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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 endedFebruary 28, 2011

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 38,100,943 common shares, without par value,
issued and outstanding as of February 28, 2011.

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 | Other [X]
|--------------- | ----------------------------------------------------------- | ---------
|                | by the International Accounting
      Standards Board [   ] |          

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. [X] 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

As used in this annual report, the terms we, us, our and the Company mean Pan American Lithium Corp. and our subsidiaries, unless otherwise indicated.

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) the
inability of the Company to close the private placement with POSCO for any
reason including the securities of the company being cease traded, the Company
being unable to obtain final approval from the TSX Venture Exchange, the
representations and warranties in the subscription agreement not being true as
of the closing date, and POSCAN not delivering the purchase price for any
reason, (2) a downturn in general economic conditions, (3) a decreased demand or
price of lithium and other minerals, (4) delays in the start of projects with
respect to the Companys property interests, (5) inability to locate and acquire
additional property interests, (6) the uncertainty of government regulation and
politics in North America and Chile regarding mining and mineral exploration,
(7) potential negative financial impact from regulatory investigations, claims,
lawsuits and other legal proceedings and challenges, and (8) 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.

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 for
various periods from our inception to February 28, 2011:

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Year Ended February
      28, 2011 (audited)
      Year Ended February
      28, 2010 (audited)
      Year Ended February
      28, 2009 (audited)
      Year Ended
      February 29, 2008 (audited)
      From Inception 
        on September
      18, 2006 to February 28, 2007 (audited)($)
      ($)
      ($)
      ($)
      ($)Revenue
    Nil
    Nil
    Nil
    Nil
    NilExpenses
    2,501,592
    970,008
    63,956
    194,683
    23,618Net Loss
    2,369,091
    1,388,366
    53,182
    174,310
    15,289Basic and Diluted Loss Per Share
    0.07
    0.10
    0.01
    0.04
    0.02


As at 
        February 28, 2011 (audited)
      As at 
        February 28, 2010 (audited)
      As at 
        February 28, 2009 (audited)
      As at 
        February 29, 2008 (audited)
      As at 
        February 28, 2007 (audited)($)
      ($)
      ($)
      ($)
      ($)Mineral Properties
    4,441,553
    3,727,127
    139,775
    138,915
    -Total Assets
    4,675,795
    5,706,053
    237,236
    163,400
    124,319Long-Term Debt
    Nil
    Nil
    Nil
    Nil
    NilDividends
    Nil
    Nil
    Nil
    Nil
    Nil


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

Year Ended February
      28, 2011 (audited)
      Year Ended February
      28, 2010 (audited)
      Year Ended February
      28, 2009 (audited)
      Year Ended
      February 29, 2008 (audited)
      From Inception 
        on September
      18, 2006 to February 28, 2007 (audited)($)
      ($)
      ($)
      ($)
      ($)Revenue per Canadian and US GAAP
    Nil
    Nil
    Nil
    Nil
    NilExpenses per Canadian and US GAAP
    2,501,592
    970,008
    63,956
    194,683
    23,618Net Loss per Canadian GAAP
    2,369,091
    1,388,366
    53,182
    174,310
    15,289Mineral properties written off
    Nil
    3,578,552
    Nil
    21,400
    NilMineral property and deferred acquisition costs expensed
    747,516
    524,439
    860
    117,515
    NilNet loss per US GAAP
    3,116,607
    5,491,357
    54,042
    313,225
    15,829Basic and Diluted Loss Per Share per Canadian GAAP
    0.07
    0.10
    0.01
    0.04
    0.02Basic and Diluted Loss Per Share per US GAAP
    0.09
    0.39
    0.01
    0.08
  0.02


---

As at 
        February 28, 2011 (audited)
      As at 
        February 28, 2010 (audited)
      As at 
        February 28, 2009 (audited)
      As at 
        February 29, 2008 (audited)
      As at 
        February 28, 2007 (audited)($)
      ($)
      ($)
      ($)
      ($)Mineral Properties per Canadian GAAP
    4,441,553
    3,727,127
    139,775
    138,915
    NilMineral property acquisition costs written
      off
    (4,326,068)
    (3,578,552)
    (21,400)
    (21,400)
    NilMineral property costs expensed
    (411,400)
    (148,575)
    (118,375)
    (117,515)
    NilMineral Properties  Foreign Exchange per
      Canadian GAAP
    295,915
    -
    -
    -
    -Mineral Properties per US GAAP
    Nil
    Nil
    Nil
    Nil
    NilTotal Assets per Canadian GAAP
    4,675,795
    5,706,053
    237,236
    163,400
    124,319Mineral property and deferred acquisition
      costs written off
    (4,441,553)
    (3,727,127)
    (21,400)
    (21,400)
    NilMineral property costs expensed
    Nil
    (262,825)
    (118,375)
    (117,515)
    NilTotal Assets per US GAAP
    234,242
    1,716,101
    97,461
    24,485
    124,319Long-Term Debt per Canadian and US GAAP
    Nil
    Nil
    Nil
    Nil
    NilDividends per Canadian and US GAAP
    Nil
    Nil
    Nil
    Nil
    Nil


Our selected financial information is presented in Canadian
dollars. As of the closing on August 26, 2011, the exchange rate was 1.0173CAD
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
      LowJuly 2011
      0.9588
      0.9527June 2011
      0.9809
      0.9741May 2011
      0.9712
      0.9643April 2011
      0.9610
      0.9551March 2011
      0.9795
      0.9736February 2011
      0.9905
      0.9848


Average exchange rates - five yearsFinancial year ended:
      AverageFebruary 28, 2011
      1.0204February 28, 2010
      1.1048February 28, 2009
      1.1151February 29, 2008
      1.0359February 28, 2007
      1.1363February 28, 2006
      1.1930


*B.*                    *Capitalization
  and Indebtedness*

Not applicable

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

Not applicable

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*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 $4,000,238 as of
February 28, 2011 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. Because its common stock is not listed on a
major stock market, many investors may not be willing or allowed to purchase its
common shares or may demand steep discounts. 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 2011
but, other than the private placement with POSCO, 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.

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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.

Failure to effectively manage the Company's growth could place additional strains on its managerial, operational and financial resources and could adversely affect its business and prospective operating results.

The Company's growth has placed, and is expected to continue to place, a strain on the Company's managerial, operational and financial resources. Further, as its subsidiary's business grows, and if and as it acquires interests in
more subsidiaries and other entities, it will be required to manage multiple relationships. Any further growth by the Company or its subsidiary, or an increase in the number of its strategic relationships will increase this strain on its managerial,
operational and financial resources. This strain may inhibit the Company's ability to achieve the rapid execution necessary to implement its business plan, and could have a material adverse effect upon the Company's financial condition,
business prospects and prospective operations and the value of an investment in the Company.

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.

All of our mineral properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral resource or reserve on any of our properties in commercially exploitable quantities. Until we can do so, we
cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource or reserve in a commercially exploitable quantity, our business could fail.

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.

Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration
and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.

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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 and grade of mineral deposits in the properties the Company explores, the
proximity of the resource to infrastructure such as a smelter or processing facilities, power, water, roads and a point for shipping, available workforce, capacity of processing equipment, proximity to markets and costs of shipment, market
fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental regulation. These factors cannot be accurately predicted, most are beyond our control, 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 and permitting which may cause substantial delays or require capital outlays in excess of those anticipated causing a material adverse effect on us.

Exploration, development and exploitation activities are subject to federal, provincial, state and local laws, regulations and policies, including laws regulating permitting, bonding, and the removal of natural resources from the ground and the
discharge of materials into the environment. Exploration, development 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 and other operational activities.

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 could 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 a material 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 in Chile and Mexico 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.

---

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

Under Chilean mining law, lithium and certain other metals are technically reserved to the state of Chile for the Chilean National Nuclear Commission. As a consequence, the Company must apply through the Ministry of Mines for a special operating
permit that allows it to process and export lithium products. This 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'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 August 22, 2011, there were 42,421,420 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 12,956,773 shares of the Company's common stock, or approximately 31% of the Company's issued and outstanding shares of common
stock on August 22, 2011. 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 42,421,420 shares were issued and outstanding as of August 22, 2011. 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.

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.

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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.

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.

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On December 28, 2009, the Company entered into a Share Option
Agreement dated December 18, 2009 (the Option Agreement) with Escondidas
Internacional S.A. de C.V., a privately held Mexican corporation (Escondidas),
and the shareholders of Escondidas (the Shareholders) to obtain indirect
interests in a geothermal lithium brines project in Baja California Norte,
Mexico .

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 August 24, 2011, the Company announced that it has entered
into a subscription agreement for a private placement with POSCO Canada Ltd.
("POSCAN") Upon closing, the Company will issue 10,522,090 common shares to
POSCAN at the price of CDN$0.136 per common share, resulting in gross proceeds
to the Company of CDN$1,431,004. Following the closing POSCAN will hold 19.87%
of the issued and outstanding common shares of the Company. 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.

*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.

CHILEAN SALARS  ATACAMA REGION III, CHILE

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.

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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.



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:

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



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
US$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 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 33m with a maximum measured depth of 60m.
- 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 500m between
  points. At each sample point vertical samples were taken.

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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 Form F-1.

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 May 2, 2011, we announced the pursuit of a private placement financing in the amount of CDN$350,000, and a
program for additional exploration at Laguna Verde and several of our other Chilean salars, 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)

---

|Claim Name             | Status    | UTM **NORTH** | UTM **EAST** | **Date of** **Staking** | **Date of Constitut**ion | **Expiration** Date | FOJAS    | **Number** | **Office** | **Hectares** | Yearly **Payment**
|---------------------- | --------- | ------------- | ------------ | ----------------------- | ------------------------ | ------------------- | -------- | ---------- | ---------- | ------------ | ------------------
|                       |           |               |              |                         |                          |                     |          |            |            |              |                   
|RAMALPEDER UNO         | PEDIMENTO | 7103500       | 474000       | 4/23/2009               | 10/9/2009                | 10/9/2011           | 1599 VTA | 1385       | D.ALMAGRO  | 300          | US$897            
|RAMALPEDER DOS         | PEDIMENTO | 7104500       | 475500       | 4/23/2009               | 10/9/2009                | 10/9/2011           | 1587 VTA | 1373       | D.ALMAGRO  | 100          | US$299            
|RAMALPEDER TRES        | PEDIMENTO | 7102000       | 467000       | 4/23/2009               | 10/9/2009                | 10/9/2011           | 1588 VTA | 1374       | D.ALMAGRO  | 200          | US$598            
|RAMALPEDER CUATRO      | PEDIMENTO | 7084000       | 453000       | 4/23/2009               | 10/9/2009                | 10/9/2011           | 1589 VTA | 1375       | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA UNO*       | PEDIMENTO | 7,100,500     | 472,500      | 12/20/2011              | pending                  | not yet set         | 132      | 85         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA DOS*       | PEDIMENTO | 7,099,500     | 471,500      | 12/20/2011              | pending                  | not yet set         | 133      | 86         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA TRES A*    | PEDIMENTO | 7,097,500     | 471,500      | 12/22/2011              | pending                  | not yet set         | 91       | 48         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA CUATRO*    | PEDIMENTO | 7,100,500     | 473,500      | 12/22/2011              | pending                  | not yet set         | 101      | 58         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA CINCO*     | PEDIMENTO | 7,100,500     | 474,500      | 12/22/2011              | pending                  | not yet set         | 102      | 59         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA SEIS*      | PEDIMENTO | 7,101,500     | 471,000      | 12/20/2011              | pending                  | not yet set         | 103      | 60         | D.ALMAGRO  | 200          | US$598            
|PEDERSIBORA OCHO*      | PEDIMENTO | 7,103,500     | 472,500      | 12/20/2011              | pending                  | not yet set         | 105      | 62         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA NUEVE A*   | PEDIMENTO | 7,103,500     | 470,500      | 12/22/2011              | pending                  | not yet set         | 92       | 49         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA DIEZ*      | PEDIMENTO | 7,104,500     | 472,500      | 12/22/2011              | pending                  | not yet set         | 93       | 50         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA ONCE A*    | PEDIMENTO | 7,094,500     | 473,500      | 12/22/2011              | pending                  | not yet set         | 133-C    | 86-C       | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA DOCE*      | PEDIMENTO | 7,097,500     | 473,500      | 12/22/2011              | pending                  | not yet set         | 99       | 56         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA TRECE A*   | PEDIMENTO | 7,099,500     | 470,500      | 12/22/2011              | pending                  | not yet set         | 100      | 57         | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA QUINCE*    | PEDIMENTO | 7,091,500     | 474,500      | 12/22/2011              | pending                  | not yet set         | 133-B    | 86-B       | D.ALMAGRO  | 300          | US$897            
|PEDERSIBORA DIECISEIS* | PEDIMENTO | 7,098,500     | 472,500      | 12/22/2011              | pending                  | not yet set         | 133-A    | 86-A       | D.ALMAGRO  | 100          | US$299            
|LOMAMARILLA TRES*      | PEDIMENTO | 7,103,000     | 472,500      | 10/13/2010              | pending                  | not yet set         | 3079     | 2344       | D.ALMAGRO  | 300          | US$897            
|                       |           |               |              |                         |                          |                     |          |            |            |              |                   
|                       |           |               |              |                         |                          |                     |          |            | TOTAL hac. | 5100         |                   

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 February 14, 2011, the Company signed a Purchase 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. Upon closing of
the latest Pedernales acquisition, Pan American has agreed to issue 2 million
common shares to Gareste. The parties have agreed to close this proposed
transaction on or before December 30, 2011, or such other date as the parties
may agree to in writing. Completion of the proposed transaction will be subject
to certain conditions including receipt of all necessary regulatory and exchange
approvals, and the granting of 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 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 2011. The Company on May, 2, 2011, announced a private
placement financing in the amount of CDN$350,000, some of the proceeds of which
will be used in connection with the exploration program at Pedernales.

Llanta Project

The Llanta project 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 Llanta is contained in the
following table:

|Claim Name    | Status     | UTM NORTH | UTM EAST | Date ofStaking | Date of **Constitut**ion | **Expiration** Date | FOJAS    | **Number** | Office     | Hectares | Yearly **Payment**
|------------- | ---------- | --------- | -------- | -------------- | ------------------------ | ------------------- | -------- | ---------- | ---------- | -------- | ------------------
|              |            |           |          |                |                          |                     |          |            |            |          |                   
|LLANTA UNO    | PEDIMENTOS | 7,083,500 | 412,500  | 2/11/2011      | Pending                  | not yet set         | 664 VTA. | 467        | D.ALMAGRO  | 300      | US$897            
|LLANTA DOS    | PEDIMENTOS | 7,084,500 | 412,500  | 2/11/2011      | Pending                  | not yet set         | 665 VTA. | 468        | D.ALMAGRO  | 300      | US$897            
|LLANTA TRES   | PEDIMENTOS | 7,085,500 | 412,500  | 2/11/2011      | Pending                  | not yet set         | 666 VTA. | 469        | D.ALMAGRO  | 300      | US$897            
|LLANTA CUATRO | PEDIMENTOS | 7,086,500 | 412,500  | 2/11/2011      | Pending                  | not yet set         | 667 VTA. | 470        | D.ALMAGRO  | 300      | US$897            
|LLANTA CINCO  | PEDIMENTOS | 7,087,500 | 412,500  | 2/11/2011      | Pending                  | not yet set         | 668 VTA. | 471        | D.ALMAGRO  | 300      | US$897            
|LLANTA SEIS   | PEDIMENTOS | 7,083,500 | 415,500  | 2/11/2011      | Pending                  | not yet set         | 669 VTA. | 472        | D.ALMAGRO  | 300      | US$897            
|LLANTA SIETE  | PEDIMENTOS | 7,084,500 | 415,500  | 2/11/2011      | Pending                  | not yet set         | 670 VTA. | 473        | D.ALMAGRO  | 300      | US$897            
|LLANTA OCHO   | PEDIMENTOS | 7,085,500 | 415,500  | 2/11/2011      | Pending                  | not yet set         | 671 VTA. | 474        | D.ALMAGRO  | 300      | US$897            
|LLANTA NUEVE  | PEDIMENTOS | 7,086,500 | 415,500  | 2/11/2011      | Pending                  | not yet set         | 672 VTA. | 475        | D.ALMAGRO  | 300      | US$897            
|LLANTA DIEZ   | PEDIMENTOS | 7,087,500 | 415,500  | 2/11/2011      | Pending                  | not yet set         | 673 VTA. | 476        | D.ALMAGRO  | 300      | US$897            
|              |            |           |          |                |                          |                     |          |            |            |          |                   
|              |            |           |          |                |                          |                     |          |            | TOTAL hac. | 3000     |                   

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.
These amounts are set out in the following table:

---

MILESTONE
      CASH PAYMENT
      SHARES
      INCREMENTAL % INTEREST
      EARNEDRegulatory approval of Agreement
    
    50,000One year from execution of Agreement
    US$25,000
    25,000Two years from execution of Agreement
    US$25,000
    25,000Three years from execution of Agreement
    US$50,000
    50,000Delivery of scoping study
    
    50,000
    10Delivery of pre-feasibility study (PFS)
    
    100,000
    20180 days after Delivery of PFS
    US$50,000Delivery of bankable feasibility study
      (BFS)
    
    200,000
    40180 days after Delivery of BFS
    US$100,000Receipt of actual funds from project debt
      financing to build production facility based on BFS
    US$350,000
    400,000
    10TOTALS
    US$600,000
    900,000
    80


Geology, Geochemistry and Exploration Justification

The Llanta project is a closed basin aquifer that is roughly 40
km downstream from the Salar de Pedernales and in geological theory contains
brines that originated from that salar. In addition, the Rio de la Sal, which
leaves from the Salar de Pedernales, flows into the valley comprising the Llanta
project and disappears subsurface at these concessions. Our outside, independent
technical expert, John Hiner, visited and sampled the Rio de la Sal as it enters
the Llanta properties. These samples yielded Li values as high as 391 mg/liter.
The Company intends, pending adequate funding, to design and implement an
exploration program at Llanta during calendar year 2011. The Company on May, 2,
2011, announced a private placement financing in the amount of CDN$350,000, some
of the proceeds of which will be used in connection with the exploration program
at Llanta.

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)

|Claim Name        | Status        | UTM NORTH | UTM**EAST** | **Date of****Staking** | Date of **Constituti**on | **Expiration** Date | FOJAS | **Number**     | Office    | Hectares | Yearly **Payment**
|----------------- | ------------- | --------- | ----------- | ---------------------- | ------------------------ | ------------------- | ----- | -------------- | --------- | -------- | ------------------
|                  |               |           |             |                        |                          |                     |       |                |           |          |                   
|Braguna Una       | MANIFESTACION | 7088500   | 539000      | 1/27/2011              | n/a                      | none                | 651   | 458            | D.ALMAGRO | 300      | US 2200           
|Braguna Dos       | MANIFESTACION | 7089500   | 539000      | 1/27/2011              | n/a                      | none                | 643   | 454            | D.ALMAGRO | 300      | US 2200           
|Braguna Tres      | MANIFESTACION | 7090500   | 539000      | 1/27/2011              | n/a                      | none                | 645   | 455            | D.ALMAGRO | 300      | US 2200           
|Braguna Cuatro    | MANIFESTACION | 7091500   | 539000      | 1/27/2011              | n/a                      | none                | 647   | 456            | D.ALMAGRO | 200      | US 2200           
|Braguna Cinco     | MANIFESTACION | 7093000   | 539200      | 1/27/2011              | n/a                      | none                | 649   | 457            | D.ALMAGRO | 200      | US 2200           
|Braguna Seis      | MANIFESTACION | 7094500   | 540000      | 1/27/2011              | n/a                      | none                | 639   | 452            | D.ALMAGRO | 200      | US 2200           
|Braguna Siete     | MANIFESTACION | 7095500   | 540000      | 1/27/2011              | n/a                      | none                | 641   | 453            | D.ALMAGRO | 200      | US 2200           
|Braguna Ocho      | Exploracion   | 7089500   | 541000      | 4/28/2010              | 9/16/2010                | 9/16/2012           | 1036  | 785            | D.ALMAGRO | 300      | US$ 939           
|Braguna Nueve     | Exploracion   | 7089500   | 542000      | 4/28/2010              | 9/16/2010                | 9/16/2012           | 1037  | 786            | D.ALMAGRO | 300      | US$ 939           
|Braguna Diez      | Exploracion   | 7092500   | 540000      | 4/28/2010              | 9/16/2010                | 9/16/2012           | 1038  | 787            | D.ALMAGRO | 300      | US$ 939           
|Braguna Once      | Exploracion   | 7092500   | 541000      | 4/28/2010              | 9/16/2010                | 9/16/2012           | 1039  | 788            | D.ALMAGRO | 300      | US$ 939           
|Braguna Doce      | Exploracion   | 7095500   | 541500      | 4/28/2010              | 9/16/2010                | 9/16/2012           | 1040  | 789            | D.ALMAGRO | 300      | US$ 939           
|Braguna Trece     | Exploracion   | 7094500   | 538500      | 4/28/2010              | 9/16/2010                | 9/16/2012           | 1041  | 790            | D.ALMAGRO | 300      | US$ 939           
|Braguna Catorce   | Exploracion   | 7096500   | 539500      | 4/28/2010              | 9/16/2010                | 9/16/2012           | 1042  | 791            | D.ALMAGRO | 300      | US$ 939           
|Braguna Quince    | Exploracion   | 7097500   | 540500      | 4/28/2010              | 9/16/2010                | 9/16/2012           | 1043  | 792            | D.ALMAGRO | 300      | US$ 939           
|Braguna Diesiseis | Exploracion   | 7097500   | 542500      | 4/28/2010              | 9/16/2010                | 9/16/2012           | 1044  | 793            | D.ALMAGRO | 300      | US$ 939           
|                  |               |           |             |                        |                          |                     |       | Total Hectares | 4400      |         

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, B.C., 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:

|Claim Name              | Status        | UTM NORTH | UTM EAST | Date
          of Staking | **Date
      of**Constitution | **Expiration**Date | FOJAS      | Number         | Office  | Hectares | Yearly **Payment**
|----------------------- | ------------- | --------- | -------- | ------------------------- | ----------------------------- | ------------------ | ---------- | -------------- | ------- | -------- | ------------------
|                        |               |           |          |                           |                               |                    |            |                |         |          |                   
|MACUNGA UNO             | PEDIMENTOS    | 7032500   | 494816   | 11/5/2010                 | pending                       | not yet set        | 9930 Vta.  | 7910           | COPIAPÓ | 300      | US$897            
|MACUNGA DOS             | PEDIMENTOS    | 7033500   | 496500   | 12/9/2010                 | pending                       | not yet set        | 10900 Vta. | 8662           | COPIAPÓ | 300      | US$897            
|MACUNGA TRES            | PEDIMENTOS    | 7031500   | 495500   | 11/5/2010                 | pending                       | not yet set        | 9932 Vta.  | 7912           | COPIAPÓ | 200      | US$598            
|MACUNGA CINCO           | PEDIMENTOS    | 7030900   | 486900   | 11/11/2010                | pending                       | not yet set        | 10033      | 7995           | COPIAPÓ | 200      | US$598            
|MACUNGA SEIS            | PEDIMENTOS    | 7032500   | 488300   | 11/11/2010                | pending                       | not yet set        | 10034      | 7996           | COPIAPÓ | 200      | US$598            
|MACUNGA TRES DEL 1 AL 5 | MANIFESTACION | 7,031,850 | 493,600  | 11/11/2010                | n/a                           | none               | 10227 Vta. | 8136           | COPIAPÓ | 20       |                   
|                        |               |           |          |                           |                               |                    |            |                |         |          |                   
|                        |               |           |          |                           |                               |                    |            | Total Hectares | 1220    |         

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.
These amounts are set out in the following table:

---

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


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. The Company
intends, pending adequate funding, to design and implement an exploration
program at Maricunga during calendar year 2011.

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  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)

|Claim Name                                                                              | Status        | UTM NORTH | UTM EAST | Date of **Staking** | Date of Constitution | **Expiration** Date | FOJAS     | **Number**     | **Office** | **Hectares** | Yearly **Payment**
|--------------------------------------------------------------------------------------- | ------------- | --------- | -------- | ------------------- | -------------------- | ------------------- | --------- | -------------- | ---------- | ------------ | ------------------
|                                                                                        |               |           |          |                     |                      |                     |           |                |            |              |                   
|HUMEDAL 1*                                                                              | Manifestacion | 7087500   | 520500   | 4/4/2008            | 1/20/2011            | 1/28/2011           | 629       | 447            | D.ALMAGRO  | 300          | US$897            
|HUMEDAL 2*                                                                              | Manifestacion | 7087500   | 521500   | 4/4/2008            | 1/20/2011            | 1/28/2011           | 631       | 448            | D.ALMAGRO  | 300          | US$897            
|HUMEDAL 3*                                                                              | Manifestacion | 7087500   | 522500   | 4/4/2008            | 1/20/2011            | 1/28/2011           | 633       | 449            | D.ALMAGRO  | 300          | US$897            
|HUMEDAL 4*                                                                              | Manifestacion | 7087500   | 523500   | 4/4/2008            | 1/20/2011            | 1/28/2011           | 635       | 450            | D.ALMAGRO  | 300          | US$897            
|HUMEDAL 5*                                                                              | Manifestacion | 7087500   | 524500   | 4/4/2008            | 1/20/2011            | 1/28/2011           | 637       | 451            | D.ALMAGRO  | 300          | US$897            
|HUMEDAL 7                                                                               | Manifestacion | 7984500   | 525000   | 4/4/2008            | 4/2/2011             | 11/8/2011           | 1683 VTA. | 1270           | D.ALMAGRO  | 300          | US$735            
|HUMEDAL 8                                                                               | Manifestacion | 7084500   | 526000   | 4/4/2008            | 4/2/2011             | 11/8/2011           | 1681 VTA  | 1269           | D.ALMAGRO  | 300          | US$736            
|HUMEDAL 9                                                                               | Manifestacion | 7084500   | 527000   | 4/4/2008            | 4/2/2011             | 11/8/2011           | 1680 VTA. | 1268           | D.ALMAGRO  | 300          | US$736            
|HUMEDAL 10                                                                              | Manifestacion | 7084500   | 528000   | 4/4/2008            | 4/2/2011             | 11/8/2011           | 1678 VTA. | 1267           | D.ALMAGRO  | 300          | US$736            
|HUMEDAL 11                                                                              | Manifestacion | 7084500   | 529500   | 4/4/2008            | 4/2/2011             | 11/8/2011           | 1677 VTA. | 1266           | D.ALMAGRO  | 300          | US$736            
|SALAR 1                                                                                 | MENSURA       | 7086500   | 527500   | 3/15/2007           | N/A                  | None                | 462 VTA   | 400            | D.ALMAGRO  | 300          | US$2,200          
|SALAR 2                                                                                 | MENSURA       | 7087500   | 527500   | 3/15/2007           | N/A                  | None                | 4463 VTA  | 401            | D.ALMAGRO  | 300          | US$2,200          
|                                                                                        |               |           |          |                     |                      |                     |           |                |            |              |                   
|                                                                                        |               |           |          |                     |                      |                     |           |                |            |              |                   
|* Denotes that Zoro owns overstaked, junior
      rights only in the listed concessions |               |           |          |                     |                     
|                                                                                        |               |           |          |                     |                      |                     |           |                |            |              |                   
|                                                                                        |               |           |          |                     |                      |                     |           | Total Hectares | 3600       |             

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., Canada, 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)

Claim Name
    Status
    UTM NORTH
    UTM EAST
    Date of Staking
    Date of Presentation
    **Expiration** Date
    FOJAS
    Number
    Office
    Hectares
    Yearly **Payment**HUMEDAL 12
    MANIFESTACION
    7081000
    531500
    5/25/2008
    4/2/2011
    11/8/2011
    1675 VTA.
    1265
    D.ALMAGRO
    200
    US$574HUMEDAL 13
    MANIFESTACION
    7081000
    532500
    5/25/2008
    4/2/2011
    11/8/2011
    1674 VTA.
    1264
    D.ALMAGRO
    200
    US$574HUMEDAL 14
    MANIFESTACION
    7081000
    534500
    1/27/2011
    1/27/2011
    9/4/2011
    627
    446
    D.ALMAGRO
    200
    US$ 574HUMEDAL 15
    MANIFESTACION
    7081500
    534500
    1/27/2011
    4/2/2011
    11/8/2011
    1674 VTA.
    1263
    D.ALMAGRO
    300
    US$736HUMEDAL 16
    MANIFESTACION
    7082000
    535500
    1/27/2011
    4/2/2011
    11/8/2011
    1671 VTA.
    1262
    D.ALMAGRO
    200
    US$574Total Hectares
    1100


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., Canada, 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 ANDSALAR 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.

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 US$3.00 per hectare.

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 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 9, 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.

Upon the exercise of the option, we will have the right to
acquire 76% of the issued and outstanding shares of Escondidas held by the
shareholders. In consideration for the option, we have agreed to pay or issue
the following on the closing date of the Option Agreement on a pro rata
basis:

- payment of US$125,000 to the shareholders;
- issuance of 5,000,000 common shares to the shareholders; and
- issuance of 5,000,000 warrants to the shareholders, each warrant of which
  entitles the shareholder to acquire one additional common share at the
  exercise price of $0.50 per share for a period of two years from the closing
  date.

In addition, we are obligated to pay to the shareholders the
following amounts on a pro rata basis:

- US$500,000 - 6 months from commencement of commercial production;
- US$500,000 - 12 months from commencement of commercial production; and
- US$750,000 - 18 months from commencement of commercial production.

The Option Agreement further provides that we will pay:

- US$150,000 to Escondidas on signing for the repayment of outstanding
  indebtedness owed by Escondidas;
- US$50,000 to Escondidas on signing, and US$8,000 (formerly US$25,000) on a
  monthly basis thereafter until the earlier of the closing date or the
  termination of the Option Agreement to cover costs relating to outstanding
  expenses, due diligence, legal fees and other general and administrative
  expenses of Escondidas; and
- US$50,000 to Escondidas at closing for the repayment of outstanding
  indebtedness owed by Escondidas.

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.

We are currently conducting our due diligence review in
connection with the Escondidas transaction. We anticipate that we will incur a
significant amount of time and costs in connection with the due diligence and
closing of the Escondidas transaction. If additional funds are required to close
the transaction, we anticipate that we will raise such funds through an equity
financing on a private placement basis. We are currently negotiating a possible
extension of the closing date with the parties to the Option Agreement.

We currently only hold an option to obtain control of
Escondidas, and to indirectly acquire an interest in the Mexican property, and
we have not yet determined whether we will exercise this option. We are not
currently performing any exploration or other activities on or for the
underlying property, and are simply paying the Escondidas shareholders the
US$1,000 monthly fee to keep the option effective. Accordingly, we do not need
any permits, nor do we have any current operational plans regarding this
property, and do not consider the Mexican property to be material at this
time.

---

*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 financial statements are prepared in accordance with
Canadian GAAP which has several notable differences from US GAAP. Canadian GAAP
permits the deferral of acquisition and exploration costs, subject to periodic
adjustments for impairment, whereas US GAAP requires that such costs be expensed
in the period incurred. See Note 13 to the financial statements which sets out a
reconciliation between Canadian and US GAAP.

*A.*                    *Operating
Results*

Year ended February 28, 2011

During the year ended February 28, 2011, the Company incurred
expenses of $2,501,592, primarily consisting of management fees of $941,697,
investor communications of $599,172, stock based compensation of $558,858 and
professional fees of $209,375. Net loss for the year ended February 28, 2011 was
$2,369,091. During the year ended February 28, 2010, the Company incurred
expenses of $970,008, primarily consisting of management fees of $234,489,
investor communications of $216,085, stock based compensation of $242,698 and
professional fees of $130,737. Net loss for the year ended February 28, 2010 was
$1,388,366, including a $393,689 impairment charge for writing off the Aspen
Grove property. Stock based compensation during the year ended February 28, 2011
increased over the same period the prior year due to additional incentive stock
options granted to various directors, officers, and consultants. Other expenses
increased due to additional support for exploration and development of
properties in Chile as well as increased fund-raising efforts. The Companys
professional fees increased due to legal and audit costs associated with due
diligence, acquisitions, financings and costs related to compliance with
Canadian Securities laws and the filing of a Registration Statement on Form F-1.
Investor communications expenses increased due to the hiring of Minegate
Resources Capital Group for investor relations and financing matters, who
subsequently worked with a number of subcontractors, paid for by the Company,
who provided print and internet advertising, media campaigns, and related
services all in Canada to the Company. In addition, investor communication
expenses increased due to the hiring of Jack Wynn & Co. Inc. on February 24,
2010 for US$10,000 a month (plus a $10,000 deposit) for news media relations and
communications consulting services and Crescendo Communications LLC for advising
the Company on investor relation strategies along with marketing the Company to
prospective investors. Management fees increased due to (1) the engagement of
Kriyah Consultants LLC and other consultants to provide services including
senior management, accounting, human resources, and other corporate services,
(2) the expansion of the Companys Board of Directors by adding Dr. Ronald
Richman as an independent director, and the formation of a Technical Advisory
Committee to the Board of Directors consisting of Dr. David Terry, Dr. Richman,
and Dr. Tim Lowenstein and the entry into consulting and advisory agreements on
April 30, 2010 with each of the individuals, and (3) the recognition of non cash
expense related to options earned but not yet granted to the President and CEO,
Andrew Brodkey.

Following the disposition of its Aspen Grove Property and
additional mineral claims located in British Columbia, Canada, the Company holds
property interests in Chile and Mexico 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.

---

Year ended February 28, 2010

During the year ended February 28, 2010, we incurred expenses
of $970,008, primarily consisting of management fees of $234,489, investor
communications of $216,085, stock based compensation of $242,698 and
professional fees of $130,737. Our net loss for the year ended February 28, 2010
was $1,388,366, including a $393,689 impairment charge for writing off the Aspen
Grove property. During the year ended February 28, 2009, we incurred expenses of
$63,956, primarily consisting of management fees of $42,000, professional fees
of $12,466, rent expenses of $9,000 and office and miscellaneous of $490. Our
net loss for the year ended February 28, 2009 was $53,182. These material
increases reflected the focus on our lithium property interests and increased
professional fees resulting from the acquisitions of our lithium property
interests and professional investor relations, communications and related
services initiated by us. Our professional fees increased due to legal and audit
costs associated with due diligence, acquisitions, financings and costs related
to compliance with Canadian Securities laws and the filing of this Registration
Statement. Investor communications expense increased due to the hiring of
Minegate Resources Capital Group for investor relations and financing matters,
who subsequently worked with a number of subcontractors, paid for by us, who
provided print and internet advertising, media campaigns, and related services
all in Canada to our company. In addition, investor communication expenses
increased due to the hiring of Jack Wynn & Co. Inc. for news media relations
and communications consulting services. Management fees increased due to the
engagement of Kriyah Consultants LLC and other consultants to provide services
including senior management, accounting, human resources, and other corporate
services. Stock based compensation expense increased due to additional incentive
stock options granted to various directors, officers, and consultants.

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

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*

The Company had cash of $165,165 at February 28, 2011 and
$1,637,451 at February 28, 2010, and the Company had working capital deficit of
$162,504 at February 28, 2011 as compared to working capital of $1,659,938 at
February 28, 2010.

On December 4, 2009, the Company closed a non-brokered unit
private placement financing of approximately $2,954,640 in connection with the
closing of the Amended Share Exchange Agreement on December 4, 2009. Pursuant to
the terms of the financing, the Company issued a total of 9,848,801 units at
$0.30 per unit for gross proceeds of $2,954,640. Each unit is comprised of one
common share and one-half of one common share purchase warrant. Each whole
warrant entitles the holder to purchase one additional common share at a price
of $0.50 until expiry on June 4, 2011. The Company also issued 782,836 warrants
and paid cash of approximately $290,755 in finders fees and legal costs in
connection with the closing of the financing.

On July 15, 2010, the Company announced that it has arranged a
non-brokered private placement for the sale of up to 6,666,667 million units, at
CDN$0.15 per unit, to raise up to CDN$1,000,000.05. Each unit consists of one
common share and one non-transferrable common share purchase warrant, with each
such warrant exercisable at CDN$0.25 for a period of two years from the date of
closing. On September 30, 2010, the Company announced the
closing of the first tranche of the private placement of 3,532,397 units at $0.15 a unit for total gross proceeds of $529,859. On October 4, 2010, the Company announced the closing of the second tranche of the private placement of 1,900,476
Units for total gross proceeds of $285,071.

---

Subsequent to the year ended February 28, 2011, the Company closed a non-brokered unit private placement financing of approximately $611,500.  Pursuant to the terms of the financing the Company issued a total of 4,076,667 units at $0.15 per
unit. Each unit is comprised of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one additional common share at a price of $0.25 until June 16, 2013. The Company paid a cash finder's fee
of $39,650 and issued 267,666 warrants to finders in connection with the closing of the financing.

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 Laguna Brava, as described under the heading "Results of Operations", the assumed continuation of due diligence costs with respect to the Escondidas transaction, 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 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.

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 anticipates hiring this consultant during calendar year 2011. 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 later this year at 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 geochem program estimated to cost $150,000 which is anticipated to commence
during the fall of 2010 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 nine other salar properties in Region III Chile, subject to adequate funding, the Company intends to design and implement exploration programs at Llanta, Salar de Pedernales and Salar de Maricunga during 2011. 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. 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 sites, in the approximate amount of $50,000 per year.

The Company intends to conduct additional due diligence to evaluate the merits of the Escondidas transaction while awaiting the procurement, by the joint venture partner of Escondidas, of additional agreements for access and permits from Mexican
governmental agencies. The costs for this exercise are anticipated not to exceed the US$1,000 (formerly US$25,000) per month that is currently being remitted to Escondidas by the Company.

---

The Company estimates its minimum operating expenses and
working capital requirements for the next 12 month period to be as follows:

EstimatedExpense
    
    AmountAdvertising and promotion
    $
    12,000Bank charges
    
    5,000Exploration
    
    396,000Investor communications
    
    180,000Management fees
    
    564,000Office and miscellaneous
    
    50,000Professional fees
    
    240,000Rent
    
    17,000Transfer agent and filing fees
    
    36,000Travel
    
    60,000Total
    $
    1,560,000


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. Under such circumstances, the Company anticipate that exploration
expenses would be reduced significantly, as it would only pay the minimum costs
to keep its properties in good standing, and generally reduce its overhead
costs. Specifically, under such circumstances the Company would reduce its
professional fees, investor relations expenses, consulting fees, and travel
expenses.

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.

CAPITAL RESOURCES

The Company has capital commitments in connection with its
Chilean properties. The Company indirectly holds interests in nine Chilean
lithium salars through its 99% owned subsidiary Salico, and the right to expand
its position at one salar and to earn interests in two additional properties.
The Company estimates that Salico is required to pay $50,000 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 $1,524,546 in operating activities
during the year ended February 28, 2011 and used cash of $869,816 during the
year ended February 28, 2010.

Financing Activities

The Company received total cash of $786,416 in financing
activities during the year ended February 28, 2011. During such time, the
Company received cash of $883,994 from the issuance of shares, less $97,578 for
share issuance costs. The Company received total cash of $3,411,286 in financing
activities during the year ended February 28, 2010. During such time, the
Company received cash of $3,843,724 from the issuance of shares, less $11,500
due to related parties and less $420,938 for share issuance costs.

Investing Activities

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. The Company used cash of
$904,166 in investing activities during the year ended February 28, 2010 due to
the acquisition of mineral properties, deferred acquisition costs and advances
and deferred exploration expenditures.

---

*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 28, 2011:

Payments due by periodless
      
      
      
      
      
      
      
      
      morethan 1
      
      
      
      
      
      3-5
      
      
      than 5Total
      
      
      year
      
      
      1-3 years
      
      
      years
      
      
      yearsContractual Obligations
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -Long-Term Debt Obligations
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -Capital (Finance) Lease Obligations
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -Operating Lease Obligations
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -Purchase Obligations*
      
      254,783
      
      
      254,783
      
      
      -
      
      
      -
      
      
      -Other Long-Term Liabilities Reflected on
        our 
        Balance Sheet under the GAAP of the primary
        financial statements
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -Total
      
      254,783
      
      
      254,783
      
      
      -
      
      
      -
      
      
      -


*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(1)
      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 present


---

Name Province/State Country of
      Residence
      Position(s)
      with the Company
      Period Served
      with the CompanyDr. Ronald Richman(2)(3)Tucson, Arizona,
      USA
    Director
    April 14, 2010 to presentDr. David Hackman
    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 individual.            
|--- | -------------------------------------------------------------
|(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).

---

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 Information Circular:

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.

Option-Based Awards

In accordance with Policy 4.4 of the TSX Venture Exchange (the
Exchange), the directors of the Company have adopted a rolling stock
option plan (the Plan) subject to Shareholder and Exchange approval.
The Plan complies with the requirements of Exchange Policy 4.4 for Tier 2
issuers. Under the Plan, a maximum of 10% of the issued and outstanding Common
Shares are proposed to be reserved at any time for issuance on the exercise of
stock options. As the number of Common Shares reserved for issuance under the
Plan increases with the issue of additional Common Shares, the Plan is
considered to be a rolling stock option plan.

The Company has the Plan to provide effective incentives to
directors, officers, senior management personnel, employees and key consultants
of the Company and to enable the Company to attract and retain experienced and
qualified individuals in those positions by permitting such individuals to
directly participate in an increase in per share value created for the Companys
shareholders. The size of stock option grants to NEOs is dependent on each
officers level of responsibility, authority and importance to the Company and
the degree to which such officers long-term contribution to the Company will be
key to its long-term success.

---

Summary Compensation Table

Particulars of compensation paid to each NEO in the two 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) ($)
      Non-equity Incentive
        Plan Compensation(1) **($)**
      PensionValue ($)
      All Other Compens-ation ($)
      Total
        Compens -ation ($)Annual
        IncentivePlans
      Long-
        term IncentivePlansAndrew Brodkey(4)
        Chairman of the Board, 
        Chief Executive Officer 
        and President
      2011 
        2010
      $140,044 
        $45,542
      Nil 
        Nil
      $116,565 
        $22,085
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      $256,609 
        $67,627Jodi Henderson(5)
        Corporate Secretary
      2011 
        2010
      $53,484 
        $13,995
      Nil 
        Nil
      $51,859 
        $22,086
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      $105,343 
        $26,081David Hackman(6)
        V.P. Exploration
      2011 
        2010
      $73,720 
        $19,037
      Nil 
        Nil
      $32,540 
        $22,086
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      $106,260 
        $41,123Frank Garcia(7)
        Chief Financial Officer
      2011 
        2010
      $48,032 
        $12,560
      Nil 
        Nil
      $78,752 
        $22,085
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      $126,784 
        $34,645Jerry Minni(8)
        Former Chief Financial 
        Officer
      2011 
        2010
      $7,000 
        $48,000
      Nil 
        Nil
      $19,050 
        $19,050
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        $25,875
      $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 is estimated using the
      Black-Scholes option pricing model. As disclosed in the Companys audited
      annual financial statements for the financial year ended February 28,
      2011, such fair value is estimated to be $0.25.The Company has not
      granted any stock options subsequent to the financial year ended February
      28, 2011.
|(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 subsequent to the
financial year ended February 28, 2011.

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 28, 2011, including
awards granted before the year ended February 28, 2011.

---

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 28, 2011 was $0.225 .                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 28, 2011 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
    $81,276
    Nil
    NilJodi Henderson(2)Corporate Secretary
    $42,552
    Nil
    NilDavid Hackman(3)V.P. Exploration
    $28,641
    Nil
    NilFrank Garcia(4)
    $41,728
    Nil
    Nil


---

Chief Financial OfficerJerry Minni(5)Former Chief
      Financial Officer
    $19,050
    Nil
    Nil


|(1) | 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | 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.                                                  
|(3) | 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.                                                                                                                                                     
|(4) | 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.                                  
|(5) | 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 28, 2011.

The Company has not granted any stock options subsequent to the
financial year ended February 28, 2011.

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 28, 2011.

---

Name
      Fees earned
      ($)
      Share- based
      awards ($)
      Option- based
      awards ($)
      Non-equity incentive
      plan compensation ($)
      Pension value
      ($)
      All other
      compensation ($)
      Total ($)Dr. David Terry(1)
    $10,906
    Nil
    $41,564
    Nil
    Nil
    Nil
    $52,470Dr. Ronald Richman(2)
    $10,189
    Nil
    $55,986
    Nil
    Nil
    Nil
    $66,175


|(1) | 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.         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | 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 0.40.

Narrative Discussion

Dr. David Terry has entered into an Independent Director
Agreement with the Company for a monthly fee of US$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 US$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 28, 2011.

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(2)
      300,000 
        100,000
      $0.15 
        $0.30
      September 15, 2013 
        May 26, 2020
      Nil
      Nil
      NilDr. Ronald Richman(3)
      200,000
      $0.55
      April 9, 2020
      Nil
      Nil
      Nil


|(1) | The closing price of the Companys common shares on
      February 28, 2011 was $0.225.
|--- | ---------------------------------------------------------------------------------------
|(2) | Dr. David Terry has been a director of the Company since
      May 30, 2008.           
|(3) | Dr. Ronald Richman has been a director of the Company
      since April 10, 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 28, 2011 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)
    $31,830
    Nil
    NilDr. Ronald Richman(2)
    $50,858
    Nil
    Nil


|(1) | Dr. David Terry has been a director of the Company since
      May 30, 2008. On May 25, 2010, 100,000 stock option granted to this
      optionee at an exercise price of $0.30. On July 7, 2011, the closing price
      of the Companys common shares was $0.13.       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Dr. Ronald Richman has been a director of the Company
      since April 10, 2010. On April 14, 2010, 200,000 stock option granted to
      this optionee at an exercise price of $0.55. On July 7, 2011, the closing
      price of the Companys common shares was $0.13.

Narrative Discussion

For a summary of the material provisions of the Plan, pursuant
to which all option-based awards are granted to the Companys directors, please
see below under the heading Particulars of Matters to Be Acted Upon  Approval
of Stock Option Plan.

The Company has not granted any stock options subsequent to the
financial year ended February 28, 2011.

*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 August 22, 2011, we had five employees, including
management.

*E.*                    *Share
Ownership*

As of August 22, 2011, there are 42,421,420 common shares of
our company issued and outstanding. Our directors and officers owned, directly
or indirectly, the following common shares:

Name
      Number of CommonSharesBeneficially Owned
      Percentage(1)Andrew Brodkey
    1,023,000
    2.4%Dr. David Terry
    nil
    0.0%Dr. Ronald Richman
    nil
    0.0%Dr David Hackman
    300,000
    0.7%Frank Garcia
    200,000
    0.5%Jodi Henderson
    200,000
    0.5%


|(1) | Based on 42,421,420 shares of common stock issued and
      outstanding as of August 22, 2011. 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

As of August 22, 2011, there were 42,421,420 common shares of
our company issued and outstanding. As of August 22, 2011, the Company is not
aware of any person who owns more than five percent (5%) of our common shares

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 August 22, 2011, Computershare Investor Service Inc., our
registrar and transfer agent, reported that our companys 42,421,420 common
shares are held as follows:

Location
    Number of Shares
    Percentage of Shares
    Number of RegisteredShareholders of RecordCanada
    35,589,293
    83.89%
    31United States
    5,088,527
    12.00%
    28Other
    1,743,600
    4.11%
    3Total
    42,421,420
    100%
    62


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 February 28, 2008 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.

---

During the years ended February 28, 2011 and 2010, the Company
had the following transactions with related parties:

| | 1.  | Management fees of $7,000 (February 28, 2010 - $48,000)
      were incurred to a company controlled by a former director and
    officer.                                                                               
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                         
| | 2.  | Management fees of $140,044 (February 28, 2010 - $45,542)
      were incurred to an officer and director.                                                                                                               
| |     |                                                                                                                                                                                                                         
| | 3.  | Management fees of $21,188 (February 28, 2010 - $Nil)
      were incurred to two directors.                                                                                                                             
| |     |                                                                                                                                                                                                                         
| | 4.  | Management fees of $48,032 (February 28, 2010 - $Nil)
      were incurred to an officer.                                                                                                                                
| |     |                                                                                                                                                                                                                         
| | 5.  | Management fees of $30,756 and rent of $16,153 (February
      28, 2010 - $10,605 and $nil respectively) were incurred to a company in
      which a director and officer is general manager.                           
| |     |                                                                                                                                                                                                                         
| | 6.  | Management fees of $73,720 (February 28, 2010 - $19,037)
      were incurred to a company controlled by a director.                                                                                                     
| |     |                                                                                                                                                                                                                         
| | 7.  | Management fees of $53,484 (February 28, 2010 - $13,995)
      were incurred to an officer.                                                                                                                             
| |     |                                                                                                                                                                                                                         
| | 8.  | Management fees of $9,173 (February 28, 2010- $nil) were
      incurred to a member of the Companys technical advisory
  committee.                                                                                    
| |     |                                                                                                                                                                                                                         
| | 9.  | Deferred exploration costs of $34,735 (February 28, 2010
      - $Nil) were incurred to a company with one director and two officers in
      common.                                                                   
| |     |                                                                                                                                                                                                                         
| | 10. | Rent of $nil (February 28, 2010 - $13,750) were incurred
      to a company controlled by a director.                                                                                                                   
| |     |                                                                                                                                                                                                                         
| | 11. | Accounting fees of $nil (February 28, 2010 - $12,125)
      were incurred to a firm a former director was a partner of.                                                                                                 
| |     |                                                                                                                                                                                                                         
| | 12. | As at February 28, 2011, accounts payable include $437
      owing to an officer of the Company and accrued liabilities include
      $183,747 for unissued stock options to the President and CEO of the
      Company.

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 28, 2010, the Company incurred
$45,542 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 28, 2010, the Company incurred $19,037 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 $10,605
during the year ended February 28, 2010. During this same period, the Company
incurred $13,995 to Jodi Henderson, the Companys Corporate Secretary. The
Company also paid management fees of $48,000, accounting - fees of $12,125, and
rent of $13,750 to companies controlled by Jerry Minni, a former director and
officer, or to companies in which Mr. Minni was a partner.

On January 15, 2010, 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. Each agreement granted
100,000 options to such persons, each option entitling the holder to acquire one common
share in the capital of the Company at the exercise price of $0.50 per share
until expiry on January 15, 2015.

---

Subsequent to the year ended February 28, 2010, the Company
entered into stock option agreements with each of David Hackman, Jodi Henderson,
and Frank Garcia each being officers of the Company and Andrew Brodkey being a
director and officer of the Company. Andrew Brodkey, Jodi Henderson and Frank
Garcia entered into stock option agreements that granted 75,000 options and
David Hackman entered a stock option agreement that granted 50,000 options, each
option entitling the holder to acquire on common share in the capital of the
Company at the exercise price of $0.55 per share until expiry on March 30, 2015.
Except for Frank Garcia and 23,800 of Jodi Hendersons granted options, these
options are contingent on Exchange and shareholder approval of a new rolling
stock option plan, which will be presented at the next annual general meeting.

ITEM
8                      
Financial Information

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

Our financial statements are stated in Canadian States dollars
and are prepared in accordance with Canadian generally accepted accounting
principles. In this annual report, unless otherwise specified, all dollar
amounts are expressed in Canadian dollars.

Financial Statements filed as part of this Annual Report

| | 1. | Independent Auditors Report of Manning Elliott dated
      June 28, 2011 on the Financial Statements as at February 28,
2011
| | -- | -----------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                              
| | 2. | Consolidated Balance Sheets at February 28, 2011 and
      2010;                                                             
| |    |                                                                                                                              
| | 3. | Consolidated Statements of Operations and Deficit for the
      years ended February 28, 2011, 2010, and 2009;               
| |    |                                                                                                                              
| | 4. | Consolidated Statements of Comprehensive Loss for the
      years ended February 28, 2011, 2010, and 2009;                   
| |    |                                                                                                                              
| | 5. | Consolidated Statements of Cash Flows for the years ended
      February 28, 2011, 2010, and 2009; and                       
| |    |                                                                                                                              
| | 6. | Notes to the Consolidated Financial
  Statements.                                                                            

The audited financial statements for the years ended February
28, 2011, 2010, and 2009 can be found under Item 17 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
Over-the-Counter 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.

The annual high and low market prices for our common shares for
the two most recent full fiscal years were as follows:

TSX VENTURE EXCHANGEYear Ended
      High
      LowFebruary 28, 2011
      0.240
      0.200February 28, 2010(1)
      0.760
      .0630


|(1) | Our common shares started trading on the TSX Venture
      Exchange on July 28, 2009.
|--- | -------------------------------------------------------------------------------------

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, 2011
      0.220
      0.140February 28, 2011
      0.335
      0.200November 30, 2010
      0.260
      0.165August 31, 2010
      0.285
      0.150May 31, 2010
      0.800
      0.200February 28, 2010
      0.760
      0.340November 30, 2009
      0.500
      0.345August 31, 2009
      0.460
      0.200OTC BULLETIN BOARDMay 31, 2011
      0.200
      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 February 28, 2011 through July 31, 2011 on the
TSX Venture Exchange and the OTC Bulletin Board were as follows:

OTC Bulletin BoardMonth
      High
      LowJuly 2011
      0.180
      0.120June 2011
      0.170
      0.110May 2011
      0.180
      0.140April 2011
      0.190
      0.155March 2011
      0.220
      0.165February 2011
      0.240
      0.200OTC Bulletin BoardJuly 2011
      0.20
      0.13June 2011
      0.18
      0.13May 2011
      0.20
      0.14April 2011(1)
      0.20
      0.16


|(1) | Our common shares started trading on the OTC Bulletin
      Board on April 5, 2011.
|--- | -----------------------------------------------------------------------------------

---

*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.

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.  | Share Option Agreement among Etna Resources Inc.,
      Escondidas Internacional S.A. de C.V. dated December 18, 2009.                                  
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                         
| | 2.  | Amendment to Share Option Agreement among Etna Resources
      Inc., Escondidas Internacional S.A. de C.V. dated December 18,
  2009.                   
| |     |                                                                                                                                                         
| | 3.  | Second Amendment to Share Option Agreement among Etna
      Resources Inc., Escondidas Internacional S.A. de C.V. dated December 18,
    2009.          
| |     |                                                                                                                                                         
| | 4.  | Letter Agreement Escondidas Internacional S.A. de C.V.
      and the shareholders of Escondidas Internacional S.A. de C.V. dated
      October 28, 2010.
| |     |                                                                                                                                                         
| | 5.  | Consulting and Professional Services Agreement between
      JVM Management Ltd. and Etna Resources Inc. dated November 3,
  2009.                      
| |     |                                                                                                                                                         
| | 6.  | Consulting and Professional Services Agreement between
      Sage Associates, Inc. and Etna Resources Inc. dated November 1,
    2009.                  
| |     |                                                                                                                                                         
| | 7.  | Consulting Services Agreement between Kriyah Consultants
      LLC. and Etna Resources Inc. dated November 1, 2009.                                     
| |     |                                                                                                                                                         
| | 8.  | Consulting Services Agreement between Tim Lowenstein and
      Etna Resources Inc. dated November 1, 2009.                                              
| |     |                                                                                                                                                         
| | 9.  | Employment Agreement between Etna Resources Inc. and
      Andrew Brodkey dated November 1, 2009.                                                       
| |     |                                                                                                                                                         
| | 10. | Independent Director Agreement between Pan American
      Lithium Corp. and Ronald Richman dated April 30, 2010.                                        
| |     |                                                                                                                                                         
| | 11. | Independent Director Agreement between Pan American
      Lithium Corp. and David Terry dated April 30,
2010.                                           

---

| | 12. | Amended and Restated Consulting Services Agreement dated
      May 3, 2011 by and between Level 3 Capital Management Inc. and Pan
      American Lithium Corp.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                               
| | 13. | A Purchase Agreement between Pan American Lithium Corp.
      and Sociedad Gareste, Limitada (Gareste) dated February 14,
  2011.                           
| |     |                                                                                                                                                               
| | 14. | A Binding Letter Agreement between Gareste and Pan American Lithium Corp. dated February 14 for a Joint Venture and Earn-In for Llanta Lithium Brines.        
| |     |                                                                                                                                                               
| | 15. | A Binding Letter Agreement between Gareste and Pan American Lithium Corp. dated February 14 for a Joint Venture and Earn-In for Maricunga Salar.              

*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*

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 (a
non-resident holder).

This summary is based upon the current provisions of the
Income Tax Act (Canada), the regulations thereunder (the Regulations),
the current publicly announced administrative and assessing policies of the
Canada Customs and Revenue Agency and the Canada-United States Tax Convention as
amended by the Protocols thereto (the Treaty). This summary also takes into
account the amendments to the Income Tax Act (Canada) and the Regulations
publicly announced by the Minister of Finance (Canada) prior to the date hereof
(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 theIncome Tax Act (Canada) to withholding tax at a
rate of 25% subject to a reduction under the provisions of an applicable tax
treaty, which tax is deducted at source by our company. The Treaty provides that
the Income Tax Act (Canada) standard 25% withholding tax rate is reduced
to 15% on dividends paid on shares of a corporation resident in Canada (such as
our company) to residents of the United States, and also provides for a further
reduction of this rate 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 the corporation paying the dividend.

Capital Gains

A non-resident holder is not subject to tax under the Income
Tax Act (Canada) in respect of a capital gain realized upon the disposition
of a common share of our company unless such share represents taxable Canadian
property, as defined in the Income Tax Act (Canada), to the holder
thereof. Our common shares generally will be considered taxable Canadian
property to a non-resident holder if:

|- | the non-resident holder;
|- | ------------------------

---

|- | persons with whom the non-resident holder did not deal at
      arms length; or                          
|- | ----------------------------------------------------------------------------------------------------------
|  |                                                                                                           
|- | the non-resident holder and persons with whom such
      non-resident holder did not deal at arms length,

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 such shares.
In the case of a non-resident holder to whom shares of our company represent
taxable Canadian property and who is resident in the United States, 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.

Certain 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 Certain Canadian Federal Income Tax Consequences above.

The following discussion is based upon the Internal Revenue
Code of 1986, as amended (the Code), Treasury Regulations, published Internal
Revenue Service (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 should 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 U.S. 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 U.S. federal
income tax purposes to the extent paid out of our current or accumulated
earnings and profits, as determined under U.S. federal income tax principles.
Distributions which are taxable dividends and which meet certain requirements
will be unqualified dividend income and taxed to U.S. Holders at a maximum
U.S. 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 of 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
U.S. 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 U.S. 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 U.S. 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 are 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. There are further limitations on the foreign
tax credit for certain types of income such as passive income, high
withholding tax interest, financial services income, shipping income, and
certain other classifications of income. 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.

*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,
B.C., 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

Not applicable.

ITEM
15T.                  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 28, 2011. 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 Canadian GAAP. Based on this evaluation the CEO and CFO have
concluded that our internal controls over financial reporting as of February 28,
2011 (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 theSarbanes-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 LLP, Chartered Accountants, as
independent auditors to audit our financial statements for the fiscal years
ended February 28, 2011 and February 28, 2010. The aggregate of fees billed by
Manning Elliott LLP, Chartered Accountants, for professional services rendered for
the audit of our annual financial statements included in this annual report for
the fiscal years ended 2010 and 2011 were $29,000 and $28,500, respectively.

Audit Related Fees

For the fiscal years ended February 28, 2010 and February 28,
2011, the aggregate fees billed for assurance and related services by Manning
Elliott LLP, Chartered Accountants, relating to our quarterly financial statements
which are not reported under the caption Audit Fees above, were $21,500 and
16,700 for 2010 and 2011, respectively.

Tax Fees

For the fiscal years ended February 28, 2010 and February 28,
2011, the aggregate fees billed for tax compliance, tax advice and tax planning
by Manning Elliott LLP, Chartered Accountants, was $1,000 for both years.

---

All Other Fees

For the fiscal years ended February 28, 2010 and February 28,
2011, the aggregate fees billed by Manning Elliott LLP, Chartered Accountants, for
other non-audit professional services, other than those services listed above,
totalled $11,400 and $19,179 for 2010 and 2011, respectively.

Pre-Approval Policies and Procedures

Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Manning Elliott LLP, 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.

PART III

ITEM
17                    
Financial Statements

---

|PAN AMERICAN LITHIUM CORP.                   
|---------------------------------------------
|(An Exploration Stage Company)               
|                                             
|CONSOLIDATED FINANCIAL STATEMENTS            
|YEARS ENDED FEBRUARY 28, 2011, 2010, and 2009
|(Expressed in Canadian dollars)              

|CONSOLIDATED BALANCE SHEETS                            
|-------------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS
      AND DEFICIT
|CONSOLIDATED STATEMENTS
      OF COMPREHENSIVE LOSS    
|CONSOLIDATED STATEMENTS OF CASH FLOWS                  
|NOTES TO THE CONSOLIDATED
      FINANCIAL STATEMENTS   

---



|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|-------------------------------------------------------

To the Shareholders of 
  Pan American Lithium Corp. (An
  Exploration Stage Company)

We have audited the accompanying consolidated financial
  statements of Pan American Lithium Corp. (the Company) which comprise the
  consolidated balance sheets as at February 28, 2011 and 2010, and the
  consolidated statements of operations and deficit, comprehensive loss and cash
  flows for the years ended February 28, 2011, 2010, and 2009, 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
  Canadian generally accepted accounting principles, 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 Company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 Companys internal control.
  The Company is not required to have, nor were we engaged to perform, an audit of
  the Companys internal control over financial reporting. Accordingly, we express
  no such opinion. 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 in 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
  the Company as at February 28, 2011 and 2010, and the results of its operations
  and its cash flows for the years then ended February 28, 2011, 2010, and 2009 in
  accordance with Canadian generally accepted accounting principles.

Emphasis of MatterWithout qualifying our opinion, we
  draw attention to Note 1 in the consolidated financial statements which
  indicates the existence of a material uncertainty that may cast significant
  doubt on the ability of Pan American Lithium Corp. to continue as a going
  concern.

/s/ Manning Elliott LLP

CHARTERED ACCOUNTANTS 
  Vancouver, British Columbia 
  June
  28, 2011

---

|PAN AMERICAN LITHIUM CORP.      
|--------------------------------
|(An Exploration Stage Company)  
|CONSOLIDATED BALANCE SHEETS     
|AS AT FEBRUARY 28, 2011 AND 2010

|                                                    |   | 2011       |   |   | 2010       |  
|--------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                    |   |            |   |   |            |  
|ASSETS                                              |   |            |   |   |            |  
|CURRENT                                             |   |            |   |   |            |  
|Cash                                                | $ | 165,165    |   | $ | 1,637,451  |  
|Amounts receivable and prepaid expenses             |   | 69,077     |   |   | 78,650     |  
|                                                    |   | 234,242    |   |   | 1,716,101  |  
|MINERAL PROPERTIES (Note 4)                         |   | 4,441,553  |   |   | 3,989,952  |  
|                                                    | $ | 4,675,795  |   | $ | 5,706,053  |  
|LIABILITIES                                         |   |            |   |   |            |  
|CURRENT                                             |   |            |   |   |            |  
|Accounts payable and accrued liabilities            | $ | 396,746    |   | $ | 56,163     |  
|                                                    |   |            |   |   |            |  
|SHAREHOLDERS' EQUITY                                |   |            |   |   |            |  
|SHARE CAPITAL (Note 5)                              |   | 6,636,776  |   |   | 6,288,322  |  
|CONTRIBUTED SURPLUS (Note 5)                        |   | 1,981,060  |   |   | 992,715    |  
|ACCUMULATED OTHER COMPREHENSIVE LOSS (Note
      6) |   | (338,549   | ) |   | -          |  
|DEFICIT                                             |   | (4,000,238 | ) |   | (1,631,147 | )
|                                                    |   | 4,279,049  |   |   | 5,649,890  |  
|                                                    | $ | 4,675,795  |   | $ | 5,706,053  |  

Going Concern (Note 1) 
  Commitments (Note 4 and 9) 
  Subsequent Events (Note 12)

APPROVED BY THE BOARD OF DIRECTORS:

|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 DEFICIT   
|FOR THE YEARS ENDED FEBRUARY 28, 2011, 2010 AND 2009

|                                                        |   | 2011       |   |   | 2010       |   |   | 2009      |  
|------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | --------- | -
|                                                        |   |            |   |   |            |   |   |           |  
|EXPENSES                                                |   |            |   |   |            |   |   |           |  
|Advertising and
      promotion                         | $ | 34,672     |   | $ | 54,430     |   | $ | -         |  
|Bank charges                                            |   | 3,975      |   |   | 1,032      |   |   | -         |  
|Investor
      communications                           |   | 599,172    |   |   | 216,085    |   |   | -         |  
|Management fees (Note 7)                                |   | 941,697    |   |   | 234,489    |   |   | 42,000    |  
|Office and
      miscellaneous                          |   | 46,464     |   |   | 21,002     |   |   | 490       |  
|Professional fees                                       |   | 209,375    |   |   | 130,737    |   |   | 12,466    |  
|Rent (Note 7)                                           |   | 16,153     |   |   | 19,176     |   |   | 9,000     |  
|Stock-based compensation (Note 5(d))                    |   | 558,858    |   |   | 242,698    |   |   | -         |  
|Transfer agent and
      filing fees                    |   | 35,392     |   |   | 26,442     |   |   | -         |  
|Travel                                                  |   | 55,834     |   |   | 23,917     |   |   | -         |  
|                                                        |   |            |   |   |            |   |   |           |  
|LOSS BEFORE OTHER ITEMS                                 |   | (2,501,592 | ) |   | (970,008   | ) |   | (63,956   | )
|                                                        |   |            |   |   |            |   |   |           |  
|OTHER ITEMS:                                            |   |            |   |   |            |   |   |           |  
|Loss on foreign exchange                                |   | -          |   |   | (24,669    | ) |   | -         |  
|Write off of mineral property (Note 4)                  |   | -          |   |   | (393,689   | ) |   | -         |  
|Unrealized gain on derivative liability (Note 9(a),(c)) |   | 132,501    |   |   | -          |   |   | -         |  
|Interest income                                         |   | -          |   |   | -          |   |   | 152       |  
|                                                        |   |            |   |   |            |   |   |           |  
|LOSS BEFORE INCOME TAXES                                |   | (2,369,091 | ) |   | (1,388,366 | ) |   | (63,804   | )
|                                                        |   |            |   |   |            |   |   |           |  
|FUTURE INCOME TAX RECOVERY                              |   | -          |   |   | -          |   |   | 10,622    |  
|                                                        |   |            |   |   |            |   |   |           |  
|NET LOSS, FOR THE YEAR                                  |   | (2,369,091 | ) |   | (1,388,366 | ) |   | (53,182   | )
|                                                        |   |            |   |   |            |   |   |           |  
|DEFICIT, BEGINNING OF YEAR                              |   | (1,631,147 | ) |   | (242,781   | ) |   | (189,599  | )
|                                                        |   |            |   |   |            |   |   |           |  
|DEFICIT, END OF YEAR                                    | $ | (4,000,238 | ) | $ | (1,631,147 | ) | $ | (242,781  | )
|                                                        |   |            |   |   |            |   |   |           |  
|BASIC AND DILUTED LOSS PER SHARE                        | $ | (0.068     | ) | $ | (0.102     | ) | $ | (0.011    | )
|                                                        |   |            |   |   |            |   |   |           |  
|WEIGHTED AVERAGE NUMBER OF SHARES
      OUTSTANDING     |   | 34,861,292 |   |   | 13,618,688 |   |   | 5,050,753 |  

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

---

|PAN AMERICAN LITHIUM CORP.                           
|-----------------------------------------------------
|(An Exploration Stage Company)                       
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS        
|FOR THE YEARS ENDED FEBRUARY 28, 2011, 2010, AND 2009

|                                                |   | 2011       |   |   | 2010       |   |   | 2009    |  
|----------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ------- | -
|NET LOSS FOR THE YEAR                           | $ | (2,369,091 | ) | $ | (1,388,366 | ) | $ | (53,182 | )
|Unrealized loss on foreign exchange translation |   | (338,549   | ) |   | -          |   |   | -       |  
|                                                |   |            |   |   |            |   |   |         |  
|COMPREHENSIVE LOSS FOR THE YEAR                 | $ | (2,707,640 | ) | $ | (1,388,366 | ) | $ | (53,182 | )

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               
|FOR THE YEARS ENDED FEBRUARY 28, 2011, 2010 AND 2009

|                                               |   | 2011       |   |   | 2010       |   |   | 2009    |  
|---------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ------- | -
|OPERATING ACTIVITIES                           |   |            |   |   |            |   |   |         |  
|Net loss for the year                          | $ | (2,369,091 | ) | $ | (1,388,366 | ) | $ | (53,182 | )
|Items not involving cash:                      |   |            |   |   |            |   |   |         |  
|Future income tax recovery                     |   | -          |   |   | -          |   |   | (10,622 | )
|Unrealized gain on
      derivative liability  |   | (132,501   | ) |   | -          |   |   | -       |  
|Write off of mineral property                  |   | -          |   |   | 393,689    |   |   | -       |  
|Stock-based
      compensation                 |   | 558,858    |   |   | 242,698    |   |   | -       |  
|                                               |   | (1,942,734 | ) |   | (751,979   | ) |   | (63,804 | )
|Changes in working capital items:              |   |            |   |   |            |   |   |         |  
|Amounts receivable and prepaid expenses        |   | 9,573      |   |   | (73,571    | ) |   | 3,166   |  
|Accounts payable
      and accrued liabilities |   | 408,615    |   |   | (44,266    | ) |   | 29,799  |  
|Cash used in operating
      activities        |   | (1,524,546 | ) |   | (869,816   | ) |   | (30,839 | )
|FINANCING ACTIVITIES                           |   |            |   |   |            |   |   |         |  
|Due to related parties                         |   | -          |   |   | (11,500    | ) |   | 2,500   |  
|Deferred financing
      costs                 |   | -          |   |   | -          |   |   | (28,672 | )
|Proceeds from issuance of shares               |   | 883,994    |   |   | 3,843,724  |   |   | 43,000  |  
|Share issuance
      costs                     |   | (97,578    | ) |   | (420,938   | ) |   | -       |  
|Cash provided by
      financing activities    |   | 786,416    |   |   | 3,411,286  |   |   | 16,828  |  
|INVESTING ACTIVITIES                           |   |            |   |   |            |   |   |         |  
|Mineral property expenditures                  |   | (691,522   | ) |   | (904,166   | ) |   | (860    | )
|Cash used in investing activities              |   | (691,522   | ) |   | (904,166   | ) |   | (860    | )
|EFFECT OF EXCHANGE RATE CHANGES ON CASH        |   | (42,634    | ) |   | -          |   |   | -       |  
|CHANGE IN CASH                                 |   | (1,472,286 | ) |   | 1,637,304  |   |   | (14,871 | )
|CASH, BEGINNING OF YEAR                        |   | 1,637,451  |   |   | 147        |   |   | 15,018  |  
|CASH, END OF YEAR                              | $ | 165,165    |   | $ | 1,637,451  |   | $ | 147     |  

NON-CASH TRANSACTIONS SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:

|Interest paid                      | $ | -       |  | $ | -         |  | $ | - | 
|---------------------------------- | - | ------- |  | - | --------- |  | - | - | 
|Income tax paid                    | $ | -       |  | $ | -         |  | $ | - | 
|Shares issued for mineral property | $ | -       |  | $ | 3,155,700 |  | $ | - | 
|Shares issued to agent             | $ | -       |  | $ | 199,000   |  | $ | - | 
|Warrants issued to agent           | $ | 105,665 |  | $ | -         |  | $ | - | 

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 28, 2011 AND 2010

|1. | NATURE OF BUSINESS AND GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Pan American Lithium Corp. (formerly Etna Resources Inc.)
      (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 28, 2011, 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 28, 2011, the Company incurred losses and has a deficit of
      $4,000,238. As at February 28, 2011, the Company has a working capital
      deficiency of $162,504. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Companys plan for 2012 is to continue to acquire and
      explore mineral properties. The Company intends to fund these activities
      through equity financing arrangement (see Note 12(b)), which may be
      insufficient to fund its capital expenditure, working capital and other
      cash requirements for the year ending February 28, 2011. There is no
      assurance that the Company will obtain the necessary financing to complete
      its objectives.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | 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. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

1

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|2. | SIGNIFICANT ACCOUNTING POLICIES - continued
|-- | -------------------------------------------
|   |                                            
|   | d)                                         
|   |                                            
|   |                                            
|   |                                            
|   |                                            
|   |                                            
|   | e)                                         
|   |                                            
|   |                                            
|   |                                            
|   | f)                                         
|   |                                            
|   |                                            
|   |                                            
|   | g)                                         
|   |                                            
|   |                                            
|   |                                            
|   | h)                                         
|   |                                            
|   |                                            

2

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|2. | SIGNIFICANT ACCOUNTING POLICIES - continued
|-- | -------------------------------------------
|   |                                            
|   | h)                                         
|   |                                            
|   |                                            
|   |                                            
|   | i)                                         
|   |                                            
|   |                                            
|   |                                            
|   | j)                                         
|   |                                            
|   |                                            
|   |                                            
|   | k)                                         
|   |                                            
|   |                                            
|   |                                            
|   | l)                                         
|   |                                            
|   |                                            
|   |                                            
|   |                                            
|   |                                            
|   |                                            

3

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|2. | SIGNIFICANT ACCOUNTING POLICIES - continued
|-- | -------------------------------------------
|   |                                            
|   | m)                                         
|   |                                            
|   |                                            
|   |                                            
|   | n)                                         
|   |                                            
|   |                                            
|   |                                            
|   |                                            
|   |                                            
|   |                                            
|   |                                            
|   | o)                                         
|   |                                            
|   |                                            
|   |                                            
|   | p)                                         
|   |                                            
|   |                                            
|   |                                            
|   | q)                                         
|   |                                            
|   |                                            

4

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|3. | NEW ACCOUNTING PRONOUNCEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In January 2009, the Accounting Standards Board ("AcSB")
      issued CICA Handbook Section 1582, Business Combinations, which replaces
      Section 1581, Business Combinations. The AcSB also issued Section 1601,
      Consolidated Financial Statements, and Section 1602, Non-Controlling
      Interests, which replace Section 1600, Consolidated Financial
      Statements. These new sections are based on the International Accounting
      Standards Boards (IASB) International Financial Reporting Standard 3,
      Business Combinations. These new standards replace the existing guidance
      on business combinations and consolidated financial statements. These new
      standards require that most assets acquired and liabilities assumed,
      including contingent liabilities, to be measured at fair value and all
      acquisition costs to be expensed. These new standards also require
      non-controlling interests to be recognized as a separate component of
      equity and net earnings to be calculated without a deduction for
      non-controlling interests. The objective of these new standards is to
      harmonize Canadian accounting for business combinations with the
      international and U.S. accounting standards. The new standards are to be
      applied prospectively to business combinations for which the acquisition
      date is on or after the beginning of the first annual reporting period
      beginning on or after January 1, 2011, with earlier application permitted.
      Assets and liabilities that arose from business combinations whose
      acquisition dates preceded the application of the new standards will not
      be adjusted upon application of these new standards. The Non-Controlling
      Interests standard should be applied retrospectively except for certain
      items. The Company does not expect that the adoption of this standard will
      have a material impact on the Companys financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In January 2009, the CICA issued Section 1601,
      Consolidated Financial Statements, and 1602, Non- controlling interests,
      which replaces existing guidance. Section 1602 provides guidance on
      accounting for a non-controlling interest in a subsidiary in consolidated
      financial statements subsequent to a business combination. These standards
      are effective on or after the beginning of the first annual reporting
      period on or after January 2011 with earlier adoption permitted. The
      Company does not expect that the adoption of this standard will have a
      material impact on the Companys financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In February 2008, the AcSB adopted a strategic plan for
      the direction of accounting standards in Canada. As part of that plan,
      accounting standards in Canada for public companies will converge with
      International Financial Reporting Standards ("IFRS"). AcSB announced that
      2011 is the changeover date for publicly-listed companies to use IFRS,
      replacing Canadian GAAP. This date is for interim and annual financial
      statements relating to fiscal years beginning on or after January 1, 2011.
      The Companys adoption of IFRS on March 1, 2011 requires the restatement,
      for comparative purposes, of amounts reported by the Company for the year
      ended February 28, 2011, including the opening balance sheet as at March
      1, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

5

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|4. | MINERAL PROPERTIES
|-- | ------------------

| |                                                            |   | 2011      |   |   | 2010      | 
| | ---------------------------------------------------------- | - | --------- | - | - | --------- | 
| |                                                            |   |           |   |   |           | 
| | Salico Lithium Properties, Atacama Region
      III, Chile |   |           |   |   |           | 
| |                                                            |   |           |   |   |           | 
| | Acquisition cost                                           | $ | -         |   | $ | 3,578,552 | 
| | Assay reports                                              |   | 11,668    |   |   | -         | 
| | Claims expense                                             |   | 71,575    |   |   | -         | 
| | Site maintenance                                           |   | 489,415   |   |   | 119,070   | 
| | Technical report                                           |   | 24,769    |   |   | 29,505    | 
| | Change in foreign exchange (Note 2n)                       |   | (272,762  | ) |   | -         | 
| |                                                            |   | 324,665   |   |   | 3,727,127 | 
| | Balance, beginning of the year                             |   | 3,727,127 |   |   | -         | 
| | Balance, end of year                                       | $ | 4,051,792 |   | $ | 3,727,127 | 
| |                                                            |   |           |   |   |           | 
| | Cerro Prieto Lithium Property, Mexico                      |   |           |   |   |           | 
| |                                                            |   |           |   |   |           | 
| | Acquisition cost                                           | $ | -         |   | $ | 210,200   | 
| | Site maintenance                                           |   | 150,089   |   |   | 52,625    | 
| | Change in foreign exchange (Note 2n)                       |   | (23,153   | ) |   | -         | 
| |                                                            |   | 126,936   |   |   | 262,825   | 
| | Balance, beginning of the year                             |   | 262,825   |   |   | -         | 
| | Balance, end of year                                       | $ | 389,761   |   | $ | 262,825   | 
| |                                                            |   |           |   |   |           | 
| | Total Mineral Properties                                   | $ | 4,441,553 |   | $ | 3,989,952 | 

Chilean Lithium 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
  salar concessions (the Properties ) located in Chile. Under the terms
  of the agreement, Gareste organized a new Chilean limited liability company,
  South American Lithium Company S.A. Cerrada (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
  to such interest holders at 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 paid US$50,000 to Gareste on signing to
  cover costs incurred in connection with the formation and organization of
  SALICO. In addition, the Company 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.

6

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|4. | 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 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 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; 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
      $8,000.                                                                                                    

7

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|4. | MINERAL PROPERTIES - continued                                                                                                                                                                                                                                                                                            
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                           
|   | Aspen Grove Property                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                           
|   | Pursuant to an agreement dated May 28, 2007, the Company
      was granted an option to acquire a 100% interest, subject to a 2% Net
      Smelter Return (NSR), in the Aspen Grove Property situated in the Nicola
      Mining Division, B.C.                                                                         
|   |                                                                                                                                                                                                                                                                                                                           
|   | On June 10, 2010, the Company terminated the option
      agreement dated May 28, 2007. As the Company is focused on lithium and
      light metals, the Company decided to release its option and the
      acquisition and exploration costs of $393,689 were written off during the
      year ended February 28, 2010.
|   |                                                                                                                                                                                                                                                                                                                           
|5. | SHARE CAPITAL AND CONTRIBUTED SURPLUS                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                           
|   | a)                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                           
|   | b)                                                                                                                                                                                                                                                                                                                        

| |                                              |  | Number of  |  |   | Amount Net of    |  |   | Contributed |  
| | -------------------------------------------- |  | ---------- |  | - | ---------------- |  | - | ----------- | -
| |                                              |  | Shares     |  |   | Share Issue Cost |  |   | Surplus     |  
| |                                              |  |            |  |   |                  |  |   |             |  
| | Balance, February 28, 2009                   |  | 5,231,000  |  | $ | 368,088          |  | $ | -           |  
| |                                              |  |            |  |   |                  |  |   |             |  
| | Issued pursuant to a public
      offering   |  | 5,500,000  |  |   | 581,818          |  |   | -           |  
| | Issued for mineral property                  |  | 50,000     |  |   | 7,500            |  |   | -           |  
| | Issued for mineral property                  |  | 10,494,000 |  |   | 3,148,200        |  |   | -           |  
| | Issued in a private placement                |  | 9,848,801  |  |   | 1,886,792        |  |   | -           |  
| | Issued for corporate financing
      fee     |  | 100,000    |  |   | 15,000           |  |   | -           |  
| | Issued as finders fee for private placement |  | 613,333    |  |   | 184,000          |  |   | -           |  
| | Exercise of stock options                    |  | 175,000    |  |   | 26,250           |  |   | -           |  
| | Exercise of agents warrants                  |  | 252,228    |  |   | 37,835           |  |   | -           |  
| | Stock-based compensation                     |  |            |  |   |                  |  |   |             |  
| | Warrants                                     |  | -          |  |   | -                |  |   | 782,856     |  
| | Stock options                                |  | -          |  |   | -                |  |   | 242,698     |  
| | Transfer from contributed surplus on:        |  |            |  |   |                  |  |   |             |  
| | Stock options exercise                       |  | -          |  |   | 22,750           |  |   | (22,750     | )
| | Agents
      warrants exercise               |  | -          |  |   | 10,089           |  |   | (10,089     | )
| |                                              |  |            |  |   |                  |  |   |             |  
| | Balance, February 28, 2010                   |  | 32,264,362 |  |   | 6,288,322        |  |   | 992,715     |  
| |                                              |  |            |  |   |                  |  |   |             |  
| | Exercise of stock options                    |  | 225,000    |  |   | 33,750           |  |   | -           |  
| | Exercise of agents warrants                  |  | 178,708    |  |   | 35,313           |  |   | -           |  
| | Issued in a private placement                |  | 5,432,873  |  |   | 241,021          |  |   | 362,192     |  
| | Stock-based compensation                     |  |            |  |   |                  |  |   |             |  
| | Warrants                                     |  | -          |  |   | -                |  |   | 105,665     |  
| | Stock options                                |  | -          |  |   | -                |  |   | 558,858     |  
| | Transfer from contributed surplus on:        |  |            |  |   |                  |  |   |             |  
| | Stock options exercise                       |  | -          |  |   | 28,571           |  |   | (28,571     | )
| | Agents
      warrants exercise               |  | -          |  |   | 9,799            |  |   | (9,799      | )
| |                                              |  |            |  |   |                  |  |   |             |  
| | Balance, February 28, 2011                   |  | 38,100,943 |  | $ | 6,636,776        |  | $ | 1,981,060   |  

8

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|5. | SHARE CAPITAL AND CONTRIBUTED SURPLUS -
      continued
|-- | -------------------------------------------------------
|   |                                                        
|   | b)                                                     
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        
|   |                                                        

9

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|5. | 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 28, 2011, 1,795,500 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 subsequent to the completion of the Companys initial public
      offering. 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 28, 2011 and 2010 and changes during the year then ended is
      presented below:                                                                                                                                                                                                                                                                                                  

2011
      
      
      2010Options
      
      
      Weighted
      
      
      Options
      
      
      WeightedOutstanding
      
      
      Average
        Exercise
      
      
      Outstanding
      
      
      AveragePrice
      
      
      
      
      
      Exercise PriceOpening balance
      
      1,775,000
      
      $
      0.34
      
      
      -
      
      
      -Granted
      
      1,900,000
      
      $
      0.53
      
      
      1,950,000
      
      $
      0.32Exercised
      
      (225,000
      )
      $
      0.15
      
      
      (175,000
      )
      $
      0.15Forfeited
      
      (800,000
      )
      $
      0.39
      
      
      -
      
      
      -Ending balance
      
      2,650,000
      
      $
      0.40
      
      
      1,775,000
      
      $
      0.34


10

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|5. | SHARE CAPITAL - continued
|-- | -------------------------
|   |                          
|   | d)                       
|   |                          
|   |                          

2011Quantity
      
      
      
      
      ExerciseOutstanding
      
      Exercisable
      
      
      Price
      
      
      Expiry Date300,000
      
      300,000
      
      
      $0.15
      
      
      September 15, 2013750,000
      
      750,000
      
      
      $0.50
      
      
      January 15, 2015351,200
      
      197,625
      
      
      $0.55
      
      
      April 21, 2015200,000
      
      100,000
      
      
      $0.55
      
      
      April 9, 202098,800
      
      49,400
      
      
      $0.55
      
      
      April 21, 2020950,000
      
      475,000
      
      
      $0.15
      
      
      May 26, 20202,650,000
      
      1,872,025


2010Quantity
      
      
      
      
      ExerciseOutstanding
      
      Exercisable
      
      
      Price
      
      
      Expiry Date825,000
      
      325,000
      
      
      $0.15
      
      
      September 15, 2013950,000
      
      375,000
      
      
      $0.50
      
      
      January 15, 20151,775,000
      
      700,000


The weighted average contract life
  remaining on the above options is 6.28 years (2010 4.28 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:

2011
      
      
      2010Risk free interest rate
      
      3.04%
      
      
      2.35%Expected dividend yield
      
      -
      
      
      -Expected stock price volatility
      
      144%
      
      
      138%Expected life of options
      
      7.60 years
      
      
      4.38 years


The weighted average fair value of the
  options granted during the period was $0.25 (2010 - $0.23) .

Total stock-based compensation for the
  year ended February 28, 2011 was $558,858 (2010 -$242,698) and was expensed to
  operations and included in contributed surplus 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 28, 2011 AND 2010

|5. | SHARE CAPITAL - continued
        e)          
          Warrants
|-- | -----------------------------------------------------------------

| |                                         |  |            |   |   | Weighted Average | 
| | --------------------------------------- |  | ---------- | - | - | ---------------- | 
| |                                         |  | Number of  |   |   | Exercise         | 
| |                                         |  | Warrants   |   |   | Price            | 
| |                                         |  |            |   |   |                  | 
| | Balance, February 28, 2009              |  | -          |   | $ | -                | 
| | Agents warrants granted                |  | 440,000    |   | $ | 0.15             | 
| | Agents warrants granted                |  | 782,836    |   | $ | 0.50             | 
| | Warrants granted with private placement |  | 4,924,399  |   | $ | 0.50             | 
| | Less: exercised                         |  | (252,228   | ) | $ | -                | 
| |                                         |  |            |   |   |                  | 
| | 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             | 

During the year ended February 28,
  2011, 24,306 warrants were exercised at a price of $0.50, 154,402 warrants were
  exercised at a price of $0.15, and an aggregate of 5,962,440 warrants were
  issued at a price of $0.25.

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

2011
      
      
      2010Risk free interest rate
      
      1.38%
      
      
      1.27%Expected dividend yield
      
      -
      
      
      -Expected stock price volatility
      
      180%
      
      
      69%Expected life of options
      
      2 years
      
      
      1.46 years


Details of share purchase warrants
  outstanding as of February 28, 2011 and 2010 are:

Number of Warrants Outstandingand Exercisable
      Exercise Price2011
      2010
      per
        Share
      Expiry
        Date33,370
      187,772
      $0.15
      July 22, 2010758,530
      782,836
      $0.50
      May 4, 20114,924,399
      4,924,399
      $0.50
      May 4, 2011349,800
      -
      $0.25
      September 29, 20123,532,397
      -
      $0.25
      September 29, 20121,900,476
      -
      $0.25
      October 4, 2012179,767
      -
      $0.25
      October 4, 201211,678,739
      5,895,007


12

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|6. | ACCUMULATED OTHER COMPREHENSIVE
      LOSS
|-- | ------------------------------------------

| |                                                       |   | 2011     |   |   | 2010 | 
| | ----------------------------------------------------- | - | -------- | - | - | ---- | 
| | Balance - Beginning of year                           | $ | -        |   | $ | -    | 
| | Unrealized loss on
      foreign exchange translation |   | (338,549 | ) |   | -    | 
| | Balance - End of year                                 | $ | (338,549 | ) | $ | -    | 

|7. | RELATED PARTY TRANSACTIONS AND BALANCES                                                                                                                                            
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                    
|   | During the years ended February 28, 2011 and 2010, the
      following transactions were recorded at their exchange amounts being the
      amounts agreed upon by related parties:

| | a) | Management fees of $7,000 (February 28, 2010 - $48,000;
      February 28, 2009 - $42,000) were incurred to a company controlled by a
      former director and officer.                                                                           
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                    
| | b) | Management fees of $140,044 (February 28, 2010 - $45,542;
      February 28, 2009 - $Nil) were incurred to an officer and
      director.                                                                                                          
| |    |                                                                                                                                                                                                                                                    
| | c) | Management fees of $21,188 (February 28, 2010 - $Nil;
      February 28, 2009 - $Nil) were incurred to two directors.                                                                                                                              
| |    |                                                                                                                                                                                                                                                    
| | d) | Management fees of $48,032 (February 28, 2010 - $Nil;
      February 28, 2009 - $Nil) were incurred to an officer.                                                                                                                                 
| |    |                                                                                                                                                                                                                                                    
| | e) | Management fees of $30,756 and rent of $16,153 (February
      28, 2010 - $10,605 and $nil respectively; February 28, 2009 - $Nil and
      $Nil respectively) were incurred to a company in which a director and
      officer is general manager.
| |    |                                                                                                                                                                                                                                                    
| | f) | Management fees of $73,720 (February 28, 2010 - $19,037;
      February 28, 2009 - $Nil) were incurred to a company controlled by a
      director.                                                                                                
| |    |                                                                                                                                                                                                                                                    
| | g) | Management fees of $53,484 (February 28, 2010 - $13,995;
      February 28, 2009 - $Nil) were incurred to an officer.                                                                                                                              
| |    |                                                                                                                                                                                                                                                    
| | h) | Management fees of $9,173 (February 28, 2010- $nil;
      February 28, 2009 - $Nil) were incurred to a member of the Companys
      technical advisory committee.                                                                                 
| |    |                                                                                                                                                                                                                                                    
| | i) | Deferred exploration costs of $34,735 (February 28, 2010
      - $Nil; February 28, 2009 - $Nil) were incurred to a company with one
      director and two officers in common.                                                                    
| |    |                                                                                                                                                                                                                                                    
| | j) | Rent of $nil (February 28, 2010 - $13,750; February 28,
      2009 - $9,000) were incurred to a company controlled by a
      director.                                                                                                            
| |    |                                                                                                                                                                                                                                                    
| | k) | Accounting fees of $nil (February 28, 2010 - $12,125;
      February 28, 2009 - $350) were incurred to a firm a former director was a
      partner of.                                                                                            

As at February 28, 2011, accounts
  payable include $437 owing to an officer of the Company and accrued liabilities
  include $183,747 for unissued stock options to the President and CEO of the
  Company, (see Note 9(a)).

13

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|8. | 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.

2011
      
      
      2010
      
      
      2009Combined statutory tax rate
      
      28.18%
      
      
      29.76%
      
      
      30.42%Income tax recovery atcombined statutory rate
      $
      (667,532
      )
      $
      (413,143
      )
      $
      (16,178
      )Permanent differences
      
      153,233
      
      
      (47,752
      )
      
      -Reduction in tax rates
      
      53,901
      
      
      73,686
      
      
      (1,829
      )Valuation allowance
      
      460,398
      
      
      387,209
      
      
      7,385Future income tax recovery
      $
      -
      
      $
      -
      
      $
      (10,622
      )


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

2011
      
      
      2010Non-capital loss carry forwards
      $
      687,217
      
      $
      250,154Eligible capital expenditures
      
      180
      
      
      190Share issuance costs
      
      101,495
      
      
      109,306Mineral properties
      
      66,100
      
      
      34,944Future income tax asset
      
      854,992
      
      
      394,594Less: Valuation allowance
      
      (854,992
      )
      
      (394,594
      )Future income tax assets
      $
      -
      
      $
      -


As of February 28, 2011 the company had
  approximately $2,749,000 (February 28, 2010: $1,021,000) 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
      
      1,728,000$
      2,749,000


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 future taxable income.

14

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|9. | COMMITMENTS
|-- | -----------
|   |            
|   | a)         
|   |            
|   | b)         
|   |            
|   | c)         
|   |            
|   | d)         
|   |            
|   | e)         
|   |            
|   | f)         

15

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|9.  | COMMITMENTS - continued                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | g)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10. | 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.                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | As at February 28, 2011 the Company had capital resources
      consisting mainly of cash. 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.                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|11. | FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Companys financial instruments consist of cash, and
      accounts payable. The carrying amounts of these financial instruments are
      a reasonable estimate of their fair values because of their current
      nature.                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The following table summarizes information regarding the
      carrying values of the Companys financial
      instruments:                                                                                                                                                                                                                                                                                                             

| |                                        |   | 2011    |  |  | 2010      | 
| | -------------------------------------- | - | ------- |  |  | --------- | 
| | Held for trading (i)                   | $ | 165,165 |  |  | 1,637,451 | 
| | Other financial
      liabilities (ii) | $ | 106,924 |  |  | 56,163    | 

| | (i)  | Cash            
| | ---- | ----------------
| | (ii) | Accounts payable

16

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|11. | FINANCIAL INSTRUMENTS - continued                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                            
|    | 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.                                                                                                                     

The following table sets forth the
  Companys financial assets measured at fair value on a recurring basis by level
  within the fair value hierarchy:

| |                                           |   |               |  |  |               |  |  |               |  |  | Total   | 
| | ----------------------------------------- | - | ------------- |  |  | ------------- |  |  | ------------- |  |  | ------- | 
| |                                           |   | Level
      1 |  |  | Level
      2 |  |  | Level
      3 |  |  | 2011    | 
| | Cash                                      | $ | 165,165       |  |  | -             |  |  | -             |  |  | 165,165 | 
| | Total assets
      measured at fair value | $ | 165,165       |  |  | -             |  |  | -             |  |  | 165,165 | 

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

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. The Company has
  completed a sensitivity analysis to estimate the impact on comprehensive for the
  year which a change in foreign exchange rates would have had. A change of +/-
  10% in US$ foreign exchange rate would have an impact of approximately +/-
  $1,200 on the Companys comprehensive loss. This impact results from the
  Companys US$ based balances of monetary assets and liabilities.

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 28, 2011 AND 2010

|12. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|13. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | These consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in
      Canada, which differ in certain respect with those principles and
      practices that the Company would have followed had its financial
      statements been prepared in accordance with accounting principles and
      practices generally accepted in the Unites States.                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Companys accounting principles generally accepted in
      Canada (Canadian GAAP) differ from accounting principles generally
      accepted in the United States (U.S. GAAP). The material differences
      between Canadian GAAP and US GAAP and the rules and regulations of the
      Securities and Exchange Commission affecting the Companys financial
      statements are summarized as follows:                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Resource Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Canadian GAAP permits the deferral of costs for the
      acquisition of mineral properties and exploration expenditures subject to
      periodic assessments for impairment. US GAAP requires that mineral
      exploration costs relating to unproven mineral properties be expensed.
      Under US GAAP the acquisition costs of mineral properties are initially
      capitalized with an assessment for impairment under ASC 360 performed at
      each reporting period. For US GAAP cash flow statement purposes, mineral
      property exploration expenditures would be shown under operating
      activities rather than investing activities.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Once commercial production has commenced, mine mill,
      machinery, plant facilities and certain equipment are depreciated using
      the units of production method, if sufficient reserve information is
      available or the straight line method over their useful lives, not to
      exceed the life of the mine to which the assets relate. Under US GAAP, the
      Company expects to use the units of production method based on reserves as
      defined under SEC Industry Guide 7 once such reserve amounts are
      determinable.                                                                                                         

18

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|13. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES - continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Flow- through shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Under Canadian income tax legislation, the Company is
      permitted to issue shares whereby the Company agrees to incur Canadian
      exploration expenditures (as defined in the Income Tax Act, Canada) and
      renounce the related income tax deductions to the investors. Under
      Canadian GAAP, the full amount of funds received from flow-through share
      issuances are initially recorded as share capital. Upon renouncing the
      expenditures, the amount of deferred tax on the expenditures is removed
      from share capital. Under U.S. GAAP, the premium paid for the flow-through
      shares in excess of market value is credited to liabilities and included
      in income when the Company renounces the related tax benefits. The
      different treatment of flow-through shares under Canadian and US GAAP did
      not result in any accounting differences as no premium was paid for the
      flow-through shares.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The impact of the above differences between Canadian and
      United States generally accepted accounting principle and the rules and
      regulations of the Securities and Exchange Commission on the statements of
      operations, the balance sheets and the statements of cash flows are
      summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| | Statements of Operations                                                                        |   | 2011       |   |   | 2010       |   |   | 2009     |  
| | ----------------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | -------- | -
| | Net loss per Canadian GAAP                                                                      | $ | (2,369,091 | ) | $ | (1,388,366 | ) | $ | (53,182  | )
| | Mineral properties written off                                                                  |   | -          |   |   | (3,578,552 | ) |   | -        |  
| | Mineral property expenditure                                                                    |   | (747,516   | ) |   | (524,439   | ) |   | (860     | )
| | Net loss per US GAAP                                                                            | $ | (3,116,607 | ) | $ | (5,491,357 | ) | $ | (54,042  | )
| | Basic and diluted loss per share per US
      GAAP                                              | $ | (0.09      | ) | $ | (0.40      | ) | $ | (0.01    | )
| | Balance Sheets                                                                                  |   |            |   |   |            |   |   |          |  
| | Total assets per Canadian GAAP                                                                  | $ | 4,675,795  |   | $ | 5,706,053  |   | $ | 237,236  |  
| | Decrease in mineral properties due to writing off and
      expensing of mineral property costs |   | (4,441,553 | ) |   | (3,989,952 | ) |   | (139,775 | )
| | Total assets per US GAAP                                                                        | $ | 234,242    |   | $ | 1,716,101  |   | $ | 97,461   |  
| | Total liabilities per Canadian and US GAAP                                                      | $ | 396,746    |   | $ | 56,163     |   | $ | 111,929  |  
| | Stockholders equity per Canadian GAAP                                                          | $ | 4,279,049  |   | $ | 5,649,890  |   | $ | 125,307  |  
| | Cumulative mineral properties adjustment                                                        |   | (4,441,553 | ) |   | (3,989,952 | ) |   | (139,775 | )
| | Stockholders equity (deficiency) per US
      GAAP                                             | $ | (162,504   | ) | $ | 1,659,938  |   | $ | (14,468  | )

19

---

|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|13. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES - continued
|--- | ---------------------------------------------------------------------------------------------------------

| | Statements of Cash Flows                            |   |            |   |   |            |   |   |         |  
| | --------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ------- | -
| | Operating Activities per Canadian GAAP              | $ | (1,524,546 | ) | $ | (869,816   | ) | $ | (30,839 | )
| | Mineral property expenditures                       |   | (691,522   | ) |   | (904,166   | ) |   | (860    | )
| | Operating Activities per US GAAP                    | $ | (2,216,068 | ) | $ | (1,773,982 | ) | $ | (31,699 | )
| | Financing Activities per Canadian and US
      GAAP | $ | 786,416    |   | $ | 3,411,286  |   | $ | 16,828  |  
| | Investing Activities per Canadian GAAP              | $ | (691,522   | ) | $ | (904,166   | ) | $ | (860    | )
| | Mineral property expenditures                       |   | 691,522    |   |   | 904,166    |   |   | 860     |  
| | Investing Activities per US GAAP                    | $ | -          |   | $ | -          |   | $ | -       |  

Recently Adopted Accounting
  Standards

| | a) | Accounting for Transfer of Financial Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | In December 2009, the FASB issued ASU 2009-16, Transfers
      and Servicing (Topic 860), and Amendment of the Accounting Transfers of
      Financial Assets (formerly SFAS 166, Accounting for Transfers of
      Financial Assets). This ASU significantly changes how companies account
      for transfers of financial assets. The ASU provides revised guidance in a
      number of areas including the elimination of the qualifying special
      purpose entity concept, the introduction of a new participating interest
      definition that must be met for transfers of portions of financial assets
      to be eligible for sale accounting, clarification and amendments to the
      derecognition criteria for a transfer accounted for as a sale when
      beneficial interests are received by the transferor, and extensive new
      disclosures.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The provisions of this ASU are to be applied to transfers
      of financial assets occurring in years beginning after November 15, 2009.
      The adoption of this ASU did not impact our financial results or
      disclosures as at February 28, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | b) | Consolidation of Variable Interest Entities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | In December 2009, the FASB issued ASU 2009-17,
      Consolidations (Topic 810), Improvements to Financial Reporting
      Enterprises Involved with Variable Interest Entities (formerly SFAS 167,
      Amendments to FASB Interpretation No 46 (R)) which amends the
      consolidation guidance for variable interest entities. (VIE) The changes
      include the elimination of the exemption for qualifying special purpose
      entities and a new approach for determining who should consolidate a VIE.
      In addition, the changes to when it is necessary to reassess who should
      consolidate a VIE have also been made.                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | In determining the primary beneficiary, or entity
      required to consolidate a VIE, quantitative analysis of who absorbs the
      majority of the expected losses or receives a majority of the expected
      residual returns or both of the VIE is no longer required. Under ASU
      2009-17, an entity is required to assess whether its variable interest or
      interests in an entity give it a controlling financial interest in the
      VIE, which involves more qualitative analysis.                                                                                                                                                                                                                                                                                                                                                                       

20

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|PAN AMERICAN LITHIUM CORP.                    
|----------------------------------------------
|(An Exploration Stage Company)                
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|FOR THE YEARS ENDED FEBRUARY 28, 2011 AND 2010

|13. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPLES - continued
|--- | ---------------------------------------------------------------------------------------------------------
|    |                                                                                                          
|    | Recently Adopted Accounting Standards 
      continued                                                  

| | b) | Consolidation of Variable Interest Entities -
      continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Additional disclosures will be required under this ASU to
      provide more transparent information regarding an entitys involvement
      with a VIE. The provisions of this ASU are to be applied for years
      beginning after November 15, 2009, for interim periods within those years,
      and for interim annual reporting periods thereafter. The adoption of this
      ASU did not impact our financial results or disclosures as at February 28,
      2011.                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | c) | Fair Value Measurement and Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | In January 2010, the FASB issued ASU 2010-16, Fair Value
      Measurements and Disclosures (Topic 810) Improving Disclosures About Fair
      Value Measurements. This ASU provides further disclosure requirements for
      recurring and non-recurring fair value measurements. These disclosure
      requirements include transfers in and out of Level 1 and 2 and additional
      information relating to activity in Level 3 fair value measurements. The
      ASU also provides clarification on the level of disaggregation for
      disclosure of fair value measurement.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The new disclosure and clarifications are effective for
      interim and annual periods beginning after December 31, 2009, except for
      disclosures about activity in Level 3 fair value measurements, which are
      effective for fiscal years beginning after December 15, 2010 and for
      interim periods within those fiscal years. The adoption of this ASU did
      not impact our financial results or disclosures as at February 28,
      2011.                                                                                                                        

Recently issued accounting
  standards

We will transition to International
  Financial Reporting Standards as issued by the International Accounting
  Standards Board (IFRS) on January 1, 2011 and will no longer be required to
  prepare a reconciliation to US GAAP. Accordingly, we have not assessed the
  impact of adopting recent US accounting pronouncements with an application date
  of January 1, 2011 or beyond on our financial statements and disclosures.

21

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ITEM
18                   
 Financial Statements

Refer to Item 17 - Financial Statements.

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)                       
|     |                                                                                                                                                                  
|4.2  | Share Option Agreement among Etna Resources Inc.,
      Escondidas Internacional S.A. de C.V. dated December 18,
      2009.(2)                                  
|     |                                                                                                                                                                  
|4.3  | Amendment to Share Option Agreement among Etna Resources
      Inc., Escondidas Internacional S.A. de C. V. dated December 18,
      2009.(2)                    
|     |                                                                                                                                                                  
|4.4  | Second Amendment to Share Option Agreement among Etna
      Resources Inc., Escondidas Internacional S. A. de C.V. dated December 18,
      2009.(2)             
|     |                                                                                                                                                                  
|4.5  | Letter Agreement Escondidas Internacional S.A. de C.V.
      and the shareholders of Escondidas Internacional S. A. de C.V. dated
      October 28, 2010.(2)     
|     |                                                                                                                                                                  
|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.           
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                       
|4.15* | A Binding Letter Agreement between Gareste and Pan American Lithium Corp. dated February 14 for a Joint Venture and Earn-In for Llanta Lithium Brines.
|      |                                                                                                                                                       
|4.16  | A Binding Letter Agreement between Gareste and Pan American Lithium Corp. dated February 14 for a Joint Venture and Earn-In for Maricunga Salar.      
|      |                                                                                                                                                       
|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.   
|      |                                                                                                                                                       
|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.                                                                  
|      |                                                                                                                                                       
|12.3* | Section
        906 Certification under Sarbanes-Oxley Act of 2002 for Andrew Brodkey.                                                                
|      |                                                                                                                                                       
|12.4* | 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.

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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                                                            | 
|(Principal Executive Officer)                                        | 
|                                                                     | 
|Date: August 31, 2011                                                | 
|                                                                     | 
|/s/ Frank Garcia                                                     | 
|Frank Garcia                                                         | 
|Chief Financial Officer                                              | 
|(Principal Financial Officer and Principal Accounting
      Officer) | 
|                                                                     | 
|Date: August 31, 2011                                                | 

---