Chalice Mining : December 2021 Quarterly Activities & Cash Flow Report

ASX Announcement

28 January 2022

December 2021 Quarterly Activities Report

World-class,tier-1 scale maiden resource defined at Julimar and key drilling access approval obtained to test exciting targets along the extensive Julimar Complex

Highlights

Julimar Nickel-Copper-PGE Project, Western Australia (100%-owned)

• Maiden Indicated and Inferred, pit-constrained mineral resource estimate (Resource) defined for the Gonneville PGE-Ni-Cu-Co-Audeposit (Deposit), located on Chalice-ownedfarmland:
• • 330Mt @ 0.94g/t 3E1, 0.16% Ni, 0.10% Cu, 0.016% Co (~0.58% NiEq2 or ~1.6g/t PdEq3);
  • Containing 10Moz 3E, 530kt Ni, 330kt Cu, 53kt Co (~1.9Mt NiEq or ~17Moz PdEq);
  • The pit-constrained Resource includes a significant higher-gradesulphide component above a 0.6% NiEq cut-off grade, starting from a depth of ~30m:
    « 74Mt @ 1.8g/t 3E, 0.22% Ni, 0.21% Cu, 0.021% Co (~1.0% NiEq or ~2.8g/t PdEq).
• The Deposit remains open to the north and at depth, with the maiden Resource interpreted to cover just ~7% of the 26km long Julimar Complex, demonstrating the potential for material growth with ongoing drilling.
• Step-outdrilling is continuing at Gonneville on Chalice-owned farmland with multiple rigs, focused on extending the high-grade Resource.
• New "blind' shallow, high-gradePGE-Ni-Cu-Co sulphide discovery made on Chalice-ownedfarmland within a newly identified ultramafic intrusive unit located immediately south of the ~6.5km long Hartog Airborne EM (AEM) anomaly.
• Initial low-impact diamond drilling commenced in January 2022 at the Hartog-Baudin Targets on existing tracks within the Julimar State Forest following key WA State Government approvals.
• First-passair-core (AC) drilling completed at the Torres Target on private farmland at the northern end of the Julimar Complex, with several zones of prospective ultramafic geology intersected - all assays are pending.
• Scoping Study for the initial development of Gonneville progressing with all key study scopes awarded to highly-regarded external consultancies.

West Yilgarn Nickel-Copper-PGE Province, Western Australia

• First-passAC drilling completed at the Recherche Target (Barrabarra Project), with a 150-400m wide sequence of prospective mafic-ultramafic geology intersected - all assays are pending.

1 3E = Palladium (Pd) + Platinum (Pt) + Gold (Au), with an average in-situ ratio of ~4:1:0.04 (Pd:Pt:Au)

2 NiEq (Nickel Equivalent %) = Ni (%) + 0.37xPd (g/t) + 0.24xPt (g/t) + 0.25xAu (g/t) + 0.65xCu (%) + 3.24xCo (%)

3 PdEq (Palladium Equivalent g/t) = Pd (g/t) + 0.66xPt (g/t) + 0.67xAu (g/t) + 2.71xNi (%) + 1.76xCu (%) + 8.78xCo (%)

Registered Office

ABN 47 116 648 956

Level 3, 46 Colin Street		[e-mail]
West Perth, Western Australia	T: [phone]	@chalicemining
PO Box 428, Perth WA 6872		www.chalicemining.com	chalice-mining

Corporate

• Falcon Metals (ASX: FAL) demerger and IPO completed - $30 million raised from existing and new shareholders, with Falcon commencing trading on the ASX on 22 December 2021.
• Derek La Ferla appointed as Non-executive Chairman at the 2021 AGM, following the retirement of Company founder and long-standingChairman, Tim Goyder.
• Chalice ended 2021 in a strong financial position with ~$65 million in cash.

1. Environment, Social and Governance

There were no significant environmental or safety incidents during the quarter. An annual compliance report was submitted to Government confirming that all non-ground disturbing exploration activities within the Julimar State Forest were undertaken in accordance with Conservation Management Plan Stage 1 requirements.

Specialist botanists and zoologists continued to conduct baseline flora and fauna surveys across private farmland at Gonneville and in the Julimar State Forest throughout the quarter. Baseline environmental surveys have now been completed over an area of ~5,700 hectares in the Julimar region.

Chalice submitted a final Conservation Management Plan (CMP) for initial low-impact drilling within the Julimar State Forest, which was approved by the WA State Government on 29 December 2021.

The Yued and Whadjuk Traditional Owners completed cultural heritage surveys of the Hartog-Baudin targets which have confirmed that no cultural heritage sites are affected by the drilling program. Chalice has developed cultural heritage management plans in consultation with the Yued and Whadjuk Peoples for the Hartog-Baudin exploration drilling program.

The emergence of the Omicron variant of COVID-19 into Western Australia has triggered several operational precautions and the Company continues to monitor health advice and plan accordingly.

Chalice's stakeholder engagement activities on the Julimar Project continued during the quarter, including active engagement with the State and Federal Governments. The Company continues to prioritise local procurement options and has committed to several local community initiatives.

2. Exploration and Development Activities

2.1 Julimar Nickel-Copper-PGE Project, WA

2.1.1 Overview of activities

The following activities were completed at the project during the quarter:

• A maiden Indicated and Inferred, pit-constrained mineral resource estimate (Resource) was defined for the Gonneville PGE-Ni-Cu-Co-Au Deposit during the quarter. For full details, refer to the ASX announcement dated 9 November 2021.
• Resource definition and extensional drilling continued on Chalice-owned private farmland during the quarter at the Gonneville PGE-Ni-Cu-Co-Au Deposit, which included:
• • 38 reverse circulation (RC) holes drilled for 7,900m - comprising step-out drilling on an 80m x 40m spaced grid over the northern part of the Gonneville Intrusion, selected exploration targets and infill drilling on a nominal 40m x 40m spacing over the Resource pit area.
  • 58 diamond holes (including diamond tails on RC pre-collars) drilled for 18,500m - comprising step-out drilling designed to test the extent of the high-grade zones along strike and down- dip and infill drilling on a nominal 40m x 40m spacing over the Resource area.

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• An initial exploration drill program was completed at the greenfield Torres Target, located on private property at the northern end of the Julimar Complex:
• • 78 AC holes drilled for 1,770m - drilling was completed on a wide-spaced pattern, all holes were vertical and drilled to refusal, typically at the top of fresh basement;
  • Zones of prospective ultramafic geology were intersected in eight holes, with all assays pending.
• Chalice submitted a final Conservation Management Plan (CMP) for initial low-impact drilling at the Hartog-Baudin Targets on 12 November 2021:
• • The WA State Government approved the CMP on 29 December 2021.
  • Final permit approval for on-track drilling was subsequently received from Department of Mines, Industry, Regulation and Safety (DMIRS) in mid-January, with drilling commencing on sites selected based on their ease of access (rather than prospectivity).
• A cultural heritage management plan was completed for drilling in the Julimar State Forest, in consultation with the Whadjuk and Yued Peoples.
• Studies continued to support a Scoping Study for the initial development stage at Gonneville, with all study scopes awarded to highly-regarded external consultancies. Work undertaken during the quarter included:
• • Metallurgical testwork continued on a range of Gonneville samples, which included:
  • • Commencement of optimisation flotation testing on lower grade, disseminated composites. Previous testwork included batch and locked cycle flotation testing on 10 composites representing both individual high-grade zones as well as conceptual mining composites. This work indicated the potential to produce marketable copper-PGE and nickel-cobalt-PGE concentrates and/or a bulk nickel-copper-PGE concentrate.
    • Continuation of leaching tests on oxide composites, which has focused on optimisation and consumption of reagents together with recovery of PGEs from solution.
    • Commencement of environmental characterisation of tailings samples.
  • The commencement of flowsheet development for a Sulphide Processing Facility, including comminution and flotation to produce copper and nickel concentrates (including PGEs, gold and cobalt) for a range of plant throughput options.
  • The appointment of mining engineering consultants to commence mining studies in the first quarter of 2022, including the development of mine schedules at various throughput rates.
  • The Company's Water Consultant continued planning for groundwater and surface water baseline studies as well as identification of potential water supply options.
  • Other technical studies were progressed, including:
  • • Non-processinfrastructure options.
    • Power supply options.
    • Conceptual tailings disposal options.

2.1.2 Gonneville Resource

The Company defined a tier-1 scale, pit-constrained maiden Resource for Gonneville of 330Mt @ 0.94g/t Pd+Pt+Au (3E), 0.16% Ni, 0.10% Cu, 0.016% Co (refer to Appendix B), confirming Gonneville as the largest nickel sulphide discovery worldwide since 20004 (>20 years), and the largest PGE discovery in Australian history.

4 Source: S&P Global Market Intelligence, Capital IQ

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Gonneville is located on Chalice-owned farmland, and includes a mix of oxide, transitional and sulphide mineralisation (Figure 1).

The robust nature of the Resource is demonstrated by a significant higher-grade sulphide component above a 0.6% NiEq cut-off grade, starting from a depth of ~30m (Figure 2). The significant high-grade component of the Resource provides excellent optionality for any future development, has the potential to materially improve project economics in the initial years of operation, and will be a key focus of the Scoping Study.

The completion of the maiden Resource is a significant milestone for the Julimar Project and provides a strong foundation for the ongoing Scoping Study.

The maiden Resource confirms the world-class nature of the Julimar Project, and demonstrates the potential for the project to become a strategic, long-life 'green metals' asset.

Figure 1. 3D view (looking NW) of Gonneville block model (all domains) and Resource pit shell.

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Figure 2. 3D view (looking NE) of Gonneville higher-grade sulphide block model (>0.6% NiEq) and Resource pit shell.

2.1.2.1 Step-out drilling results

Step-out drilling at the north-western limit of the Gonneville deposit during the quarter intersected a new shallow zone of high-grade sulphide mineralisation. The mineralisation occurs within a newly identified narrow ultramafic unit located approximately 70m above the hanging wall contact between the Gonneville Intrusion and the surrounding meta-sediments.

This discovery is considered significant because the new zone is located immediately south of the ~6.5km long Hartog AEM anomaly (Figure 3). In addition, it confirms that there are other mineralised intrusions in the area that have no EM response.

As such, it is interpreted that the Hartog AEM anomaly may stem from the northern extension of this mineralised zone, which in turn may represent the very southern extent of an entirely new intrusion (Hartog).

The new zone has so far been intersected in five wide-spaced holes, based on initial visual logging. Assays have been received for two of these holes, with significant high-grade (>0.6% NiEq) results including:

• 3m @ 2.0g/t Pd, 0.3g/t Pt, 0.6% Ni, 0.5% Cu, 0.05% Co (~2.0% NiEq) from 68m (JRC392); and
• 2m @ 1.8g/t Pd, 0.2g/t Pt, 0.6% Ni, 0.5% Cu, 0.06% Co (~1.9% NiEq) from 139.2m (JD211);

The ultramafic unit appears to widen towards the north where it is trending towards the ~6.5km long Hartog AEM anomaly.

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