Zara

Australian gold company Chalice Gold Mines (ASX:CHN) announced that it has made more substantial progress in its plan to develop the Zara Project in Eritrea following its merger with Sub Sahara.

Among the recent key achievements have been highly favourable results from both metallurgical testwork and water drilling.

Metallurgical Testwork

Metallurgical testwork being undertaken at the AMMTEC Perth laboratory on representative composite samples from seven specificall holes representative of the Koka deposit is confirming the favourable metallurgical characteristics of the project. Metallurgical recovery results on the master composite prepared from 104 intervals selected as representative of the orebody is excellent with around 60% of gold recovered by gravity and overall recoveries of 95 to 97% for grind sizes of 80% passing 150 to 75 micron respectively. Reagent consumptions are low at less than 0.5 kg/t for both lime and cyanide. Further variability testwork and optimisation work is in progress to complete all technical data required for the feasibility study.

Water Drilling

Test drilling for water has confirmed the presence of significant water contained gravels of the nearby Zara River some 7km from Koka. The Zara River has a catchment of some 970sqkm and is the main drainage system for the region. Production bores are now being established ready for detailed pump testing to establish su the number of production bores required. Early indications are that required water volumes should be met from 4-5 bores. Importantly, the water quality is good with low TDS values.

Overall Study Progress

The Scoping Study involving consultants Lycopodium Minerals, AMC and Knight Piesold remains on schedule for completion in late October and will be presented to the Eritrean Government and released to the Australian Stock Exchange in early November as the first phase of our ongoing commitment to progressing the project to final feasibility stage by mid 2010.