CCS335 _ Neural Networks and Deep Learning Laboratory_Lab Complete Record
2010_06_24_Prospectus.pdf
1. LATIN RESOURCES LIMITED
ACN 131 405 144
PROSPECTUS
For an offer of up to 25,000,000 Shares at an issue price of $0.20 each to raise up to
$5,000,000.
Oversubscriptions of up to a further 5,000,000 shares at an issue price of $0.20 each to
raise up to a further $1,000,000 may be accepted.
IMPORTANT INFORMATION
This is an important document that should be read in its entirety.
If you do not understand it you should consult your professional advisers without delay.
The Shares offered by this Prospectus should be considered highly speculative.
2. 1
IMPORTANT NOTICE
This Prospectus is dated 24 June 2010 and was lodged with the ASIC on that date. The
ASIC and its officers take no responsibility for the contents of this Prospectus or the merits
of the investment to which this Prospectus relates.
The expiry date of this Prospectus is at 5.00pm WST on that date which is 13 months after
the date this Prospectus was lodged with the ASIC (Expiry Date). No Shares may be
issued on the basis of this Prospectus after the Expiry Date.
Application will be made to ASX within seven (7) days after the date of this Prospectus for
Official Quotation of the Shares the subject of this Prospectus.
The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law
and persons who come into possession of this Prospectus should seek advice on and
observe any of these restrictions. Failure to comply with these restrictions may violate
securities laws. Applicants who are resident in countries other than Australia should
consult their professional advisers as to whether any governmental or other consents are
required or whether any other formalities need to be considered and followed.
This Prospectus does not constitute an offer in any place in which, or to any person to
whom, it would not be lawful to make such an offer.
It is important that investors read this Prospectus in its entirety and seek professional
advice where necessary. The Shares the subject of this Prospectus should be considered
highly speculative.
WEB SITE – ELECTRONIC PROSPECTUS
A copy of this Prospectus can be downloaded from the website of the Company at
www.latinresources.com.au. Any person accessing the electronic version of this
Prospectus for the purpose of making an investment in the Company must be an
Australian resident and must only access this Prospectus from within Australia.
The Corporations Act prohibits any person passing onto another person an Application
Form unless it is attached to a hard copy of this Prospectus or it accompanies the
complete and unaltered version of this Prospectus. Any person may obtain a hard copy
of this Prospectus free of charge by contacting the Company.
EXPOSURE PERIOD
This Prospectus will be circulated during the Exposure Period. The purpose of the
Exposure Period is to enable this Prospectus to be examined by market participants prior
to the raising of funds. Potential investors should be aware that this examination may
result in the identification of deficiencies in this Prospectus and, in those circumstances,
any application that has been received may need to be dealt with in accordance with
Section 724 of the Corporations Act.
Applications for Shares under this Prospectus will not be processed by the Company until
after the expiry of the Exposure Period. No preference will be conferred on persons who
lodge applications prior to the expiry of the Exposure Period.
3. 2
* Note: The Company only has an option over the Guadalupito Project and has an
exclusivity arrangement in relation to the San Antonio Project. Refer to Sections 11.2, 11.3
and 11.4 for further details.
4. 3
INVESTMENT HIGHLIGHT S
Management and Project Development Strategy
Latin Resources was incorporated in Australia for the purpose of acquiring and
exploring projects that are prospective for minerals in Peru through its wholly
owned subsidiary Peruvian Latin Resources S.A.C.
The Company has invested in excess of $3 million over 2 years to assemble its
portfolio of projects.
Latin Resources‟ strategy is to acquire interests in both high quality iron ore
projects that are close to well established infrastructure and prospective gold
projects with potential for economic mineralisation.
Latin Resources‟ board, management team and consultants have a history of
successful project acquisition and project management.
The Company‟s management team has considerable knowledge, networks and
operating experience in Peru.
Peru
Peru is a mineral rich country and top Latin producer of gold, zinc, silver, tin, lead,
and 2nd top producer of copper and molybdenum.
Peru is significantly underexplored, with estimates that only 20% of areas with
mineral resource potential have been explored.
Mineral exports account for over 50% of Peru‟s GDP and most mining majors have
projects in Peru.
Peruvian authorities are pro-mining and the country offers a favourable legal and
regulatory framework for foreign investment.
Latin Ilo Iron Ore Projects
Latin Resources has applied for and now has 100% ownership rights over these
concessions, which pre date the Teck Ilo Iron Ore Projects outlined below.
Multiple iron ore projects located in the Ilo region of the Moquequa and Tacna
Department comprising 25,200 hectares of granted and 6,500 hectares pending
exploration concessions.
The projects are all within 10 kilometres of the coast and 30 km of the port of Ilo.
Magnetic and gravity delineated drill targets.
Drill permitting has already commenced.
Teck Ilo Iron Ore Projects
Latin Resources has applied for 100% ownership rights over these concessions,
which are subject to the Teck Agreement (including royalty and earn in rights to
Teck in the event of the discovery of an economic mineral resource). Further
details of the Teck Agreement can be found in Section 11.1.
Multiple iron ore projects located in the Ilo region of the Moquequa and Tacna
Department comprising 32,200 hectares of granted and pending exploration
concessions.
Projects and concession areas identified using airborne geophysical data
provided under the Teck Agreement.
The projects are all within 30 kilometres of the coast.
5. 4
Other 100% owned projects
Latin Resources has also applied for and been granted 100% concession rights
over iron ore focussed projects as follows:
Toray project (4,500 hectare) in the Apurimac Department;
Coribeni project (4,000 hectare) in the Cusco Department; and
Latin Pampa de Pongo (900 hectare) in the Arequipa Department.
All projects areas in recognized iron provinces.
Projects under option or exclusivity arrangements
Latin Resources has entered into an exclusivity arrangement in relation to the San
Antonio Project (gold), the key highlights of which are as follows:
High grade vein style gold mineralisation.
Latin Resources has an exclusive period to conduct technical due
diligence and negotiate an earn in agreement.
The Company does not currently have any rights to this project other than
the exclusive due diligence period.
Latin Resources has entered into an option to acquire the Guadalupito Project
(iron/minerals sands), the key highlights of which are as follows:
Guadalupito is an iron rich mineral sands project with anomalous amounts
of gold, zircon and tungsten.
Latin Resources has a right to earn a 100% interest in the Guadalupito
project through staged payments and expenditure.
Located 25 kms to the city of Chimbote and one of two of Peru‟s domestic
steel producers.
Initial test pit and metallurgical work reveals that products can be
separated into individual products.
6. 5
INVESTMENT RISKS
The following table sets out a summary of the key risks associated with investing in the
Company. This list of risks is not exhaustive. Full details of the risks tabled below are set out
in Section 10 of this prospectus.
Risk area Risks Further details
Country Risk There are country risks in Peru related to
Economical, Political, Sovereign and
legal systems.
Section 10.2
Government Regulations There are risks associated with
complying with national, state and
local authorities in Peru.
Section 10.2(b)
Exploration Unknown exploration success, technical
and geological uncertainties.
Section 10.3(a)
San Antonio /
Guadalupito Projects
The Company only has an option over
the Guadalupito Project and has an
exclusivity arrangement in relation to
the San Antonio Project. Accordingly,
these projects are contingent assets.
Section 10.3(b)
Estimates of Ore Reserves Mineral resource estimates subjective. Section 10.3(d)
Commodity, Price
Volatility and Exchange
Rate Risks
Supply and demand of commodities
and other macro economic factors
may impact the Company.
Section 10.3(e)
Environmental Risks Impact on the environment and subject
to Peruvian Legislation.
Section 10.3(f)
Title Risks Tenement licences, leases and
agreements are subject to certain title
risks.
Section 10.3(g)
Large proportion of
concessions are still in
the application phase
Approximately 47% of the Company‟s
mining concessions in Peru are still in the
application phase.
Section 10.3(l)
General Risks Exploration, development and mining
operations.
Section 10.4
Investors should be aware that an investment in the Company involves risks that may be
higher than risks associated with an investment in some other companies. Careful
consideration should be given to all matters raised in this Prospectus and the relative risk
factors prior to applying for Shares offered for subscription under this Prospectus. Some of
these risks can be mitigated by the use of appropriate safeguards and actions, but some
are outside the Company‟s control and cannot be mitigated. Investors should consider
the risk factors described above and outlined in more detail in Section 10, together with
the information contained elsewhere in this Prospectus, before deciding whether to
apply for Shares.
8. 2742-02/Documents/Prospectus 7
1. CORPORATE DIRECTORY
Directors
Mr Roderick Brown
Non-Executive Chairman
Mr Christopher Gale
Managing Director
Mr Mark Rowbottam
Non-Executive Director
Mr David Vilensky
Non-Executive Director
Company Secretary
Mr Morgan Barron
Solicitors
Steinepreis Paganin
Lawyers and Consultants
Level 4, Next Building
16 Milligan Street
Perth WA 6000
Telephone: (08) 9321 4000
Facsimile: (08) 9321 4333
Peruvian Solicitors
Estudio Manini & Asociados S.C.R.L.
Los Castaños 335
San Isidro - Lima 27, Peru
(+51) (1) 442-0848
Independent Geologist
Castle Consulting
PO Box 473
South Perth WA 6951
Telephone: (08) 9474 9351
Share Registry*
Advanced Share Registry Ltd
150 Stirling Highway
Nedlands WA 6009
Telephone: (08) 9389 8033
Facsimile: (08) 9389 7871
Registered Office
Old Swan Brewery
Level 1, 173 Mounts Bay Road
PERTH WA 6000
Telephone: (08) 9485 0601
Facsimile: (08) 9321 6666
Email: info@latinresources.com.au
Website: www.latinresources.com.au
Manager to the Offer
Melbourne Capital Ltd
Level 14, Queen Street
Melbourne VIC 3000
Telephone: (03) 8610 8688
Facsimile: (03) 8610 8666
Investigating Accountants’ Report
PKF Corporate Advisory Services (WA) Pty
Ltd
Level 7, BGC Centre, The Esplanade,
Perth WA 6000
Telephone: (08) 9278 2222
Facsimile: (08) 9278 2200
Auditors
PKF Chartered Accountants and Business
Advisors
Level 7, BGC Centre, 28 The Esplanade,
Perth WA 6000
Telephone: (08) 9278 2222
Facsimile: (08) 9278 2200
PROPOSED ASX CODE: LRS
*This entity is included for information purposes only. It has not been involved in the
preparation of this Prospectus.
9. 8
2. CHAIRMAN’S LETTER
24 June 2010
Dear Investor
On behalf of the Directors of Latin Resources Limited (Company), I am delighted to
present this Prospectus and invite you to become a Shareholder in the Company.
The Company has ownership over an impressive portfolio of projects which are
prospective for iron ore and is investigating further opportunities that are prospective for
gold and iron rich mineral sands. These projects are located in Peru, South America.
The priority for the Company will be the assessment and evaluation of the Company‟s
portfolio of iron concessions and completion of due diligence on the potential gold and
iron mineral sands opportunities. Arising from this work, the Company intends to define
targets for aggressive exploration with the view to building a significant resource base.
Appropriate exploration budgets have been allocated for this purpose over the next two
years.
The Board and management of the Company have demonstrable technical,
operational and corporate experience in mineral exploration, project acquisition and
development.
Over the last 18 months, the Company has been fortunate to have had the financial
support of Dempsey Resources Pty Ltd (a subsidiary of Cape Lambert Resources Limited)
via the issue of a Convertible Note (with a face value of $2.24m) and the conversion of
options.
The funds raised under this Prospectus will primarily be used to drive aggressive
exploration programs, repay the Convertible Note, meet the expenses of the Offer and
satisfy general working capital requirements.
This Offer presents investors with the opportunity to share in the future of the Company.
However, all investors should be aware of the speculative nature of mineral exploration
and mining. Please study this document carefully and seek professional advice, if
necessary, to make an informed decision.
On behalf of the Directors, I commend this investment opportunity to you as I believe the
Company has projects with exceptional promise and we look forward to welcoming you
as a shareholder in Latin Resources Limited.
Yours faithfully
Roderick Brown
Chairman
10. 2742-02/Documents/Prospectus 9
3. INVESTMENT OVERVIEW
3.1 Important Notice
This Section is not intended to provide full information for investors intending to
apply for Shares offered pursuant to this Prospectus. This Prospectus should be
read and considered in its entirety.
3.2 Indicative Timetable
Lodgement of Prospectus with the ASIC 24 June 2010
Opening Date 2 July 2010
Closing Date 5:00pm WST on 31 July 2010
Despatch of Holding Statements 6 August 2010
Expected date for listing on ASX 12 August 2010
The above dates are indicative only and may change without notice. The
Company reserves the right to extend the Closing Date or close the Offer early
without notice.
3.3 Purpose of the Offer and Use of funds
The purpose of the Offer is to provide the Company with additional funding so
that it can pursue its exploration and corporate objectives.
The Company has designed a work programme and budget to progress its
mineral exploration portfolio over the next two years. The Company estimates
that it will have approximately $3.39 million in cash, net of costs on listing on ASX
and repayment of the Convertible Note. These funds are expected to be
sufficient to cover the proposed expenditure of the Company during the next
two years. A summary of the Company‟s proposed expenditure is tabled below.
Most funds will be used to carry out exploration on the Company‟s mineral
exploration portfolio. A more detailed breakdown of this expenditure is given
within the Independent Geologist‟s Report in Section 7.
A break down of the funds available to the Company from the proceeds of the
Offer and the intended use of the funds available is set out in the tables below:
Full Subscription
($5m)
Over Subscription
($6m)
Pre offer cash (Estimate) $200,000 $200,000
Funds raised under the Offer $5,000,000 $6,000,000
Funds Available on completion of
the Offer
$5,200,000 $6,200,000
Add - Options exercised by
Dempsey Resources Pty Ltd
(10,000,000 Options at $0.10)*
$1,000,000 $1,000,000
Sub Total $6,200,000 $7,200,000
Less estimated capital raising costs ($600,000) ($650,000)
Less repayments of Convertible
Note to Dempsey Resources Pty Ltd*
($2,240,000) ($2,240,000)
Net funds available $3,360,000 $4,310,000
11. 10
* Dempsey Resources Pty Ltd is the holder of the Convertible Note, which must be
repaid on or prior to 17 August 2010, and also 10,000,000 Options that are convertible
into Shares at an exercise price of $0.10. Dempsey Resources Pty Ltd has advised the
Company that it will convert its 10,000,000 Options upon the Company being
granted conditional approval to list on ASX. Further details on the Options issued to
Dempsey Resources Pty Ltd are set out in Section 12.5.1.
USE OF FUNDS
Full Subscription
($5m)
Over Subscription
($6m)
Year 1
Exploration $750,000 $1,200,000
Administration & other expenses $600,000 $600,000
Total Year 1 $1,350,000 $1,800,000
Year 2
Exploration $1,030,000 $1,030,000
Administration & other expenses $600,000 $600,000
Total Year 2 $1,630,000 $1,630,000
Unallocated working capital $380,000 $880,000
Total estimated funds expended $3,360,000 $4,310,000
The majority of the funds spent under the proposed exploration budget will be
expended on exploratory drilling of mineral targets.
The allocation of funds to exploration in the tables above and the Independent
Geologist‟s Report assumes that some or all of the concessions applied for in
relation to the Teck Agreement (the “Teck Ilo Iron Ore Project”) are granted. As
at the date of this Prospectus, these concessions are all in the application phase
(please refer to Section 5.3.2 of this Prospectus for an overview of the process for
applying for and being granted a mining concession in Peru). In the event that
the concessions relating to the Teck Ilo Iron Ore Project are not granted (or are
not granted in a timely manner), the funds that have been allocated to
exploration of the Teck Ilo Iron Ore Project are intended to be re-allocated in
accordance with the disclosure in the Independent Geologist‟s Report.
The application of funds set out in the tables above is contingent upon positive
exploration progress and results from the expenditure in line with the Company‟s
objectives and strategy. The Directors reserve the right to expend the funds of
the Company for the above purpose or for related or other purposes in line with
the Company‟s objectives and strategy. The final expenditure of funds may vary
from the above depending upon the circumstances in which the Company
develops and operates.
The Use of Funds table set out above does not include any allocation of funds
towards either the Guadalupito project (under option) or San Antonio project
(subject to an exclusive dealing arrangement). In the event that the Company
exercises the option to acquire the Guadalupito project and/or successfully
12. 11
concludes an agreement in relation to the San Antonio project, some of the
funds allocated to working capital may be re-allocated to one or both of these
projects. However, it is unlikely that the Company will have sufficient funds to
adequately pursue either or both of these projects without seeking further
funding in the future (by way of debt, equity, convertible debt or alternative
funding strategies). .
3.4 Capital Structure
The capital structure of the Company following completion of the Offer is
summarised below6:
Full
Subscription ($5m)
Over
Subscription ($6m)
Shares Options Shares Options
On issue at the date
of this Prospectus
92,750,000 15,000,0005 92,750,000 15,000,0005
Issued pursuant to
Dempsey exercising
Options1
10,000,000 (10,000,000) 10,000,000 (10,000,000)
Issued pursuant to
this Prospectus2
25,000,000 6,000,000 30,000,000 6,000,000
Total 127,750,000* 11,000,000 3,4 132,750,000* 11,000,000 3,4
* Approximately 68,000,000 of the above Shares will be subject to ASX imposed
escrow upon listing.
Notes:
1. Dempsey Resources Pty Ltd currently holds 10,000,000 Options exercisable at
$0.10 each and has provided written confirmation to the Company that it
will exercise these Options upon the Company being granted conditional
approval to list on ASX.
2. It is proposed that the Company will issue 6 million Options on a success
basis to Melbourne Capital Ltd (or its nominees) upon listing forming part of
their remuneration as Lead Manager to the Offer (see section 12.5.3 for
further details).
3. As set out in Section 3.5 below, the Company intends to proceed with an
entitlements issue of Options post listing on ASX. In conjunction with this, the
Company has agreed to issue 15 million Options at an issue price of $0.01
each to Melbourne Capital Ltd (or its nominees). These Options will have the
same terms and conditions as the Options to be issued under the
entitlements issue.
4. As set out in Section 3.5 below, the Company is proposing to proceed with a
non-renounceable entitlement issue of Options on the basis of one (1)
Option for every five (5) Shares held. The entitlements issue is proposed to
commence within three (3) months after Official Quotation of the
Company‟s Shares is achieved. On completion of the entitlements issue, the
total number of Options on issue will increase from 26,000,000 to 51,550,000
(based on full subscription).
13. 12
5. This number includes the Options held by Dempsey Resources Pty Ltd and
other Options issued prior to the date of this Prospectus, the terms of which
are set out in Section 12.5.2.
6. Refer to Investigating Accountant‟s Report at Section 8 of this Prospectus for
further information.
3.5 Proposed non-renounceable entitlement Option issue
It is proposed that the Company will proceed with an Option entitlement issue
within three (3) months after Official Quotation of the Company‟s Shares on the
ASX. The Option entitlement is intended to be on the basis of one (1) Option for
every five (5) Shares held. The subscription price per Option is proposed to be
$0.01. These Options will be issued on the same terms and conditions as the
Options to be issued to Melbourne Capital Ltd (see Section 12.5.5 for further
details).
It is proposed that all Shareholders registered on the applicable entitlement date
will be entitled to participate in the non-renounceable entitlements issue of
Options.
A disclosure document for the entitlements issue of Options will be issued when
the proposed Options are offered. Anyone who wishes to acquire Options will
need to complete an application form which will be in or accompanying the
disclosure document. Application will be made for the Options to be granted
Quotation on the ASX. It is anticipated that Melbourne Capital Ltd and Allegra
Capital Pty Ltd will sub-underwrite the entitlements issue on an equal and joint
basis.
The Board reserves the right to adjust the terms of the Options proposed to be
issued under the entitlements issue.
3.6 Risk Factors
Prospective investors in the Company should be aware that subscribing for
Shares the subject of this Prospectus involves a number of risks. These risks are set
out in Section 10 of this Prospectus and investors are urged to consider those risks
carefully (and, if necessary, consult their professional adviser) before deciding
whether to invest in the Company.
The risk factors set out in Section 10 of this Prospectus, and other general risks
applicable to all investments in listed securities not specifically referred to, may in
the future affect the value of the Shares. Accordingly, an investment in the
Company should be considered highly speculative.
14. 13
4. DETAILS OF THE OFFER
4.1 The Offer
Pursuant to the Offer, the Company invites applications for up to 25,000,000
Shares at an issue price of $0.20 each to raise up to $5,000,000.
Oversubscriptions of up to a further 5,000,000 shares at an issue price of $0.20
each to raise up to a further $1,000,000 may be accepted.
The Shares offered under this Prospectus will rank equally and pari passu with the
existing Shares on issue.
4.2 Applications
Applications for Shares under the Offer must be made using the Application
Form.
Payment for the Shares must be made in full at the issue price of $0.20 per Share.
Applications for Shares must be for a minimum of 10,000 Shares and thereafter in
multiples of 1,000 Shares. Completed Application Forms and accompanying
cheques must be:
Mailed to: Or delivered to:
Latin Resources Limited
C/ - Advanced Share Registry Limited
PO BOX 1156
NEDLANDS WA 6909
Latin Resources Limited
C/ - Advanced Share Registry Limited
150 Stirling Highway
NEDLANDS WA 6009
Cheques should be made payable to “Latin Resources Limited – Share Offer
Account” and crossed “Not Negotiable”. Completed Application Forms must
reach one of the above addresses by no later than the Closing Date.
The Company reserves the right to close the Offer early.
4.3 Allotment
Subject to ASX granting approval for the Company to be admitted to the
Official List, allotment of Shares offered by this Prospectus will take place as soon
as practicable after the Closing Date. Prior to allotment, all application monies
shall be held by the Company on trust. The Company, irrespective of whether
the allotment of Shares takes place, will retain any interest earned on the
application monies.
The Directors reserve the right to allot Shares in full for any application or to allot
any lesser number or to decline any application. Where the number of Shares
allotted is less than the number applied for, or where no allotment is made, the
surplus application monies will be returned by cheque to the applicant within
seven (7) days of the allotment date.
4.4 Minimum Subscription
The minimum subscription to be raised pursuant to the Offer is $5,000,000.
If the minimum subscription has not been raised within four (4) months after the
date of this Prospectus, all applications will be dealt with in accordance with the
Corporations Act.
15. 14
4.5 ASX Listing
The Company will apply to ASX within seven (7) days after the date of this
Prospectus for admission to the Official List and for Official Quotation of the
Shares offered under this Prospectus. If the Shares are not admitted to quotation
within three (3) months after the date of this Prospectus, or such longer period as
is permitted by the Corporations Act, none of the Shares offered by this
Prospectus will be allotted or issued. In that circumstance, all applications will be
dealt with in accordance with the Corporations Act.
4.6 Applicants outside Australia
This Prospectus does not, and is not intended to, constitute an offer in any place
or jurisdiction, or to any person to whom, it would not be lawful to make such an
offer or to issue this Prospectus. The distribution of this Prospectus in jurisdictions
outside Australia may be restricted by law and persons who come into
possession of this Prospectus should seek advice on and observe any such
restrictions. Any failure to comply with such restrictions may constitute a violation
of applicable securities laws. No action has been taken to register or qualify the
Shares or otherwise permit a public offering of the Shares the subject of this
Prospectus in any jurisdiction outside Australia.
It is the responsibility of applicants outside Australia to obtain all necessary
approvals for the allotment and issue of the Shares pursuant to this Prospectus.
The return of a completed Application Form will be taken by the Company to
constitute a representation and warranty by the applicant that all relevant
approvals have been obtained.
4.7 Not Underwritten
The Offer is not underwritten.
4.8 Manager to the Offer
Melbourne Capital Ltd is the Lead Manager to the Offer.
4.9 Commissions Payable
The Company in conjunction with the Lead Manager reserves the right to pay
commissions up to of 4% (exclusive of goods and services tax) of amounts
subscribed to any licensed securities dealers or Australian financial services
licensee in respect of any valid applications lodged and accepted by the
Company and bearing the stamp of the licensed securities dealer or Australian
financial services licensee. Payments will be subject to the receipt of a proper
tax invoice from the licensed securities dealer or Australian financial services
licensee.
4.10 CHESS
The Company will apply to participate in the Clearing House Electronic
Subregister System (CHESS). CHESS is operated by ASX Settlement and Transfer
Corporation Pty Ltd (ASTC), a wholly owned subsidiary of ASX, in accordance
with the Listing Rules and the ASTC Settlement Rules.
Under CHESS, the Company will not issue certificates to investors. Instead,
holders of Shares will receive a statement of their holdings in the Company. If an
investor is broker sponsored, ASTC will send a CHESS statement.
16. 15
4.11 Privacy Statement
If you complete an Application Form, you will be providing personal information
to the Company. The Company collects, holds and will use that information to
assess your application, service your needs as a Shareholder and to facilitate
distribution payments and corporate communications to you as a Shareholder.
The information may also be used from time to time and disclosed to persons
inspecting the register, including bidders for your securities in the context of
takeovers; regulatory bodies, including the Australian Taxation Office; authorised
securities brokers; print service providers; mail houses and the Share Registry.
You can access, correct and update the personal information that we hold
about you. If you wish to do so, please contact the Share Registry at the
relevant contact number set out in this Prospectus.
Collection, maintenance and disclosure of certain personal information is
governed by legislation including the Privacy Act 1988 (as amended), the
Corporations Act and certain rules such as the ASTC Settlement Rules. You
should note that if you do not provide the information required on the
application for Shares, the Company may not be able to accept or process your
application.
4.12 Queries
This Prospectus provides information for investors to decide if they wish to invest
in the Company and should be read in its entirety. If you have any questions
about investing in the Company, please contact your stockbroker, financial
planner, accountant, lawyer or independent financial adviser.
17. 16
5. INTRODUCTION TO LATIN RESOURCES LIMITED
5.1 Background
The Company was incorporated on 2 June 2008 and was formed with the aim of
growing shareholder value through the acquisition, exploration and discovery of
commercially viable mineral resources in Peru and the subsequent development
of mining operations.
The Company operates in Peru through its wholly owned subsidiary company
Peruvian Latin Resources S.A.C. (PLR), a Peruvian incorporated company. To
date, the Company has invested more than $3 million to apply for and explore
its portfolio of 100% owned concessions, which are prospective for iron ore
mineralisation. This investment has resulted in the Company having identified drill
targets in its lead iron ore project in the Ilo region, for immediate exploration
activity.
5.2 Strategy and Objectives
The Company has a strategy to explore and develop its portfolio of iron ore
project and potential gold and iron mineral sands projects. In pursuit of this
strategy, the immediate Company‟s objectives are to:
(a) establish structured and focussed exploration programs targeting known
anomalous areas close to ports and infrastructure; and
(b) drill targets within the existing geological data base where target
minerals are highly prospective.
The medium to long term objectives of the Company are to:
(a) pursue the discovery of economic mineralisation;
(b) seek future projects either by direct application or in joint ventures; and
(c) become a producer of gold and iron from one or more of its existing
concessions or new projects acquired in the future (subject, of course,
to being able to delineate an economic ore body).
5.3 Peru
Peru is the third largest country in South America, bounded on the north by
Ecuador and Colombia, to the east by Brazil and Bolivia, to the south by Chile
and to the west by the Pacific Ocean. Peru lies entirely within the Tropics
between the Equator and 18° south. Geographically, Peru is divided into three
major regions, a narrow coastal belt separated from the Amazon rain forest by
the northern extension of the Andes mountain range. This narrow coastal belt is
mainly desert and contains Peru‟s major cities and its best highway, the Pan-
American, which runs the entire length of the country. The eastern slopes of the
Andes receive much more rainfall than the western slopes and form part of the
rain forest of the Amazon Basin.
Peru has a strong resource base (mining, forest products, fish products, natural
gas) with growing non-traditional exports. The country is one of the most
extensively mineralised regions of the world and has a long history of mining
activities dating back to pre-Columbian times. Peru plays host to some of the
largest and lowest cost precious and base-metal mines in the world, including
Alto Chicama, Yanacocha and Antamina. Many of the world's major mining
18. 17
companies, including BHP-Billiton, Newmont, Phelps Dodge and Barrick have
operations in the country. Peru is a leading producer of copper, zinc, silver and
gold, and also produces molybdenum, tin, iron ore and a number of industrial
minerals. Peru has a well-developed domestic mining service industry which
supports virtually all mining activities over the mining life-cycle. The system of
mining tenure is well-conceived and operates efficiently and predictably. Where
carried out responsibly and respectfully, mining is an accepted part of the
Peruvian social fabric.
The Peruvian economy has grown strongly throughout the last decade, with a
stable exchange rate and low inflation. The government‟s pursuit of sound trade
and macroeconomic policies has seen the country enter into numerous free
trade agreements and taxation treaties. Peru offers a favourable legal and
regulatory framework for foreign investment and Peru‟s Country credit rating was
upgraded to Investment Grade by Standard and Poors in 2008.
5.3.1 Peru Mineral Taxation
Peru offers a stable and favourable taxation regime for foreign investors
including mineral exploration and operating mining companies. The following is
a summary of the main taxes that apply to miners in Peru:
Corporate tax rate 30%
Dividend withholding tax 4.1%
Royalties 1% for annual sales up to US$60 million
2% for annual sales from US$60 – US$120 million
3% for annual sales above US$120 million
Foreign investors and local enterprises may apply for certain tax, currency and
other stability agreements with the government of Peru provided that certain
requirements and minimum investments are met. The agreements guarantee
stability for a term of ten years with respect to (i) the income tax regime, (ii) the
currency exchange regime, including free availability of foreign currency and
free remittance of capital and profits abroad (only for foreign investors); and (iii)
non-discrimination.
5.3.2 Overview of process for grant of a mining concession in Peru
A mining concession granted in Peru allows its holder to carry out exploration
and exploitation activities within its area, provided that prior to the beginning of
any mining activity, such concession title is granted by the Mining and
Metallurgic Geology Institute of Peru (INGEMMET) and other applicable
administrative authorizations are obtained (e.g. environmental, use of water, use
of explosives, etc.).
The application for a mining concession (called a pediment) involves the
following:
(a) an Official Form for mining pediments has to be filled-in with information
regarding the requested area and the petitioner; and filed before
INGEMMET;
(b) the petitioner has to pay: (i) an administrative fee equivalent to 10% of a
Peruvian Tax Unit. Considering current exchange rates, this fee amounts
19. 18
today to approximately US$128; and, (ii) the validity fee corresponding
to the year in which the pediment is filed (i.e. US$3 per hectare); and
(c) the filing of an affidavit regarding its social responsibility commitment
with the population located in the areas surrounding the pediment.
After the pediment is filed, it will be evaluated by the technical and legal areas
of INGEMMET (this, in practice, takes between 3 and 4 weeks). If the evaluations
are favourable, the petitioner will receive from INGEMMET standard form
documents (regarding the pediments‟ existence and the area covered by it)
that must be published in the official gazette and in a newspaper of the area in
which the pediment is located (making these publications involve expenses of
around US$300).
The petitioner has 30 business days to make these publications and then 60 days
to provide INGEMMET evidence of same. Within the next 30 business days,
INGEMMET will issue additional technical and legal reports. If these reports
confirm the technical and legal viability of the pediment, the concession title
should be granted.
In general, the proceeding for the issuance of mining concession title, takes no
less than 4 months. This term could be longer if technical or legal objections are
raised during the proceeding (e.g. overlapping with other properties or with
protected areas, etc.). Once the title is granted, its holder must wait for another
month to obtain an official document stating that no objections were filed
against such title. Once this document is obtained, the concession holder can
apply for its recording in the Peruvian Public Registry (which will provide full
enforceability to the concession). This recording takes around 5-10 days to be
completed and involves expenses of US$185.
5.3.3 Peru Iron Ore Exploration
Peru has five recognised provinces that are prospective for iron mineralisation
and have been the focus of previous exploration activity. These include the
Ferruginosa and Santa Iron Provinces in the north, the Pucara and Ferrobamba
Provinces in the central and lower Andes and the Costa Sur Iron Province on the
southern coastal strip.
The Ferrobamba and Coastal Sur Provinces are the most important regions in
terms of known iron ore resources and host a number of substantial iron
resources including Ccopane and Opaban in the Ferrobamaba Province and
Marcona and Pampa de Pongo in the Coastal Sur Province. These regions
continue to be under explored and have the potential to host other significant
iron occurrences.
Marcona is the only commercially significant iron producer in Peru and exports
approximately 6 million tonnes of iron ore per annum.
5.3.4 Peru Gold Exploration
In 2008, Peru produced 179 tonnes of gold, ranking it number 5 for world gold
producing countries. This is up 29% since 2001. For comparison, Australia ranks
number 4 and produced 225 tonnes of gold in 2008.
Most of the production in Peru (2008) comes from three mines: Yanacocha
(Newmont/Buenaventura) - 1.8Mozs produced at a cash cost $244/oz; Lagunas
Norte (Barrick) - 1.2Mozs at a cash cost of $125/oz and Pierina (Barrick) - 0.4 Mozs
produced at a cash cost of $284/oz.
20. 19
There are many gold mines in Peru, but the largest and lowest cost deposits are
the „acid-sulfate‟ or „high sulfidation‟ deposits of the Tertiary volcanic rocks in the
high cordillera (3800 – 5,200 meters). There are at least ten, volcanic-hosted,
acid-sulfate or other gold deposits in the cordillera that are in production.
Acid sulfate gold deposits in the Andes are especially attractive due to the deep
oxidation normally present, caused by the extreme uplifting of the Andes, which
ultimately changes the original sulfidic „refractory‟ nature (requiring crushing,
milling, and concentrating at great capital and processing costs) of the deposits
into oxidized, porous rock with free gold grains that can easily be recovered by
cyanide heap leaching. Due to the natural high porosity, the ore commonly
does not need crushing (greatly reducing costs) and the ore is mined and
transported directly to a leach pad („run of mine‟). After the cyanide leaching
cycle on the leach pad, the recovery of gold from the „pregnant solution‟ is
most commonly accomplished by a simple process utilizing zinc powder (Merrill
Crowe). Cash operating costs of these mines range from US$120 to 300/ounce.
Typical gold grades are 0.7 to 2.0 g/t. There are at least 12 deposits of this type in
Peru in the lower to mid size resource range that have recently been put into
production or are anticipated to be put into production over the next 1 to 3
years.
There are other styles of gold deposits in Peru that represent exploration and
development opportunities for the Company as well: „Orogenic‟ gold veins (e.g.
Yilgarn) on the eastern side of the cordillera are a principal target. These veins
are related to both metamorphism and hydrothermal processes – they tend to
form veins that continue to great depths. Peru has one large gold camp of this
type – Pataz. These deposits have only recently been recognized as orogenic in
Peru and exploration is picking up for this deposit style – IRL (Corihuarmi) has a
very large orogenic vein project in southeastern Peru, Oleachea.
5.4 Projects Overview
The Company has built a portfolio of concessions through direct ownership and
entered into option/exclusivity agreements that are consistent with its strategy of
pursuing both high quality iron ore projects close to well established
infrastructure and gold projects with the potential for economic mineralisation.
The following table is a summary the Company‟s current rights and interests in
various projects.
Concession Mineral Granted
(ha)
Pending
(ha)
Total
(ha)
Rights
Latin Ilo Fe 22,200 2,600 24,800 100%
Latin Morrito Fe 3,000 3,000 100%
Ferro Tacna Fe 3,900 3,900 100%
Teck Ilo Fe,Cu,Au 32,200 32,200 100%3
Toray Fe 4,500 4,500 100%
Coribeni Fe 4,000 4,000 100%
Pampa De Pongo Fe 900 900 100%
TOTAL 34,600 38,700 73,300
San Antonio1 Au 8,300 8,300
Guadalupito2 Fe, Au, Zr,W 2,357 2,357
Notes:
21. 20
1. This project is subject to an exclusivity arrangement and is not owned by the
Company.
2. This project is under option and is not currently owned by the Company.
3. Subject to the Teck Agreement.
5.4.1 Latin Ilo Iron Projects – Southern Coastal Iron Province
The Company has had a strong interest in the Coastal Sur Iron Province and Ilo
area due to many known occurrences of iron (magnetite-maghemite veins), a
geologic setting somewhat similar to Marcona and Pampa de Pongo, a large
amount of open ground for staking and the proximity to the Pan American
highway and port facility at Ilo city. The proximity of the project areas to well
established infrastructure is consistent with the Company‟s strategy and the
potential to have a lower capital intensity hurdle involved in any development
opportunity.
The city and port of Ilo are located on the Southern Peruvian coast, 900
kilometres South of Lima in the Moquegua Department. The Company has
applied for 100% ownership of these concessions over the last two years and
currently has 22,200 hectares of granted concessions and 2,600 hectares of
pending concessions. These concessions pre date the Teck Agreement and the
Company has full economic rights to any mineral discovery within these
concessions. Latin Resources intends to explore the region for a Pampa de
Pongo or Marcona style deposit/ mineral occurrence.
5.4.2 Teck Ilo Iron Projects – Southern Coastal Iron Province
The Company has signed an agreement with Teck Cominco Peru S.A (Teck), a
subsidiary of the largest diversified mining company in Canada, regarding the
sharing and use of Teck airborne geophysical data flown by Teck in 2003. Teck
flew the survey for copper exploration and Latin Resources is reprocessing the
raw data for iron exploration. There are two large flight blocks totalling 297,400
hectares which are covered with 8,682 line-kilometres of airborne magnetic
data (500 meter line spacing). The ground exploration data has been provided
to the Company and several anomalies have been identified for investigation.
Latin Resources views the agreement with Teck as a major step forward in
potentially discovering a Marcona style deposit in the Ilo region and it has
expedited the Company‟s exploration and concession staking program.
With this data, Latin Resources has had the opportunity to enhance its Ilo
portfolio of properties by remodelling the Teck data for major Iron anomalies.
Based on this work, Latin has applied for a further 32,200 hectares of concessions
within the areas of interest.
These concessions will be 100% owned by Latin (when granted), however, Teck
has certain royalty rights for any iron ore sales and the right to earn in to any gold
or base metal projects that are discovered in concessions staked within the area
of interest following the execution of the Teck Agreement. Refer to Section 11.1
for further details.
22. 21
Map showing the current and proposed claims
5.4.3 Coastal Iron Exploration – Ilo Norte Targets
Latin Resources has 7,300 hectares of 100% controlled concessions within 7
blocks at Ilo Norte.
Ground magnetic and gravity surveys were carried out over the Ilo Norte
concessions. The Company has since identified a large iron skarn at Ilo Norte.
The altered and anomalous outcrops cover an area of 600 x 400 meters and is
partly surrounded by colluvial cover. The skarn consists of a stacked sequence,
approximately 120 meters thick, of interlayered calc-silicate altered volcanic
rocks and iron-rich (magnetite and maghemite) horizons up to 20 meters thick
individually.
This package of altered and mineralized rocks dips east (into the hillside) at 20 to
30 degrees. Iron grades from 41 samples in the core of the skarn vary from 30.5%
up to 34.6%. Approximately 800 meters to the south of the skarn target, there
are several magnetite-rich veins of 0.5 to 1.5 meters width, which contain up to
62.29% Fe. The complete sample results are set out in Appendix 1 to the
Independent Geologist‟s Report in Section 7 of this Prospectus.
24. 23
Ilo Norte Magnetite Vein
5.4.4 Coastal Iron Exploration – Ilo Sur target
The Company has been granted 10,200 hectares in twelve blocks at Ilo Sur,
based on numerous occurrences of magnetite – maghemite veins, some
exposed alteration and abundant covered areas. Latin Resources has a further
two blocks totalling 2,000 hectares in application at Ilo Sur.
Ground magnetic and gravity surveys were also carried out over the Ilo Sur
concessions. Mapping in the east block of the Ilo Sur property has identified a
300 x 300 meter area of several iron veins (4-6 meters long) and weak to
moderate skarn alteration in volcaniclastic and volcanic intrusive rocks (sample
results pending). This area is surrounded by sand or colluvial cover. This alteration
zone is adjacent to a magnetic andesite dike.
Magnetic surveying in the area has produced a „remnantly‟ magnetized circular
anomaly of 200 x 300 meters, coincident with the vein and altered area – the
remnant magnetism may be the product of a remnant polar reversal effect or
was produced by hydrothermal alteration, which is common in skarn deposits.
25. 24
View of Ilo Sur surface at geophysical anomaly
Ilo Sur drill target area
5.5 Other Projects - Iron Ore – Toray, Coribeni, Pampa de Pongo, Ferro Tacna
The Company holds 100% of rights to 8,500 hectares of concessions in the
Ferrobamba Iron Province which hosts known significant iron resources. The
Toray Project is located in the Apurimac Department and is 4,500 hectares in
area and the Coribeni Project is located in the Cusco Department and is 4,000
hectares in area. Both of these projects were staked on colour anomalies seen
from the air on open ground. A brief visit was made to Toray and several small
magnetite veins and structures were noted. More work is needed to determine
Drill Target Area
26. 25
the true potential of the properties, but the preliminary work nevertheless
indicates strong iron mineralization is present.
The Company has also staked additional concessions in the Coastal Sur Iron
Province in close proximity to the large Marcona and Pampa de Pongo
resources. Latin Pampa de Pongo is located in the Ica Department and is 900
hectares in area and is 5.0 kilometres from the Pampa de Pongo deposit. This
concession was staked on an airborne magnetic Image map acquired by the
Company that shows an anomaly similar to the original airborne anomaly that
led to the discovery of the Pampa de Pongo deposit. The surface of the claim is
completely covered by sand and a ground magnetic survey is currently
underway over this block.
A further 3,900 hectares of concessions have been staked in the Tacna
Department based upon magnetic survey results.
5.6 Other Projects – Under Exclusivity and Option Arrangements
5.6.1 Gold Projects – San Antonio (Exclusive 90 day due diligence period)
This property consists of 8,300 hectares of claims and is located 200 kilometres
east of Lima, on the eastern side of the cordillera, in the Junin Department of
central Peru. The property is owned by two individuals who have leased the
mining rights to a small scale miner to mine gold from the property for 20 years.
The Company has been granted an exclusive 90 day due diligence period to
assess the property. This period expires on 31 August 2010. At completion of the
technical and legal due diligence period, the Company intends to start
negotiating an agreement with the holder of the mining lease (subject to the
due diligence not identifying any material issues that can not be resolved).
For further information on the San Antonio Project, please refer to the
Independent Geologist‟s Report in Section 7 of this Prospectus.
Typical San Antonio gold vein
27. 26
The San Antonio Project should be treated as a contingent asset and investors
should consider an investment in the Company on the basis that the San
Antonio project is not acquired.
5.6.2 Guadalupito Iron Sands Project – Subject to staged Option
Guadalupito is a mineral (beach) sands project located 390 kilometres north of
Lima on the coast and 25 kilometres north of Chimbote, a large Peruvian fishing
and port city. Chimbote is the location of the largest steel and iron smelter in
Peru (SiderPeru) a 400,000 tonne/year plant (including a (DRI) Direct Reduced
Iron plant), owned by Gerdau of Brazil. The Panamerican Highway crosses the
project, so access and location is excellent.
The Company has signed two option agreements with the owners of the
properties with a 6 month due diligence period to enable the collection of
samples for mineral sands analysis. A reputable consultant, GBRM of Perth, has
been appointed to carry out the analysis and test work in a Perth Laboratory.
The properties consist of 2,357 hectares, with 1,400 hectares on-shore
(approximately 8kms of strike length of the 30km long expanse of Guadalupito
Beach, about 20kms north of the iron smelting town and port of Cimbote in
central Peru).
Prior to exercising the options to acquire the Guadalupito Project, the Company
is required to make staged payments (as outlined in Sections 11.2 and 11.3) and
has access to the project areas to conduct due diligence.
As part of this due diligence, channel samples have been collected from four
pits along a 500 meter segment of the beach. Each pit was approximately 1.5
metres deep (to water table) and pairs of channels were sampled on opposite
sides of the pit. The results from the sampling indicate that magnetite and zircon
are the only economic minerals present. Magnetite fractions of the heavy
mineral concentrate were 13.4%, 9.5%, 2.4% and 1.1%. XRF analyses of the
magnetite fractions varied from 45.6 to 60.2% Fe. Titanium grades were 3.8 to
4.5%. The magnetite (or a portion) is likely to be titaniferous.
The four samples may not be representative of the entire sand deposit but
suggest that the magnetite concentrations in the beach vary greatly over
hundreds of metres.
The Guadalupito Project should be treated as a contingent asset and investors
should consider an investment in the Company on the basis that the
Guadalupito project is not acquired.
5.7 Competent Person’s Statement
The information in this section of the Prospectus that relates to exploration results
has been compiled by Malcolm Castle and taken from the Independent
Geologist’s Report set out in Section 7 of this Prospectus. Mr Castle has
consented to the inclusion of this information in this Section of the Prospectus in
the form and context in which it is included.
Mr Castle has over 40 years experience in exploration geology and property
evaluation, working for major companies for 20 years as an exploration
geologist. He established a consulting company 20 years ago and specializes in
exploration management, technical audit, due diligence and property
valuation at all stages of development. He has wide experience in a number of
commodities including gold, base metals, iron ore and mineral sands. He has
28. 27
been responsible for project discovery through to feasibility study in Australia, Fiji,
Southern Africa and Indonesia and technical Audits in many countries.
Mr Castle completed studies in Applied Geology with the University of New South
Wales in 1965 and has been awarded a B.Sc. (Hons) degree. He has completed
postgraduate studies with the Securities Institute of Australia in 2001 and has
been awarded a Graduate Certificate in Applied Finance and Investment in
2004.
Mr Castle is a Member of the Australasian Institute of Mining and Metallurgy
(“AusIMM”) and has the appropriate relevant qualifications, experience,
competence and independence to be considered as an “Expert” and
“Competent Person” the Australian Valmin and JORC Codes, respectively.
29. 28
6. BOARD & MANAGEMENT
6.1 Directors
Roderick Brown
Chairman
Mr Brown is a mining engineer by profession and has extensive experience in
general management. He has held various senior management positions
including Managing Director, with companies involved in the engineering,
mining and industrial service sectors across Australia, USA and Europe. Mr Brown
has 20 years experience as Company Director and is currently Chairman of RCR
Tomlinson and Chairman of Immersive Technologies.
Christopher Gale
Managing Director
Mr Gale is an experienced executive in both public and private companies
having founded and managed a number of private and public businesses over
a twenty year period. Mr Gale is also a director of Allegra Capital Pty Ltd, an
independent corporate advisory firm and Australian Financial Services License
holder. Allegra Capital specialises in providing corporate advice to private and
ASX listed companies and the management of equity raisings He has advised
numerous companies in sectors of mining, oil & gas and technology.. Before
founding Allegra Capital Mr Gale was an executive of the corporate advisory
firm Australian Heritage Pty Ltd and previously CEO of listed public company
Swiftel.
Mark Rowbottam
Non-executive Director
Mr Rowbottam is an experienced corporate executive, advisor and company
director. Mr Rowbottam has undergraduate science qualifications and a Master
of Business Administration with specialties in corporate administration and
marketing. He is a Fellow of the Securities Institute of Australia and active
member of the Chartered Secretaries Australia and the Licensing Executive
Society of Australia and New Zealand. Mr Rowbottam has more than 15 years‟
experience in the corporate finance arena and has been involved in a number
of ASX capital raisings, mergers/acquisitions and corporate transactions.
David Vilensky
Non-executive Director
Mr Vilensky is a practising solicitor and managing partner of Perth law firm Bowen
Buchbinder Vilensky. He has more than 25 years of experience in the field of
corporate and business law and in commercial and corporate management. Mr
Vilensky is also regarded as a specialist on Trade Practice Law and has written a
number of published articles on this subject. Mr. Vilensky acts for a number of
listed and public companies and is on the board of Zambezi Resources Ltd, a
listed exploration company focusing on mining and resource projects in Zambia.
Morgan Barron
Company Secretary
Mr Barron is a qualified Chartered Accountant who has worked in various
corporate roles both in Australia and across Europe. Mr Barron holds a Bachelor
of Commerce Degree, is an Associate of the Securities Institute of Australia, the
Institute of Chartered Accountants and a graduate of the Australian Institute of
Company Directors. Mr Barron has more than 10 years‟ experience in the
corporate finance arena and has been involved in a number of ASX capital
raisings, mergers/acquisitions and corporate transactions.
30. 29
6.2 Management
Stan Myers
General Manager (Peruvian Latin Resources)
Mr Myers is a geologist with M.S and B.S (Geology) qualifications from the
University of Idaho U.S.A. He has over 22 years of exploration experience for
precious and base metals in North and South America. Mr Myers has a wide
range of successful experience in exploration team management, exploration
business management, project management and grass-roots generative
exploration in both greenfields terrains and within operating districts. Mr Myers is
based in Lima, Peru where he has lived for the past 17 years
Mr Myers spent 14 years working for Newmont Peru Ltd as Exploration Manger
and more recently 3 years as Director of Exploration for Southwestern Resources
Corp (acquired by Hothschild in 2009).
Geoff Blackburn O.A.M
Consulting Geologist
Mr Geoff Blackburn O.A.M. is a practising consulting geologist who graduated
from Curtin University with a Bachelor of Applied Science and has spent more
than 40 successful years in the mineral exploration industry being responsible for
or implicated in the discovery of a large number of mineral deposits. He has had
a wide range of experience with a wide range of commodities both within
Western Australia and in many overseas countries including two years working in
Peru. A former President of the Australian Association of Mining and Exploration
Companies (AMEC), he has also served on numerous advisory boards for
Government and Tertiary Educational Institutions. In 2004 he was presented with
an award as Prospector of the Year and was awarded his O.A.M for services to
the Mining Industry on Australia Day 2006.
Mr Blackburn was instrumental in identifying the Guadalupito Iron Sands Project
for Latin Resources and was involved in the early exploration of the Ilo Iron
Project in the south of Peru. He has been retained to advise the company on
the continuing exploration and development of the Guadalupito Iron Sands
Project.
6.3 Corporate Governance
The Company‟s main corporate governance policies and practices are outlined
below:
The Board of Directors
The Company‟s Board of Directors is responsible for corporate governance of
the Company. The Board develops strategies for the Company, reviews
strategic objectives and monitors performance against those objectives. The
goals of the corporate governance processes are to:
(a) maintain and increase Shareholder value;
(b) ensure a prudential and ethical basis for the Company‟s conduct and
activities; and
(c) ensure compliance with the Company‟s legal and regulatory
objectives.
Consistent with these goals, the Board assumes the following responsibilities:
(a) developing initiatives for profit and asset growth;
31. 30
(b) reviewing the corporate, commercial and financial performance of the
Company on a regular basis;
(c) acting on behalf of, and being accountable to, the Shareholders; and
(d) identifying business risks and implementing actions to manage those risks
and corporate systems to assure quality.
The Company is committed to the circulation of relevant materials to Directors in
a timely manner to facilitate Directors‟ participation in the Board discussions on a
fully-informed basis.
Composition of the Board
Election of Board members is substantially the province of the Shareholders in
general meeting. However, subject thereto, the Company is committed to the
following principles:
(a) the Board is to comprise Directors with a blend of skills, experience and
attributes appropriate for the Company and its business; and
(b) the principal criterion for the appointment of new Directors is their ability
to add value to the Company and its business.
No formal nomination committee or procedures have been adopted for the
identification, appointment and review of the Board membership, but an
informal assessment process, facilitated by the Chairman in consultation with the
Company‟s professional advisors, has been committed to by the Board.
Independent professional advice
Subject to the Chairman‟s approval (not to be unreasonably withheld), the
Directors, at the Company‟s expense, may obtain independent professional
advice on issues arising in the course of their duties.
Remuneration arrangements
The remuneration of an Executive Directors will be decided by the Board,
without the affected Executive Director participating in that decision-making
process.
The total maximum remuneration of Non-Executive Directors is the subject of a
Shareholder resolution in accordance with the Company‟s Constitution, the
Corporations Act and the ASX Listing Rules, as applicable. The determination of
Non-Executive Directors‟ remuneration within that maximum will be made by the
Board having regard to the inputs and value to the Company of the respective
contributions by each Non-executive Director. The current limit, which may only
be varied by Shareholders in general meeting, is an aggregate amount of
$350,000 per annum.
The Board may award additional remuneration to Non-executive Directors
called upon to perform extra services or make special exertions on behalf of the
Company.
Continuous Disclosure Policy
The Company Secretary has been appointed as the person responsible for
communications with ASX. This person is also responsible for ensuring the
32. 31
compliance with the continuous disclosure requirements in ASX Listing Rules and
overseeing and co-ordinating information disclosure to the ASX.
The Company Secretary is responsible for the communications strategy to
promote the effective communications with shareholders and encourage
effective participation at general meetings. The Company adheres to best
practice in its preparation of notices of meetings to ensure all Shareholders are
fully informed.
Trading Policy
It is the Company‟s policy to encourage Directors and employees to own Shares
in the Company. The Shares trading policy reinforces the obligations of Directors
and employees of the Company, under the Corporations Act 2001 and the ASX
Listing Rules in relation to trading in Shares. The policy restricts Directors and
employees from acting on material information until it has been released to the
market. Directors are required to report their proposed Share trading to the
Company Secretary.
Communicating with Shareholders
The Board ensures that Shareholders are kept informed of all major
developments that affect their Shareholding or the Company‟s state of affairs
through quarterly, half-yearly, annual and ad hoc reports. All shareholders are
encouraged to attend the annual general meeting to meet the Chairman and
Directors and to receive the most updated report on the Company‟s activities.
The Company maintains a website at www.latinresources.com.au to provide
shareholders with information of the Company‟s activities. Shareholders may
communicate with the Company through its email address
info@latinresources.com.au
External audit
The Company in general meetings is responsible for the appointment of the
external auditors of the Company, and the Board from time to time will review
the scope, performance and fees of those external auditors.
Audit committee
The Company will not have a separate constituted audit committee.
Identification and management of risk
The Board‟s collective experience will enable accurate identification of the
principal risks that may affect the Company‟s business. Key operational risks and
their management will be recurring items for deliberation at Board meetings.
Ethical standards
The Board is committed to the establishment and maintenance of appropriate
ethical standards.
33. 32 | P a g e
Malcolm Castle
Consulting Geologist
P.O. Box 473, South Perth, WA 6951
Phone: 08 9474 9351
Mobile: 04 1234 7511
Email: mcastle@castleconsulting.com.au
ABN: 84 274 218 871
24 June 2010
The Directors
Latin Resources Limited
Dear Sirs,
Re:
INDEPENDENT GEOLOGIST’S REPORT ON
MINERAL PROPERTIES in PERU
I have been commissioned by Latin Resources Limited (“Latin” or the “Company”) to provide an
independent technical report on the Company’s projects in Peru (“Report”). This report is to be included
in a Prospectus to be lodged by the Company with the Australian Securities and Investments Commission
(“ASIC”) on or about 24 June 2010, to raise approximately $5M (before expenses) by issuing 25,000,000
shares at 20 cents. The funds raised will be used for the purpose of exploration and evaluation of the
mineral properties held by The Company.
The Properties
The Company is currently exploring iron and gold properties in Peru and is currently focused on three
areas for iron. The southern coastal region of Peru includes favourable geology, many iron occurrences
and two world class iron deposits at Marcona and Pampa de Pongo. The Company’s exploration projects
are Ilo Norte, Ilo Sur and Teck Ilo, which is the result of an exploration agreement with a subsidiary of
Teck Resources Limited, a Canadian company.
In the Cusco region in the southern cordillera of Peru, in which three large deposits are known at Opaban,
Cusco and Ccopane, Latin has early stage iron ore projects at Toray and Coribeni.
Details in respect to the legal status and tenure of the tenements comprising the Projects have not been
considered in this report but are outlined in the Independent Solicitor’s Report in Section 11 of the
Prospectus.
34. 33 | P a g e
DECLARATIONS
Relevant codes and guidelines
This Report has been prepared as a technical assessment in accordance with the Code for Technical
Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports
(the “VALMIN Code”), which is binding upon Members of the Australasian Institute of Mining and
Metallurgy (“AusIMM”) and the Australian Institute of Geoscientists (“AIG”), as well as the rules and
guidelines issued by the Australian Securities and Investments Commission (“ASIC”) and the ASX Limited
(“ASX”) which pertain to Independent Expert Reports (Regulatory Guides RG111 and RG112).
Where and if mineral resources have been referred to in this Report, the classifications are consistent
with the ”Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(“JORC Code”), prepared by the Joint Ore Reserves Committee of the AusIMM, the AIG and the Minerals
Council of Australia, effective December 2004.
Under the definition provided by the ASX and in the VALMIN Code, these properties are classified as
‘exploration projects’, which are inherently speculative in nature. The properties are considered to be
sufficiently prospective, subject to varying degrees of risk, to warrant further exploration and
development of their economic potential, consistent with the exploration and development programs
proposed by the Company.
Sources of Information
The statements and opinion contained in this Report are given in good faith and this review is based on
information provided by the title holders, along with technical reports prepared by consultants, previous
tenements holders and other relevant published and unpublished data for the area. I have endeavoured,
by making all reasonable enquiries, to confirm the authenticity, accuracy and completeness of the
technical data upon which this Report is based. A final draft of this Report was provided to the Company
along with a written request to identify any material errors or omissions prior to lodgement.
This Report has been compiled based on information available up to and including the date of this
Report. Consent has been given for the distribution of this Report in the form and context in which it
appears. I have no reason to doubt the authenticity or substance of the information provided.
Qualifications and Experience
The person responsible for the preparation of this Report is:
Malcolm Castle, B.Sc. (Hons), GCertAppFin (Sec Inst), MAusIMM.
Malcolm Castle has over 40 years experience in exploration geology and property evaluation,
working for major companies for 20 years as an exploration geologist. He established a
consulting company 20 years ago and specializes in exploration management, technical audit,
due diligence and property valuation at all stages of development. He has wide experience in a
number of commodities including gold, base metals, iron ore and mineral sands. He has been
responsible for project discovery through to feasibility study in Australia, Fiji, Southern Africa and
Indonesia and technical Audits in many countries.
35. 34 | P a g e
Mr Castle completed studies in Applied Geology with the University of New South Wales in 1965
and has been awarded a B.Sc. (Hons) degree. He has completed postgraduate studies with the
Securities Institute of Australia in 2001 and has been awarded a Graduate Certificate in Applied
Finance and Investment in 2004.
Mr Castle is a Member of the Australasian Institute of Mining and Metallurgy (“AusIMM”) and
has the appropriate relevant qualifications, experience, competence and independence to be
considered as an “Expert” and “Competent Person” the Australian Valmin and JORC Codes,
respectively.
Independence
I am not, nor intend to be a director, officer or other direct employee of the Company and have no
material interest in the Projects or the Company. The relationship with the Company is solely one of
professional association between client and independent consultant. The review work and this Report
are prepared in return for professional fees based upon agreed commercial rates and the payment of
these fees is in no way contingent on the results of this Report.
Yours faithfully
Malcolm Castle
B.Sc.(Hons), MAusIMM,
GCertAppFin (Sec Inst)
36. 35 | P a g e
PERU EXPLORATION INTRODUCTION
The southern coastal region of Peru has favourable geology for iron ore mineralization with many iron
occurrences and two world class iron ore deposits at Marcona and Pampa de Pongo. The Company’s
exploration projects are Ilo Norte, Ilo Sur and Teck Ilo, which is the result of an exploration agreement
with a subsidiary of Teck Resources Limited, a Canadian company.
In the Cusco and Apurimac region in the southern cordillera of Peru three large iron ore deposits are
known at Opaban, Cusco and Ccopane. The Company has iron ore projects at Toray and Coribeni in this
region.
Latin is also conducting evaluation work on an iron sands project in northern Peru at Guadalupito and a
gold project called San Antonio. The San Antonio project is in the volcanic belt of the cordillera, a region
currently hosting large deposits of oxide gold mineralisation.
The Company is currently focused on two areas for iron - the southern coastal region of Peru with
favourable geology, many iron occurrences and two world class iron projects: Marcona (1.4 billion
tonnes) and Pampa de Pongo (930 million tonnes) and the Cusco region in the southern cordillera of
Peru, in which three large deposits are known: Opaban (269 million tonnes), Cusco (500 million tonnes)
and Ccopane (106 million tonnes).
The Company is exploring for gold primarily in the volcanic belt of the cordillera, a region currently
endowed with plus 80 million ounces of oxide, low-cost, gold in reserves and resources and, secondarily,
in the eastern margin of the cordillera which has a growing gold endowment (at least 15 million ounces)
in ‘renewed’ old districts and new discoveries and along the coast of southern Peru.
37. 36 | P a g e
A map of the Companies projects in Peru are shown below:
38. 37 | P a g e
COASTAL IRON EXPLORATION
Favourable geology for iron ore occurrences is present along 700 kilometres of the Southern Peruvian
coast. The largest iron ore deposits in Peru, Marcona and Pampa de Pongo, are located in this belt 400
kilometres south of Lima. Marcona is owned and operated by Shougang Hierro Peru (Shougang is the
fourth largest steel producer in China) and expects to increase production from 5.5 million tonnes of iron
ore in 2009 to 10.0 million tonnes in 2010 after a US$1.0 billion investment in project upgrades
announced last year. Pampa de Pongo, recently purchased by Nanjinzhao Group of China from Cardero
Resouorce Corporation of Canada, is being advanced to production. Recently the Southern Peru coastal
belt attracted attention for iron ore exploration.
Both Marcona and Pampa de Pongo are Iron Oxide Copper Gold (‘IOCG’) type deposits, which have skarn
affinities and normally have anomalous to copper and/or gold values. There are also important copper-
rich deposits and many small gold veins and occurrences in this belt. The belt has been explored for
copper dominant IOCG deposits by most of the large copper companies working in Peru. The coast of
Peru has good infrastructure and easy access, low population density and several ports, making it an
outstanding location for the discovery and development of iron and other deposits
Target Model - Macona
The Marcona iron ± copper deposit is located approximately 400 km south of Lima, Peru and less than 20
km from the Pacific Ocean coast and the port of San Nicolas. It is the largest iron accumulation with
associated Cu and Au along the western coast of South America.
Approximate inventory at Marcona is more than 1400 Mt of iron ore. A further 1000 Mt of magnetite
mineralisation is known some 30 km to the southeast, at the similar, Pampa de Pongo deposit which is
hosted by sediments and tuffs at a higher stratigraphic position, and is concealed below 20 m of sand.
Both deposits contain some Cu and Au and exhibit numerous features that allow their inclusion as "Iron
Oxide-Copper-Gold" style deposits.
The Marcona iron deposits were first identified in 1915 and mining commenced in 1953, while artesenal
copper mining had been carried out in the district from the late 19th century. The larger iron bodies are
hosted by the Lower Paleozoic Marcona and Middle to Upper Jurassic Río Grande Formations. The
Marcona Formation is dominated by arenites and both calcitic and dolomitic carbonates, whereas the Río
Grande Formation comprises a thick sequence of basaltic andesites and andesites (sills and flows),
volcaniclastics and minor limestones.
Although the iron ore at Marcona includes major carbonate replacement facies, the iron deposits widely
exhibit intra-mineralisation hydrothermal breccia textures and multistage iron oxide ±copper sulphide
mineralisation. Copper mineralisation is mainly associated with magnetite and lesser specularite. The iron
oxide bodies strike northeast and north-northwest and show both fault and lithological controls on ore
geometry. Intra- and post-iron mineralisation igneous activity in the Marcona Mine area included
dacitic/granodioritic dykes and andesitic "ocöite" dykes.
The age of the Marcona deposit is uncertain, although the preferred genetic model for the district
involves a large metal flux coeval with deep-seated Jurassic, and probably Cretaceous igneous intrusive
activity. At a local scale, iron oxide-associated mineralisation at Marcona and the surrounding district
probably formed in an environment characterised by repeated crustal extension over a 20 to 60 m.y.
period. The anomalous concentration of thick andesitic volcanics or sills and dykes at Marcona, and
39. 38 | P a g e
evidence for district-scale thermal anomalies preceding and during the main introduction of iron oxide
mineralisation, indicate that the area was also an important volcanic centre and the site of a long-lived
thermal anomaly.
CUSCO IRON EXPLORATION
The Cusco region consists of a 250 x 200 kilometre area in south-central Peru in the Departments of
Cusco and Apurimac. Prospective elevations in this region are between 3400 to 4600 metres above sea
level. This region is within the Abancay Deflection – a major, deep-seated, structural zone that has
deformed the northwest trending Andean volcanic arc and fold and thrust Belt into an east west
direction. There are numerous world class precious and base metal mines within the Abancay Deflection,
making it one of the most economically important mining regions in Peru.
There are currently three large iron deposits in the Cusco region – Opaban and Cusco, held by Strike
Resources Limited (Australia) and Ccopane held by Cuervo Resources Incorporated (Canada). These are
classic skarn deposits related to Mesozoic to Tertiary dioritic intrusions that cut Jurassic limestone. Iron
skarns in Cusco commonly have anomalously or strong grades of copper and gold. The cores of the skarns
are typically composed of magnetite with wide spread calc silicate alteration on the margins. Highly
variable silica and sulphides (source of sulphur) are common. Many skarns in this region have been
explored or developed for copper, gold and to a limited extent iron, for centuries.
Large iron and copper deposits in this region are physically stranded from the coast, 250 to 450
kilometres to the west and will require infrastructure to be put in place. In the Cusco and Apurimac
Departments, there at least 20 known copper skarn or porphyry deposits (several in the 500 to 1,000
million tonne range) that have not been developed due to the transportation issue. A railroad will have a
positive impact for the region and country and there have been many discussions and proposals
considered between the government and private groups.
GOLD EXPLORATION IN PERU
In 2008, Peru produced 179 tonnes of gold, ranking it number 5 for world gold producing countries. For
comparison, Australia ranks number 4 and produced 225 tonnes of gold in 2008. Most of the production
in Peru (2008) comes from three mines: Yanacocha (Newmont/Buenaventura) - 1.8Mozs produced per
year at a cash cost $244/oz; Lagunas Norte (Barrick) - 1.2Mozs per year at a cash cost of $125/oz and
Pierina (Barrick) - 0.4 Mozs per year produced at a cash cost of $284/oz.
There are many gold mines in Peru, but the largest and lowest cost deposits are the ‘acid sulphate’ or
‘high sulphidation’ deposits of the Tertiary volcanic rocks in the high cordillera (3800 – 5,200 metres).
There are at least ten, volcanic-hosted, acid-sulphate or other gold deposits in the cordillera with total
production, reserves and resources over 1.0 million ounces:
Acid sulphate gold deposits in the Andes are especially attractive due to the deep oxidation normally
present, caused by the extreme uplifting of the Andes, which ultimately changes the original sulphidic
refractory nature (requiring crushing, milling, and concentrating at higher capital and processing costs) of
the deposits into oxidized, porous rock with free gold grains that can easily be recovered by cyanide heap
leaching. Due to the natural high porosity, the ore commonly does not need crushing (greatly reducing
costs) and the ore is mined and transported directly to a leach pad (‘run of mine’). After the cyanide
leaching cycle on the leach pad, the recovery of gold from the ‘pregnant solution’ is most commonly
40. 39 | P a g e
accomplished by a simple process utilizing zinc powder (Merrill Crowe). Cash operating costs of these
mines range from US $120 to 300/ounce. Typical gold grades are 0.7 to 2.0 g/t.
There are at least 12 deposits of this type in Peru in the 150,000 to 400,000 ounce range that have
recently been put into production or will be put into production over the next 1 to 3 years. An excellent
example of these modest-sized deposits and how profitable then can be, is the Corihuarmi deposit, put
into production in 2008 by IRL Limited (London). The mine is located in central Peru at approximately
4500 metres elevation. The Measured and Indicated Resource totals 6,676,000 tonnes grading 0.72 g/t
gold containing 154,100 ounces. From this, a Proven and Probable Minable Reserve of 6,282,000 tonnes
grading 0.74g/t gold and containing 148,600 ounces was defined based upon a 0.25g/t gold cut-off for
the ‘Susan’ deposit and a 0.3g/t cut-off for the ‘Diana’ deposit. All resource and reserve figures are in
accordance with the JORC code and are as of 1 January 2009. The mine/operation was constructed in 9
months with a capital investment of US $20.0 million dollars. In the first 9 months of production, the
company produced 51,961 ounces - in the first seven months of production the capital investment plus
US $7.0 in pre-development costs were recovered. Current cash costs at Corihuarmi are US$161/ounce.
The Corihuarmi Gold Mine is located approximately 160km south east of Lima, Peru, in the Central Andes
at an altitude of almost 5,000 metres. The project was acquired in 2002 by IRL Limited and drilling and
supporting studies took place over a 3 year period followed by the completion of an Environmental
Impact Study and a bankable feasibility study. Permitting was completed in early 2007 and construction
of the mine, plant and all infrastructure commenced in June 2007.
The ore reserve reported in the 2006 bankable feasibility study was 4,026,600 tonnes containing 144,600
ounces at a 0.5g/t gold cut-off. The new Ore Reserve, based on a gold price of $800/ounce, represents an
increase in ounces from the original reserves in spite of depleting 69,000 ounces since production
commenced in March 2008. After accounting for this depletion, the new total represents an increase of
over 73,000 ounces. Gold production is projected at over 31,000 ounces for 2009 and to average over
28,000 ounces per annum for the 3 year period through 2011. During this period, an average cash
operating cost of approximately $370 per ounce is estimated.
There are other styles of gold deposits in Peru. Orogenic gold veins similar to the Yilgarn deposits on the
eastern side of the cordillera are a principal target. These veins are related to both metamorphism and
hydrothermal processes – they tend to form veins that continue to great depths. Peru has one large gold
camp of this type – Pataz, which likely contains over 10 million ounces of gold. These deposits have only
recently been recognized as orogenic in Peru and exploration is picking up for this deposit style and IRL
Limited has a very large orogenic vein project in south-eastern Peru, at Oleachea that reportedly
contains 2 to 5 million ounces. Two or three other companies have orogenic gold projects in the Oleachea
area that reportedly have over 1.0 million ounces.
The other opportunity for the company are the intrusive-related coastal gold veins, which tend to be very
small (most <25,000 ounces), but occasionally, larger veins are discovered. Both the orogenic and coastal
veins are ‘free-milling’ (consisting of free gold grains) significantly lowering processing costs.
ILO PROJECT
There are many known occurrences of iron in the form of magnetite-maghemite veins in a geologic
setting similar to Marcona and Pampa de Pongo. The Southern Peru (Grupo Mexico) copper port facility
at Ilo city is 20 kilometres to the south. The processing of ore for export (if found) would require either a
simple magnetic separation plant or a more advanced Direct Reduced Iron processing plant.
41. 40 | P a g e
LOCATION AND TENURE
Ilo is located on the southern Peruvian coast, 900 kilometres south of Lima in the Moquegua Department.
Access is by daily flights to either Tacna or Arequipa and then by vehicle on paved highways to the port
city of Ilo, followed by gravel roads to the project.
The Ilo Project includes 47 tenements totalling 36,700 hectares.
ILO NORTE PROJECT
TENEMENT NAME HA Concession
Granted
In
Application
LATIN ILO NORTE 1 1000 14/09/2009
LATIN ILO NORTE 2 1000 11/03/2009
LATIN ILO NORTE 3 1000 28/09/2009
LATIN ILO NORTE 4 1000 28/09/2009
LATIN ILO NORTE 5 600 27/01/2010
LATIN ILO NORTE 6 700 22/01/2010
LATIN ILO NORTE 7 1000 15/02/2010
LATIN ILO NORTE 8 1000 22/01/2010
TOTAL HECTARES 7300
ILO SUR PROJECT
TENEMENT NAME HA Concession
Granted
In
Application
LATIN ILO SUR A 1000 3/09/2008
LATIN ILO SUR B 1000 12/02/2010
LATIN ILO SUR C1 800 19/02/2009
LATIN ILO SUR C2 300 9/03/2009
LATIN ILO SUR D 800 26/02/2009
LATIN ILO SUR E1 900 17/07/2009
LATIN ILO SUR E2 400 19/06/2009
LATIN ILO SUR G 1000 3/02/2010
LATIN ILO SUR H 1000 3/02/2010
LATIN ILO SUR I 1000 22/01/2010
LATIN ILO SUR J 1000 13/10/2009
LATIN ILO SUR K 1000 15/02/2010
LATIN ILO SUR L 1000 10/02/2010
LATIN ILO SUR F 1000 22/02/2010
TOTAL HECTARES 12200
ILO ESTE PROJECT
TENEMENT NAME HA Concession
Granted
In
Application
LATIN ILO ESTE I 800 26/02/2009
LATIN ILO ESTE II 900 25/05/2009
LATIN ILO ESTE III 600 18/02/2009
42. 41 | P a g e
LATIN ILO ESTE IV 400 18/02/2009
LATIN ILO ESTE V 1000 28/01/2009
LATIN ILO ESTE VI 1000 28/01/2009
LATIN ILO ESTE VII 600 25/01/2010
TOTAL HECTARES 5300
LOCAL GEOLOGY AND MINERALIZATION
The southern Peruvian coastal geology has been affected by tectonic events since the Precambrian. The
oldest rocks in the region are accreted crystalline basement rocks, which are part of the South American
craton. Beginning in the early Mesozoic, Mariana-type subduction was developed, with repeated cycles of
compression and extension through the Mesozoic. This Mesozoic tectonism is considered the beginning
of the Andean Cycle. Jurassic and Triassic volcanism and sedimentation was extensive during this period.
The Cenozoic tectonic evolution of the Peruvian Andes marks a change to the currently active continental
Andean-type margin. Complex cycles of compression and extension continued through the Cenozoic,
producing terrestrial volcanism and sedimentation, which filled fore-arc basins along the present
southern Peruvian coast. Ash from recent volcanism, along with alluvial-fluvial sediments and wind-blown
sand, cover large areas of the region.
The Ilo project area is composed of mostly interlayered andesite volcanic rocks and volcaniclastic
sedimentary rocks of the Lower Jurassic Chocolate Formation, the Upper Jurassic Guaneros Formation
and the Lower to Middle Cretaceous Toquepala Group. The andesitic rocks are fine to medium-grained
lavas and subvolcanic intrusives and the volcaniclastic rocks are typically fine to medium grained
sandstones and coarser conglomerates. The interlayered sequence dips to the east and southeast at
shallow to moderate angles (average 30 degrees).
Both northwest and northeast striking faults, which are common throughout the Andes, have been
mapped or interpreted in the project and influence the geology and mineralization of the Ilo targets.
Mineralisation
Skarn alteration and iron-mineralization at the Ilo Norte iron target is developed over at least a 600 x 400
metre area (partially covered on the margins by colluvium) and consists of intercalated calc-silicate
hornfels with iron-rich (magnetite - maghemite dominant) horizons. The altered sequence is parallel to
bedding and is approximately 120 meters thick. Individual iron-rich horizons range in thickness from
centimetres to 20 meters. Five samples were collected from the area which returned the following
results.
SAMPLE Fe Al2O3 SiO2
% % %
672032 56.60 3.71 8.63
672033 48.10 6.7 13.2
672034 47.00 6.77 16.4
672035 56.70 1.72 13
672036 61.40 0.97 9.86
43. 42 | P a g e
The Company believes that Ilo Norte is the first skarn system recognized in the Ilo area, suggesting that
the area possesses the geologic setting to produce large deposits.
Ilo Sur is extensively covered with windblown sand, but a 300 x 300 meter area of small iron veins and
weak to moderate iron-oxide rich alteration was found in several volcanic outcrops. A boulder of
magnetite-rich float was found down-slope of the outcrop and contains 60.2% iron. Many other
magnetite-rich veins are scattered over the project area. Iron grades from 7 samples in the core of the
skarn vary from 28.9% up to 66.6%. The complete sample results are set out in Appendix 2 to this
report.
The geologic setting of Ilo is very similar to the geology of the Marcona and Pampa de Pongo deposits and
have not ben systematically explored for Iron. .
PREVIOUS EXPLORATION
Ilo Norte Ground Geophysical Surveying
Ground magnetics and gravity surveying was carried out over Ilo Norte and at Ilo Sur, which is 45
kilometres to the south of Ilo Norte. At Ilo Norte, the geophysics indicates an anomaly of similar size to
the surface anomaly, with possible deep extensions on two margins. The anomaly possibly extends to 300
metres of depth, either extending vertically or possibly to the east down-dip. The magnetic response
ranges up to 1,000 nano teslas. The magnetic results strongly suggest both northwest and northeast
trending off-sets to the mineralization, adding to the exploration potential with the possibility of
discovering, deeper, down-dropped blocks of mineralization. Gravity surveying was difficult to correct
due to the steep terrain, but did produce a separate anomaly 400 meters to the west of the surface
skarn, suggesting potential for finding hematite-rich zones. The surface over the gravity anomaly is
covered with fresh to weakly altered andesite, suggesting that the target is within more favourable host
rocks deeper in the layered sequence.
The magnetic complex in the northern part of the area has potential for both magnetite and haematite
mineralization. It could represent a substantial, variable magnetite content alteration system.
As a magnetite target, the large (~600m x 300m), partially defined, moderately to strongly magnetic body
at the central northern edge of the survey area (~8074000N 251000E) and tenement may contain a
substantial, near surface magnetite concentration. This zone is not closed off to the north. Peak anomaly
magnitudes are ~1000- 2000nT in these stronger areas. For a significant magnetite body, these intensities
are moderate rather than high. This probably indicates that there is significant magnetite within the
strongly anomalous areas, but it is more likely to be distributed as a series of small, massive magnetite
bodies, a stockworked magnetite vein system or disseminated through the host lithology rather than
being a single, largish body of massive magnetite. The available magnetic data does not have sufficient
resolution or extent to determine the detailed magnetite distribution within the main anomalous area.
The major magnetic feature and immediate surrounds could also represent a good IOCG style copper-
gold target. For this style of alteration, mineralization could be in either the magnetite or haematite
zones. The smaller and weaker magnetic zones within the overall magnetic complex offer similar but
smaller scale magnetite mineralization potential to the major magnetic zone.
The elongate (~1.5km long), north-easterly trending magnetic zone extending NE from the south eastern
edge of the magnetic complex is likely to be mapping a narrow magnetite vein or a magnetic andesite
44. 43 | P a g e
dyke. From the profile shape, the depth to top could be about 20m or so, deepening to the north east.
This feature looks fragmented in the images but the profile data indicates that it is probably more or less
continuous.
There is a similar, but less well defined, northerly trending vein type magnetic zone immediately to the
north east of the main magnetic anomaly. These veins may be narrower or shallower than the elongate,
north easterly trending vein system discussed above.
Both possible vein/dyke systems have potential as small, narrow magnetite resources, but tonnage
potential is distinctly limited. They may have more potential as gold ± copper systems.
Ilo Sur Ground Geophysical Surveying
Magnetite surveying over Ilo Sur produced a remnantly magnetized anomaly coincident with the altered
outcrop. The 300 to 400 nano tesla anomaly is in the footwall of a west-dipping andesite dike, suggesting
the possibility that the dyke may have acted as a trap to iron-rich mineralization. The residual Bouguer
gravity anomaly is about 0.7 milligals, which is elevated.
Most of the anomalies are moderate strength rather than strong magnetic responses. This suggests
‘normal’ lithological sources rather than massive magnetite type concentrations.
The majority of the anomalies are quite small in extent, commonly being defined on one or two of the
ground magnetic traverses. They look like small to moderate sized intrusives or localized alteration zones.
This small, intrusive type geometry and the ‘normal’ magnetic susceptibilities indicate that the anomalies
have limited potential as economically significant, large scale magnetite deposits. They probably offer
greater potential as copper-gold targets, though again they are of limited size. Most of the anomalies
look quite shallow.
The proposed Ilo exploration programme budget is set out below:
Ilo Projects
Year 1 Year 2 Total
Data Compilation 30,000 30,000 60,000
Gravity Survey 80,000 25,000 105,000
RC /Diamond Drilling 140,000 295,000 435,000
Total 250,000 350,000 600,000
In the event that the concessions relating to the Teck Agreement are not granted or the grant is delayed,
the proposed Ilo exploration programme budget is intended to be increased as set out below:
Ilo Projects
Year 1 Year 2 Total
Data Compilation 60,000 60,000 120,000
Gravity Survey 160,000 50,000 210,000
RC /Diamond Drilling 430000 740,000 1,170,000
Total 650,000 850,000 1,500,000
45. 44 | P a g e
TECK AGREEMENT
An agreement has been signed with Teck of Canada, regarding the sharing and use of Teck airborne
geophysical data flown in 2003. The area was surveyed for copper exploration but the raw data has been
reprocessed for iron exploration. There are two large flight blocks totalling 297,400 hectares which are
covered with 8,682 line kilometres of airborne magnetic data (500 meter line spacing). Teck drilled at
least two copper projects as a result of the survey and all the ground exploration data will be provided to
the Company. The company has staked a large number of concessions based on the reprocessed data
from this Agreement that indicate prospectivity for iron mineraliastion. The Company has applied for
additional claims along the coast of southern Peru – one claim of 900 hectares (Latin Pampa de Pongo), in
the Marcona and Pampa de Pongo deposits area, 400 kilometres south of Lima and two claim blocks of
2,400 hectares total (Ferro Tacna claims) in the Tacna Department south of Ilo. The Latin Pampa de
Pongo claim is located approximately 5.0 kilometres from the Pampa de Pongo deposit. An airborne
magnetic image shows an anomaly similar to the original airborne anomaly that led to the discovery of
the Pampa de Pongo deposit. The area is completely covered by sand and a ground magnetic survey was
completed and has produced interesting anomalies. The two blocks staked in Tacna were based on Fe
anomalies, occurrences, and favourable geology.
TECK AREA
TENEMENT NAME HA Concession
Granted
In
Application
BOMBERS 1 600 4/05/2010
BOMBERS 2 200 4/05/2010
BOMBERS 3 500 4/05/2010
BOMBERS 4 900 26/05/2010
ESSENDON 1 1000 21/04/2010
ESSENDON 2 300 21/04/2010
ESSENDON 3 600 21/04/2010
ESSENDON 4 700 21/04/2010
ESSENDON 5 600 21/04/2010
ESSENDON 6 600 21/04/2010
ESSENDON 7 1000 21/04/2010
ESSENDON 8 1000 26/05/2010
ESSENDON 9 1000 26/05/2010
ESSENDON 10 800 26/05/2010
FREMANTLE 1 500 4/05/2010
FREMANTLE 2 800 4/05/2010
FREMANTLE 3 300 4/05/2010
FREMANTLE 4 500 4/05/2010
FREMANTLE 5 400 4/05/2010
FREMANTLE 6 900 4/05/2010
FREMANTLE 7 400 4/05/2010
FREMANTLE 8 1000 26/05/2010
FREMANTLE 9 1000 11/06/2010
46. 45 | P a g e
FREMANTLE 10 1000 11/06/2010
FREMANTLE 11 1000 11/06/2010
FREMANTLE 12 300 11/06/2010
FREMANTLE 13 900 11/06/2010
FREMANTLE 14 1000 11/06/2010
FREMANTLE 15 1000 11/06/2010
FREMANTLE 16 1000 11/06/2010
FREMANTLE 17 1000 11/06/2010
FREMANTLE 18 1000 11/06/2010
FREMANTLE 19 1000 11/06/2010
FREMANTLE 20 1000 11/06/2010
FREMANTLE 21 1000 11/06/2010
VANDALS 1 1000 11/06/2010
VANDALS 2 1000 11/06/2010
VANDALS 3 1000 11/06/2010
VANDALS 4 1000 11/06/2010
VANDALS 5 400 11/06/2010
BOMBERS 5 600 11/06/2010
BOMBERS 6 500 11/06/2010
TOTAL HECTARES 32200
The proposed Ilo Teck exploration programme budget is set out below:
Teck Ilo Projects
Year 1 Year 2 Total
Data Compilation 30,000 30,000 60,000
Gravity Survey 80,000 25,000 105,000
RC /Diamond Drilling 290,000 445,000 735,000
Total 400,000 500,000 900,000
Note, however, the comments regarding a re-allocation of these funds if there is a delay in the grant of
the Ilo Teck concessions.
OTHER IRON ORE PROJECTS -– TORAY, CORIBENI, PAMPA DE PONGO, FERRO TACNA
Toray is located in Apurimac Department. Several small (<1 metre) magnetite-rich veins and structures
within intrusive rocks of the Abancay Batholith near the Ferrobamba limestone were observed during a
brief reconnaissance of the project in January 2009. More field work is planned to bring the prospect to a
decision point. A ground magnetic survey will be considered to explore for a skarn target under alluvial
cover.
Coribeni is located in Cusco Department, 150 kilometres northwest of Cusco. The claims cover a colour
anomaly in the far Eastern Cordillera of the Peruvian Andes. The rocks are reported by government
