Chalice announces $12.6m rights issue

West Perth-based Chalice Gold has announced plans to raise $12.6 million through a rights issue to existing shareholders which will be used to fund its gold project in East Africa.

Chalice has proposed a 1-for-6 rights issue at 42 cents per share.

The rights issue will be fully underwritten by Southern Cross Equities.

Chalice has just completed a Definitive Feasibility Study on the Zara Gold Project in Eritrea.

The company said the capital raising will be used to fund diamond drilling at Konate Prospect and integrate exploration targets.

See full company statement below:

Chalice Gold Mines Limited (ASX: CHN) ('Chalice' or the 'Company') announces it proposes a 1-for-6 rights issue to existing shareholders at 42 cents to raise $12.6M before issue costs.

Subject to completion of due diligence and execution of an underwriting agreement on usual market terms, the rights issue will be fully underwritten by Southern Cross Equities Limited.

Chalice anticipates lodging the Prospectus for the rights issue on about 13 August 2010 with the Prospectus to be dispatched to existing shareholders shortly thereafter.

The funds raised from the rights issue will be used to underpin the continued exploration and development of the Company's 100%-owned Zara Gold Project in Eritrea, East Africa, where it has recently completed a Definitive Feasibility Study based on a proposed open pit mine at the Koka deposit.

Specifically, the funds will be used to:
- continue diamond drilling at the priority Konate Prospect, located
4.5km south of Koka;
- undertake target generation within the prospective 6km long Koka-Konate corridor;
- integrate exploration data over the entire 615 sq km Zara tenement package to define further exploration targets;
undertake an in-fill bulk leach extractable gold ("BLEG") regional stream sampling program;
- complete an airborne magnetic and radiometric survey over the Zara tenement package;
- undertake further exploration on regional tenements; and
- provide general working capital and meet the issue costs.

Chalice recently announced (see ASX release 13 July 2010) positive results from the independent Feasibility Study for its proposed open pit mine at its Koka Gold Project which forms part of the Zara Project.