar deposits to those developed at Indee are the main targets within the Yandeearra Project area for Chalice and De Grey Mining. Currently, there is no active mining at the Indee Project, and production is now restricted to heap-leaching of stockpile material. As of 14 July 2008, the Indee heap leach operation had produced 29,337 oz of gold from 851,836 tonnes (t) of ore grading at 1.5 g/t Au (Range River Gold, 2008).

Drilling at De Grey Mining’s Wingina Well Prospect to the northeast of Yandeearra has defined a combined Measured, Indicated and Inferred Resource of 3.4 Mt at 1.8 g/t Au containing 203,000 oz of gold above a 0.5 g/t Au cut-off (De Grey Mining Ltd, 2008c). Gold and PGE exploration is continuing on numerous other prospects, and no production has commenced at Wingina Well.

Tantalum is mined from the Wodgina deposit (30 km east of Yandeearra) on the eastern extension of the Pilbara Well Greenstone Belt. However, similar host rocks to those at Wodgina have not yet been identified at Yandeearra. Annual production at Wodgina is ~1.3 to 1.4 Mlb Ta2O5 (Mining Journal, 2007).

142

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

3.1.4 Exploration History

A moratorium on mining and exploration within the Yandeearra Aboriginal Reserve was only recently lifted. Following the lifting of the exploration moratorium and the granting of a number of exploration licences, the Farno Group (Farno) undertook initial geological mapping, stream sediment sampling, grid soil sampling and first pass RAB drilling targeting gold and base metals in the Pilbara Well Greenstone Belt. Pursuant to a joint venture with Farno, Bullion Minerals Ltd (Bullion) completed further soil sampling and aircore, RAB, RC and vacuum drilling programmes at several prospects within the project area, mostly in the Mallina Basin. This work outlined 17 significant gold in-soil anomalies, which are currently under investigation by Chalice.

In the 2006, Chalice completed a 12,601 m aircore programme, testing for Indee-style gold deposits in Mallina Formation turbiditic sedimentary rocks. Six geochemical anomalies (Holly, Fir, Aspen, Connolly, Magda and Hogan) along the Central Shear Zone and a seventh target at Woomerina were tested (Chalice Gold Mines, 2006c). Best results are presented in Table 3-4. Drilling returned low level gold anomalism in several drill holes, associated with variably quartz veined zones in a sequence of sandstone and siltstone.

143

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 3-4: Best Results of Chalice’s Aircore 2006 programme at Yandeearra

Prospect	Hole	North	East	Width (m)	Interval (m)	Au (ppm)	Comments
Holly	CYAC007	7683405	633303	5	68–73	0.66
Including 1	m @ 1.15 g/t from 70 to 71 m
Holly	CYAC018	7683496	633413	1	10–11	1.75
Holly	CYAC019	7683497	633393	2	11–1	1.82
Holly	CYAC024	7683496	633234	1	26–2	2.1
Holly	CYAC035	7683303	633298	7	40–47	0.73	EOH
Including 3	m @ 1.32 g/t from 41 to 44 m
Holly	CYAC007	7683405	633303	5	68–73	0.66
Including 1	m @ 1.15 g/t from 70 to 71 m
Holly	CYAC018	7683496	633413	1	10–11	1.75
Holly	CYAC019	7683497	633393	2	11–13	1.82
Connolly	CYAC102	7678795	631166	1	31–32	0.69
Connolly	CYAC105	7678796	631072	1	32–33	1.43
Connolly	CYAC120	7678397	630917	1	15–16	0.84
Connolly	CYAC128	7678396	630671	1	52–53	0.51
Connolly	CYAC132	7678003	630898	3	33–36	1.08
Connolly	CYAC133	7678003	630870	3	47–50	2.11
Connolly	CYAC134	7677998	630841	1	2–3	1.43
Connolly	CYAC135	7677999	630821	2	52–54	3.15
Connolly	CYAC137	7678005	630760	1	49–50	0.72
Connolly	CYAC138	7678003	630735	1	5–6	0.63
Connolly	CYAC144	7678003	630576	1	13–14	0.5
Woomerina	CYAC197	7672027	641605	5	4–9	0.80	veined siltstone
Including 1	m @ 2.25 g/t from 8 to 9 m
Woomerina	CYAC198	7672050	641601	1	7–8	0.78	Lower saprolite
Woomerina	CYAC201	7672135	641600	1	37–38	0.57	Sandysiltstone
Woomerina	CYAC202	7672159	641600	2	8–10	0.92	siltstone

Source: Chalice Gold Mines, 2006c

In 2007, preliminary review of the available radiometric data for the Yandeearra Project area outlined at least one priority uranium target in the southern part of the project area. The target was defined by a discrete uranium channel radiometric anomaly associated with a small area of mapped sediment outcrop in the Pilbara Well Greenstone Belt north of the Yule Granite. Rock chip sample results from follow up work are presented in Table 3-5.

144

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 3-5: Significant Rock Chip Sampling Results from Yandeearra

Sample Number	Easting	Northing	Au (Average; ppb)	Au 1 (ppb)	U (ppm)
114501	608966	7652030	4	4	4.82
114503	608772	7652249	39	47	2.55
114509	631233	7659220	9	9	4.33
114511	630158	7659754	<1	<1	3.49
114520	628125	7653058	<1	<1	9.18
114521	627927	7653198	<1	<1	34.25
114526	627994	7651508	15	15	23.90
114527	628047	7651563	1069	1138	50.71
114528	628020	7651540	14640	16360	920.70
114529	635029	7649350	74	79	24.98
114530	635269	7649524	65	70	22.71
114531	636895	7652122	12	12	14.76
114532	636909	7650560	4	4	34.85
114533	634280	7652260	<1	<1	4.29
114534	614530	7646288	5	5	5.66
114536	629123	7652209	164	164
114537	629101	7652198	25	25
114538	628015	7651547	4	4	45.24
114539	628002	7651532	69	69	28.2
114540	627983	7651513	46	46	30.23
114541	628022	7651545	1567	1567	4.39
114542	628069	7651567	57	57	18.37
114543	628073	7651564	1911	1833	8.77
114544	628592	7652525	32	32
114547	628420	7652029	215	230
114548	628427	7652019	10	10
114549	628105	7651881	8	8
114550	628388	7652018	4	4
114551	628321	7651996	4	4
114552	628021	7652004	5	5
114553	628185	7651899	6	6
114554	628181	7651929	12	12
114555	628255	7652027	16	16
114556	628295	7652014	5	5
114557	628617	7652492	7	7

Source: De Grey Mining Ltd (2008a)

In 2008, further compilation of data from previous explorers, in conjunction with field reconnaissance, highlighted two regional-scale gold mineralised structures; the John Bull and Pilbara Well Shear Zones (Figure 3-2).

145

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

The John Bull Shear can be traced over a strike length of at least 7 km (De Grey Mining Ltd, 2008a). Samples from the Princess May and John Bull historic workings, which have never been drilled, assayed up to 71.4 g/t and 33.2 g/t Au (De Grey Mining Ltd, 2008a). Work by previous explorers includes only eight drill holes elsewhere along a 530 m strike length of the John Bull Shear Zone. Those holes returned intercepts including 9 m at 1.99g/t Au, 4m at 2.67 g/t Au and 7 m at 1.84 g/t Au (De Grey Mining Ltd, 2008a).

Gold mineralisation is reported as hosted by quartz veining and pyrite within basalt and felsic dykes intruded along the structure. High grade gold assays up to 45.5 g/t and 14.9 g/t (De Grey Mining Ltd, 2008a; Table 3-6) were also returned from sampling at the Foochow, Hong Kong and Empress Well North workings located 3 km west of the John Bull Shear Zone (Figure 3-3). Gold there is hosted by laminated quartz carbonate veins within extensively chlorite-carbonate altered dolerite and basalt, extending over at least 300 m strike.

==> picture [418 x 352] intentionally omitted <==

----- Start of picture text -----

John Bull (Figure
3-3)
Pilbara Well (Figure
3-4)
----- End of picture text -----

Figure 3-2: Location of the John Bull and Pilbara Well shear zones at Yandeearra

The Pilbara Well Shear Zone is an 800 m wide structure of highly foliated greenstone and granite, along the south eastern margin of the greenstone belt. Gold workings extend over more than 10 km strike and were the site of alluvial and bedrock mining in the late nineteenth century (De Grey Mining Ltd, 2008b). Sampled vein quartz collected by De Grey, from old workings that have never been drilled, returned assays up to 14.4 g/t Au and 2.67% Cu (De Grey Mining Ltd, 2008b; Table 3-6).

146

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

==> picture [292 x 348] intentionally omitted <==

Figure 3-3: Results from the John Bull shear zone

==> picture [379 x 255] intentionally omitted <==

Figure 3-4: Results from the Pilbara Well shear zone rock chip sampling

147

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 3-6: Rock chip sampling results from John Bull and Pilbara Well areas

Sample	East	North	Gold (g/t)	Copper (%)	Silver (g/t)	Prospect
55048	636,710	7,657,377	33.2	0.10	2	Princess May
55053	635,616	7,655,006	71.4	0.01	5	John Bull
55054	635,716	7,654,970	10.1	0.03	1
55061	635,344	7,650,550	8.25	30.2	34	Pilbara Well
55015	635,154	7,650,586	1.48	0.01	26
55066	636,652	7,650,810	7.89	0.48	8	Esmeralda
55068	636,962	7,651,029	14.4	2.67	5	Queen Mab
55107	633,553	7,656,464	5.35	0	1	Hong Kong
55108	633,635	7,656,582	6.93	0.01	1
55109	633,648	7,656,602	45.5	0	4
55111	634,336	7,657,211	14.9	0.01	2	Foochow
55118	631,594	7,655,955	11.2	0.12	2	Empress Well North
55120	631,627	7,655,972	9.54	0.01	1
550005	631,758	7,651,589	2.55	0.01	0	Diorite

Source: De Grey Mining Ltd, 2008b

Prior to De Grey’s withdrawal from their joint venture with Chalice at Yandeearra, further gold and base metal exploration continued at the project with soil geochemistry, geological reconnaissance and rock sampling programs undertaken. Several new gold and base metal occurrences were identified by this work. Despite grades up to 58.6g/t gold, 38g/t silver and 3.10% lead from rock samples (Table 3-7) most occurrences were found to be related to wide-spaced veins and narrow felsic dykes and were downgraded as having limited tonnage potential (Chalice, 2009).

Table 3-7: Reconnaissance rock sampling results >1.00g/t gold, 20g/t Au or 1% lead obtained by De Grey (Chalice, 2009).

Sample	Sample ID	East	North	Gold, g/t	Silver, g/t	Copper, %	Lead, %	Zinc %
Gossan Veins	550966	639,672	7,653,035	1.19	38	0.07	2.58	0.64
	550967	639,700	7,653,051	2.26	27	0.05	3.10	0.18
	550969	639,768	7,653,152	6.89	2	0.01	0.05	0.00
	P545047	639,566	7,653,050	1.03	0	0.00	0.00	0.00
Gold Vein	550972	638,541	7,652,298	0.16	16	0.06	1.59	0.02
	550974	638,456	7,652,258	58.6	4	0.01	0.01	0.00
Aplite	550979	638,800	7,654,878	1.58	0	0.00	0.00	0.00
	550981	638,599	7,654,914	4.56	0	0.00	0.00	0.00

148

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Further exploration was then focussed on a large, previously unexplored area near the Cleaverville Chert Hills where soil sampling late in 2008 identified a new, gold-in-soil anomaly. Gold anomalism up to 2.64g/t in soils remains open and untested to the north and east (Figure 3-5). There are no known gold occurrences in the area and a bedrock source to the gold in soil has yet to be identified. The soil anomaly occurs in a structurally favourable position at the western end of a large granite body that intrudes the greenstone rocks of the Cleaverville Chert and underlying felsic volcanic lithologies (Chalice, 2009).

==> picture [354 x 262] intentionally omitted <==

Figure 3-5: Recent surface sampling results from Yandeearra (Chalice, 2009).

In total, twenty four (24) ‘prospects’ have been identified by Chalice and previous workers within the current Chalice tenement holding (Figure 3-6). The exploration results presented above, and the level of geological understanding of these prospects and the immediate areas adjacent to the prospects, will form the basis of the Geological Risk Method valuation (explained in Section 4).

It should be noted that exploration data specific to each prospect presented in Figure 3-6, are not necessarily available. As such, the Yandeearra tenement holding has been divided into four areas for the purpose of the Geological Risk Method valuation (Figure 3-7A). The division of the areas was defined by tenement boundaries, and took into account the commonality and continuity of geological features throughout the tenements (Figure 3-7B), as well as the distribution of exploration results (Figure 3-7C). To derive the final estimated value using the Geological Risk Method, the areas were summed based on commodity of interest.

The only area not included in the total estimated value is area ‘D’. The VALMIN Code (Clause 70) cautions against the attribution of value to exploration tenements under application at the time of preparing the valuation, and as such these tenements were not included in this valuation. Other tenement applications in the Yandeearra Project area cover existing granted tenements held by Chalice, and as such, those areas were included in this valuation.

149

==> picture [386 x 557] intentionally omitted <==

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

==> picture [314 x 660] intentionally omitted <==

Figure 3-7: Definition of area division for the purpose of Geological Risk valuation

151

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

3.2 Gnaweeda Project

3.2.1 Introduction

The Gnaweeda Project comprises 172.28 km[2] of tenements, located approximately 30 km east of Meekatharra in the Murchison District of Western Australia (Figure 3-8). The Murchison Province is the western most of three granite-greenstone terrains that together form part of the Archean Yilgarn Craton. The Province extends for over 450 km in strike from Mt Gibson to Meekatharra.

Within the Province, several arcuate belts of supracrustal or greenstone rocks are present, bounded by intrusive granitic batholiths. Mafic volcanic and intrusive rocks with subordinate felsic volcanics and sediments characterise the greenstone sequence.

==> picture [412 x 408] intentionally omitted <==

Figure 3-8: Location of the Gnaweeda project

Note: the exact overall tenement outline for the Gnaweeda project has changed since production of this figure in the independent geological report provided in the Chalice Prospectus (Cary, 2006). Refer to Table 3-8 and Figure 3-10 for the current tenement outline

152

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

3.2.2 Ownership

The Gnaweeda Project comprises two granted tenements, listed in Table 3-8, and is subject to the JV agreement outlined below.

Chalice has a JV agreement with Teck Cominco (Teck) in relation to gold at the Gnaweeda Project. In July 2005, a JV was signed whereby Teck can earn a 70% interest in the project by spending A$1.5M over three years (with minimum expenditure of A$140,000). The JV is staged so that Teck can earn a 51% interest in the project by expenditure of A$750,000 within three years, which has just been met by Teck. Thereafter, an additional 19% interest can be earned by expenditure of another A$750,000 up to total of A$1.5M. At this time, Chalice has a 49% interest in the Gnaweeda Project, and it will be on this basis that SRK’s valuation of Chalice’s equity position in the Gnaweeda Project will made.

Table 3-8: Chalice gold mines tenement schedule for the Gnaweeda project as at April 2009.

Manager	Holder	Id	Area	Unit	Grant Date	Expiry Date	Rent Date	Rent
TECK	JABU	E51/0926	28	SB	31-Jul-02	30-Jul-09	30-Jul-09	A$12,745.04
TECK	JABU	E51/0927	28	SB	31-Jul-02	30-Jul-09	30-Jul-09	A$12,745.04

JABU = J A Bunting & Associates Pty Ltd; TECK = Teck Cominco

3.2.3 Geological Setting of the Gnaweeda Project

The Gnaweeda project covers the mainly buried Gnaweeda greenstone belt (GGB), located east of the Meekatharra–Mt Magnet Greenstone belt of the Murchison Province (Figure 3-8). The bulk of the GGB is covered by colluvial and alluvial material, typically around 20 m thick, locally with narrow palaeochannels to 80 m deep. The cover is developed over a variably preserved weathering profile, with laterite caps (Bunting and McIntyre, 2003).

Based on the interpretation of magnetic data, the GGB can be subdivided into three litho-tectonic subdomains (Figure 3-9). The western subdomain comprises a broadly conformable package of non-magnetic mafic volcanic and intrusive rocks, with extensive, continuous narrow interbedded strongly magnetic units which define large-scale isoclinal folds and possible repetition of stratigraphy (Bunting and McIntyre, 2003).

The central subdomain comprises a package of gabbro or dolerite and prominent magnetic felsic volcanics and sediments, with strike broadly parallel to the gross strike of the greenstone belt (Bunting and McIntyre, 2003).

The eastern subdomain contains a sequence of complexly folded, variably magnetic, mainly mafic and ultramafic volcanic rocks (Bunting and McIntyre, 2003).

The boundary between the Central and Eastern subdomains is interpreted as either a major structure, or the eastern margin of a broad high strain zone including the Western and Central subdomains. A significant northwest-trending sinistral shear corridor (comprising several structures) separates the southern and central segments of the belt (Bunting and McIntyre, 2003). Numerous mafic dykes are evident throughout the area, with the dominant swarms oriented northeast and east–west (Tillick, 2007A).

153

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Locally within the tenements, bedrock is generally obscured by regolith, and outcrop is restricted to the northernmost portion of the tenements. Limited outcrop of greenstone belt is present in the northeast near the old Mistletoe mine, where Tertiary laterite is developed over heavily weathered mafic and ultramafic rocks and interbedded shale (Bunting and McIntyre, 2003). In the southern part of the tenement around Bunarra, extensive outcrops of weathered felsic volcanic, volcaniclastic and sedimentary rocks are inter-layered with minor mafic volcanics and dolerite (Bunting and McIntyre, 2003).

==> picture [300 x 369] intentionally omitted <==

Figure 3-9: Distribution of the geological domains at Gnaweeda

Source: Teck Cominco (2006)

Structurally, the area is complex, with the predominantly north–south-striking greenstone belt being influenced and disrupted by the occurrence of a large granitoid intrusive which has resulted in localised anastomosing of the belt (Figure 3-10).

Host rocks to mineralisation comprise a package of mafic extrusive and intrusive (gabbroic or doleritic) rocks, intruded by felsic porphyries, with minor shales and sedimentary units (Tillick, 2007a). Mineralisation is reported as developed both in mafic rocks and in felsic units, with extensive, but generally low grade, gold mineralisation developed in the mafic rocks (Tillick, 2007a). Mapping of mineralised zones indicates that quartz veining in the felsic rocks generally contains higher grade intersections (Tillick, 2007a). Alteration typically has sericite-carbonate with minor sulphide proximal to quartz veins, and a distal halo consisting of biotite and chlorite (Tillick, 2007a).

154

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

3.2.4 Exploration History

The area has old gold workings located at Mistletoe and Bunarra (Figure 3-10). There is no record of production from Bunarra, but the Mistletoe mine has reported production of approximately 490 oz of gold from 444 t of ore mined, as well as 1200 oz of dollied and alluvial gold (Bunting and McIntyre, 2003). Early modern exploration work comprised VHMS-style base metal exploration in the southern parts of the tenements, focussed on outcropping gossan hosted in felsic volcanoclastics rocks in the vicinity of Bunarra Bore. Initial work (pre-19977) was completed by Esso, with Dominion subsequently exploring the area for gold. Base metal exploration work, including some drilling, was completed by Outokumpu (1991 to 1992). St Joe Minerals completed some sampling and shallow drilling to the west of this prospect. In 1977, BHP drilled a magnetic anomaly within the greenstones, intersecting olivine orthocumulate and gabbroic rocks.

Gold exploration has been completed in two main areas, the main Gnaweeda trend explored by Newcrest in 1993 to 1999 (and subsequently Australian Gold Resources (AGR) in JV with Newcrest), and an area to the east explored by Mines and Resources Australia (MRA) in 1992 to 1999 (Bunting and McIntyre, 2003). In both areas, the companies explored using airborne and ground magnetics, RAB, aircore and RC drilling. Geological mapping of four core holes was completed by Newcrest/AGR, and MRA undertook soil and stream-sediment sampling.

Newcrest and Australian Gold Resources outlined a 1 km long supergene Au anomaly (0.5 to 0.8g/t Au), and subsequent drilling in an initially widely spaced RAB programme reported 12 m @ 8.7 g/t Au (Bunting and McIntyre, 2003). Limited deeper RC and diamond drilling revealed significant grades at depth, including 16 m @ 2.58 g/t Au (TR202-6), 20 m @ 1.4 g/t Au (TR209-1), 24 m @ 2.74 g/t Au (GZ090-1) and 4 m @ 5 g/t Au (TR20035E-5) (Bunting and McIntyre, 2003).

Bullion Minerals (McIntyre, 2005b) completed detailed compilation and analysis of open file historical drilling data, compilation and imaging of open file aeromagnetic data, and collection of new ultra-detailed aeromagnetic data. Extensive drilling was completed in the Turnberry‐St Annes ‐ area, which identified gold arsenic mineralised systems developed over 6km of strike, within a zone up to 750 m wide (McIntyre, 2005). Mineralisation was reported as hosted in a package of mafic volcanic/intrusive, felsic intrusive and sedimentary rocks. Higher grades were interpreted as being associated with quartz veined felsic intrusives (McIntyre, 2005a).

Teck Cominco drilled areas to the south of the current tenement package, and relinquished that ground (E51/1027). On the current tenement package, Teck have drilled 55 holes across RAB, aircore and RC holes, for a total of 4990 m. Holes at Turnberry largely intersected coarse-grained mafic (dolerite?) rocks with pervasive carbonate alteration, localised quartz-carbonate veining and disseminated pyrite (Tillick, 2007b). Mineralised zones in one hole (GNRC003) appeared to correspond to strong silica-pyrite alteration, with abundant fine-grained arsenopryite (?) (Tillick, 2007b). The majority of the holes in general encountered a mixed package of foliated mafic volcanic rocks, dolerite, shale, ultramafic schist and minor feldspar porphyry. Nearly all holes encountered zones of strong carbonate + quartz pyrite veining and wallrock alteration.

The strongest Au mineralisation occurs in foliated fine-grained mafic volcanics that have been strongly carbonated and contain disseminated pyrite and quartz veining (GNRC005), and a shale/fine mafic volcanic unit with abundant quartz veining, chlorite and sericite alteration, and minor pyrite (GNRC009) (Tillick, 2007d). Shallow 5 m composite samples returned 11.64 g/t from 15 to 20 m in GNRC007 from lateritised clays directly beneath the transported cover, and 13.49 g/t from 80 to 85 m in GNRC008 from red-brown weathered saprolite. Some significant drilling results from the drilling are presented in Table 3-9.

155

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 3-9: Significant Drilling Results from Teck Drilling

Hole No.	From (m)	To (m)	Interval (m)	Au g/t
GNRC001	230	240	10	1.37
GNRC002	205	210	5	1.31
GNRC003	50	55	5	2.43
	60	65	5	0.92
	245	255	10	2.03
GNRC005	91	92	1	1.02
	277	278	1	23.02
	278	279	1	8.07
	279	280	1	4.54
GNRC007	15	20	5	11.64
GNRC008	55	60	5	2.35
	80	85	5	13.49
GNRC009	70	75	5	0.91
	151	152	1	1.93
	152	153	1	2.34
	168	169	1	59.27
	169	170	1	8.60
	170	171	1	1.88
	171	172	1	1.34
	223	224	1	2.63
	231	232	1	3.17
	After Tillick (2007d)

156

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

==> picture [415 x 607] intentionally omitted <==

Figure 3-10: Map showing exploration results at Gnaweeda Tenement outlines shown in white. Prospects defined by previous explorers and Chalice are labelled.

157

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

3.3 Wilga Project

3.3.1 Introduction

The Wilga Project comprises approximately 12 km[2] of tenements, located approximately 50 km south of Laverton and 15 km south southeast of AngloGold-Ashanti’s Cleo gold mine (Figure 3-11).

==> picture [414 x 427] intentionally omitted <==

Figure 3-11: Location of the Wilga Project

158

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

3.3.2 Ownership

The Wilga Project comprises two tenements, as presented in Table 3-10.

Table 3-10: Chalice Gold Mines Tenement Schedule for the Wilga Project as at April

2009	2009	2009	2009	2009	2009	2009	2009	2009
Manager	Holder	ID No.	Area	Unit	Grant Date	Expiry Date	Rent Date	Rent
CGM	CGM	E39/1003	7	SB	23-Sep-05	22-Sep-10	22-Sep-09	A$708.40
CGM	CGM	P39/4890	100	HA	29-Jan-09	28-Jan-13	28-Jan-10	A$220.00

CGM = Chalice Gold Mines Ltd

Chalice has recently entered an agreement with AngloGold Ashanti Ltd (AngloGold) in relation to Exploration Licence 39/1003, and for Prospecting Licence 39/4890, that make up the Wilga Project. Under the terms of the agreement, AngloGold has the right to earn a 75% interest in the tenements with the expenditure of A$2M within four years from August 2008.

Upon earning its 75% interest, a JV will be established with participating interests being AngloGold 75% and Chalice 25%. AngloGold will be the manager of the JV and project and can withdraw prior to earning its interest.

As AngloGold has yet to reach the earn-in period, Chalice effectively retains 100% ownership of the Wilga Project at this time.

3.3.3 Geological Setting of the Wilga Project

The Project is located within the Burtville Domain, adjacent to the Laverton Tectonic Zone (LTZ), which separates the Burtville Doman from the Laverton Domain to the west. The LTZ is dominated by acid to intermediate volcanic and volcanoclastics rocks, including fault-bounded polymict conglomerates, and minor mafic and ultramafic rocks. The area in general is characterised by structurally disrupted stratigraphy, with extensive faulting, folding and shearing noted, variable metamorphic grade and extensive alteration and metasomatism (Alexander, 2007).

The oldest rocks in the immediate Wilga Project area are mafic and ultramafic volcanics with interbedded banded iron and cherty units. The sequence is dominated by high-Mg basalts and komatiite, with lesser basalt, dolerite and gabbro and sedimentary rocks (Alexander, 2007; Figure 3-12). Banded Iron Formations are generally contained within basaltic sequences, at or near the contact between basalts and ultramafic rocks (Delta, 1987). Several generations of intrusive rocks locally cut the stratigraphy, including dolerites/gabbros, which often occur as sills, and quartz-feldspar intrusives.

159

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

==> picture [411 x 314] intentionally omitted <==

Figure 3-12: Local geology of the Wilga Project

After Alexander (2007)

‘Quartz blows’ have been mapped at the surface, often parallel to the strike of the stratigraphy, which predominantly dips moderately to steeply east, with localised tight folding highlighted within the banded iron formation (‘BIF’) units (Delta, 1987). Several east–west-striking shear zones are also mapped, which locally off set stratigraphy. Regional metamorphism is predominantly Greenschist facies, with localised Amphibolite facies developed close to shear zones.

Mineralisation in the area is reported as hosted by banded iron/chert formations, quartz veining and shear zones within the basaltic sequences (Allen, 2006). Visible gold has been noted from the area associated with the BIFs, and reconnaissance rock chip sampling of the outcrop has produced assays of 7.8 g/t and 5.1 g/t gold (Cary, 2006).

3.3.4 Exploration History

A summary of previous exploration on the tenement is presented in Table 3-11.

160

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 3-11: Summary of Exploration Results at Wilga

Company	Year(s)	Work Completed
Australian Selection Pty Ltd	1966–71	Detailed aeromagnetic survey, gridding, soil sampling and geological mapping, Auger drilling, pitting and trenching and eighty diamond drill holes
US Steel International Inc	?	Regional reconnaissance and geological mapping
Nord Resources	1981–1983	Drilled 88, 9 m deep air track holes over a banded Iron formation south of Wilga Trig. Reconnaissance mapping and surface sampling was carried out prior to drilling
Union Oil	1986	Tested approximately 6 km of strike length of the banded iron formations. Drilled 24 RC holes for 1,406 m. Concentrated their drilling on the Relief Bore, Wilga and RSVG prospects
Delta Gold	1984–1990	Geological Mapping, griding, ground magnetic surveys, soil and rock chip sampling and RAB and RC drilling (45 holes). Geochemical sampling included assaying for Au, with select samples assayed for Zn, Pb, Cu and As
Chalice Gold Mines	2006–2007	Soil sampling (173 samples), interpretation of geophysical data, mapping
AngloGold Ashanti	2008-2009	Surface rock chip sampling and gold analyses (35 samples); 1:5,000 scale geological mapping and an archaeological heritage survey.

Auger drilling defined an extensive, low order (>10 ppb Au, peak 31 ppb Au) gold anomaly in an area of cover to the west of the main mineralised BIF. The anomaly trends north to north‐north east and is semicontinuous over a strike distance of approximately 1,800 m at the >10 ppb Au contour (Alexander, 2007).

Of the 35 surface rock chip samples assayed by AngloGold Ashanti, 7 returned values greater than 0.03ppm. Geological mapping revealed a north northwest striking stratigraphy of BIF, basalt, pyroxenite and isoclinals folding of the stratigraphy (Chalice, 2009). Initial indications show that gold mineralisation is associated with a north northwesterly striking BIF ridge (Figure 3-13).

RAB and RC drilling identified a trend of gold anomalism (≥1 g/t and up to 5 g/t in 10 holes) which correlates with the mapped and interpreted distribution of BIF in the western part of the tenement (Figure 3-14). Further potential exists for similar intersections within the interpreted BIF unit along strike to the north and to the south.

161

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

==> picture [259 x 297] intentionally omitted <==

Figure 3-13: Wilga Project schematic geological map showing major units and structures interpreted from aeromagnetic survey and higher grade gold values in rock chip samples (Chalice, 2009)

162

==> picture [370 x 528] intentionally omitted <==

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

4 Valuation

4.1 Valuation of Exploration Properties

Valuation of exploration properties relies on the application of a number of different methodologies that can be used in conjunction to determine a probable (or likely) market value. The methods used are related to the stage of exploration, and whether there are identified mineral resources on the property. The major methods used to value exploration properties are (Lawrance, 1994):

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

• Geoscience Ratings Methods

• JV terms – Comparable Market Value

• Multiples of Exploration Expenditure (MEE)

• Rule of Thumb.

In addition, SRK has developed a probability (risk) based approach to exploration valuation (the Geological Risk Method), which relies on identifying likely net present value (NPV) outcomes from successful development, and discounting this figure by the cost and probability of success through various (5) stages of the exploration and development process (Lord et al, 2001). This is SRK’s preferred method that relies on development of geological models for mineralisation and then detailed review of exploration data to apply these models. In addition, the probability based approach requires determination of the likely or preferred NPV outcomes as well as estimation of the probabilities related to the likelihood of this outcome.

Using the Geoscience Ratings Method requires information such as tenement acquisition and maintenance costs, and detailed analysis of the information which requires additional research to incorporate into the valuation. SRK does not favour the MEE method as it is expenditure based and takes limited account of the geological features present within the project area to derive a value. However, attributing the annual rental commitment as a means of determining a minimum tenement value, is sometimes appropriate.

The Rule of Thumb approach is typically used when a resource has been outlined but its economic viability has yet to be determined. It is important to note that this should be applied only with caution and the results should be interpreted as indicative only as it does not take into account many other factors such as native title, environmental, taxation, mill and capital costs or mine closure costs. As no resources are defined on the assets subject to this valuation, the Rule of Thumb approach is not appropriate to use.

SRK has further utilised the technical observations as provided by Chalice (Table 4-1) to determine Project maturity and prospectivity potential, as based on exploration work completed by Chalice.

Consequently, SRK has undertaken the valuation of the Yandeearra, Gnaweeda and Wilga exploration Projects using the probability (risk) based approach (Geological Risk Method). The results of this valuation have been compared to a limited number of comparable market transactions for early stage exploration projects using a value per square kilometre. This is not SRK’s preferred method as it does not take into account the detailed geology of each tenement area, instead applying a somewhat arbitrary value figure per square kilometre of tenement. SRK has utilised this method primarily as a comparison to the Geological Risk Method. A further benchmark used to calibrate the Geological Risk Method valuation was the implied value as derived from the terms of a JV agreement, where applicable.

164

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Our valuation encompasses the exploration potential of the three project areas comprising Chalice’s holding in Western Australia.

This technical review does not account for:

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

• the value of any nearby infrastructure;

• the value of any commodity other than Au, Cu, Fe, Ta or U;

• acquisition costs;

• financing costs; and

• infill drilling/future exploration and resource definition costs.

All values quoted are in Australian Dollars (A$$).

In summary, SRK has derived our preferred valuation of the Yandeearra, Gnaweeda and Wilga exploration projects using the Geological Risk Method to determine the value of exploration potential. This has been cross-checked, where possible, with the comparable transactions method (including implied value from JV agreements where applicable), as described below.

165

Risk Probability Factor Category	Variable, i.e.: Low for Area B Low to moderate for Area A Negligible for Area C	Low	Very low	Negligible	Negligible	Moderate	Very low	Low
Comments	Exploration results for Area B have lowered expectation of discovery of Indee target style. Alternative style within Area A (De Grey JV) is possibly higher grade (5 -7 g/t Au) but smaller tonnage deposit	No significant exploration results to date, but large tonnage deposit considered low probability.	De Grey Mining’s Orchard Tank-Acacia zone (Zn-Pb-Cu-Au-Ag) provides likely mineralisation model.	Evidence of host rocks for notable Ta mineralisation is unknown and therefore not regarded as a priority exploration objective	Should disregard as an exploration objective, and particularly because of issues in conducting exploration to test beneath areas covered by Proterozoic basalt	High grade intercepts at depth provide basis for continuing further evaluation but mineralisation continuity and orientation needs to be established before proceeding towards resource definition stage to meet upper end of target size	Not considered to be primary target mineralisation based on past exploration results, and not a current exploration objective	Preliminary exploration results to date support evaluation but grade and size of potential mineralisation style is ill defined
Assumed Potential Target Model	200,000 to 300,000 oz Au, 1.5 – 2.5 g/t grade (Area B). e.g. Range River Gold’s Indee or De Grey Mining’s Wingina Well deposits and mineralisation styles	5-7 Mt @ 58% Fe. a.g. Atlas Iron’s Trigg deposit within its Abydos Project (east of Yandeearra)	5 -7 Mt @ 3-4% Cu equivalent. e.g. CBH Resources/Sipa Resources Panorama JV (with resources such as Sulphur Springs, 13.8Mt @ 3.7% Zn, 1.4% Cu and Kangaroo Caves, 1.7 Mt @ 9.8% Zn 0.6% Cu)	No target identifiable	Initial conceptual target not proven by subsequent work	250,000 to 500,000 oz	Not known	250,000 – 500,000 oz
Commodity	Au	Fe	Cu	Ta	U	Au	Cu	Au
Project	Yandeearra					Gnaweeda		Wilga

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

4.2 Comparable Transaction Valuations

The comparable market transactions method was used in three situations for application to the Chalice assets:

1. As a value of specific commodities as based on JV terms (Section 4.2.1).

2. As a ‘value per square kilometre’ value for the Yandeearra, Gnaweeda and Wilga exploration projects (Section 4.2.2).

3. To determine a realistic Target Value (TV, NPV) for the exploration projects valued in the Geological Risk Method (Section 4.3).

4.2.1 Joint Venture Terms

One may consider a fair indication of market value of the projects as the earn-in cost outlined in the JV agreements for each project (see Sections 3.1.2, 3.2.2 and 3.3.2 for details). Effectively, these agreements represent the most recent transactions on the projects. Taking into consideration the stage that the JV agreements are at, and the current equity that Chalice retains in the projects, the implied value of the respective projects, for specific minerals, are presented in Table 4-2. Note that the Atlas joint venture is not listed in Table 4-2 as SRK considers that Atlas effectively has 100% ownership at this time, therefore the iron assets are not included in this valuation.

In determination of the implied value of the JV for the Wilga Project, SRK has estimated that it is likely that $0.5M will be spent to advance the Project from anomaly definition to systematic drill testing of any defined target. Based on the exploration success probabilities determined by Lord et al. (2001), there is a 17% probability of progressing the Project to resource delineation from systematic drill testing. As such, SRK has used the sum of the initial $500,000 and 17% of the residual amount to be spent under the JV agreement, to determine the current implied value (Table 4-2).

As De Grey withdrew from the Yandeearra joint venture prior to passing the first earn in/option period SRK has applied a discount to the implied value of the joint venture agreement. Under the joint venture agreement, De Grey was to spend $1.67 million to earn up to 80% in the rights to gold and base metals. De Grey spent in excess of $600,000 on the project, exceeding their minimum commitment of $417,000 under the joint venture agreement. The discount applied to stage 2 is a further 50% (75% total) to reflect the likelihood of any future joint ventures proceeding to this stage.

Table 4-2: Implied Value of the Chalice Projects for Specific Minerals as a Function of the JV Agreements

Project	JV Company	Initial Payment (A$)	Stage 1 (A$)	To Earn (%)	Stage 2 (A$)	To Earn (%)	Implied Value (for 100%) (A$)
Yandeearra1a	De GreyMining	265,000	835,000	60	835,000	80	1,636,000
Yandeearra3b	Atlas Iron	250,000	200,000	100	1,000,000	100	725,000
Gnaweeda2b	Teck Cominco	140,000	750,000	51	750,000	70	1,807,000
Wilga2	AngloGold		2,000,000	75			755,555
Total							4,923,555

1 = Au and base metals;2 = Au only 3 = Fe only

Notes: Stage 2 reduced by (a) 75% to account for JV withdrawal, and (b) 50% to reflect likelihood of proceeding.

4.2.2 Value per Square Kilometre

SRK undertook analysis of transactions reported through the past two to four years in Australia for companies that acquired (or sold) gold and base metals, or uranium exploration exposure. The

167

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

primary source of transaction information was the Mineral Economics Group Database (MEG, 2007), supplemented by searching the Mining News database and individual company news releases to various stock exchanges. Properties that contained reported known reserves or resources, infrastructure, or significantly different mineralisation styles were disregarded as they were not considered comparable.

The number of comparable exploration transactions obtained for the analysis varied depending on the Project location. These transactions predominately involved staged joint venture, typically with an initial payment followed by a series of earn-ins to gain a proportion of the project. To take account for the possibility that once initial payment was made, subsequent earn-ins may not be completed, SRK discounted these by a factor of 50%.

Based on these transactions SRK could determine the implied value in relation to tenement size to derive an upper, moderate and lower range of market values of the projects, which can be considered by BDO as a benchmark for the SRK Geological Risk Method.

Although Chalice’s projects are located across three mining districts in Western Australia, due to a paucity of transaction data for specific Districts, transactions across Western Australia as a whole were considered.

4.2.2.1 Gold

Results for comparative gold transactions are summarised in Table 4-3.

Table 4-3: Summary of Comparable Transactions involving Gold Exploration Projects in Western Australia

Projects in Western Australia
Transaction	Implied Value per km2 (A$)
In December 2008, Anglo American PLC entered an agreement with Traka Resources Ltd whereby they can earn an initial 51% by spending A$3.35 million (A$350,000 stage 1, A$3 million after 12 months) plus the access/heritage clearance-related costs (which are not accounted for) at the Musgrave Project.	1,011
In July 2007, St Barbara agreed to spend A$5M on exploration over five years on Mawson West’s Golden Mile South project (112 km2) to earn 70% of the project.	52,521
Prime Minerals Ltd. agreed to spend A$800K at the Star of Mangaroon project (72 km2) to earn 80% from Fox Resources. Notably, this property included 26,000 oz of gold (not JORC compliant) which has not been accounted for.	8,681
In July 2004, Newmont Exploration Pty Ltd agreed to spend A$3.5M over four years (with minimum A$400K first year commitment) on Cullen Resources’ Gunbarrel project (~450 km2).	11,111
In 2004, Aurogenic Resources Pty Ltd agreed to spend A$4M over three years (with minimum First year commitment of A$1M) to earn a 51% interest in the ~480 km2Meekatharra/Annean JV (with St Barbara Mines).	10,212
In June 2004, NGM Resources paid to farm into Gindalbie Gold NL’s Anketell project (~1,000 km2). NGM could earn a 26% interest in the project by spending the equivalent of A$1,050,000.	4,038
Average (without Golden Mile South transaction)	7,010

Transactions are presented on a value per square kilometre basis.

The St Barbara transaction is at a very high value, as the project is presumably along strike from the Golden Mile. SRK has therefore chosen not to use this in our calculations. Furthermore, the Anglo American transaction is considered a low-end value as the calculation does not account for the access/heritage clearance-related costs.

168

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Chalice currently effectively owns 100% of the gold rights at Yandeearra and Wilga, and only 49% of the gold rights at Gnaweeda. These percentages have been accounted for in the final calculation of Chalice’s gold exploration assets on a value per square kilometre basis (Table 4-4).

SRK has restricted the area used for the Yandeearra valuation, as the prospective shear zones do not persist homogenously throughout the entire tenement package. As such, a simple calculation based on tenement area would be misleading. Based on the location of defined prospects, continuity of geology, and on the aeromagnetic data and fault interpretation completed by Chalice (Figure 4-1), SRK has defined zones within the Yandeearra project for consideration in the value per square valuation. The total area defined by SRK totalled 360 km[2] .

SRK has used the entire tenement area for the Gnaweeda and Wilga project valuations, as geological continuity broadly covers the entire tenement areas.

==> picture [416 x 286] intentionally omitted <==

Figure 4-1: Area used for value per km[2] valuation for Au at Yandeearra

Area defined by yellow dotted outline (total area of 360 km[2] ). Stars represent defined prospects. White lines represent Chalice’s fault interpretation for the aeromagnetic data (background).

169

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 4-4: Range of Values for Chalice’s Gold Exploration Assets on a Value per Square Kilometre Basis

Project Name/Rights	Area **(km2) **	Low Value **(A$/km2) **	Average Value **(A$/km2) **	High Value **(A$/km2) **
		1,011	7,010	11,111
Yandeearra (100% Au rights)	360	364,000	2,524,000	4,000,000
Gnaweeda (49% Au rights)	172.28	85,000	592,000	938,000
Wilga (100% Au rights)	12	12,000	84,000	133,000
Totals	544.3	461,000	3,200,000	5,071,000

4.2.2.2 Fe Ore

It should be noted that only little evidence of iron ore mineralisation (BIF- or channel-hosted iron ore) has yet been defined for the Yandeearra Project thus far. The Pilbara is a world-class iron ore producer. However, stratigraphy known to host iron ore mineralization is yet to be defined within the Yandeearra Project area. Similarly, geophysical signatures generally interpreted as channel iron features are yet to be defined in the Yandeearra Project area.

Given the current lack of geological knowledge / features at Yandeearra to support BIF- or channel-hosted iron ore features, a comparable transaction valuation based on value per square kilometre is inappropriate.

4.2.2.3 Base Metals

Results for comparative base metals (copper) transactions are summarised in Table 4-5.

Despite being prospective for copper mineralisation, both the Vale and Redstone Resources transactions were based on Iron Oxide Copper Gold (IOCG) and Ni-Cu-PGE exploration targets. Although these deposit styles differ from the VHMS targets reported for Yandeearra, they still represent potential for copper mineralisation. As such, SRK has chosen to use these transactions in our calculations.

The Graynic Metals and West Musgrave Mining transactions were for exploration assets with VHMS potential in the Pilbara, and are therefore appropriate for comparison purposes. However, the Graynic transaction was for a project at an advanced stage, and with numerous ore-grade drilling intersects. As such, the value of the transaction is greater than what would be the case for an early stage project such as those at Yandeearra and Gnaweeda. As such, the Graynic transaction has not been used in the calculations. Despite the Gnaweeda project being located in the Yilgarn Craton, SRK still considers the Pilbara transactions appropriate to use in valuation of the copper potential at Gnaweeda.

The total area of Chalice’s Cu exploration projects is 1191 km[2] . This is based on 1019km[2] at Yandeearra and 172 km[2] at Gnaweeda. Chalice currently effectively owns 100% of the copper rights at Yandeearra and Gnaweeda. These percentages have been accounted for in the final calculation of Chalice’s copper exploration assets on a value per square kilometre basis (Table 4-6).

170

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 4-5: Summary of Comparable Transactions involving Copper Exploration Projects in Western Australia

==> picture [446 x 291] intentionally omitted <==

----- Start of picture text -----

Implied Value
Transaction per km [2]
(A$)
Under a farm-in agreement in 2008, Vale can earn an initial 51% interest in Rubicon’s
Warburton by spending A$3M on exploration or development over three years. Vale
can increase its interest in Warburton to 70% by sole funding exploration and
1,379
development up to the commencement of a bankable feasibility study (BFS), and can
earn a further 5% by solely funding the BFS. In the event that Vale elects to fund the
BFS, Rubicon will be free-carried to its completion
In 2007, Redstone Resources continued their exploration programme on the
Blackstone Range/Michael Hills tenements, spending the required A$1,000,000 in 2,959
the year to earn 100% of the project from Resources Mining Group
When it listed on the ASX in June 2005, Graynic Metals had an earn-in agreement
with Cazaly Resources Ltd to earn 80% of the Quartz Circle Cu project for the 19,231
expenditure of A$1M.
In March 2002, West Musgrave Mining signed an option to acquire up to a 70%
interest in the base metal portion of Caldera Resource’s Tabletop project. Under the
terms of the agreement, West Musgrave would pay Caldera A$20,000 and fund a
A$30,000 ground gravity survey over priority targets. If West Musgrave completes the 8,483
program, it could then earn a 51% stake by spending another A$300,000 over two
years, then raise its stake to 70% by spending an additional A$1M over the
subsequent three years
Average 8,013
Average [#] 4,274
----- End of picture text -----*

Transactions are presented on a value per square kilometre basis. *All transactions[#] Transactions with Graynic omitted

Table 4-6: Range of Values for Chalice’s Copper Exploration Assets on a Value Per Square Kilometre Basis

Project Name/Rights	Area **(km2) **	Low Value **(A$/km2) **	SRK Preferred Value *(A$/km2) **	High Value# **(A$/km2) **
		1,379	4,274	8,483
Yandeearra (100% Cu rights)	1019	1,405,000	4,355,000	8,644,000
Gnaweeda (100% Cu rights)	172.28	238,000	736,000	1,461,000
Totals	1191.28	1,643,000	5,091,000	10,105,000

*Average of all transactions with Graynic omitted.[#] Highest transaction value

4.2.2.4 Tantalum

The Yandeearra project is located close to the operating Wodgina tantalum (Ta) mine. , and as such there is some potential that similar pegmatite intrusions may be present in this area.

However, it should be noted that no evidence of Ta mineralisation, or similar host rocks to that at Wodgina, has yet been defined for the Yandeearra project, nor has any exploration been conducted specifically targeting Ta within the Yandeearra tenements.

171

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Given that there is a paucity of Ta transactions due to its ‘specialist metal’ category, the fact that the Wodgina Mine is anomalous to the District (and Australia as a whole), and that the defined resource there is contained within a confined area, valuation of the Ta potential using a value per square kilometre basis would yield a vastly un-proportional result, in comparison to the total Yandeearra project area. As such, valuation of Ta potential using this method is deemed by SRK as inappropriate.

4.2.2.5 Uranium

Results for comparative uranium transactions are summarised in Table 4-7. The correlation of uranium with gold suggests an intrusion-related mineralisation model, although there has only been a very limited number of samples collected (24 rock chip samples) relative to the total size of the tenement holding at Yandeearra. The distribution of sampling for U is restricted within the Yandeearra project area as a whole, with sampling clustered to within an area interpreted to be strongly faulted (Figure 4-2). Given the correlation of U and Au results from the rock chip sampling programme (Table 3-5), and the spatial association with interpreted faults, SRK has restricted the area used for the Yandeearra U valuation to that used in the Au valuation. The total area defined by SRK totals 360 km[2] .

==> picture [413 x 282] intentionally omitted <==

Figure 4-2: Location of U samples collected at Yandeearra to date

Red dots denote the location of the U samples. Area defined by yellow dotted outline (total area of 360 km[2] ). Stars represent defined prospects. White lines represent Chalice’s fault interpretation for the aeromagnetic data (background).

The transactions identified are based largely on company listings from 2006, although SRK has also reviewed all relevant listings from 2007 and 2008 (Table 4-7). In addition, the majority of transactions are for U exploration assets where an intrusion-related model was not preferred, rather sedimentary-hosted U was the exploration model being employed. Regardless, SRK has had to use the transaction data as the most appropriate valuation benchmark data available.

172

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

The average market value of the exploration tenements from the listing data was A$3,700/km[2] . SRK considers this to be at some point in the valuation range, because following listing, the performance of the share price of a number of exploration companies is significantly different to the listing price. During the period, most of the uranium exploration companies experienced significant increases in price, reflecting the general market perception that there was greater value in the properties than originally suggested by the directors at the time of listing.

To gauge where the listing value was on the valuation range, SRK reviewed the share price performance post-listing, and determined the first plateau in price immediately after listing. This recognition of the first plateau removes the initial buy-sell effect related to immediate opportunistic buying and immediate profit taking by seed investors not bound by escrow, and represents a measure of the true market perception of property value. Of the companies reviewed, there was an average premium to the listing price at the first price plateau of approximately 40% to the listing price.

In determining a valuation range therefore, SRK has set the high end of the range for the uranium assets at the 40% premium price, which was A$5,180/km[2] at the valuation date. The low end of the range for uranium assets at the time is therefore set at the listing average, or A$3,700/km[2] . Results are presented in Table 4-8.

Table 4-7: Summary of Comparable Transactions involving Uranium Exploration Projects in Western Australia

Projects in Western Australia
Project	Implied Value per km2 (A$)
UraniumSA (USA, 18/10/06) hold 17 exploration properties of 7,638 km2located across the Gawler Craton, SA. The company issued 33M shares, and had 35M outstanding shares and options at listing, and approx A$0.5M in cash assets. Options were valued using a Black Scholes model.	5,424
Mantra Resources Ltd (MRU, 9/10/06), listed with tenements for uranium exploration in Tanzania, approximately 10,300 km2. On listing there were approx 32M shares and 24.15M options on issue. Options listed at about A$0.10.	1,407
Thor Mining (THR) undertook a dual listing (AIM ASX), part of which was the purchase of uranium assets of Hale Mining for 16M A$0.20 shares and 8.5M options. Using a Black Schole method for valuing the options, this represented a purchase price of A$4.044M. The uranium assets were approximately 3,000 km2in the Northern Territory.	1,348
Newera Uranium Ltd (NRU, 19/6/06) listed with the issue of 15M shares at a price of A$0.20 dollars = A$3M. Includes 1.2M director shares and 10M shares to Cazaly as payment for some of the tenements. Portfolio of grassroots exploration projects in WA and NT covering 338 blocks (approx. 946 km2) (including applications).	9,640
Aura Energy Ltd (AEE, 30/5/06), listed with the issue of 25.5M shares at price of A$0.20 dollars = A$5.1M. A further 11M shares were held in the company. Portfolio of grassroots exploration projects in WA only (including Wondinong and Altona projects) covering 1,733 km2(including applications).	3,786
A-Cap Resources Ltd (ACB, 19/5/06). Although holding uranium interests in Botswana, the float was a multi-commodity float, and details are not available to disengage the uranium value from the nickel and gold assets.	Outside of Aus, so not used
U3O8 Ltd (UTO, 9/5/06) listed with the issue of 25.35M shares at a price of A$0.20 = A$5.07M. At the time, after listing there were 65.6M shares on issue and 2.5M options. Portfolio of grassroots exploration projects in WA, SA and QLD covering 2,243 km2 (including applications).	5,823
Encounter Resources Ltd (ENR, 24/3/06) listed with the issue of 28.5M shares at a price of A$0.20 for A$5.7M (March 2006). Total shares on issue after listing was 63.4969M. Portfolio of grassroots exploration projects in WA only covering 3,252 km2(including applications).	3,066
Toro Energy Ltd (TOE, 24/3/06) listed with the issue of 72M shares at a price of A$0.25 raising A$18M (March 2006). Total shares on listing were 145.502M. Toro formed by the amalgamationofthe uranium interests ofOxianaLtd andMinotaur Exploration Ltd	1,519

173

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Project	Implied Value per km2 (A$)
encompassing exploration projects in SA covering 26,069 km~~2~~(including applications).
Mega Redport Ltd (Canadian-listed) announced an A$19.7M takeover offer for Hindmarsh Resources Ltd (January 2006). Hindmarsh’s main assets comprised 13,600 km2 exploration tenements in SA and NT.	1,450

Transactions are presented on a Value per Kilometre Basis. Transactions including tenements under application not considered.

Table 4-8: Range of Values for Chalice’s Uranium Exploration Assets on a Value per Square Kilometre Basis

Project Name/Rights	Area **(km2) **	Low Value *(A$/km2) **	Average Value **(A$/km2) **	High Value **(A$/km2) **
		2,741	3,289	3,837
Yandeearra (100% rights)	360	986,760	1,184,040	1,381,320
Probability of progressing (50%)			50%
Totals	360	493,380	592,020	690,660

Transactions are presented on a Value per Kilometre Basis. * SRK preferred value.

4.3 Geological Risk Valuation

The following Chalice assets were valued by SRK using the Geological Risk Method:

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

• Yandeearra (Au, Fe and Cu)

• Gnaweeda (Au and Cu)

• Wilga

SRK developed a series of exploration models and target values appropriate to the deposit style being targeted, as will be further explained below. The deposit styles on which the models are based are presented in (Table 1-1).

4.3.1 Overview of the Geological Risk Method

The basis of valuation is the need for commercial definition of exploration, as exploration does not deliver cash to a mining company and it has no immediate earning potential. Exploration, however, does have the potential to generate value and an expectation of achieving that value.

In the case of exploration, that value is the expected NPV that is to be delivered to the mining division - a threshold or range of NPV that meets the company’s minimum financial criteria, appropriate to the deposit style being explored for. As the term ‘NPV’ implies that a Discounted Cash Flow (DCF) valuation method has been used, SRK chooses to refer to the final value as the ‘Total Value’ (TV). In applying TVs, it is important to consider several factors – targets with large TVs will be difficult to find, so the probabilities of finding such deposits will be lower. Lower target TVs, for example, near-mine resources for mill feed, will have much higher probabilities of success. Similarly in areas of deep cover, TVs can be reduced to account for the increased CAPEX that would be required to develop the project. Once established, the Geological Risk Method works back from this TV value.

The basis for the Geological Risk Method is a simple formula (shown below) that is applied to each exploration stage, starting from the chosen TV value for an operating mine and discounting through the main Exploration Stages backwards from Stage E to the defined current Stage, to give a current value:

174

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

EV = P x TV – C

Where:

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

• EV = Prospect value

• P = Probability of advancing to next stage. These probabilities were determined on a prospect by prospect basis after review of the previous exploration work undertaken in the area.

• TV = Target value (NPV of deposit style)

• C = Cost of exploration

A schematic diagram of the methodology is given in Figure 4-3.

Exploration Stages

==> picture [319 x 249] intentionally omitted <==

----- Start of picture text -----

A B C D E $
Project Generation Reconnaissance Drill Testing Detailed Resource Definition Feasibility Study Expected Value to be delivered
PA PB PC PD PE to the mining division.
CA=$ CB=$ CC=$ CD=$ CE=$
EVA=$ EVB=$ EVC=$ EVD=$ EVE=$ Expected NPV of target deposit
style
Risk Risk Risk Risk Risk
Geological Investigation Stages Economic Evaluation Stages
EV = P x TV -C EV = Expected Value of Discovery at Stage
P = Probability of success
C = Cost of each stage
TV = Target Value (NPV of deposit style)
----- End of picture text -----

Figure 4-3: Schematic diagram of the Geological Risk Method (after Lord et al., 2001).

4.3.1.1 Target Values

Gold

In determining a value for the Chalice Au exploration projects, the default probability (P) and cost of exploration (C) are both determined from the analysis of comparable historical data regarding greenstone gold deposits from the Laverton region after research in Lord et al., (2001). A table comprising the default probabilities and exploration costs utilised in the Geological Risk Method calculations is located in Appendix 2.

The target value scenario of the Lord et al., (2001) study was based on a 500,000 oz gold target with the TV estimated by the applying the low, medium and high values per ounce figures derived from the comparable market transaction value per in situ ounce analysis.

175

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

SRK notes that the target deposit size for the Chalice projects varies between Yandeearra, Gnaweeda and Wilga (Table 4-9). Target size was allocated after examination and interpretation of historical exploration and discovery results in the region, being a reasonable size for the location and commodity, and representing a modest sized exploration target for a junior exploration company.

The value per ounce for this calculation was determined from research on market transactions in Western Australia, for assets with a similar Au resource base to what is targeted for the Chalice Au projects (Table 4-9). A range of project value per in situ ounce was derived from recent transactions; SRK used the average value as the preferred value per in situ ounce to set a target value for the Chalice projects (Table 4-10).

Table 4-9: Target Sizes used for Chalice’s Gold Exploration Assets

Project	Target Size (oz Au)*	Comment
Yandeearra	250,000	Target determined by proximity to the Indee project (400k oz Au), Calvert and Toweranna projects (combined ~130 k oz) and Wingina project (~203k oz Au). Also defined by Chalice
Gnaweeda	250,000	Target determined by proximity to the Mt Magnet mine (~3.5M oz Au produced). Also defined by Chalice
Wilga	500,000	Target determined by the Lord et al_.,_(2001) study (same District as the Wilga project), and proximity to the Sunrise/Cleo (7.2Moz Au), Fortitude (437k oz Au) and Red October (380k oz Au) deposits. Also defined by Chalice

• Inferred category

Table 4-10: Summary of Transactions involving Gold Resource Projects in Western Australia

Australia
Transaction	Implied Value per In Situ oz (A$)
Mt Morgans: In February 2009 Range River Gold signed a conditional sale and purchase agreement with Barrick Gold for A$3.5 million to acquire 100% of the 205,000oz (measured, indicated & inferred).	17.07
Tuckabianna: Silver Lake Resources did a deal with Extract Resources, paying A$1.2M in July 2007 for a 230,000 oz Resource (category not stated, so assumed Inferred).	5.22
South Kalgoorlie, Dioro Exploration paid Harmony Gold Mining A$45M in July 2007 for a 1.878M oz Resource (category not stated, so assumed Inferred). NB – includes exploration tenements.	23.87
Aphrodite: Apex Minerals bought the 287,000oz (Inferred) deposit from Barrick Mining for A$7.0M in May 2007.	24.39
Kunanalling: Carbine Resources paid Cazaly a consideration worth roughly A$15.3M (when calculated for 100% of the deposit) made up of management fees, Carbine shares and cash. Reported resource is 612,000 oz, primarily Inferred category.	24.99
Riverina: Monarch Mining paid 15M Monarch shares and 5M options in August 2007 (Monarch share price at this time was approximately A$0.29) for 200,000 oz Indicated and Inferred Resource.	29.00
Mt Ida: Monarch Mining paid A$2.3M to International Goldfields for 50% share of 54,500 oz Measured Resource and 58,000 Indicated Resource. May2007.	40.89
RSG valued Norseman for Kalgoorlie- Boulder Resources February 2007. 1,200,000 oz Inferred Resource. (SRK has used RSG’s stated high end value).	41.57
Average	26

Transactions are presented on a value per in-situ oz basis.

176

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Iron Ore

SRK has assumed BIF- and channel-hosted iron ore models. In determining a value for the Fe ore potential at Yandeearra, the target values and cost of exploration (C) were adjusted accordingly. For example, probabilities of outlining a deposit may be lower as many iron prospects are outcropping and exploration is less mature than the gold sector. However, the cost to develop iron deposits, particularly capital costs, will be significantly higher, as it is a bulk commodity requiring significant infrastructure.

The assumed value per in situ tonne Fe-ore was determined assuming 58% grade calculation and products within contaminant specifications (~A$0.80/t).

High and low values were calculated assuming a 25% variation. Chalice’s JV partner Atlas Iron has already defined reserves of 7Mt @ 58% Fe at their Trigg deposit to the north of the Yandeearra Project. Their target size by 2009 for that district, as reported on the Atlas website, is 30-40Mt within the Abydos Project. SRK has allocated a similar range in target size for Yandeearra.

Base Metals (Cu)

In determining a value for the Chalice base metals (copper) potential projects, the target values and cost of exploration (C) were adjusted accordingly. For example, probabilities of outlining a deposit may be lower as there are relatively few base metal projects of VHMS affinity defined in Western Australia relative to gold projects, and exploration is less mature than the gold sector.

SRK had difficulty identifying many transactions for Cu projects in Western Australia, and as such extended the search to the Northern Territory, South Australia and New South Wales – known Cu producing States with a more active transaction history for copper projects with a resource/reserve base.

Target size was allocated after examination and interpretation of historical exploration and discovery results in copper producing districts of Australia, being a reasonable size for the location and commodity, and representing a modest sized exploration target for a junior exploration company. SRK has allocated a target size of 7 Mt @ 4% Cu (equivalent), with negligible credits from other commodities which may be associated with such systems. The TV was based on other properties / discoveries in the Pilbara (Sulphur Springs, 13.8Mt @ 3.7% Zn, 1.4% Cu and Kangaroo Caves, 1.7 Mt @ 9.8% Zn 0.6% Cu).

The value per in situ tonne for this calculation was determined from research on market transactions in Australia. A range of project value per in situ tonne was derived from recent transactions.

Table 4-11: Summary of Transactions Involving Copper Resource Projects in Australia

Australia
Transaction	Implied comparable value per In Situ Tonne (A$)
In April, 2009 Nickelore arranged to sell its 90% interest in Mount Pleasant and Bardoc to Kalgoorlie Mining Associates for A$1.3 million in cash. Reserves / resources at the time of the deal were 5,800 t contained Cu ($287/in situ tonne). Cu grade of 4.32% is significantly higher than what it expected for Chalice’s Projects (~2% Cu) therefore the implied value is discounted by 0.5.	143
In 2008 Argonaut Resources NL sold its 10% interest in the Kanmantoo Copper Mine to Hillgrove Resources Ltd for A$2.5 million in Hillgrove shares. Reserves / resources at the time of the deal were 492,831 t contained Cu.	507
In August 2005, Sylvania entered into an option agreement with Warwick John Flint over all of the Australian tenements of Sylvania at Jimblebar and Copper Knob. Under the terms ofthe agreement,Flinthad theright to exercise the optionat any time up until 16	41

177

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Transaction	Implied comparable value per In Situ Tonne (A$)
August 2005, to acquire Sylvania’s interests in its Australian tenements for the consideration of A$41,900 (A$55,000), and the issuance to Sylvania of fully paid ordinary shares in a listed entity to the value of A$152,000 (A$200,000).
In January 2003, Straits Resources sold its 50% interest in Maroochydore to Aditya Birla Group for A$10M (A$5M). SRK has applied a market correction factor of 2 to account for the Cu price variation since the date of this transaction (see Figure 4-4).	26
In November 2003, Asia Multi-Foods & Oils (Australia) Ltd acquired a 100% interest in Jervois from Solbec Pharmaceuticals for A$500,000 in cash and a royalty of A$2/Mt of ore mined and treated to a maximum of A$500,000, for a total purchase price of A$1M (A$570,000). SRK has applied a market correction factor of 2 to account for the Cu price variation since the date of this transaction (see Figure 4-4).	12
In May 2006, Straits Resources announced its takeover bid for the 41.38% of Tritton Resources for a total transaction value of A$75.7 million (equating to $136/in situ tonne Cu). SRK has applied a market correction factor of 0.5 to account for the Cu price variation since the date of this transaction (see Figure 4-4).	68
Average*	58
Transactions are presented on a value per in situ tonne basis. *Omitting the outlying value.

When charted, the transactions all fell within a reasonable range except for that of the Kanmantoo Copper Mine, which was considerably higher. SRK therefore regarded this transaction as anomalous and did not include it in the average value calculation.

Based on the chart in Figure 4-4, the LME Cu price has declined considerably since the May 2006 Straits Resources transaction occurred, SRK has therefore applied a market correction factor of 0.5 to this transaction. Furthermore, as the Cu price has increased since 2003, a correction factor of 2 was applied to the transactions that occurred in this year.

SRK has therefore used the average value of$58 / tonne as the preferred value and $143/ tonne as the high value for the Chalice projects (Table 4-11).

==> picture [324 x 197] intentionally omitted <==

Figure 4-4: LME chart of copper prices January 2003 - present in US Dollars

(http://www.lme.co.uk/copper_graphs.asp).

Uranium

The project is relatively immature in terms of U-focussed exploration, and there is a commensurate limited understanding of the geological setting in regards to the intrusion-related U mineralisation

178

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

potential for the Yandeearra project. The limited available data on which to base a geological assessment using the Geological Risk Method, results in low probabilities being assigned to critical geological criteria used in the analysis. With the currently available data, the probabilities will be 0.5 or worse. As such, the value result would likely be zero. For this reason, SRK considers the Geological Risk Method valuation for U inappropriate at this stage of the projects development.

Tantalum

Tantalum is a specialty metal which is only produced as a primary commodity by 2 mines in Australia (Greenbushes and Wodgina), which account for 50% of the global demand. A total of 5 other mines globally account for more than 45% of the residual demand. These deposits are Tanco Mine (Cabot) in Manitoba, Canada, the Kenticha Mine (Ethiopia Mineral Development Enterprise) in Ethiopia, the Yichun Mine in China, and the Pitinga Mine (Paranapanema) and Mibra Mine (Metallurg) in Brazil (Data source: http://www.tanb.org).

As such, Target Values on which to base a Geological Risk Method valuation for Ta, are difficult to establish. Despite this, given the lack of focussed exploration in the Yandeearra tenements for Ta mineralisation, and the lack of identification of potential source intrusive rocks from available aeromagnetic data, the probabilities attributed to successful identification of key criteria required to develop such a deposit, will currently be 0.5 or worse. As such, the value result would likely be zero.

179

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

4.3.1.2 Exploration Progress

In order to determine the relative exploration stage of the project, the following guidelines are used, as described by Lord et al., (2001).

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

==> picture [11 x 14] intentionally omitted <==

==> picture [11 x 15] intentionally omitted <==

• Stage A Generative - Ground acquisition, project generation

• Stage B Reconnaissance -Prospect Definition (Mapping and Geochemistry)

• Stage C Systematic Drill Testing - (RC, DD)

• Stage D Resource Delineation

• Stage E Feasibility

• Mine

The Chalice projects were considered by SRK to be at various stages, across different commodities, as presented in Table 4-12.

Table 4-12: Allocation of Exploration Stage for Chalice Projects

Project	Commodity	Stage*
Yandeearra	Gold	B-C (B used)
	Iron Ore	A
	Base Metals (Cu)	A-B (A used)
	Uranium#	B
	Tantalum#	A
Gnaweeda	Gold	C
	Base Metals (Cu)	A
Wilga	Gold	B

*Allocation of stage based on review of provided data.[#] Not estimated

The basis of the Geological Risk Method is the determination of the probability that the project will advance to the next stage of development. The Geological Risk of each project is quantified by assessing features indicating the presence of three key geological success factors: source, pathway and presence of mineralising fluid. Geological elements appropriate to the various geological models within Chalice’s exploration portfolio were developed.

The risk probability is defined by multiplying together these probabilities. Lord et al., (2001) note that “…probability is the factor that most geologists have the most problem choosing. However, geologists deal with probability intuitively every day ”. The Geological Risk Method allows the geological features of the exploration ground being valued to be taken into account.

Key features that can indicate the presence of favourable conditions (e.g. major geological structures) are given probability risk weightings between 0.5 and 1.0 depending on the perceived importance of these features in the geological model being invoked. Conversely, the absence of features favourable to mineralisation (e.g. no rheology contrast) can also be given a low probability weighting between 0.0 and 0.5. The absence of data or knowledge is represented by a probability risk weighting of 0.5. These factors obviously change for each different geological setting and the geological model used by the current explorers.

180

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

An example is shown in Table 4-13 for Archean orogenic lode gold deposits in Australia. Such a model is appropriate to apply, and has been applied, to Chalice’s Au projects in this valuation. This list highlights the degree to which this valuation method relies on the geological model for mineralisation. If an interested party did not agree with the primary model assumed for the region, or was interested in a different commodity, it is possible for them to define different versions of P1 to P3 and re-calculate the probability. This allows specific targeting of a valuation using the same methodology in order to define how much the property is worth to any particular party. The probability factors are determined from analysis of the available geological data in conjunction with the authors’ experience in the geological regions being valued.

The risk probability tables for BIF (Table 4-14) and CID Fe (Table 4-15) and VHMS style deposits (Table 4-16) follow.

Table 4-13: Risk Probability for Archean Lode Gold Mineralisation

Risk Probability P = P1 x P2 x P3	Probability Assigned
Source	-
The source for the area is not well defined or differentiated, and there is extensive evidence of mineralisation in the region. Given that all of the Prospects would have the same value (1) this factor did not influence our calculations.
P1 Pathway
Veryfavourablegold bearingstructure<3km	0.9
Moderately favourable gold bearing structure<3km	0.7
Slightly favourable gold bearing structure <3km	0.6
Unnamed major structure defined byaeromagnetics	0.6
Unknown/ no information	0.5
Structure, but not favourable for gold	0.3
Evidence of no structure	0.3
P2 Fluid
Presence of near economic drill intercepts	0.9
Significant soil anomaly	0.7
Significant RAB anomaly	0.7
Moderate soil anomaly	0.6
Moderate RAB anomaly	0.6
Unknown/no information	0.5
No significant anomalies – target tested	0.2
P3 Trap
Within recognised local structures that host deposits	0.9
Within recognised local structures (favourable orientation w.r.t. regional structures)	0.8
Within 2nd/3rd order structures, favourable orientations	0.7
Evidence for disrupted stratigraphy through faults, folding - within bend or dilatational jog add 0.1 (to above values)	0.6
Favourable Lithologyand/or Rheologycontrast	0.6 to 0.7
Unknown/no information	0.5
Lies outside 2nd/3rd order structures	0.3 to 0.4

181

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 4-14: Risk Probability table for BIF Fe

Table 4-14: Risk Probability table for BIF Fe
Risk Probability P = P1 x P2 x P3	Probability Assigned
P1 Presence of BIF’s
Extensive BIF outcrop geologicallymapped	0.8
Extensive BIF occurrences inferred from aeromagnetics.	0.7
Minor BIF occurrences inferred from aeromagnetics/ground-truthing.	0.6
Unknown/No information	0.5
Evidence of no BIF’s	0.2
P2 Pathway
Very favourable structure<3km	0.9
Moderatelyfavourable structure<3km	0.7
Slightlyfavourable structure <3km	0.6
Unnamed major structure defined by aeromagnetics	0.6
Unknown/ no information	0.5
Evidence of no structure	0.3
P2 Fluid
Presence of near economic drill intercepts	0.9
Significant soil anomaly/rock chip	0.7
Significant RAB anomaly	0.7
Moderate soil anomaly/rock chip	0.6
Moderate RAB anomaly	0.6
Unknown/no information	0.5
No significant anomalies – target tested	0.2

Table 4-15: CID Fe ore Probability table

Table 4-15: CID Fe ore Probability table
Risk Probability P = P1 x P2 x P3	Probability Assigned
P1 Presence of high Fe BIF Source Rocks
Extensive BIF outcrop geologicallymapped	0.8
Extensive BIF occurrences inferred from aeromagnetics.	0.7
Minor BIF occurrences inferred from aeromagnetics/ground-truthing.	0.6
Unknown/No information	0.5
Evidence of no BIF’s	0.2
P2 Presence of palaeo-drainage channels of an adequate size to host economic mineralisation
Significantly sized palaeo-drainage channel	0.8
Moderately sized palaeo-drainage channel	0.7
Small sizedpalaeo-drainage channels	0.6
Unknown/ no information	0.5
Evidence of no palaeo-drainage channels.	0.2
P3 Presence of CID Trap
Presence of near economic drill intercepts	0.8
Significant drilling anomaly / surface exposed CID’s	0.7
Moderate drill anomaly or rock chip anomaly	0.6
Unknown/no information	0.5
Evidence of no CID’s	0.2

182

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 4-16: VHMS Risk Probability Table

Table 4-16: VHMS Risk Probability Table
Risk Probability P = P1 x P2 x P3	Probability Assigned
P1 Presence of structure
Major structure defined byaeromagnetics	1.0
Minor structure defined by aeromagnetics	0.7
Possible structures defined by aeromagnetics	0.6
Unknown/no information	0.5
Evidence of no structure	0.3
P2 Evidence of site to host large deposit
Spatially extensive altered volcano-sedimentary rocks	0.8
Altered and sulphidised volcano-sedimentaryrocks	0.7
Volcanic basement and favourable cover sequence	0.6
Unknown/no information	0.5
No evidence of alteration or felsic through mafic volcanic basement	0.3
P3 Presence of potential fluid source or evidence of Cu-bearing fluid
Presence of near economic drill intercept	0.9
Presence of sulphides	0.8
Alteration zoning in volcanics/sediments	0.7
Significant anomaly	0.6
Unknown/no information	0.5
Evidence of lack of Cu-bearing fluid	0.2

In the case where multiple criteria relate to one critical success factor, the highest probability is assigned for the calculation. It is obvious that many of these factors remain subjective, so in order for the process to remain transparent, all probabilities are published in conjunction with the final valuation figures. This enables re-calculation of the final values if geological opinion differs substantially from that assumed by the original valuer. Risk probabilities used in this study are summarised in Table 4-17 to Table 4-19.

Table 4-17: Risk Probability Table for Chalice’s Au Projects

Project	P1 (Pathway)	P2 (Fluid)	P3 (Trap)	Probability
Yandeearra*
Area A	0.7	0.6	0.6	0.252
Area B	0.6	0.6	0.7	0.252
Area C	0.5	0.5	0.5	0.125
Gnaweeda
Turnberry – St Annes	0.6	0.7	0.8	0.336
Mistletoe	0.6	0.6	0.5	0.18
Bunarra	0.6	0.6	0.5	0.18
Wilga	0.6	0.6	0.6	0.216

*Areas as defined in Figure 3-7

183

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 4-18: Risk probability table for Chalice’s Fe ore Projects

Project	P1 (Pathway)	P2 (Fluid)	P3 (Trap)	Probability
Yandeearra (BIF)	0.5	0.5	0.5	0.125
Yandeearra (CID)	0.5	0.5	0.5	0.125

Table 4-19: Risk Probability Table for Chalice’s Base Metals (Cu) Projects

Project	P1 (Presence of Structure)	P2 (Evidence of site to host large ore deposit)	P3 (Evidence of Cu-bearing fluid)	Probability
Yandeearra
Area A	0.5	0.5	0.5	0.125
Area B	0.5	0.5	0.5	0.125
Area C	0.5	0.5	0.5	0.125
Gnaweeda
Turnberry – St Annes	0.5	0.5	0.5	0.125
Mistletoe	0.5	0.5	0.5	0.125
Bunarra	0.5	0.5	0.5	0.125

For the later theoretical stages of exploration for any project, historical data is examined in order to determine the probability of moving from one exploration stage to the next. This is dependent on the known history of exploration and mining in the region.

SRK believes that it is possible in many circumstances to apply values obtained from one geological setting where there has been a great deal of exploration to other similar geological settings. The default probabilities used by SRK in the valuation of the Chalice projects are based on the Lord et al. (2001), study of the Laverton district. Lord et al., (2001) reviewed gold exploration over the previous 13 years, and tracked the progress of 290 exploration prospects, from the generative stage through to the decision to mine. From this study, at each stage of the exploration process a probability was determined for the prospect advancing to the next stage. The results of the SRK valuation of the Chalice exploration assets are given in Table 4-20 to Table 4-22.

The results from the Geological Risk Method should be checked against at least one other valuation method. It is very important that the models assumed in the Geological Risk Method are calibrated to the real world, for example, by using recent comparable transactions. The comparison of the three valuation methods used by SRK to value the exploration assets of Chalice (Geological Risk, Comparable Transaction and JV Terms), are shown below (Table 4-23).

184

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 4-20: Results of SRK Geological Risk Valuation of the Chalice’s Au Projects

Project	Low (A$)	Intermediate (A$)	High (A$)
Yandeearra	0	1,295,000	2,323,000
Gnaweeda	0	860,000	1,521,000
Wilga	0	428,000	784,000
Totals:	0	2,583,000	4,628,000

Note that calculations account for Chalice’s percentage ownership.

Table 4-21: Results of SRK Geological Risk valuation of Chalice’s Fe ore Project

Project	Low (A$)	Intermediate (A$)	High (A$)
Yandeearra(BIF)	0	46,500	115,200
Yandeearra(CID)	0	46,500	115,200
Totals*:	0	46,500	115,200

*** Neither Chalice or Atlas have published the deposit model of interest for the JV area. Either iron ore model is valid, so the total value attributed is based on using only one model type, not summing up the value for both.**

Table 4-22: Results of SRK Geological Risk Valuation of Chalice’s Base Metals (Cu) Projects

Project	Low (A$)	Intermediate (A$)	High (A$)
Yandeearra	0	115,000	940,000
Gnaweeda	0	170,000	730,000
Totals	0	285,000	1,670,000

185

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 4-23: Comparison between Valuation Methods for Chalice Projects

Project Name	Valuation Method	Low (A$)	Intermediate (A$)	High (A$)
Yandeearra (Au)
	Per Square Kilometre	364,000	2,524,000	4,000,000
	Geological Risk Method	0	1,295,000	2,323,000
	JV Agreement1*(60%)	1,636,000 (980,000)
Yandeearra (CID & BIF Fe Ore)
	Per Square Kilometre	Not Estimated
	Geological Risk Method	0	46,500	115,000
	JV Agreement	725,000
Yandeearra (Cu)
	Per Square Kilometre	1,405,000	4,355,000	8,644,000
	Geological Risk Method	0	115,000	940,000
	JV Agreement1*(40%)	1,636,000 (650,000)
Yandeearra (U)
	Per Square Kilometre	Not Estimated
	Geological Risk Method	Not Estimated
Gnaweeda (Au)
	Per Square Kilometre	85,000	592,000	938,000
	Geological Risk Method	0	860,000	1,521,000
	JV Agreement2	1,800,000
Gnaweeda (Cu)
	Per Square Kilometre	238,000	736,000	1,461,000
	Geological Risk Method	0	170,000	730,000
Wilga
	Per Square Kilometre	12,000	84,000	133,000
	Geological Risk Method	0	428,000	784,000
	JV Agreement2	755,555

~~1~~ Au and Base Metals ~~2~~ Au only * 60-40 (in brackets) split between Au and base metals

186

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

5 Summary and Conclusions

In summary, SRK has used three different methods for valuing the exploration assets held by Chalice. The results do not show that any particular method generates consistently higher or lower valuations. The results from all methods fall within an acceptable valuation range, perhaps with the exception of Yandeearra Cu, for which the Square Kilometre Method gives high values (Table 4-23).

5.1 Yandeearra

5.1.1 Gold

The implied value of the governing JV agreement for Au and base metals at Yandeearra, is used as the low end value estimate. As the JV covers both gold and base metals, and given the demonstrable Au production in the district, SRK has allocated a 60-40% split to the implied value of the JV between the Au and base metals. The final value ranges are presented in Table 5-1. The high end is the intermediate Geological Risk Method value. Because of the large size of the Yandeearra Project, the high end value calculated with the per square kilometre method is not considered appropriate by SRK.

5.1.2 Fe Ore

As Atlas has undertaken little exploration within the Project area, the values estimated using the Geological Risk Method are relatively low. Resultantly, SRK has used the high value calculated from the Geological Risk Method as the low end value, and the implied value of the governing joint venture agreement as the high value.

5.1.3 Copper

Copper is not Chalice’s commodity of focus, and has therefore not been as routinely sampled as Au at Yandeearra. As such, current exploration results yield little information for Cu potential, which negatively impacts the probabilities used for the Geological Risk Method, and result in lower value ranges, of which the intermediate is used as the low end of the valuation range. However, the area does contain know Cu mineralisation, and SRK has chosen to account for this by using the allocated 60-40% split to the implied value of the JV between the Au and base metals as the high end of the valuation range. Because of the large size of the Yandeearra Project, values calculated utilising the per square kilometre method are not considered appropriate by SRK. The final value ranges are presented in Table 5-1.

5.1.4 Uranium

Only one method of valuation was deemed suitable for U. SRK’s substantial in-house database for uranium transactions over the past four years was used to determine a value for the current U potential of Yandeearra Project. However, no transactions were representative of the early stage of exploration. This coupled with the poor reconnaissance sampling results indicates that Yandeearra is too early in the U exploration phase to attribute a value for U potential. As such, SRK has not allocated a value for U at Yandeearra.

5.1.5 Tantalum

The potential for Ta mineralisation is yet to be established at Yandeearra by a Ta-focussed exploration program, and so application of the Geological Risk Method valuation is inappropriate, as there is no data on which to base an analysis. In addition, given the ‘specialty metal’ category for Ta, no early-stage exploration transactions could be found for comparative analysis. Partly based on advice from Chalice, who consider the Ta potential extremely low (and as such have not

187

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

budgeted exploration for Ta over the life of the Yandeearra Project), a value for Ta has not been estimated.

5.2 Gnaweeda

5.2.1 Gold

The Project is still being actively explored primarily for Au, and yielding good results. The JV implied value has therefore not been fully realised when in comparison to the intermediate value defined by the Geological Risk Method and comparative transactions. As such, SRK has allocated the implied JV value as an upper range estimate of value and the Geological Risk Method as the lower end of the valuation range. The final value ranges are presented in Table 5-1.

5.2.2 Copper

As for U and Ta at Yandeearra, Cu is not a commodity of focus for Chalice at Gnaweeda. No sampling for Cu has been undertaken by Chalice, only historic exploration reports indicate its potential. As such, SRK has allocated the lowest value from the per square kilometre calculations as the high end of the valuation range and the intermediate value from the Geological Risk Method as the low end of the range. Similarly to the Yandeearra Project, the high per square kilometre value is not considered appropriate by SRK. The final value ranges are presented in Table 5-1.

5.3 Wilga

5.3.1 Gold

The Wilga Project is probably the most advanced in Chalice’s portfolio, and represents a high potential early stage exploration play. The implied value of the JV agreement is significantly higher than values estimated using the per square kilometre technique and is similar to the high end Geological Risk Method value. For the purposes of estimating the Projects current value range, SRK has used the JV implied value, and the intermediate value estimated using the Geological Risk Method. The final value ranges are presented in Table 5-1.

It is SRK’s opinion that the exploration assets, which are the subject of this review, should be valued between A$2.7M and A$5.5M, with an SRK preferred value of A$3.5M.

188

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

Table 5-1: SRK’s Estimate of the Value Range for the Yandeearra, Gnaweeda and Wilga Projects

Area	Unit	Low (A$)	Preferred (A$)	High (A$)
Yandeearra	Au	980,000	1,000,000	1,300,000
	Fe (BIF OR CID)	115,000	420,000	725,000
	Cu	115,000	290,000	650,000
	U	0	0	0
	Ta	0	0	0
	Sub-total	1,210,000	1,710,000	2,675,000
Gnaweeda	Au	860,000	1,000,000	1,800,000
	Cu	170,000	190,000	240,000
	Sub-total	1,030,000	1,190,000	2,040,000
Wilga	Au	430,000	600,000	750,000
Total		2,670,000	3,500,000	5,465,000

189

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

6 References

Alexander, B, 2007: Wilga Well project annual technical Report for E39/1003 for the Period 23/09/06 to 22/09/07. Unpublished company report.

• Allen, G, 2006: Wilga Well project Annual Technical Report for E39/1003 for the Period 23/09/05 to 22/09/06.

• Bunting, JA, and McIntyre, JR, 2003: Gnaweeda Project Annual Technical Report on Exploration Licences 51/926 and 51/927 for the period 31.07.02 to 30.07.03. Helix Resources Ltd company Report September 2003.

• Cary, R. 2006. Independent Geologist’s Report. Section on Wilga Well. Chalice Gold Mines Ltd Prospectus.

Chalice Gold Mines Ltd, 2006a: Quarterly Report to 31 March 2006.

Chalice Gold Mines Ltd, 2006b: Quarterly Report to 30 June 2006.

Chalice Gold Mines Ltd, 2006c: Quarterly Report to 30 September 2006.

Chalice Gold Mines Ltd, 2006d: Quarterly Report to 31 December 2006.

Chalice Gold Mines Ltd, 2007a: Quarterly Report to 31 March 2007.

Chalice Gold Mines Ltd, 2007b: Quarterly Report to 30 June 2007.

Chalice Gold Mines Ltd, 2007c: Quarterly Report to 30 September 2007. Chalice Gold Mines Ltd, 2007d: Quarterly Report to 31 December 2007.

Chalice Gold Mines Ltd, 2008a: Quarterly Report to 31 March 2008.

Chalice Gold Mines Ltd, 2008b: Quarterly Report to 30 June 2008.

Chalice, 2009. Chalice Gold Mines Limited Quarterly Report for the period ending March 2009. 11pp.

De Grey Mining Ltd, 2008a: Exploration results generate new exploration targets at Yandeyarra Joint Venture project. ASX/media release, April 9[th] , 2008.

• De Grey Mining Ltd, 2008b: High grade gold and copper results define further targets at Yandeyarra. ASX media release, April 21st 2008.

• De Grey Mining Ltd, 2008c: Turner River Gold - Wingina Well Resource. De Grey website; http://www.degreymining.com.au/turnerriver_wingina.asp

De Grey, 2008d. De Grey Mining Ltd Quarterly Report for months ending 31 December. 9 pp.

• Delta Gold NL., 1987: Wilga Area Gold Prospects. Mount Margaret Mineral Field. Western Australia. E39/38 and E39/51. September 1987.

• Lord, D, Etheridge, M, Wilson, M, Hall, G and Uttley, P, 2001. Measuring Exploration Success: An alternate to the discovery-cost-per-ounce method of quantifying exploration effectiveness. In Society of Economic Geologists Newsletter Number 45, April 2001.

190

SRK Consulting BDO001_Valuation of Exploration Assets

May 2009

McIntyre, JR, 2005a: Gnaweeda Project Information Memorandum. January 2005.

• McIntyre, JR, 2005b: Gnaweeda Project Annual Technical Report on Exploration Licences 51/926 and 51/927 for the period 31.07.04 to 30.07.05. Bullion Minerals company Report August 19th 2005.

• MEG database, 2007. Metals Economics Group Database (SRK subscribe to this internet database service).

Mining Journal, 2007: Mining Journal special publication Tantalum. November 2007.

Randabel, J., 2007: Chalice Gold Mine Ltd – Yandeearra Project Memorandum. May 10[th] , 2007

• Range River Gold, 2008: Quarterly production Report and update. ASX and media release, July 14[th] , 2008.

• Smithies, R.H. and Farrell, T.R., 2000: Geology of the Satirist 1:100000 Sheet. Western Australia Geological Survey, 1:100000 Geological Series Explanatory Notes.

SRK, 2008. Technical Valuation of the Yandeearra, Gnaweeda, and Wilga Exploration Assets of Chalice Gold Mines Ltd. SRK Report (unpublished).

• Teck Cominco, 2006: Combined annual Report C46/2005 Gnaweeda Project E51/926 and E51/927. Teck Cominco company Report 31st July 2005 – 30th July 2006.

• Tillick, D, 2007a: Annual Report for period 17.02.2006 to 16/02/2007, E51/1027, Gnaweeda Project, Glengarry Sheet SG50-12 (Gabanintha 2644). Teck Cominco company Report April 2007.

• Tillick, D, 2007b: Gnaweeda Quarterly (March ’07) Memorandum. Teck Cominco company Report. March 2007.

• Tillick, D, 2007c: Gnaweeda Quarterly (June ’07) Memorandum. Teck Cominco company Report. June 2007.

• Tillick, D, 2007d: Gnaweeda Quarterly (December ’07) Memorandum. Teck Cominco company Report. December 2007.

• Venables, T, 2007: Report on field work carried out for Chalice Gold at the Yandeearra Project, Pilbara Region, Western Australia. November 7[th] , 2007.

191

SRK Consulting BDO001_Valuation of Exploration Assets

Appendices

Appendices

192

SRK Consulting BDO001_Valuation of Exploration Assets

Appendix 1

Appendix 1: BDO Kendalls’ Instruction Letter to SRK

193

SRK Consulting BDO001_Valuation of Exploration Assets

Appendix 1-1

==> picture [351 x 500] intentionally omitted <==

194

SRK Consulting BDO001_Valuation of Exploration Assets

Appendix 2

Appendix 2: Costs and Default Probabilities Utilised in Geological Risk Method Calculations

195

SRK Consulting BDO001_Valuation of Exploration Assets

Appendix 2-1

	Stage	Probability of advancing from previous stage (Default values – based on detailed study by Lord et al., (2001))	Cost to move from one stage to the next	Cost to move from one stage to the next	Cost to move from one stage to the next	Cost to move from one stage to the next
			Yandeearra Au/Cu (A$)	Yandeearra Fe (A$)	Gnaweeda Au/Cu (A$)	Wilga (A$)
A to B	Ground Acquisition, Project Generation	0.54	10,000	10,000	10,000	10,000
B to C	Prospect Definition (Mapping, Geochemistry, Geophysics)	0.17	70,000	500,000	70,000	70,000
C to D	Drill Testing (Systematic, RC, Diamond more detailed geophysics)	0.58	230,000	7,000,000	230,000	230,000
D to E	Resource Delineation	0.87	460,000	22,000,000	460,000	460,000

196

SRK Consulting BDO001_Valuation of Exploration Assets

SRK Report Distribution Record

Ref: Copy No: Date:		BDO001
		Electronic
		29 May 2009
Name/Title		Company	Copy #
Mike Griffiths		Sub-Sahara Resources	1
Peter Gray		BDO Kendalls	2
Sherif Andrawes		BDO Kendalls	3
Approval Signature:

This document is protected by copyright vested in SRK. It may not be reproduced or transmitted in any form or by any means whatsoever to any person without the written permission of the copyright holder, SRK.

Rev No.	Date	Revised By	Revision Details
RevA	8 May 2009	KB	Report Writing
RevB	11 May 2009	R Dickson	Formatting Review
RevC	11 May 2009	Deb Lord	Peer Review of revised report
Rev 0	11 May 2009	Louis Bucci	Distribution of report to BDO and Subsahara Resources
Rev 1	13 May 2009	Kate Bassano	Minor correction and re-distribution to BDO and Subsahara Resources
Rev 2	22 May 2009	Kate Bassano	Additon of Deborah Lord’s electronic signature.
Rev 3	29 May 2009	Kate Bassano	Ammendments as per Tony Kiernan’s requests

197

BDO001_Valuation of Exploration Assets_Rev3.doc

KB/rd/DL

May 2009

APPENDIX
10

SUB­SAHARA
RESOURCES
NL ACN
061
104
158

NOTICE
OF
MEETING

SCHEME
MEETING

TO: The
holders
of
the
Scheme
Shares

NOTICE
IS
HEREBY
GIVEN
that,
pursuant
to
an
order
of
the
Supreme
Court
of
Western Australia
 made
 on
 18
 June
 2009,
 a
 meeting
 of
 the
 holders
 of
 the
 Scheme
 Shares
 (the " Scheme
Meeting ")
will
be
held
at
the
Holiday
Inn
City
Centre,
788
Hay
Street,
Perth, Western
Australia
6000
on
4
August
2009
at
10:00am
for
the
purpose
of
considering
and, if thought fit, agreeing (with or without modification) to the proposed Scheme of Arrangement
between
Sub‐Sahara
Resources
NL
and
the
holders
of
Scheme
Shares.

In
accordance
with
section
412(1)
of
the
Corporations
Act,
a
copy
of
the
proposed
Scheme of Arrangement and a copy of the Scheme Booklet in relation to the Scheme of Arrangement
accompany
this
Notice.

By
the
order
referred
to
above,
the
Court
has
directed
that
Barry
Colin
Bolitho
or,
failing him,
Neil
Christian
Fearis
to
act
as
Chairman
of
the
Scheme
Meeting.

The
Scheme
of
Arrangement
is
subject
to
subsequent
approval
by
the
Court.

Words
 and
 expressions
 defined
 in
 and
 for
 the
 purpose
 of
 the
 Scheme
 of
 Arrangement have
the
same
meanings
where
used
in
this
Notice.

DATED :
3
July
2009.

==> picture [106 x 37] intentionally omitted <==

Ernest
Anthony
Myers Company
Secretary

198

SUB­SAHARA
RESOURCES
NL
(ACN
061
104
158)

PROXY
FORM SCHEME
MEETING

I/We,.............................................................................................................................................

of
.....................................................................................................
being
a
holder/holders
of

Scheme
Shares
hereby
appoint
...............................………………………
of

.......................................................................................................................

• (or
failing
him)
the
Chairman
of
the
Meeting
as
my/our
proxy
to
vote
for
me/us
and
on
my/our behalf
 at
 the
 meeting
 of
 holders
 of
 Scheme
 Shares
 convened
 pursuant
 to
 an
 order
 of
 the Supreme
Court
of
Western
Australia

made
on
18
June
2009
for
the
purpose
of
considering and,
if
thought
fit,
agreeing
to
the
proposed
Scheme
of
Arrangement
between
Sub‐Sahara Resources
NL
and
the
holders
of
Scheme
Shares,
such
meeting
to
be
held
on
4
August
2009 at
10:00am,
and
at
any
meeting
held
subsequent
and
pursuant
to
an
adjournment
of
that meeting.

• This
form
is
to
be
used
in
accordance
with
the
directions
below.

Unless
the
proxy
is
directed, he
may
vote
as
he
thinks
fit.

• Words
and
expressions
defined
in
and
for
the
purposes
of
the
Scheme
of
Arrangement
have
the same
meanings
where
used
in
this
form.

Approve
the
Scheme
of
Arrangement

For:

==> picture [89 x 27] intentionally omitted <==

----- Start of picture text -----

Against:
----- End of picture text -----

Instructions :

1. To
direct
the
appointee
to
cast
all
votes
covered
by
this
instrument
in
a
particular manner,
 place
 a
 sufficient
 indication
 (including,
 without
 limitation,
 a
 tick √ or
 a cross X )
in
the
relevant
box.

2. To
direct
the
appointee
to
cast
some
only
of
the
votes
covered
by
this
instrument
in a
particular
manner,
place
in
the
relevant
box
either
the
number
of
votes
to
be
cast in
that
manner
or
the
percentage
of
the
total
votes
covered
by
this
instrument.

3. A
 holder
 of
 Scheme
 Shares
 entitled
 to
 attend
 and
 vote
 at
 the
 Scheme
 Meeting
 is entitled
to
appoint
not
more
than
two
proxies
to
attend
and,
on
a
poll,
to
vote
in
his stead.

4. Where
two
proxies
are
appointed,
neither
proxy
shall
be
entitled
to
vote
on
a
show of
hands
and,
on
a
poll,
the
appointment
shall
be
of
no
effect
unless
each
proxy
is appointed
to
represent
a
specified
proportion
of
the
holder's
voting
rights.

5. A
proxy
need
not
himself
be
a
holder
of
Scheme
Shares.

199

1. The
Proxy
Form
must
be
signed
by
the
holder
or
his
attorney
duly
authorised
in writing
 (or,
 if
 the
 holder
 is
 a
 corporation,
 either
 under
 the
 common
 seal
 of
 that corporation
 or
 under
 the
 hand
 of
 an
 officer
 or
 attorney
 of
 the
 corporation
 duly authorised
in
writing).

2. The
Proxy
Form
(and
any
power
of
attorney
or
other
authority
pursuant
to
which the
Proxy
Form
has
been
signed)
must
be
deposited
at
the
registered
office
of
the Company
 not
 later
 than
 48
 hours
 before
 the
 time
 fixed
 for
 the
 holding
 of
 the Scheme
Meeting.

Dated:

.....................................
2009

Signed
..............................................

INDIVIDUAL
/DIRECTOR

Signed
..............................................

INDIVIDUAL
/DIRECTOR
/SECRETARY

200

Sub­Sahara
Resources
NL

288
Stirling
Street Perth,
Western
Australia
6000 PO
Box
8260 Perth
Business
Centre Western
Australia
6849

T:
+61
8
9227
3260 F:
+61
8
9227
3271 E:
enquiries@subsahara.com.au W:
www.
subsahara.com.au