---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 20-F

(Mark One)

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 29, 2012

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[   ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report
_______________________

For the transition period from ___________________to
____________________

Commission file number 000-54260

PAN AMERICAN LITHIUM CORP.(Exact name of Registrant as specified in its charter)

Not Applicable(Translation of
Registrants name into English)

British Columbia, Canada(Jurisdiction
of incorporation or organization)

Suite 110, 3040 N. Campbell AvenueTucson, Arizona
USA 85719(520) 989-0031(Address of principal
executive offices)

Andrew Brodkey, President,Suite 110, 3040 N.
Campbell AvenueTucson, Arizona USA 85719(520)
989-0031
  (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact
  Person)

Securities registered or to be registered pursuant to Section
12(b) of the Act.

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|Not Applicable      | Not Applicable                           

Securities registered or to be registered pursuant to Section
12(g) of the Act.

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Common Shares Without Par Value
  (Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.

Not Applicable
  (Title of Class)

Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report.

There were 55,003,592 common shares, without par value,
issued and outstanding as of February 29, 2012.

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. [  
] YES     [X] NO

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. [   ]
YES     [X] NO

Note  Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] YES    
[   ] NO

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
[   ] YES     [   ] NO

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):

|Large accelerated filer [   ] | Accelerated filer [   ] | Non-accelerated filer [X]
|----------------------------- | ----------------------- | -------------------------

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|U.S. GAAP [   ] | International Financial
      Reporting Standards as issued by the International Accounting
      Standards Board [X] | Other [   ]
|--------------- | --------------------------------------------------------------------------------------------------------------------- | -----------

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow. [   ] Item 17   
 [   ] Item 18

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
[   ] YES     [X] NO

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. [   ] YES   
 [   ] NO

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PART I

GENERAL

Certain statements in this annual report are forward-looking
statements, which reflect the Companys managements expectations regarding the
Companys future growth, results of operations, performance and business
prospects and opportunities including statements related to the development of
existing and future property interests, availability of financing and projected
costs and expenses. Forward-looking statements consist of statements that are
not purely historical, including any statements regarding beliefs, plans,
expectations or intentions regarding the future. Such statements are subject to
risks and uncertainties that may cause actual results, performance or
developments to differ materially from those contained in the statements. No
assurance can be given that any of the events anticipated by the forward-looking
statements will occur or, if they do occur, what benefits the Company will
obtain from them. These forward-looking statements reflect managements current
views and are based on certain assumptions and speak only as of the date of this
report. These assumptions, which include managements current expectations,
estimates and assumptions about current mineral property interests, the global
economic environment, the market price and demand for lithium and other minerals
and the Companys ability to manage the Companys property interests and
operating costs, may prove to be incorrect. A number of risks and uncertainties
could cause the Companys actual results to differ materially from those
expressed or implied by the forward-looking statements, including: (1) a
downturn in general economic conditions, (2) a decreased demand or price of
lithium and other minerals, (3) the inability to obtain equipment, materials,
supplies or workforce, or other factors resulting in delays in the exploration
or development of projects with respect to the Companys property interests, (4)
inability to locate and acquire additional property interests, (5) the
uncertainty of government regulation and politics in North America and Chile
regarding mining and mineral exploration, (6) the inability to obtain licenses,
permits and governmental approvals necessary for exploration, or properties or
the construction and operation of mining facilities, (7) potential negative
financial impact from regulatory investigations, claims, lawsuits and other
legal or regulatory proceedings and challenges, (8) uncertainties associated
with negotiations, (9) assets of the Company may be nationalized, (10) the
Company may be subject to increased taxation by foreign governments, and (11)
other factors beyond the Companys control.

There is a significant risk that such forward-looking
statements will not prove to be accurate. Investors are cautioned not to place
undue reliance on these forward-looking statements. No forward-looking statement
is a guarantee of future results. The Company disclaim any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as required by
law. Additional information about these and other assumptions, risks and
uncertainties are set out in the section entitled Risk Factors below.

Unless otherwise indicated, all dollar amounts referred to
herein are in United States dollars. All references to CDN$ are to Canadian
dollars and all references to US$ are to United States dollars.

EXPLANATORY NOTE REGARDING PRESENTATION OF FINANCIAL
INFORMATION

The annual audited consolidated financial statements for the
year ended February 29, 2012 are our first annual consolidated financial
statements that have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB) and IFRS 1, First Time Adoption of International
Financial Reporting Standards. See page 13 in our Managements Discussion and
Analysis of Financial Condition and Results of Operations included in this
annual report on Form 20-F under Item 5  Operating and Financial Review and
Prospects.

We have prepared the annual audited consolidated financial
statements that comply with IFRS as described in the accounting policies in Note
4 of our annual audited consolidated financial statements. In preparing the
annual audited consolidated financial statements, our opening statement of
financial position was prepared at March 1, 2010, our date of transition to
IFRS. Note 12 of our annual audited consolidated financial statements explains
the principal adjustments we made in restating our Canadian generally accepted
accounting principles (GAAP) statements of financial position as at March 1,
2010 and February 29, 2011 and our previously published Canadian GAAP
consolidated statements of operations and comprehensive loss for the year ended
February 29, 2011.

Please note that information relating to financial periods
ended before February 29, 2011 were prepared in accordance with Canadian GAAP,
which may not be comparable to IFRS.

---

ITEM
1                       
Identity of Directors, Senior Management and Advisers

Not applicable.

ITEM
2                       
Offer Statistics and Expected Timetable

Not applicable.

ITEM
3                      
 Key Information

*A.*                     *Selected
  Financial Data*

The following table sets out selected financial information
prepared in accordance with IFRS as issued by ISAB for the year ended February
29, 2012 and February 28, 2011:

Year
        Ended 
        February 29, 2012 (audited)
      Year
        Ended 
        February 28, 2011 (audited)($)Revenue
    Nil
    NilExpenses
    $1,494,737
    $2,628,049Net Loss
    $977,249
    $2,741,536Basic and Diluted Loss Per Share
    $0.021
    $0.079


As
        at 
        February 29, 2012 (audited)
      As
        at 
        February 28, 2011 (audited)($)
      ($)Mineral Properties
    4,636,325
    4,441,553Total Assets
    5,274,159
    4,675,795Long-Term Debt
    Nil
    NilDividends
    Nil
    Nil


The following table sets out selected financial information
prepared in accordance with Canadian GAAP for various periods from our inception
to February 28, 2011:

Year Ended 
        February 28, 2010
      (audited)
      Year Ended 
        February 28, 2009
      (audited)
      Year Ended 
        February 29, 2008
      (audited)($)
      ($)
      ($)Revenue
    Nil
    Nil
    NilExpenses
    970,008
    63,956
    194,683Net Loss
    1,388,366
    53,182
    174,310Basic and Diluted Loss Per Share
    0.10
    0.01
    0.04


As at 
        February 28, 2010(audited)
      As at 
        February 28, 2009 (audited)
      As at 
        February 29, 2008 (audited)($)
      ($)
      ($)Mineral Properties
    3,727,127
    139,775
    138,915Total Assets
    5,706,053
    237,236
    163,400Long-Term Debt
    Nil
    Nil
    NilDividends
    Nil
    Nil
    Nil


---

The following is reconciliation from Canadian GAAP to U.S.
GAAP:

Year Ended 
        February 28, 2010
      (audited)
      Year Ended 
        February 28, 2009
      (audited)
      Year Ended February 29, 2008
      (audited)($)
      ($)
      ($)Revenue per Canadian and US GAAP
    Nil
    Nil
    NilExpenses per Canadian and US GAAP
    970,008
    63,956
    194,683Net Loss per Canadian GAAP
    1,388,366
    53,182
    174,310Mineral properties written off
    3,578,552
    Nil
    21,400Mineral property and deferred acquisition
      costs expensed
    524,439
    860
    117,515Net loss per US GAAP
    5,491,357
    54,042
    313,225Basic and Diluted Loss Per Share per Canadian
      GAAP
    0.10
    0.01
    0.04Basic and Diluted Loss Per Share per US GAAP
    0.39
    0.01
    0.08


As at 
        February 28, 2010 (audited)
      As at 
        February 28, 2009 (audited)
      As at 
        February 29, 2008 (audited)($)
      ($)
      ($)Mineral Properties per Canadian GAAP
    3,727,127
    139,775
    138,915Mineral property acquisition costs written
      off
    (3,578,552)
    (21,400)
    (21,400)Mineral property costs expensed
    (148,575)
    (118,375)
    (117,515)Mineral Properties  Foreign Exchange per
      Canadian GAAP
    -
    -
    -Mineral Properties per US GAAP
    Nil
    Nil
    NilTotal Assets per Canadian GAAP
    5,706,053
    237,236
    163,400Mineral property and deferred acquisition
      costs written off
    (3,727,127)
    (21,400)
    (21,400)Mineral property costs expensed
    (262,825)
    (118,375)
    (117,515)Total Assets per US GAAP Long-Term Debt per
    1,716,101
    97,461
    24,485Canadian and US GAAP
    Nil
    Nil
    NilDividends per Canadian and US GAAP
    Nil
    Nil
    Nil


Please note that information relating to financial periods
ended before February 29, 2011 were prepared in accordance with Canadian GAAP,
which may not be comparable to IFRS.

---

Our selected financial information is presented in Canadian
dollars. As of the closing on June 25, 2012, the exchange rate was 1.0292 CAD
per 1USD, as stated by the Bank of Canada. The following are exchange rates for
the high and low for the last six months, and the average annual rate for the
last five financial years, using the last day of each month in each year: (Rates
are stated as xCAD per 1USD and are as stated by the Bank of Canada)

High and low exchange rates observed - last
        six monthsHigh
      LowJune 2012
      0.9837
      0.9576May 2012
      1.0329
      0.9858April 2012
      1.0204
      0.9950March 2012
      1.0161
      0.9965February 2012
      1.0158
      0.9960January 2012
      1.0034
      0.9713December 2011
      0.9948
      0.9594


Average exchange rates - five yearsFinancial year ended:
      AverageFebruary 29, 2012
      0.9916February 28, 2011
      1.0204February 28, 2010
      1.1048February 29, 2009
      1.1151February 28, 2008
      1.0359


*B.*                     *Capitalization
  and Indebtedness*

Not applicable

*C.*                     *Reasons for the Offer and Use of Proceeds*

Not applicable

*D.*                     *Risk
  Factors*

Much of the information included in this report includes or is
based upon estimates, projections or other forward-looking statements. Such
forward-looking statements include any projections or estimates made by the
Company and its management in connection with the Companys business operations.
While these forward-looking statements, and any assumptions upon which they are
based, are made in good faith and reflect the Companys current judgment
regarding the direction of its business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions,
or other future performance suggested herein. Except as required by law, the
Company undertakes no obligation to update forward-looking statements to reflect
events or circumstances occurring after the date of such statements.

Such estimates, projections or other forward-looking statements
involve various risks and uncertainties as outlined below. The Company cautions
readers of this report that important factors in some cases have affected and,
in the future, could materially affect actual results and cause actual results
to differ materially from the results expressed in any such estimates,
projections or other forward-looking statements. In evaluating the Company, its
business and any investment in its business, readers should carefully consider
the following factors.

Risks Relating to the Early Stage of the Company and its
Ability to Raise Capital

The Company is at a very early stage and its success is
subject to the substantial risks inherent in the establishment of a new business
venture.

The implementation of the Companys business strategy is in a
very early stage and subject to all of the risks inherent in the establishment
of a new business venture. Accordingly, its intended business and prospective
operations may not prove to be successful in the near future, if at all. Any
future success that the Company might enjoy will depend upon many factors, many
of which are beyond the Companys control, or which cannot be predicted at this
time, and which could have a material adverse effect upon the Companys
financial condition, business prospects and operations and the value of an
investment in the Company.

---

The Company has no operating history and its business plan is unproven and may not be successful.

Although the Company' s business formed in September 2006,
  it has no commercial operations. None of its projects have proven or provable
  reserves, are built, or are in production. The Company has not licensed or sold
  any mineral products commercially and do not have any definitive agreements
  to do so. The Company has not proven that its business model will allow it to
  generate a profit.

The Company has suffered operating losses since inception and it may not be able to achieve profitability.

The Company had an accumulated deficit of $4,868,788 as of February 29, 2012 and it expects to continue to incur significant discovery and development expenses in the foreseeable future related to the completion of feasibility, development and
commercialization of its projects. As a result, it will be sustaining substantial operating and net losses, and it is possible that it will never be able to sustain or develop the revenue levels necessary to attain profitability.

The Company may have difficulty raising additional capital, which could deprive it of necessary resources.

The Company expects to continue to devote significant capital resources to fund exploration and development of its properties. In order to support the initiatives envisioned in its business plan, it will need to raise additional funds through public
or private debt or equity financing, collaborative relationships or other arrangements. Its ability to raise additional financing depends on many factors beyond its control, including the state of capital markets, the market price of its common
stock and the development or prospects for development of competitive technology or competitive projects by others. Sufficient additional financing may not be available to it or may be available only on terms that would result in further dilution to
the current owners of the Company' s common stock.

The Company expects to raise additional capital during 2012 but it does not have any firm commitments for funding. If it is unsuccessful in raising additional capital, or the terms of raising such capital are unacceptable, it may have to modify its
business plan and/or significantly curtail its planned activities. If the Company is successful raising additional capital through the issuance of additional equity, its investor' s interest will be diluted.

There are substantial doubts about the Company' s ability to continue as a going concern and if it is unable to continue its business, its shares may have little or no value.

The Company' s ability to become a profitable operating company is dependent upon its ability to generate revenues and/or obtain financing adequate to explore and develop its properties. Achieving a level of revenues adequate to support its
cost structure has raised substantial doubts about its ability to continue as a going concern. The Company plans to attempt to raise additional equity capital by issuing shares and, if necessary through one or more private placement or public
offerings. However, the doubts raised relating to the Company' s ability to continue as a going concern may make its shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any
additional capital.

Risks Related To The Company' s Business

Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, the Company faces a high risk of business failure.

Potential investors should be aware of the difficulties normally encountered by mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses,
difficulties, complications and delays encountered in connection with the exploration programs that the Company intends to undertake on its properties and any additional properties that the Company may acquire. These potential problems include
unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by the Company in the exploration of its properties may not result in the discovery of mineral deposits.
Any expenditures that the Company may make in the exploration of any other mineral property that it may acquire may not result in the discovery of any commercially exploitable mineral deposits. Problems such as unusual or unexpected geological
formations and other conditions are involved in all mineral exploration and often result in unsuccessful exploration efforts.  If the results of the Company' s exploration do not reveal viable commercial mineralization, the Company may decide
to abandon some or all of its property interests.

Because of the speculative nature of the exploration of mineral properties, there is no assurance that the Company' s exploration activities will result in the discovery of any quantities of mineral deposits on its current properties or any
other additional properties the Company may acquire.

---

The Company intends to continue exploration on its current properties and the Company may or may not acquire additional interests in other mineral properties. The search for mineral deposits as a business is extremely risky. The Company can provide
investors with no assurance that exploration on its current properties, or any other property that the Company may acquire, will establish that any commercially exploitable quantities of mineral deposits exist. Additional potential problems may
prevent the Company from discovering any mineral deposits. These potential problems include unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. If the Company is unable to establish the
presence of mineral deposits on its properties, its ability to fund future exploration activities will be impeded, the Company will not be able to operate profitably and investors may lose all of their investment in the Company.

The potential profitability of mineral ventures depends in part upon factors beyond the control of the Company and even if the Company discovers and exploits mineral deposits, the Company may never become commercially viable and the Company may
be forced to cease operations.

The commercial feasibility of an exploration program on a mineral property is dependent upon many factors beyond the Company' s control, including the existence and size of mineral deposits in the properties the Company explores, the proximity
and capacity processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental regulation. These factors cannot be accurately predicted and any one or a combination of these factors may result
in the Company not receiving an adequate return on invested capital. These factors may have material and negative effects on the Company' s financial performance and its ability to continue operations.

Exploration, development and exploitation activities are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing a material adverse effect on us.

Exploration and exploitation activities are subject to federal, provincial, state and local laws, regulations and policies, including laws regulating the removal of natural resources from the ground and the discharge of materials into the
environment. Exploration and exploitation activities are also subject to federal, provincial, state and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment.

Environmental and other legal standards imposed by federal, provincial, state or local authorities may be changed and any such changes may prevent us from conducting planned activities or may increase our costs of doing so, which would have material
adverse effects on our business. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for
pollution or other environmental damages that we may not be able to or elect not to insure against due to prohibitive premium costs and other reasons. Any laws, regulations or policies of any government body or regulatory agency may be changed,
applied or interpreted in a manner which could materially alter and negatively affect our ability to carry on our business.

Title to mineral properties and related water rights is a complex process and the Company may suffer a material adverse effect in the event one or more of its property interests are determined to have title deficiencies.

Acquisition of title to mineral properties and related water rights is a very detailed and time-consuming process. Title to, and the area of, mineral properties may be disputed. Although the Company has obtained a title opinion in respect to its
Chilean salar property interests, the Company cannot give an assurance that title to such property will not be challenged or impugned. Mineral properties sometimes contain claims or transfer histories that examiners cannot verify. A successful claim
that the Company does not have title to one or more of its properties or lack appropriate water rights could cause the Company to lose any rights to explore, develop and mine any minerals on that property, without compensation for its prior
expenditures relating to such property.

One of the Company' s material properties is located in Chile, and any material change to the laws of Chile affecting mineral properties may have a material adverse effect on the Company.

Chile is a developing country. As with any developing country, the Company will be subject to certain risks which may result from changes in Chilean law and politics, including expropriation, currency fluctuation and possible political instability
which may result in the impairment or loss of mineral concessions or other mineral rights. Changes in regulations or shifts in political conditions are beyond the control of the Company and may adversely affect its business. Obtaining legal and
accounting services in under-developed countries is difficult and may make implementation of proper controls difficult and assessment of the Company' s legal entitlements less certain. Operations may be affected in varying degrees by government
regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety.

---

Chile' s status as a developing country may make it more difficult for the Company to obtain any required exploration, development and production financing for its projects. The Company does not maintain political risk insurance.

Current global financial conditions may adversely affect the Company.

Market events and conditions, including disruptions in the international credit markets and other financial systems and the deterioration of global economic conditions, could impede the Company' s access to capital or increase the cost of
capital. These unprecedented disruptions in the current credit and financial markets have had a significant material adverse impact on a number of financial institutions and have limited access to capital and credit for many companies. These
disruptions could, among other things, make it more difficult for the Company to obtain capital, or increase its cost of obtaining capital and financing for its operations. The Company' s access to additional capital may not be available on
terms acceptable to it or at all.

The Company is also exposed to liquidity risks in meeting its operating and capital expenditure requirements in instances where cash positions are unable to be maintained or appropriate financing is unavailable. These factors may impact the ability
of the Company to obtain loans and other credit facilities in the future and, if obtained, on terms favourable to the Company. If these increased levels of volatility and market turmoil continue, the Company' s operations could be adversely
impacted and the trading price of the common stock could be adversely affected. As a result of current global financial conditions, numerous financial institutions have gone into bankruptcy or have been rescued by government authorities. As such,
the Company is subject to the risk of loss of its deposits with financial institutions that hold the Company' s cash.

Mineral concessions under Chilean law do not automatically vest title to lithium.

Under Chilean mining law, for mining concessions granted post-1979, lithium and certain other metals are technically reserved to the state of Chile for the Chilean National Nuclear Commission. As a consequence, and since the Company' s current
mineral concessions all post-date 1979, the Company must apply through the Ministry of Mines for a special operating permit that allows it to process and export lithium products, or rely on some other provision of the Chilean Mining Code to produce
lithium. A special operating permit is authorized and must be signed by the President of Chile. Although the Company is not aware of any current lithium project in Chile which upon application has not received this permit, the risk still remains
that the application which may be submitted by the Company for this purpose could be rejected. In this event the failure to secure a lithium operating permit could materially and adversely affect the ability of the Company to carry on its business.

Because the Company' s property interests may not contain mineral deposits and because it has never made a profit from its operations, the Company' s securities are highly speculative and investors may lose all of their investment in
the Company.

The Company' s securities must be considered highly speculative, generally because of the nature of its business and its stage of operations. The Company currently has exploration stage property interests which may not contain mineral deposits.
The Company may or may not acquire additional interests in other mineral properties but, except as stated herein, the Company does not have plans to acquire rights in any specific mineral properties as of the date of this report. Accordingly, the
Company has not generated significant revenues nor has it realized a profit from its operations to date and there is little likelihood that the Company will generate any revenues or realize any profits in the short term. Any profitability in the
future from the Company' s business will be dependent upon locating and exploiting mineral deposits on the Company' s current properties or mineral deposits on any additional properties that the Company may acquire. The likelihood that any
mineral properties that the Company may acquire or have an interest in will contain commercially exploitable mineral deposits is extremely remote. The Company may never discover mineral deposits in respect to its current properties or any other
area, or the Company may do so and still not be commercially successful if the Company is unable to exploit those mineral deposits profitably. The Company may not be able to operate profitably and may have to cease operations, the price of its
securities may decline and investors may lose all of their investment in the Company.

---

If we establish the existence of a mineral resource on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional
capital, we will not be able to exploit the resource, and our business could fail.

If we do discover mineral resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to explore and fully establish the extent of the resource, develop processes to extract it
and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial
operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.

Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse
impact on our company.

Mineral exploration, development and production involves many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the geological, technical and operating
hazards and risks inherent in the exploration for mineral resources and, if we discover a mineral resource in commercially exploitable quantity, our operations could be subject to all of the hazards and risks inherent in the development and
production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including
damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our company.

As the Company faces intense competition in the mineral exploration and exploitation industry, the Company will have to compete with the Company' s competitors for financing and for qualified managerial and technical employees.

The Company' s competition includes large established mining companies with substantial capabilities and with greater financial and technical resources than the Company. As a result of this competition, the Company may have to compete for
financing and be unable to acquire financing on terms it considers acceptable. We also compete with other mineral resource exploration companies for financing from a limited number of investors that are prepared to make investments in mineral
resource exploration companies. The presence of competing mineral resource exploration companies may impact on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in
competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors. We also compete with other mineral resource exploration companies for available resources,
including, but not limited to, qualified managerial and technical employees (such as professional geologists), camp staff, helicopter or float planes, mineral exploration supplies and drill rigs. If we are unable to successfully compete for
financing or for qualified employees, our exploration programs may be slowed down or suspended, which may cause us to cease operations as a company.

The Company may be exposed to environmental and occupational safety risks.

The Company' s operations use metals and other materials that may be hazardous if not handled appropriately. Inappropriate procedures or defective equipment could result in environmental damage or health risks resulting in chronic health
conditions or death. The Company could be exposed to litigation as a result of any environmental or occupational safety breaches.

The Company' s future is dependent upon its ability to obtain financing and if the Company does not obtain such financing, the Company may have to cease its exploration activities and investors could lose their entire investment.

There is no assurance that the Company will operate profitably or will generate positive cash flow in the future. The Company requires additional financing in order to proceed with the exploration and development of its properties. The Company will
also require additional financing for the fees it must pay to maintain its status in relation to the rights to the Company' s properties and to pay the fees and expenses necessary to operate as a public company. The Company will also need more
funds if the costs of the exploration of its mineral claims are greater than the Company has anticipated. The Company will require additional financing to sustain its business operations if it is not successful in earning revenues. The Company will
also need further financing if it decides to obtain additional mineral properties. The Company currently does not have any arrangements for further financing and it may not be
able to obtain financing when required. The Company' s future is dependent upon its ability to obtain financing. If the Company does not obtain such financing, its business could fail and investors could lose their entire investment.

---

The Company' s directors and officers are engaged in other business activities and accordingly may not devote sufficient time to the Company' s business affairs, which may affect its ability to conduct operations and generate revenues.

The Company' s directors and officers are involved in other business activities and serve as officers and directors of other mineral exploration companies. As a result of their other business endeavours, the directors and officers may not be
able to devote sufficient time to the Company' s business affairs, which may negatively affect its ability to conduct its ongoing operations and its ability to generate revenues. In addition, the management of the Company may be periodically
interrupted or delayed as a result of its officers'  other business interests.

Risks Relating to the Company' s Common Stock

There are a large number of unexercised share purchase warrants and stock options outstanding. If these are exercised, your interest in the Company will be diluted.

As of June 25, 2012, there were 57,749,783 shares of the Company' s common stock issued and outstanding. If all of the share purchase warrants and options that were issued and outstanding as of that date were to be exercised, including warrants
and options that are not yet exercisable, the Company would be required to issue up to an additional 15,281,773 shares of the Company' s common stock, or approximately 26% of the Company' s issued and outstanding shares of common stock on
June 25, 2012. This would substantially decrease the proportionate ownership and voting power of all other stockholders. This dilution could cause the price of the Company' s shares to decline and it could result in the creation of new control
persons. In addition, the Company' s stockholders could suffer dilution in the net book value per share.

A decline in the price of the Company' s common stock could affect its ability to raise further working capital and adversely impact its ability to continue operations.

A prolonged decline in the price of the Company' s common stock could result in a reduction in the liquidity of its common stock and a reduction in its ability to raise capital.  Because a significant portion of the Company' s operations
have been and will be financed through the sale of equity securities, a decline in the price of its common stock could be especially detrimental to the Company' s liquidity and its operations. Such reductions may force the Company to reallocate
funds from other planned uses and may have a significant negative effect on the Company' s business plan and operations, including its ability to develop new products and continue its current operations. If the Company' s stock price
declines, it can offer no assurance that the Company will be able to raise additional capital or generate funds from operations sufficient to meet its obligations. If the Company is unable to raise sufficient capital in the future, the Company may
not be able to have the resources to continue its normal operations.

Because the Company can issue additional shares of common stock, purchasers of its common stock may incur immediate dilution and may experience further dilution.

The Company is authorized to issue an unlimited number of shares of common stock, of which 57,749,783 shares were issued and outstanding as of June 25, 2012. The Company' s board of directors has the authority to cause the Company to issue
additional shares of common stock without consent of any of the Company' s stockholders. Consequently, the stockholders may experience more dilution in their ownership of the Company' s stock in the future. At its annual and special
shareholders'  meeting held on August 5, 2011, the Company' s shareholders approved the alternation of the Company' s Notice of Articles and Article to amend and increase the authorized share structure of the Company to authorize an
unlimited number of a new class of preferred shares without par value, issuable in series, with special rights and restrictions applicable to the preferred shares which permit the directors to affix specific rights and restrictions to each series
if, as and when issued.

The Company' s stock is a penny stock. Trading of its stock may be restricted by the Securities and Exchange Commission' s penny stock regulations which may limit a stockholder' s ability to buy and sell its stock.

The Company' s common stock is expected to trade at a price substantially below $5.00 per share, which will make it a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny
stock"  to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.

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The Company' s securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors" . The term
"accredited investor"  refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse.
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the
transaction and monthly account statements showing the market value of each penny stock held in the customer' s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer
orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer' s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser' s written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade the
Company' s securities. The Company believes that the penny stock rules discourage investor interest in and limit the marketability of its common stock.

FINRA sales practice requirements may also limit a stockholder's ability to buy and sell the Company' s stock.

In addition to the "penny stock"  rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority ("FINRA" ) has adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer' s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced
securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy the Company' s common stock, which may limit your ability to buy and sell the
Company' s stock.

An investor' s ability to trade the Company' s common stock may be limited by trading volume.

A consistently active trading market for the Company' s common stock may not occur on the OTC Bulletin Board. A limited trading volume may prevent the Company' s shareholders from selling shares at such times or in such amounts as they may
otherwise desire. Further, while the Company' s common shares are traded on the TSX Venture Exchange, its common shares have historically been sporadically or thinly traded on the TSX Venture Exchange.

The Company has not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.

Recent federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these
measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed.
Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors independence, audit committee oversight and the adoption of a code of ethics. While the
Company' s board of directors has formed an audit committee of which the majority are independent directors, and has adopted a set of corporate governance guidelines, the Company has not adopted a Code of Ethics and Business Conduct, and other
relevant corporate governance measures and, since its securities are not listed on a national securities exchange or NASDAQ, the Company is not required to do so. It is possible that if the Company were to adopt some or all of these corporate
governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the
absence of nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to its senior officers and recommendations for director nominees may be made by a
majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind its current lack of corporate governance measures in formulating their investment decisions.

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Because the Company will not pay dividends in the
foreseeable future, stockholders will only benefit from owning common stock if
it appreciates.

The Company has never paid dividends on its common stock and it
does not intend to do so in the foreseeable future. The Company intends to
retain any future earnings to finance its growth. Accordingly, any potential
investor who anticipates the need for current dividends from his or her
investment should not purchase the Companys common stock.

ITEM
4                      
 Information on Company

*A.*                     *History and Development*

Name

The Companys legal and commercial name is Pan American
Lithium Corp..

Principal Office

The Companys head office is located at Suite 110, 3040 N.
Campbell Avenue, Tucson, Arizona USA 85719.

The Companys telephone number is (520) 989-0031 and facsimile
number is 520 623-3326.

Corporate Information

The Company was incorporated under the laws of the Province of
British Columbia on September 18, 2006. On January 20, 2010, the Company
effected a name change to Pan American Lithium Corp. The Company is a mineral
exploration company engaged in the business of acquiring, exploring and
evaluating lithium properties in Latin America. The Company is currently listed
for trading on the TSX Venture Exchange (the Exchange) under the symbol PL
and has registered its common shares under Section 12(g) of the United States
Securities Exchange Act of 1934 by filing a Form 8-A on January 26, 2011 with
the United States Securities and Exchange Commission. It is listed under the
symbol PALTF on both the OTCQB and OTCBB Exchanges.

The Companys initial public offering in Canada was completed
on July 28, 2009 and the Company has been listed for trading on the TSX Venture
Exchange since July 28, 2009.

Important Events

On December 4, 2009, we acquired 99% of South American Lithium
Company S.A. Cerrada (Salico) which, in turn, held interests in a total of
nine lithium properties in Chile as depicted in the table below. Salico obtained
its rights in the concessions at these properties from Sociedad Gareste Ltda.
(Gareste), a Chilean limited liability company. We acquired our 99% interest
in Salico in connection with the closing of an Amended and Restated Securities
Exchange Agreement dated October 18, 2009. Pursuant to the terms of the Amended
and Restated Securities Exchange Agreement, and at the closing thereof, we
purchased 99% of the interests of Salico from the owners in consideration for us
issuing 10,494,000 common shares to such holders at a fair value of $3,148,200.
Acquisition costs also included $184,000 which is the fair value of 613,333
finders shares issued. We also agreed to pay US$50,000 to the former holder of
the property interests on signing to cover costs incurred in connection with the
formation and organization of Salico and a monthly fee of US$25,000 to
compensate general and administrative costs of the former holder from the
execution date to the closing date. The closing of the agreement occurred on
December 4, 2009.

On February 14, 2011, we entered into agreements with Garesteto
acquire interests through joint ventures in two new lithium brine projectsthe
Salar de Maricunga and the Llanta Project, and additional rights via a purchase
agreement in one existing brine projectthe Salar de Pedernalesall in Atacama
Region III, Chile. The details of these transactions are described below.

On September 14, 2011, the Company closed a private placement
with POSCO Canada, Ltd. (POSCAN). The Company issued 10,522,090 common shares
to POSCAN at a price of CDN$0.136 per common share, resulting in gross proceeds
to the Company of $1,431,004. Following the closing, POSCAN held 19.87% of the
issued and outstanding common shares.

The Company granted POSCAN a right until expiry on December 31,
2012 to construct a production or R&D facility, at POSCANs expense, for the
extraction of lithium or other minerals from brines at one of the Company's Chilean brine properties, on terms to be mutually agreed upon.
If POSCAN elects not to exercise the right by this date, POSCANs pre-approval
rights on certain corporate actions discussed below will terminate and the
Company will not be required to nominate a POSCAN nominee to the Companys board
at future annual general meetings.

---

In connection with the closing, the Company increased the size
of its board to four directors and appointed Mr. Hyundae Kim as a director as a
nominee of POSCAN. Mr. Kims appointment, including his Personal Information
Form, is currently being reviewed by the TSXV. The Company has agreed to
nominate the POSCAN nominee to its board at annual general meetings so long as
POSCAN owns no less than 10% of the Companys issued and outstanding common
shares and so long as POSCAN exercises its right to build the pilot plant on or
prior to December 31, 2012. During the period in which the nominee is appointed
to the Companys board, the Company will not be permitted to carry out certain
corporate actions without the prior approval of the nominee, including certain
corporate reorganizations, a sale of all assets, a change of business, the
alteration of the Companys constating documents (with the exception of the
creation of a class or series of preferred shares) and the Company incurring
debt that exceeds $1 million (except non-recourse project financing, the
issuance of convertible debt or preferred securities, or debt owed to trade
creditors or to officers, directors and consultants for unpaid salaries and
expenses).

The Company also granted POSCAN a pre-emptive right to purchase
a pro rata share of any new securities offered by the Company for such period of
time that POSCAN owns no less than 10% of the Companys issued and outstanding
common shares. Under such circumstances, POSCAN is entitled to participate in
such new offerings to maintain its percentage of common shares. Certain
issuances are exempted from the pre-emptive right such as securities issued to
insiders, consultants and employees for compensation purposes, the issuance of
common shares on the exercise of securities outstanding on the closing date of
the financing, the issuance of securities for the settlement of certain debts,
the issuance of securities to brokers, agents and finders in connection with any
financings and the issuances of securities in connection with business
combinations.

On September 23, 2011, the Company amended its Notice of
Articles to authorize a class of preferred shares without par value. Following
the amendment, the Company is authorized to issue an unlimited number of common
shares without par value and an unlimited number of preferred shares without par
value. The preferred shares may be issued in series on such terms as determined
by the directors of the Company.

On November 10, 2011, the Company engaged Zone Capital
Partners, LLC (Zone Capital) to provide financial consulting services for a
period of six months in exchange for compensation of $5,000 per month and
issuance of 300,000 3-year warrants subject to TSXV approval. The Company
amended the terms of the agreements to provide up to one million restricted
common shares of the Company in lieu of any warrants. The common shares will be
delivered to Zone on a bi-monthly basis by dividing (a) $20,000 (for each
bi-monthly period); by (b) the closing price of the Shares on the Exchange on
the last trading day of each bi-monthly period, applying the maximum discount
allowable under TSXV policies. The Shares issued under the agreement will be
subject to a 4-month hold period in accordance with the policies of the
TSXV.

On January 16, 2012, the Company closed a private placement
with Andrew Brodkey, the Companys President, Chief Executive Officer and
Director. The Company issued 1,000,000 common shares to Mr. Brodkey at a price
of CDN$0.06 per common share, resulting in gross proceeds to the Company of
$60,000.

*B.*                     *Business
Overview*

General

We currently has one set of lithium exploration properties
consisting of interests or rights to acquire interests in eleven lithium brine
salars in Atacama Region III, Chile, and an option to acquire an indirect
interest in the Cerro Prieto geothermal brine project in Baja California Norte,
Mexico. We have not yet determined whether our property interests contain
reserves that are technically or economically recoverable. The recoverability of
amounts shown for resource properties and related deferred exploration
expenditures are dependent upon the discovery of economically recoverable
reserves, confirmation of our interest in the underlying mineral claims, our
ability to obtain necessary financing to complete the development of the
resource at such property and upon future profitable production or proceeds from
the disposition thereof.

If payments to maintain exploration concessions are not
actually made in a timely manner, the concessions technically expire but titles
are not automatically lost. Chilean law provides for a grace period to make the
payments, which include some penalty interest, but (provided there has been no
overstaking) titles are not divested from the holder until and unless the
concessions are taken to auction by the government. To the extent that the
mineral concession tables below reflect that titles have reached an expiration
date, the Company has taken steps to
pay and renew such titles, or has otherwise taken steps to convert to manifestacion and mensura (described below) any concessions that have been overstaked by third-parties. If the Company is unable to renew its mineral claims, it may have a
material adverse affect on the Company' s operations.

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CHILEAN SALARS -  ATACAMA REGION III,

General

The existing portfolio of rights in the eleven properties includes surface brine lakes or surface flow at Laguna Verde, Laguna Brava and Rio de la Sal /Pedernales, and eight additional lithium brine salar projects, all located in the mineral-rich
Atacama Region III. The rights in these lithium projects cover a cumulative area in excess of 20,000 hectares. Nine of these properties are accessible by passenger car and are adjacent to serviceable roads, while two of the salars (Salar de
Wheelwright and Lagunas Jilgueros) are primarily accessible by passenger car, but require a short (under 5 km) traverse, using four wheel drive vehicles, from serviceable roads. It is believed that the salars collectively carry the potential to host
lithium in three distinct brine types: surface water, shallow and deep brines. None of these projects is past the exploration stage, and we have not yet identified reserves at any of these properties.

The following two maps depict the locations of and access to each of the nine properties in Chile Atacama Region III in which Salico owns or has rights in mineral concessions.



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We consider only the Laguna Verde property to be material as of the date of this filing.

Laguna Verde property

Location and Access

The Laguna Verde property is depicted on Property Location Map 1 above and the property map below, and at this time is the only property considered to be material by us.

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The Laguna Verde property is accessible via paved International
Highway (Camino Internacional) C31 from Copiapo (the capital of Atacama Region
III) leading northeasterly and easterly 161 kilometers to the border station at
Maricunga, then south and east 80 kilometers to Laguna Verde. The roads are all
well maintained by the local provincial authorities and accessible via 2 wheel
drive vehicles. Travel time from Copiapo to Laguna Verde is about 4 hours.
Although lithium has been identified in both the brines and the sediments in the
Laguna Verde salar, there has been no known production. There is no record or
visible sign of production of any salts from either the brines or the salar
sediments at this property. There are no physical improvements at the site other
than a small stone structure adjacent to a geothermal bathing spring on the
periphery of the surface lake.

Titles and Nature of Concessions; Royalties

Pertinent data relating to the nature of the mineral
concessions comprising Laguna Verde is contained in the following table:

MINERAL CONCESSION DATALAGUNA VERDE (UTM coordinatesWGS84
Datum)

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The Laguna Verde Project comprises 13 mineral exploration
claims, which are pedimentos, totalling 3,400 hectares. The pedimentos were
staked in April 2009, constituted earliest in November of 2009, and are valid
for two years. The pedimentos are maintained by yearly payments of approximately
U.S. $3.00 per hectare, which in the aggregate total US$10,166 per year, the
responsibility for which belongs to Salico and ultimately our company. At the
end of two years, the claims must be converted to exploitation claims. Our
intent is to pay all annual fees and hold the concessions in exploration status
for the complete period allowed under Chilean law. The claims protect the
claimant as to all mineral rights, and a right of surface access upon agreement
with the surface owner. As the surface owner at Laguna Verde is the state of
Chile, we, through Salico, will solicit a surface rights agreement with the
government of Chile at the time of and in connection with a feasibility study.

In connection with the closing of the December, 2009
acquisition of Laguna Verde and the other 8 properties, Salico granted a 2% net
smelter return royalty to the vendor on future production from Laguna Verde,
payable following commencement of commercial production, to a maximum of US$6
million. Prior to commencement of commercial production at Laguna Verde, Salico
may re-purchase one-half of this net smelter return royalty (1%) for US$2
million.

Geology and Mineralization

Laguna Verde has the following physical characteristics:

| | 1. | Altitude                    | 4350 m    
| | -- | --------------------------- | ----------
| | 2. | Catchment basin size        | 1075 km2  
| | 3. | Lake surface area           | 15 km2    
| | 4. | Annual Precipitation        | 170 mm/yr 
| | 5. | Evaporation potential       | 2000 mm/yr
| | 6. | Water temperature (surface) | 1oC       

The catchment basin draining into Laguna Verde is dominated
entirely by young andesitic and dacitic volcanic rocks. Young volcanic cones and
vents surround the entire basin, and in most instances constitute the divides
separating the basin from other valleys and nearby salars. Elevations
surrounding Laguna Verde reach 6,800 meters and more. The lake is fed by active
hot springs, and is thought to be of geothermal origin. The volcano Ojo del
Salado forms a significant and commanding divide to the south. The high
elevations around the basin are all volcanic cones and vents. Figure 1 is
illustrative of the young volcanism at Laguna Verde.

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Figure 1. View of Volcanic Cones at Laguna Verde

Lithium and associated elements (potassium, magnesium, boron,
and sodium) occur in salar brines as complex salts, fluorides, and sulfates.
Lithium also occurs as lithium dioxide. The high solubility of lithium allows
for dispersion in water of the ion Li+.

Work completed at Laguna Verde

Laguna Verde was examined in detail by the French Institut de
Recherche pour le Development (IRD) in 1995 as part of a program to evaluate the
high Andes salars for potable water. Their sample results and chemistry (in
Mg/liter) are presented below:

Smpl
      PH
      Cl
      SO4
      B
      Si
      Na
      K
      Li
      Ca
      MgLav 1
    7.56
    92500
    13800
    513
    13.3
    57700
    5400
    204
    533
    2380(8+2+3)E
    7.89
    90800
    14700
    494
    13.7
    56400
    7660
    318
    441
    1960Lav-8E
    7.79
    83400
    21600
    674
    16.2
    58400
    6400
    229
    674
    532Lav-3E
    7.63
    100000
    6500
    594
    14.1
    50200
    7260
    453
    2210
    5140Lav-6E
    8.98
    84800
    20200
    358
    18.3
    61000
    6360
    186
    9.23
    32.3Lav-7E
    9.77
    75500
    21200
    562
    31.5
    60000
    7200
    185
    0.526
    1.80Lav-2E
    10.1
    41200
    23300
    396
    54.7
    62100
    5950
    155
    0.372
    1.33


In March of 2010, we undertook a work program at Laguna Verde
to determine the depth and volume of the surface lake. Based on bathymetric
measurements taken from a Zodiac boat, water depths vary from 0.5m to in excess
of 60m, and the mean lake depth is 33m. The lake is perennial and water levels
vary seasonally by only a half meter or so, judging by stone wall construction
and thermal spring usage by travelers through the area.

We initiated a comprehensive lake brine sampling program on our
Laguna Verde Project in April 2010. This sampling program, conducted under the
supervision of John Hiner, L.P. Geo, an independent professional geologist,
entailed the collection of brine lake water samples from surface and at various
depths on a pre-established grid at 500 m or less designed in consultation with
Mr. Hiner. Access to sample points was achieved using a 4m Zodiac boat. Grid
sampling across the lake was undertaken for the purpose of determining lateral
and vertical distribution of lithium and other elements in the lake waters. The
sample points were located by GPS and samples were then taken at surface and at
depth.

Samples taken at depth were collected using a Van Dorn Vertical
Water Sampling Bottle  Type Beta Plus. This device is a weighted elongated
cylinder with valves at the top and bottom that allow the device to pass through
water to the desired depth. On reaching the targeted depth a weighted control is
sent down the line and on reaching the device triggers the closure of the
valves, thereby collecting an undisturbed water sample at depth. Due to high
winds and rough water collection at depths greater than 15m were not possible
due to the angle on the sampler control lines caused by wind drifting which made
closing the sampler valves difficult.

Sample Preparation, Analyses and Security

For the grid sample program, water samples were collected in
sterilized plastic bottles. The bottles were labeled with felt marker pen,
double-rinsed and submerged to collect a sample with as little entrained oxygen
as possible. None of the samples were acidized, as all of the waters had pH
levels above 7.0, and because the high solubility of lithium in water renders such buffering unnecessary. Sample locations
were noted by GPS and noted in field notebook. Where possible, photographs of
sample sites were taken.

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No employee, officer, director, or associate of our company or
Salico was involved in the selection of samples to be taken, the collection of
the samples, or the preparation of the samples. For the grid sampling program,
independent contractors were interviewed, selected, and trained by Mr. Hiner,
who was on site during sample collection. The samples remained in the possession
of Mr. Hiner until delivered to a common carrier overnight shipping facility in
Copiapo, Chile

Brine samples were collected in sterilized plastic bottles
under the supervision of Mr. Hiner, sealed on site, and shipped by common
carrier to an independent certified laboratory--ALS Chemex Environmental
laboratories in Burnaby, British Columbia, Canada, for analysis. The samples
were analyzed directly as submitted by inductively coupled plasma-mass
spectrometry (ICP). Any over limit results were subsequently reanalyzed by ICP
methods using higher limit standards. Two control samples consisting of
distilled water were inserted into the sample stream. No geochemical lithium
standard is yet available commercially in either liquid or solid form.

A total of 78 brine samples were collected at Laguna Verde, two
of which were control samples of distilled water. All samples were tested using
ICP for total dissolved solids and a suite of 30 metals. Sulphates were analyzed
via a turbid metric method.

The average chemical composition (in mg/l) of elements of
interest at Laguna Verde is shown in the following table.

Element/Metal
      Detection Limits
        (mg/l)
      Laguna VerdeAverage
        Grade
      Standard
        DeviationBoron mg/l
      10
      522
      15Calcium mg/l
      5
      899
      24Lithium mg/l
      1
      213
      14Magnesium mg/l
      10
      2545
      76Potassium mg/l
      200
      4881
      299Sodium mg/l
      200
      64887
      3742Total Dissolved Solids
      200
      194052
      8042Sulfates (SO4)
      50
      15985
      569Density
      
      1.14
      0


An analysis of the values for lithium, magnesium and potassium
throughout the lake and at depth indicated that the standard deviation of no
more than 6% of the average grade at Laguna Verde. The density of the lake
waters was found to be constant from surface to a depth of 15m at 1.14 and
consequently there did not appear to be any notable increase amount of dissolved
solids or grades of metals with depth.

The results of this sampling program compare favorably with
water chemistry results taken by IRD in the 1990s, supporting the proposition
that water chemistry is consistent over time.

Laguna Verde has no known reserves reportable under US
securities laws, and the programs carried out on the property to date have been
simply exploratory in nature. However, on June 14, 2010, we filed on SEDAR a
National Instrument 43-101 technical report, compliant with Canadian law, for an
inferred resource estimates for our Laguna Verde property. The inferred resource
estimate was determined using a volumetric calculation for water volume in the
lake, and calculations of contained metals and elements based on average grades.
The following criteria were utilized:

- The surface area of the lake was established by both polygonal method, and
  confirmed by planimetric measurement to be 15.2 square kilometers.
- The mean average depth of the lake was determined by a bathymetric survey
  using a weighted rope line to be 33 meters with a maximum measured depth of 60
  meters.
- Based on the results of 78 samples, lithium and potassium values are
  consistent throughout the lake. Average grades have a standard deviation of 14
  mg/l for lithium and 299 mg/l for potassium, a difference of +/- 7%. The
  brines are uniformly consistent based on available data. Therefore the average
  grades for Li of 213 mg/l and K of 4881 mg/l were used over the total volume.
- Spacing of sample points were on a grid at an interval of 500 m between
  points. At each sample point vertical samples were taken.

---

The formula used for calculating lithium carbonate equivalent is 1 tonne of lithium metal equals 5.285 tons of lithium carbonate. The formula used for calculating potash equivalent is 1 tonne of potassium metal equals 1.910 tonnes of potassium
chloride. Industrial markets ordinarily trade lithium and construct off take agreements as lithium carbonate equivalent. Likewise, potassium chloride is generally the stated media for both spot sales and off take agreements. It is therefore common
in initial resource evaluations by industrial mineral companies to utilize these terms as part of the measurement of tonnages of product under evaluation.

The inferred resource estimate at the Laguna Verde surface lake was computed at an average grade of 212.40 mg/litre to be 512,960 tons of lithium carbonate equivalent, and at an average potassium grade of 4,881 mg/litre computed to be 4,223,134 tons
of potassium chloride equivalent. For more information, see the technical report filed on SEDAR on June 14, 2010. Cautionary Note to U.S. Investors-The United States Securities and Exchange Commission permits U.S. mining companies, in their
filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms in our press releases, on its website, and herein such as "measured,"
"indicated,"  or "inferred"  "resources, which the SEC guidelines strictly prohibit U.S. registered companies from including in their filings with the SEC. U.S. investors are urged to consider closely the disclosure in
this Annual Report.

Exploration Status, Costs and Budget

We have completed our initial exploration efforts, described above, which have resulted in the calculation of a Canadian law-compliant inferred resource estimate at Laguna Verde for contained tonnes of both lithium carbonate equivalent and potassium
chloride equivalent. Costs incurred in connection with this exploration and calculation totaled approximately US$185,000.

The sequential phases of investigation for Laguna Verde are (1) a scoping study to select the optimal processes through which to recover lithium and other metals from the lake brines, followed by (2) a pre-feasibility study to evaluate preliminary
economics for the selected process methodology, and (3) a full, bankable feasibility study accompanied by final exploration and reserve calculations, initial process engineering and permitting. Estimated costs for each of these phases are as
follows:

- Scoping Study—US$300,000
- Pre-Feasibility Study—US$1,700,000
- Full Feasibility, Permitting, etc.—US$8 million

Upon successful permitting and production of a bankable feasibility study, we anticipate that, subject to available financing, we would engineer and construct the facilities and improvements reflected by the feasibility study.

On September 29, 2010 and October 4, 2010, we closed two private placement financing for total gross proceeds of CDN$814,931. On June 16, 2011, we completed a private placement financing for total gross proceeds of $611,500. On September 14,
2011, we closed a private placement for total gross proceeds of $1,431,004.  On January 16, 2012, we closed a private placement for total gross proceeds of $60,000.We intend to use some portion of the proceeds from these financings
for scoping and the commencement of pre-feasibility studies at Laguna Verde, and the additional exploration, but this work has yet to commence.

Improvements, Infrastructure and Utilities

Road access to the Laguna Verde salar property is reflected in the maps found above.

Power transmission lines, on the Chilean electric power grid, are closest at Maricunga, and on a straight-line are approximately 50 km from the project. Should the costs to extend power lines to the property prove not to be economical, we would
either (1) import diesel fuel which can be stored on-site in tanks, (2) import compressed natural gas which can be stored on-site in tanks, or (3) investigate the use of solar power which can be generated on site.

Water-containing lithium brines are expected to be drawn directly from the Laguna Verde Lake as operational process feed. To the extent that fresh water is needed for operations, we will investigate during the scoping study the use of a reverse
osmosis/membrane circuit, vapor condensers, or other technology to generate fresh water while simultaneously upgrading the metal concentration of the brines.

---

Permitting and Environmental Issues at Laguna Verde

The Laguna Verde project is expected to have minimal impact on
any existing community or significant environmental parameter. No towns or
populated areas fall within the boundaries of the property and the nearest
significant community is Inca de Oro, which is over 38 km to the southwest and
located in a separate and distinct hydrologic basin. The area in the vicinity is
unpopulated, and in general any transient local residents have a long history of
subsistence living from transient goat herding. In general the local communities
have a very favorable attitude towards mining and resource extraction,
particularly in terms of the possibility of future employment. Laguna Verde is
located in an isolated setting far from any significant population, and a
Declaration (DIA) is not required at the present stage of exploration whereby
the existence of potentially economic mineralization or an ore body is still
being determined by phased exploration efforts.

There is no record of any exploration work having been
performed in this area in the past. There is a thermal spring on the shore of
Laguna Verde that has been used locally for recreational soaking and other
activities, and stone fences have been constructed as a shield from the
prevalent winds in the area. There are no permanent structures or other
facilities at the lake. Because there is no requirement by the Chilean
regulatory agencies regarding the reclamation of such workings by subsequent
lessees, there is no known environmental liability associated with the
claims.

We have applied for water exploration permits for the Laguna
Verde project. At present, there are no other third-party applications pending
for water rights or permits at this property.

Economic and Market Factors

As per our technical report filed on SEDAR, the average
chemical composition of lithium at Laguna Verde is 212.40 mg/liter. Several
lithium brine operations in different countries, utilizing conventional solar
evaporation recovery circuits, are economically profitable and currently active
today, processing brines with lithium grades comparable to Laguna Verde. One
such operation is the Chemetall-Foote brine facility at Silver Peak, in the
Clayton Valley of Nevada, which pumps and processes underground brines which
contain lithium grades as low as 60 mg/liter and an average grade of around 240
mg/liter, and which has been operating since 1967. The current price for lithium
carbonate is U$ 5,120/tonne, and the average price on long-term contracts for
the last 3 years has been in excess of US 5,000/tonne of lithium carbonate.

We intend to evaluate, through a scoping study, the optimal
processing technologies to utilize for recovering lithium from brines at Laguna
Verde at a targeted rate of 10,000 tonnes/year of lithium carbonate equivalent.
These will include an analysis of conventional solar evaporative methodology
(which has average lithium recoveries at around 40%), newer, commercially
available ion exchange technology, which can achieve higher lithium recoveries,
and processes for the increasing the grade of lithium and other metals in
brines. Lithium recovery through two separate conventional solar evaporation
pond operations at the Salar de Atacama, located several hundred kilometers to
the north of Laguna Verde, are understood to be in the operating cost range of
US$1500/tonne lithium carbonate. These facilities, owned and managed
independently by SQM and Chemetall, collectively produce over 60,000 tonnes/year
of lithium carbonate equivalent.

Rio de la Sal/Pedernales

The Rio de la Sal/Pedernales property is depicted on Property
Location Map 1 above. We do not currently consider this property to be material.

Titles and Nature of Concessions; Royalties

Pertinent data relating to the nature of the mineral
concessions comprising Rio de la Sal/Pedernales is contained in the following
table:

MINERAL CONCESSION DATARIO DE LA SAL/PEDERNALES (UTM
coordinatesWGS84 Datum)

---



In connection with the closing of the December, 2009
acquisition of 4 pedimentos at the Rio de la Sal/Pedernales and the other 8
properties, Salico granted a 2% net smelter return royalty to the vendor on
future production from the property, payable following commencement of
commercial production, to a maximum of US$6 million. Prior to commencement of
commercial production at Rio de la Sal/Pedernales, Salico may re-purchase
one-half of this net smelter return royalty (1%) for US$2 million.

On April 30, 2012, the Company entered into a definitive
agreement with Sociedad Gareste, Limitada (Gareste) for the acquisition of 15
additional exploration concessions totaling 4,200 hectares, plus water rights
applications at the Pedernales salar owned by Gareste. The mineral concessions
covered by this agreement are denoted with an asterisk in the table above. In
connection with the entry into of the definitive agreement, the Company issued 2
million common shares to Gareste and granted a 2% NSR to Gareste, capped at US$6
million, one-half of which can be repurchased by Pan American for US$2 million
prior to commercial production.

Geology, Geochemistry and Exploration Justification

The mineral concessions owned by Salico and subject to the
February, 2011 Purchase Agreement cover portions of the actual Salar de
Pedernales, and parts of the Rio de la Sal stream originating from this salar.
The Salar de Pedernales is the second-largest salar in Chile. Around the year
1920, the company owning and managing the Pedernales salar constructed a tunnel
through which this salar was allowed to drain. The Rio de la Sal stream,
originating from this tunnel, then transported lithium-bearing solutions from
the salar downstream.

The French Institut de Recherché pour le Development (IRD), in
1995 as part of its potable water investigation program to evaluate the high
Andes salars, visited the Salar de Pedernales, but not the actual Rio de la Sal.
Results of their sampling program at the Salar de Pedernales demonstrated
average lithium values of 326 ppm. Subsequently, in connection with an initial
NI 43-101 Technical Report we filed on SEDAR on November 13, 2009 and compliant
under Canadian law, our independent technical expert, John Hiner, L.P. Geo.,
visited the Rio de la Sal property and took four water samples from the flowing
stream. Under Mr. Hiners typical sample collection, custody and transmission
protocol, two samples were sent to and analyzed by ALS Chemex in Burnaby, B.C.,
while Mr. Hiner hand-transported two others to Exact Scientific in Bellingham,
Washington for analysis. These samples yielded Li values as high as 391
mg/liter.

In November of 2010, the Company and Gareste jointly began a
trenching exploration program on the combined Pedernales property position. The
table below summarizes results from 12 brine samples taken from six trenches of
approximately 3 meters in depth from the concessions at the Salar de Pedernales.

---

TRENCH NO.
      SAMPLE NO.
      LI (MG/L)
      K (MG/L)
      MG/LI RATIO1
    1 2
    890 930
    8200 8700
    7.81 7.772
    1 2
    310 280
    3000 2700
    8.90 9.293
    1 2
    270 260
    2800 2800
    7.70 7.778
    1 2
    290 300
    2700 2800
    9.59 10.19
    1 2
    60 50
    <500 <500
    10.4 11.810
    1 2
    1070 1070
    8100 8000
    9.32 9.26


Based on these results which show high lithium and potassium
grades, we have re-evaluated our exploration priorities and intend, pending
adequate funding, to design and implement an exploration program at this salar
during calendar year 2012. On June 16, 2011, we completed a private placement
financing for total gross proceeds of $611,500, some of the proceeds of which
will be used in connection with the exploration program at Pedernales.

Laguna Brava property

Location and Access

The Laguna Brava property is depicted on Property Location Map
1 above and the property map below. Although we have expended some exploration
effort at this property, at this time, we do not consider Laguna Brava to be
material.



The Laguna Brava Salar is situated near Maricunga, a noted
mining district, in the same general region of the central Andes, near the
Argentine border. The property is accessible via paved International Highway
(Camino Internacional) C31 from Copiapo, leading north-easterly and easterly 161
kilometres to the border station at Maricunga. At the north end of the Salar Maricunga, provincial
road C173 leads north to about 40 kilometres to the southwest side of the Salar
Pedernales. Numerous access and bulldozer drill roads lead easterly around the
south end of Pedernales approximately 50 kilometers to Piedra Parada. Laguna
Brava is reached from Piedra Parada by traveling about 15 kilometers on dirt
roads leading east and northeast across young volcanic terrain to the closed
basin that constitutes Laguna Brava. The project is accessible via 2 wheel drive
vehicles. Travel time from Copiapo to Laguna Brava is about 4 hours. Although
lithium has been identified in the brines in the Laguna Brava salar, there has
been no known production.

---

Titles and Nature of Concessions; Royalties

Pertinent data relating to the nature of the mineral
concessions comprising Laguna Brava is contained in the following table:

MINERAL CONCESSION DATALAGUNA BRAVA (UTM coordinatesWGS84
Datum)



The Laguna Brava Project is comprised of 16 mineral exploration
claims, which are pedimentos, totalling 4,400 hectares. Seven of the pedimentos
were originally staked in May 2009, constituted in January of 2010, and before
expiration, were converted to manifestaciones in January 2011. In April 2010,
Salico staked an additional nine pedimentos to cover the remainder of the Laguna
Brava basin, which concessions expire in September of 2012. The pedimentos are
maintained by yearly payments of approximately U.S. $3.00 per hectare, and
mensuras roughly three times that amount, the responsibility for which belongs
to Salico and ultimately Pan American. At the end of two years all pedimentos
must be either converted to mensuras/exploitation claims or restaked. Our
intention is to pay all annual fees and hold the concessions in exploration
status for the complete period allowed under Chilean law. The claims protect the
claimant as to all mineral rights, and a right of surface access upon agreement
with the surface owner. As the surface owner at Laguna Brava is the state of
Chile, we will solicit a surface rights agreement with the government of Chile
at the time of and in connection with a feasibility study.

In connection with the closing of the December, 2009
acquisition of Laguna Brava and the other 8 properties, Salico granted a 2% net
smelter return royalty to the vendor on future production from Laguna Brava
(which agreement extends to all after-acquired claims), payable following
commencement of commercial production, to a maximum of US$6 million. Prior to
commencement of commercial production at Laguna Brava, Salico may re-purchase
one-half of this net smelter return royalty (1%) for US$2 million.

Geology and Mineralization

Laguna Brava has the following physical characteristics:

Salar Name
      Catchment Basin size
      Salar Size
      Lake area
      Annual Precip.
      Evaporation Potential
      Water Temp.L. Brava
    545 km2
    unknown
    8.2km2
    140mm/yr
    2000 mm/yr
    -2oC


---

The Laguna Brava salar is situated in a region of young and
active volcanoes and obvious geothermal activity. The entire catchment area is
dominated by Cenozoic dacite and andesite volcanic rocks, many of which have
been altered by hydrothermal fluids associated with volcanism. The lake is fed
by active hot springs, which appears to be the principal source of lithium,
potassium, and other metallic salts. Seasonal runoff probably contributes a
small component of the metals budget via leaching and groundwater inflow. To the
immediate north of Laguna Brava are two smaller lakes, neither of which exhibit
geochemically anomalous lithium or potassium content. We believe that the
geothermal sources that feed Laguna Brava occur in close proximity to the
lake.

Mineralization at Laguna Brava consists of lithium in brine.
The brine is rich in sodium, potassium, and sulphate, as well as chloride.
Lithium occurs in the brine as lithium chloride, as a component of potassium
chloride, and as a component of other complex soluble salts.

Work completed at Laguna Brava

Laguna Brava was examined in detail by the French Institut de
Recherche pour le Development (IRD) in 1995 as part of a program to evaluate the
high Andes salars for potable water. Their sample results and chemistry (in
Mg/liter) are presented below:

Smpl No.
      pH
      Alk
      Cl
      SO4
      B
      Si
      Na
      K
      Li
      Ca
      MgBra-2EQ
    7.59
    5.2
    63700
    10200
    550
    15.8
    40000
    2300
    231
    787
    1750BRA-1E
    7.58
    4.87
    63100
    10100
    809
    19.5
    38200
    2570
    244
    1380
    1970BRA-3E
    7.71
    6.12
    49600
    23900
    911
    21.1
    38000
    3160
    275
    392
    1400


We initiated a comprehensive lake brine sampling program at the
shallow Laguna Brava surface lake in April 2010. This sampling program,
conducted under the supervision of John Hiner, L.P. Geo, an independent
professional geologist, entailed the collection of brine lake water samples from
surface and at various depths on a pre-established grid designed in consultation
with Mr. Hiner. Access to sample points was achieved on foot and by using a 4m
Zodiac boat. Grid sampling across the lake was undertaken for the purpose of
determining lateral and vertical distribution of lithium and other elements in
the lake waters. The sample points were located by GPS and samples were then
taken at surface and at depth. Samples taken at depth were collected using a Van
Dorn Vertical Water Sampling Bottle  Type Beta Plus. This device is a weighted
elongated cylinder with valves at the top and bottom that allow the device to
pass through water to the desired depth. On reaching that depth a weighted
control travels down the line and on reaching the device closes the valves
thereby collecting an undisturbed water sample at depth.

Sample Preparation, Analyses and Security

For the grid sample program, water samples were collected in
sterilized plastic bottles. The bottles were labeled with felt marker pen,
double-rinsed and submerged to collect a sample with as little entrained oxygen
as possible. None of the samples were acidized, as all of the waters had pH
levels above 7.0, and because the high solubility of lithium in water renders
such buffering unnecessary. Sample locations were noted by GPS and noted in
field notebook. Where possible, photographs of sample sites were taken.

No employee, officer, director, or associate of our company or
Salico was involved in the selection of samples to be taken, the collection of
the samples, or the preparation of the samples. For the grid sampling program,
independent contractors were interviewed, selected, and trained by Mr. Hiner,
who was on site during sample collection. The samples remained in the possession
of Mr. Hiner until delivered to a common carrier overnight shipping facility in
Copiapo, Chile

Brine samples were collected in sterilized plastic bottles
under the supervision of Mr. Hiner, sealed on site, and shipped by common
carrier to an independent certified laboratory--ALS Chemex Environmental
laboratories in Burnaby, British Columbia, Canada, for analysis. The samples
were analyzed directly as submitted by inductively coupled plasma-mass
spectrometry (ICP). Any over limit results were subsequently reanalyzed by ICP
methods using higher limit standards. Two control samples consisting of
distilled water were inserted into the sample stream. No geochemical lithium
standard is yet available commercially in either liquid or solid form.

---

Thirty-two samples were collected at Laguna Brava, as well as
two control samples. Analysis of the values for lithium, magnesium, and
potassium throughout the lake indicates that the standard deviation for each of
the elements is no more than 7%, indicating very homogeneous concentration
levels in lake waters. The density of the lake waters was determined to be
constant from surface to bottom at 1.14 (the measurement of mass per unit
volume). Consequently there does not appear to be any notable increase amount of
dissolved solids or grades of metals with depth. The average chemistry (in mg/l)
is shown in the table below.

Element/Metal
      Detection Limits mg/l
      Laguna BravaAverage Grade
      Standard DeviationBoron mg/l
      10
      699
      42Calcium mg/l
      5
      1074
      38Lithium mg/l
      1
      310
      23Magnesium mg/l
      10
      2367
      138Potassium mg/l
      200
      2997
      197Sodium mg/l
      200
      54128
      3834Total Dissolved Solids
      200
      162875
      9954Sulfates (SO4)
      50
      12866
      855Density
      
      1.12
      0


Laguna Brava has no known reserves reportable under US
securities laws, and the programs carried out on the property to date have been
simply exploratory in nature. However, on June 14, 2010, we filed on SEDAR a
National Instrument 43-101 technical report, compliant with Canadian law, for
inferred resource estimates for lithium carbonate equivalent and potassium
chloride equivalent for the shallow surface lake at the Laguna Brava property.
The inferred resource estimates were determined using a volumetric calculation
for water volume in the lake, and calculations of contained metals and elements
based on average grades. Since the estimates derived for the shallow surface
lake are relatively nominal and we do not have any information as to the
underground brine potential of this salar, we do not consider the Laguna Brava
property to be material at this time. However, this position could change if and
as more exploration of the underground brine potential is undertaken at Laguna
Brava. At the current time, there are no plans for any additional exploration at
Laguna Brava.

Salar de Maricunga

The Maricunga salar property is depicted on Property Location
Map 1 above. We do not currently consider this property to be material.

Titles and Nature of Concessions; Royalties

Pertinent data relating to the nature of the mineral
concessions comprising the property position at the Salar de Maricunga is
contained in the following table:



On April 30, 2012, the Company entered into a joint venture
agreement with Gareste for the Salar de Maricunga. This agreement contemplates
that Pan American will perform certain tasks, issue common shares to Gareste,
and pay certain cash amounts to Gareste in order to obtain up to 80% of the
project. These amounts are set out in the following table:

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MILESTONE
      CASH PAYMENT
      SHARES
      INCREMENTAL % INTEREST
      EARNEDRegulatory approval of Agreement
    
    200,000One year from execution of Agreement
    US$100,000
    100,000Two years from execution of Agreement
    US$100,000
    100,000Three years from execution of Agreement
    US$100,000
    100,000Delivery of scoping study
    
    100,000
    10Delivery of pre-feasibility study (PFS)
    
    100,000
    20180 days after Delivery of PFS
    US$ 100,000Delivery of bankable feasibility study
      (BFS)
    
    300,000
    40180 days after Delivery of BFS
    US$ 100,000Receipt of actual funds from project debt
      financing to build production facility based on BFS
    US$1 million
    1,000,000
    10TOTALS
    US$1.5 million
    2 million
    80


The Company can earn a 70% interest in Maricunga by delivering
the three studies, paying the first three cash payments and issuing the Share as
set out in the preceding tables. The Company has the right to terminate the
earn-in at any time at its sole discretion. The Company can earn a further 10%
in the Maricunga project by providing financing for the debt portion of the
capital to build the project, and an additional 6% of the project by providing
Gareste with a full carry through production. Gareste also was granted a 2% NSR
royalty capped at US$6 million, one-half of which can be repurchased by the
Company for US$2 million prior to commercial production. All common shares
issued to Gareste will be subject to a hold period in accordance with applicable
securities laws.

Geology, Geochemistry and Exploration Justification

The Salar de Maricunga is the third-largest salar in Chile and
is a typical high Andes salar with a surface salt crust found in a closed basin,
which contains subsurface brines with lithium and other light metals occurring
as salts.

The French Institut de Recherche pour le Development (IRD), in
1995 as part of its potable water investigation program to evaluate the high
Andes salars, visited Maricunga. Results of their sampling programs for surface
waters and inflow streams demonstrated lithium values as high as 300 ppm at this
salar.

Our outside independent expert geologist, John Hiner, has
visited Maricunga but has not yet sampled the claims or has been able to
recommend an exploration program or other work at these concessions.

Piedra Parada Property

The Piedra Parada property is depicted on Property Location Map
1 above. At this time, we do not consider Piedra Parada to be material.

Titles and Nature of Concessions; Royalties

At the closing of the Amended and Restated Securities Exchange
Agreement in December of 2009, we obtained through our acquisition of Salico
contractual rights in the concessions at Piedra Parada owned by Sociedad Gareste
Ltda. (Gareste), a Chilean limited liability company. These rights include
Salicos right to extract and exploit lithium and light metals (Lithium
Rights) from the brines at Piedra Parada, Subsequent to the closing referred to
above, Gareste conveyed its rights in the underlying concessions, subject to the
Lithium Rights of Salico, to Zoro Mining Corp. (Zoro), a publicly-traded
Nevada company (OTCBB: ZORM) which shares two officers and one director in
common with our company.

The Lithium Rights of Salico pertain to the mineral concessions
at Piedra Parada owned by Zoro described in the following table:

---

MINERAL CONCESSION DATAPIEDRA PARADA (UTM coordinatesWGS84
Datum)



At the Piedra Parada salar, in connection with its receipt of
contractual Lithium Rights in the concessions, Salico granted a 2% net smelter
return royalty to the vendor, Gareste, on the proceeds from the sale of lithium
and light metals to a maximum of US$6 million. Prior to commencement of
commercial production at Piedra Parada, Salico may re-purchase one-half of the
net smelter return royalty for US$2 million. Salico is obligated to pay the
vendor a payment of US$2,000 per month as a lease and rental remittance fee, and
to cover overhead and ancillary expenses, to maintain the Piedra Parada
concessions through the exploration stage, which payments will increase to
US$5,000 per month at such time as these concessions are converted to
exploitation status. Gareste conveyed to Zoro these rights to receive payments
and other rights under the agreement with Salico for Lithium Rights, along with
the underlying concessions.

Geology, Geochemistry and Exploration Justification

Rotational block faulting associated with Andean uplift created
the framework for the creation of the closed basins that occur in the Andes.
Fault structures in the vicinity of active volcanoes provided the plumbing for
geothermal systems, whose waters contributed lithium and other elements to these
basins. High evaporation rates generally exceed inflow rates so water bodies
become playa lakes or salt flats. Piedra Parada is a typical high Andes salar
with a surface salt crust found in a closed basin, which contains subsurface
brines with lithium and other light metals occurring as salts.

Piedra Parada was examined in detail by the French Institut de
Recherche pour le Development (IRD) in 1995 as part of a program to evaluate the
high Andes salars for potable water. Results of their sampling program
demonstrated lithium values of as high as 100 ppm in surface water brine pools.
Subsequently, in connection with an initial NI 43-101 Technical Report, filed on
SEDAR by us on November 13, 2009, our independent technical expert, John Hiner,
L.P. Geo., visited the Piedra Parada salar site and took several samples at the
edges of a pool, a shallow pit, and from the inflow stream to the salar. Under
Mr. Hiners typical sample collection, custody and transmission protocol, these
samples were sent to and analyzed by ALS Chemex in Burnaby, B.C., and yielded Li
values as high as 92 ppm.

Although Mr. Hiner recommended an exploration program and
additional work at Piedra Parada, at this time, we have no plans for any
exploration at this property, and we do not consider the Piedra Parada property
to be material.

Lagunas Jilgueros Property

The Lagunas Jilgueros property is depicted on Property Location
Map 1 above. We do not currently consider Lagunas Jilgueros to be material.

---

Titles and Nature of Concessions; Royalties

Pertinent data relating to the nature of the mineral
concessions comprising Lagunas Jilgueros is contained in the following table:

MINERAL CONCESSION DATALAGUNAS JILGUEROS (UTM
coordinatesWGS84 Datum)



In connection with the closing of the December, 2009
acquisition of Lagunas Jilgueros and the other 8 properties, Salico granted a 2%
net smelter return royalty to the vendor on future production from Lagunas
Jilgueros, payable following commencement of commercial production, to a maximum
of US$6 million. Prior to commencement of commercial production at Lagunas
Jilgueros, Salico may re-purchase one-half of this net smelter return royalty
(1%) for US$2 million.

Geology, Geochemistry and Exploration Justification

Rotational block faulting associated with Andean uplift created
the framework for the creation of the closed basins that occur in the Andes.
Fault structures in the vicinity of active volcanoes provided the plumbing for
geothermal systems, whose waters contributed lithium and other elements to these
basins. High evaporation rates generally exceed inflow rates so water bodies
become playa lakes or salt flats. Lagunas Jilgueros is a typical high Andes
salar with a surface salt crust found in a closed basin, which contains
subsurface brines with lithium and other light metals occurring as salts.

Lagunas Jilgueros was examined in detail by the French Institut
de Recherche pour le Development (IRD) in 1995 as part of a program to evaluate
the high Andes salars for potable water. Results of their sampling program
demonstrated lithium values of as high as 18 ppm in surface water brine pools.
Subsequently, in connection with an initial NI 43-101 Technical Report we filed
on SEDAR on November 13, 2009, our independent technical expert, John Hiner,
L.P. Geo., visited the Lagunas Jilgueros salar site and took one water samples
at the edge of a small surface lake. Under Mr. Hiners typical sample
collection, custody and transmission protocol, this sample was sent to and
analyzed by ALS Chemex in Burnaby, B.C., and yielded a Li value of 24 ppm.

Although Mr., Hiner recommended an exploration program and
additional work at Lagunas Jilgueros, at this time we have no plans for any
exploration at this property, and do not consider it to be material.

La Laguna, Laguna Escondida, Salar Ignorado and Salar de
Wheelwright

The La Laguna, Laguna Escondida, Salar Ignorado and Salar de
Wheelwright properties are depicted on Property Location Maps 1 and 2 above. We
do not currently consider any of these properties to be material. These four
properties are summarized together in this section because we have not done any
work at or taken any samples from these sites. They are generally among the
smallest in size of the nine projects and there is minimal historical and
anecdotal information available for these properties.

Titles and Nature of Concessions; Royalties

Pertinent data relating to the nature of the mineral
concessions comprising La Laguna, Laguna Escondida, Salar Ignorado and Salar de
Wheelwright is contained in the following table:

---

MINERAL CONCESSION DATALA LAGUNA, LAGUNA ESCONDIDA, SALAR
IGNORADO AND SALAR DE WHEELWRIGHT (UTM coordinatesWGS84 Datum)



These four properties aggregate 3,100 hectares, and concessions
at each individual property total the following:

- La Laguna400 hectares
- Laguna Escondida900 hectares
- Salar Ignorado600 hectares
- Salar de Wheelwright1,200 hectares

In connection with the closing of the December, 2009
acquisition of La Laguna, Laguna Escondida, Salar Ignorado, Salar de Wheelwright
and interests in the other 5 properties, Salico granted a 2% net smelter return
royalty to the vendor on future production from each of La Laguna, Laguna
Escondida, Salar Ignorado and Salar de Wheelwright, payable following
commencement of commercial production at each of these properties, to a maximum
of US$6 million at each property. Prior to commencement of commercial production
at each of La Laguna, Laguna Escondida, Salar Ignorado and Salar de Wheelwright,
Salico may re-purchase one-half of this net smelter return royalty (1%) for US$2
million at each property.

Geology, Geochemistry and Exploration Justification

La Laguna, Laguna Escondida, Salar Ignorado, Salar de
Wheelwright are typical high Andes salars with a surface salt crust found in
closed basins, which contains subsurface brines with lithium and other light
metals occurring as salts.

The French Institut de Recherche pour le Development (IRD), in
1995 as part of its potable water investigation program to evaluate the high
Andes salars, visited each of these sites. Results of their sampling programs
for surface waters and inflow streams demonstrated lithium values as high as the
following:

- La Laguna23 ppm
- Laguna Escondida9 ppm
- Salar Ignorado14 ppm
- Salar de Wheelwright127 ppm

Our outside independent expert geologist, John Hiner, did not
visit any of these properties. Mr. Hiner has consequently not been able to
recommend an exploration program or other work at any of these properties at
this time. We currently have no plans for any exploration at any of these
projects and do not consider them to be material.

Llanta Project

On February 14, 2011, the Company signed a binding letter of
intent with Gareste to acquire interests in these concessions, and related water
rights applications, through an earn-in/joint venture arrangement to be
negotiated and executed by the parties. This agreement contemplates that Pan
American will perform certain tasks, issue common shares to Gareste, and pay
certain cash amounts to Gareste in order to obtain up to 80% of the project.
Effective
December 23, 2011, the parties extended the closing dates for Maricunga and Llanta from December 31, 2011 to June 30, 2012 and all other terms remained unchanged. The Company anticipates that it will not proceed with the acquisition of the Llanta
property.

---

Mineral Title in Chile

Chile' s current mining policy is based on legal provisions
  founded in Spanish law with modifications via a series of prior Mining Codes
  leading to the revised Mining Code of 1982. These were established to stimulate
  the development of mining and to guarantee the property rights of both local
  and foreign investors. According to the law, the state owns all mineral resources,
  but exploration and exploitation of these resources by private parties is permitted
  through mining concessions, which are granted, to any claimant to mineral rights
  who follows the required procedures. An exploration claim can be placed on any
  area, whereas the survey to establish a permanent exploitation claim ("mensura"
  ) can only be effected on "free" areas which have no valid claims
  in place or in process of constitution.

The concessions have both rights and obligations as defined by a Constitutional Organic Law as enacted in 1982. Concessions can be mortgaged or transferred and the holder has full ownership rights and is entitled to obtain the rights of way for
exploration and exploitation. The concession holder has the right to use, for mining purposes, any water flows which infiltrate any mining workings. In addition, the concession holder has the right to defend his ownership against state and third
parties. An exploration concession is obtained by a claims filing and includes all minerals that may exist within its area. Exploration and exploitation mining rights in Chile are acquired in the following stages:

Pedimento: A pedimento is an initial exploration claim whose position is well defined by UTM coordinates which define north-south and east-west boundaries. The minimum size of a pedimento is 100 hectares and the maximum is 5,000 hectares with
a maximum length-to-width ratio of 5:1. The duration of validity is for a maximum period of 2 years from the date of constitution, however at the end of this period it may a) be reduced in size by at least 50% and renewed for an additional 2 years
or b) entered in the process to establish a permanent claim by converting to a "manifestation" . New pedimentos are allowed to overlap with pre-existing ones; however the pedimento with the earliest filing date always takes precedence,
providing the claim holder continues the process of constitution in accordance with the Mining Code and the applicable regulations. Pedimentos are maintained by yearly payments of approximately U.S. $3.00 per hectare. If payments to maintain
pedimentos are not actually made in a timely manner, the concessions technically expire but titles are not automatically lost. Chilean law provides for a grace period to make the payments, which includes some penalty interest, but (provided there
has been no overstaking) titles are not divested from the holder until and unless the concessions are taken to auction by the government. To the extent that the mineral concession tables above reflect that titles have reached an expiration date, the
Company has taken steps to pay and renew such titles, or has otherwise taken steps to convert to manifestacion and  mensura (described below) any concessions that have been overstaked by third-parties.

Manifestacion: Before a pedimento expires, or at any stage during its two year life, it may be converted to a manifestacion which lasts for 220 days.

Mensura: Prior to the expiration of a manifestacion, the owner of a manifestacion must request a survey ("mensura" ). After acceptance of the "Survey Request"  (solicitud de Mensura), the owner has approximately 12
months to have the claim surveyed by a government licensed surveyor. The surrounding claim owners may witness the survey, which is subsequently described in a legal format and presented to the National Mining Service ("SERNAGEOMIN" ) for
technical review which includes field inspection and verification. Following the technical approval by SERNAGEOMIN, the file returns to the judge of the appropriate jurisdiction who must dictate the constitution of the claim as a
"mensura"  (equivalent of a patented claim in the United States). Once constituted, an abstract describing the claim is published in Chile' s official mining bulletin, which is published weekly, and 30 days later the claim can be
inscribed in the appropriate Mining Registry (referred to as "Conservador de Minas" ).

Once constituted, a "mensura"  is a permanent property right, with no expiration date. So long as the annual fees (referred to as "patentes" ) are paid in a timely manner, (from March to May of each year) clear title and
ownership of the mineral rights is assured in perpetuity. Currently, the patentes are the equivalent of US$7.33 per hectare per year. Failure to pay the annual patentes for an extended period can result in the claim being listed for
"remate" , which is an Auction Sale, wherein a third party may acquire a claim for the payment of back taxes owed plus a penalty payment. In such a case, the claim is included in a list published 30 days prior to the Auction and the owner
has the possibility of paying the back taxes plus penalty and thus removing the claim from the Auction List.

Mineral concessions under Chilean mining law provide for direct exploitation of mineral salts like potassium, magnesium, calcium, and sodium. Under Article 7 of the Chilean Mining Code, lithium, uranium, and thorium are technically reserved to the state of Chile for the Chilean
National Nuclear Commission. As a consequence, under Articles 8 through 10 of
the Chilean Mining Code, there are three alternative approaches, under each of
which Salico could produce and market lithium minerals:

---

| | 1. | Salico can secure through the Ministry of Mines a special
      operating permit that allows it to process and export lithium products.
      This permit is authorized and signed by the President of Chile. This
      procedure has been used for all contracts under which existing lithium
      production companies operate in Chile. We are not aware of any lithium
      exploitation project wherein the special operating permit was not granted.
      Salico expects to apply for and receive such special permits on its
      projects that are subsequently shown to be economically feasible. We
      consider this special operating permit scenario to be a reasonable
      expectation, given prior precedents set by Soquem Inc., Chemetall Foote
      Corp, and other lithium operations in Chile, all of which operate under
      the special permit process.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 2. | Alternatively, Salico may process lithium as a by-product
      in a conventional salt recovery circuit. The lithium products must then
      offered to the Chilean National Nuclear Commission, which then must elect
      whether or not to take delivery. If the Commission decides not to take
      delivery, then by default Salico will be at liberty to commercialize the
      lithium products with third parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 3. | If the Commission elects to take delivery of the lithium
      products under scenario 2, Salico is obligated to deliver the lithium at
      its cost. Before taking delivery, however, the Commission is required to
      pay, in advance, for all infrastructure and operational costs related to
      the separation and delivery of the lithium product. In a typical lithium
      recovery system, where evaporation ponds are used to sequentially separate
      out various non-lithium salts, and where lithium is the last salt
      processed, the Commission would have to pay a large portion of the
      infrastructure and operational costs, resulting in recovery of all
      non-lithium by- products at a drastically reduced capital and operational
      cost to Salico.                                                                                    

We are not aware of any instance whereby the Commission has
required delivery of lithium or of any research or development by the government
of Chile that would require the acquisition and use of lithium. We do not know
of any special appropriation or line-item in the national Chilean budget that
would allow for the Commission to purchase lithium and pay for corresponding
infrastructure and operational costs.

Permitting, Environmental and Water Issues in Chile

The following summary is based upon Chiles Environmental Law
19.300 and the Regulations regarding environmental impact studies, as posted on
the web site of Chiles Regional Commission for the Environment (CONAMA)
(http://www.conama.cl/portal/1255/channel.html).

Chiles environmental law (referred to as Law No 19.300),
which regulates all environmental activities in the country, was first published
on March 9th, 1994. An exploration project or field activity cannot be initiated
until its potential impact to the environment is carefully evaluated. This is
documented in Article 8 of the environmental law and is referred to as the
Sistema de Evaluación de Impacto Ambiental (SEIA).

The SEIA is administered and coordinated on both regional and
national levels by the Comisión Regional del Medio Ambiente (COREMA) and the
Comisión Nacional del Medio Ambiente (CONAMA), respectively. The initial
application is generally made to COREMA, in the corresponding region where the
property is located, however in cases where the property might affect various
regions the application is made directly to the CONAMA. Various other Chilean
government organizations are also involved with the review process, however most
documentation is ultimately forwarded to CONAMA, which is the final authority on
the environment and is the organization that issues the final environmental
permits.

There are two types of environmental review; an Environmental
Impact Statement (Declaración de Impacto Ambiental, or DIA), and an
Environmental Impact Assessment (Evaluación de Impacto Ambiental, or EIA). As
defined in the SEIA, a Declaration (DIA) must be prepared prior to starting
detailed drilling for a mining project (defined as the stage of reducing
uncertainty in the quantification of mineral resources and for purposes of
defining a mining plan). The regulations provide an exemption from the need to
prepare a DIA during the exploratory stage when the extent of the ore body is
being determined. A DIA is prepared in cases when the applicant believes that
there will be no significant environmental impact or social controversy as a
result of the proposed drilling and advanced exploration activities. The
potential impacts include areas such as health risks, contamination of soils,
air and/or water, relocation of communities or alteration of their ways of life,
proximity to endangered areas or archaeological sites, alteration of the
natural landscape, and/or alteration of cultural heritage sites. The DIA will
include a statement from the applicant declaring that the project will comply
with the current environmental legislation, and a detailed description of the
type of planned activities, including any voluntary environmental commitments
that might be completed during the project.

---

For any detailed drilling phase, a DIA will be required. A full
Environmental Impact Study (EIA) will only be required in connection with
permitting process when the project moves forward to approval for construction.
The EIA report is much more detailed and includes a table of contents, an
executive summary, a detailed description of the design of the project
facilities and operating parameters, a program for compliance with the
environmental legislation, a detailed description of the possible impacts and an
assessment of how they would be dealt with and repaired, a baseline study, a
plan for compensation (if required), details of a follow-up program, a
description of the EIA presentation made to COREMA or CONAMA, and an appendix
with all of the backup documentation. Once an application is made, the review
process by COREMA or CONAMA will take a maximum of 120 days. Question and answer
cycles typically delay this process. After the basic environmental approval is
given a number of construction/operating permits may be granted by the
appropriate authorities allowing the mine development and facilities
construction to commence. If, however, COREMA or CONAMA comes back with
additional questions or deficiencies, an equal period of time is granted to the
applicant to make the appropriate corrections or additions. Once re-submitted
and a 60 day period has elapsed, if no further notification from COREMA or
CONAMA is received, the application is assumed to be approved.

Presentation of a pre-feasibility or scoping study to the
General Direction of Waters (DGA) that indicates the scope of the project and
related criteria are a requirement in order to obtain final water usage permits
for a project. These studies also determine which of the projects require
consumptive water usage permits, versus non-consumptive water usage permits.

Under the Chilean mining law, mineral concessions carry the
right to exploit all potential surface and subsurface mineral assemblages
including rock, salt crusts, muds, clays, unconsolidated and consolidated
erosional material and sediments, and other salt depositional complexes.
Processing of brines and other waters contained within the Pan American mineral
concessions will require additional permits as granted by the Chilean General
Direction of Waters, which has a Regional office in Copiapo.

OPTION TO ACQUIRE ESCONDIDAS  MEXICO

On December 18, 2009, we entered into a Share Option Agreement
(the Option Agreement) with Escondidas Internacional S.A. de C.V., a
privately-held Mexican corporation (Escondidas) and the shareholders of
Escondidas. Following the entry into the option agreement, the shareholders
granted an option to us to acquire 76% of the issued and outstanding shares of
Escondidas. The primary asset of Escondidas is a joint venture and development
agreement with CPI Internacional S.A. de C.V., a privately-held Mexican
corporation (CPI), whereby CPI and Escondidas agreed to jointly process
lithium and precious metals in the Cierro Prieto geothermal brine concessions
that are owned by CPI and located in Baja California, Mexico, roughly 30 km
south of the city of Mexicali.

Effective March 29, 2010, the parties extended the termination
date of the Option Agreement to June 30, 2010. On June 30, 2010 the parties
extended the termination date of the Option Agreement to October 31, 2010 and
substantially changed the terms of the agreement to those reflected above. On
October 28, 2010 we extended the termination date of the Option Agreement to
April 30, 2011 and all other terms remained unchanged. On April 30, 2011, the
Company extended the termination date of the Option Agreement to October 31,
2011 and reduced the amount payable monthly to US$1,000. On October 31, 2011, we
extended the termination date of the Option Agreement to April 30, 2012. The
closing date for the Option Agreement has not been extended and the Company
anticipates that it will not complete the acquisition of Escondidas.

*C.*                     *Organizational Structure*

The Company currently owns 99% of South American Lithium
Company S.A. Cerrada, a company governed by the laws of Chile.

*D.*                     *Property,
Plant and Equipment*

We currently occupy and sublease office space at Suite 110,
3040 N. Campbell Avenue, Tucson, Arizona USA 85719, as our principal offices and
pay the lessee approximately $1,000 per month. We believe these facilities are
in good condition, but that we may need to expand our leased space as our
research and development efforts increase.

We also have an interest in the mineral properties, as
described in more detail under the heading Business Overview.

---

ITEM
4A                   Unresolved
Staff Comments

Not applicable.

ITEM
5                      Operating
and Financial Review and Prospects

The annual audited consolidated financial statements for the
year ended February 29, 2012 are our first annual consolidated financial
statements that have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB) and IFRS 1, First Time Adoption of International
Financial Reporting Standards. See page 13 in our Managements Discussion and
Analysis of Financial Condition and Results of Operations included in this
annual report on Form 20-F under Item 5  Operating and Financial Review and
Prospects.

We have prepared the annual audited consolidated financial
statements that comply with IFRS as described in the accounting policies in Note
3 of our annual audited consolidated financial statements. In preparing the
annual audited consolidated financial statements, our opening statement of
financial position was prepared at March 1, 2010, our date of transition to
IFRS. Note 12 of our annual audited consolidated financial statements explains
the principal adjustments we made in restating our Canadian generally accepted
accounting principles (GAAP) statements of financial position as at March 1,
2010 and February 29, 2011 and our previously published Canadian GAAP
consolidated statements of operations and comprehensive loss for the year ended
February 29, 2011.

Please note that information relating to financial periods
ended before February 29, 2011 were prepared in accordance with Canadian GAAP,
which may not be comparable to IFRS.

*A.*                     *Operating
Results*

Year ended February 29, 2012

During the year ended February 29, 2012, the Company incurred
expenses of $1,494,737, primarily consisting of management fees of $523,084,
investor communications of $440,579, share based payments of $128,519 and
professional fees of $192,697. Net loss for the year ended February 29, 2012 was
$977,249 consisting of net loss before other items of $1,622,512 and other items
of $645,263. During the year ended February 28, 2011, the Company incurred
expenses of $2,628,049, primarily consisting of management fees of $941,697,
investor communications of $599,172, share based payments of $685,315 and
professional fees of $209,375. Net loss for the year ended February 28, 2011 was
$2,741,536 consisting of net loss before other items of $2,628,049 and other
items of ($113,487). Share based payments during the year ended February 29,
2012 decreased over the same period the prior year due to fewer options vesting.
Advertising and promotion expenses decreased due to fewer media placements.
Investor communications expenses decreased due to fewer consultants hired.
Management fees decreased due to fewer consultants hired. Stock transfer and
filing fees expenses increased due to expenses related to stock transactions.
Travel expenses increased due to increased support of South American
operations.

Following the disposition of its Aspen Grove Property and
additional mineral claims located in British Columbia, Canada, the Company holds
property interests in Chile as described under the heading Description of
Business. On June 10, 2010, the Company entered into a Termination Agreement
with two individuals to terminate the Option Agreement dated May 28, 2007 and to
release its option on the 17 mineral claims that comprise the Aspen Grove copper
property. As the Company is focussed on the exploration and development of
properties containing lithium and light metals, the Company decided to release
its option on the Aspen Grove property and transfer all interest in such
property back to the original optionors. Following the agreement, the Company
wrote off $393,689 with respect to the Aspen Grove Property.

SUMMARY OF QUARTERLY RESULTS

The following table provides quarterly financial information
for the prior eight quarters:

Description
      Three Months
      Ended February 29, 2012
      Three Months
      Ended November 30, 2011
      Three Months
      Ended August 31, 2011
      Three Months
      Ended May 31, 2011
      Three Months
      Ended February 28, 2011
      Three Months
      Ended November 30, 2010
      Three Months
      Ended August 31, 2010
      Three Months
      Ended May 31, 2010($)
      ($)
      ($)
      ($)
      ($)
      ($)
      ($)
      ($)Revenue
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil


---

Description
      Three Months
      Ended February 29, 2012
      Three Months
      Ended November 30, 2011
      Three Months
      Ended August 31, 2011
      Three Months
      Ended May 31, 2011
      Three Months
      Ended February 28, 2011
      Three Months
      Ended November 30, 2010
      Three Months
      Ended August 31, 2010
      Three Months
      Ended May 31, 2010($)
      ($)
      ($)
      ($)
      ($)
      ($)
      ($)
      ($)Net loss before other items
    206,470
    565,530
    392,905
    329,832
    831,193
    530,452
    546,334
    720,070Net loss(income)
    (97,690)
    445,291
    390,977
    238,671
    906,307
    545,343
    548,236
    741,650Comprehensive Loss
    47,060
    256,449
    345,582
    264,401
    1,244,856
    545,343
    548,236
    741,650Basic and fully-diluted loss(income) per share
    (0.003)
    0.009
    0.009
    0.006
    0.026
    0.015
    0.017
    0.023


During the three months ended May 31, 2010, expenses were
$720,070 as the Company continued to focus on increased development of its
mineral properties and increased fund raising efforts. During this time,
investor communications accounted for $132,941, management fees were $147,908,
share based payments increased to $305,122, professional fees were $62,482, and
advertising was $33,433. During the three months ended August 31, 2010, expenses
were $546,334 as the Company continued to focus on increased development of its
mineral properties and increased fund raising efforts. During this time,
investor communications accounted for $114,781, management fees were $181,057,
share based payments expense was $169,058, professional fees were $46,237, and
travel expenses were $20,402. During the three months ended November 30, 2010,
expenses were $530,452 as the Company continued to focus on continued
development of its mineral properties and increased fund raising efforts. During
this time, investor communications accounted for $146,451, management fees were
$153,929, share based payments expense was $134,197, and professional fees were
$53,374. During the three months ended February 28, 2011, expenses were $831,193
as the Company continued to focus on continued development of its mineral
properties and increased fund raising efforts. During this time, investor
communications accounted for $204,999, management fees were $458,803, share
based payments expense was $76,938, and professional fees were $47,282. During
the three months ended May 31, 2011, the Company incurred expenses of $329,832
primarily consisting of management fees of $142,992, investor communications of
$70,395, share based payment of $45,810 and professional fees of $34,898.
Expenses decreased during the three months ended May 31, 2011 due to
managements efforts to reduce costs. During the three months ended August 31,
2011, the Company incurred expenses of $392,905 primarily consisting of share
based payments of $4,455, management fees of $138,029, investor communications
of $103,961, office and miscellaneous expenses of $14,806, professional fees of
$69,747, stock transfer and filing fees of $27,186 and travel expenses of
$30,056. Expenses increased during the three months ended August 31, 2011 due
primarily to increased professional fees on higher legal costs. During the three
months ended November 30, 2011, the Company incurred expenses of $565,530
primarily consisting of share based payments of $178,058, management fees of
$135,188, investor communications of $154,980, office and miscellaneous expenses
of $12,286, professional fees of $55,108, stock transfer and filing fees of
$3,583 and travel expenses of $21,452. Expenses decreased during the three
months ended November 30, 2011 due primarily to share based payments on new
stock option issuances. During the three months ended February 29, 2012, the
Company incurred expenses of $334,245 primarily consisting of share based
payments of $27,971, management fees of $106,875, investor communications of
$111,243, office expenses of $25,223, professional fees of $32,944, stock
transfer and filing fees of $7,877 and travel expenses of $14,096. Expenses
decreased during the three months ended February 29, 2012 due primarily to fewer
options vesting and lower investor communications expense.

Currency
  Fluctuations

The Companys currency fluctuation exposure is primarily to the
U.S. Dollar and the Canadian Dollar. The Company does not use derivative
financial instruments for speculative trading purposes, nor does the Company
hedge its foreign currency exposure to manage the Companys foreign currency
fluctuation risk. Fluctuations in and among the currencies in which the Company
operates could have a material effect on the Companys operations and its
financial results.

---

*B.*                     *Liquidity
and Capital Resources*

LIQUIDITY

The Company had cash of $537,722 at February 29, 2012 and
$165,165 at February 28, 2011, and the Company had working capital of $285,016
at February 29, 2012 as compared to working capital deficit of $162,504 at
February 28, 2011.

On June 16, 2011 the Company completed a non-brokered private
placement of 4,076,667 units at $0.15 per unit for gross proceeds of $611,500.
Each unit consists of one common share and one common share purchase warrant,
entitling the purchaser to acquire one additional common share at an exercise
price of $0.25 per common share until June 16, 2013. In connection with the
offering, the Company paid a cash finders fee of $40,150, incurred share
issuance cost of $6,144 and issued 267,666 warrants, which each warrant entitles
the finder to acquire one additional common share at an exercise price of $0.25
per common share until June 16, 2013.

On September 15, 2011 the Company completed a non-brokered
private placement with POSCAN of 10,522,090 common shares at the price of
CDN$0.136 per common share, resulting in gross proceeds to the Company of
$1,431,004. The Company also agreed that while POSCAN owns more than 10% of the
Companys issued and outstanding common shares, the Company will appoint a
director nominated by POSCAN; the Company will require approval from the nominee
for certain corporate actions; and POSCAN will have a pre-emptive right to
purchase a pro rata share of any new securities offered by the Company.

On October 11, 2011 the Company entered into debt settlement
agreements with Gareste Limitada, Pro Business Trust, and Boulder Design LLC to
settle outstanding debt in the amount of CDN$200,365 (the Debt). The
Debt was incurred by the Company under a Consulting and Professional Services
Agreement with each of Pro Business Trust and Boulder Design LLC, and an
Operator Agreement with Sociedad Gareste Limitada. Under the terms of the debt
settlement agreements, the Company will satisfy the Debt with the issuance of
1,335,768 common shares of the Company at a deemed issuance price of $0.15 per
common share. These shares for debt transactions are subject to the approval of
the Exchange. As of June 27, 2012 the TSXV has not approved these
transactions.

On October 11, 2011, the Company issued 350,082 common shares
under the Consulting Agreement with PBT. PBT provided services and expenditures
for a Chilean exploration program at several of the Companys brine projects in
the Atacama Region III. The Company satisfied US$41,631 of expenditure incurred
under the Consulting Agreement through the issuance of common shares.

On January 16, 2012, the Company closed a private placement
with Andrew Brodkey, the Companys President, Chief Executive Officer and
Director. The Company issued 1,000,000 common shares to Mr. Brodkey at a price
of CDN$0.06 per common share, resulting in gross proceeds to the Company of
$60,000.

The Company anticipates that it currently does not have
sufficient capital in order to meet its requirements for the next twelve month
period. These costs include the proposed scoping and feasibility studies at
Laguna Verde, the proposed exploration program at several of its properties,
general and administrative costs and costs associated with keeping the Chilean
salars in good standing during the next twelve months. The Company plans to
raise such funds primarily through the private placement or registered offering
of its equity securities. Under such circumstances, there is no assurance that
the Company will be able to obtain further funds required for the Companys
continued working capital requirements. Any issuance of the Companys equity
securities in the near future may result in substantial dilution to the
Companys existing shareholders.

CAPITAL RESOURCES

The Company has capital commitments in connection with its
Chilean properties. The Company indirectly holds interests in its Chilean
lithium salars through its 99% owned subsidiary Salico. . The Company estimates
that Salico is required to pay $80,000 during the next twelve months to keep the
property interests in good standing. The Company is also required to pay to a
third-party US$2,000 per month as a lease and rental remittance fee to maintain
the Piedra Parada concessions through the exploration stage, which payments will
increase to US$5,000 per month at such time as these concessions are converted
to exploitation status.

Operating Activities

The Company used cash of $1,209,572 in operating activities
during the year ended February 29, 2012 and used cash of $1,524,546 during the
year ended February 28, 2011. This decrease is due lower management and investor
communications expenditures.

---

Financing Activities

The Company received total cash of 2,034,013 in financing
activities during the year ended February 29, 2012. During such time, the
Company received cash of $2,102,504 from the issuance of shares, less $83,491
for share issuance costs and $15,000 from subscriptions received. The Company
received total cash of $786,416 in financing activities during the year ended
February 28, 2010. During such time, the Company received cash of $883,994 from
the issuance of shares, less $97,578 for share issuance costs.

Investing Activities

The Company used cash of $430,298 in investing activities
during the year ended February 29, 2012 due to deferred exploration expenses.
The Company used cash of $691,522 in investing activities during the year ended
February 28, 2011 due to the acquisition of mineral properties and deferred
exploration expenditures.

Anticipated Cash Requirements

At Laguna Verde, subject to adequate funding, the Company is
planning to engage a professional chemistry and engineering consulting firm to
undertake scoping and pre-feasibility studies. Such studies are expected to take
12 months to complete and cost in the range of $1.5 to $2 million, of which the
scoping study portion is expected to be around $200,000. The Company, pending
adequate funding, anticipates hiring this consultant during calendar year 2012.
Thereafter, the Company intends to commence a full feasibility study, permitting
and preliminary engineering, which could cost in total upwards of $8 million.
The Company announced on June 17, 2011 that it had entered into an agreement
with the University of Nevada-Reno to conduct research on the concentration of
lithium from brines provided by the Company from several of its
lithium-potassium brine properties in Chile. This study, which is estimated to
cost in the range of US$10,000, is effectively a pre-scoping exercise which
should allow the Company to identify additional processing methodologies which
can be incorporated into the full scoping study planned for Laguna Verde.

Subject to adequate funding, the Company is planning to
undertake a conditional three stage exploration program at Laguna Brava. Stage 1
would include a bathymetry and geochemical program estimated to cost $150,000
which is anticipated to commence sometime during 2012 and last 3 months.
Following successful results, Stage 2 would include a hydrologic program and
metallurgy and evaporation test work to cost $176,500 which is anticipated to
take 9 months. Following successful results, Stage 3 would include a drilling
and aquifer evaluation to cost $455,000 which is anticipated to last an
additional 6 months. Total cost for the three stages, including a 15%
contingency, is approximately $900,000.

As to the other salar properties in Region III Chile, subject
to adequate funding, the Company has designed and intends to implement
exploration programs at Salar de Pedernales and Salar de Maricunga during 2012.
The Company announced on June 14, 2011 that PBT is providing the funds for and
is commencing an initial 300 meter drilling exploration program at the Llanta
project. This program was expanded to provide for geophysical testing of the
Llanta valley, and the completion of at least one potential production well in
the Llanta aquifer. The first phase of this program was completed in December of
2011. Although the Companys independent hydrologists recommended a Phase 2
program, the Company has elected not to pursue such activity at Llanta.
Accordingly, as of June 30, 2012, the agreement between Gareste and the Company
was not closed and has lapsed. The Company has no immediate plans for
exploration or development for the upcoming fiscal year at any of the other
properties not specifically mentioned. The Company intends to spend only
necessary property holding costs for these other sites, in the approximate
amount of $50,000 per year.

The Company is also evaluating the merits of converting its
exploration concessions at each of the properties to full mensura or
exploitation status, thereby avoiding third-party overstaking and challenges to
mining titles. The estimated total cost of such conversions amounts to $600,000.

---

The Company estimates its minimum operating expenses, excluding
any exploration expenses, for the next 12 month period to be as follows:

Expense
    
    Estimated AmountAdvertising and promotion
    $
    12,000Bank charges
    
    5,000Investor communications
    
    180,000Management fees
    
    564,000Office and miscellaneous
    
    50,000Professional fees
    
    240,000Rent
    
    17,000Transfer agent and filing fees
    
    36,000Travel
    
    60,000Total
    $
    1,164,000


If the Company does not raise any additional funds, it will not
have enough working capital to follow its projected costs for the next 12 month
period.

The Company plans to raise its required funds primarily through
the private placement of its equity securities. Under such circumstances, there
is no assurance that it will be able to obtain further funds required for its
continued working capital requirements. Any issuance of its equity securities in
the near future may result in substantial dilution to its existing shareholders.

*C.*                     *Research
and Development, Patents and Licenses etc.*

We do not currently, and did not previously, have research and
  development policies in place. Over the past three fiscal years, no funds were
  expended by our company on research and development activities.

*D.*                     *Trend
Information*

We do not currently know of any trends, uncertainties, demands,
  commitments or events that are reasonably likely to have a material effect on
  our net sales or revenue, income from continuing operations, profitability,
  liquidity or capital resources, or that would cause reported financial information
  not necessarily to be indicative of future operating results or financial condition.

*E.*                     *Off-Balance
Sheet Arrangements*

We do not have any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.

*F.*                     *Contractual
Obligations*

The following table describes the contractual obligations
incurred by us as of the date of the financial statements for the period ended
February 29, 2012:

| |                                                                                                                     |  | Payments due by period | 
| | ------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | 
| |                                                                                                                     |  |                        | 
| |                                                                                                                     |  |                        | 
| |                                                                                                                     |  | Total                  | 
| | Contractual Obligations                                                                                             |  | -                      | 
| | Long-Term Debt Obligations                                                                                          |  | -                      | 
| | Capital (Finance) Lease Obligations                                                                                 |  | -                      | 
| | Operating Lease Obligations                                                                                         |  | -                      | 
| | Purchase Obligations*                                                                                               |  | 20,000                 | 
| | Other Long-Term Liabilities Reflected on our Balance Sheet
      under the GAAP of the primary financial statements |  | -                      | 
| | Total                                                                                                               |  | 20,000                 | 

---

*Purchase obligations include scheduled payments to various
related and third party consultants and companies for which there is a valid and
binding contract.

ITEM
6                      Directors,
Senior Management and Employees

*A.*                     *Directors and Senior Management*

The following table sets forth the names and business
experience of each of our directors and officers, as of the date hereof:

Name Province/State Country of
      Residence
      Position(s) with the
      Company
      Period Served with the
      CompanyAndrew Brodkey(2)
        Tucson, Arizona, USA
    President, Chief Executive Officer and
      Director
    December 4, 2009 to presentDr. David Terry(2)(3), PhD., P.Geo West
      Vancouver, BC, Canada
    Director
    May 30, 2008 to presentDr. Ronald Richman(2)(3)Tucson, Arizona,
      USA
    Director
    April 14, 2010 to presentHyundae Kim(3)Seoul, Korea
    Director
    September 15, 2011 to presentDr. David Hackman Tucson, AZ
    Vice President Exploration
    December 4, 2009 to presentFrank Garcia Tucson, Arizona, USA
    Chief Financial Officer
    April 14, 2010 to presentJodi Henderson Tucson, Arizona, USA
    Secretary
    December 4, 2009 to present


|(1) | Information has been furnished by the respective nominees
      individually.
|--- | -----------------------------------------------------------------------------
|    |                                                                              
|(2) | Denotes a member of the Audit Committee of the
      Company.                
|    |                                                                              
|(3) | Denotes an independent director.                                             

Andrew Brodkey

Andrew Brodkey is a mining engineer and a lawyer. He graduated
with distinction with a B.S. in Mining Engineering from the University of
Arizona in 1979. Mr. Brodkey earned a law degree, cum laude, from Creighton
University in 1982. He worked at the Denver, Colorado law firm of Gorsuch,
Kirgis, Campbell, Walker and Grover as an associate specializing in natural
resources and environmental law from 1982 until 1987. Subsequently, Mr. Brodkey
joined Magma Copper Company, a NYSE-traded mining company in 1987, where he held
various positions, eventually succeeding to the role of Vice President and
General Counsel in 1992. Following Magmas acquisition by BHP in 1996, he
remained in a senior legal position with BHP Copper Inc., and in 2000 moved to
the position of Vice President, Business Development for BHP Copper. Following
his departure from BHP in 2002, Mr. Brodkey held the position of Managing
Director of the International Mining & Metals Group of CB Richard Ellis, Inc
(CBRE), where he was responsible for creating and building the mining property
practice of CBRE. Currently, Mr. Brodkey is the President, CEO and Director of
Titan Iron Ore Corp. (OTCBB: TFER), and President and Director of Zoro Mining
Corp. (OTCBB/OTCQB: ZORM). His is also the Manager of Kriyah Consultants LLC,
which has a contractual relationship with the Company.

Dr. David Terry

Dr. David Terry holds a BSc and a PhD in Geology from the
University of Western Ontario and a P. Geo. license in the Province of British
Columbia. Dr. Terry has over 20 years of experience in the resource sector
focused primarily on exploration for a wide spectrum of mineral deposits
throughout North and South America. He has held numerous senior positions with
both large mining companies and junior exploration companies, including IMA
Exploration Inc., Boliden Limited, Westmin Resources Limited, Hemlo Gold Mines
Inc., Cominco Limited and Gold Fields Mining Corporation. Dr. Terry currently serves as a director
and officer of several publicly-listed mineral exploration companies.

---

Dr. Ronald Richman

Dr. Ronald Richman from 2008 to the present was a co-director
at Arid Lands Bioenergy Institute at the University of Arizona responsible for
developing industrial liaison program, and reviewing programs for potential
commercialization responsible for developing industrial liaison program, and
reviewing programs for potential commercialization. From 2003 to the present,
Dr. Richman was Director and Chief Executive Officer of Innovative Technology
Development Center in Tucson, AZ a Not-for-Profit organization promoting
sustainable economic development across Southern Arizona with focus on renewable
resources. Prior to this, Dr. Richman held senior executive positions with IBM
where he worked for 35 years. Dr. Richman received a Bachelor of Science Degree
in Chemistry from New York University, a Master of Science in Chemistry at the
University of Colorado, a Doctor of Philosophy in Chemistry from the University
of Colorado, the Wharton Executive Program, Wharton School, Senior Management
Development at Sands Point IBM. Dr. Richman is also a Director of Titan Iron Ore
Corp. (OTCBB: TFER).

Hyundae Kim

Mr. Kim was a director of POSCO in Seoul, Korea from November
  2009 to September 2011. He was the Managing Director of ILJIN Group of Seoul,
  Korea from July 2006 to October 2009 and a Vice Director with the Korean Government
  from September 2001 to June 2006.

Dr. David Hackman

Dr. David Hackman is a geologist and a registered professional
engineer with over 35 years international experience specializing in the
evaluation of leachable and other metal deposits. He has worked as a geologist
for Mobil Oil Company and ALCOA. From 1990 to 1995, he was the president, of
Liximin, Inc., a mineral exploration and mine development company based in
Tucson, Arizona. From 1996 to 2000, he was an officer and director of Silver
Eagle Resources Ltd. Currently, Dr. Hackman is the V.P of Exploration and a
Director of Zoro Mining Corp. and Pacific Copper Corp., and is also the V.P. of
Exploration for Titan Iron Ore Corp.

Frank Garcia

Frank Garcia from 2007 to the present has worked as Accounting
Manager for Kriyah Consultants LLC providing accounting services for mining
exploration companies. From 1997 to 2006, Mr. Garcia was employed in senior
management positions by Misys PLC, a global software and solutions company
serving customers in international banking and securities, international
healthcare, and UK retail financial services. Prior to 1997 Mr. Garcia held
executive positions with CEMEX, a world leader in the construction materials
industry. Mr. Garcia is currently the CFO of two publicly-traded mining
companies-- Zoro Mining Corp. (OTCBB/OTCQB: ZORM) and Titan Iron Ore Corp.
(OTCBB: TFER ). Mr. Garcia received his Bachelor of Science Business
AdministrationMajor in Accounting from the University of Arizona in 1981.

Jodi Henderson

Jodi Henderson is currently the Director of Operations for Kriyah
  Consultants, LLC an administration company that manages publicly held mining
  exploration companies. Prior to her September 2007 appointment to Kriyah she
  managed the administration and marketing for the International Mining &
  Metals Group of CB Richard Ellis, Inc. After she received her degree in Applied
  Mathematics from the Indiana State University she gained 10 years of board,
  administration and finance management experience which included a tenure as
  a Director for the Tucson Museum of Art from 2002 to 2005. Currently, Ms. Henderson
  is the Secretary and Treasurer for Zoro Mining Corp. (OTCBB/OTCQB: ZORM) and
  Secretary of Pacific Copper Corp. (OTCBB: PPFP) and Titan Iron Ore Corp. (OTCQB:
  TFER ).

Relationships

There are no family relationships between any of the directors
or executive officers of our company.

There are no arrangements or understandings between any of the
directors and/or executive officers and any other person pursuant to which that
director and/or executive officer was selected.

---

*B.*                     *Compensation*

General

For the purpose of this annual report on Form 20-F:

CEO of the Company means each individual who acted as
chief executive officer of the Company or acted in a similar capacity for any
part of the most recently completed financial year;

CFO of the Company means each individual who acted as
chief financial officer of the Company or acted in a similar capacity for any
part of the most recently completed financial year; and

Named Executive Officers or NEO means:

|(a) | the Companys CEO,                                                                                                                                                                                                                                                                                                                                                                                           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|(b) | the Companys CFO,                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|(c) | each of the Companys three most highly compensated
      executive officers, or the three most highly compensated individuals
      acting in a similar capacity, other than the CEO and CFO, at the end of
      the most recently completed financial year and whose total compensation
      was, individually, more than $150,000 as determined in accordance with
      applicable securities laws, and
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|(d) | any individual who would be a NEO under paragraph (c) but
      for the fact that the individual was neither an executive officer of the
      Company, nor acting in a similar capacity at the end of the most recently
      completed financial year.                                                                                                                                                     

Compensation Discussion and Analysis

The overall objective of the Companys compensation strategy is
to offer medium-term and long-term compensation components to ensure that the
Company has in place programs to attract, retain and develop management of the
highest calibre and has in place a process to provide for the orderly succession
of management, including receipt on an annual basis of any recommendations of
the chief executive officer, if any, in this regard. The Company currently has
medium-term and long-term compensation components in place, such as the stock
options granted which have expiry dates in 2015 and 2020, respectively. The
Company intends to further develop these compensation components. The objectives
of the Companys compensation policies and procedures are to align the interests
of the Companys employees with the interests of the Companys shareholders.
Therefore, a significant portion of the total compensation is based upon overall
corporate performance. The Company relies on Board discussion without a formal
agenda for objectives, criteria and analysis when determining executive
compensation. There are no formal performance goals or similar conditions that
must be satisfied in connection with the payment of executive compensation.

The Company does not have in place a Compensation and
Nominating Committee. All tasks related to developing and monitoring the
Companys approach to the compensation of officers of the Company and to
developing and monitoring the Companys approach to the nomination of directors
to the Board are performed by the members of the Board. The compensation of the
NEOs and the Companys employees are reviewed, recommended and approved by the
Board.

The Company directly, or indirectly through companies managed
by NEOs, pays management fees to NEOs. The Company also chooses to grant stock
options to NEOs and directors to satisfy the long-term compensation component.
The Board may consider, on an annual basis, an award of bonuses to key
executives and senior management. The amount and award of such bonuses is
discretionary, depending on, among other factors, the financial performance of
the Company and the position of a participant. The Board considers that the
payment of such discretionary annual cash bonuses satisfies the medium term
compensation component. In the future, the Board may also consider the grant of
options to purchase common shares of the Company with longer future vesting
dates to satisfy the long term compensation component.

Risk Management Disclosure

The Board of Directors has reviewed the elements of
compensation of the Company to identify any risks arising from the Company's
compensation policies and practices that could reasonably be expected to have a
material adverse effect on the Company as well as the practices used to mitigate
any such risks. The Board of Directors concluded that the compensation program and policies of the
Company did not encourage its executives to take inappropriate or excessive
risks. This assessment was based on a number of considerations, including,
without limitation, the following: (i) the Company's compensation policies and
practices are generally uniform throughout the organization; (ii) in exercising
its discretion under its compensation policies the Board of Directors reviews
individual and corporate performance taking into account the long-term interests
of the Company; and (iii) the results of annual assessments of executives'
goals, objectives and performance are reviewed and considered in awarding
compensation.

---

Restrictions on Purchase of Financial Instruments

Although the Company has not adopted a formal policy forbidding
  an NEO or director from purchasing financial instruments that are designed to
  hedge or offset a decrease in market value of equity securities granted as compensation
  or held, directly or indirectly, by the NEO or director, the Company is not
  aware of any NEO or director having entered into this type of transaction.

Compensation Governance

The Board has not adopted any specific policies or practices
  to determine the compensation for the Companys directors and officers,
  other than disclosed above. The Company has not established a compensation committee.

Summary Compensation Table

Particulars of compensation paid to each NEO in the three most
recently completed financial years are set out in the summary compensation table
below.

Name and Principal Position
      Year
      Salary
        ($)
      Share- based
        Awards (2) ($)
      Option-
        based Awards(3)($)
      Non-equity Incentive
        Plan Compensation(1) ($)
      Pension
        Value ($)
      All Other
        Compens- ation ($)
      Total Compens- ation ($)Annual
        **Incentive** Plans
      Long-
        term Incent ive PlansAndrew Brodkey(4)
        Chairman of the Board, 
        Chief Executive Officer 
        and President
      2012 
        2011 
        2010
      134,020 
        140,044 
        45,542
      Nil 
        Nil 
        Nil
      97,543 
        122,966 
        22,085
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      231,563 
        263,010 
        67,627Jodi Henderson(5)
        Corporate Secretary
      2012 
        2011 
        2010
      50,668 
        53,484 
        13,995
      Nil 
        Nil 
        Nil
      27,470 
        56,555 
        22,086
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      78,138 
        110,039 
        26,081David Hackman(6)
        V.P. Exploration
      2012 
        2011 
        2010
      70,962 
        73,720 
        19,037
      Nil 
        Nil 
        Nil
      14,446 
        37,149 
        22,086
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      85,408 
        110,869 
        42,123Frank Garcia(7)
        Chief Financial Officer
      2012 
        2011 
        2010
      54,117 
        48,032 
        12,560
      Nil 
        Nil 
        Nil
      27,322 
        78,752 
        22,085
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      81,439 
        126,784 
        34,645Jerry Minni(8)
        Former Chief Financial 
        Officer
      2012 
        2011 
        200
      N/A 
        7,000 
        48,000
      N/A 
        Nil 
        Nil
      N/A 
        19,050 
        19,050
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        25,875
      N/A 
        26,050 
        92,925


|1. | Non-equity Incentive Plan Compensation includes all
      compensation under an incentive plan or portion of an incentive plan that
      is not an equity incentive plan.                                                                                                                                                                                    
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                 
|2. | Share-based Awards means an award under an equity
      incentive plan of equity-based instruments that do not have option-like
      features, including, for greater certainty, common shares, restricted
      shares, restricted share units, deferred share units, phantom shares,
      phantom share units, common share equivalent units, and
  stock.

---

|3. | Option-based Awards means an award under an equity
      incentive plan of options, including, for greater certainty, share
      options, share appreciation rights, and similar instruments that have
      option-like features. The value of these options in 2012 is estimated
      using the Black-Scholes option pricing model with the following
      assumptions: share price of $0.12, risk free interest rate of 2.13%,
      expected stock price volatility of 147%, expected dividend yield of 0 and
      expected term of 10 years. The value of these options in 2011 is estimated
      using the Black-Scholes option pricing model with the following
      assumptions: share price of $0.25, risk free interest rate of 3.04%,
      expected stock price volatility of 144%, expected dividend yield of 0 and
      expected term of 7.6 years. The value of these options in 2010 is
      estimated using the Black-Scholes option pricing model with the following
      assumptions: share price of $0.23, risk free interest rate of 2.35%,
      expected stock price volatility of 138%, expected dividend yield of 0 and
      expected term of 4.38 years.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4. | Andrew Brodkey was appointed as the President, Chief
      Executive Officer and a director of the Company on December 4,
  2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|5. | Jodi Henderson was appointed as Corporate Secretary on
      December 4, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6. | David Hackman was appointed V.P. Exploration of the
      Company on December 4, 2009. The payment of $19,037 and $73,720 in the
      financial year ended February 28, 2010 and 2011, respectively, was paid to
      Sage Associates Inc, a company wholly owned by David Hackman.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|7. | Frank Garcia was appointed Chief Financial Officer of the
      Company on March 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|8. | Jerry Minni was appointed the Chief Financial Officer of
      the Company on September 18, 2006 and resigned from that position on March
      30, 2010. Jerry Minnis total compensation for 2010 includes $48,000 to
      JVM Management Ltd., a company controlled by Jerry Minni, $12,125
      accounting fees and $13,750 for office facilities and
  rent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Narrative Discussion

The Company entered into an employment agreement dated November
1, 2009 with Andrew Brodkey, Chief Executive Officer, President and a director
of the Company. Pursuant to the terms of the agreement, the Company agreed to
pay Mr. Brodkey a base salary of US$10,000 per month and grant options to
acquire 1,500,000 common shares of the Company, the terms of which were to be
agreed upon at a later date. The term of the agreement is for a two year period
with automatic renewals for similar two year periods. The agreement can be
terminated with 30 days notice. If the agreement is terminated, subject to
certain conditions, the Company will pay a severance of one months compensation
for every month of service up to a maximum of two years wages.

The Company entered into a consulting agreement dated November
1, 2009 with Sage Associates Inc., a company wholly owned by Dr. David Hackman,
an officer of the Company. Pursuant to the terms of the agreement, Sage
Associates agreed to provide geological and advisory services in consideration
for the payment of US$6,000 per month. Such services primarily involve geologic
evaluation of properties, design and implementation of exploration programs, and
coordination with outside independent geologists. The term of this agreement
extends through the end of the calendar year 2010 and can be renewed at the
Companys discretion. Either party without notice may terminate this agreement,
and if the Company exercises its right it will only be obligated to pay Dr.
Hackman for the fees actually earned by Dr. Hackman.

The Company entered into a consulting agreement dated November
1, 2009 with JVM Management Ltd., a company wholly owned by Jerry Minni,
formerly the Chief Financial Officer, Secretary and a director of the Company.
Pursuant to the terms of the agreement, JVM Management provided administrative
and management services to the Company in consideration for the payment of
$3,500 per month. These services included day-to-day operations of the Company
as well as bookkeeping, all regulatory filings, contracts, procurement of
services, and related matters. The Company also paid accounting fees of $12,125
to J.A. Minni & Associates Inc., and rent of $13,750 to Earls Cove Financial
Corp., both of which entities were controlled by Jerry Minni, a former director
and officer, or were entities in which Mr. Minni was a partner or proprietor.
Jerry Minni resigned as the Companys Chief Financial Officer on March 30, 2010.

The Company has not granted any stock options to its NEOs
subsequent to the financial year ended February 29, 2012.

The Company has also engaged Kriyah Consultants LLC, a company
managed by Andrew Brodkey, to provide administrative services for US$2,500 per
month.

---

Other than as set forth in the foregoing, no NEO of the Company
has received, during the most recently completed financial year, compensation
pursuant to:

| | (a) | any standard arrangement for the compensation of NEOs for
      their services in their capacity as NEOs, including any additional amounts
      payable for committee participation or special assignments;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                             
| | (b) | any other arrangement, in addition to, or in lieu of, any
      standard arrangement, for the compensation of NEOs in their capacity as
      NEOs; or                                                      
| |     |                                                                                                                                                                                                             
| | (c) | any arrangement for the compensation of NEOs for services
      as consultants or expert.                                                                                                                   

Incentive Plan Awards

An incentive plan is any plan providing compensation that
depends on achieving certain performance goals or similar conditions within a
specified period. An incentive plan award means compensation awarded, earned,
paid, or payable under an incentive plan.

Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth all option and share-based
awards granted to NEOs that were outstanding as of February 29, 2012, including
awards granted before the year ended February 29, 2012.

Name
      Option-based Awards
      Share-based AwardsNumber
        of securities underlying unexercised
        options (#)
      Option exercise price ($)
      Option expiration date
      Value
        of unexercised in-the- money options ($)(1)
      Number
        of shares or units of shares that
        have not vested (#)
      Market or
        payout value of share- based awards that have not vested ($)Andrew Brodkey(2)
        Chairman of the Board, 
        Chief Executive Officer 
        and President
      100,000 
        75,000 
        350,000
      $0.50 
        $0.55 
        $0.30
      Jan. 15, 2015 
        March 30, 2015 
        May 26, 2020
      Nil
      Nil
      NilJodi Henderson(3)
        Corporate Secretary
      100,000 
        51,200 
        23,800 
        50,000
      $0.50 
        $0.55 
        $0.55 
        $0.30
      Jan. 15, 2015 
        March 30, 2015 
        March 30, 2020 
        May 26, 2020
      Nil
      Nil
      NilDavid Hackman(4)
        V.P. Exploration
      100,000 
        50,000
      $0.50 
        $0.55
      Jan. 15, 2015 
        March 30, 2015
      Nil
      Nil
      NilFrank Garcia(5)
        Chief Financial Officer
      100,000 
        75,000 
        50,000
      $0.50 
        $0.55 
        $0.30
      Jan. 15, 2015 
        March 30, 2020 
        May 26, 2020
      Nil
      Nil
      NilJerry Minni(6)
        Former Chief Financial 
        Officer
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil


|1. | The closing price of the Companys common shares on
      February 29, 2012 was $0.065 .                                                                 
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Andrew Brodkey was appointed as the President, Chief
      Executive Officer and a director of the Company on December 4,
  2009.                        
|3. | Jodi Henderson was appointed as Corporate Secretary on
      December 4, 2009.                                                                           
|4. | David Hackman was appointed V.P. Exploration of the
      Company on December 4, 2009.                                                                   
|5. | Frank Garcia was appointed Chief Financial Officer of the
      Company on March 30, 2010.                                                               
|6. | Jerry Minni was appointed the Chief Financial Officer of
      the Company on September 18, 2006 and resigned from that position on March
      30, 2010.

---

Incentive Plan Awards  Value Vested or Earned During the
Year

The following table sets forth details of the value vested or
earned for all incentive plan awards during the year ended February 29, 2012 by
NEOs.

Name
      Option-based awards  Value
      vested during the year ($)
      Share-based awards  Value
      vested during the year ($)
      Non-equity incentive plan
      compensation  Value earned during the year
      ($)Andrew Brodkey(1)Chairman of the Board,
      Chief Executive Officer and President
    97,543
    Nil
    NilJodi Henderson(2)Corporate Secretary
    27,470
    Nil
    NilDavid Hackman(3)V.P. Exploration
    14,446
    Nil
    NilFrank Garcia(4)Chief Financial Officer
    27,322
    Nil
    NilJerry Minni(5)Former Chief Financial
      Officer
    Nil
    Nil
    Nil


|7.  | Andrew Brodkey was appointed as President, Chief
      Executive Officer and a director of the Company on December 4, 2009. On
      March 30, 2010, 75,000 stock options were granted to this optionee at an
      exercise price of $0.55. On May 26, 2010, 350,000 stock options were
      granted to this optionee at an exercise price of $0.30.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8.  | Jodi Henderson was appointed as Corporate Secretary on
      December 4, 2009. On March 30, 2010, 75,000 stock options were granted to
      this optionee at an exercise price of $0.55. On May 25, 2010, 50,000 stock
      options were granted to this optionee at an exercise price of
  $0.30.                                                  
|9.  | David Hackman was appointed V.P. Exploration of the
      Company on December 4, 2009. On March 30, 2010, 50,000 stock options were
      granted to this optionee at an exercise price of $0.55.                                                                                                                                                     
|10. | Frank Garcia was appointed Chief Financial Officer of the
      Company on March 30, 2010. On March 30, 2010, 75,000 stock options were
      granted to this optionee at an exercise price of $0.55. On May 26, 2010,
      50,000 stock options were granted to this optionee at an exercise price of
      $0.30.                                  
|11. | Jerry Minni was appointed the Chief Financial Officer of
      the Company on September 16, 2006 and resigned from that position on March
      30, 2010.                                                                                                                                                                                             

Narrative Discussion

Refer to the section titled Compensation Discussion and
Analysis, above, and Stock Option Plan, below, for a description of all plan
based awards and their significant terms. Also refer to the copy of the stock
option plan attached to this Information Circular as Schedule A. There was no
re-pricing of stock options under the stock option plan or otherwise during the
Companys most recently completed financial year ended February 29, 2012.

The Company has not granted any stock options to its NEOs
subsequent to the financial year ended February 29, 2012.

Pension Plan Benefits

The Company does not have a pension plan that provides for
payments or benefits to the NEOs at, following, or in connection with
retirement.

Defined Benefits Plans

The Company does not have a pension plan that provide for
payments or benefits at, following, or in connection with retirement, excluding
defined contribution plans.

---

Defined Contribution Plans

The Company does not have a pension plan that provides for
payments or benefits at, following or in connection with retirement, excluding
defined benefit plans.

Deferred Compensation Plans

The Company does not have any deferred compensation plan with
respect to any NEO.

Termination and Change of Control Benefits

If the Company terminates the employment agreement with Andrew
Brodkey, the Company will pay a severance of one months compensation for every
month of service up to a maximum of two years wages.

Director Compensation

Director Compensation Table

The following table sets forth the details of all compensation
provided to the Companys directors, other than the NEOs, during the Companys
most recently completed financial year ended February 29, 2012.

Name
      Fees earned
      ($)
      Share- based
      awards ($)
      Option- based
      awards ($)
      Non-equity incentive
      plan compensation ($)
      Pension value
      ($)
      All other
      compensation ($)
      Total ($)Dr. David Terry(1)
    $13,440
    Nil
    $3,046
    Nil
    Nil
    Nil
    $16,486Dr. Ronald Richman(2)
    $11,804
    Nil
    $25,490
    Nil
    Nil
    Nil
    $37,294Hyundae Kim(3)
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil


|12. | Dr. David Terry has been a director of the Company since
      May 30, 2008. David Terry was granted an aggregate of 100,000 stock
      options. The fair value of the vested options on the date of grant was
      calculated using the Black-Scholes option pricing model, which valued them
      at $0.25.          
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|13. | Dr. Ronald Richman was appointed a director of the
      Company on April 14, 2010. Ronald Richman was granted an aggregate of
      200,000 stock options. The fair value of the vested options on the date of
      grant was calculated using the Black-Scholes option pricing model, which
      valued them at $0.25.
|14. | Hyundae Kim was appointed a director of the Company on
      September 15, 2011.                                                                                                                                                                                                                                          

Narrative Discussion

Dr. David Terry has entered into an Independent Director
Agreement with the Company for a monthly fee of USD $1,000 that continued until
the Annual General Meeting. As Dr. Terry was re-elected as a director at the
Meeting, the Company intends to extend the term of that Independent Director
Agreement. Either party without notice may terminate this agreement, and if the
Company exercises its right, the Dr. Terry shall be entitled to keep the monthly
fee already paid to him for that calendar month.

Dr. Ronald Richman entered into an Independent Director
Agreement with the Company for a monthly fee of USD $1,000 that continued until
the Annual General Meeting. As Dr. Richman was re-elected as a director at the
Meeting, the Company intends to extend the term of that Independent Director
Agreement.Either party without notice may terminate this agreement, and
if the Company exercises its right, Dr. Richman shall be entitled to keep the
monthly fee already paid to him for that calendar month.

Other than noted above, the Company does not have any
arrangements, standard or otherwise, pursuant to which non-NEO directors are
compensated by the Company for their services in their capacity as directors, or
for committee participation, involvement in special assignments or for services
as consultants or experts. The Board intends to continue to compensate directors
primarily through the grant of stock options and reimbursement of expenses
incurred by such persons acting as directors of the Company.

---

Outstanding Share-Based Awards and Option-Based Awards for
Directors

The following table sets forth all option and share-based
awards granted to the Companys directors, other than the NEOs, that were
outstanding as of February 29, 2012.

Option-based Awards
      Share-based AwardsName
      Number of securities
        underlying unexercised options (#)
      Option exercise
        price ($)
      Option expiration
        date
      Value of unexercised
        in-the- money options(1)($)
      Number of shares or units of shares that have not vested
        (#)
      Market or payout value of share-based awards that have not vested ($)Dr. David Terry
      300,000 
        100,000
      0.15 
        0.30
      September 15, 2013 
        May 26, 2020
      Nil
      Nil
      NilDr. Ronald Richman
      200,000
      0.55
      April 9, 2020
      Nil
      Nil
      NilHyundae Kim
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil


|1. | The closing price of the Companys common shares on
      February 29, 2012 was $0.065.
|-- | ---------------------------------------------------------------------------------------

Incentive Plan Awards  Value Vested or Earned During the
Year

The following table sets forth details of the value vested or
earned for all incentive plan awards during the year ended February 29, 2012 by
directors.

Name
      Option-based awards  Value
      vested during the year ($)
      Share-based awards  Value
      vested during the year ($)
      Non-equity incentive plan
      compensation  Value earned during the year
      ($)Dr. David Terry(1)
    3,046
    Nil
    NilDr. Ronald Richman(2)
    25,490
    Nil
    NilHyundae Kim
    Nil
    Nil
    Nil


|1. | On May 25, 2010, 100,000 stock option granted to this
      optionee at an exercise price of $0.30. On June 25, 2012, the closing
      price of the Companys common shares was $0.05.  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                          
|2. | On April 14, 2010, 200,000 stock option granted to this
      optionee at an exercise price of $0.55. On June 25, 2012, the closing
      price of the Companys common shares was $0.05.

Narrative Discussion

The Company has not granted any stock options to its directors
subsequent to the financial year ended February 29, 2012.

*C.*                     *Board
Practices*

Our directors are re-elected and our officers are re-appointed
at the annual general meeting of our shareholders. The last annual general
meeting was held on August 5, 2011 and each of our current directors and
officers will continue to hold his respective office until his successor is
elected or appointed, unless his office is earlier vacated under any of the
relevant provisions of our Articles or of the British Columbia Business
Corporations Act.

If the Company terminates the employment agreement with Andrew
Brodkey, the Company will pay a severance of one months compensation for every
month of service up to a maximum of two years wages.

---

The members of the Companys Audit Committee are:

Member
      Independent(1)
      Financially Literate(2)Andrew Brodkey
    No
    YesDr. David Terry
    Yes
    YesDr. Ronald Richman
    Yes
    Yes


|1 | A member of an audit committee is independent if the
      member has no direct or indirect material relationship with the Company,
      which could, in the view of the Board, reasonably interfere with the
      exercise of a members independent judgment. Mr. Brodkey is not
      independent, as he is the President and Chief Executive Officer of the
      Company.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | An individual is financially literate if he has the
      ability to read and understand a set of financial statements that present
      a breadth of complexity of accounting issues that are generally comparable
      to the breadth and complexity of the issues that can reasonably be
      expected to be raised by the Companys financial
  statements.              

The audit committee reviews and approves the scope of the audit
procedures employed by our independent auditors, reviews the results of the
auditors examination, the scope of audits. The audit committee also recommends
the selection of independent auditors.

*D.*                     *Employees*

As of June 28, 2012, we had 1 employee, including
management.

*E.*                     *Share
Ownership*

As of 25, 2012, there are 57,749,783 common shares of our
company issued and outstanding. Our directors and officers owned, directly or
indirectly, the following common shares:

Name
      Number of Common Shares
      Beneficially Owned
      Percentage(1)Andrew Brodkey
    2,023,000
    3.5%Dr. David Terry
    nil
    0.0%Dr. Ronald Richman
    nil
    0.0%Dr David Hackman
    300,000
    0.5%Hyundae Kim
    nil
    0.0%Frank Garcia
    200,000
    0.3%Jodi Henderson
    200,000
    0.3%


|1 | Based on 57,749,783 shares of common stock issued and
      outstanding as of June 25, 2012. Beneficial ownership is determined in
      accordance with the rules of the SEC and generally includes voting or
      investment power with respect to securities. Except as otherwise
      indicated, we believe that the beneficial owners of the common stock
      listed above, based on information furnished by such owners, have sole
      investment and voting power with respect to such shares, subject to
      community property laws where applicable.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For a discussion regarding any arrangement that involves the
issue or grant of options or shares or securities of the Company, please see the
discussion under Item 6B Compensation.

ITEM
7                      
 Major Shareholders and Related Party Transactions

The following table sets forth persons known to us to be the
beneficial owner of more than five percent (5%) of each class of our shares
issued and outstanding as of June 25, 2012:

---

Name
      Number of Common Shares(1)
      Percentage of Common Shares(2)CDS & Co.
    45,116,216
    78.12


|1 | Does not include options to acquire common shares of our
      company held by the persons set forth in the table.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | Based on 57,749,783 common shares issued and outstanding
      as of June 25, 2012. Beneficial ownership is determined in accordance with
      the rules of the SEC and generally includes voting or investment power
      with respect to securities. Except as otherwise indicated, we believe that
      the beneficial owners of the common stock listed above, based on
      information furnished by such owners, have sole investment and voting
      power with respect to such shares, subject to community property laws
      where applicable.

The voting rights of our major shareholder do not differ from
the voting rights of holders of our companys shares who are not major
shareholders.

As of June 25, 2012, Computershare Trust Company, our registrar
and transfer agent, reported that our companys 57,749,783 common shares are
held as follows:

Location
    Number of Shares
    Percentage of Shares
    Number of Registered Shareholders of RecordCanada
    47,117,573
    81.59%
    12United States
    6,688,610
    11.58%
    31Other
    3,943,600
    6.83%
    4Total
    57,749,783
    100%
    47


There are no arrangements known to us, the operation of which
may at a subsequent date result in a change in the control of our company.

*B.*                     *Related
Party Transactions*

Other than as disclosed herein, to the best of our knowledge,
there have been no material transactions or loans from March 1, 2010 up to the
date of this annual report between our company and: (a) enterprises that
directly or indirectly through one or more intermediaries, control or are
controlled by, or are under common control with, our company; (b) associates;
(c) individuals owning, directly or indirectly, an interest in the voting power
of our company that gives them significant influence over our company, and close
members of any such individuals family; (d) key management personnel of our
company, including directors and senior management of our company and close
members of such individuals families; and (e) enterprises in which a
substantial interest in the voting power is owned, directly or indirectly, by
any person described in (c) or (d) or over which such a person is able to
exercise significant influence.

As of February 29, 2012 and February 28, 2011 the Company has
identified its directors and certain senior officers as its key management
personnel and the compensation costs for key management personnel and companies
related to them were recorded at their exchange amounts as agreed upon by
transacting parties and on terms and conditions similar to non-related parties.

The compensation costs for key management personnel for the
year ended February 29, 2012 and February 28, 2011 are as follows:

| |                            |   | February 29, |  |   | February 28, | 
| | -------------------------- | - | ------------ |  | - | ------------ | 
| |                            |   | 2012         |  |   | 2011         | 
| | Salaries and benefits      | $ | 335,011      |  | $ | 343,468      | 
| | Share-based
      payments |   | 195,317      |  |   | 370,701      | 
| |                            | $ | 530,328      |  | $ | 714,169      | 

Other related party transactions:

| | a) | Management fees and rent of $32,061 and $14,461 (February
      28, 2011 - $30,756 and $16,153) were incurred to a company in which a
      director and officer is general manager and a balance of $18,401 was owing
      to this party as at February 29, 2012 (February 28, 2011:
  $Nil).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | b) | Deferred exploration costs of $23,543 (February 28, 2011
      - $34,735) were incurred to a company with one director and two officers
      in common.                                                                                                                       
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                
| | c) | As at February 29, 2012, accounts payable includes $nil
      (February 28, 2011 - $437) owing to an officer of the Company and accrued
      liabilities include $nil (February 28, 2011 - $183,747) for unissued stock
      options to the President and CEO of the Company.
| |    |                                                                                                                                                                                                                                                                                
| | d) | An officer and director of the Company purchased
      1,000,000 shares of the Companys common stock at $0.06 per share for
      gross proceeds of $60,000.                                                                                                                  

The Company entered into an employment agreement dated November
1, 2009 with Andrew Brodkey, the current Chief Executive Officer and a director
of the Company. Pursuant to the terms of the agreement, the Company has agreed
to pay Mr. Brodkey a base salary of US$10,000 per month and options to acquire
1.5 million shares of the Company, the terms of which were to be agreed upon at
a later date. During the year ended February 29, 2012, the Company incurred
$134,020 to Mr. Brodkey. In addition, the Company entered into a consulting
agreement dated November 1, 2009 with Sage Associates Inc., a company
wholly-owned by David Hackman, an officer of the Company. Pursuant to the terms
of the agreement, Sage Associates agreed to provide geological and advisory
services in consideration for the payment of US$6,000 per month. During the year
ended February 29, 2012, the Company incurred $70,962 to Sage. The Company has
engaged Kriyah Consultants LLC, a company whose Manager is Andrew Brodkey, to
provide administrative services for US$2,500 per month and incurred $32,061
during the year ended February 29, 2012. During this same period, the Company
incurred $50,668 to Jodi Henderson, the Companys Corporate Secretary and
$54,117 to Frank Garcia, the Companys Chief Financial Officer.

On September 23, 2011, the Company entered into stock option
agreements with each of Andrew Brodkey, David Hackman, Frank Garcia, and Jodi
Henderson. Andrew Brodkey is a director and officer of the Company and David
Hackman and Jodi Henderson are officers of the Company. All options are
exercisable at a price of $0.15 per share until September 22, 2022. Andrew
Brodkey was granted options to purchase 975,000 shares; David Hackman was
granted options to purchase 150,000 shares; Frank Garcia was granted options to
purchase 275,000 shares and Jodi Henderson was granted options to purchase
275,000 shares.

ITEM
8                       
Financial Information

*A.*                     *Financial
Statements and Other Financial Information*

Effective March 1, 2010, we adopted IFRS pursuant to National
Instrument 52-107, Acceptable Accounting Principles, Auditing Standards and
Reporting Currency. The consolidated financial statements have been prepared
in compliance with IFRS. See Item 18: Financial Statements.

Legal Proceedings

There are no pending legal proceedings to which we are a party
or of which any of our property is the subject. There are no legal proceedings
to which any director, officer or affiliate of our company or any associate of
any such director, officer or affiliate of our company is a party or has a
material interest adverse to us.

Dividend Distributions

Holders of our common shares are entitled to receive such
dividends as may be declared from time to time by our board, in its discretion,
out of funds legally available for that purpose. We intend to retain future
earnings, if any, for use in the operation and expansion of our business and do
not intend to pay any cash dividends in the foreseeable future.

*B.*                     *Significant
Changes*

None.

ITEM
9                      
 The Offer and Listing

*A.*                     *Offer
and Listing Details*

Our common shares started traded on the TSX Venture Exchange on
July 28, 2009. Since April 4, 2011, our common shares have been quoted on the
OTC Bulletin Board, and the OTCQB Exchange, under the symbol PALTF.

---

Our authorized capital consists of unlimited common shares
without par value. Our preference shares may be issued in one or more series and
our directors may fix the number of shares which is to comprise each series and
the designation, rights, privileges, restrictions and conditions attaching to
each series.

Holders of our common shares are entitled to vote at all
meetings of shareholders, except meetings at which only holders of a specified
class of shares are entitled to vote, receive any dividend declared by our
companys board of directors and, subject to the rights, privileges,
restrictions and conditions attaching to any other class of shares, receive the
remaining property of our company upon dissolution.

TSX VENTURE EXCHANGEYear Ended
    High
    LowFebruary 29, 2012
    0.180
    0.065February 28, 2011
    0.235
    0.150February 28,
      2010(1)
    0.760
    0.063OTC BULLETIN BOARDFebruary 29,
      2012(2)
    0.200
    0.130


|1. | Our common shares started trading on the TSX Venture
      Exchange on July 28, 2009.
|-- | -------------------------------------------------------------------------------------
|2. | Our common shares started trading on the OTC Bulletin
      Board on April 4, 2011.  

The high and low market prices for our common shares for each
full financial quarter for the two most recent full fiscal years on the
Over-the-Counter Bulletin Board were as follows:

TSX VENTURE EXCHANGEQuarter Ended
    High
    LowMay 31, 2012
    0.070
    0.050February 29, 2012
    0.095
    0.065November 30, 2011
    0.130
    0.075August 31, 2011
    0.160
    0.110May 31, 2011
    0.180
    0.135February 28, 2011
    0.235
    0.200November 30, 2010
    0.235
    0.185August 31, 2010
    0.185
    0.150OTC BULLETIN BOARDMay 31, 2012
    0.070
    0.047February 29, 2012
    0.098
    0.065November 30, 2011
    0.115
    0.080August 31, 2011
    0.169
    0.129May 31, 2011
    0.195
    0.140February 28, 2011
    0.240
    0.200


The high and low market prices of our common shares for each of
the most recent six months, from November 30, 2011 through April 30, 2012 on the
TSX Venture Exchange and the OTC Bulletin Board were as follows:

TSX Venture ExchangeMonth
    High
    LowMay 2012
    0.070
    0.050April 2012
    0.095
    0.055March 2012
    0.095
    0.070February 2012
    0.095
    0.065January 2012
    0.100
    0.065December 2011
    0.085
    0.060OTC Bulletin
      BoardMay 2012
    0.070
    0.047April 2012
    0.096
    0.061March 2012
    0.096
    0.068February 2012
    0.098
    0.065January 2012
    0.105
    0.064December 2011
    0.078
    0.053


---

*B.*                     *Plan
of Distribution*

Not applicable.

*C.*                     *Markets*

Our common shares are exclusively traded on the TSX Venture
Exchange and the OTC Bulletin Board.

*D.*                     *Selling
Shareholders*

Not applicable.

*E.*                     *Dilution*

Not applicable.

*F.*                     *Expenses
of the Issue*

Not applicable.

ITEM
10                      Additional
Information

*A.*                     *Share
Capital*

Not applicable.

*B.*                     *Memorandum and Articles of Association*

We are incorporated under the laws of the Province of British
Columbia, Canada and have been assigned incorporation number 0769134

Our Articles do not contain a description of our objects and
purposes.

Our Articles do not restrict a directors power to (a) vote on
a proposal, arrangement or contract in which the director is materially
interested, (b) to vote compensation to themselves or any other members of their
body in the absence of an independent quorum, or (c) exercise borrowing powers.
Under our Articles, there is no mandatory retirement age for our directors and
our directors are not required to own securities of our company in order to
serve as directors.

Our authorized capital consists of an unlimited number of
common shares without par value and an unlimited number of preferred shares
without par value.

Holders of our common shares are entitled to vote at all
meetings of shareholders, except meetings at which only holders of a specified
class of shares are entitled to vote, receive any dividend declared by our
companys board of directors and, subject to the rights, privileges,
restrictions and conditions attaching to any other class of shares, receive the
remaining property of our company upon dissolution.

Our Articles state that the rights attaching to our common
shares and preference shares may be altered, amended, repealed, suspended or
changed by the affirmative vote of the holders of not less than two-thirds of
our common and preference shares.

At each annual general meeting of our company, all of our
directors retire and the shareholders elect a new board of directors. Each
director holds office until our next annual general meeting, or until his office
is earlier vacated in accordance with our Articles or with the provisions of the
British Columbia Business Corporations Act. A director appointed or
elected to fill a vacancy on our board also holds office until our next annual
general meeting.

Our Articles provide that our annual meetings of shareholders
must be held at such time in each calendar year and not more than 15 months
after the last annual general meeting and at such place as our board of
directors may from time to time determine.

---

Under our Articles, and subject to the special rights and
restrictions attached to the shares of any class or series of shares, the quorum
for the transaction of business at a meeting of our shareholders is two persons
who are present in person or by proxy.

Our Articles state that our directors, the President, the
Secretary, and any lawyer or auditor of our company are entitled to attend any
meeting of our shareholders.

Except as provided in the Investment Canada Act, or
similar legislation, there are no limitations specific to the rights of
non-Canadians to hold or vote our common shares under the laws of Canada or
British Columbia, or in our charter documents.

There are no provisions in our Articles that would have the
effect of delaying, deferring or preventing a change in control of our company,
and that would operate only with respect to a merger, acquisition or corporate
restructuring involving our company.

Our Articles do not contain any provisions governing the
ownership threshold above which shareholder ownership must be disclosed.
Securities legislation in Canada, however, requires that we disclose in our
annual general meeting proxy statement, holders who beneficially own more than
10% of our issued and outstanding shares, and United States Federal securities
laws require the disclosure in our annual report on Form 20-F of holders who own
more than 5% of our issued and outstanding shares.

At its annual and special shareholders meeting held on August
5, 2011, the Companys shareholders approved the alternation of the Companys
Notice of Articles and Article to amend and increase the authorized share
structure of the Company to authorize an unlimited number of a new class of
Preferred Shares without par value, issuable in series, with special rights and
restrictions applicable to the Preferred Shares which permit the directors to
affix specific rights and restrictions to each series if, as and when issued.

*C.*                     *Material
Contracts*

The material contracts to which we are a party which were
entered into during the last two fiscal years are as follows:

| | 1.  | Consulting and Professional Services Agreement between
      JVM Management Ltd. and Etna Resources Inc. dated November 3,
  2009.                            
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                               
| | 2.  | Consulting and Professional Services Agreement between
      Sage Associates, Inc. and Etna Resources Inc. dated November 1,
    2009.                        
| |     |                                                                                                                                                               
| | 3.  | Consulting Services Agreement between Kriyah Consultants
      LLC. and Etna Resources Inc. dated November 1, 2009.                                           
| |     |                                                                                                                                                               
| | 4.  | Consulting Services Agreement between Tim Lowenstein and
      Etna Resources Inc. dated November 1, 2009.                                                    
| |     |                                                                                                                                                               
| | 5.  | Employment Agreement between Etna Resources Inc. and
      Andrew Brodkey dated November 1, 2009.                                                             
| |     |                                                                                                                                                               
| | 6.  | Independent Director Agreement between Pan American
      Lithium Corp. and Ronald Richman dated April 30, 2010.                                              
| |     |                                                                                                                                                               
| | 7.  | Independent Director Agreement between Pan American
      Lithium Corp. and David Terry dated April 30, 2010.                                                 
| |     |                                                                                                                                                               
| | 8.  | Amended and Restated Consulting Services Agreement dated
      May 3, 2011 by and between Level 3 Capital Management Inc. and Pan
      American Lithium Corp.
| |     |                                                                                                                                                               
| | 9.  | A Purchase Agreement between Pan American Lithium Corp.
      and Sociedad Gareste, Limitada (Gareste) dated February 14,
  2011.                           
| |     |                                                                                                                                                               
| | 10. | A binding letter of intent with Gareste dated February
      14, 2011 to acquire interests through joint ventures in two new lithium
      brine projects.    

---

| | 11. | Joint Venture Agreement with Gareste to acquire an
      interest in Maricunga dated April 30, 2012.
| | --- | ----------------------------------------------------------------------------------------------------

*D.*                     *Exchange Controls*

There are no government laws, decrees or regulations in Canada
which restrict the export or import of capital or which affect the remittance of
dividends, interest or other payments to non-resident holders of our common
shares. Any remittances of dividends to United States residents and to other
non-residents are, however, subject to withholding tax. See Taxation below.

*E.*                     *Taxation*

Material Canadian Federal Income Tax Consequences

We consider that the following general summary fairly describes
the principal Canadian Federal income tax consequences applicable to a holder of
our common shares who is a resident of the United States, who is not, will not
be and will not be deemed to be, a resident of Canada for purposes of the
Income Tax Act (Canada) and any applicable tax treaty and who does not
use or hold, and is not deemed to use or hold, his common shares in the capital
of our company in connection with carrying on a business in Canada, referred to
as a non-resident holder.

This summary is based upon the current provisions of the
Income Tax Act, the regulations thereunder, referred to as the
Regulations, the current publicly announced administrative and assessing
policies of the Canada Revenue Agency and the Canada-United States Tax
Convention (1980), as amended, referred to as the Treaty. This summary also
takes into account the amendments to the Income Tax Act and the
Regulations publicly announced by the Minister of Finance (Canada) prior to the
date hereof, referred to as the Tax Proposals, and assumes that all such Tax
Proposals will be enacted in their present form. However, no assurances can be
given that the Tax Proposals will be enacted in the form proposed, or at all.
This summary is not exhaustive of all possible Canadian Federal income tax
consequences applicable to a holder of our common shares and, except for the
foregoing, this summary does not take into account or anticipate any changes in
law, whether by legislative, administrative or judicial decision or action, nor
does it take into account provincial, territorial or foreign income tax
legislation or considerations, which may differ from the Canadian Federal income
tax consequences described herein.

This summary is of a general nature only and is not intended
to be, and should not be construed to be, legal, business or tax advice to any
particular holder or prospective holder of our common shares, and no opinion or
representation with respect to the tax consequences to any holder or prospective
holder of our common shares is made. Accordingly, holders and prospective
holders of our common shares should consult their own tax advisors with respect
to the income tax consequences of purchasing, owning and disposing of our common
shares in their particular circumstances.

Dividends

Dividends paid on our common shares to a non-resident holder
will be subject under the Income Tax Act to withholding tax which tax is
deducted at source by our company. The withholding tax rate for dividends
prescribed by the Income Tax Act is 25% but this rate may be reduced
under the provisions of an applicable tax treaty. Under the Treaty, the
withholding tax rate is reduced to 15% on dividends paid by our company to
residents of the United States and is further reduced to 5% where the beneficial
owner of the dividends is a corporation resident in the United States that owns
at least 10% of the voting shares of our company.

Capital Gains

A non-resident holder is not subject to tax under the Income
  Tax Act in respect of a capital gain realized upon the disposition of a
  common share of our company unless such share is taxable Canadian property
  (as defined in the Income Tax Act) of the non-resident holder. Our common
  shares generally will not be taxable Canadian property of a non-resident holder
  unless the non-resident holder alone or together with non-arms length
  persons owned, or had an interest in an option in respect of, not less than
  25% of the issued shares of any class of our capital stock at any time during
  the 60-month period immediately preceding the disposition of the shares. In
  the case of a non-resident holder resident in the United States for whom shares
  of our company are taxable Canadian property, no Canadian taxes will generally
  be payable on a capital gain realized on such shares by reason of the Treaty
  unless the value of such shares is derived principally from real property situated
  in Canada.

---

Material United States Federal Income Tax Consequences

The following is a general discussion of certain possible United States Federal foreign income tax matters under current law, generally applicable to a U.S. Holder (as defined below) of our common shares who holds such shares as capital assets. This
  discussion does not address all aspects of United States Federal income tax matters and does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the
  definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. See "Material Canadian Federal Income Tax Consequences"  above.

The following discussion is based upon the Internal Revenue Code of 1986, as amended, referred to as the "Code" , Treasury Regulations, published by the Internal Revenue Service, referred to as "IRS" , rulings, published
administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the
potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. No assurance can be given that the IRS will agree with such statements and
conclusions, or will not take, or a court will not adopt, a position contrary to any position taken herein.

The following discussion is for general information only and is not intended to be, nor should it be construed to be, legal, business or tax advice to any holder or prospective holder of our common shares, and no opinion or representation with
respect to the United States Federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares are urged to consult their own tax advisors with respect to Federal, state,
local and foreign tax consequences of purchasing, owning and disposing of our common shares.

U.S. Holders

As used herein, a "U.S. Holder"  includes a holder of less than 10% of our common shares who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political
subdivision thereof, any entity which is taxable as a corporation for United States tax purposes and any other person or entity whose ownership of our common shares is effectively connected with the conduct of a trade or business in the United
States. A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts,
regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of our common shares is not effectively connected with the conduct of a trade or business in the United States and shareholders
who acquired their shares through the exercise of employee stock options or otherwise as compensation.

Distributions

The gross amount of a distribution paid to a U.S. Holder will generally be taxable as dividend income to the U.S. Holder for United States Federal income tax purposes to the extent paid out of our current or accumulated earnings and profits, as
determined under United States Federal income tax principles. Distributions which are taxable dividends and which meet certain requirements will be "qualified dividend income"  and taxed to U.S. Holders at a maximum United States Federal
rate of 15%. Distributions in excess of our current and accumulated earnings and profits will be treated first as a tax-free return of capital to the extent the U.S. Holder' s tax basis in the common shares and, to the extent in excess of such
tax basis, will be treated as a gain from a sale or exchange of such shares.

Capital Gains

In general, upon a sale, exchange or other disposition of common shares, a U.S. Holder will generally recognize a capital gain or loss for United States Federal income tax purposes in an amount equal to the difference between the amount realized on
the sale or other distribution and the U.S. Holder' s adjusted tax basis in such shares. Such gain or loss will be a United States source gain or loss and will be treated as a long-term capital gain or loss if the U.S. Holder' s holding
period of the shares exceeds one year. If the U.S. Holder is an individual, any capital gain will generally be subject to United States Federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of
capital losses is subject to significant limitations.

Foreign Tax Credit

A U.S. Holder who pays (or has had withheld from distributions) Canadian income tax with respect to the ownership of our common shares may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid
or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer' s income subject to tax. This election is made on a year-by-year
basis and generally applies to all foreign income taxes paid by (or withheld
from) the U.S. Holder during that year. There are significant and complex
limitations which apply to the tax credit, among which is an ownership period
requirement and the general limitation that the credit cannot exceed the
proportionate share of the U.S. Holders United States income tax liability that
the U.S. Holders foreign source income bears to his or its worldwide taxable
income. In determining the application of this limitation, the various items of
income and deduction must be classified into foreign and domestic sources.
Complex rules govern this classification process. The availability of the
foreign tax credit and the application of these complex limitations on the tax
credit are fact specific and holders and prospective holders of our common
shares should consult their own tax advisors regarding their individual
circumstances.

---

Passive Foreign Investment Corporation

We do not believe that we are a passive foreign investment
corporation, referred to as a PFIC. However, since PFIC status depends upon
the composition of a companys income and assets and the market value of its
assets and shares from time to time, there is no assurance that we will not be
considered a PFIC for any taxable year. If we were treated as a PFIC for any
taxable year during which a U.S. Holder held shares, certain adverse tax
consequences could apply to the U.S. Holder.

If we are treated as a PFIC for any taxable year, gains
recognized by such U.S. Holder on a sale or other disposition of shares would be
allocated ratably over the U.S. Holders holding period for the shares. The
amount allocated to the taxable year of the sale or other exchange and to any
year before we became a PFIC would be taxed as ordinary income. The amount
allocated to each other taxable year would be subject to tax at the highest rate
in effect for individuals or corporations, as applicable, and an interest charge
would be imposed on the amount allocated to such taxable year. Further, any
distribution in respect of shares in excess of 125% of the average of the annual
distributions on shares received by the U.S. Holder during the preceding three
years or the U.S. Holders holding period, whichever is shorter, would be
subject to taxation as described above. Certain elections may be available to
U.S. Holders that may mitigate some of the adverse consequences resulting from
PFIC status. However, regardless of whether such elections are made, dividends
paid by a PFIC will not be qualified dividend income and will generally be
taxed at the higher rates applicable to other items of ordinary income.

U.S. Holders and prospective holders should consult their
own tax advisors regarding the potential application of the PFIC rules to their
ownership of our common shares.

*F.*                     *Dividends
and Paying Agents*

Not applicable.

*G.*                     *Statements
by Experts*

Not applicable.

*H.*                     *Documents
on Display*

Documents concerning our company referred to in this annual
report may be viewed by appointment during normal business hours at our
registered and records office at Suite 800 - 885 West Georgia Street, Vancouver,
British Columbia, Canada, V6C 3H1.

*I.*                     *Subsidiary
Information*

The Company currently holds a 99% interest in South American
Lithium Company S.A. Cerrada, a company governed by the laws of Chile.

ITEM
11                     
Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM
12                     
Description of Securities Other Than Equity Securities

None.

---

PART II

ITEM
13                      Defaults,
Dividend Arrearages and Delinquencies

Not applicable.

ITEM
14                      Material
Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

ITEM
15                     
Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
in our companys reports filed or submitted under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commissions rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
companys reports filed under the Securities Exchange Act of 1934 is accumulated
and communicated to management, including our companys Chief Executive Officer
(CEO) and Chief Financial Officer (CFO) as appropriate, to allow timely
decisions regarding required disclosure.

As required by Rule 13a-15 under the Securities Exchange Act of
1934, we have carried out an evaluation of the effectiveness of the design and
operation of our companys disclosure controls and procedures as of the end of
the period covered by this annual report, being February 29, 2012. This
evaluation was carried out by our CEO (being our principal executive officer)
and CFO (being our principal financial officer).

Based upon that evaluation, our CEO and CFO concluded that our
disclosure controls and procedures are ineffective to ensure that (i)
information we are required to disclose in reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission rules and forms and (ii) that such
information is accumulated and communicated to our management, including our CEO
and CFO in order to allow timely decisions regarding required disclosure.

Managements Annual Report on Internal Control Over
Financial Reporting

Our Board has overall responsibility for reviewing our
disclosure to ensure we provide full and plain disclosure to shareholders and
other stakeholders. Our Board discharges its responsibilities through its
committees, specifically with respect to financial disclosure. The Audit
Committee is responsible for reviewing our financial reporting procedures and
internal controls to ensure full and accurate disclosure of our financial
position.

Our CEO and CFO are responsible for designing internal controls
over financial reporting or causing them to be designed under their supervision
in order to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with IFRS. Based on this evaluation the CEO and CFO have concluded
that our internal controls over financial reporting as of February 29, 2012 (the
Evaluation Date) are ineffective.Management has used the
framework set forth in the report entitled Internal Control--Integrated
Framework published by the Committee of Sponsoring Organizations of the Treadway
Commission, known as COSO, to evaluate the effectiveness of our internal control
over financial reporting.

Based on such evaluation, they have concluded that as of the
Evaluation Date, certain material weaknesses exist in our internal controls and
procedures, however, our CEO and CFO believe that these material weaknesses
would not prevent them from becoming aware, on a timely basis, of material
information relating to us required to be included in our reports filed or
submitted under the Exchange Act due to their involvement in all of our
operations. Such weaknesses are:

| | (i)  | Due to our limited number of staff, it is not feasible to
      achieve complete segregation of incompatible duties.                                                                                                                    
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                         
| | (ii) | Due to our limited number of staff, we do not have a
      sufficient number of finance personnel with all the technical accounting
      knowledge to address all complex and non-routine accounting transactions
      that may arise.

---

| | (iii) | We did not have a Whistle Blower Policy in place during
      the period.
| | ----- | -------------------------------------------------------------------------

These weaknesses in our internal controls are not pervasive and
we have attempted to mitigate their effects. However, these weaknesses impact
our internal controls over financial reporting by reducing the effectiveness of
the internal controls over financial reporting we have in place. The weaknesses
in our internal control also affect financial reporting by increasing the
likelihood that a material misstatement would not be prevented or detected.

Attestation Report of Registered Public Accounting Firm

The annual report does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting, pursuant to the exemption found in Section 404(c) of the
Sarbanes-Oxley Act of 2002, as added by Section 989G of the Dodd-Frank Wall
Street Reform and Consumer Protection Act.

Changes in Internal Control Over Financial Reporting

There were no significant changes in our internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any significant deficiencies or material
weaknesses of internal controls that would require corrective action.

ITEM
16                      [Reserved]

ITEM
16A                   Audit
Committee Financial Expert

Our board has determined that we do not have a member of our
audit committee that qualifies as an audit committee financial expert as
defined in Item 16A(b) of Form 20-F. We believe that the members of our audit
committee, are collectively capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for financial
reporting.

Our board of directors has determined that Dr. David Terry and
Dr. Ronald Richman qualify as independent members of our audit committee as
that term is defined in Rule 4350(d) of the Marketplace Rules of the FINRA.
Andrew Brodkey is not independent as defined in Rule 4200(a)(15)of the
Marketplace Rules of the FINRA. We believe that having an audit committee
financial expert and an audit committee that consists entirely of independent
directors would be overly costly and burdensome and is not warranted in our
circumstances given the early stages of our development and the fact that we
have not generated revenues to date.

ITEM
16B                   Code
of Ethics

The Company has not currently adopted a code of ethics but is
evaluating its internal procedures to determine the necessity of same. In the
event that it is determined a code of ethics is necessary, an appropriate code
will be implemented.

ITEM
16C                   Principal
Accountant Fees and Services

Audit Fees

Our board appointed Manning Elliott, Chartered Accountants, as
independent auditors to audit our financial statements for the fiscal years
ended February 29, 2012 and February 28, 2011. The aggregate of fees billed by
Manning Elliott, Chartered Accountants, for professional services rendered for
the audit of our annual financial statements included in this annual report for
the fiscal years ended 2011 and 2012 were $28,500 and $29,000, respectively.

Audit Related Fees

For the fiscal years ended February 28, 2011 and February 29,
2012, the aggregate fees billed for assurance and related services by Manning
Elliott, Chartered Accountants, relating to our quarterly financial statements
which are not reported under the caption Audit Fees above, were $16,700 and
$23,500 for 2011 and 2012, respectively.

---

Tax Fees

For the fiscal years ended February 28, 2011 and February 29,
2012, the aggregate fees billed for tax compliance, tax advice and tax planning
by Manning Elliott, Chartered Accountants, was $1,000 and $1,500 for 2011 and
2012 respectively.

All Other Fees

For the fiscal years ended February 28, 2011 and February 29,
2012, the aggregate fees billed by Manning Elliott, Chartered Accountants, for
other non-audit professional services, other than those services listed above,
totalled $19,179 and $5,600 for 2011 and 2012, respectively.

Pre-Approval Policies and Procedures

Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Manning Elliott, Chartered Accountants,
is engaged by us to render any auditing or permitted non-audit related service,
the engagement be:

|- | approved by our audit committee;
      or                                                                                                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                     
|- | entered into pursuant to pre-approval policies and
      procedures established by the audit committee, provided the policies and
      procedures are detailed as to the particular service, the audit committee
      is informed of each service, and such policies and procedures do not
      include delegation of the audit committees responsibilities to
      management.

The audit committee pre-approves all services provided by our
independent auditors. The pre-approval process has been implemented in response
to the new rules. Therefore, the audit committee does not have records of what
percentage of the above fees were pre-approved. However, all of the above
services and fees were reviewed and approved by the audit committee either
before or after the respective services were rendered.

The audit committee has considered the nature and amount of the
fees billed by Manning Elliott, Chartered Accountants, and believes that the
provision of the services for activities unrelated to the audit is compatible
with maintaining the independence of Manning Elliott, Chartered Accountants.

ITEM
16D.                
Exemption from the Listing Standards for Audit Committees

Not Applicable.

ITEM
16E                   Purchases
of Equity Securities the Company and Affiliated Purchasers

Not Applicable.

ITEM
16F                   Change
in Registrants Certifying Account

None.

ITEM
16G                   Corporate
Governance

Not Applicable.

ITEM
16H                  
Mine Safety Disclosure

None.

PART III

ITEM
17                     
Financial Statements

Refer to Item 18 - Financial Statements.

---

ITEM
18                     
Financial Statements





PAN AMERICAN LITHIUM CORP. 
  (An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED FEBRUARY 29, 2012 AND FEBRUARY 28, 2011

(Expressed in Canadian dollars)





|CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                    
|-----------------------------------------------------------------
|                                                                 
|CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE
      LOSS
|                                                                 
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
      EQUITY 
|                                                                 
|CONSOLIDATED STATEMENT OF CASH FLOWS                             
|                                                                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   

---



|INDEPENDENT AUDITORS REPORT
|----------------------------

To the Shareholders of
  Pan American Lithium Corp.

We have audited the accompanying consolidated financial
statements of Pan American Lithium Corp. which comprise the consolidated
statements of financial position as at February 29, 2012, February 28, 2011 and
March 1, 2010, and the consolidated statements of operations and comprehensive
loss, changes in equity and cash flows for the years ended February 29, 2012 and
February 28, 2011, and the related notes comprising a summary of significant
accounting policies and other explanatory information.

Managements Responsibility for the Consolidated
Financial StatementsManagement is responsible for the preparation and
fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.

Auditors ResponsibilityOur responsibility is to
express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards and the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, we
consider internal control relevant to the entitys preparation and fair
presentation of the consolidated financial statements 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. An
audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial
statements.

We believe that the audit evidence we have obtained based on
our audits is sufficient and appropriate to provide a basis for our audit
opinion.

OpinionIn our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of
Pan American Lithium Corp. as at February 29, 2012, February 28, 2011 and March
1, 2010, and its financial performance and cash flows for the years ended
February 29, 2012 and February 28, 2011 in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board.

Emphasis of MatterWe draw attention to Note 1 to
these consolidated financial statements which describes the uncertainty related
to Pan American Lithium Corps ability to operate as a going concern in the
future. Our opinion is not qualified in respect of this matter.

/s/ Manning Elliott LLP

CHARTERED ACCOUNTANTS Vancouver, British Columbia June
28, 2012

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
  (Expressed in Canadian Dollars)

|                                                           |   | February 29, |   |   | February 28, |   |   | March 1,   |  
|---------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ---------- | -
|                                                           |   | 2012         |   |   | 2011         |   |   | 2010       |  
|                                                           |   |              |   |   | (Note 12)    |   |   | (Note 12)  |  
|CURRENT ASSETS                                             |   |              |   |   |              |   |   |            |  
|Cash                                                       | $ | 537,722      |   | $ | 165,165      |   | $ | 1,637,451  |  
|Amounts receivable and
      prepaid expenses              |   | 100,112      |   |   | 69,077       |   |   | 78,650     |  
|                                                           |   |              |   |   |              |   |   |            |  
|Total Current Assets                                       |   | 637,834      |   |   | 234,242      |   |   | 1,716,101  |  
|                                                           |   |              |   |   |              |   |   |            |  
|MINERAL PROPERTIES (Notes 5 and 7)                         |   | 4,636,325    |   |   | 4,441,553    |   |   | 3,989,952  |  
|                                                           |   |              |   |   |              |   |   |            |  
|TOTAL ASSETS                                               | $ | 5,274,159    |   | $ | 4,675,795    |   | $ | 5,706,053  |  
|                                                           |   |              |   |   |              |   |   |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY                       |   |              |   |   |              |   |   |            |  
|                                                           |   |              |   |   |              |   |   |            |  
|Current Liabilities                                        |   |              |   |   |              |   |   |            |  
|Accounts payable and accrued liabilities (Note
      7(c)) | $ | 334,623      |   | $ | 396,746      |   | $ | 56,163     |  
|Due to related parties (Note 7)                            |   | 18,195       |   |   | -            |   |   | -          |  
|                                                           |   |              |   |   |              |   |   |            |  
|Total Current Liabilities                                  |   | 352,818      |   |   | 396,746      |   |   | 56,163     |  
|                                                           |   |              |   |   |              |   |   |            |  
|WARRANT LIABILITY (Note 6(e))                              |   | 58,424       |   |   | 716,552      |   |   | 108,372    |  
|                                                           |   |              |   |   |              |   |   |            |  
|Total Liabilities                                          |   | 411,242      |   |   | 1,113,298    |   |   | 164,535    |  
|                                                           |   |              |   |   |              |   |   |            |  
|Shareholders Equity                                       |   |              |   |   |              |   |   |            |  
|                                                           |   |              |   |   |              |   |   |            |  
|Share capital (Note 6)                                     |   | 8,600,055    |   |   | 6,674,338    |   |   | 6,325,884  |  
|Contributed surplus                                        |   | 1,391,442    |   |   | 1,118,247    |   |   | 365,637    |  
|Share subscriptions received                               |   | 15,000       |   |   | -            |   |   | -          |  
|Accumulated other comprehensive loss                       |   | (274,792     | ) |   | (338,549     | ) |   | -          |  
|Deficit                                                    |   | (4,868,788   | ) |   | (3,891,539   | ) |   | (1,150,003 | )
|                                                           |   |              |   |   |              |   |   |            |  
|Total Shareholders Equity                                 |   | 4,862,917    |   |   | 3,562,497    |   |   | 5,541,518  |  
|                                                           |   |              |   |   |              |   |   |            |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                 | $ | 5,274,159    |   | $ | 4,675,795    |   | $ | 5,706,053  |  
|                                                           |   |              |   |   |              |   |   |            |  
|Going Concern (Note 1)                                     |   |              |   |   |              |   |   |            |  
|Commitments (Note 8)                                       |   |              |   |   |              |   |   |            |  
|Subsequent Events (Note 13)                                |   |              |   |   |              |   |   |            |  

APPROVED BY THE BOARD OF DIRECTORS ON JUNE 28, 2012:

|Ron
      Richman    | 
|---------------------- | 
|                       | 
|Andrew
      Brodkey | 

The accompanying notes are an integral part of these
consolidated financial statements.

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
  (Expressed in Canadian Dollars)

|                                                       |   | For the years ended |  
|------------------------------------------------------ | - | ------------------- | -
|                                                       |   |                     |  
|                                                       |   | February 29,        |  
|                                                       |   | 2012                |  
|                                                       |   |                     |  
|EXPENSES                                               |   |                     |  
|Advertising and promotion                              | $ | 5,880               |  
|Bank charges                                           |   | 2,920               |  
|Investor communications                                |   | 440,579             |  
|Management fees (Note 7(a))                            |   | 523,084             |  
|Office and miscellaneous                               |   | 62,195              |  
|Professional fees                                      |   | 192,697             |  
|Rent (Note 7(a))                                       |   | 14,461              |  
|Share-based payments (Note 6(d))                       |   | 128,519             |  
|Stock transfer and filing fees                         |   | 47,975              |  
|Travel                                                 |   | 76,427              |  
|LOSS BEFORE OTHER ITEMS                                |   | (1,494,737          | )
|                                                       |   |                     |  
|OTHER ITEMS                                            |   |                     |  
|Gain on derivative liability                           |   | 81,587              |  
|Gain (loss) on warrant liability (Note 6(e))           |   | 851,233             |  
|Impairment of mineral property (Note 5)                |   | (418,873            | )
|Gain on foreign exchange                               |   | 3,541               |  
|                                                       |   | 517,488             |  
|NET LOSS                                               |   | (977,249            | )
|Unrealized gain (loss) on foreign exchange translation |   | 63,757              |  
|COMPREHENSIVE LOSS                                     |   | (913,492            | )
|BASIC AND DILUTED NET LOSS PER SHARE                   | $ | (0.021              | )
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING   |   | 46,399,041          |  

The accompanying notes are an integral part of these
consolidated financial statements.

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY 
  (Expressed in Canadian Dollars)

|                                |  |               |  |   |             |  |   |               |   |   |               |  |   | Accumulated |   |   |               |   |   |            |  
|------------------------------- |  | ------------- |  | - | ----------- |  | - | ------------- | - | - | ------------- |  | - | ----------- | - | - | ------------- | - | - | ---------- | -
|                                |  |               |  |   |             |  |   |               |   |   |               |  |   | Other       |   |   |               |   |   | Total      |  
|                                |  | Common Shares |  |   | Contributed |  |   | Subscriptions |   |   | Comprehensive |  |   |             |   |   | Shareholders |  
|                                |  | Shares        |  |   | Amount      |  |   | Surplus       |   |   | Received      |  |   | Loss        |   |   | Deficit       |   |   | Equity     |  
|                                |  |               |  |   |             |  |   |               |   |   |               |  |   |             |   |   |               |   |   |            |  
|Balance, March 1, 2010          |  | 32,264,362    |  | $ | 6,325,884   |  | $ | 365,637       |   | $ | -             |  | $ | -           |   | $ | (1,150,003    | ) | $ | 5,541,518  |  
|Exercise of stock options       |  | 225,000       |  |   | 33,750      |  |   | -             |   |   | -             |  |   | -           |   |   | -             |   |   | 33,750     |  
|Exercise of agent warrants      |  | 178,708       |  |   | 35,313      |  |   | -             |   |   | -             |  |   | -           |   |   | -             |   |   | 35,313     |  
|Private placement               |  | 5,432,873     |  |   | 241,021     |  |   | 105,665       |   |   | -             |  |   | -           |   |   |               |   |   | 346,686    |  
|Share-based payments            |  | -             |  |   | -           |  |   | 685,315       |   |   | -             |  |   | -           |   |   | -             |   |   | 685,315    |  
|Transfer from contributed       |  | -             |  |   | -           |  |   | -             |   |   |               |  |   | -           |   |   | -             |   |   | -          |  
|surplus on:                     |  |               |  |   |             |  |   |               |   |   | -             |  |   |             |   |   |               |   |   |            |  
|Stock option exercise           |  | -             |  |   | 28,571      |  |   | (28,571       | ) |   | -             |  |   | -           |   |   | -             |   |   | -          |  
|Agent
      warrant exercise    |  | -             |  |   | 9,799       |  |   | (9,799        | ) |   | -             |  |   | -           |   |   | -             |   |   | -          |  
|Unrealized loss on foreign      |  | -             |  |   |             |  |   |               |   |   |               |  |   | (338,549    | ) |   |               |   |   | (338,549   | )
|exchange translation            |  |               |  |   |             |  |   |               |   |   | -             |  |   |             |   |   |               |   |   |            |  
|Loss for the year               |  | -             |  |   | -           |  |   | -             |   |   | -             |  |   | -           |   |   | (2,741,536    | ) |   | (2,741,536 | )
|Balance, February 28, 2011      |  | 38,100,943    |  |   | 6,674,338   |  |   | 1,118,247     |   |   | -             |  |   | (338,549    | ) |   | (3,891,539    | ) |   | 3,562,497  |  
|                                |  |               |  |   |             |  |   |               |   |   |               |  |   |             |   |   |               |   |   |            |  
|                                |  |               |  |   |             |  |   |               |   |   |               |  |   |             |   |   |               |   |   |            |  
|Issued in exchange for services |  | 1,303,892     |  |   | 116,710     |  |   | -             |   |   | -             |  |   | -           |   |   | -             |   |   | 116,710    |  
|Private placements              |  | 15,598,757    |  |   | 1,809,007   |  |   | 16,901        |   |   | -             |  |   | -           |   |   | -             |   |   | 1,825,908  |  
|Share-based payments            |  |               |  |   | -           |  |   | 256,294       |   |   | -             |  |   | -           |   |   | -             |   |   | 256,294    |  
|Unrealized gain on foreign      |  |               |  |   | -           |  |   | -             |   |   | -             |  |   | 63,757      |   |   | -             |   |   | 63,757     |  
|exchange translation            |  |               |  |   |             |  |   |               |   |   |               |  |   |             |   |   |               |   |   |            |  
|Subscriptions received          |  |               |  |   |             |  |   |               |   |   | 15,000        |  |   |             |   |   |               |   |   | 15,000     |  
|Loss for the year               |  |               |  |   | -           |  |   | -             |   |   | -             |  |   | -           |   |   | (977,249      | ) |   | (977,249   | )
|Balance, February 29, 2012      |  | 55,003,592    |  | $ | 8,600,055   |  | $ | 1,391,442     |   | $ | 15,000        |  | $ | (274,792    | ) | $ | (4,868,788    | ) | $ | 4,862,917  |  

The accompanying notes are an integral part of these
consolidated financial statements

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS 
  (Expressed in Canadian Dollars)

|                                               |   | For the years ended |  
|---------------------------------------------- | - | ------------------- | -
|                                               |   | February 29,        |  
|                                               |   | 2012                |  
|                                               |   |                     |  
|CASH PROVIDED BY (USED IN):                    |   |                     |  
|OPERATING ACTIVITIES                           |   |                     |  
|Net loss for the year                          | $ | (977,249            | )
|Operating items not involving
      cash:      |   |                     |  
|Impairment of mineral property                 |   | 418,873             |  
|Gain on derivative liability                   |   | (81,587             | )
|Loss (gain) on warrant liability               |   | (851,233            | )
|Non-cash investor communications
      expense |   | 74,700              |  
|Share-based payments                           |   | 128,519             |  
|                                               |   | (1,287,977          | )
|Changes in working capital items:              |   |                     |  
|Amounts receivable                             |   | (15,287             | )
|Prepaid expenses                               |   | (15,748             | )
|Accounts payable and accrued
      liabilities |   | 91,245              |  
|Due to related parties                         |   | 18,195              |  
|                                               |   |                     |  
|                                               |   | (1,209,572          | )
|                                               |   |                     |  
|FINANCING ACTIVITIES                           |   |                     |  
|Share issue costs                              |   | (83,491             | )
|Proceeds from subscriptions received           |   | 15,000              |  
|Proceeds from issuance of shares               |   | 2,102,504           |  
|                                               |   | 2,034,013           |  
|INVESTING ACTIVITIES                           |   |                     |  
|                                               |   |                     |  
|Deferred exploration expenditures              |   | (430,298            | )
|                                               |   | (430,298            | )
|                                               |   |                     |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH        |   | (21,586             | )
|                                               |   |                     |  
|CHANGE IN CASH                                 |   | 372,557             |  
|                                               |   |                     |  
|CASH, BEGINNING OF YEAR                        |   | 165,165             |  
|                                               |   |                     |  
|CASH, END OF YEAR                              | $ | 537,722             |  
|                                               |   |                     |  
|SUPPLEMENTAL CASH FLOW INFORMATION             |   |                     |  
|Interest paid                                  | $ | -                   |  
|Taxes paid                                     | $ | -                   |  
|NON-CASH FINANCING AND INVESTING ITEMS         |   |                     |  
|Warrants issued to agent                       | $ | 16,901              |  
|Shares issued for exploration expenditure      | $ | 42,010              |  

The accompanying notes are an integral part of these consolidated
  financial statements.

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|1. | NATURE OF BUSINESS AND GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Pan American Lithium Corp., incorporated in British
      Columbia, is a public company listed on the TSX Venture Exchange (TSX-V)
      and trades under the symbol PL. The address of the Companys corporate
      office and its principal place of business is 3040 N. Campbell Avenue,
      Tucson, AZ, United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Pan American Lithium Corp. (the Company) was
      incorporated on September 18, 2006 under the laws of British Columbia. The
      Companys principal business activities include the acquisition,
      exploration and development of mineral properties. At February 29, 2012,
      the Company had not yet determined whether the properties contain ore
      reserves that are economically recoverable. The recoverability of amounts
      shown for mineral properties and related deferred exploration costs is
      dependent upon the discovery of economically recoverable reserves,
      confirmation of the Company's interest in the underlying mineral claims,
      the ability of the Company to obtain necessary financing to complete the
      development, and upon future profitable production or proceeds from the
      disposition of the mineral property.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | For the period from incorporation on September 18, 2006
      to February 29, 2012, the Company incurred losses of $4,868,788 since
      inception and does not have sufficient working capital as at February 29,
      2012 to meet its expected obligations over the next twelve months. These
      factors raise substantial doubt about the Companys ability to continue as
      a going concern. The Company's ability to continue its operations and to
      realize assets at their carrying values is dependent upon obtaining
      additional financing and generating revenues sufficient to cover its
      operating costs.                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | These consolidated financial statements do not give
      effect to any adjustments which would be necessary should the Company be
      unable to continue as a going concern and therefore be required to realize
      its assets and discharge its liabilities in other than the normal course
      of business and at amounts different from those reflected in these
      financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|2. | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | a) | Statement of Compliance and Conversion to
      International Financial Reporting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | These consolidated financial statements have been
      prepared in accordance with International Financial Reporting Standards
      (IFRS) as issued by the International Accounting Standards Board. These
      are the Companys first IFRS annual consolidated financial statements to
      be presented in accordance with IFRS and IFRS 1 First-time adoption of
      International Financial Reporting Standardshas been applied.
      Previously the Company prepared its consolidated annual and interim
      financial statements in accordance with Canadian generally accepted
      accounting principles. Note 12 contains reconciliations and descriptions
      of the effects of the transition from Canadian GAAP to IFRS on equity,
      operations and comprehensive loss along with reconciliations of the
      statements of financial position as at March 1, 2010 and February 28, 2011
      and the statements of operations and comprehensive loss and cash flows for
      the year ended February 28, 2011.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | b) | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | These consolidated financial statements are expressed in
      Canadian dollars and have been prepared on a historical cost basis except
      for financial instruments that have been measured at fair value. In
      addition, these consolidated financial statements have been prepared using
      the accrual basis of accounting on a going concern basis. The accounting
      policies set out below have been applied consistently to all years
      presented in these consolidated financial statements as if the policies
      have always been in effect, subject to certain IFRS transition elections
      described in Note 12.                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | These consolidated financial statements are prepared on a
      consolidated basis and include the accounts of the Company and its 99%
      owned subsidiary SALICO (see Note 5) which owns mineral interests located
      in Chile. All inter-company transaction and balances have been eliminated
      upon consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

1

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|2. | BASIS OF PRESENTATION - continued         
|-- | ------------------------------------------
|   |                                           
|   | c)                                        
|   |                                           
|   |                                           
|   |                                           
|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|   |                                           
|   | a)                                        
|   |                                           
|   |                                           
|   |                                           
|   | b)                                        
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   | c)                                        
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           

2

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
    continued
|-- | ----------------------------------------------------------
|   |                                                           
|   | d)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | e)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | f)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           

3

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
    continued
|-- | ----------------------------------------------------------
|   |                                                           
|   | g)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   | h)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   | i)                                                        
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           
|   |                                                           

4

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
    continued                                                                                                                                                                                                                                                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | k)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | l)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | NEW ACCOUNTING PRONOUNCEMENTS                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Certain new standards, interpretations and amendments to
      existing standards have been issued by the IASB or the International
      Financial Reporting Interpretations Committee (IFRIC) that are mandatory
      for accounting periods beginning after January 1, 2011, or later periods.
      Some updates that are not applicable or are not consequential to the
      Company may have been excluded from the list
below.

a)    New accounting
standards effective March 1, 2012

Amendments to IFRS 7Financial Instruments: Disclosures - In October 2010, the IASB
issued amendments to IFRS 7 that improve the disclosure requirements in relation
to transferred financial assets. The amendments are effective for annual periods
beginning on or after July 1, 2011, with early adoption permitted. The Company
does not anticipate this amendment to have a significant impact on its
consolidated financial statements.

IAS 12Income
taxes - In December 2010, the IASB issued an amendment to IAS 12 that
provides a practical solution to determining the recovery of investment
properties as it relates to the accounting for deferred income taxes. This
amendment is effective for annual periods beginning on or after July 1, 2011,
with early adoption permitted. The Company does not anticipate this amendment to
have a significant impact on its consolidated financial statements.

b)    New accounting
standards effective March 1, 2013:

IFRS 10Consolidated
Financial Statements-IFRS 10 requires an entity to consolidate
an investee when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns
through its power over the investee. Under existing IFRS, consolidation is
required when an entity has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. IFRS 10
replaces SIC-12 Consolidation - Special Purpose Entities and parts of IAS
27 Consolidated and Separate Financial Statements.

5

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|4. | NEW ACCOUNTING PRONOUNCEMENTS - continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | IFRS 11Joint Arrangements-IFRS 11 requires a venturer to classify its interest in a joint
      arrangement as a joint venture or joint operation. Joint ventures will be
      accounted for using the equity method of accounting whereas for a joint
      operation the venturer will recognize its share of the assets,
      liabilities, revenue and expenses of the joint operation. Under existing
      IFRS, entities have the choice to proportionately consolidate or equity
      account for interests in joint ventures. IFRS 11 supersedes IAS 31
      Interests in Joint Venturesand SIC-13 Jointly Controlled
      Entities - Non-monetary Contributions by Venturers.                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | IFRS 12Disclosure of Interests in Other
      Entities-IFRS 12 establishes disclosure requirements for
      interests in other entities, such as joint arrangements, associates,
      special purpose vehicles and off balance sheet vehicles. The standard
      carries forward existing disclosures and also introduces significant
      additional disclosure requirements that address the nature of, and risks
      associated with, an entitys interests in other entities.                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | IFRS 13Fair Value Measurement-IFRS 13 is a comprehensive standard for fair value measurement and
      disclosure requirements for use across all IFRS standards. The new
      standard clarifies that 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. It also establishes
      disclosures about fair value measurement. Under existing IFRS, guidance on
      measuring and disclosing fair value is dispersed among the specific
      standards requiring fair value measurements and in many cases does not
      reflect a clear measurement basis or consistent disclosures.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Amendments to other standards -In addition, there
      have been other amendments to existing standards, including IAS 27
      Separate Financial Statementsand IAS 28 Investments in
      Associates and Joint Ventures. IAS 27 addresses accounting for
      subsidiaries, jointly controlled entities and associates in
      non-consolidated financial statements. IAS 28 has been amended to include
      joint ventures in its scope and to address the changes in IFRS 10 to IFRS
      13.                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Each of the new standards, IFRS 10 to 13 and the
      amendments to other standards, is effective for annual periods beginning
      on or after January 1, 2013 with early adoption permitted. The Company has
      not yet begun the process of assessing the impact that the new and amended
      standards will have on its consolidated financial statements or whether to
      early adopt any of the new requirements.                                                                                                                                                                                                                                                                                                  

c)    New accounting
standards effective March 1, 2015:

IFRS 9Financial
Instruments-IFRS 9 was issued in November 2009 and contained
requirements for financial assets. This standard addresses classification and
measurement of financial assets and replaces the multiple category and
measurement models in IAS 39 for debt instruments with a new mixed measurement
model having only two categories: Amortized cost and fair value through profit
or loss. IFRS 9 also replaces the models for measuring equity instruments and
such instruments are either recognized at the fair value through profit or loss
or at fair value through other comprehensive income. Where such equity
instruments are measured at fair value through other comprehensive income,
dividends are recognized in profit or loss to the extent not clearly
representing a return of investment; however, others gains and losses (including
impairments) associated with such instruments remain in accumulated other
comprehensive income indefinitely.

Requirements for financial liabilities
were added in October 2010 and they largely carried forward existing
requirements in IAS 39, Financial Instruments  Recognition and
Measurement, except that fair value changes due to credit risk for
liabilities designated at fair value through profit and loss would generally be
recorded in other comprehensive income.

6

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|5. | MINERAL PROPERTIES
|-- | ------------------

| |                                                                      |   | February 29, |   |   | February 28, |  
| | -------------------------------------------------------------------- | - | ------------ | - | - | ------------ | -
| |                                                                      |   | 2012         |   |   | 2011         |  
| |                                                                      |   |              |   |   |              |  
| | Salico Lithium/Potassium Properties,
      Atacama Region III, Chile |   |              |   |   |              |  
| |                                                                      |   |              |   |   |              |  
| | Acquisition cost                                                     | $ | -            |   | $ | -            |  
| | Assay reports                                                        |   | -            |   |   | 11,668       |  
| | Claims expense                                                       |   | -            |   |   | 71,575       |  
| | Site
      maintenance                                               |   | 412,389      |   |   | 489,415      |  
| | Technical report                                                     |   | 5,653        |   |   | 24,769       |  
| | Hydrology                                                            |   | 79,583       |   |   | -            |  
| | Mapping                                                              |   | 536          |   |   | -            |  
| | Trenching                                                            |   | 18,398       |   |   | -            |  
| | Change in foreign exchange                                           |   | 67,974       |   |   | (272,762     | )
| |                                                                      |   | 584,533      |   |   | 324,665      |  
| | Balance, beginning of the period                                     |   | 4,051,792    |   |   | 3,727,127    |  
| | Balance, end of period                                               | $ | 4,636,325    |   | $ | 4,051,792    |  
| |                                                                      |   |              |   |   |              |  
| | Cerro Prieto Lithium/Potassium Property, Mexico                      |   |              |   |   |              |  
| |                                                                      |   |              |   |   |              |  
| | Acquisition cost                                                     | $ | -            |   | $ | -            |  
| | Site maintenance                                                     |   | 11,743       |   |   | 150,089      |  
| | Impairment of mineral property                                       |   | (418,873     | ) |   |              |  
| | Change in foreign exchange                                           |   | 17,369       |   |   | (23,153      | )
| |                                                                      |   | (389,761     | ) |   | 126,936      |  
| | Balance, beginning of the period                                     |   | 389,761      |   |   | 262,825      |  
| | Balance, end of period                                               | $ | -            |   | $ | 389,761      |  
| |                                                                      |   |              |   |   |              |  
| | Total Mineral Properties                                             | $ | 4,636,325    |   | $ | 4,441,553    |  

Chilean Lithium/Potassium Properties

The Company entered into a Securities
Exchange Agreement dated August 18, 2009 and amended September 18, 2009
(Agreement) with Sociedad Gareste Limitada (Gareste), a private limited
liability company organized under the laws of Chile, which owned nine
lithium/potassium salar concessions (the Properties ) located in Chile.
Under the terms of the agreement, Gareste organized a new Chilean limited
liability company (SALICO) and transferred the Properties to SALICO subject to
a net smelter return royalty. The Company consummated an agreement to purchase
99% of the interests of SALICO from the owners thereof in consideration for the
Company issuing 10,494,000 common shares with a fair value of $3,148,200. In
connection with the Agreement the Company issued 613,333 finders shares with a
fair value of $184,000. The fair value of the finders shares has been included
in the acquisition costs. The Company has also agreed to pay US$50,000 to
Gareste on signing to cover costs incurred in connection with the formation and
organization of SALICO. In addition, the Company has agreed to pay a monthly fee
of US$25,000 to compensate Gareste for the general and administrative costs. The
Company completed the acquisition on December 4, 2009.

7

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|5. | MINERAL PROPERTIES - continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | In connection with the closing of the acquisition, Salico
      granted a 2% net smelter return royalty to the vendor on future production
      from eight salars, and a 2% net smelter return royalty to another vendor
      on one salar, payable following commencement of commercial production to a
      maximum of US$6 million on a per salar basis. Prior to commencement of
      commercial production at any salar, Salico may re-purchase one-half of
      each net smelter return royalty for US$2 million on a per salar basis. At
      the Piedra Parada salar, where Salico obtained contractual rights to
      exploit lithium and light metals, Salico granted a 2% net smelter return
      royalty to the owner on the proceeds from the sale of lithium, potassium
      and light metals to a maximum of US$6 million. Salico is obligated to pay
      the owner a payment of US$2,000 per month as a lease and rental remittance
      fee to maintain the Piedra Parada concessions through the exploration
      stage, which payments will increase to US$5,000 per month at such time as
      these concessions are converted to exploitation status. Subsequent and
      subject to the agreement with SALICO, the owner of the Piedra Parada
      mineral concessions conveyed such concessions and the right to receive the
      maintenance payment described herein, to Zoro Mining Corp. (OTCBB:ZORM), a
      publicly traded mining company with one director and 2 officers in common
      with the Company.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Mexican Lithium/Potassium Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company entered into a Share Option Agreement (the
      Option Agreement) dated December 18, 2009 among the Company, Escondidas
      Internacional S.A. de C.V. (Escondidas) and the shareholders of
      Escondidas (the Shareholders) whereby, among other things, the
      Shareholders granted an Option to the Company to acquire 76% of the shares
      of Escondidas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | In consideration, the Company paid $200,000 to Escondidas
      upon execution of the agreement, and agreed to pay $25,000 per month until
      the earlier of closing or termination of the agreement. Upon closing the
      Company will pay an additional $50,000 to Escondidas. In addition, the
      agreement calls for cash payments to the Shareholders as follows; $125,000
      on the closing date, $500,000 six months from the closing date, $500,000
      twelve months from the closing date, and $750,000 eighteen months from the
      closing date. Upon closing, the agreement also calls for the issuance of
      10,300,000 common shares and 7,500,000 warrants to the Shareholders. Each
      warrant will be exercisable for one common share up to two years from
      closing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Subsequently, the Company entered into an amended
      agreements changing the terms of the Option Agreement originally dated
      December 18, 2009. Under the terms of the amended
  agreements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | i.   |  | The closing date is changed from June 30, 2010 to October
      31, 2011 (subsequently amended to April 30, 2012); and                                                    
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |  |                                                                                                                                                                           
| | ii.  |  | The number of shares issued to the shareholders is
      reduced from 10,300,000 to 5,000,000; and                                                                        
| |      |  |                                                                                                                                                                           
| | iii. |  | The number of warrants issued to the shareholders is
      reduced from 7,500,000 to 5,000,000; and                                                                       
| |      |  |                                                                                                                                                                           
| | iv.  |  | The date of the obligated payment of $500,000 is amended
      from 6 months from the closing date to 6 months from the commencement of
      commercial production; and  
| |      |  |                                                                                                                                                                           
| | v.   |  | The date of the obligated payment of $500,000 is amended
      from 12 months from the closing date to 12 months from the commencement of
      commercial production; and
| |      |  |                                                                                                                                                                           
| | vi.  |  | The date of the obligated payment of $750,000 is amended
      from 18 months from the closing date to 18 months from the commencement of
      commercial production; and
| |      |  |                                                                                                                                                                           
| | vii. |  | The monthly obligated payment is reduced from $25,000 to
      $1,000.                                                                                                    

On May 3, 2012 the Company announced
that the closing date of the share option agreement dated December 18, 2009 with
Escondidas Internacional S.A. de C.V., a privately held Mexican corporation, had
lapsed and the parties have not signed an agreement to extend the closing date.
As a result, the Company has written off all capitalized property costs as of
February 29, 2012 and recorded an impairment loss of $418,873.

8

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|6. | SHARE CAPITAL
|-- | -------------
|   |              
|   | a)           
|   |              
|   |              
|   |              
|   | b)           
|   |              
|   |              

| | i)   | The Company issued 953,810 shares of common stock with a
      fair value of $74,700 to an investor relations consultant for services
      rendered.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ii)  | On June 16, 2011 the Company completed a non-brokered
      private placement of 4,076,667 Units at $0.15 per Unit for gross
      proceeds of $611,500. Each Unit consists of one common share and one
      common share purchase warrant, entitling the purchaser to acquire one
      additional common share at an exercise price of $0.25 per common share
      until June 16, 2013. The proceeds of $0.15 per Unit were allocated based
      on fair value as follows: $0.102 to share capital and $0.048 to warrant
      liability. In connection with the offering, the Company paid a cash
      finders fee of $40,150, incurred share issuance cost of $6,144, and
      issued 267,666 agent warrants. Each agent warrant entitles the finder to
      acquire one additional common share at an exercise price of $0.25 per
      Common Share until June 16, 2013. The agent warrants were valued at
      $16,901 based on the Black-Scholes model using the following assumptions:
      volatility  122%, expected life of option  2 years, dividends  0%, and
      risk free rate of 1.45%.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | iii) | On September 15, 2011, the Company closed a private
      placement with POSCO Canada Ltd. ("POSCAN") and issued 10,522,090 common
      shares to POSCAN at the price of $0.136 per common share, resulting in
      gross proceeds to the Company of $1,431,004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | iv)  | On October 11, 2011 the Company issued 350,082 shares to
      a consultant for exploration work performed in Chile and valued the
      services at $42,010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | v)   | On January 16, 2012, the Company issued 1,000,000 shares
      of the Companys common stock in a non-brokered private placement to the
      Companys President and CEO, Andrew Brodkey at $0.06 per share for gross
      proceeds of $60,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | vi)  | The Company incurred $37,196 in legal fees related to the
      private placements above which has been recorded as share issuance
      cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

The details for the common share
issuances during the year ended February 28, 2011 are as follows:

| | i)  | The Company received proceeds of $33,750 for the exercise
      of 225,000 stock options at $0.15, $23,160 for the exercise of 154,402
      stock purchase warrants at $0.15, and $12,153 for the exercise of 24,306
      stock purchase warrants at $0.50.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ii) | On September 29, 2010 and October 4, 2010, pursuant to a
      private placement, the Company issued 5,432,873 shares in two tranches at
      $0.15 for total proceeds of $814,931 before share issue costs. Each unit
      is comprised of one share and one share purchase warrant. Each warrant is
      exercisable into one share at $0.25 per share for a period of two years
      from the date of issuance. The proceeds of $0.15 per share were allocated
      based on fair value as follows; $0.083 to stock and $0.067 to warrants
      liability. In connection with the private placement, the Company incurred
      share issue costs consisting of legal and regulatory expenses of $18,143,
      finders fees of $87,910, and $105,665 of non cash expense based on the
      Black-Scholes valuation of the finders warrants.

9

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|6. | SHARE CAPITAL - continued
|-- | -------------------------
|   |                          
|   | c)                       
|   |                          
|   |                          

DATE
    Released
    Remaining15-Jun-09
    399,000
    3,591,00015-Dec-09
    598,500
    2,992,50015-Jun-10
    598,500
    2,394,00015-Dec-10
    598,500
    1,795,50015-Jun-11
    598,500
    1,197,00015-Dec-11
    598,500
    598,50015-Jun-12
    598,500
    -


| |    | As at February 29, 2012, 598,500 shares remain in
      escrow.                                                                                                                                                                                                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| | d) | Stock options                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| |    | The Company has adopted an incentive share option plan
      for granting options to directors, employees and consultants, under which
      the total outstanding options are limited to 10% of the outstanding common
      shares of the Company. The directors, subject to the policies of the TSX
      Venture Exchange, impose terms upon which each option shall become
      vested.
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| |    | A summary of the status of the stock option plan as of
      February 29, 2012 and February 28, 2011 and changes during the periods
      then ended is presented below:                                                                                                                                                                                                                     

| |                 |  | February 29, 2012 |  |   | February 28, 2011 | 
| | --------------- |  | ----------------- |  | - | ----------------- | 
| |                 |  | Options           |  |   | Weighted Average  | 
| |                 |  | Outstanding       |  |   | Exercise Price    | 
| |                 |  |                   |  |   |                   | 
| | Opening balance |  | 2,650,000         |  | $ | 0.40              | 
| | Granted         |  | 2,125,000         |  | $ | 0.15              | 
| | Exercised       |  | -                 |  |   | -                 | 
| | Forfeited       |  | -                 |  |   | -                 | 
| | Ending balance  |  | 4,775,000         |  | $ | 0.29              | 

10

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|6. | SHARE CAPITAL - continued
|-- | -------------------------
|   |                          
|   | d)                       
|   |                          
|   |                          

February 29, 2012Quantity
      ExerciseOutstanding
      
      Exercisable
      Price
      Expiry Date300,000
      
      300,000
      $0.15
      September 15, 2013750,000
      
      750,000
      $0.50
      January 15, 2015351,200
      
      351,200
      $0.55
      April 21, 2015200,000
      
      200,000
      $0.55
      April 9, 202098,800
      
      98,800
      $0.55
      April 21, 2020950,000
      
      950,000
      $0.30
      May 26, 20202,125,000
      
      1,062,500
      $0.15
      September 22, 20214,775,000
      
      3,712,500


The weighted average contract life
remaining on the above options is 7.19 years (February 28, 2011  6.28
years).

The Company uses the Black-Scholes
Option Pricing Model (the Model) to calculate the fair value of stock options
granted. The Model requires management to make estimates, which are subjective
and may not be representative of actual results. Changes in assumptions can
materially affect estimates of fair values. For purposes of the calculation, the
following weighted average assumptions were used:

February 29,
    February 28,2012
    2011Risk free interest rate
    2.13%
    3.04%Expected dividend yield
    -
    -Expected stock price volatility
    147%
    144%Expected life of options
    10 years
    7.6 years


The weighted average fair value of the
options granted during the period was $0.12 (2011 - $0.25) .

The Company granted 2,125,000 options
to directors, officers, and consultants during the year ended February 29,
2012.Total share-based payment for the year ended February 29, 2012 was
$256,294 (2011 - $685,315) of which $128,519 was expensed to operations and
$127,775 was recorded against accrued liabilities for options granted to
directors, officers, and consultants of the Company.

11

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 (Expressed in Canadian Dollars)

|6. | SHARE CAPITAL - continued
|-- | -------------------------

| | e) | Warrants
| | -- | --------

| |                                         |  |            |   |   | Weighted Average | 
| | --------------------------------------- |  | ---------- | - | - | ---------------- | 
| |                                         |  | Number of  |   |   | Exercise         | 
| |                                         |  | Warrants   |   |   | Price            | 
| |                                         |  |            |   |   |                  | 
| | Balance, February 28, 2010              |  | 5,895,007  |   | $ | 0.49             | 
| |                                         |  |            |   |   |                  | 
| | Agents warrants granted                |  | 529,567    |   | $ | 0.25             | 
| | Warrants granted with private placement |  | 5,432,873  |   | $ | 0.25             | 
| | Less: exercised                         |  | (178,708   | ) | $ | 0.20             | 
| | Less: expired                           |  | -          |   |   |                  | 
| | Balance, February 28, 2011              |  | 11,678,739 |   | $ | 0.37             | 
| |                                         |  |            |   |   |                  | 
| | Warrants granted with private placement |  | 4,076,667  |   | $ | 0.25             | 
| | Agents warrants granted                |  | 267,666    |   | $ | 0.25             | 
| |                                         |  |            |   |   |                  | 
| | Less: expired                           |  | (5,716,299 | ) | $ | 0.50             | 
| | Balance, February 29, 2012              |  | 10,306,773 |   | $ | 0.25             | 

During the year ended February 29,
2012, an aggregate of 4,344,333 warrants were issued at a price of $0.25 and
5,716,299 warrants had expired. No warrants were exercised.

As at February 29, 2012, the warrant
liability was $58,424 (2011 - $716,552). The fair value of the warrant liability
was determined using the Black-Scholes valuation model. During the year ended
February 29, 2012, a gain on warrant liability of $851,233 (2011  loss of
$245,988) was recorded. As at February 29, 2012 and 2011, the intrinsic value of
the warrant liability was $nil.

The fair values of the warrants have
been estimated using the Black-Scholes option pricing model using the following
assumptions:

2012
    2011Risk free interest rate
    1.00%
    0.63%Expected dividend yield
    -
    -Expected stock price
      volatility
    108%
    110%Expected life of options
    0.90 years
    0.92 years


12

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|6. | SHARE CAPITAL - continued
|-- | -------------------------

| | e) | Warrants
| | -- | --------

Details of share purchase warrants
outstanding as of February 29, 2012 and February 28, 2011 are:

Number of Warrants Outstanding andExercisableFebruary
      
      Exercise Price29,2012
      February 28, 2011
      per
        Share
      Expiry
        Date-
      33,370
      $0.15
      July 24, 2011-
      758,530
      $0.50
      June 4, 2011-
      4,924,399
      $0.50
      June 4, 2011349,800
      349,800
      $0.25
      September 29, 20123,532,397
      3,532,397
      $0.25
      September 29, 20121,900,476
      1,900,476
      $0.25
      October 4, 2012179,767
      179,767
      $0.25
      October 4, 20124,076,667
      -
      $0.25
      June 16, 2013267,666
      -
      $0.25
      June 16, 201310,306,773
      11,678,739


|7. | RELATED PARTY TRANSACTIONS AND BALANCES                                                                                                                                                                                                                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                
|   | As of February 29, 2012 and February 28, 2011 the Company
      has identified its directors and certain senior officers as its key
      management personnel and the compensation costs for key management
      personnel and companies related to them were recorded at their exchange
      amounts as agreed upon by transacting parties.
|   |                                                                                                                                                                                                                                                                                                                                                
|   | The compensation costs for key management personnel for
      the year ended February 29, 2012 and February 28, 2011 are as
    follows:                                                                                                                                                                                                       

| |                       |   | February 29, |  |   | February 28, | 
| | --------------------- | - | ------------ |  | - | ------------ | 
| |                       |   | 2012         |  |   | 2011         | 
| | Salaries and benefits | $ | 335,011      |  | $ | 343,468      | 
| | Share-based payments  |   | 110,542      |  |   | 370,701      | 
| |                       | $ | 445,553      |  | $ | 714,169      | 

Other related party transactions:

| | a) | Management fees and rent of $32,061 and $14,461 (February
      28, 2011 - $30,756 and $16,153) were incurred to a company in which a
      director and officer is general manager and a balance of $18,401 was owing
      to this party as at February 29, 2012 (February 28, 2011: $Nil).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                              
| | b) | Deferred exploration costs of $23,543 (February 28, 2011
      - $34,735) were incurred to a company with one director and two officers
      in common.                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                              
| | c) | As at February 28, 2011, accrued liabilities include
      $183,747 for unissued stock options to the President and CEO of the
      Company.                                                                                                                                                

13

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|7. | RELATED PARTY TRANSACTIONS AND BALANCES -
  continued
|-- | -----------------------------------------------------
|   |                                                      
|   | d)                                                   

|8. | COMMITMENTS
|-- | -----------
|   |            
|   | a)         
|   |            
|   | b)         
|   |            
|   | c)         
|   |            
|   | d)         
|   |            
|   | e)         

14

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|8. | COMMITMENTS - continued
|-- | -----------------------
|   |                        
|   | f)                     
|   |                        
|   | g)                     
|   |                        
|   | h)                     

|9. | MANAGEMENT OF CAPITAL                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Companys objectives when managing capital are to
      safeguard the Companys ability to continue as a going concern in order to
      pursue the sourcing and exploration of mineral properties. The Company
      does not have any externally imposed capital requirements to which it is
      subject.                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company considers all components of shareholders
      equity to be capital. The Company manages the capital structure and makes
      adjustments to it in light of changes in economic conditions and the risk
      characteristics of the underlying assets. To maintain or adjust the
      capital structure, the Company may attempt to issue common shares or
      dispose of assets or adjust the amount of cash.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Companys investment policy is to invest its cash in
      instruments with high credit quality and terms to maturity selected to
      match the expected timing of expenditures from continuing
    operations.                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company expects its current capital resources,
      together with the proceeds from planned additional equity fundraising,
      will be sufficient to carry out its exploration plans and operations
      through its next operating period.                                                                                                                                                                             

15

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|10. | FINANCIAL INSTRUMENTS                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                  
|    | Financial Instruments                                                                                                            
|    |                                                                                                                                  
|    | The Companys financial instruments consist of cash,
      accounts payable, due to related parties, and warrant liability.      
|    |                                                                                                                                  
|    | The following table summarizes information regarding the
      carrying and fair values of the Companys financial
  instruments:

| |                                   |   | February 29, 2012 |  |   |          |  |   | February 28, 2011 |  |   |          | 
| | --------------------------------- | - | ----------------- |  | - | -------- |  | - | ----------------- |  | - | -------- | 
| |                                   |   | Fair Value        |  |   | Carrying |  |   | Fair Value        |  |   | Carrying | 
| |                                   |   |                   |  |   | Value    |  |   |                   |  |   | Value    | 
| | FVTPL asset (i)                   | $ | 537,722           |  | $ | 537,722  |  | $ | 165,165           |  | $ | 165,165  | 
| | FVTPL liability (ii)              |   | 58,424            |  |   | 58,424   |  |   | 716,552           |  |   | 716,552  | 
| | Other financial liabilities (iii) |   | 352,818           |  |   | 352,818  |  |   | 396,746           |  |   | 396,746  | 

| | i)   | Cash                                                 
| | ---- | -----------------------------------------------------
| | ii)  | Warrant liability                                    
| | iii) | Accounts payable and amounts due to related
  parties

Fair values

The Company classifies its fair value
measurements in accordance with an established hierarchy that prioritizes the
inputs in valuation techniques used to measure fair value as follows:

| | Level 1  | Unadjusted quoted prices in
      active markets for identical assets or liabilities;                                                                                    
| | --------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Level 2  | Inputs other than quoted prices that are observable for
      the asset or liability either directly (i.e. as prices) or indirectly
      (i.e. derived from prices); and
| | Level 3  | Inputs that are not based on
      observable market date.                                                                                                               

16

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|10. | FINANCIAL INSTRUMENTS - continued                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                
|    | The following table sets forth the Companys financial
      assets and liabilities measured at fair value on a recurring basis by
      level within the fair value hierarchy:

| |                      |   |               |  |  |               |  |  |               |  |  | Total   | 
| | -------------------- | - | ------------- |  |  | ------------- |  |  | ------------- |  |  | ------- | 
| |                      |   | Level
      1 |  |  | Level
      2 |  |  | Level
      3 |  |  | 2012    | 
| |                      |   |               |  |  |               |  |  |               |  |  |         | 
| | Cash                 | $ | 537,722       |  |  | -             |  |  | -             |  |  | 537,722 | 
| |                      |   |               |  |  |               |  |  |               |  |  |         | 
| | Derivative liability |   | -             |  |  | 4,022         |  |  | -             |  |  | 4,022   | 
| |                      |   |               |  |  |               |  |  |               |  |  |         | 
| | Warrant liability    |   | -             |  |  | 58,424        |  |  | -             |  |  | 58,424  | 

The Company believes the recorded
values of all other financial instruments approximate their current fair values
because of their nature and respective maturity dates.

Credit Risk

The Company is not exposed to
significant credit risk.

Liquidity Risk

Liquidity risk is the risk that the
Company will not be able to meet its financial obligations as they fall due
(Note 1). The Company manages liquidity risk through the management of its
capital structure and financial leverage as outlined above.

The Company monitors its ability to
meet its short-term exploration and administrative expenditures by raising
additional funds through share issuance when required. All of the Companys
financial liabilities have contractual maturities of 30 days or are due on
demand and are subject to normal trade terms. The Company does not have
investments in any asset backed deposits.

Foreign Exchange Risk

The Company bears significant foreign
exchange risk as the majority of the cash is held in US dollars. As at February
29, 2012, with other variables unchanged, a 1% change in the value of the US
Dollar against the Canadian Dollar would have an impact of $45,513 on the
comprehensive loss.

Interest Rate Risk

The Company is not exposed to
significant interest rate risk.

17

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|11. | INCOME TAXES                                                                                                                                                                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                             
|    | The following table reconciles the amount of income taxes
      recoverable on application of the combined statutory Canadian federal and
      provincial income tax rates.

2012
    
    
    2011Combined statutory tax rate
    
    26.25%
    
    
    28.18%Income tax recovery at combined statutory
      rate
    $
    (256,568
    )
    $
    (772,565
    )Permanent differences
    
    (260,326
    )
    
    258,266Reduction in tax rates
    
    23,352
    
    
    53,901Unrecognized deferred tax assets
    
    493,542
    
    
    460,398Deferred income tax recovery
    $
    -
    
    $
    -


Significant components of the Companys
deferred income tax assets are shown below:

2012
    
    
    2011Non-capital loss carry forwards
    $
    1,168,263
    
    $
    687,217Eligible capital expenditures
    
    183
    
    
    180Share issuance costs
    
    85,988
    
    
    101,495Mineral properties
    
    94,101
    
    
    66,100Deferred income tax asset
    
    1,348,535
    
    
    854,992Unrecognized deferred tax asset
    
    (1,348,535
    )
    
    (854,992
    )Deferred income tax assets
    $
    -
    
    $
    -


As of February 29, 2012 the company had
approximately $4,673,000 (February 28, 2011: $2,749,000) of non-capital loss
carry forwards available to reduce the taxable income for future years. The
non-capital losses expire as follows:

2027
    $
    22,0002028
    
    72,0002029
    
    69,0002030
    
    858,0002031
    
    1,728,0002032
    
    1,924,000$
    4,673,000


The company also has certain allowances
with respect to resource development and exploration costs of approximately
$264,000, which, subject to certain restrictions, are available to be offset
against deferred taxable income.

18

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|12. | ADOPTION OF IFRS - continued
|--- | ----------------------------

a)    Transition to IFRS

The Company has adopted IFRS effective
March 1, 2011 with a transition date of March 1, 2010 (Transition Date). Prior
to the adoption of IFRS the Company prepared its financial statements in
accordance with Canadian GAAP.

The comparative information presented
in these first annual financial statements for the year ended February 28, 2011,
and the opening financial position as at March 1, 2010 have been prepared in
accordance with the accounting policies referenced in Note 3 and IFRS 1,
First-Time Adoption of International Financial Reporting Standards.

b)    Initial elections
upon adoption

The Company adopted IFRS in accordance
with IFRS 1 which requires the retrospective application of IFRS at the
Transition Date with all adjustments to assets and liabilities taken to deficit,
subject to mandatory exceptions and the application of optional exemptions. The
IFRS 1 exceptions applied in the conversion from Canadian GAAP to IFRS by the
Company are explained as follows:

| | (i)   | Share-based payments  The Company elected under IFRS 1
      to apply IFRS 2, Share-Based Payments only to equity instruments that were
      issued after November 7, 2002 and had not vested by the Transition
      Date.                                                   
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                 
| | (ii)  | Business combinations  The Company elected under IFRS 1
      to not to apply IFRS 3, Business Combinations retrospectively to any
      business combinations that may have occurred prior to its Transition Date
      and such business combinations have not been restated.
| |       |                                                                                                                                                                                                                                                                                 
| | (iii) | Compound financial instruments  The Company has elected
      under IFRS 1 not to retrospectively separate the liability and equity
      components of any compound instruments for which the liability component
      is no longer outstanding at the Transition Date.      
| |       |                                                                                                                                                                                                                                                                                 
| | (iv)  | Foreign currency translation - The Company has elected to
      deem all foreign currency translation differences that arose prior to the
      Transition Date in respect of all foreign operations to be nil at the date
      of transition                                  

c)    Reconciliation
between Canadian GAAP and IFRS

In preparing the Companys first annual
financial statement in accordance with IFRS, management noted that adjustments
related to flow-through shares, share based payments, and warrant liability were
necessary to be made by the Company previously in its financial statements
prepared in accordance with Canadian GAAP.

Flow-through shares

Under Canadian GAAP, when flow-through
shares are issued, they are initially recorded in share capital at their issue
price less the deferred tax liability related to the renounced expenditures.
Under IFRS, flow-through shares are recognized based on the quoted price of the
existing shares on the date the Company and the investors agree to the
transaction. The difference (premium) between the amount recognized in common
shares and the amount the investors pay for the shares is recognized as a
flow-through share related liabilities which is reversed into the statement of
loss within other income when the eligible expenditures are incurred. The amount
recognized as flow-through share related liabilities represents the difference
between the fair value of the common shares and the amount the investor pays for
the flow-through shares.

19

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|12. | ADOPTION OF IFRS
|--- | ----------------

c)    Reconciliation
between Canadian GAAP and IFRS - continued

The cumulative premium and renunciation
adjustment as at March 1, 2010 related to flow-through shares issued before
March 1, 2010 is $37,562. As at February 28, 2011 no additional cumulative
premium and renunciation adjustment were identified under IFRS.

Share-based payments

The Company adjusted the share-based
payment expense relating to performance based share options held by
non-employees of the Company due to a change in measurement date under IFRS. As
a result, an adjustment of $32,552 was required on the application of IFRS 2 at
the transition date and an adjustment of $126,457 was required for the year
ended February 28, 2011.

Warrant liability

The Companys functional currency is
the U.S. Dollar and it has issued and outstanding warrants that have an exercise
price denominated in Canadian Dollars. For IFRS purposes, all the Companys
warrants are classified and accounted for as derivatives and are recorded as
liabilities carried at their fair value. Any changes in the fair value from
period to period are recorded as a gain or loss in the statement of operations
and comprehensive loss. The cumulative adjustment as at March 1, 2010 related to
the warrant liabilities was an increase in warrant liabilities of $108,372, and
a corresponding decrease of $659,630 and $551,258 to contributed surplus and
deficit, respectably. For the year ended February 28, 2011, the adjustment
related to warrant liabilities was an increase in warrant liabilities of
$608,180, a loss on warrant liabilities of $245,988, and a corresponding
decrease in contributed surplus of $362,192.

The February 28, 2011 Canadian GAAP
statement of financial position has been reconciled to IFRS as follows:

| |                                            |   | February 28, |   |   | Effect of  |   |   | February 28, |  
| | ------------------------------------------ | - | ------------ | - | - | ---------- | - | - | ------------ | -
| |                                            |   | 2011         |   |   | IFRS       |   |   | 2011         |  
| |                                            |   | Canadian     |   |   |            |   |   |              |  
| |                                            |   | GAAP         |   |   | Transition |   |   | IFRS         |  
| |                                            |   |              |   |   |            |   |   |              |  
| | Total Assets                               | $ | 4,675,795    |   | $ | -          |   | $ | 4,675,795    |  
| |                                            |   |              |   |   |            |   |   |              |  
| | Total Liabilities                          | $ | 396,746      |   | $ | 716,552    |   | $ | 1,113,298    |  
| |                                            |   |              |   |   |            |   |   |              |  
| | Shareholders Equity                       |   |              |   |   |            |   |   |              |  
| | Share capital                              |   | 6,636,776    |   |   | 37,562     |   |   | 6,674,338    |  
| | Contributed surplus                        |   | 1,981,060    |   |   | (862,813   | ) |   | 1,118,247    |  
| | Accumulated other comprehensive income     |   | (338,549     | ) |   | -          |   |   | (338,549     | )
| | Deficit                                    |   | (4,000,238   | ) |   | 108,699    |   |   | (3,891,539   | )
| |                                            |   |              |   |   |            |   |   |              |  
| | Total Shareholders' Equity                 |   | 4,279,049    |   |   | (716,552   | ) |   | 3,562,497    |  
| |                                            |   |              |   |   |            |   |   |              |  
| | Total Liabilities and Shareholders' Equity | $ | 4,675,795    |   | $ | -          |   | $ | 4,675,795    |  

20

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|12. | ADOPTION OF IFRS - continued                                                                                 
|--- | -------------------------------------------------------------------------------------------------------------
|    |                                                                                                              
|    | The March 1, 2010 Canadian GAAP statement of financial
      position has been reconciled to IFRS as
follows:

| |                                            |   |               |   |   | Effect of  |   |   |               |  
| | ------------------------------------------ | - | ------------- | - | - | ---------- | - | - | ------------- | -
| |                                            |   | March 1, 2010 |   |   | IFRS       |   |   | March 1, 2010 |  
| |                                            |   | Canadian GAAP |   |   | Transition |   |   | IFRS          |  
| |                                            |   |               |   |   |            |   |   |               |  
| | Total Assets                               | $ | 5,706,053     |   | $ | -          |   | $ | 5,706,053     |  
| |                                            |   |               |   |   |            |   |   |               |  
| | Total Liabilities                          | $ | 56,163        |   | $ | 108,372    |   | $ | 164,535       |  
| |                                            |   |               |   |   |            |   |   |               |  
| | Shareholders Equity                       |   |               |   |   |            |   |   |               |  
| |                                            |   |               |   |   |            |   |   |               |  
| | Share capital                              |   | 6,288,322     |   |   | 37,562     |   |   | 6,325,884     |  
| |                                            |   |               |   |   |            |   |   |               |  
| | Contributed surplus                        |   | 992,715       |   |   | (627,078   | ) |   | 365,637       |  
| |                                            |   |               |   |   |            |   |   |               |  
| | Deficit                                    |   | (1,631,147    | ) |   | 481,144    |   |   | (1,150,003    | )
| |                                            |   |               |   |   |            |   |   |               |  
| | Total Shareholders' Equity                 |   | 5,649,890     |   |   | (108,372   | ) |   | 5,541,518     |  
| |                                            |   |               |   |   |            |   |   |               |  
| | Total Liabilities and Shareholders' Equity | $ | 5,706,063     |   | $ | -          |   | $ | 5,706,053     |  

The February 28, 2011 Canadian GAAP
statement of operations and comprehensive loss has been reconciled to IFRS as
follows

| |                                 |   | Year ended        |   |   |            |  |   | Year ended        | 
| | ------------------------------- | - | ----------------- | - | - | ---------- |  | - | ----------------- | 
| |                                 |   |                   |   |   | Effect of  |  |   |                   | 
| |                                 |   | February 28, 2011 |   |   | IFRS       |  |   | February 28, 2011 | 
| |                                 |   | Canadian GAAP     |   |   | Transition |  |   | IFRS              | 
| |                                 |   |                   |   |   |            |  |   |                   | 
| | Revenue                         | $ | -                 |   | $ | -          |  | $ | -                 | 
| |                                 |   |                   |   |   |            |  |   |                   | 
| | Total Expenses                  |   | 2,501,592         |   |   | 126,457    |  |   | 2,628,049         | 
| |                                 |   |                   |   |   |            |  |   |                   | 
| | Total other items               |   | (132,501          | ) |   | 245,988    |  |   | 113,487           | 
| |                                 |   |                   |   |   |            |  |   |                   | 
| | Net loss and comprehensive loss | $ | 2,369,091         |   | $ | 372,445    |  | $ | 2,741,536         | 

There is no material differences
between the consolidated statement of cash flows presented under IFRS and the
consolidated statement of cash flows presented under previous Canadian GAAP.

21

---

PAN AMERICAN LITHIUM CORP. (An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
FEBRUARY 29, 2012 AND FEBRUARY 28, 2011 
  (Expressed in Canadian Dollars)

|13 | SUBSEQUENT EVENTS
|-- | -----------------
|   |                  
|   | a)               
|   |                  
|   | b)               
|   |                  
|   | c)               
|   |                  
|   | d)               

| | MILESTONE                                                                                           |  | CASH 
    PAYMENT US $ |  |  | COMMON 
    SHARES |  |  | INCREMENTAL 
      % INTEREST
    EARNED | 
| | --------------------------------------------------------------------------------------------------- |  | ---------------------- |  |  | ------------------ |  |  | ---------------------------------------- | 
| | Regulatory approval of Agreement                                                                    |  |                        |  |  | 200,000            |  |  |                                          | 
| | One year from May 3, 2012                                                                           |  | 100,000                |  |  | 100,000            |  |  |                                          | 
| | Two years from May 3, 2012                                                                          |  | 100,000                |  |  | 100,000            |  |  |                                          | 
| | Three years from May 3, 2012                                                                        |  | 100,000                |  |  | 100,000            |  |  |                                          | 
| | Delivery of scoping study                                                                           |  |                        |  |  | 100,000            |  |  | 10%                                      | 
| | Delivery of pre-feasibility study ("PFS") 180 days after
      Delivery of PFS                      |  | 100,000                |  |  | 100,000            |  |  | 20%                                      | 
| | Delivery of bankable feasibility study
      ("BFS") 180 days after Delivery of BFS                 |  | 100,000                |  |  | 300,000            |  |  | 40%                                      | 
| | Receipt of actual funds from project debt financing to
      build production facility based on BFS |  | 1,000,000              |  |  | 1,000,000          |  |  | 10%                                      | 
| | Totals                                                                                              |  | 1,500,000              |  |  | 2,000,000          |  |  | 80%                                      | 

The Company can earn a 70% interest in
Maricunga by delivering the three studies, paying the first four cash payments
and issuing common shares as set out in the preceding table. The Company has the
right to terminate the earn-in at any time at its sole discretion. The Company
can earn a further 10% in the Maricunga project by providing financing for the
debt portion of the capital to build the project, and an additional 10% of the
project by providing Gareste with the funds to complete construction. Gareste
also was granted a 2% NSR royalty capped at US$6 million, one-half of which can
be repurchased by the Company for US$2 million prior to commercial production.
All common shares issued to Gareste will be subject to a hold period in
accordance with applicable securities laws.

22

---

ITEM
19                    
 Exhibits

The following exhibits are being filed as part of this annual
report, or are incorporated by reference where indicated:

|1.   | Incorporation Documents                                                                                                                                          
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                  
|1.1  | Articles of Incorporation of Pan American Lithium
      Corp.(1)                                                                                                 
|     |                                                                                                                                                                  
|4.   | Material Agreements                                                                                                                                              
|     |                                                                                                                                                                  
|4.1  | Share Exchange Agreement-Sociedad Gareste Limitada
      Amended and Restated Share Exchange Agreement-Sociedad Gareste
      Limitada(1)                        
|     |                                                                                                                                                                  
|4.6  | Consulting and Professional Services Agreement between
      JVM Management Ltd. and Etna Resources Inc. dated November 3,
      2009(2)                         
|     |                                                                                                                                                                  
|4.7  | Consulting and Professional Services Agreement between
      Sage Associated, Inc. and Etna Resources Inc. dated November 1,
      2009(2)                       
|     |                                                                                                                                                                  
|4.8  | Consulting Services Agreement between Kriyah Consultants
      LLC. and Etna Resources Inc. dated November 1,
2009(2)                                            
|     |                                                                                                                                                                  
|4.9  | Consulting Services Agreement between Tim Lowenstein and
      Etna Resources Inc. dated November 1, 2009(2)                                                     
|     |                                                                                                                                                                  
|4.10 | Employment Agreement between Etna Resources Inc. and
      Andrew Brodkey dated November 1, 2009(2)                                                              
|     |                                                                                                                                                                  
|4.11 | Independent Director Agreement between Pan American
      Lithium Corp. and Ronald Richman dated April 30,
  2010(2)                                             
|     |                                                                                                                                                                  
|4.12 | Independent Director Agreement between Pan American
      Lithium Corp. and David Terry dated April 30, 2010(2)                                                  
|     |                                                                                                                                                                  
|4.13 | Amended and Restated Consulting Services Agreement dated
      May 3, 2011 by and between Level 3 Capital Management Inc. and Pan
      American Lithium Corp.(2)
|     |                                                                                                                                                                  
|4.14 | A Purchase Agreement between Pan American Lithium Corp.
      and Sociedad Gareste, Limitada (Gareste) dated February 14,
      2011.(3)                       
|     |                                                                                                                                                                  
|4.15 | A binding letter of intent with Gareste dated February
      14, 2011 to acquire interests through joint ventures in two new lithium
      brine projects.(3)    
|     |                                                                                                                                                                  
|4.16 | A Joint Venture Agreement with Gareste dated April 30,
      2012 to acquire an interests through joint ventures in one new lithium
  brine projects.            
|     |                                                                                                                                                                  
|8.   | List of Subsidiaries                                                                                                                                             
|     |                                                                                                                                                                  
|8.1  | The Company currently holds a 99% interest in South
      American Lithium Company S.A. Cerrada, a company governed by the laws of
      Chile.                  

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|12.          | Certification                                                                         
|------------ | --------------------------------------------------------------------------------------
|             |                                                                                       
|12.1
      * | Section 302
        Certification under Sarbanes-Oxley Act of 2002 for Andrew Brodkey.
|             |                                                                                       
|12.2
      * | Section 302
        Certification under Sarbanes-Oxley Act of 2002 for Frank Garcia.  
|             |                                                                                       
|13.1
      * | Section 906
        Certification under Sarbanes-Oxley Act of 2002 for Andrew Brodkey.
|             |                                                                                       
|13.2
      * | Section 906
        Certification under Sarbanes-Oxley Act of 2002 for Frank Garcia.  

|*   | Filed herewith.                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|    |                                                                                                                
|(1) | Incorporated by reference to the Companys registration
        statement on Form F-1 filed on June 3, 2010    
|(2) | Incorporated by reference to the Companys registration
        statement on Form F-1 filed on October 27, 2010
|(3) | Incorporated by reference to the Companys annual
        report on Form 20-F filed on August 31, 2011         

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SIGNATURES

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.

PAN AMERICAN LITHIUM CORP.

|/s/ Andrew Brodkey                    | 
|------------------------------------- | 
|Andrew Brodkey                        | 
|President and Chief Executive Officer | 
|(Principal Executive Officer)         | 
|                                      | 
|Date: July 13, 2012                   | 

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