Latin Resources Limited
Annual Report 2017

Plain-text annual report

ABN: 81 131 405 144 2017 ANNUAL REPORT ARGENTINA’S NEXT LITHIUM COMPANY DIRECTORS REGISTERED OFFICE SHARE REGISTRY BANKERS Mr David Vilensky Unit 3, 32 Harrogate Street, West Leederville Mr Christopher Gale (Managing Director) Mr Brent Jones Western Australia Telephone +61 8 6181 9798 Perth, 6000 Computershare Investor ANZ Services Pty Limited 6/646 Hay Street Level 11 Subiaco 6008 172 St Georges Terrace Western Australia Facsimile +61 8 9321 6666 COMPANY SECRETARY Ms Sarah Smith E-mail PERU OFFICE Calle Cura Bejar 190. Oficina 303, San Isidro / Lima - Perú Teléfono 51 (1) 2070-490 Western Australia SOLICITORS Steinepreis Paganin Level 4 The Read Buildings 16 Milligan Street Perth 6000 NAB Central Business Banking Centre Perth 6000 Western Australia AUDITORS Stantons Western Australia Level 2 STOCK EXCHANGE Australian Stock Exchange Limited (LRS) 1 Walker Avenue West Perth 6005 Western Australia ARGENTINA’S NEXT LITHIUM COMPANY CONTENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. Company Overview Review of operations Directors’ report Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Directors’ declaration 10. Auditors’ independence declaration 11. Independent auditor’s report 12. Additional information required by the ASX 13. Tenement schedule Page 2 3 29 42 43 44 45 46 71 72 73 77 79 COMPANY OVERVIEW During the year the Company continued to expand its portfolio of Argentinean tenements with the acquisition of several prospective lithium exploration concessions and mining licences. At the date of this report, the Company has access to approximately 294,000 hectares of pegmatite bearing ground prospective for lithium within the Catamarca, San Luis and Salta regions of Argentina. In addition, during the period the Company acquired the La Rioja concessions prospective for cobalt. In Catamarca province exploration reverse circulation drilling program of was completed. A total of forty reverse circulation drill holes completed, for a total of 2,680 meters producing a total of 223 samples all of which all were assayed. There were very encouraging results and Latin will continue with detailed mapping with further sampling of the project area will continue at Catamarca to identify high priority pegmatite drill targets. This will include mapping and sampling at the highly prospective but under explored Lomo Pelada prospect where there is known to be extensive multiple pegmatite dykes in close proximity to each other. Latin Resources will continue to focus its attention on its Lithium projects in Argentina and its objective of defining a JORC resource in 2018. The Company continues to progress the Joint Venture with First Quantum Minerals in the Pachamanca concessions in Peru. During the year First Quantum gained approvals to commence field work and geophysical assessment of the area in preparation and planning of initial drill plans on the area. The Company also successfully concluded the sale of the Ilo Copper Project with Toronto listed Westminster Resources Ltd (WMR). On financial settlement of the sale agreement, the Company will receive USD$250,000 together with 19 million shares in WMR. On receipt of the WMR shares the Company will have a 40% direct interest in WMR. In keeping with the Company’s long term strategy of identifying and developing projects with suitable JV partners, the Company commenced preliminary discussions with a number of different parties in relation to potential joint venture agreements or offtake arrangements in respect of its lithium assets in Argentina. Latin Resources Limited (ABN 81 131 405 144) 2 REVIEW OF OPERATIONS Highlights for the year ended 31 December 2017 CATAMARCA – (ARGENTINA)  Geochemical analysis of 29 rock chip samples taken at the end of 2016 confirms the presence of significant lithium oxide (Li2O) in the historical Ancasti and Villisman spodumene mines with grades of up to 4.46% Li2O received.  EIR/DIA issued and approved allowing for the completion of 2,680 meters of reverse circulation drilling at five prospects. o At Reflejos del Mar, drilled 986 meters in 13 holes of which 8 intercepted pegmatites with true thicknesses between 0.8m and 4.7m and Li2O grade between 0.55% and 2.40%. o At Campo el Abra, drilled 393 meters in 8 holes of which 6 intercepted pegmatites with true thicknesses between 0.8m and 4.7m and Li2O grade between 0.87% and 2.02%. o At La Culpable, drilled 369 meters in 5 holes of which 4 intercepted pegmatites with true thicknesses between 0.8m and 4.7m and Li2O grade between 1.62% and 4.61%. o At Santa Gertrudis, drilled 560 meters in 8 holes of which 8 intercepted pegmatites with true thicknesses between 0.8m and 4.7m and Li2O grade between 0.67% and 1.42%. o At Ipizca II, 372 meters were drilled from 5 holes of which 3 intercepted pegmatites with true thicknesses of 1m. No significant grades were encountered.  An initial mapping project completed at the Lomo Pelada prospect 3km to the west of Villisman Village with multiple pegmatites identified and sampled. SAN LUIS – (ARGENTINA)  Binding agreement gives a direct path to 100% ownership of the prized Geminis Mine and surrounding LRS Don Gregorio exploration concessions.  Spectacular spodumene mineralisation within the main pegmatite which is up to 18m thick, more than 200m long and gently dipping at 20-30 degrees.  The area contains multiple similar unexplored pegmatites.  Non-invasive mapping activity confirms two pegmatite zones containing multiple pegmatites in the vicinity of Geminis mine covering an area of 2.1km by 1.7km.  Reconnaissance of the northeast of the San Francisco concession shows strike length continuation of the Geminis group pegmatites of 7.5km.  Sample analysis collected from exposed pegmatites reports grades up to 3.83% Li2O with fractionation levels of pegmatites measured using geochemical K/Rb ratios showing all pegmatites prospective for lithium mineralisation.  The Maria del Huerto mine was mapped in detail and sampled to provide information used in the design of a preliminary drilling program.  Analysis of the twenty samples from Maria del Huerto have reported grades of up to 1.93% Li2O. Latin Resources Limited (ABN 81 131 405 144) 3 REVIEW OF OPERATIONS  The EIA drill permit was completed and submitted in March and then approved in October 2017 allowing for the issuance of the DIA by the San Luis Department of Mines, which is yet to occur.  Satellite imagery analysis of vacant ground and field follow up has led to ten new concession applications being submitted covering an area of over 76,000 hectares. LA RIOJA – (ARGENTINA)  Three exploration concessions covering 28,220 hectares have been applied for in La Rioja Province that surrounds the King Tut mine.  The King Tut mine was a historic producer of cobalt and gold ore and has been documented by various authors since at least 1922.  The exploration concessions have never been subject to systematic exploration and the area, being in such close proximity to a known high-grade cobalt-gold deposit is considered highly prospective. SALTA – (ARGENTINA)  Two due diligence field trips to the Ansotana Projects San Elena, El Quemado and Tres Tetas completed. ILO COPPER PROJECTS – (PERU)  In September 2017, LRS entered into a binding agreement to sell the Ilo copper projects in Peru to TSX listed Westminster Resources Limited.  The total sale value exceed $6.8m in cash and shares.  The transaction enables LRS to focus resources on the development of its lithium projects in Argentina.  Sale does not include Pachamanca/MT-03 which is under a JV agreement with First Quantum Minerals. TECHNOLOGY  Agreement with National University of Cuyo (UnCuyo) has secured first option to acquire an exclusive license of the University’s patented technology to produce lithium carbonate to spodumene.   Spodumene to lithium carbonate pilot plant construction has commenced Latin Resources has appointed Primero Consulting Engineers to carry out a high level scoping study for its lithium pegmatite projects. Latin Resources Limited (ABN 81 131 405 144) 4 REVIEW OF OPERATIONS Projects CATAMARCA – (ARGENTINA) Ancasti Rock Chip Geochemical Analysis In January 2017, geochemical results were received for samples taken during a detailed mapping program conducted at the end of 2016 which targeted areas historically mined for spodumene in both Villisman and Ancasti districts. The aim of the sampling and mapping was to confirm the presence of lithium and other elements of interest and to estimate the size and orientation of the pegmatite dykes containing the mineralisation. Latin collected a total of twenty-nine rock chip samples from seven of its prospects. Thirteen samples taken from Ancasti (southern) prospects Ipizca II and Santa Gertrudis, and fourteen samples taken from the Villisman (northern) prospects La Herrumbrada, Lay Joyita, Lomo Pelada, Reflejos de Mar and Campo el Abra. The samples were sent to the internationally recognised laboratory ALS in Mendoza for sample preparation followed by analysis by ALS in Vancouver using Multi-Element Analysis by Sodium Peroxide Fusion and ICP-MS and Li Analysis by Sodium Peroxide Fusion and ICP-ES for sample over 2.5% lithium. The results confirmed that significant grades of lithium contained within the Ancasti prospects with 19 of the 29 samples being 1% Li2O or higher, the best grades ranging from 2.02 Li2O to 4.46 Li2O, with an average grade of all samples being 1.42% Li2O. The analysis also shows that the pegmatites contain significant values of tantalum and niobium. Figure 1. Ancasti and Villisman Rock Chip Geochemical Analysis Latin Resources Limited (ABN 81 131 405 144) 5 REVIEW OF OPERATIONS Table 1. Assay and location table of rock chip samples taken in November-December 2016 Ancasti Reverse Circulation Drilling From early February until the end of March 2017 a reverse circulation drilling program was completed by the top tier drilling company, Major Drilling, using a multi-purpose UDR-650 rig. The Catamarca drilling program aimed to test the depth continuity and lithium content of the pegmatites that are exposed at surface both within old open pits and along strike extensions from the pit exposures on five of the eleven historically mined pegmatites that make up the Ancasti Lithium project. Latin Resources Limited (ABN 81 131 405 144) 6 Sample IDProjectEastingNorthingLi %Li2OBe ppmNb ppmTa ppmDescriptionCEA-M1Campo el Abra255,521 6,846,058 0.030.07611.40.29Rock chip taken from pegmatite in the pit wall. Spodumene content is very lowCEA-M2Campo el Abra255,513 6,846,085 0.631.3562.52236.7Rock chip taken from pegmatite in the pit wall. Fresh green and altered white spodumene content is moderateCEA-M3Campo el Abra255,519 6,846,100 0.290.6222811.10.57Rock chip taken from pegmatite in the pit wall. Fresh green spodumene content lowCEA-M4Campo el Abra255,516 6,846,114 0.942.022055.5<0.04Rock chip taken from pegmatite in the pit wall. Fresh green spodumene content is moderateCEA-M5Campo el Abra255,504 6,846,210 0.721.564519.20.35Rock chip taken from pegmatite in the pit wall. Tabular crystals of altered white spodumene content is moderateIP2-ZN-M1Ipizca II253,396 6,813,618 0.270.5718.655.253.2Rock chip taken from pegmatite in the pit wall. Highly altered white spodumene content is lowIP2-ZN-M2Ipizca II253,394 6,813,621 0.671.4314396.9166Rock chip taken from pegmatite in the pit wall. Highly altered white spodumene content is moderateIP2-ZN-M3Ipizca II253,392 6,813,628 0.070.14552289100Rock chip taken from pegmatite in the pit wall. Spodumene content very lowIP2-ZN-M4Ipizca II253,391 6,813,645 0.020.0513.990.79.18Rock chip taken from pegmatite in the pit wall. Spodumene content very lowIP2-ZN-M5Ipizca II253,387 6,813,649 1.142.4445810195.2Rock chip taken from pegmatite in the pit wall. Fresh light green and altered white spodumene content is moderateIP2-ZS-M1Ipizca II253,411 6,813,572 0.040.098.774.733.6Rock chip taken from pegmatite in the pit wall. No visible spodumene IP2-ZS-M2Ipizca II253,416 6,813,560 0.410.8833.6143.588.9Rock chip taken from heavily oxidised pegmatite in the pit wall. White altered spodumene content is lowLH-M1La Herrumbrada259,366 6,845,583 1.382.964.79.32.81Rock chip taken from pegmatite in the pit wall. Spodumene content moderateLH-M2La Herrumbrada259,379 6,845,581 0.531.151099.43.25Rock chip taken from pegmatite in the pit wall. Light green large prismatic spodumene content is moderateLJ-M1La Joyita256,174 6,850,510 0.430.9222.2180536Rock chip taken from pegmatite in the pit wall. Spodumene content is moderateLJ-M2La Joyita256,177 6,850,528 2.074.4626.222.941.8Rock chip taken from pegmatite in the pit wall. Prismatic green spodumene content is highLP-M1Loma Pelada259,278 6,843,647 0.932.00118.56041.9Rock chip taken from pegmatite in the pit wall. Altered white spodumene content is very lowLP-M2Loma Pelada259,356 6,843,956 0.631.35180.523.911Rock chip taken from pegmatite in the pit wall. Altered white spodumene content is moderateLP-M3Loma Pelada259,361 6,843,907 0.471.011267.72.87Rock chip taken from pegmatite in the pit wall. Altered white s podumene content is low-moderateLP-M4Loma Pelada259,361 6,843,907 1.082.3313311.74.99Rock chip taken from pegmatite in the pit wall. Spodumene content very lowRM-M1Reflejos de Mar259,939 6,849,149 0.932.0036610.631.4Rock chip taken from pegmatite in the pit wall. Fresh pale green spodumene content is moderateRM-M2Reflejos de Mar259,935 6,849,148 1.062.2735639.436.3Rock chip taken from pegmatite in the pit wall. Spodumene content is moderateRM-M3Reflejos de Mar259,950 6,849,188 1.413.026.99.617.75Rock chip taken from pegmatite in the pit wall. Fresh prismatic green spodumene content is moderate - highSG-M1Santa Gertrudis255,990 6,804,006 0.240.52198.5105.541.8Rock chip taken from pegmatite in the pit wall. Altered white spodumene content lowSG-M2Santa Gertrudis255,989 6,804,009 0.481.0420963.943Rock chip taken from pegmatite in the pit wall. Spodumene content very lowSG-M3Santa Gertrudis255,991 6,804,018 0.270.59156.58.44.14Rock chip taken from pegmatite in the pit wall. Spodumene content lowSG-M4Santa Gertrudis255,986 6,804,062 1.032.2214024.413.9Rock chip taken from pegmatite in the pit wall. Fresh green and altered white spodumene content is moderateSG-M5Santa Gertrudis255,986 6,804,078 0.471.0019826.34.57Rock chip taken from pegmatite in the pit wall. Highly altered white spodumene content is lowSGMC-M1Santa Gertrudis255,993 6,803,990 0.461.001394817Rock chip taken from pegmatite in the pit wall. Altered white spodumene content is low REVIEW OF OPERATIONS A total of thirty nine 41/2 inch reverse circulation holes were drilled, for a total of 2,680 meters producing a total of 223 samples submitted in five batches to ALS Mendoza for sample preparation and then transported to Vancouver for analysis using multi-element analysis by sodium peroxide fusion. Figure 2. Ancasti Projects Drilled in 2017 Reflejos del Mar Of the thirteen holes drilled, eight intercepted pegmatites of between 1 and 7 meters in apparent thickness. The drilling successfully intersected the down dip extension of the pegmatite orebody exploited in the historic mine and confirmed the LRS geological model. These first pass exploration results show several significant intercepts containing lithium grades that may be suitable for further investigation and possible development in conjunction with other similar deposits. There are also elevated niobium and tantalum grades which may contribute to any future operation with by-product credits. The drilling has closed off the deposit in all directions. Latin Resources Limited (ABN 81 131 405 144) 7 From To Intercept Thickness True Thickness Li2O % BeO ppm Na2O5 ppm Ta2O5 ppm REVIEW OF OPERATIONS Hole Number RDMRC001 Including RDMRC002 Including RDMRC003 RDMRC007 Including RDMRC008 RDMRC009 20 21 39 39 29 39 40 53 86 25 24 46 45 30 45 44 57 87 RDMRC012 67 Table 2. Significant Assay Results at Reflejos del Mar 68 5 3 7 6 1 6 4 4 1 1 4.7 2.8 4.6 3.9 1.0 4.7 3.1 2.8 0.9 0.8 1.29 1.74 2.17 2.40 1.24 1.39 1.90 0.84 0.55 0.75 493 414 444 489 907 537 540 503 184 616 82 100 37 36 107 76 88 73 64 22 51 54 55 58 446 55 52 46 55 49 Figure 3. Reflejos del Mar Drill Hole Collar Locations Figures 4 and 5. Reflejos del Mar Cross sections A – A’ and B – B’ Latin Resources Limited (ABN 81 131 405 144) 8 REVIEW OF OPERATIONS Campo el Abra Of the eight holes drilled at Campo el Abra, six intercepted pegmatites of between 6 and 15 meters in apparent thickness which translates to between 4m and 9m in true thickness. Intercepts contain between trace visual spodumene up to 30% spodumene. The pegmatite intercepted is the down-dip extension of the outcropping pegmatite that was the subject of small-scale historical mining. Its location and orientation is consistent with what was expected from the pre-drilling surface outcrop and mine mapping. The grades support further investigation and possible developmental studies. The mineralisation is of acceptable thickness when considering possible theoretical mining scenarios and it is open to the north, south and at depth and has a strike length of 150m+. From To Intercept Thickness True Thickness Li2O % BeO ppm Na2O5 ppm Ta2O5 ppm Hole Number CEARC001 Including CEARC002 CEARC003 Including CEARC004 Including CEARC007 Including CEARC008 7 13 15 11 16 29 30 10 11 26 15 14 30 18 17 41 34 14 13 34 8 1 15 7 1 12 4 4 2 8 Including 2 Table 3. Significant Assay Results at Campo el Abra 27 29 7.6 1.0 9.2 6.7 1.0 7.6 2.5 3.8 1.9 5.2 1.3 1.02 1.55 0.87 1.07 1.57 1.38 2.02 1.33 1.76 1.33 1.66 476 401 463 411 422 499 573 342 327 426 368 35 24 35 30 22 34 21 19 19 31 20 17 9 15 12 10 28 7 9 9 16 5 Figure 6. Campo el Abra Drill Hole Collar Locations Latin Resources Limited (ABN 81 131 405 144) 9 REVIEW OF OPERATIONS Figures 7,8,9. Campo el Abra Cross section A - A', B – B’ and C – C’ Latin Resources Limited (ABN 81 131 405 144) 10 REVIEW OF OPERATIONS Santa Gertrudis Of the eight holes drilled, all holes intercepted pegmatites of between 1 and 5 meters in apparent thickness containing between trace visual spodumene up to 20%. The drilling successfully intersected the down dip extension of the pegmatite orebody exploited in the historic mine and was as expected from mapping. The pegmatite is open to the north, south and at depth, however, the Li2O grades are a little low. Hole Number From To SGRC001 Including 31 33 50 SGRC002 27 SGRC003 46 SGRC003 47 SGRC004 50 SGRC004 SGRC005 22 Table 4. Significant Assay Results at Santa Gertrudis 35 34 52 32 47 48 52 23 Intercept Thickness 4 1 2 5 1 1 2 1 True Thickness 3.7 0.9 1.3 4.7 1.0 0.6 1.2 0.9 Li2O % 0.85 1.42 1.06 0.89 0.67 0.79 0.70 0.73 Na2O5 ppm Ta2O5 ppm 94 66 97 53 120 143 86 75 68 19 48 31 195 58 68 38 Figure 10. Campo el Abra Drill Hole Collar Locations Latin Resources Limited (ABN 81 131 405 144) 11 REVIEW OF OPERATIONS Figure 11 and 12. Santa Gertrudis Cross sections A - A', B – B’ La Culpable Of the five holes drilled four holes intercepted pegmatites of between 3 and 6 meters in apparent thickness containing between trace visual spodumene up to 20% as logged. The location of the pegmatites was as expected the thicknesses however did not expand nor did it continue to the south. The bifurcation did not continue to the north. The grades at La Culpable, however, were very high for Li2O and for tantalum. Hole Number From To LCRC001 Including LCRC002 Including LCRC004 Including 18 20 30 32 90 90 24 21 34 33 93 91 Intercept Thickness True Thickness 6 1 4 1 3 1 5.2 0.9 2.3 0.9 2.8 0.9 Li2O % 1.62 3.38 2.03 4.22 2.98 4.61 Na2O5 ppm Ta2O5 ppm 75 93 104 58 219 232 193 193 160 152 453 623 Table 5. Significant Assay Results at La Culpable Latin Resources Limited (ABN 81 131 405 144) 12 REVIEW OF OPERATIONS Figure 13. La Culpable Drill Hole Collar Locations Figure 14 and 15. La Culpable Cross section A - A' and B – B’ The results can now be used to help prioritise the long-term plans for LRS and assist in deciding which projects to develop further into the future. Please refer to Table 1 for details of the number of holes and quantity of meters drilled at each of the five projects and a summary of the results and current thinking regarding the next phase for each prospect drilled thus far. Latin Resources Limited (ABN 81 131 405 144) 13 REVIEW OF OPERATIONS In summary: Campo el Abra (CEA) shows the thickest intercepts thus far drilled at the Ancasti projects. At 150m+ in strike length, it is also the longest prospect delineated thus far, it is open in all directions except to the west (which is up dip), and it also has a good Li2O grade that possibly justifies further delineation work toward developmental studies. Santa Gertrudis is also open to the north, south and at depth. While the grades are a little low they are sufficient to warrant follow up, and recent mapping and satellite interpretation show the pegmatite possibly extends up to 500m from the known mineralisation. La Culpable demonstrated that very high Li2O grades were contained there along with interesting elevated tantalum and niobium grades that warrant more work to delineate these zones further. These grades represent the highest grades within pegmatites so far encountered at Ancasti. Detailed mapping with further sampling of the project area will continue at Catamarca to identify high priority pegmatite drill targets. Project Number Holes Total Meters Min True Thickness Max True Thickness Open to North Open to South Open at Depth Contains Promising Grade Follow Up Work Warranted Campo el Abra Ipizca II La Culpable Reflejos del Mar Santa Gertrudis 8 5 5 393 372 369 13 986 8 560 3.8 1.0 2.3 0.8 0.6 Total 39 2680 Table 6. Summary of Ancasti Drilling and Results The Lomo Pelada Prospect 9.2 1.0 5.2 4.7 4.7 Yes Yes Yes Yes No Yes No Yes Yes No No No Yes No Yes Yes Yes Yes Yes Yes Yes No Yes No Yes Mapping and sampling have been completed at the Lomo Pelada project approximately 3km west from the village of Villisman. Historical mapping and a first pass visit in early 2017 showed the possibility of the existence of multiple sub-parallel pegmatites. This has now been confirmed with drill targets currently being determined with drilling to commence first-quarter 2018. SAN LUIS – (ARGENTINA) The Geminis Mine and Don Gregorio Exploration Concession LRS secured a path to the 100% ownership of the Geminis Lithium Mine and Don Gregorio concessions in the western part of the Libertador del San Martin region of San Luis, through the initial signing of a Binding Letter of Intent and subsequent signing of the Sale Agreement. The Geminis mine has been historically linked to lithium mining in San Luis and contains known high-grade lithium bearing pegmatites. It was recognized by geologists from the National Development Bank whose work has been reflected in unpublished reports as one of the main lithium deposits in the province of San Luis with lithium ore produced dfuring the period 1935 - 1980. The Geminis Mine (12 Ha) and surrounding Don Gregorio (388 Ha) exploration concessions are located approximately 8km to the south-east of the village of San Francisco del Monte de Ore and 18km to the north of the historical gold mining centre of La Carolina in the Sierra Grande de San Luis mountain range. Latin Resources Limited (ABN 81 131 405 144) 14 REVIEW OF OPERATIONS Latin Resources’ San Francisco exploration concession surrounds the Geminis and Don Gregorio concessions (See Figure 16). There are two possible access routes to the mine. The first is via a 4WD track directly to the south of San Francisco village; the second is via the original access track by which ore was transported from the Geminis mine to the south to reach the main road to the La Toma processing facilities. Figure 16 Location of Geminis, Don Gregorio and San Francisco concessions Mining at Geminis began in the 1930’s and continued until 1959. Since then very sporadic mining has taken place, but there has been no recent activity. Apart from a small quarry to the south of the operations all of the mining was carried out using underground methods. The underground workings observed consist of three adits which access a series of tunnels that vary in size and length. The most northerly adit named Pozon Blanco is quite small and collapsed. The central adit named Cantera Grande is 6m long, 2.8m wide and 2.5m high. The main adit further to the south is named Poniente Labors and contains approximately 70m of tunnels with an entrance chamber measuring 5m x 7.6m. Mining activity was small scale and carried out in campaigns. It is thought that on average the mine produced approximately 5-10 tonnes of spodumene per month (Barrio, Raul E. and Echeveste, Horacio J.). The mine workings are spread over a strike distance of approximately 150m. The San Francisco, Geminis Mine and Don Gregorio concessions are located within the Totoral Pegmatite Field which is the southernmost pegmatite field of the Pampean Pegmatite Province Pegmatites are intruded into Pringles Metamorphic Complex host rocks which comprise mostly fine grade gneisses and schists of Ordovician age (456 – 488 million years). The TPF comprises a 17 km long swarm of rare-element pegmatites of the LCT (Li-CS-Ta) family that trends NNE – SSW that was intruded into the PMC between 465 and 317 million years ago (Galliski, M.A. and Cerny, P., 2006). Latin Resources Limited (ABN 81 131 405 144) 15 REVIEW OF OPERATIONS Figure 17. Regional geology map of the Totoral Pegmatite Field within the Pampean Pegmatite Province The pegmatites located at the Geminis mine are of the complex spodumene type. A broad range of economic minerals is present. Most significantly there is intense spodumene mineralisation with parts of the mine comprising up to 80% of the material. During mining individual spodumene crystals have been measured to have a length of up to 4m. Other minerals which are significant and may contribute to the overall value are the lithium minerals amblygonite and lithiophilite which are found within the pegmatites non-nucleus zones as are other minerals tantalite, columbite and beryl. The non-lithium minerals present are significant as they may contribute as credits within any future concentrate. LRS staff have recently entered and inspected the central and southern adits. Each adit and the mine workings within have exposed walls that contain extremely high percentages of oxidised spodumene (See Figures 18 and 19). Figure 18 and 19. Exposed pegmatite in mine adits at the Geminis Mine Latin Resources Limited (ABN 81 131 405 144) 16 REVIEW OF OPERATIONS From preliminary studies the main pegmatite is between 12-18 meters thick and has a known strike length of more than 200m which is visible from the mine exposures and the satellite image (See Figure 2). It is possible that other pegmatites along strike from the mine are in fact connected to the main mine pegmatite and that the strike length is in fact much longer. in from there is area Also preliminary mapping and the satellite image, the other immediate pegmatites above and below the mine pegmatite. The orientation of the known pegmatites is also very favourable as it dips gently at 20-30 degrees to the south-east. Figure 20. Satellite image showing the Geminis Mine Entrance Location with the known pegmatite outcrops The final agreement is made up of three stages with the following terms and conditions; Stage 1: I. II. Within five days of signing the Final Agreement, Latin must pay the vendor US$15,000 From the time of signing the Final Agreement Latin has at its own cost to meet the following milestones; a. Approval of the Environmental Impact Report (EIR). b. Obtaining the registration by the competent authority of the Manifestations of Discovery. c. The approval of the reactivation plan requested by the competent authority of the Geminis Mine. Stage 2: I. At the completion of Stage 1 or sooner at Latin’s discretion Stage 2 begins with the following payment obligations: a. Within five days of the start of Stage 2, Latin must pay the vendor US$20,000 b. Within five days of the beginning of the third month of Stage 2, Latin must pay the vendor US$20,000 II. The objective of stage 2 is to complete the necessary permits and initial exploration drilling. Stage 3: I. At the completion of Stage 2, Stage 3 commences with the following payment obligations: a. Within five days of the commencement, Latin must pay the Vendor US$50,000 b. Within five days of the beginning of the third, sixth and ninth month Latin must pay the Vendor US$50,000 for a total of US$150,000. III. The purpose of Stage 3 is to allow Latin to complete resource definition drilling aimed at defining a mineral resource containing a minimum of one million tonnes of spodumene. Once Stages 1, 2 and 3 are completed, and all payments have been made (US$260,000), Latin then has the right to exercise its option to acquire 100% of the project with the payment to the Vendor of US$2,000,000. Latin Resources Limited (ABN 81 131 405 144) 17 REVIEW OF OPERATIONS Non-invasive geological mapping and sampling was carried out at the Geminis Mine after the binding letter of intent was signed on the 1st August 2017. The initial work concentrated efforts in and around the Geminis Mine workings and then expanded out into the Don Gregorio exploration concession. In the mine area, six pegmatite bodies have been mapped sometimes as discreet structures over a strike length of 1.6km following the significant trend of the orebody exploited through historical mining. The individual pegmatites vary from 4m up to 20m in thickness and dip relatively gently to the south-east at between 15 to 30 degrees which is an ideal orientation for any future possible open pit mining. The overall zone has a thickness of 400m. Approximately 800m to the north west of the main mine pegmatite group is another packet of eight sheeted pegmatites with a similar orientation to the mining group and thicknesses of between 4m to 25m. Both zones together cover an area of 2.1km by 1.7km. The results from the sampling have confirmed that the spodumene zones that have been exposed by the historical mining contain very encouraging lithium grades even after having been significantly weathered. The grades of lithium in the fresh material should be higher as lithium is very mobile and is usually highly the depleted host the weathering process. from rock by For pegmatites that been not have excavated and do not have the spodumene bearing intermediate and nuclei zones, the lithium exposed grades are low as expected. Figure 21. Rock Chip sample locations showing Li2O grade at the at Geminis Mine Project For these pegmatites, it is necessary to judge their prospectivity for lithium minerals by estimating the level of fractionation of each pegmatite. Fractionation is the process of mineral crystallisation as the magma evolves and cools. Compatible elements are the first to drop out and crystallise. Non-compatible elements form minerals as the magma becomes more fractionated. Lithium minerals and other economic minerals such as tantalum and niobium are non-compatible elements, and the more fractionated a pegmatite, the more likely it is to contain concentrations of these elements. Several geochemical signatures can be used to estimate the level of fractionation in a pegmatite. One of the more reliable indicators is the potassium-rubidium ratio (K/Rb). Pegmatites with a K/Rb ratio of less than 270 are thought to be fractionated sufficiently to be prospective for rare metals such as lithium (Cerny, 1989). All of the rock chip samples taken at Geminis and Don Gregorio show K/Rb ratio’s above this level with some showing extremely high levels of fractionation. This is very encouraging for the prospectivity of the area. Latin Resources Limited (ABN 81 131 405 144) 18 REVIEW OF OPERATIONS 84-C-2016 Reconnaissance Exploration During the field work at Geminis and Don Gregorio, the LRS geology team also made a field reconnaissance trip to the north eastern part of the San Francisco exploration concession to visit and confirm the presence of in the pegmatites seen satellite imagery of the area. Significant pegmatite mineralisation was identified during this visit. The pegmatites appear to be directly along strike in the same trend as the Geminis and Don Gregorio pegmatites which are extremely encouraging as this represents a strike distance of approximately 7.5km (Figure 6). Further detailed geological and sampling work undertaken here and the gap in between the zones shortly Figure 22. Concession 84-C-2016 7.5km pegmatite strike length Maria del Huerto Sampling and mapping have produced positive results at the Maria del Huerto mining tenements. Geochemical samples were taken during a first pass mapping and sampling field program at the end of January 2017 and in May completing detailed 1:1000 geological mapping of the old workings and other pegmatite outcrops to finalise a drilling program. This work supports the original mapping which shows the presence of at least three sub-parallel 5-6m thick pegmatite sheets 20-30m apart that dip at 50-60 degrees. Pegmatites one and two occur as outcrop and subcrop and have not been mined to any great extent. Only the external and marginal zones of the pegmatites are exposed, and they are heavily weathered. Pegmatite three has previously been mined to a depth of approximately ten meters and is exposed for approximately 110m within the mine workings. Here the spodumene bearing intermediate zone and nucleus is well exposed. It has also undergone only limited weathering. A total of twenty samples were taken from three pegmatites within and adjacent to the old mine workings. The samples were sent to the internationally recognised laboratory ALS in Mendoza for sample preparation followed by analysis by ALS in Vancouver. The results returned have confirmed expectations that economic grades of lithium are contained within the mine exposure with adjacent pegmatite outcrops showing elevated lithium grades in the outer zones despite being heavily weathered. Latin Resources Limited (ABN 81 131 405 144) 19 REVIEW OF OPERATIONS Table 7. Maria del Huerto Geochemical Results The detailed mapping and sampling allowed the design of targets/drill collar locations for the initial exploration and resource development drilling. Approximately 1,200m of diamond drilling and 3,000m of reverse circulation drilling has been planned to target the sheeted pegmatite mineralisation. The company has received notification that the Environmental Impact Report submitted in March for the Maria del Huerto project has been accepted and approved by the San Luis Mineria Department. The acceptance of the EIR allows the department to now issue the DIA which is the actual approval for drilling. The Company is awaiting issue of the DIA prior to mobilising the drill programme. Latin Resources Limited (ABN 81 131 405 144) 20 Sample NumberEastingNorthingLithologyPegmatite ZonationVisible SpodumeneLi2O %Be ppmNb ppmTa ppmDescriptionMH1-S12739166398167Pegmatite 1ExternalNone0.01%9234Feldspar crystals of 25 -35 cm length containing small grains of quartz. Moderate presence of muscovite books.MH1.S22739126398168Pegmatite 1ExternalNone0.01%11152Feldspar crystals 20 cm length with quartz veinlet 1 cm width, forming graphic texture. Scarce muscovite.MH1-S32739216398166Pegmatite 1ExternalNone0.00%781Feldspar crystals in a quartz and plagioclase matrix. Scarce muscovite.MH1-S42739296398174Pegmatite 1ExternalNone0.00%1671Quartz and plagioclase crystals. No mica and spodumene identification.MH1-S52739116398174GraniteNANone0.01%792Very fine grained quartz containing green muscovite (80% - 20%). Apparently this is the granite.MH2-S62740096398302Pegmatite 2MarginalNone0.03%496918Big quartz crystals (10 – 12 cm) associated with feldspar and some zones containing abundant green muscovite books.MH2-S72740116398305Pegmatite 2MarginalNone0.03%1027016Quartz crystals in a green muscovite zone. Minor feldspar. MH2-S82739966398309Pegmatite 2MarginalNone0.01%7101Fine grained quartz forming matrix with green muscovite crystals. Minor plagioclase. MH2-S92739916398292Pegmatite 2ExternalNone0.01%972Big crystals of feldspar, quartz and green muscovite.MH2-S102740186398313Pegmatite 2ExternalNone0.02%42277Quartz veinlets 5-7 cm in a matrix of feldspar. Moderate presence of green muscovite. MH3-S112740456398393Pegmatite 3ExternalMinor0.13%189013Grey and green muscovite sector in the intermediate zone. All books are dipping in different angles. Minor quartz crystals. MH3-S122740446398398Pegmatite 3IntermediateHigh1.91%9833Quartz, spodumene crystals (6 cm width), plagioclase and mica from intermediate zone. High abundance of spodumene.MH3-S132740486398394Pegmatite 3IntermediateModerate1.27%214610Quartz, spodumene crystals (8 cm width), plagioclase and mica from the intermediate zone. MH3-S142740506398398Pegmatite 3NucleusHigh1.67%17352White crystals of quartz, very solid, with highly weathered pink spodumene crystals and mica.MH3-S152740576398400Pegmatite 3IntermediateModerate1.38%549104White crystals of quartz, some feldspar and moderate presence of spodumene. Accessory minerals are apatite and tourmaline. MH3-S162740586398403Pegmatite 3IntermediateHigh1.93%52652White crystals of quartz, plagioclase and moderate presence of mica. Green spodumene, apparently not weathered. Some apatite.MH3-S172740686398410Pegmatite 3MarginalNone0.06%495257Crystals of quartz and plagioclase forming a hard matrix. High abundance of mica and some apatite.MH3-S182740666398412Pegmatite 3ExternalNone0.04%5343510Grey and green mica zone. MH3-S192740786398413Pegmatite 3MarginalNone0.04%15503124Plagioclase crystals and quartz containing grey muscovite.MH3-S202740796398419Pegmatite 3MarginalNone0.06%584317Crystals of quartz and mica REVIEW OF OPERATIONS Figure 23. Maria del Huerto Geological Map, Geochemical Results and Planned Drill Hole Collars New Exploration Concession Applications Latin Resources Limited (ABN 81 131 405 144) 21 REVIEW OF OPERATIONS In the San Luis area, there are many pegmatites occurring in swarms. Some have been previously mined for spodumene, and many have been exploited or are still being mined for quartz and feldspar to support a sizeable ceramics industry. The LRS geological team has systematically evaluated these zones by identifying possible pegmatitic outcrops using satellite imagery analysis and then ground-truthing these outcrops to confirm the lithology. As a result of this work, ten new exploration zones have been identified, and exploration concession applications totalling 76,309 hectares have been submitted for these areas. Figure 24. New San Luis Concessions Latin Resources Limited (ABN 81 131 405 144) 22 REVIEW OF OPERATIONS SALTA – (ARGENTINA) El Quemada and San Elena From the 15th of May until the 20th a field trip was undertaken to visit El Quemada and San Elena deposits which make up two of the four projects held by Antosana group in Salta, north-west Argentina. The aim was to check the geology, potential size, logistics issues and to take samples to give information on lithium grades as previous samples were not analyzed for Li. The mining property El Quemado in the departments of Cachi and La Poma; the Santa Elena mining is property located in the department of Poma. La Access to the located is Figure 25. San Elena and El Quemada Location project is via a one day's horse ride from the village through a series of east-west valleys to the site. The altitude of the project ranges between 4,200 and 5,000m. The El Quemado Pegmatitic District belongs to the geological province of Cordillera Oriental, Northwest of Argentina. The oldest rocks belong to a metamorphic basement affected by different deformation phases; This basement is constituted by metasedimentary rocks of Neoproterozoic- Lower Cambrian age from the La Paya and Puncoviscana Formations (Aceñolaza 1975, Adams 2008). The predominant outcrop in the mining concessions of El Quemado and Santa Elena consists of fine-grained metasediments in the middle of quartzites, muscovite and biotite shales, laminar bundles of strata 5 to 20 cm thick. In the Santa Elena mining concession, pegmatites were identified that vary from 0.30 to 11.00 meters of power with outcrop up to 750 meters long. The average thickness of the pegmatites identified on the surface is 3.50 meters in width. Figure 265. Lepidolite in Pegmatite Near San Elena Mine Figure 27. San Elena Pegmatite with quartz, albite, k-feld, Muscovite and clay Latin Resources Limited (ABN 81 131 405 144) 23 REVIEW OF OPERATIONS Figure 28. San Elena Pegmatite Outcrop Map El Quemado was also visited. It is approximately three km from San Elena and reaches an altitude of 5,000 (see figure 4). In the El Quemado mining concession, pegmatites were identified that vary from 0.20 to 2.50 meters of power with outcrop up to 700 meters long. The average thickness of the pegmatites identified on the surface is 2 meters. Compositionally they are complex pegmatites, with albite, milky quartz, muscovite biotite and microcline. Tres Tetas Tres Teta's mining concession was visited by LRS geologists from November 30 to December 3, 2017. The exploration work focused on the identification of pegmatitic bodies within the Tres Tetas 42 hectare concession geological- where structural mapping and geochemical sampling work were undertaken. The Tres Tetas mining property is located in the department of Cachi. Access to the mining properties is made from the city of Salta to the town of Cachi (paved road 160 km), then by horse from Cachi to the Huaico Hondo post (20 km); from this point, it is continued by a bridle path (29 km) to the mining property. Figure 29. Tres Tetas Location Latin Resources Limited (ABN 81 131 405 144) 24 REVIEW OF OPERATIONS In the Tres Tetas mining concession, intrusive rocks, metasediments of the Fm Paya, sills and pegmatite dykes, dacite sills, milky quartz veins and quaternary deposits appear. The main host lithology in the Tres Tetas concession are the metasediments of the Paya formation, which is composed of fine-grained sediments amidst quartzites, muscovite and biotite shales, laminar packages of 3 to 30 cm layers. The sequence has an NW - SE direction and dips to the SW. It is displaced by local NE - SW faults. To the NW of the Tres Tetas concession, the intrusive Dioritic Quartzite emerges, intruding the metasediments of the Paya formation. It presents a porphyritic texture - medium grain, composed of plagioclase altering to clays, translucent quartz and fresh biotite. In parallel with the metasediments of the Paya formation, it presents a mid-grain porphyritic texture, composed of plagioclase, quartz and hornblende. In the Tres Tetas mining concession, pegmatites were identified that vary between 0.10 to 3 meters width with outcrops of up to 150 meters length. The average thickness of the Figure 30. Typical Tres Tetas Pegmatite pegmatites identified on the surface is 1.00 meter. The pegmatites presented as sills and dykes cutting the metasediments of the Paya formation, with a preferred orientation of NW - SE and less frequent N – S. The dip angles vary from 25 ° to 82 °. The pegmatites are composed of milky quartz, albite, weak Muscovite and traces of tourmaline. Figure 31. Tres Tetas Geology Map Latin Resources Limited (ABN 81 131 405 144) 25 REVIEW OF OPERATIONS LA RIOJA – (ARGENTINA) In June LRS applied for exploration concessions in the known cobalt province of La Rioja. The three tenements which total 28,220 hectares adjoined and fully encompass an area that contains the historic King Tut Cobalt - Gold Mine that operated between 1901 – 1902 and produced 80 tonnes of ore at 1.3% Co. The King Tut Mine and LRS’ three new concession applications are located on the western slopes of a large massif in the Valle Hermoso district, Department Sarmento, La Rioja province in North West Argentina. The closest population centre is Vinchina which is approximately 58km to the south-west. It is on the eastern bank of the El Salto ravine, averaging approximately 2,800 m above sea level. Table 8. LRS Concession Areas The massif, which is comprised of metamorphosed slates, shales and psammites of the Lower Ordovician Suri Formation and the andesitic volcanics of the La Ojota Formation. The Ordovician Suri Formation represents shallow marine sedimentation events in a volcanic arc-related setting. These rocks which generally trend N – S have a sub-vertical dip and are often stained with black spots of manganese oxide. According to Angelelli (1984), The King Tut Mine consists of “a main vein and several others”. This vein system occurs in an area of siliceous alteration. Mineralisation consists of pyrrhotite, cobaltiferous arsenopyrite and cobaltite with some associated with pyrite and Chalcopyrite. Figure 32. LRS La Rioja Concession Applications Locations Latin Resources Limited (ABN 81 131 405 144) 26 Concession NameHectaresGladys10,048 Cecilia9,280 Anita9,103 Total28,431 REVIEW OF OPERATIONS ILO COPPER PROJECT – SOUTHERN PERU Sale Agreement of Copper Assets On the 4th of September, the company entered into a Binding Sale Agreement with Westminster Resources Limited (“TSX-V: WMR”) a publicly listed company on the Toronto Venture Exchange, Canada to sell its Ilo Copper assets in Moquegua, Southern Peru. The binding agreement entitled Westminster to 100% ownership of 44 concessions totalling over 36,000 hectares held by Latin’s 100% owned subsidiary, Peruvian Latin Resources SAC. The agreement does not include the Pachamanca/MT03 project, that is the subject of a Joint Venture agreement with First Quantum Minerals Ltd. The main terms of the agreement are as follow: Upon completion of due diligence and receiving the necessary approvals, the necessary acceptance for filing by the TSX-V and effecting the transfer of the Projects, the following terms and conditions will be met under a formal Sale Agreement to be completed between Westminster Resources and Peruvian Latin Resources Ltd: a. Upon signing of the Sale Agreement, the issue to Latin of a total of 19,000,000 common shares in the capital of WMR ("Purchase Shares"). b. The Purchase Shares will be placed into voluntary escrow and held until the Concessions representing the Projects have been effectively transferred to WMR or its subsidiary but shall vest with the following milestones: i. 1,000,000 shares vest 6 months from the date of the Sale Agreement; ii. 3,000,000 shares vest 12 months from the date of the Sale Agreement; and iii. 15,000,000 shares vest 18 months from the date of the Sale Agreement. c. A lump sum of USD$150,000 on the signing of the Sale Agreement; d. A final payment of USD$100,000 on the 12 month anniversary of the signing of the Sale Agreement. Upon completion of the contemplated transaction, Peruvian Latin Resources will be the most significant shareholder of the Company, holding approximately 43% of the issued share capital on an undiluted basis. The objective of the sale was to secure tangible material value for shareholders upon completion of a transaction about the Ilo Copper projects. Latin expects to deliver consistent value to shareholders through its diversified portfolio of assets through joint ventures and to develop its projects inclusive of niche commodities in lithium and cobalt, as well as mainstream commodities in copper, at various stages of exploration. Subsequent to year end, the Sale Agreement was executed and the Company received the first instalment of USD$150,000. Pachamanca/MT-03 (Under Joint Venture – First Quantum Minerals earning 80%) Approvals and permits were obtained allowing First Quantum Minerals to perform an induced polarization/resistivity geophysical survey of the area. Initial results were impacted by nitrate layers within the overlying caliche sediments. However, sufficient data was obtained to identify preliminary drill targets. Completion of drill design continues for a diamond drilling program to be conducted once drill permits have been approved. Latin Resources Limited (ABN 81 131 405 144) 27 REVIEW OF OPERATIONS TECHNOLOGY License Option Agreement for Patented Lithium Extraction Technology in Argentina The company has secured the first option to acquire on an exclusive basis the license of the patented technology from the National University of UnCuyo (UnCuyo) in Mendoza Argentina for commercial use and exploitation in Argentina, Australia, China, Canada and the USA. UnCuyo through the Secretariat of Science, Technology and Postgraduate, the Secretariat of Institutional Development and the Foundation of the National University of UnCuyo, has identified, protected and promoted a now patented technology to be licensed which consists of the process of obtaining Lithium Carbonate from Lithium Aluminosilicates including spodumene. The UnCuyo researchers discovered and developed the Technology as an alternative to the current method of lithium extraction. During this process, the rock is crushed and, through chemical treatments, the lithium is recovered in the form of salts. The method is environmentally friendly, and without the environmental legacies of current procedures currently used for lithium carbonate production. The Technology was developed at the UnCuyo University using lithium spodumene samples from the San Luis province of Argentina meaning it will be reflective of the correct metallurgical samples for LRS projects. The Technology would, therefore, prove to be highly valuable to Latin if proven successful at a scalable size as Latin controls a large number of concessions that host lithium spodumene pegmatites in the San Luis province. Primero - High-Level Scoping Study Latin Resources has appointed Primero Consulting Engineers to carry out a high level scoping study for its lithium pegmatite projects in Argentina. The metallurgical test work will be carried out on material derived from drill core at the Maria Del Huerto project. The Company strategy is to run the scoping study in parallel with the drilling to determine a JORC resource in respect of its lithium projects in Argentina. The purpose of this work is to provide Latin Resources with an indicative CAPEX for a stand‐alone 1.2Mt process plant, based on benchmark data located in Argentina. Through its Corporate Social Responsibility (CSR), Environment and Safety Peruvian and Argentinian subsidiaries, Latin Resources Limited applies some of the most comprehensive and advanced policies in Corporate Social Responsibility in the Peruvian and Argentinian Exploration and Mining Sector and shareholders can be assured that these provide Latin with a definite competitive advantage over other explorers in the Peruvian and Argentinian socio-environmental context. Also the company strives to comply fully with international environmental and safety standards that are the basis for Peruvian and Argentinian legislation governing the Mining Industry. Safety is paramount in all Latin’s activities, and the Group has had an exemplary record to date with no lost time injuries of the Group’s employees on any Project. Competent person statements The mineral resources statement in this Annual Report is based on, and fairly represents, information and supporting documentation prepared by a competent person or persons. The mineral resources statement as a whole has been approved by Mr Kerry Griffin, who is a consultant of Latin Resources Limited. Mr Griffin consents to the inclusion of the mineral resources statement in the form and context in which it appears in the Annual Report. The information in this report that relates to Geological Data and Exploration Results is based on information compiled by Mr Kerry Griffin, who is a Member of the Australian Institute of Geoscientists. Mr Griffin has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Griffin is the Exploration and Development Manager of Latin Resources Limited and consents to the inclusion in this report of the matters based on his information, and information presented to him, in the form and context in which it appears. Latin Resources Limited (ABN 81 131 405 144) 28 DIRECTORS’ REPORT The directors present their report together with the financial statements of the Group consisting of Latin Resources Limited (Latin or the Company) and its subsidiaries (together the Group) for the year ended 31 December 2017. Directors The names and details of the Company’s directors in office during the financial period and until the date of this report are set out below. The directors were in office for this entire period unless otherwise stated. DAVID VILENSKY (Independent Non-Executive Chairman) Mr Vilensky is a practising corporate lawyer and the managing director of Perth law firm Bowen Buchbinder Vilensky. He has more than 30 years experience in the areas of corporate and business law and in commercial and corporate management. Mr Vilensky practises mainly in the area of mining and resources, corporate and commercial law, trade practices law, contract law and complex dispute resolution. Mr Vilensky acts for a number of listed and private companies and is also the non–executive chairman of Zambezi Resources Limited, an ASX listed company focusing on copper exploration in Zambia. Other directorships of Australian listed companies held by Mr Vilensky in the last three years are: Current: Zambezi Resources Limited CHRISTOPHER GALE (Managing Director) Mr Gale has extensive experience in senior management roles in both the public and private sectors, especially in commercial and financial roles. He has also held various board and executive roles at a number of mining and technology companies during his career. Chris is the current Chairman of the Council on Australian Latin American Relations (COALAR) established by the Australian Government Department of Foreign Affairs and Trade (DFAT). He is also a founding director of Allegra Capital, a boutique corporate advisory firm based in Perth and is a member of the Australian Institute of Company Directors (AICD). Other directorships of Australian listed companies held by Mr Gale in the last three years are: Nil BRENT JONES (Non-Executive Director) Mr. Jones is an experienced financial services professional who has held operating roles at Woolworths, AFL, Civil Engineers - Ostojic Group and the National Tax and Accountants’ Association prior to his current management position. Over the past 15 years, Mr. Jones has been the joint Managing Director of InterPrac Limited, an unlisted public company, specializing in providing the accounting industry access to financial services products and distribution capabilities. Mr. Jones has a degree in information technology, is a member of the National Tax and Accountants Association and is a Graduate of the Australian Institute of Company Directors (AICD). Other directorships of Australian listed companies held by Mr Jones in the last three years are: Nil Directors’ shares and share rights As at the date of this report, the interests of the Directors in the shares and options of Latin were as follows: Director David Vilensky Chris Gale Brent Jones Ordinary shares Number 10,913,122 9,345,028 41,966,653 Share rights Number 4,236,923 57,877,796 3,269,231 Share options Number - - - Company secretary SARAH SMITH Ms Smith holds a Bachelor of Business and is a Chartered Accountant with significant experience in the administration of ASX listed companies, as well as capital raisings and IPOs, due diligence reviews and ASIC compliance. Latin Resources Limited (ABN81 131 405 144) 29 DIRECTORS’ REPORT Principal activities The principal activities during the year of entities within the consolidated entity were the exploration and evaluation of mining projects in Peru and Argentina. Financial review RESULTS The consolidated loss after tax of the Group for the year ended 31 December 2017 was $2,381,967 (2016: $7,844,976). The result comprises the impairment of exploration and evaluation expenditure of $nil (2016: $4.9m), finance expenses of $0.9m (2016: $1.5m) and other income and expense items $1.5m (2016: $1.5m). ASSETS Total assets increased by 12% or $1.3 million during the year to $12.5 million. The movement primarily comprised an increase in exploration expenditure (net of currency loss) of $1.4m and a reduction in cash ($0.3 million). The carrying value of exploration and evaluation assets was affected by the transfer of $2.9 million for the value of Ilo copper assets to Current Assets held for sale. LIABILITIES Total liabilities marginally reduced by 2% or $0.2 million to $7.4 million during the year. The fall was mainly due to a reduction in interest bearing loans and borrowings ($0.4m) offset against the increase in deferred consideration for the Guadalupito project resulting from foreign exchange movements ($0.3m) and unwinding of interest. EQUITY Total equity increased by 40% or $1.5 million during the year to $5.2 million. The increase reflects the increases in Contributed equity of $4.4 million from placements partially offset by loss of $2.4 million for the year and a decrease in Reserves of $0.5 million from foreign currency translation movements of $0.8 million and increase in share based payments and transaction costs of $0.3million. SHAREHOLDER RETURNS The Company’s share price decreased marginally during the period however the market capitalisation of the company increased due to share and placement issues to fund the Company’s defined strategic direction in the area of lithium in line with its long term strategy of mineral exploration in South America. Shareholder returns for the last 5 years is as follows: Loss attributable to the Group ($) Basic loss per share (Cents) Dividends ($) Closing share price ($) Total shareholder return (%) December 2017** (2,381,967) (0.12) Nil 0.011 (8) December 2016** (7,844,976) (0.63) Nil 0.012 140 December 2015** (12,183,490) (2.41) Nil 0.005 (78) December 2014** (5,828,378) (2.17) Nil 0.023 (67) December 2013^* (1,093,216) (0.49) Nil 0.070 (13) * Denotes six months period ** Denotes twelve month period ^ The results have been restated to reflect a prior period adjustment Dividends No amounts have been paid or declared by way of a dividend since the end of the previous financial period and up until the date of this report. The Directors do not recommend the payment of any dividend for the financial year ended 31 December 2017. Latin Resources Limited (ABN 81 131 405 144) 30 DIRECTORS’ REPORT Liquidity and capital resources The Group’s principal source of liquidity as at 31 December 2017 is cash and cash equivalents of $995,492 (2016: $1,338,668). Funding for 2018 is expected from a combination of proceeds from the sale or joint venturing of interests in existing projects, further capital raisings and potential conversion of options. Shares, share rights and options As at 31 December 2017 the Company had 2,622,366,170 fully paid Shares on issue, 259,375,000 Share Options and 65,031,642 Share Rights on issue. SHARES A total of 1,044,968,072 shares were issued during the year. A breakdown of the shares issued is shown at Note 19 of the financial statements SHARE RIGHTS During the year no share rights were issued to directors or employees and 6,971,657 share rights were cancelled due to resignations and 6,095,832 share rights converted in accordance with the deferred rights plan approved by shareholders on 27 May 2014. OPTIONS During the year 250,000,000 options were issued and 14,054,768 were exercised. A total of 366,939,885 options expired in the period unexercised. Options totalling 125 million were issued to investors who participated in the placement announced in July 2017, and 125 million options were issued to brokers associated with the July 2017 placement. As at the date of this report there were 750,446,442 share options on issue. Option holders do not have the right, by virtue of the option, to vote or participate in any share issue of the Company or any related body corporate. Significant changes in the state of affairs There have been no significant changes in the state of affairs of the Group other than those listed above. Risk management The Board is responsible for identifying business risks and implementing actions to manage those risks and corporate systems to assure quality. The Board delegates these tasks to management who provide the Board with periodic reports identifying areas of potential risks and the safeguards in place to efficiently manage material business risks. Strategic and operational risks are reviewed at least annually as part of the forecasting and budgeting process. The Managing Director and Chief Financial Officer have provided assurance in writing to the Board that they believe that the Company’s material business risks are being managed effectively and that the Company’s financial reporting, risk management and associated compliance and controls have been assessed and are operating effectively so far as they relate to the financial report. Significant events after balance date Please refer to Note 27 for details of significant events after date. Latin Resources Limited (ABN 81 131 405 144) 31 DIRECTORS’ REPORT Likely developments and expected results In 2018 the Group intends to continue to progress its mineral projects in Argentina and Peru via JV arrangements or via the sale of its interests in the projects. The Group will also continue to look for other opportunities that will create value for its shareholders. Environmental regulation and performance The Group carries out exploration and evaluation activities at its operations in Peru and Argentina which are subject to environmental regulations. During the year there has been no significant breach of these regulations. Indemnification and insurance of directors and officers During the year insurance premiums were paid to insure the Directors and officers against certain liabilities arising out of their conduct while acting as a director or an officer of the Company. Under the terms and conditions of the insurance contract, the nature of the liabilities insured against and the premium paid cannot be disclosed. Directors’ meetings The number of meetings of directors (including meetings of committees of directors) held for the year ended 31 December 2017 and the number of meetings attended by each director is as follows: Director David Vilensky Chris Gale Brent Jones Committee membership Board meetings held Board meetings attended 8 8 8 8 8 8 During the year the Board did not set up separate Committees. The Board carried out the duties that would ordinarily be carried out by the Nomination, Remuneration and Audit and Risk Management Committees. Corporate governance statement The Company’s Corporate Governance statement is located on the Company’s website at www.latinresources.com. Diversity Latin strives to be an equal opportunity employer and we will not discriminate against prospective employees based on gender or any other non-skill related characteristic. We pride ourselves on the diversity of our staff and encourage suitably qualified young people, women, people from cultural minorities and people with disabilities to apply for positions. Whilst efforts will be made to identify suitably qualified female candidates and candidates from a diversity of backgrounds when seeking to fulfil positions, the Company does not believe it is meaningful, nor in the best interests of shareholders to set formal targets for the composition of employees based on gender or any other non-skill related characteristic nor detailed policies in this regard. The Board has established a policy regarding diversity and details of the policy are available on the Company’s website. Gender composition of the Group’s workforce for the 2017 year is as follows: Board Executive Group 31 December 2017 31 December 2016 Female - - 62% Male 100% 100% 38% Female - - 60% Male 100% 100% 40% Latin Resources Limited (ABN 81 131 405 144) 32 DIRECTORS’ REPORT Auditors’ independence declaration The auditors’ independence declaration is set out on page 46 and forms part of the Directors’ report for the year ended 31 December 2017. Non-audit services Non-audit services provided by the Group’s auditor Stantons International during the year ended 31 December 2017 is shown at Note 28 of the financial statements. The directors are satisfied that the provision of non-audit services, during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporation Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Remuneration report (Audited) This remuneration report for the year ended 31 December 2017 outlines the remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308(3C) of the Act. The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly and indirectly, including any director (whether executive or otherwise) of the parent company. For the purposes of this report, the term executive includes executive directors and other senior management of the Group. DIRECTOR AND SENIOR MANAGEMENT Non-executive directors David Vilensky Brent Jones Non-Executive Chairman Non-Executive Director Executive director Chris Gale Other Executives Sarah Smith Kerry Griffin Managing Director Company Secretary Exploration and Development Manager REMUNERATION GOVERNANCE Remuneration Committee The Board carries out the duties that would ordinarily be carried out by the Remuneration Committee under the Remuneration Committee Charter including the following processes to set the level and composition of remuneration for Directors and senior executives and ensuring that such remuneration is appropriate and not excessive. The Board approves the remuneration arrangements of the Managing Director and other executives and all awards made under incentive plans following recommendations from the Remuneration Committee. The Board also sets the remuneration of Non-executive directors, subject to the fee pool approved by shareholders. The Board approves, having regard to the recommendations of the Managing Director, the level of incentives to other personnel and contractors. Latin Resources Limited (ABN 81 131 405 144) 33 DIRECTORS’ REPORT The Board seeks external remuneration advice as and when required to ensure it is fully informed when making remuneration decisions. Remuneration advisors are engaged by and report directly to the Board. No consultants were used or paid by the Group during the year. NON-EXECUTIVE DIRECTOR REMUNERATION ARRANGEMENTS The Board seeks to set aggregate remuneration at a level that provides the Group with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The Constitution and the ASX listing rules specify that the aggregate remuneration of Non-executive directors shall be determined from time to time by a general meeting of shareholders. The current limit is $350,000 which remains unchanged from when the company first listed on the ASX. Non-executive directors are remunerated by way of fees based on-executive directors of comparable companies and scope and extent of the Company’s activities. Non-executive directors are also entitled to participate in the Non- executive director Deferred Rights plan which was approved by shareholders on 27 May 2014 but do not receive retirement benefits, nor do they participate in any incentive programs. No options or share rights were awarded to non-executive directors as remuneration during the year. Non-executive director Deferred rights plan The Non-executive director Deferred rights plan was approved by shareholders on 27 May 2014 for the purpose of retaining Non-executive directors, controlling the cash cost of directors fees and aligning the interests of Non-executive directors with shareholders and providing them with the opportunity to participate in the future growth of the Group. Under the plan the Group may offer share rights to Non–executive directors of the Company. Share rights issued under the Deferred rights plan comprise of retention rights being rights that vest and may be exercised into Restricted Shares, based on completion of a period of service. The Board in their absolute discretion determine the number of share rights to be offered and the criteria that may apply. Offers made under the Deferred rights plan must set out the number of share rights, the vesting conditions and the measurement period. The retention rights are issued for no consideration, however, the vesting of the benefits are conditional on achieving certain measurable performance measures. The performance measure used in 2014 was the completion of service for the year. Vesting of the share rights is measured over a three year interval after the commencement of the respective measurement period. At the end of the measurement period and subject to the performance measures, each share right will convert into one ordinary share in the Company. The Group is aware that the vesting of share rights is treated as income to executives and attracts tax in a similar manner to cash payments irrespective of the executive selling or retaining the resulting shares. The maximum percentage of base remuneration that a Non-executive director may receive in share rights is 100% which is pre-determined based on the advice of the remuneration consultant. Where a non-executive director or employee ceases employment prior to their incentives vesting due to resignation or termination for cause, incentives will be forfeited. Where a non-executive director or employee ceases employment for any other reason, they may at the Board’s discretion, retain a number of unvested share rights on a pro-rata basis to reflect their period of service during the measurement period. These unvested share rights only vest subject to meeting the relevant performance measures. The Board will not seek any increase in the aggregate remuneration for the Non-executive director pool at the 2018 AGM. Latin Resources Limited (ABN 81 131 405 144) 34 DIRECTORS’ REPORT EXECUTIVE REMUNERATION ARRANGEMENTS The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group that is competitive by market standards and aligns their interests with those of shareholders. Executive remuneration consists of fixed remuneration and variable remuneration comprising short term incentives and long term incentives. Fixed remuneration The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Remuneration Committee through a process that considers individual performance, Group performance and market conditions. Variable remuneration The Company established an Incentive Rights Plan (the Plan) that was re-approved by shareholders on 27 November 2015 and applies to full time and permanent part time employees and contractors. The Plan provides the Company with a range of incentives to attract, retain and align the interest of shareholders and employees and contractors. Short term incentives Short term incentives (STI) may include cash and shares and are awarded to executives based on the achievement of KPI’s. Given the current stage of the Company’s evolution and the market conditions for mineral exploration and development companies, no STI targets were established at the start of the reporting period, and hence no STI’s were issued for the year ended 31 December 2017. Long term incentives Long term incentives (LTI) are considered annually by the Remuneration Committee to align remuneration with the creation of shareholder value over the long term. LTI’s can include:    cash; retention rights being rights that vest and may be exercised into Restricted Shares, based on completion of a period of service and comprise no more than third of the LTI value; and performance rights, being rights that vest and may be exercised into Restricted Shares, based on achievement of specified performance objectives and comprise no more than two thirds of the LTI value. The retention and performance rights are issued for no consideration, however, the vesting of the benefits are conditional on achieving specific measurable performance measures that are aligned with the Group’s strategic objectives. The following performance measures were used in 2017, in equal weighting:   Completion of service for the year; and Shareholder returns (Total shareholder return of 15% per annum or greater). Vesting of the LTI is measured over a three year interval after the commencement of the respective measurement period. At the end of the measurement period and subject to the performance measures, each share right will convert into one ordinary share in the Company. The Group is aware that the vesting of share rights is treated as income to executives and attracts tax in a similar manner to cash payments irrespective of the executive selling or retaining the resulting shares. The maximum percentage of base remuneration that an executive may receive as a LTI is pre-determined based on the advice of the remuneration consultant. The maximum percentage of base remuneration that the Managing Director can receive is 60% and for other executives it is 45%. Where a director or employee ceases employment prior to their incentives vesting due to resignation or termination for cause, incentives will be forfeited. Where a director or employee ceases employment for any other reason, they may at the Board’s discretion, retain a number of unvested share rights on a pro-rata basis to reflect their period of service during the LTI grant performance period. These unvested share rights only vest subject to meeting the relevant LTI performance measures. Latin Resources Limited (ABN 81 131 405 144) 35 DIRECTORS’ REPORT Employment agreements and contracts The Group has entered into contracts and agreements with executives the details of which are provided below. Non Executive Directors The Chairman and Non Executive Directors are elected to the Board by shareholders on rotation. The pool of directors’ remuneration, including cash payments for directors’ fees and share based incentive remuneration, is approved by shareholders in Annual Meeting. In accordance with the total directors’ fees approved by shareholders, the Board has agreed the following directors’ fees to be paid: - Chairman - $64,800 per annum - Non Executive directors - $50,000 per annum. No committee fees are paid. Managing Director The Managing Director is currently employed under a consultancy agreement for a three year term ending on 30 September 2019 which can be extended by mutual consent. Mr Gale is paid a fixed remuneration of A$300,000 per annum with an uplift in remuneration in the event of an increase in the market capitalisation of the Company. The Group may terminate the agreement with or without cause by giving one month and six months’ notice respectively. The Managing director may terminate the agreement with or without cause by giving 21 days and three months’ notice respectively. If the agreement is terminated without cause or due to a change of control the Managing Director is entitled to a payment equivalent to fees for one year, the value of any annual fringe benefits and any vested entitlement under a LTI plan. The Group retains the right to terminate the agreement immediately by making a payment in lieu of notice for termination by either party without cause. Exploration and Development Manager The Exploration and Development Manager is employed under a consultancy agreement with a fee of USD$1,000 per day for a six month term ending on 1 August 2019 which can be extended by mutual agreement. Company Secretary The Company Secretary is employed under a consultancy agreement which is ongoing. Either party may terminate the agreement by giving 60 days written notice. The monthly retainer fee for the Company Secretary is $3,000 per month plus GST with additional fees charged for shareholder meetings and corporate actions. Chief Financial Officer (CFO) The CFO services are supplied by a third party consultancy group under a consultancy agreement which is ongoing. Either party may terminate the agreement by giving 1 months’ notice. The CFO services are supplied at the rate of $1,600 per day plus GST on an as needs basis and a minimum of 1 day per week. Prohibition on trading The Remuneration policy prohibits directors and employees that are granted shares as a result of share rights from entering into arrangements that limit their exposure to losses that would result from share price decreases. The policy also requires directors, and employees to seek approval from the Company prior to that individual buying or selling any company securities. Directors and employees are not permitted to trade during a closed period. Procedures are in place where trading during a closed period is sought in exceptional circumstances. Latin Resources Limited (ABN 81 131 405 144) 36 DIRECTORS’ REPORT REMUNERATION OF KEY MANAGEMENT PERSONNEL AND EXECUTIVES FOR THE YEAR ENDED 31 DECEMBER 2017 Short-term benefits Post employment Other long- term benefits Share-based payments Total Performance related Equity compensation 12 months to 31 Dec 2017 Salary & Fees Bonus Non-cash benefits $ $ $ Super $ Long service leave Share rights Shares $ $ $ $ % % Directors D. Vilensky C. Gale B. Jones Other KMP 64,800 15,000 312,500 15,000 50,000 15,000 S. Smith J. Grygorcewicz2 K. Griffin 47,070 89,850 324,363 - - - Total 888,583 45,000 - - - - - - - - - - - - - - - - - - - - - - 164,5571 - - - - 164,557 - - - - - - - 79,800 492,057 65,000 47,070 89,850 324,363 19% 22% 23% - - - - 33% - - - - 1,098,140 11% 15% 1 These amounts refer to share rights issued in accordance with the Incentive rights plan approved by shareholders on 30 November 2014. Out of the total of $164,557, a portion of $41,140 was expensed during the year with the balance being capitalised. 2 Mr Grygorcewicz joined the Company on 21 February 2017. Latin Resources Limited (ABN 81 131 405 144) 37 DIRECTORS’ REPORT REMUNERATION OF KEY MANAGEMENT PERSONNEL AND EXECUTIVES FOR THE YEAR ENDED 31 DECEMBER 2016 12 months to 31 Dec 2016 Directors D. Vilensky C. Gale B. Jones Other KMP A. Begovich4 A. Bristow5 C. Spier6 S. Smith7 K. Griffin8 Total Short-term benefits Post employment Salary & Fees $ Bonus $ Non-cash benefits $ Super Other $ $ Other long-term benefits Long service leave $ 64,800 403,20010 52,361³ 66,294 72,932 11,355 22,400 22,866 716,208 - - - - - - - - - - - - - - - - - - - - - 7,075 - 1,079 - - 8,154 - - - - - - - - - - - - - - - - - - Share-based payments Total Performance related Equity compensation Share rights $ 58,6821 124,6602 - 10,7671 30,0931 14,3591 - - 238,561 Shares $ $ % % - - - 123,482 527,860 52,361 4,2689 - - - - 4,268 88,404 103,025 26,793 22,400 22,866 967,191 - 16 - - - - - - 9% 48 24 - 17 29 54 - - 25% 1 These amounts refer to share rights issued in accordance with the Deferred rights plan issued in April 2014 as approved by shareholders on 27 May 2014. 2 These amounts refer to share rights issued in accordance with the Incentive rights plan approved by shareholders on 30 November 2014. 3 This amount includes shares issued to directors in settlement of director fees payable. No value has been attributable to the listed options issued at the same time. 4 Mr Begovich resigned 31 May 2016. 5 Mr Bristow resigned in December 2016. 6 Mr Spier resigned on 4 April 2016. 7 Ms Smith joined the Company on 31 May 2016. 8 Mr Griffin joined the Company on 16 November 2016. 9 These amounts refer to shares issued to KMP to reward employees for services to the Company. 10 Included in this amount is $66,000 relating to arrears of consulting fees for the 2015 year paid in the current year. Latin Resources Limited (ABN 81 131 405 144) 38 DIRECTORS’ REPORT ADDITIONAL DISCLOSURES RELATING TO REMUNERATION (a) Share holdings of key management personnel 31 Dec 2017 Directors D. Vilensky C. Gale B. Jones Other KMP S. Smith J. Grygorcewicz1 K. Griffin Balance at start of year Granted as remuneration On exercise of options/conversion of rights Net change other Balance at end of year 6,589,479 9,367,615 41,466,653 - - - 57,423,747 - - - - - - - 4,323,4632 977,4132 - 180 (1,000,000) 500,000 10,913,122 9,345,028 41,966,653 - - - 5,300,876 - 1,000,000 - 500,180 - 1,000,000 - 63,224,803 1 Mr Grygorcewicz joined the Company on 21 February 2017. 2 The shares were issued for rights approved and issued in prior years. Share rights are converted according to the calculation criteria as per the Share Rights Plan as approved by shareholders on 27 May 2014. 31 Dec 2016 D. Vilensky C. Gale B. Jones Other KMP A. Begovich A. Bristow C. Spier S. Smith K. Griffin Balance at start of year 6,589,479 19,367,615 32,587,343 Granted as remuneration - - 3,906,2342 On exercise of options - - - Net change other - (10,000,000) 4,973,076 Balance at end of year 6,589,479 9,367,615 41,466,653 8,330,340 2,033,854 4,156,868 - - 73,065,499 355,7083 - - - - 4,261,942 - - - - - - (8,686,048)1 (2,033,854) 1 (4,156,868) 1 - - (19,903,694) - - - - - 57,423,747 1 This represents KMP entitlements to share rights in the Company up until their resignation. 2 The value of these shares at the date of issue was $25,000. 3 The value of these shares at the date of issue was $4,268. (b) Share right holdings of key management personnel 31 Dec 2017 Directors D. Vilensky C. Gale B. Jones Other KMP S. Smith J. Grygorcewicz K. Griffin Balance at start of year Granted as remuneration Converted to Shares Net change other Balance at end of year 4,414,552 58,099,964 - - - - 62,514,516 - - - - - - - (4,414,552)1 (1,068,322)1 - - - - (5,482,874) - - - - - - - - 57,031,642 - - - - 57,031,642 1 Share rights were converted according to the calculation criteria as per the Share Rights Plan as approved by shareholders on 27 May 2014. Latin Resources Limited (ABN 81 131 405 144) 39 DIRECTORS’ REPORT 31 Dec 2016 D. Vilensky C. Gale B. Jones Other KMP A. Begovich A. Bristow C. Spier S. Smith K. Griffin Balance at start of year 4,414,552 5,406,355 - Granted as remuneration2 - 60,693,609⁴ - Converted to Shares - - - Net change other - (8,000,000)¹ - Balance at end of year 4,414,552 58,099,964 - 2,237,350 3,101,937 2,964,402 - - 18,124,596 - - - - - 60,693,609 - - - - - - (2,237,350)³ (3,101,937)³ (2,964,402)³ - - (16,303,689) - - - - - 62,514,516 1 This relates to the transfer of 8 million incentive rights to an unrelated third party. 2 The performance share rights issued in April 2014 as approved by shareholders on 27 May 2014 continued to be expensed in the current year. No rights were granted in the current year. ³ This represents KMP entitlements to share rights in the Company up until their resignation. ⁴ The total value of these share rights is $493,673 which will be expensed over the vesting period. (c) Vesting profile of share rights granted to key management personnel Number Grant date Vested in year (%) Net change other (%) Date at which share rights are to be vested Directors D. Vilensky C. Gale – Retention rights C. Gale – Performance rights1 B. Jones - 8,005,323 49,026,319 - - 31/10/2016 31/10/2016 - Other KMP S. Smith J. Grygorcewicz K. Griffin - - - - - - - 67% - - - - - - - - - - - - - 31/12/2018 31/1/2019 - - - - 1 Performance rights are subject to the vesting conditions being satisfied after the Measurement Period of 3 years commencing 1 January 2016. (d) Option holdings of key management personnel The number of options held by directors and other key management personnel both directly and indirectly are set out below. Balance at start of year Granted as remuneration Exercised Net change other Balance at end of year Vested exercisable Vested not exercisable 31 Dec 2017 Directors D. Vilensky C. Gale B. Jones Other KMP S. Smith J. Grygorcewicz K. Griffin 1,502,370 2,926,073 1,562,494 - - - 5,990,937 - - - - - - - - - - - - - - (1,502,370)1 (2,926,073)1 (1,562,494)2 - - - (5,990,937) - - - - - - - 1 Options expired during the period unexercised. The options were initially granted on 7 August 2015. 2 Options expired during the period unexercised. The options were initially granted on 26 February 2016. Latin Resources Limited (ABN 81 131 405 144) - - - - - - - - - - - - - - 40 DIRECTORS’ REPORT 31 Dec 2016 Directors D. Vilensky C. Gale B. Jones Other KMP A. Begovich A. Bristow C. Spier S. Smith K. Griffin Balance at start of year Granted as remuneration Exercised Net change other Balance at end of year Vested exercisable Vested not exercisable 1,502,370 2,926,073 4,125,000 - - 1,562,494¹ - - - - - (4,125,000) 1,502,370 2,926,073 1,562,494 1,502,370 2,926,073 1,562,494 1,416,062 1,226,322 1,364,515 - - 12,560,342 - - - - - 1,562,494 - (1,416,062)² - (1,226,322)² - (1,364,515)² - - - - - (8,131,899) - - - - - 5,990,937 - - - - - 5,990,937 - - - - - - - - - 1 Listed options issued to B. Jones during the year. No value has been assigned to them as it was immaterial in nature. ² This represents KMP entitlements to options in the Company up until their resignation. (e) Loans to key management personnel During the period the Company advanced a total of $50,000 to Bowen Buchbinder Vilensky, a firm related to Mr Vilensky. The short term advance was for a period of 4 months at commercial terms attracting an interest rate of 10% per annum and secured by personal guarantee. The advance was fully repaid during the period, including interest accruing to the advance. (f) Other transactions with key management personnel Refer Note 23 for details of other transactions with directors. There were no other transactions with other key management personnel during the current or prior year. This Report is signed in accordance with a resolution of the Board of Directors. ------------------------------------------ David Vilensky Chairman Signed on 29 March 2018 Latin Resources Limited (ABN 81 131 405 144) 41 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the twelve months ended 31 December 2017 Interest revenue Other income Gain from settlement of liabilities Depreciation and amortisation expense Employee benefits expense Finance expenses Exploration and evaluation expenditure Profit/(Loss) on fair value of financial assets through profit or loss Other expenses Loss before tax Income tax benefit Loss for the year Notes 31 Dec 2017 $ 31 Dec 2016 $ 5 13 6(a) 6(b) 14 6(c) 7 4,550 116,945 - (18,526) (490,704) (882,727) - 264,500 (1,376,005) (2,381,967) 49,515 345,843 85,560 (28,480) (803,711) (1,493,387) (4,861,649) (50,000) (1,088,667) (7,844,976) - - (2,381,967) (7,844,976) Loss attributable to owners of the Parent Company (2,381,967) (7,844,976) Other comprehensive income Items that cannot be reclassified to profit or loss in subsequent periods: Items that may be reclassified to profit or loss in subsequent periods: Exchange differences on translating foreign operations - - (822,997) 441,165 Total comprehensive loss for the year attributable to owners of the Parent Company (3,204,964) (7,403,811) Basic and diluted loss per share (Cents) 8 (0.12) (0.63) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Latin Resources Limited (ABN 81 131 405 144) 42 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2017 ASSETS Current assets Cash and cash equivalents Trade and other receivables Assets held for sale Other financial assets Total current assets Non-current assets Trade and other receivables Plant and equipment Exploration and evaluation assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Interest bearing loans and borrowings Deferred consideration Provisions Total current liabilities Non-current liabilities Deferred consideration Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Accumulated losses Total equity Notes 31 Dec 2017 $ 31 Dec 2016 $ 9(a) 10(a) 11 12 10(b) 13 14 15 16 17(a) 18 17(b) 995,492 141,193 2,898,233 348,610 4,383,528 1,338,668 152,275 - 177,481 1,668,424 1,700,263 65,541 6,368,500 8,134,304 12,517,832 1,603,327 76,827 7,842,533 9,522,687 11,191,111 855,801 65,000 22,000 45,885 988,686 917,433 500,000 9,222 42,995 1,469,650 6,364,308 6,364,308 7,352,994 5,164,838 6,036,695 6,036,695 7,506,345 3,684,766 19 20 21 46,437,382 7,557,481 (48,830,025) 5,164,838 42,041,903 8,090,921 (46,448,058) 3,684,766 The above consolidated statement of financial position should be read in conjunction with accompanying notes Latin Resources Limited (ABN 81 131 405 144) 43 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the twelve months ended 31 December 2017 Contributed equity Share based payment reserve $ $ Foreign currency translation reserve $ Accumulated losses Total $ $ Balance at 1 January 2016 36,202,047 2,247,712 5,117,180 (38,603,082) 4,963,857 Loss for the year Other comprehensive income Total comprehensive loss Issue of shares Share based payments Exercise of options Transaction costs Balance at 31 December 2016 Loss for the year Other comprehensive loss Total comprehensive loss Issue of shares Share based payments Transaction costs Balance at 31 December 2017 - - - 6,450,612 - - (610,756) 42,041,903 - - - 4,874,890 - (479,411) 46,437,382 - - - - - 441,165 441,165 - 284,864 - - 2,532,576 - - - 5,558,345 - - - - 164,557 125,000 2,822,133 - (822,997) (822,997) - - - 4,735,348 (7,844,976) - (7,844,976) - - - - (46,448,058) (2,381,967) - (2,381,967) - - - (48,830,025) (7,844,976) 441,165 (7,403,811) 6,450,612 284,864 - (610,756) 3,684,766 (2,381,967) (822,997) (3,204,964) 4,874,890 164,557 (354,411) 5,164,838 The above consolidated statement of changes in equity should be read in conjunction with accompanying notes. Latin Resources Limited (ABN 81 131 405 144) 44 CONSOLIDATED STATEMENT OF CASH FLOWS For the twelve months ended 31 December 2017 Cash flows from operating activities Receipts from other income Payments to suppliers and employees Interest received Interest paid R&D refund (net of fees) Net cash flows used in operating activities Cash Flows from investing activities Payments for plant and equipment Proceeds from plant and equipment Proceeds from sale of investments Purchase of equity investments in listed entities Payments for exploration and evaluation assets Proceeds from security deposits Net cash flows used in investing activities Cash flows from financing activities Proceeds from the issue of equity Transaction costs of issuing shares Proceeds from borrowing Repayment of borrowings Net cash from financing activities Notes 31 Dec 2017 $ 31 Dec 2016 $ 9(b) 27,926 (1,976,425) 4,548 (30,000) - (1,973,951) (12,929) - 208,372 - (2,623,514) 2,629 (2,425,442) 4,849,738 (354,411) - (435,000) 4,060,327 (339,066) 1,338,668 (4,110) 995,492 296,884 (1,762,879) 49,515 (7,096) 761,357 (662,219) - 17,886 - (200,000) (1,788,401) 603 (1,969,912) 4,830,128 (295,756) - (595,793) 3,938,579 1,306,448 32,076 144 1,338,668 Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Net foreign exchange difference Cash and cash equivalents at the end of the year 9(a) The above consolidated statement of cash flows should be read on conjunction with accompanying notes. Latin Resources Limited (ABN 81 131 405 144) 45 NOTES TO THE FINANCIAL STATEMENTS 1. Corporate information The consolidated financial statements of the Group, being Latin Resources Limited (the Company or Parent) and its subsidiaries (collectively, the Group), for the year ended 31 December 2017 were authorised for issue in accordance with a resolution of the directors on 29 March 2018. Latin Resources Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the directors’ report. Information on the Group’s structure and other related party relationships is provided in Note 23. 2. Summary of significant accounting policies (a) BASIS OF PREPARATION The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis except for certain financial instruments which are fair value. The financial report is presented in Australian dollars and all values are rounded to the nearest dollar unless otherwise stated. (b) COMPLIANCE WITH IFRS The financial report also complies with International Financial reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board. (c) CHANGE IN ACCOUNTING POLICY AND DISCLOSURES. The accounting policies adopted are consistent with those of the previous financial year except as noted below. (d) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS Application of new and revised Accounting Standards The Group has considered the implications of new and amended Accounting Standards applicable for the annual reporting periods beginning after 1 January 2017 but determined that their application to the financial statements is either not relevant or not material. A number of new standards, amendments to standards and interpretations issued by the AASB which are not yet mandatorily applicable to the Group have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early. Standards and Interpretations issued but not yet adopted:  AASB 9 Financial Instruments and associated Amending Standards (applicable for annual reporting period commencing 1 January 2018) The Standard will be applicable retrospectively (subject to the comment on hedge accounting below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting. Key changes made to this standard that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Although the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments it is impractical at this stage to provide a reasonable estimate of such impact. Latin Resources Limited (ABN 81 131 405 144) 46 NOTES TO THE FINANCIAL STATEMENTS  AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods commencing on or after 1 January 2018). When effective, this Standard will replace the current accounting requirements applicable to revenue with a single, principles-based model. Except for a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges between entities in the same line of business to facilitate sales to customers and potential customers. The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the following five-step process: - - - - - identify the contract(s) with a customer; identify the performance obligations in the contract(s); determine the transaction price; allocate the transaction price to the performance obligations in the contract(s); and recognise revenue when (or as) the performance obligations are satisfied. This Standard will require retrospective restatement, as well as enhanced disclosures regarding revenue. Although the directors anticipate that the adoption of AASB 15 may have an impact on the Group's financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact  AASB 16: Leases This Standard supersedes AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, IC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a lease. The new standard will be effective for annual periods beginning on or after 1 January 2019. Early application is permitted, provided the new revenue standard, AASB 15 Revenue from Contracts with Customers, has been applied, or is applied at the same date as AASB 16 The key features of AASB 16 are as follows: Lessee accounting - - - - Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. AASB 16 contains disclosure requirements for lessees. Lessor accounting - - AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk.  AASB 2014-10: Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (applicable to annual reporting periods commencing on or after 1 January 2018). This Standard amends AASB 10: Consolidated Financial Statements with regards to a parent losing control over a subsidiary that is not a “business” as defined in AASB 3: Business Combinations to an associate or joint venture and requires that: - - a gain or loss (including any amounts in other comprehensive income (OCI) be recognised only to the extent of the unrelated investor’s interest in that associate or joint venture; the remaining gain or loss be eliminated against the carrying amount of the investment in that associate or joint venture; and Latin Resources Limited (ABN 81 131 405 144) 47 NOTES TO THE FINANCIAL STATEMENTS - any gain or loss from remeasuring the remaining investment in the former subsidiary at fair value also be recognised only to the extent of the unrelated investor’s interest in the associate or joint venture. The remaining gain or loss should be eliminated against the carrying amount of the remaining investment. The Company is still reviewing the impact the adoption of AASB 2014-10 may have on the Group's financial statements.  Other standards not yet applicable There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. (e) BASIS OF CONSOLIDATION The consolidated financial statements comprise the financial statements of Latin Resources Limited and its subsidiaries as at the end of each reporting period. Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. Information regarding subsidiaries is disclosed in Note 23(d). The financial statements of subsidiaries are prepared for the same reporting period as the Parent company, using consistent accounting policies or adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profits and losses resulting from inter-group transactions, have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values. The difference between the above items and the fair value of the consideration (including the fair value of any pre- existing investment in the acquiree) is goodwill or a discount on acquisition. (f) COMPARATIVE INFORMATION Certain comparative information in the financial report may have been reclassified to aid comparability with the current year. (g) GOING CONCERN The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. For the year ended 31 December 2017 the consolidated entity incurred a loss of $2,381,967 (2016: $7,844,976), had net cash outflows from operating and investing activities of $4,424,544 (2016: $2,632,131) and had net working capital surplus of $496,609 (excludes assets held for sale) as at 31 December 2017 (2016: surplus $198,774). These conditions indicate a material uncertainty that may cast significant doubt about the company and the consolidated entity’s ability to continue as a going concern. At the date of this report, the directors are satisfied there are reasonable grounds to believe that the Group will be able to continue its planned operations and the Group will be able to meet its obligations as and when they fall due because the directors are confident that the Group will be able to realise certain of its assets or seek alternative sources of funding if required. Should the Group not achieve the matters set out above, there is uncertainty whether the Group would continue as a going concern and therefore whether it would realise its assets and extinguish its Latin Resources Limited (ABN 81 131 405 144) 48 NOTES TO THE FINANCIAL STATEMENTS liabilities in the normal course of business and at the amounts stated in the financial report. The consolidated financial statements do not include any adjustment relating to the recoverability or classification of recorded asset amounts or to the amounts or classification of liabilities that might be necessary should the Group not be able to continue as a going concern. (h) SEGMENT REPORTING An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Operating segments have been identified based on the information provided to the chief operating decision makers being the Board. Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements. The Group determines and presents operating segments based on the information internally provided to the Board. (i) REVENUE Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties. The following specific recognition criteria must also be met before revenue is recognised: Interest income Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset. (j) CURRENT VERSUS NON-CURRENT CLASSIFICATION The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:     Expected to be realized or intended to be sold or consumed in normal operating cycle; Held primarily for the purpose of trading; Expected to be realized within twelve months after the reporting period; or Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when:     It is expected to be settled in a normal operating cycle; It is held primarily for the purpose of trading; It is due to be settled within twelve months after the reporting period; or There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. Latin Resources Limited (ABN 81 131 405 144) 49 NOTES TO THE FINANCIAL STATEMENTS The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. (k) INCOME TAX Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities related to the same taxable entity and the same taxation authority. (l) GOODS AND SERVICES TAX Revenues, expenses and assets are recognised net of the amount of GST except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included. • Latin Resources Limited (ABN 81 131 405 144) 50 NOTES TO THE FINANCIAL STATEMENTS The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (m) LEASES Leases in which a significant portion of the risks and rewards of ownership benefits are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to Profit or Loss on a straight lined basis over the life of the lease. (n) BORROWING COSTS Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other bowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. (o) EARNINGS PER SHARE Basic earnings per share Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (p) CASH AND CASH EQUIVALENTS Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities in the Statement of Financial Position. (q) FINANCIAL ASSETS Shares held for trading have been classified as financial assets at fair value through profit or loss. Financial assets held for trading purposes are stated at fair value, with any resultant gain or loss recognised in profit or loss. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. Assets in this category are classified as current assets if they are expected to be realised within 12 months otherwise they are classified as non-current assets. (r) PROPERTY, PLANT & EQUIPMENT Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: Plant and equipment - over 3 to 5 years; and   Motor Vehicles - over 8 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period the item is derecognised. Latin Resources Limited (ABN 81 131 405 144) 51 NOTES TO THE FINANCIAL STATEMENTS (s) EXPLORATION AND EVALUATION EXPENDITURE Expenditure on exploration and evaluation expenditure is accounted for in accordance with the ‘area of interest’ method. Exploration and evaluation expenditure is capitalised provided the rights to tenure of the area of interest is current and either:   the exploration and evaluation activities are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; or exploration and evaluation activities in the area of interest have not, at the reporting date, reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or relating to, the area of interest are continuing. When technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then any capitalised exploration and evaluation expenditure is reclassified as capitalised ‘Mine properties in development’. Prior to reclassification, capitalised exploration and evaluation expenditure is assessed for impairment. The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the cash generating unit level whenever facts and circumstances suggest that the carrying value of the asset may exceed its recoverable amount. An impairment exists when the carrying amount of an asset or cash generating unit exceeds its estimated recoverable amount. The asset or cash generating unit is then written down to its recoverable amount. Any impairment losses are recognised in the statement of profit or loss and other comprehensive income. Refer Note 3 for details regarding the impairment charge for the reporting period. (t) TRADE AND OTHER PAYABLES Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. (u) DEFERRED CONSIDERATION Deferred consideration arises when settlement of all or any part of the cost of an exploration and evaluation properties is deferred. It is stated at fair value at the date of acquisition, which is determined by discounting the amount due to present value at that date. Interest is imputed on the fair value of non-interest bearing deferred consideration at the discount rate and capitalised as part of exploration and evaluation properties. At each balance sheet date deferred consideration comprises the remaining deferred consideration valued at acquisition plus interest imputed on such amounts from acquisition to the balance sheet date. (v) PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. Provisions are measured at the present value of managements best estimate of the expenditure required to settle the present obligation at the balance sheet date. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. Latin Resources Limited (ABN 81 131 405 144) 52 NOTES TO THE FINANCIAL STATEMENTS (w) INTEREST BEARING LOANS AND BORROWINGS Interest bearing loans are recognised initially at fair value, net of transaction costs incurred on the date at which the Group becomes a party to the contractual obligations of the instrument. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest rate method. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. (x) EMPLOYEE BENEFITS Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. Long service leave and other employment entitlements The liability for long service leave and other employment entitlements is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. (y) FOREIGN CURRENCY TRANSLATION Functional and presentation currency The consolidated financial statements are presented in Australian dollars, which is Latin Resources Limited’s functional and presentation currency. Each entity in the Group determines its own functional currency based on the primary economic environment and items included in the financial statements of each entity are measured using that functional currency. Transactions and balances Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency at the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at a rate of exchange ruling at the reporting date. All exchange differences in the consolidated financial statements are taken to the profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the profit or loss. On disposal of a foreign operation, the cumulative amount recognised in equity relating to that particular foreign operation is recognised in the profit or loss. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Group companies The functional currency of Peruvian Latin Resources SAC, Minera Dylan SAC, Recursos Latinos S.A. and Mineracao Ferro Nordeste Ltda is United States dollars. The functional currency of these subsidiaries has been translated into Australian dollars for presentation purposes. The assets and liabilities of this subsidiary are translated using the exchange rates prevailing at the reporting date; revenues and expenses are translated using average exchange rates for the period; and equity transactions eliminated on consolidation are translated at exchange rates prevailing at the dates of transactions. The resulting difference from translation is recognised in a foreign currency translation reserve through other comprehensive income. Latin Resources Limited (ABN 81 131 405 144) 53 NOTES TO THE FINANCIAL STATEMENTS (z) SHARE-BASED PAYMENT TRANSACTIONS Equity-settled share-based payments are measured at the fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the Statement of comprehensive income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves. Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date. (aa) FAIR VALUE OF ASSETS AND LIABILITIES The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:   In the principal market for the asset or liability; or In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:    Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities; Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; or Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Latin Resources Limited (ABN 81 131 405 144) 54 NOTES TO THE FINANCIAL STATEMENTS For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS In the process of applying the Group’s accounting policies management makes judgements. In addition the carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Determination of mineral resources and ore reserves The Group reports its mineral resources and ore reserves in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2004 Edition (the JORC code) as a minimum standard. The information on mineral resources and ore reserves were prepared by or under the supervision of Competent Persons as defined in the JORC code. There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in reserves or resources being restated. Impairment of Exploration and evaluation assets The Group accounts for Exploration and evaluation assets in accordance with its policy (refer Note 1(s)). An impairment exists when the carrying amount of an asset or cash generating unit exceeds its estimated recoverable amount. The asset or cash generating unit is then written down to its recoverable amount. Any impairment losses are recognised in the statement of profit or loss and other comprehensive income. The Group’s projects are considered to not be at the stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. The future recoverability of Exploration and evaluation assets is dependent on a number of factors, including whether the Group decides to exploit the related concession itself or, if not, whether it can successfully recover the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. To the extent that capitalised Exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made. As at 31 December 2017 the Group recorded an impairment charge of $nil (2016: $4.9 million) (refer Note 14) to reflect concessions that management relinquished during 2016. No concessions were relinquished during 2017 and no impairment charge was made. Share-based payment transactions The Group measures the cost of equity-settled and cash-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model and the assumptions and carrying amount at the reporting date. Deferred income tax benefit from carried forward tax losses The future recoverability of the carried forward tax losses are dependent upon Group’s ability to generate taxable profits in the future in the same tax jurisdiction in which the losses arise. This is also subject to determinations and assessments made by the taxation authorities. The recognition of a deferred tax asset on carried forward tax losses (in excess of taxable temporary differences) is dependent on management’s assessment of these two factors. The ultimate recoupment and the benefit of these tax losses could differ materially from management’s assessment. Latin Resources Limited (ABN 81 131 405 144) 55 NOTES TO THE FINANCIAL STATEMENTS 4. OPERATING SEGMENT INFORMATION The Group has identified its operating segments in accordance with its accounting policy as set out in Note 2(h) and based on the internal reports that are reviewed and used by the Board (chief operating decision maker) in assessing performance and in determining the allocation of resources. The Group’s four operating segments are Australia, Brazil, Peru and Argentina. The following is an analysis of the Group’s revenues, results, assets, liabilities by reportable operating segment. 2017 Revenue Interest revenue Other income1 Total revenue Australia $ 4,550 354,006 358,556 Peru $ Argentina $ Brazil $ - 27,439 27,439 - - - 1 Includes the fair value gain of $264,500 on financial assets through profit or loss Results Depreciation & amortisation expense Share based payments Interest expense Unwinding of interest Net foreign exchange gain (16,501) - (2,343) (821,314) - (2,025) (41,140) (45,588) - (23,352) - - (1,567) - - Segment loss (1,060,774) (973,586) (347,607) Total $ 4,550 381,445 385,995 (18,526) (41,140) (49,498) (821,314) (23,352) (2,381,967) - - - - - - - - - Segment assets Segment liabilities 2,213,640 7,168,759 3,103,949 31,484 12,517,832 (198,211) (7,082,203) (27,075) (45,505) (7,352,994) Additions to non-current assets Plant & equipment Exploration & evaluation assets Total additions to non-current assets 2016 Revenue Interest revenue Gain from settlement of liabilities Other income Total revenue Results Depreciation & amortisation expense Share based payments Interest expense Unwinding of interest Net foreign exchange gain - - - 12,929 452,841 465,770 - 2,170,673 2,170,673 - - - 12,929 2,623,514 2,636,443 Australia Peru Argentina Brazil Total 49,140 85,560 13,660 148,360 375 - 332,183 332,558 (13,903) (14,577) (190,910) (115,528) - 5,062 - (5,518) (894,892) 32,921 - - - - - - - - (7,485) - - - - - - - - - 49,515 85,560 345,843 480,918 (28,480) (190,910) (121,046) (894,892) 30,498 Segment loss Segment assets (2,044,449) (5,707,945) (88,362) (4,220) (7,844,976) 3,159,558 8,052,480 (55,000) 34,073 11,191,111 Segment liabilities (627,871) (6,805,956) (23,268) (49,250) (7,506,345) Additions to non-current assets Plant & equipment Exploration & evaluation assets Total additions to non-current assets Latin Resources Limited (ABN 81 131 405 144) - - - - 654,651 654,651 - 610,869 610,869 - - - - 1,265,520 1,265,520 56 NOTES TO THE FINANCIAL STATEMENTS Segment loss represents the loss incurred by each segment without allocation of corporate overhead costs. This is the information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. 5. OTHER INCOME Sundry income¹ Profit on sale of shares Net foreign exchange gain 2017 $ 27,926 112,371 (23,352) 116,945 ¹ Sundry income includes debt condonation and penalties relating to the resolution of a contract in Peru. 6. EXPENSES (a) Employee benefits expense Employee benefits and Director Fees Share based payments (refer note 22) 1 Out of share based payments of $164,557, a portion of $41,140 was expensed during the year with balance being capitalised. (b) Finance expenses Bank fees and charges Interest expense Unwinding of the effective interest rate1 Other finance charges2 2017 $ 449,564 41,1401 490,704 2017 $ 8,490 49,498 821,314 3,425 882,727 2016 $ 296,883 - 48,960 345,843 2016 $ 612,801 190,910 803,711 2016 $ 11,771 121,046 894,892 465,678 1,493,387 1 Unwinding of the effective interest rate refers to the discounting of the Convertible securities $nil (2016: $152,586) and the remaining cost of the concessions relating to the Guadalupito project $821,314 (2016: $742,306). 2 Other finance charges relate to the premium to the market price of the Company’s shares used to extinguish liabilities during the prior year. (c) Other expenses Administration expenses Corporate expenses Net foreign exchange loss Occupancy expenses 106,468 945,184 268,572 55,781 1,376,005 175,312 840,539 18,462 54,354 1,088,667 Latin Resources Limited (ABN 81 131 405 144) 57 NOTES TO THE FINANCIAL STATEMENTS 7. INCOME TAXES The components of income tax benefit comprise: Current income tax benefit Deferred income tax benefit Income tax benefit reported in the consolidated statement of profit or loss and other comprehensive income Income tax expense recognised in equity Accounting loss before tax At the statutory income tax rate of 27.5% (in Australia and Peru) Other non-deductible expenditure for income tax purposes R&D tax rebate claim Unrecognised tax losses Income tax benefit reported in the consolidated statement comprehensive income Deferred tax assets Carried forward revenue losses - Australia Carried forward revenue losses - Peru Carried forward revenue losses - Brazil Carried forward revenue losses - Argentina Exploration and evaluation assets Provisions and accruals Other Gross deferred tax asset Offset against deferred tax liability Unrecognised tax losses Deferred tax liabilities Exploration and evaluation assets Plant and equipment Gross deferred tax liability Offset against deferred tax asset Net deferred tax liability 8. EARNINGS PER SHARE Basic and diluted earnings per share 2017 $ - - - 2016 $ - - - (2,381,967) (655,041) (589,653) - 1,244,694 (7,844,975) (2,353,492) - - 2,353,492 - - 4,542,919 (1,436,394) 197,776 44,872 13,485 (59,465) 315,577 3,618,770 - 3,618,770 - - - - - 2017 Cents (0.12) $ 3,814,618 (1,286,700) 215,756 24,264 36,314 (50,731) 353,944 3,107,465 - 3,107,465 - - - - - 2016 Cents (0.63) $ Loss used in calculating basic and diluted earnings per share (2,381,967) (7,844,976) Weighted average number of ordinary shares used in calculating basic and diluted earnings per share* Number Number 1,944,631,751 1,248,666,743 * The weighted average number of shares takes into account the weighted average effect of changes in share transactions during the year. At balance date there were 259,375,000 (2016: 390,369,653) share options and 65,031,642 (2016: 78,099,131) share rights on issue which were anti-dilutive and therefore excluded from the weighted average number of ordinary shares used in calculating dilutive earnings per share. Latin Resources Limited (ABN 81 131 405 144) 58 NOTES TO THE FINANCIAL STATEMENTS 9. CASH (a) Cash and short term deposits Cash in hand Cash at bank 2017 $ 327 995,165 995,492 2016 $ 310 1,338,358 1,338,668 1,338,668 (b) Reconciliation of net loss after income tax to net cash flows from operating activities: Loss for the year (2,381,967) (7,844,976) Adjustments to reconcile loss after tax to net cash flows from operating activities: Loss from settlement of interest bearing loans and borrowings (Gain) on sale of investments (Gain) on fair value of financial assets through profit and loss Depreciation Shares issued to settle creditors Share based payments Net foreign exchange loss/(gain) Exploration and evaluation assets impaired/written off Loss on sale of plant & equipment Unwinding of the effective interest rate Working capital adjustments: (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Increase/(decrease) in provisions for annual leave Net cash flows used in operating activities - (112,372) (264,500) 18,526 25,151 41,140 23,352 - - 821,314 (85,854) (61,631) 2,890 (1,973,951) 362,044 - 50,000 28,480 - 190,910 (1,908) 4,861,649 - 894,892 957,062 (185,087) 24,715 (662,219) Non-cash financing and investing activities During the year the Company issued 6,209,549 shares to settle liabilities amounting to $25,171. There were no other non-cash financing and investing activities. 10. TRADE AND OTHER RECEIVABLES (a) Current Trade receivables Other receivables Goods & services tax Prepayments 2017 $ 52,697 67,896 11,953 8,647 141,193 2016 $ 3,715 71,309 26,593 50,658 152,275 The current trade and other receivables at 31 December 2017 were neither provided for or impaired and are considered fully recoverable. (b) Non-Current Goods & services tax1 2017 $ 2016 $ 1,700,263 1,700,263 1,603,327 1,603,327 1 The Non-current Goods and services tax/value added tax (GST/VAT) refers to a receivable by the company’s subsidiary in Peru which can only be offset against GST/VAT attributable to future sales. Latin Resources Limited (ABN 81 131 405 144) 59 NOTES TO THE FINANCIAL STATEMENTS 11. ASSETS HELD FOR SALE Assets held for sale 2017 $ 2,898,2331 2016 $ - 1 Assets held for sale comprise the Group’s Peruvian Ilo Copper assets subject to the binding terms sheet signed with Westminster Resources Ltd on 4 September 2017. The sale was subsequently concluded on 7 February 2018. Please refer ASX announcement dated 6 September 2017 for details of consideration and Binding Terms of sale. 12. OTHER FINANCIAL ASSETS Security deposits and bonds Shares in listed entities¹ 2017 $ 30,110 318,500 348,610 1 Shares in listed entities have been fair valued using Level 1 inputs of the fair value hierarchy. 13. PLANT AND EQUIPMENT Furniture and equipment At cost Less: Accumulated depreciation Furniture and equipment Balance at beginning of period Additions Disposals Depreciation expense Effects of exchange rate movements Balance at end of period Net book value 14. EXPLORATION AND EVALUATION ASSETS Balance at beginning of period Additions Disposals Transferred to assets held for sale3 Amounts written off1 Other² Foreign currency translation movement Balance at end of period 2017 $ 179,319 (113,778) 65,541 76,827 12,929 - (18,526) (5,689) 65,541 65,541 2017 $ 7,842,533 2,623,514 - (2,898,233) - - (1,199,314) 6,368,500 2016 $ 27,481 150,000 177,481 2016 $ 172,079 (95,252) 76,827 121,877 - - (28,480) (16,570) 76,827 76,827 2016 $ 11,170,432 1,265,520 - - (4,861,649) 126,535 141,695 7,842,533 1 Amounts written off includes an impairment charge of $nil (2016: $4,861,649) to reflect the recoverable amounts of exploration and evaluation assets. ² Other refers to an adjustment to reflect the renegotiated terms for the acquisition of the concessions relating to the Guadalupito project. 3The Group has agreed binding terms for the sale of the Peru Copper Project (excluding the areas under JV with First Quantum Minerals) to Westminster Resources Ltd. The net carrying value of the areas subject to the Sale Agreement have been reclassified to Current Assets under Assets Held for Sale. The sale was settled on 7 February 2018. Latin Resources Limited (ABN 81 131 405 144) 60 NOTES TO THE FINANCIAL STATEMENTS 15. TRADE AND OTHER PAYABLES Trade payables Other payables Accruals 16. INTEREST BEARING LOANS AND BORROWINGS Loan1 2017 $ 753,711 60,874 41,216 855,801 2017 $ 65,000 65,000 2016 $ 833,981 30,676 52,776 917,433 2016 $ 500,000 500,000 1 Loan with Junefield High Value Metals Investments Limited (JVHM) is unsecured and attracts interest at 12% per annum. The loan was fully repaid on 9 January 2018. 17. DEFERRED CONSIDERATION (a) Current (b) Non-current TOTAL 2017 $ 22,000 2016 $ 9,222 6,364,308 6,036,695 6,386,308 6,045,917 The deferred consideration balances reflect the current and non-current portions of the present value of the remaining US$10.0 million (31 December 2016: US$10.1 million) the Group is required to pay in cash and shares for the acquisition of the concessions relating to the Guadalupito project. The deferred consideration is payable as follows: Share issues - - January 2018 2,000,000 fully paid shares January 2019 2,000,000 fully paid shares Cash Payments - - - - - The favourable feasibility study is to be published no later than July 2019. Within 6 months of favourable feasibility study US$250,000 Within 18 months of favourable feasibility study US$750,000 Within 30 months of favourable feasibility study US$1,000,000 Within 42 months of favourable feasibility study US$2,000,000 Within 54 months of favourable feasibility study US$6,000,000 18. PROVISIONS Employee benefits – Leave entitlements 19. CONTRIBUTED EQUITY (a) Issued capital Issued shares Option premium 2017 $ 45,885 2017 $ 2016 $ 42,995 2016 $ 44,699,938 1,737,444 46,437,382 40,304,459 1,737,444 42,041,903 Latin Resources Limited (ABN 81 131 405 144) 61 NOTES TO THE FINANCIAL STATEMENTS (b) Movements in issued capital Issued shares Balance at 1 January 2016 Settlement of borrowings Settlement of remuneration Placement3 Settlement of borrowings Settlement of creditors Placement Placement Placement Settlement of borrowings Exercise of options Transaction costs Balance at 31 December 2016 Exercise of options Deferred rights conversion Placement1 Placement2 Settlement of creditors3 Placement4 Settlement of creditors5 Concession consideration 6 Placement7 Transaction costs Number $ 892,568,828 88,381,944 4,961,942 45,000,000 12,000,000 54,732,591 77,000,000 82,500,000 309,090,911 1,155,507 10,006,375 - 1,577,398,098 14,054,768 7,403,798 213,728,500 250,000,000 2,522,049 428,571,457 1,687,500 2,000,000 125,000,000 - 2,622,366,170 34,464,603 809,750 37,668 212,500 190,000 473,233 385,000 825,000 3,400,000 17,333 100,128 (610,756) 40,304,459 281,095 - 1,068,644 1,000,000 10,401 1,500,000 6,750 8,000 1,000,000 (479,411) 44,699,938 1 The Company completed a placement on 10 May 2017 at a price of $0.005 per share. 2 The Company completed a placement on 26 July 2017 at a price of $0.004 per share. 125,000,000 options were issued to placement participants and 125,000,000 options were issued to brokers to the placement. The broker options were valued at $125,000. 3 During August 2017, 522,049 shares valued at $2,401 were issued to a former employee of the Company for services provided during the term of employment. In addition, 2,000,000 shares were issued to a consultant in lieu of cash fees of $8,000 for services provided. ⁴ The Company completed a placement on 18 October 2017 at a price of $0.0035 per share. 5 On 19 October 2017, 1,687,500 shares were issued in part settlement of a creditors invoice in lieu of cash for services provided. 6 Consideration shares issued on acquisition of Guadalipito concessions. 7 The Company completed a placement on 27 November 2017 at a price of $0.08 per share. Option premium Balance at 1 January 2016 Balance at 31 December 2016 Balance at 31 December 2017 Total Contributed Equity 2017 $ 14,812,500 14,812,500 14,812,500 2016 $ 1,737,444 1,737,444 1,737,444 46,437,382 Latin Resources Limited (ABN 81 131 405 144) 62 NOTES TO THE FINANCIAL STATEMENTS Options outstanding (includes share based payment options and non share based payment options) Balance at 1 January 2016 Granted during the year Exercised during the year Exercised during the year Balance at 31 December 2016 Exercised during the year Issued during the year Options lapsed Balance at 31 December 2017 20. RESERVES (a) Foreign currency translation reserve Balance at beginning of year Foreign currency translations Balance at the end of the year (b) Share based payments reserve Balance at the beginning of year Capital raising costs – issue of broker options Share based payments Balance at the end of the year Total reserves Nature and purpose of reserves Number of options Weighted average exercise price 214,768,078 185,607,950 (6,375) (10,000,000) 390,369,653 (14,054,768) 250,000,000 (366,939,885) 259,375,000 2017 $ 5,558,345 (822,997) 4,735,348 2017 $ 2,532,576 125,000 164,557 2,822,133 $0.02 $0.02 - $0.04 $0.02 $0.01 $0.02 $0.02 $0.01 $0.02 - $0.04 $0.01 2016 $ 5,117,180 441,165 5,558,345 2016 $ 2,247,712 - 284,864 2,532,576 7,557,481 8,090,921 Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. Share based payments reserve The share based payments reserve is used to recognise the value of equity benefits provided to directors, employees and other parties. Refer Note 22 for further details regarding share based payments. 21. ACCUMULATED LOSSES Balance at the beginning of the year Loss after income tax Balance at the end of the year 22. SHARE BASED PAYMENTS (a) Expenses arising from share based payment transactions Capital raising costs Employee benefits expense Out of share based payments of $164,557, a portion of $41,140 was expensed during the year with balance being capitalised. 2017 $ (46,448,058) (2,381,967) (48,830,025) 2016 $ (38,603,082) (7,844,976) (46,448,058) 2017 $$ 125,000 164,557 289,557 2016 $ - 190,910 190,910 Latin Resources Limited (ABN 81 131 405 144) 63 NOTES TO THE FINANCIAL STATEMENTS (b) Share rights Incentive rights plan The Incentive rights plan was approved by shareholders on 30 November 2012 for the purpose of attracting, motivating and retaining key employees and providing them with the opportunity to participate in the future growth of the Group. Under the plan the Group may offer share rights to eligible persons. Executive directors and full time and permanent part time employees are eligible persons for the purposes of the Incentive rights plan. Share rights issued under the Incentive rights plan comprise of retention rights being rights that vest and may be exercised into Restricted Shares, based on completion of a period of service and performance rights, being rights that vest and may be exercised into Restricted Shares, based on achievement of specified performance objectives. The Board, based on the recommendation of the Remuneration Committee, in their absolute discretion determine the number of share rights to be offered and any performance criteria that may apply. Offers made under the Incentive rights plan must set out the number of share rights, the vesting conditions and the measurement period. The retention and performance rights are issued for no consideration, however, the vesting of the benefits are conditional on achieving specific measurable performance measures that are aligned with the Group’s strategic objectives. Vesting of the share rights is measured over a three year interval after the commencement of the respective measurement period. At the end of the measurement period and subject to the performance measures and each share right will convert into one ordinary share in the Company. Where a director or employee ceases employment prior to their incentives vesting due to resignation or termination for cause, incentives will be forfeited. Where a director or employee ceases employment for any other reason, they may at the Board’s discretion, retain a number of unvested share rights on a pro-rata basis to reflect their period of service during the measurement period. These unvested shares only vest subject to meeting the relevant performance measures. Non-executive Director Deferred rights plan The Deferred rights plan was approved by shareholders on 27 May 2014 for the purpose of retaining Non-executive directors, controlling the cash cost of directors fees and aligning the interests of Non-executive directors with shareholders and providing them with the opportunity to participate in the future growth of the Group. Under the plan the Group may offer share rights to Non–executive directors of the Company. Share rights issued under the Deferred rights plan comprise of retention rights being rights that vest and may be exercised into Restricted Shares, based on completion of a period of service. The Board based on the recommendation of the Remuneration Committee in their absolute discretion determine the number of share rights to be offered and the criteria that may apply. Offers made under the Deferred rights plan must set out the number of share rights, the vesting conditions and the measurement period. The retention rights are issued for no consideration, however, the vesting of the benefits are conditional on achieving certain measurable performance measures. Vesting of the share rights is measured over a three year interval after the commencement of the respective measurement period. At the end of the measurement period and subject to the performance measures and the share rights will convert into one ordinary share in the Company. Where a non-executive director ceases employment prior to their incentives vesting due to resignation or termination for cause, incentives will be forfeited. Where a non-executive director ceases employment for any other reason, they may at the Board’s discretion, retain a number of unvested share options on a pro-rata basis to reflect their period of service during the measurement period. These unvested shares only vest subject to meeting the relevant performance measures. Valuation of Share rights The assessed fair value of the share rights granted to individuals is allocated equally over the measurement period. Fair values are determined using valuation model that takes into account the 10 day VWAP share price prior to grant date. Share rights without market based vesting conditions are valued at the 10 day VWAP share price prior to the grant date. Latin Resources Limited (ABN 81 131 405 144) 64 NOTES TO THE FINANCIAL STATEMENTS Share rights with market based vesting conditions are also valued at the 10 day VWAP share price prior to the grant date however a 50% discount is applied to the valuation to take into account the likelihood of meeting any market based vesting conditions. The model inputs for share rights granted in the prior year ended 31 December 2016 are as follows: Issued to Grant date Expiry date Quantity Exercise price Consideration Fair value at grant date 10 day VWAP at grant date Discount Maximum life Managing Director 31 October 2016 31 October 2019 60,693,609 - - $0.0136 $0.0136 0% - 50% 3 Years Shares issued as share based payments No shares were issued as share based payments during the period. Share rights outstanding There were 65,031,642 share rights outstanding as at 31 December 2017 (2016: 78,099,131). 8,005,323 share rights vest on 31 December 2018 and 57,026,319 which have a vesting date of 1 January 2019. The share rights that vested on 31 December 2016 were converted into shares on 17 March 2017. As at the date of this report, there were 86,383,950 share rights outstanding. (c) Options Valuation of Options Options were priced using Black and Scholes valuation pricing model (or valued at the listed price where options are listed options). Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations. Input variable Grant date share price Exercise price Expected volatility Risk-free interest rate Option life 1 125,000,000 broker options issued in the year ended were valued at the listed price of the options on grant date or 31 Dec 2017 -1 -1 -1 -1 -1 31 Dec 2016 $0.012 $0.02 - $0.04 70% 1.67% 0.3 – 1.14 years immediately after grant. 23. RELATED PARTY DISCLOSURES Information regarding individual directors’ and executives’ compensation and equity instrument disclosures are disclosed in the Remuneration report. (a) Compensation of directors and other key management personnel Short term employee benefits Post-employment benefits Share based payments (b) Loans to key management personnel As at 31 December 2017 there was a short term advance to Mr Chris Gale of $12,114. 2017 $ 933,583 - 164,557 1,098,140 2016 $ 716,208 8,154 242,829 967,191 Latin Resources Limited (ABN 81 131 405 144) 65 NOTES TO THE FINANCIAL STATEMENTS (c) Transactions with related parties Bowen Buchbinder Vilenksy, a related party of Mr David Vilensky, charged fees totaling $44,000 (exclusive of GST) for the year ended 31 December 2017 in relation to legal fees. During the period the Company, advanced a total of $50,000 to Bowen Buchbinder Vilensky, a firm related to Mr Vilensky. The short term advance was for a period of 4 months at commercial terms attracting an interest rate of 10% per annum and secured by personal guarantee. The advance was fully repaid during the period, including interest accruing to the advance. Corp Cloud Pty Ltd, a related party of Mr Chris Gale, charged fees totaling $ 15,665 (exclusive of GST) for the year ended 31 December 2017 in relation to the provision of IT services. (d) Subsidiaries The consolidated financial statements include the financial statements of Latin Resources Limited and its subsidiaries which are listed below. Name of entity Peruvian Latin Resources Limited SAC (PLR) Minera Dilan SAC (MD) Mineracao Ferro Nordeste Ltda (MFN) Recursos Latinos S.A. Country of incorporation Peru Peru Brazil Argentina Equity holding 2017 % 100 100 100 100 2016 % 100 100 100 100 Peruvian Latin Resources Limited SAC (PLR) and Mineracao Ferro Nordeste Ltda (MFN) are effectively 100% owned by the Company through 99.9% of shares held directly and 0.1% of shares are held in trust on behalf of the Company. Minera Dilan SAC is 50% each owned by the Company and PLR. The Company has advanced funds to Recursos Latinos S.A., PLR and MFN which at the date of this report do not attract interest and are not subject to a repayment schedule. (e) Ultimate parent company Latin Resources Limited is the ultimate parent of the Group. 24. COMMITMENTS Operating lease commitments: Not later than one year Later than one year but not later than five years Later than five years 25. CONTINGENCIES 2017 $ 220,563 - - 220,563 2016 $ 438,229 - - 438,229 Guadalupito project – Royalty obligation On February 8, 2011, Peruvian Latin Resources SAC (PLR) signed an agreement (Acquisition Agreement) with 14 different vendor companies (Vendors) all with a common principal shareholder to acquire additional mining concessions for its Guadalupito project. The Acquisition Agreement requires PLR to pay the Vendors a net smelting royalty of 1.5% which is calculated on all extracted and commercialised minerals from the New concessions. The royalty is payable once commercial mining operations have been initiated and mineral products are produced, at an average rate of not less than 70% of the normal capacity of the mining facilities. 26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group also has transactional currency exposures from operating costs and concession payments that are denominated in currencies other than the Australian dollar (AUD). The currencies in which these transactions are primarily denominated are the United States dollar (USD). The Board attempts to mitigate the effect of its foreign currency exposure by acquiring USD in accordance with Latin Resources Limited (ABN 81 131 405 144) 66 NOTES TO THE FINANCIAL STATEMENTS budgeted expenditures when the exchange rate is favourable. Where possible receipts of USD are maintained in a USD account as a natural hedge. The USD are converted to AUD at prevailing rates as AUD funds are required. As at 31 December 2017, the Group had the following exposure to USD that is not designated in cash flow hedges: Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Provisions Deferred consideration1 2017 $ 855,093 1,782,467 6,410 2,643,970 (711,944) (39,850) (6,386,308) (7,138,102) 2016 $ 516,356 1,673,652 3,781 2,193,789 (774,888) (39,487) (6,045,917) (6,860,292) Net exposure (4,494,132) (4,666,503) 1 As at 31 December 2017, the Group has an obligation to pay US$10.0 million (2016: US$10.1 million) in various instalments by 1 January 2024. The liability is recognised in the Group’s subsidiary in Peru whose functional currency is US dollars. The following sensitivity analysis is based on the judgements by management of reasonably possible movements in foreign exchange rates after consideration of the views of market commentators. The sensitivity is also based on foreign currency risk exposures to financial asset and liability balances as at 31 December 2017 which are on average not expected to significantly increase over the next twelve months. The following tables demonstrate the sensitivity to a reasonably possible change in the AUD/USD exchange rate with all other variables held constant. The impact on the Group’s pre-tax profit is due to changes in the fair value of monetary assets and liabilities. The impact on the Group’s equity is due to changes in the fair value of the deferred consideration. The Group’s exposure for all other currencies is not material. 31 December 2017 AUD/USD +10% AUD/USD -10% 31 December 2016 AUD/USD +10% AUD/USD -10% Effect on loss before tax $ Effect on equity $ 189,194 (189,194) (638,631) 638,631 137,942 (137,942) (604,592) 604,592 The movement in pre-tax profit is a result of changes to the fair value of monetary assets and liabilities denominated in USD. The deferred consideration liability is recognised in the Group’s subsidiary in Peru whose functional currency is US dollars. Hence the sensitivity of deferred consideration is recognised in equity. The sensitivity is measured based on the carrying amount of the liabilities rather than the contractual cash outflows up to 1 January 2024. (a) Interest rate risk Interest rate risk is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates. The Group is exposed to interest rate risk on its cash and cash equivalent balances. The Board constantly monitors its interest rate exposure and attempts to maximise interest income by using a mixture of fixed and variable interest rates, whilst ensuring sufficient funds are available for the Group’s operating activities. As at 31 December 2017 the Group had the following exposure to Australian variable interest rate risk. Latin Resources Limited (ABN 81 131 405 144) 67 NOTES TO THE FINANCIAL STATEMENTS Financial assets Cash and cash equivalents 2017 $ 2016 $ 190,099 822,312 Movement of 50 basis points on the interest rate (considered a reasonably possible change) would not have a material impact on the consolidated loss or equity. (b) Credit risk Credit risk is the risk to the Group if a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group’s maximum exposure to credit risk at the reporting date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the Consolidated Statement of Financial Position. Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents (refer Note 9(a)) and trade and other receivables (refer Note 10) and other financial assets (refer Note 12). The Group only trades with recognised creditworthy third parties. The Group only invests in high credit quality financial institutions with a credit rating of investment grade or better. 31 December 2017 Trade and other payables Interest bearing liabilities Deferred consideration 31 December 2016 Trade and other payables Interest bearing liabilities Deferred consideration (c) Price risk Less than 1 month $ 641,699 65,000 - 706,699 Less than 1 month $ 917,433 - - 917,433 1-3 months $ - - - - 1-3 months $ - 500,000 - 500,000 3-12 months $ 214,102 - - 214,102 1-5 years $ - - 2,564,103 2,564,103 5+ years $ - - 10,256,410 10,256,410 Total $ 855,801 65,000 12,820,513 13,741,314 3-12 months 1-5 years 5+ years Total $ - - - - $ - - 1,387,500 1,387,500 $ - - 12,487,500 12,487,500 $ 917,433 500,000 13,875,000 15,292,433 The Group is exposed to equity securities price risk. This arises from investments held and classified on the statement of financial position as at fair value through profit or loss. The Group is not exposed to commodity price risk. The Group’s equity investment is publicly traded on the Australian Securities Exchange (ASX). A movement of 10% in the fair value of financial assets at fair value through profit and loss (considered a reasonably possible change) on the Group’s post tax loss for the year and on equity would not have been material. (d) Capital management The Board is responsible for capital management of the Group. The Board’s objective is to ensure the entity continues as a going concern as well as to maintain an optimal structure to reduce the cost of capital. The Group is dependent from time to time on its ability to raise capital from the issue of new shares, obtain debt and its ability to realise value from its existing assets. This involves the use of cashflow forecasts to determine future capital management requirements. Capital management is undertaken to ensure a secure, cost effective and flexible supply of funds is available to meet the Group’s operating and capital expenditure requirements. As at 31 December 2017 the Group is not subject to any external capital requirements. Latin Resources Limited (ABN 81 131 405 144) 68 NOTES TO THE FINANCIAL STATEMENTS 27. EVENTS AFTER THE REPORTING PERIOD On 8 February 2018 the Company completed the Sale Agreement with Westminster Resources Ltd for the sale of the Group’s Peruvian Ilo Copper assets excluding the areas under joint venture with First Quantum Minerals. The Company received the first payment of cash consideration of USD$150,000 with a further payment of USD$100,000 receivable within 12 months and 19 million Westminster Resources Ltd shares. On 16 February 2018, the Company secured rights to lithium projects within San Luis Argentina concluding a binding terms sheet with Kontrarian Resources Fund No 1. On 19 February 2018, shareholders in General Meeting passed all resolutions put to the Meeting. The resolutions approved the issue of a total of 491,071,442 listed share options exercisable at $0.01 expiring 12 October 2019. In addition, approval was granted for the issue of 4,569,231 share rights to Mr Vilensky, 3,269,231 share rights issued to Mr Jones and 13,846,154 share rights issued to Mr Gale. 28. AUDITOR’S REMUNERATION Amounts received or due and receivable by the auditor for: An audit or review of the financial report of the consolidated group Amounts received or due and receivable by related practices of the auditor for: An audit or review of the financial report of the consolidated group Other services in relation to the consolidated group Amounts received or due and receivable by non related practices of the auditor for: An audit or review of the financial report of the consolidated group 2017 $ 2016 $ 43,099 48,293 - 4,000 4,000 - 47,099 - 5,740 5,740 - 54,033 Latin Resources Limited (ABN 81 131 405 144) 69 NOTES TO THE FINANCIAL STATEMENTS 29. PARENT ENTITY INFORMATION (a) Financial position Assets Current assets Non-current assets Total assets (i) Liabilities Current liabilities (ii) Non-current liabilities Net assets Equity Contributed equity Reserves Accumulated losses (i) Assets Balance per parent company Provision for intercompany loans and consolidation entry Balance per operating segment note (Note 4) (ii) Liabilities Balance per parent company Movement relating to mineral projects (inter-company) Balance per operating segment note (Note 4) (b) Financial performance 2017 $ 2016 $ 1,308,443 13,287,448 14,595,891 214,655 - 214,655 14,381,236 1,524,199 12,000,506 13,524,705 646,053 - 646,053 12,878,652 46,437,382 2,822,134 (34,878,280) 14,381,236 42,041,903 2,532,576 (31,695,827) 12,878,652 14,595,891 (12,382,251) 2,213,640 13,524,705 (10,365,147) 3,159,558 214,655 (16,444) 198,211 646,053 (18,182) 627,871 (Loss)/Profit of the parent entity (i) Total comprehensive profit/(loss) of the parent entity (3,182,452) (3,182,452) 1,790,075 1,790,075 (i) (Loss)/Profit for the year (Loss)/Profit per parent company Provision for intercompany loans and consolidation entry Balance per operating segment note (Note 4) (c) Contingencies and commitments Operating lease commitments: Not later than one year Later than one year but not later than five years (3,182,452) (2,121,678) (1,060,774) 1,790,075 (3,834,524) (2,044,449) 211,382 - 211,382 3,700 - 3,700 Latin Resources Limited (ABN 81 131 405 144) 70 DIRECTORS’ DECLARATION In accordance with a resolution of the directors of Latin Resources Limited, I state that: 1. In the opinion of the directors: (a) The financial statements and notes of Latin Resources Limited for the financial year ended 31 December 2017 are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2017 and of its performance for the year ended on that date; and (ii) complying with Accounting Standards and the Corporations Regulations 2001; (b) (c) the financial statements and notes also comply with International Financial Reporting Standards, as stated in note 2(b); and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the directors by the chief executive officer and chief financial officer in accordance with section 295A of the Corporations Act 2001 for the financial year ended 31 December 2017. On behalf of the Directors ------------------------------------------ David Vilensky Chairman Signed on 29 March 2018 Latin Resources Limited (ABN 81 131 405 144) 71 PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants 29 March 2018 Board of Directors Latin Resources Limited Unit 3, 32 Harrogate Street West Leederville, WA 6007 Dear Sirs RE: LATIN RESOURCES LIMITED In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Latin Resources Limited. As Audit Director for the audit of the financial statements of Latin Resources Limited for the financial year ended 31 December 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully, STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LIMITED (Trading as Stantons International) (An Authorised Audit Company) Martin Michalik Director Liability limited by a scheme approved under Professional Standards Legislation Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF LATIN RESOURCES LIMITED Report on the Audit of the Financial Report Opinion PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au We have audited the financial report of Latin Resources Limited, the Company and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group's financial position as at 31 December 2017 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter Material Uncertainty Regarding Going Concern, Carrying Value of Exploration and Evaluation Assets and Recoverability of the Peruvian GST Receivable We draw attention to Note 2(g), Note 14 and Note 10(b) of the financial report, which describe the going concern basis of preparation of the financial report, the carrying value of the Peruvian GST and the exploration and evaluation assets respectively. As referred to in Note 2(g) to the financial statements, the financial statements have been prepared on a going concern basis. As at 31 December 2017, the Group had working capital of $496,609 (after excluding assets held for sale) and had incurred a loss for the year of $2,381,967. The ability of the Group to continue as a going concern is subject to the successful recapitalisation of the Group, commencement of profitable operations or sale of the underlying projects. In the event that the Board is not successful in recapitalising the Group and in raising further funds, the Group may not be able to pay its debts as and when they become due and may be required to realise its assets and discharge its liabilities other than in the normal course of business, and at amounts different to those stated in the financial report. Liability limited by a scheme approved under Professional Standards Legislation As referred to in Note 14 and Note 10(b) respectively, the recoverability of the Group’s carrying value of exploration and evaluation assets of $6,368,500 and GST receivable of $1,700,263 in its subsidiary in Peru is dependent on the successful commercial exploitation of the exploration and evaluation assets and/or sale of those assets at amounts in excess of the book values. In the event that the Group is not successful in commercial exploitation and/or sale of the exploration and evaluation assets, the realisable value of the Group’s assets including GST receivable in Peru may be significantly less than their current carrying values. Our opinion is not modified in respect of these matters. Key Audit Matters In addition to the matters described in the Emphasis of Matter paragraphs, we have defined the matters described below to be key audit matters to be communicated in our report. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matters How the matter was addressed in the audit Issued Capital and Share Based Payments The Group’s Contributed Equity, amounted to $46,437,382 at 31 December 2017. During the year, this increased by the issuance of 1,044,968,072 ordinary through placements, the issue and exercise of options, conversions of share rights, settlement of liabilities and settlement of brokerage fees. shares Issued Capital and Share based payments are key audit matters due to: • the quantum of transactions having been effected during the year; and • the complexities involved in recognition and measurement of these instruments. We have spent significant audit effort on ensuring the issued capital was appropriately accounted for and that other share-based payments were appropriately valued and accounted for in accordance with AASB 2 Share-Based Payments (AASB 2). Inter alia, our audit procedures included the following: i. Obtained an understanding of the underlying transactions; ii. For share placements, traced funds raised to bank statements and other relevant supporting documentation; iii. Audited the option assessed the assumptions used; valuations and iv. Checked that the fair-value of share rights are appropriately charged over the vesting to expenses or period and allocated capitalised exploration and evaluation expenditure as appropriate, in accordance with AASB 2; and v. Discussed with management the requirements of the relevant accounting standards and need for disclosures to achieve fair presentation and reviewed the financial statements to ensure appropriate disclosures are made. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 31 December 2017 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. We evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in Internal control that we identify during our audit. The Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the consolidated financial report of the current period and are therefore key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 7 to 15 of the directors’ report for the year ended 31 December 2017. In our opinion the Remuneration Report of Latin Resources Limited for the year ended 31 December 2017 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company) Martin Michalik Director West Perth, Western Australia 29 March 2018 ASX ADDITIONAL INFORMATION Additional information required by the ASX Limited Listing Rules not disclosed elsewhere in this Annual Report is set out below. The information was applicable as at 27 March 2018. Class of equity securities and voting rights SHARES There were 2,622,366,170 ordinary fully paid shares on issue. All issued ordinary shares carry one vote per share. SHARE RIGHTS There were share rights over 86,383,950 unissued shares. There are no voting rights attached to the share rights however voting rights are attached to the unissued shares once all the share rights vesting criteria are met. OPTIONS The Company has the following classes of options on issue at 27 March 2018 as detailed below. Options do not carry any rights to vote. Code Class Terms LRSOB LRSAY (b) Listed Unlisted Exercisable at $0.01 each and expiring on 12 October 2019 Exercisable at $0.008 each and expiring on 30 November 2018 Number 741,071,442 9,375,000 VOTING RIGHTS In accordance with the Company’s Constitution:   on a show of hands every shareholder present in person or by proxy, attorney or representative of a shareholder has one vote and on a poll every shareholder present in person or by proxy, attorney or representative of a shareholder has in respect of fully paid shares, one vote for every share held. No class of option holder has a right to vote, however the shares issued upon exercise of options will rank parri passu with the then existing issued fully paid ordinary shares. Distribution of equity securities THE NUMBER OF EQUITY HOLDERS BY SIZE AND HOLDING, IN EACH CLASS ARE: Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary shares (listed) 134 47 66 1,424 2,206 3,877 Share rights (unlisted) - - - - 11 11 Options (listed) 1 - 1 8 197 207 HOLDING LESS THAN A MARKETABLE PARCEL Options (unlisted) - - - - 1 1 713 - 27 - RESTRICTED SECURITIES The Company has no Restricted Securities on issue. Substantial shareholders The substantial shareholders in the Company, as disclosed in substantial shareholding notices given to the company are: Shareholder Not applicable No. of Shares Held - % Held - Latin Resources Limited (ABN 81 131 405 144) 77 ASX ADDITIONAL INFORMATION Twenty largest holders of quoted shares Rank Shareholder 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. J P MORGAN NOMINEES AUSTRALIA LIMITED MR ROBERT VEITCH + MRS ELAINE VEITCH FORSYTH BARR CUSTODIANS LTD JUNEFIELD HIGH VALUE METALS INVESTMENTS LIMITED ELMER MOISES ROSALES CASTILLO MR VESA ANDREW SAARIO MR DAVID RONALDSON DEMPSEY RESOURCES PTY LTD BUBEVICH INVESTMENTS PTY LTD MR GARRY CROLE PARD INVESTMENTS PTY LTD SUBURBAN HOLDINGS PTY LIMITED CITICORP NOMINEES PTY LIMITED MR KENNETH ROY GILBERT MOONAH CAPITAL PTY LTD BROCK MCLEAN INVESTMENTS PTY LTD INTERPRAC LTD HYDRONOMEES PTY LTD MR ROBERT ANDREW VEITCH + MRS ELAINE VEITCH BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP Total Twenty largest holders of quoted options Rank Shareholder 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. SHAPE WEALTH PTY LTD MR CRAIG RUSSELL STRANGER PAC PARTNERS PTY LTD ZENIX NOMINEES PTY LTD MRS BROOKE LAUREN PICKEN RAVEN INVESTMENT HOLDINGS PTY LTD (RAVEN INVESTMENT) PERSHING AUSTRALIA NOMINEES PTY LTD (ACCUM A/C) MR ROBERT VEITCH + MRS ELAINE VEITCH TWENTY TEN ENTERPRISES PTY LTD MR ROBERT VEITCH + MRS ELAINE VEITCH SEQUIOIA GROUP HOLDIONGS PTY LTD MR TRAVIS FOUNTAIN MR ANDREW VEITCH + MRS SAMANTHAE VEITCH MR BIN LU MR GREGORY MARTIN LYLE + MR BRADLEY GRANT LYLE (b LYLE S/F A/C) MOONAH CAPITAL PTY LTD MR PHILLIP MARK ANDRISKE MR PHILLIP MARK ANDRISKE MR PRADEEP ARUNDAVARAJA KHE SANH PTY LTD (TRADING NO 1 A/C) Total No. of Shares Held 255,015,135 66,873,615 35,150,000 30,699,323 28,302,055 26,008,143 25,000,000 20,622,129 20,000,000 20,000,000 20,000,000 20,000,000 19,697,730 19,500,000 18,380,250 16,900,000 16,548,076 16,533,565 15,774,286 % Held 9.72 2.55 1.34 1.17 1.08 0.99 0.95 0.79 0.76 0.76 0.76 0.76 0.75 0.74 0.70 0.64 0.63 0.63 0.60 15,497,175 706,501,482 0.59 26.91 No. of Options Held 110,000,000 37,917,667 37,579,333 35,714,286 32,292,166 28,199,551 22,857,142 21,205,000 20,000,000 19,582,445 18,750,000 14,657,306 13,100,000 12,415,527 10,148,333 10,000,000 9,635,375 8,450,000 7,406,810 6,000,000 475,910,941 % Held 14.84 5.12 5.07 4.82 4.36 3.81 3.08 2.86 2.70 2.64 2.53 1.98 1.77 1.68 1.37 1.37 1.30 1.14 1.00 0.81 64.25 Latin Resources Limited (ABN 81 131 405 144) 78 TENEMENT SCHEDULE PERU AUXILIADORA II GIANDERI XXXIII MACARENA XXII 01-00586-07 01-01560-06 01-00588-07 SAN FRANCISCO XXIII 63-00026-10 SANTA XIX SANTA XVIII SANTA XX SANTA XXIII BLACKBURN 10 BLACKBURN 12 BLACKBURN 13 BLACKBURN 15 BLACKBURN 7 BLACKBURN 8 BLACKBURN 9 LOS CONCHALES MATHEW 2 LATIN ILO ESTE I 1 LATIN ILO ESTE II 1 LATIN ILO ESTE III 1 LATIN ILO ESTE IV 1 LATIN ILO ESTE IX 1 LATIN ILO ESTE V 1 LATIN ILO ESTE VI 1 LATIN ILO ESTE VII 1 LATIN ILO NORTE 3 1 LATIN ILO NORTE 4 1 LATIN ILO NORTE 5 1 LATIN ILO NORTE 6 1 BRIDGETTE 1 1 ESSENDON 10 1 ESSENDON 14 1 ESSENDON 21 1 ESSENDON 26 1 ESSENDON 4 1 ESSENDON 5 1 ESSENDON 6 1 ESSENDON 7 1 ESSENDON 8 1 ESSENDON 9 1 LATIN ILO NORTE 7 1 LATIN ILO NORTE 8 1 MADDISON 1 1 RYAN 1 1 01.00590-07 63-00041-09 63-00042-09 01-00595-07 01-02897-12 01-02899-12 01-03176-12 01-03179-12 01-02850-12 01-02895-12 01-02896-12 01-02590-12 01.01635-11 01-05005-08 01-05003-08 01-05001-08 01-05007-08 01-01952-14 01.05008-08 01-05009-08 01-00335-10 01-00830-09 01-00831-09 01-02510-09 01-02511-09 01-01844-11 01-02249-10 01-01824-11 01-01841-11 01-01849-11 01-01897-10 01-01898-10 01-01899-10 01-02246-10 01-02247-10 01-02248-10 01-02512-09 01-02513-09 01-01845-11 01-01843-11 Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Concession Title in the name of PLR is pending Title in the name of PLR is pending Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Latin Resources Limited (ABN 81 131 405 144) 79 TENEMENT SCHEDULE DOCKERS 1 DOCKERS 2 2 DOCKERS 3 2 DOCKERS 4 2 FLEMANTLE 16 1 FREMANTLE 1 1 FREMANTLE 10 1 FREMANTLE 11 1 FREMANTLE 14 1 FREMANTLE 18 1 FREMANTLE 2 1 FREMANTLE 22 1 FREMANTLE 29 1 FREMANTLE 3 1 FREMANTLE 4 1 FREMANTLE 5 1 FREMANTLE 7 FREMANTLE 8 1 FREMANTLE 9 1 KELLY 00 1 KELLY 01 1 LATIN ILO SUR F 1 LATIN MORRITO 1 2 LATIN MORRITO 2 2 VANDALS 1 2 VANDALS 2 2 ARGENTINA Catamarca ANCASTI ANCASTI ANCASTI VILLISMAN VILLISMAN VILLISMAN VILLISMAN VILLISMAN LATINA 1 LATINA 2 LATINA 3 LATINA 4 LATINA 5 LATINA 6 LATINA 7 LATINA 8 LATINA 9 01-01865-11 01-01866-11 01-01867-11 01-01868-11 01-02431-10 01-02062-10 01-02425-10 01-02426-10 01-02429-10 01-02433-10 01-02063-10 01-01831-11 01-01838-11 01-02064-10 01-02065-10 01-02066-10 01-02068-10 01-02250-10 01-02424-10 01-01840-11 01-04977-11 01-02824-09 01-02827-09 01-02828-09 01-02437-10 01-02438-10 36M2016 37M2016 38M2016 39M2016 40M2016 41M2016 42M2016 57M2016 1/18 3/18 5/18 6/18 4/18 2/18 13/18 14/18 12/18 Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Peru Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Latin Resources Limited (ABN 81 131 405 144) 80 TENEMENT SCHEDULE LATINA 10 LATINA 11 LATINA 12 LATINA 13 LATINA 14 MINA LA CULPABLE 3 Salta SANTA ELENA TRES TETAS I EL QUEMADO LA ELVIRITA V AGUAS CALIENTES V EL QUEMADO PENAS BANCAS V MIRKOS 4 MIRKOS 5 MIRKOS 6 MIRKOS 7 MIRKOS 10 CROSBY 1 CROSBY 2 CROSBY 3 CROSBY 4 CROSBY 5 CROSBY 6 MICROS 1 MICROS 3 MICROS 9 CROSBY 7 CROSBY 8 JOSEFINA VII EL LATINO EL LATINO I EL LATINO II La Rioja GLADYS CECILIA ANITA San Luis PORTEZUELO ESTANZUELA LA META TILISARAO BAJO DE VELIZ DE GEMINIS MARIA DEL HUERTO 11/18 10/18 9/18 8/18 7/18 45/81 18159 18263 19516 20999 21992 21993 22045 20203 20204 20205 20206 20209 21648 21649 21650 21651 22116 22117 22143 22144 22142 22317 22318 22349 22769 22770 22771 03-F-17 04-F-17 05-F-17 65-C-2016 64-C-2016 63-C-2016 66-C-2016 76-C-2016 84-C-2016 85-C-2016 MARIA DEL HUERTO 134-Q-1936 Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Mining Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Mining Concession Latin Resources Limited (ABN 81 131 405 144) 81 TENEMENT SCHEDULE GEMINIS 3 DON GREGORIO 3 ESTANZUELA SUR 674-S-1968 470-O-2006 64-R-2017 LOS MEMBRILLOS QUINES SUR 65-R-2017 66-R-2017 PASO GRANDE NORTE 67-R-2017 SOLITARIO TRAPICHE NORTE ESTANZUELA NORTE QUINES LA TOMA NORTE QUINES ESTE PASO GRANDE SUR TRAPICHE SUR LA TOMA SUR 68-R-2017 69-R-2017 70-R-2017 71-R-2017 72-R-2017 72-R-2017 1-R-2018 2-R-2018 3-R-2018 NOTES 1 Indirect interest via Westminster Resources Ltd 2Acquisition is pursuant to an option agreement. 3 Acquisition pursuant to option agreement. Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Mining Concession Mining Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Exploration Concession Latin Resources Limited (ABN 81 131 405 144) 82 REGISTERED OFFICE Unit 3, 32 Harrogate Street West Leederville, 6007 Western Australia Tel (08) 6181 9798 Fax (08) 9380 9666 

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