Chalice Mining : 2021 Annual Report to Shareholders

Annual Report 2021

Chalice Mining Limited

Chalice Mining Limited

Table of Contents

Directors

Tim Goyder

Chairman

Alex Dorsch

Managing Director and

Chief Executive Officer

Morgan Ball

Lead Independent Director

Stephen Quin

Non-Executive Director

Garret Dixon

Non-Executive Director

Linda Kenyon

Non-Executive Director

Stephen McIntosh

Non-Executive Director

Company Secretary

Jamie Armes

Principal Place of Business & Registered Office

Level 3,

46 Colin Street,

WEST PERTH

Western Australia 6005

Tel: (+61) (8) 9322 3960

Email:[e-mail]

Web:www.chalicemining.com

ABN: 47 1 16 648 956

Auditors

HLB Mann Judd

Level 4,

130 Stirling Street,

PERTH

Western Australia 6000

Home Exchange

Australian Securities Exchange Ltd

Level 40,

Central Park,

152-158 St Georges Terrace

PERTH

Western Australia 6000

OTCQB Exchange

12th Floor,

300 Vesey Street,

NEW YORK, NY,

UNITED STATES 10282

Share Registry

Computershare Investor Services Pty Ltd

Level 11,

172 St Georges Terrace,

PERTH

Western Australia 6000

Tel: [phone]

ASX Listing

ASX Code: CHN

OTCQB Listing

OTCQB Code: CGMLF

FY2021 Highlights	4
Chairman's Letter	6
Managing Director's Letter	8
The Chalice Way	11
FY2022 Strategy	12
Operating and Financial Review	14
Julimar Nickel-Copper-PGE Project	16
Pyramid Hill Gold Project	22
Generative Exploration and Strategic Investments	24
Financial Review	26
Competent Person and Qualifying Person Statement	28
Forward Looking Statements	29
Sustainability Report	30
Tenement Schedule	56
Directors' Report	58
Auditor's Independence Declaration	87
Financial Statements	88
Notes to the Financial Statements	92
Directors' Declaration	118

We acknowledge the Traditional Owners of the land on which our operations exist and on which we work. We recognise their continuing connection to land, waters and culture. We pay our respects to their Elders past, present and emerging.

Independent Auditor's Report	119
ASX Additional Information	123

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FY2021 Highlights

Shareholder Value

~650% Total Shareholder Return

• one of the top performing companies on the ASX

$115 million raised from largely institutional investors - strong balance sheet and capital discipline maintained

Chalice was included in the

S&P/ASX 200 index in June 2021

Awarded 'Explorer of the Year' by MiningNews and 'Best Emerging Company' by the Diggers and Dealers Mining Forum

Social

Zero fatalities

~$0.5M local procurement spend by Chalice plus ~$1.5M spend by direct Chalice contractors in the local shires surrounding the Julimar Project

Zero lost time injuries

Julimar Project Stakeholder

Engagement Plan implemented

• proactive information sharing campaigns and key stakeholder briefings completed

Operations

Significant growth in of our world- class Julimar Ni-Cu-PGE Project in WA. Seven new high-grade zones were discovered at the Gonneville Deposit over an area of >1.8km x 0.9km, confirming the tier-1scale of the discovery

~120,000m of resource drilling was completed at Julimar in FY2021, with the Company on track to deliver a maiden Mineral

Resource Estimate in Q4 CY2021

Several multi-kilometreEM-soil targets defined through first-pass reconnaissance exploration activities along the ~26km Julimar Complex. ~24km of the mafic- ultramafic intrusive complex remains untested with drilling

Gonneville emerging as a world- class, strategic deposit of critical 'green metals' - metals needed to to decarbonise the global economy and address climate change

Expanded our holdings in the new West Yilgarn Ni-Cu- PGE Province to >8,000km2, leveraging our competitive 'first mover' advantage in the largely unexplored province

Several new high-grade gold intersections and two new regional targets defined at the Pyramid Hill Gold Project in Victoria

Governance

All corporate governance policies updated to meet ASX Corporate Governance Principles 4th edition

Risk and Sustainability, Technical and Nomination Board Committees established

New highly regarded independent Non-Executive Directors appointed, Garret Dixon and Stephen McIntosh and, subsequent to

year-end, Linda Kenyon

Environment	Zero reportable environmental	Approval of first Conservation
environmental licence conditions	State Forest
	incidents	Management Plan (CMP) and
		submission of second CMP
	100% compliance of all	to enable further exploration
	activities within the Julimar

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Chairman's Letter

I believe this to be sound strategy, providing an appropriate structure to unlock the full potential of our portfolio and maximise returns to our shareholders. If approved, we will deliver a standalone, ASX-listed gold company targeting Tier-1 discoveries in Victoria and Western Australia. The new company will hold the district- scale Pyramid Hill Gold Project in Victoria, where I see another exciting and unique opportunity to make a world-class discovery in a safe jurisdiction.

fulfilling them, are summarised throughout this Report and I am pleased to see these efforts continuing to increase over the year.

As a born-and-bred West Australian, I am immensely proud that the globally-significant Julimar discovery sits right on Perth's doorstep. Our team has worked tirelessly to engage and establish relationships with key local stakeholders, and we are passionate about continuing to build trust and make genuine

Dear Fellow Shareholder,

It is a great pleasure to report on what has been one of the best years in Chalice's history.

When Chalice was formed in 2006, a small but highly motivated founding team set out to build an ambitious, technically-driven and disciplined exploration company. Since then, we have been dedicated to making a world-class mineral discovery and, over the past 18 months, the Company has well and truly delivered on that goal!

In June 2021, Chalice joined the ASX-200, Australia's leading share market index - becoming one of the first mineral exploration companies ever to reach this milestone. This remarkable achievement was driven by the spectacular and rapidly evolving PGE-Ni-Cu-Co-Au discovery at our Julimar Project in Western Australia.

Since the discovery of Julimar in March 2020, shareholders have enjoyed exceptional returns

• making Chalice one of the best-perfoming stocks on the ASX despite the volatility and challenges which have been experienced from time to time during the COVID-19 pandemic.

The discovery has been a game-changer for the industry and has re-written the geological understanding of the State of Western Australia. The first major discovery of palladium - arguably the PGE discovery Australia has never had - it is hard to recall a discovery which has had such profound implications for the junior exploration sector.

Chalice's ability to prosper and deliver for our shareholders is a credit to our team's commitment - and has also highlighted to the wider industry the immense wealth creation that can be achieved as a result of genuine discovery success. The accolades that have been awarded to Chalice and its superb geological team are well-deserved.

A core component of Chalice's business strategy from well before the Julimar discovery has been to maintain rigorous capital discipline and a strong balance sheet, allowing us to execute ambitious exploration programs. Following the tremendous success at Julimar this year, we raised $115 million, largely from institutional investors, underpinning continued exploration activities at the Project.

And, notwithstanding our greatly expanded exploration budget, we have maintained the same high degree of discipline in our expenditure as we always have, with a continued focus on long-term value creation and ensuring that a large proportion of the funds we raise go directly into the ground.

In July, Chalice announced its intention to pursue a demerger of its Australian gold assets, subject to shareholder and regulatory approvals. This demerger will allow Chalice to focus on the Julimar discovery and the greater West Yilgarn Ni-Cu-PGE Province in Western Australia, while creating a new company focused on progressing a compelling portfolio of gold opportunities.

We continued to add depth, experience and capability to the Chalice Board during the year, with the addition of highly-regarded Non- Executive Directors Garret Dixon and Stephen McIntosh. It has been incredibly rewarding to be able to attract this level of talent to the business and to see their growing contribution over the course of the year.

We were also delighted recently to welcome highly-experienced former senior Wesfarmers executive Linda Kenyon to the Chalice Board as Non-Executive Director. Linda's appointment marked another broader and very pleasing milestone, marking the first time ever that all ASX- 200 companies have had female representation at the Board level.

We will shortly say farewell to Stephen Quin, who has signalled his intention to step down from the Board in November 2021. On behalf of everyone at Chalice, I would like to sincerely thank Stephen for his significant contribution, guidance and service to the Company over the past 11 years.

Our success and rapid growth in FY2021 has emphasised the magnitude of our corporate responsibilities in a rapidly changing company landscape. The choice to 'do the right thing' and 'act like an owner' has always been integral to how Chalice has conducted business but, as we grow from junior explorer to mid-tier developer, so too does the breadth of our environmental and social responsibilities.

The fundamental importance of these responsibilities, and our continued focus on

contributions to the region. I believe that Chalice has the opportunity to be a leader in demonstrating how mining can co-exist with local communities and other land uses.

I remain very positive about the outlook for metals - particularly the 'green metals' that are required to power a decarbonised global economy. This steep demand growth trajectory is overlaid on a looming supply shortage and, more importantly, a shortage of Tier-1 discoveries that has plagued the industry in recent decades. The next few years are likely to provide an exciting backdrop for the Company.

In closing, I would like to extend my appreciation to all the hard-working people at Chalice. I know we have an enviable and rare mix of tenacity, experience and dynamism across our team; as a result, Chalice is well positioned to progress its journey to the project definition phase. Lastly, I would like to thank all our shareholders for their continued support. I am confident that your Company is in great shape and that our leadership group led by our Managing Director and CEO has the determination, capability and financial resources to deliver further growth.

I look forward to 2022.

Yours faithfully,

Tim Goyder

Chairman

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Managing

Director and

CEO's Letter

appointed a number of highly-qualified and experienced metallurgy, health and safety, environment, stakeholder management, business development and legal professionals

- positioning the Company to execute our

near-term goal of scoping the initial stages

• leading us to the decision to demerge our gold assets. We have also commenced early-stage exploration within the completely untested West Yilgarn Province at the Barrabarra and South West Projects, with some tantalising early results.

Dear Fellow Shareholder,

I am pleased to report on what has been another tremendous year of growth and achievement for Chalice. Like Tim, I am incredibly proud of what our team has been able to deliver and I am humbled by the level of recognition we have received - with the Company being awarded multiple accolades over the course of the year.

Thanks to our success over the past 18 months, Chalice is in superb shape - with a clear vision and strategic direction, a world-class asset and an exceptional growth pipeline in the heart of a new globally significant mineral province in Western Australia.

Our vision to become a globally-recognised explorer and developer has been refined over the course of the year to focus specifically on 'green metals' - the critical suite of metals which are required to decarbonise the global economy and address climate change.

It is becoming clear that green metals like nickel, copper, cobalt, palladium and platinum have an incredibly important role to play in an electrified world powered by renewables and green hydrogen, but new major discoveries of these metals are becoming increasingly rare. We have set our strategic ambitions accordingly.

The planned demerger of our gold portfolio in late 2021 will facilitate a logical split of commodity focus, allowing Chalice to focus on its green metals portfolio - with a clearly defined purpose to discover, define and deliver world-class sustainable green metal projects in Australia.

The globally significant Julimar discovery and the newly-defined West Yilgarn Province underpins what we see as an incredibly exciting future growth pathway for Chalice.

We will continue to explore and define the Julimar Project to maximise shareholder value and optionality. We are also committed to scaling-up our greenfield exploration activities across the largely unexplored West Yilgarn Ni-Cu- PGE Province, with the aim of making another major discovery in FY2022. Concurrently, we will also continue to evaluate and invest in assets that complement our portfolio.

In executing our strategic growth plan, we increased our focus during the year on enhancing our sustainability initiatives, caring for and supporting our people and nurturing our company culture.

We are a values-driven business and our five core values of Integrity, Ownership, Urgency, Alignment and Advancement continue to guide our actions. The 'Chalice Way' remains as strong as ever, and we continue to preserve and nurture our generative exploration and entrepreneurial skill-set as well as complement those skills with high-calibre project development expertise.

During the past year, we commenced building a world-class project definition team capable of taking Julimar from a discovery through to 'development-ready' status.

We have welcomed a number of exceptional people to our senior leadership group and have

of development for the Julimar Project and

completing feasibility studies.

Our sustainability strategy is being carefully formulated to ensure it is both impactful and genuine - with the dual objective of adopting world best practices while also ensuring we have the ability to execute. Our commitment to the environment and community is already clearly demonstrated in our operations and in the surrounding regions and it has been fantastic to hear feedback from key stakeholders affirming this view.

We are committed to best-practice environmental standards, building trust- based and open relationships with key stakeholders and delivering long-term benefits to the communities in which we operate. Our achievements in this area and our ambitions for the future are reflected in the pages of our first- ever Sustainability Report.

We achieved a number of important operational milestones during the course of the year across our portfolio. At Julimar, we rapidly scaled up the resource definition drill program and extended the mineralisation at Gonneville over an area of >1.8km x 0.9km and to a depth of 0.8km. The exceptional growth in the scale of the deposit meant that we continually increased the size of our drill program and rig count. Notwithstanding the vast amount of drilling that has been required, we remain on track to report a maiden Mineral Resource Estimate in Q4 CY2021.

In addition, following the approval of our first Conservation Management Plan, we secured access and completed first-pass reconnaissance exploration and targeting over the entirety of the >26km long Julimar Complex. The mineralisation already identified at Gonneville and the compelling targets defined along strike have positioned the Julimar Project as one of the most significant new Ni-Cu-PGE exploration projects globally.

We also remained committed and active on the other exploration projects in the Chalice portfolio, refining large-scale gold prospects under cover in Victoria at the Pyramid Hill Project

I continue to be inspired by our incredibly talented and hard-working geological team as they systematically and efficiently vector towards our next major discovery.

There have been very few investment opportunities like Chalice in the mining sector in recent years, where a Company has unlocked a new mineral province and positioned itself as the strategic first mover. As a Board, we remain committed to overseeing an aggressive but disciplined approach to unlocking the full potential of our green metals portfolio.

2022 is shaping up to be another exciting year for Chalice, with initial drill testing of the large- scale Hartog and Baudin Targets at Julimar, the Ephesus Target at Hawkstone and the Recherche Target at Barrabarra all planned in the coming months. On top of that, we look forward to reporting our maiden Mineral Resource Estimate and Scoping Study for the Gonneville deposit at Julimar and executing the planned demerger and IPO of our gold portfolio.

In closing, I would like to extend my gratitude to my fellow directors and the entire team at Chalice. Our success is a product of our exceptional people and their collective efforts.

I would also like to thank our shareholders for their continued support and I look forward to bringing you further updates as we embark on another exciting year.

Yours faithfully,

Alex Dorsch

Managing Director and Chief Executive Officer

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