It really depends on how far down the piston travels in the bore as well as if this is the thrust side of the piston or not. If the piston skirt travels lower than where the chip is at, the only option you'd have to reuse the block is to get a new cylinder liner installed into the block. In most cases with small engines, this doesn't make economic sense. You can replace many engines with a used one for a lot less than it would cost in machine shop costs to have this done. At the very least, you could replace the block by itself for far less than what it would cost in machine costs.
Another thing about the chip (hole, whatever you want to call it) is, if it's on the thrust side of the cylinder (the side opposite to the rotation of the crankshaft), there is a distinct possibility of stress risers forming, which means a crack will develop in a short period of time and will lead to engine destruction. If this is not on the thrust side, you possibly could mitigate this by grinding out the chipped area so it is smooth. While you're taking some more material away, you'd removing any sharp edges which is where stress risers start from.
Realistically you've got a busted block, which really should not be put back into service without some serious machine work, which means you should most likely just change it out, anyway.