Chalice Mining : Quarterly Activities Report - September 2021

ASX Announcement

21 October 2021

September 2021 Quarterly Activities Report

Resource modelling underway for the Gonneville PGE-Ni-Cu-Co-Au Deposit, with exploration set to ramp-up across the wider West Yilgarn Ni-Cu-PGE Province

Highlights

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

• ~160,000m of drilling completed to date at the >1.9km x 0.9km Gonneville PGE-Ni-Cu-Co-Au Deposit:
• • Wide intervals of high-gradePGE-Ni-Cu-Co+/-Au sulphide mineralisation intersected during the quarter, extending the G8, G9 and G12 zones along strike, the G2, G4 and G6 zones down-dip and the G4 zone up-dip.
  • Wide-spacedstep-out drilling now targeting extensions of the G1-G6 zones along the interpreted north-north-westerly plunge direction, with ~1,000m of potential plunge extent still untested beyond a depth of 600m.
  • All assays informing the maiden Mineral Resource Estimate (MRE) have now been reported, with the pit-constrainedMRE expected to be released in mid-Q42021.
• Final Conservation Management Plan submitted in early September for initial low-impact drilling (no vegetation clearance required) at the Hartog-BaudinTargets following extensive consultation - approval expected in the coming weeks.
• Ongoing metallurgical testwork continues to deliver promising preliminary results:
• • Excellent Pd-Curecoveries (75-90%) and good Ni-Pt recoveries (60-75%) into separate Cu- PGE-Au and Ni-Co-PGE concentrates from high-grade sulphide composites.
  • Initial locked-cycle flotation tests on disseminated sulphide composites indicate good recoveries achieved into separate Cu-PGE-Au and bulk Ni-Cu-PGE concentrates.

West Yilgarn Nickel-Copper-PGE Province, Western Australia

• First-passair-core drilling planned at the Jansz and Torres Targets at the northern end of the Julimar Complex, as well as at the Recherche Target (Barrabarra) in Q4 2021.

Falcon Metals Demerger and IPO

• Chalice's Pyramid Hill, Viking and Mt Jackson gold projects to be spun-out (via a demerger and concurrent IPO) into Falcon Metals Ltd (proposed ASX code: FAL).
• Highly qualified Board and Management secured to lead Falcon, including Dr Mark Bennett (Non-Exec Chair), Tim Markwell (Managing Director) and Alex Dorsch (Non-Exec Director).
• Eligible Chalice shareholders are expected to receive 1 ordinary Falcon share for every 3 ordinary Chalice shares (1-for-3) via an in-speciedistribution, subject to Chalice shareholder and regulatory approval.

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

• As part of the concurrent IPO, Falcon proposes to raise a minimum of $15 million and up $30 million under a pro-rataPriority Offer to Chalice shareholders.

Corporate

• Highly-regardedcompany director Derek La Ferla appointed as an Independent Non-Executive Director and will succeed retiring Chairman Tim Goyder at the upcoming AGM (subject to shareholder approval).
• Experienced corporate lawyer and governance professional, Linda Kenyon appointed as an Independent Non-Executive Director.
• Chalice remains in a strong financial position with ~$81.3 million in cash as at 30 September 2021.

1. Environment, Social and Governance

There were no significant environmental or safety incidents during the quarter.

Chalice released its inaugural Sustainability Report, Incorporated within the 2021 Annual Report lodged on 23 September 2021. This significant milestone reflects the growth of the Company and progress made in a number of sustainability themes. A copy of the Report can be viewed on our Company website here.

Chalice's extensive stakeholder engagement activities on the Julimar Project continued during the quarter. 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:

• 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:
• • 92 RC holes for 17,800m - step-out drilling continued on an initial 80m x 40m spaced grid over the northern part of the Gonneville Intrusion and infill drilling continued on a nominal 40m x 40m spacing over the high-gradeG1-G13 zones.
  • 65 diamond holes (including diamond tails on RC pre-collars) for 19,600m - step-out drilling continued testing the extent of the high-grade zones along strike and down-dip and infill drilling commenced on selected locations on a nominal 40m x 40m spacing.
  • Assay results were reported for 97 diamond holes and 174 RC holes and assay results remain pending for a further ~130 completed drill holes.
  • Drilling is being completed on a nominal 40m x 40m spaced grid within an indicative pit shell, in order to maximise the classification of resources in the indicated category to a depth of ~220m below surface, and to define a combination of indicated and inferred category resources below ~220m.
  • Resource and pit shell optimisation modelling is continuing for the maiden MRE, which is anticipated to be released in mid-Q4 2021.
• Geotechnical diamond drilling and air-core (AC) drilling was completed in the oxide zone for metallurgical composites.

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• The Phase 2 metallurgical testwork program was completed, which included:
• • Locked cycle sequential flotation testwork and batch variability testwork on composite metallurgical samples from various mineralised zones within the Gonneville Intrusion (G1-G6, G11 high-grade zones as well as disseminated zones).
  • Leaching testwork also continued on oxide mineralisation samples.
  • Testwork to determine comminution material properties was also completed.
• Development studies for Gonneville to support a Scoping Study continued, which included:
• • Ongoing geotechnical, water and non-process infrastructure studies.
  • Investigation into bulk concentrate enrichment alternatives for the disseminated sulphide mineralisation, which commenced as part of the recent $2.9M grant from the Australian Government's Co-operative Research Centre Projects (CRC-P) Program.
  • The Company anticipates that a Scoping Study for the initial stage of development at Gonneville will be completed in Q2 2022.
• Environmental and heritage surveys were completed at the Hartog-Baudin Targets, which included:
• • Dieback and spring flora baseline surveys were completed over a ~2,000ha area in the southern part of the Julimar Complex, including the Hartog and Baudin Targets. Results have informed final environmental management requirements for drilling and have not resulted in any significant changes to the planned drilling program.
  • A final Conservation Management Plan (CMP2) was submitted to the Department of Biodiversity, Conservation and Attractions. The 2nd CMP covers initial low-impact drilling activities at the Hartog and Baudin Targets, within the Julimar State Forest.
  • Heritage surveys were completed by the Whadjuk and Yued Traditional Owners.
  • No material modifications to the proposed ~70 drill sites across the ~10km strike length were made, following completion of the surveys.
  • The Company has finalised its Environmental Management Plans, which are designed to minimise any significant impacts from drilling, ahead of expected State Government endorsement and approval to access the Julimar State Forest in the coming weeks.

2.1.2 Gonneville resource definition drilling results

The step-out and resource definition drill program at the >1.9km x 0.9km Gonneville Deposit is continuing with six rigs. A total of 179 diamond drill holes and 425 RC drill holes (including RC pre- collars with diamond tails) for ~160,000m have been completed to date at the Project.

Drilling has now constrained the host Gonneville Intrusion up-dip, with the Intrusion remaining open both down-dip and along strike to the north into the Julimar State Forest (Figure 1). The intrusive 'sill' has been confirmed to continue to at least 800m below surface and is consistently 500-600m thick along strike.

As previously reported, detailed analysis of litho-geochemical data from drilling across the Gonneville Intrusion has indicated that the intrusion contains several subtly different but distinct geological domains which strike broadly north-east and dip to the north-west. This understanding has been further refined, with seven separate domains now defined.

The interpreted strike and dip of the higher sulphide abundance zones generally correlates well with the strike and dip of these domains. However, in certain areas drilling density is still not sufficient to make a definitive geological interpretation.

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Figure 1. Gonneville Intrusion Plan View - key new drill results and high-gradeG1-G13 zone outlines over simplified geology at 160m RL (~80m below surface).

2.1.2.1 Step-out drilling results

Step-out drilling down-dip of the high-grade G2, G4 and G6 zones has continued to intersect high- grade mineralisation, supporting the interpretation of a north-north-west plunge direction to each zone. Significant new high-grade (>1g/t Pd) results reported during the quarter include:

• 26m @ 4.8g/t Pd, 1.0g/t Pt, 0.5% Ni, 0.3% Cu, 0.04% Co from 286m (JD130) - G2
• 7m @ 3.9g/t Pd, 0.7g/t Pt, 0.8% Ni, 0.6% Cu, 0.05% Co from 223m (JD089) - G2
• 6.3m @ 3.4g/t Pd, 2.0g/t Pt, 0.7g/t Au, 0.3% Ni, 0.3% Cu, 0.03% Co from 434.8m (JD096) - G6
• 8.9m @ 2.4g/t Pd, 0.5g/t Pt, 0.1g/t Au, 0.9% Ni, 0.5% Cu, 0.05% Co from 246.1m (JD089) - G2
• 7m @ 3.9g/t Pd, 0.7g/t Pt, 0.8% Ni, 0.6% Cu, 0.05% Co from 223m (JD089) - G2
• 18.1m @ 1.6g/t Pd, 0.4g/t Pt, 0.2g/t Au, 0.3% Ni, 0.7% Cu, 0.02% Co from 600.2m (JD121) - G4

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• 3.3m @ 9.7g/t Pd, 0.3g/t Pt, 1.2% Ni, 0.6% Cu, 0.07% Co from 367.5m (JD115) - G2
• 4.8m @ 2.9g/t Pd, 0.8g/t Pt, 1.2% Ni, 0.5% Cu, 0.07% Co from 374.2m (JD115) - G2
• 10.2m @ 1.6g/t Pd, 0.4g/t Pt, 0.1g/t Au, 0.1% Ni, 0.6% Cu, 0.01% Co from 299m (JD090) - G4
• 4.1m @ 3.6g/t Pd, 0.6g/t Pt, 0.5% Ni, 0.3% Cu, 0.04% Co from 368.5m (JD116) - G2

Step-out drilling up-dip of the high-grade G4 zone has intersected high-grade mineralisation near the eastern footwall contact of the Gonneville Intrusion. Significant new high-grade (>1g/t Pd) results reported during the quarter include:

• 32m @ 2.4g/t Pd, 1.0g/t Pt, 0.2g/t Au, 0.1% Ni, 0.1% Cu, 0.01% Co from 76m (JRC316) - G4
• 13.4m @ 3.2g/t Pd, 0.9g/t Pt, 0.1g/t Au, 0.2% Ni, 0.1% Cu, 0.02% Co from 149m (JD123) - G4
• 10m @ 3.9g/t Pd, 0.7g/t Pt, 0.1g/t Au, 0.3% Ni, 0.3% Cu, 0.02% Co from 225m (JRC301) - G4
• 4m @ 6.2g/t Pd, 0.3g/t Pt, 0.7% Ni, 0.8% Cu, 0.04% Co from 58m (JRC351) - G4
• 8m @ 2.0g/t Pd, 1.0g/t Pt, 0.2g/t Au, 0.1% Ni, 0.01% Co from 60m (JRC316) - G4
• 4m @ 5.0g/t Pd, 0.5g/t Pt, 0.6g/t Au, 0.1% Ni, 0.01% Co from 88m (JRC351) - G4
• 10m @ 1.7g/t Pd, 0.3g/t Pt, 0.3% Ni, 0.03% Co from 49m (JRC353) - G4

Step-out drilling along strike and down-dip of the high-grade G12 zone has continued to extend this zone, which remains open to the north. Hole JRC346 was drilled just south of the Julimar State Forest boundary and confirms that high-grade mineralisation is open into the State Forest. Significant new high-grade (>1g/t Pd) results include:

• 10m @ 1.2g/t Pd, 0.2g/t Pt, 0.5% Ni, 0.3% Cu, 0.04% Co from 133m (JRC346) - G12
• 7m @ 1.6g/t Pd, 0.6g/t Pt, 0.1g/t Au, 0.2% Ni, 0.2% Cu, 0.01% Co from 130m (JRC324) - G12

11 of the 13 zones of high-grade mineralisation within the deposit remain open. Most high-grade zones have now been defined to a depth of 250-600m below surface. The Company will continue wide-spacedstep-out drilling targeting potential new high-grade zones and extensions of the highest-grade zones (G1-G6) defined to date, as these are currently assessed as being of sufficient grade to potentially support future underground mining.

The G1-G6 zones appear to have a north-north-westerly plunge orientation and, as such, deeper drilling is now focused on extending those zones at depth. Approximately 1,000m of plunge extent remains untested between the deepest G1-G6 intersections and the Julimar State Forest boundary, projected vertically.

2.1.2.2 Infill drilling results

Infill drilling of the high-grade G4 and G6 zones has intersected two broad intervals of mineralisation (>0.3g/t Pd) containing several internal high-grade (>1g/t Pd) intervals:

• 98.9m @ 1.3g/t Pd, 0.5g/t Pt, 0.3g/t Au, 0.1% Ni, 0.4% Cu, 0.01% Co from 90.7m (JD112), including:
• • 17.9m @ 2.0g/t Pd, 0.5g/t Pt, 0.5g/t Au, 0.1% Ni, 0.4% Cu, 0.01% Co from 97.8m;
  • 15.8m @ 1.8g/t Pd, 1.0g/t Pt, 0.3g/t Au, 0.1% Ni, 0.5% Cu, 0.01% Co from 118m;
  • 6m @ 1.3g/t Pd, 0.3g/t Pt, 0.3g/t Au, 0.1% Ni, 0.4% Cu, 0.01% Co from 141m; and,
  • 10m @ 1.6g/t Pd, 0.5g/t Pt, 0.6g/t Au, 0.2% Ni, 0.7% Cu, 0.02% Co from 164m.
• 75.2m @ 1.4g/t Pd, 0.4g/t Pt, 0.2g/t Au, 0.1% Ni, 0.7% Cu, 0.01% Co from 446.8m (JD128), including;
• • 33.2m @ 2.2g/t Pd, 0.5g/t Pt, 0.3g/t Au, 0.2% Ni, 1.2% Cu, 0.02% Co from 453.8m - G6; and,
  • 5.8m @ 1.6g/t Pd, 0.6g/t Pt, 0.3g/t Au, 0.1% Ni, 0.9% Cu, 0.01% Co from 490m - G4.

Other significant new high-grade (>1g/t Pd) infill drill intersections include:

• 5m @ 3.9g/t Pd, 0.7g/t Pt, 0.4% Ni, 0.3% Cu, 0.03% Co from 61m (JRC330) - G2;
• 17.7m @ 4.7g/t Pd, 1.3g/t Pt, 0.4% Ni, 0.4% Cu, 0.03% Co from 271m (JD120) - G2;

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