ANNUAL REPORT 2013 - Latin Resources Limitedlatinresources.com.au/sites/latinresources.com.au/files/financial... · DIRECTORSÕ REPORT 22 CORPORATE GOVERNANCE STATEMENT 34 ... ilmenite

A N N U A L R E P O R T

2 0 1 3

L A T I N R E S O U R C E S L I M I T E D

A mineral exploration

and development company

based in mineral rich Peru

with a focus on Iron,

Copper and

Mineral Sands.

L A T I N R E S O U R C E S L I M I T E D

A N N U A L R E P O R T 2 0 1 3

SOLICITORS: Steinepreis Paganin

Level 4, The Read Buildings 16 Milligan Street

Perth 6000, Western Australia

STOCK EXCHANGE: Australian Stock Exchange Limited (LRS)

BANKERS:ANZ

6/646 Hay Street Subiaco 6008, Western Australia

NAB Central Business Banking Centre


AUDITORS:Deloitte Touche Tohmatsu

Level 14, Woodside Plaza 240 St Georges Terrace


C O N T E N T SCORPORATE DIRECTORY 1

CHAIRMAN’S REVIEW 2

HIGHLIGHTS & MILESTONES 4

REVIEW OF OPERATIONS 6

DIRECTORS’ REPORT 22

CORPORATE GOVERNANCE STATEMENT 34

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 38

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 39

CONSOLIDATED STATEMENT OF CHANGES IN EQUIT 40

CONSOLIDATED STATEMENT OF CASH FLOWS 41

NOTES TO THE FINANCIAL STATEMENTS 42

DIRECTORS’ DECLARATION 70

AUDITORS’ INDEPENDENCE DECLARATION 71

INDEPENDENT AUDIT REPORT 72

ADDITIONAL INFORMATION REQUIRED BY THE ASX 74

TENEMENT SCHEDULE 76

DIRECTORS: Mr David Vilensky (Non-Executive Chairman)

Mr Christopher Gale (Managing Director) Mr Frankie Li (Non-Executive Director)

Mr. Zhongsheng Liu (Non-Executive Director) Mr Mark Rowbottam (Non-Executive Director)

COMPANY SECRETARY: Mr Anthony Begovich

REGISTERED OFFICE:Suite 2, Level 1

254 Rokeby Road Subiaco 6008, Western Australia

Telephone: +61 8 9485 0601 Facsimile: +61 8 9321 6666

E-mail: [email protected]

PERU OFFICE: Avenida Víctor Andrés Belaunde Nº 147,

Vía Principal Nº 155 Oficina 601, Edificio Real Tres

Centro Empresarial Real, San Isidro, Lima

SHARE REGISTRY: Computershare Investor Services Pty Limited

Level 2, Reserve Bank Building, 45 St Georges Terrace

Perth, 6000, Western Australia

C O R P O R A T E D I R E C T O R Y

1

C H A I R M A N ’ S R E V I E W

C H A I R M A N ’ S R E V I E W

D E A R S H A R E H O L D E R S

The past 12 months has been a year of continued progress for Latin Resources despite negative investor sentiment and challenging capital markets which a!ected the mining and resources sectors globally.

An important milestone was achieved with Latin Resources announcing an increase in its total JORC compliant inferred resources estimate from 393 million tonnes to over 1.45 billion tonnes at its flagship Guadalupito Iron and Mineral Sands Project located in an uninhabited desert on the northern coast of Peru.

This increase was achieved by Latin Resources adding the outstanding “Los Conchales” JORC inferred resource of 1.073 billion tonnes grading 6.1% HM located within less than 1400 hectares of the Company’s total holding of over 22,000 hectares of 100% owned concessions only 25 kilometres from the port town of Chimbote and close to other important infrastructure.

As mentioned in my Chairman’s Review of 2012, qualitative mineralogy identified discrete liberated mineral grains of recoverable size of magnetite, andalusite, rutile, ilmenite and zircon which gave the Guadalupito project even greater potential. The Company’s objective remains to bring the Guadalupito project into production as soon as possible. To this end, further progress was made in an important phase of mineral separation test work to confirm the potential for separation of these minerals.

The Company is actively seeking a joint venture partner to accelerate the Guadalupito project into production which will focus on the development of its 1.073 billion tonnes at 6.1 HM in the Los Conchales area of its concession holdings.

In addition to progress at Guadalupito, advances were made by the Company regarding its Ilo project area comprising over 110,000 hectares of mining concessions in the highly prospective IOCG/ copper porphyry belt in Southern Peru. Ten new exploration blocks have been identified within the Ilo project area following reinterpretation of all data which has resulted in new target commodities, a new target scale and new target models.

Elevated levels of copper and gold in soil samples located in the vicinity of previously reported IP geophysical anomalies has enhanced the prospect of the copper gold drill targets at Ilo Norte some of which are ready to drill with all permits and authorisations now received.

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A N N U A L R E P O R T 2 0 1 3

“The Company is actively seeking a joint venture partner to accelerate the Guadalupito project into production

which will focus on the development of its 1.073 billion tonnes at 6.1 HM at Los Conchales...”

In regard to capital raising activities, during the year in question the Company issued a total of 28,652,292 fully paid shares at an amount per share ranging from of $0.15 to $0.28 raising a total of $5,441, 397 by way of three separate placements to sophisticated and professional investors. One of these placements was to its cornerstone investor and largest shareholder the Junefield Group. The Company also appointed and welcomes Mr Zhongsheng Liu, the current CEO of the Junefield Department Store Group Limited to its Board as a non executive director.

The Board acknowledges the support from investors during the year. The ongoing support of Junefield for the Company and its projects and people is particularly pleasing and the Company is grateful for their ongoing support.

The funds raised were used by the Company to progress its projects in Peru and for general working capital purposes.

Consistent with its policy to conserve cash to the fullest extent possible, Latin Resources has suspended all major exploration and drilling until suitable joint venture partners are secured to assist with the funding of these programs. Together with the Company’s ability to advance lower cost exploration activities and permitting within the target areas of its projects, Latin Resources is confident of attracting suitable joint venture partners to advance its pipeline of quality projects.

In addition to its policy of proceeding with its projects only when suitable joint venture partners have been found, the Company has implemented a number of cost saving initiatives to reduce its cash burn rate. This included redundancies of certain sta! at our o"ce in Lima, reduced spending on external consultants and the directors and senior management agreeing to replace 20% of their cash remuneration with shares in the Company.

Despite the challenging times and some disappointment in relation to the share price of the Company not being where the Board would like it to be, I am confident that the Company will achieve its objectives and deliver a return to its very loyal shareholders.

On behalf of the Board and all shareholders, I would like to thank our Managing Director Chris Gale and his team again for their tireless e!orts and the vision and energy he continues to deliver in addition to his promotional and capital raising activities.

My fellow directors, management, sta! and consultants both in Australia and Peru accept there is no room for complacency and continue to work diligently in a challenging environment. I thank them for their outstanding and highly professional e!orts.

Finally, I also thank our valued shareholders for their ongoing support of the Company through some of the challenges over the past 12 months. Your continued commitment to and confidence in the Company is greatly appreciated and rewarding you is a key focus of the Company going forward.

We look forward to making solid progress on our various project strategies and initiatives in the coming year and I look forward to bringing you news of our progress in 2014.

MR DAVID VILENSKYChairman

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R E V I E W O F O P E R A T I O N S

H I G H L I G H T S & M I L E S T O N E S F O R 2 0 1 2 / 1 3

C O M P L E T I O NO F A S C O P I N G S T U D Y F O R G U A D A L U P I T O P R O V I D I N G C O N F I D E N C E

F O R T H E C O M P A N Y T O C O N T I N U E D E V E L O P I N G T H E P R O J E C T .

4 . 5 B I L L I O N T O N N E S 6 . 1 % H MC O N C E P T U A L E X P L O R A T I O N T A R G E T F O R G U A D A L U P I T O I N C R E A S E D .

1 B I L L I O N T O N N E S A T 6 . 1 % H MM A I D E N J O R C R E S O U R C E A T T H E L O S C O N C H A L E S

A R E A O F T H E G U A D A L U P I T O P R O J E C T .

C O M P L E T I O NO F I N I T I A L 2 0 , 0 0 0 D R I L L I N G P R O G R A M A T M A R I E L A P R O J E C T .

N E W T A R G E T SE X T E N S I V E R E C O N N A I S S A N C E , M A P P I N G A N D R E I N T E R P R E T A T I O N

A T I L O H A S U N C O V E R E D 1 0 N E W T A R G E T S W I T H G O O D P O T E N T I A L

F O R I O C G A N D / O R P O R P H Y R Y C O P P E R M I N E R A L I S A T I O N .

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A N N U A L R E P O R T 2 0 1 3

G U A D A L U P I T O P R O J E C T

I L O P R O J E C T S

M A R I E L A P R O J E C T

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R E V I E W O F O P E R A T I O N S

O V E R T H E L A S T 1 2 M O N T H S L A T I N P O S T E D O V E R 1 B I L L I O N T O N N E S O F

A D D I T I O N A L J O R C I N F E R R E D R E S O U R C E S A T I T S G U A D A L U P I T O I R O N A N D M I N E R A L

S A N D S P R O J E C T O N T H E N O R T H E R N P E R U C O A S T A S W E L L A S U P G R A D I N G I T S

G L O B A L E X P L O R A T I O N T A R G E T F O R T H E P R O J E C T T O 4 . 5 B I L L I O N T O N N E S A T 6 . 1 % .

R E V I E W O F O P E R A T I O N S6

discovery were added to total resources estimated at Guadalupito.

1 km NNE of 2011 drilling.

Latin concessions that make up the Ilo Project.

“The Company has made signi!cant

advances in required studies to bring

the project into production as soon

as possible, in particular completing an

important phase of mineral separation testwork

on bulk sample composites that con!rmed the

dominance and quality of Magnetite and Andalusite in

the heavy mineral assemblage as well as the potential for

separation of Zircon, Rutile and Ferro-titanium minerals.“

H I G H L I G H T S

C O M P A N Y O V E R V I E W Latin Resources Limited listed on the Australian Stock Exchange on the 21st of September 2010. On the third anniversary of listing, the Company continues to make outstanding progress despite challenging market conditions with exploration successes and corporate development built on the solid foundation of results reported during its first two years of operations as a listed company.

Over the last 12 months, (and in excess of its stated objective), Latin posted over 1 Billion tonnes of additional JORC inferred resources at its Guadalupito Iron and Mineral Sands Project on the Northern Peru coast as well as upgrading its global exploration target for the project to 4.5 Billion tonnes at 6.1%1. The Company has also made significant advances in required studies to bring the project into production as soon as possible, in particular completing an important phase of mineral separation testwork on bulk sample composites that confirmed the dominance and quality of Magnetite and Andalusite in the heavy mineral assemblage as well as the potential for separation of Zircon, Rutile and Ferro-titanium minerals.

1 The latest global Conceptual Exploration Target (CET) for the Guadalupito Project was estimated at between 3.9 and 5.1 Billion tonnes with between 3.2% and 8.4% HM (weighted average 4.5 Bt @ 6.1% HM), and was exclusive of previously published JORC inferred resource estimates at “Heldmaier” and “Tres Chosas”. A detailed explanation of the estimate was published on 21 November 2012. The potential quantity and grade is conceptual in nature, and there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

A N N U A L R E P O R T 2 0 1 3 7

Figure 1: Latin Resources Limited’s major focus through 2012/2013 has been the Guadalupito Iron and Mineral Sands Project in Northern coastal Peru and the Mariela and Ilo Projects along the Southern Peru coastal Iron and Copper belt.

The Company is now focussing its e!orts on the key components of feasibility studies required to develop the “Los Conchales” resource, while at the same time, actively seeking a Joint Venture partner to fund the development in return for participation in the project.

Notwithstanding these important achievements at Guadalupito, Latin has also made significant advances with its Ilo Project comprising over 110,000 hectares of mining concessions in the highly prospective coastal IOCG/Copper Porphyry belt in Southern Peru. Latin’s major shareholder, Junefield, also continued to make progress with drilling at the Mariela Project, at the northern extent of Latin’s Ilo Projects.

The most advanced project within Latin’s Ilo Projects, the Ilo Norte project, was drilled by Latin in 2011, and over the last year has been subject to a full reinterpretation, with additional mapping, geophysics and geochemistry producing an exciting new target for IOCG/Skarn replacement style mineralisation (Copper and Gold). Latin was able to achieve all permitting requirements at Ilo Norte in a market leading time frame, and is now seeking a Joint Venture partner to complete the planned Phase II drilling program.

Over the last 12 months, Latin’s geological team have carried out extensive reconnaissance, mapping and reinterpretation of all data available to the company associated with its Ilo Project, and as a result, have uncovered 10 new targets with good potential for IOCG and/or Porphyry Copper mineralisation. The Company will seek joint venture partners to assist with funding drilling programs on these targets. Latin will continue to undertake selective lower cost exploration and permitting activities with the aim of adding value to selected priority targets within this group.

The Mariela project continues to attract investment from Junefield backed Total Genius Iron Mining SAC (TGIM) though continued drilling and additional permitting activities required for more drilling. During the year, TGIM have drilled in excess of 20,000 m at Mariela.

In the next financial year the Company intends to capitalise on the advanced stage of its projects to attract quality Joint Venture partners with favourable terms and conditions to fund major exploration and development expenditure.

The Company will also continue its cost cutting program to reduce costs and preserve cash, consider divesting some of its non-core assets and continue to look for other opportunities in South America that will create value for its shareholders.

R E V I E W O F O P E R A T I O N S8

P R O J E C T S

GUADALUPITO IRON AND MINERAL SANDS PROJECTThe Guadalupito iron and mineral sands project consists of over 22,000 hectares of mining concessions (Figure 2) on the coastal plain north of the Santa River in Northern Peru.

One Billion Tonnes of new JORC inferred resource and relinquishment of option over “Heldmaier”

Snowden Mining Industry Consultants continued to work with Latin during the year to build up a total JORC inferred resource of 1,465 Mt @ 5.7% HM. This was the result of the addition of the outstanding new resource at the Company’s 100% owned “Los Conchales” deposit of 1,057Mt @ 6.1% HM to the 100% owned

“Tres Chosas” resource (257Mt @ 3.9% HM) and the “Heldmaier” resource (136Mt @ 5.5% HM) located almost entirely within concessions under option to Latin.

Considering an option related obligation of US$3.34M was due in October 2013, the Company made a cost-benefit decision to relinquish the entire 2,218 hectares of concessions under option that contained the relatively small “Heldmaier” resource representing less than 9% of total JORC inferred resources. The resulting reduction in resources left the total JORC inferred resources ending 2012/2013 at 1,329Mt @ 5.7% HM including the “Los Conchales” and “Tres Chosas” resources (Table 1).

Table 1: Snowden’s JORC Inferred Resource Estimate Summary Table for Guadalupito

INFERRED RESOURCE BLOCK SPLIT1

TONNES MT3

HM IN SITU %

HM IN SAND %4

SAND %4

OVERSIZE %5

FINES %6

Tres Chosas Above Water Table

41.8 8.9 12 78.7 19.6 1.8

Los Conchales 85.2 8 10 80.9 12.2 6.9

Total 127.0 8.3% 10.6% 80.2% 14.6% 5.2%

Tres Chosas Below Water Table

214.5 3 3.3 89 4.6 6.3

Los Conchales 987.6 5.9 8.3 72.6 18.5 8.9

Total 1202.1 5.4% 7.2% 75.5% 16.0% 8.4%

Tres Chosas Total Inferred Resources

256.3 3.9 4.8 87.3 7.1 5.6

Los Conchales 1072.8 6.1 8.4 73.2 18 8.8

Grand Total 1329.1 5.7% 7.6% 75.9% 15.9% 8.2%

Based on all drill, pit and shaft samples excavated below DTM generated from LIDAR survey. A 1% HM cut-off has been applied to modeled HM grades.1 The resource has been split above and below logged and modeled water table. 2 Wireframes were created to domain logged geological units of Gravel, Sand and Silt; All units above the logged basal gravel were combined as a Sand domain (sand dominant),

the combined Sand domain and the Basal Gravel domain are reported.3 Density was based on the laboratory measured weights of individual 1m sonic drill samples. The data was analysed per each domain on which Snowden conducted least-

square regression in relation to the assayed heavy mineral content.4 Sand is the sample -1mm +53μm size fraction and reflects a screened, deslimed ROM plant feed.5 Oversize is the sample +1mm size fraction.6 Fines is the sample -53μm size fraction.

A N N U A L R E P O R T 2 0 1 3 9

Figure 2: Guadalupito Concessions, JORC Inferred Resource Areas.

R E V I E W O F O P E R A T I O N S1 0

Part of the decision to relinquish “Heldmaier” was to focus the Company’s e!orts on development of the far superior “Los Conchales” resource which represents the most favourable development option at Guadalupito, having deeper, more consistent and higher grade mineralisation, that is both further from the shore front (4 km), and closer to infrastructure than the

previously estimated resources at “Heldmaier” and “Tres Chosas”. A section perpendicular to the strike through the “Heldmaier” resource and the “Los Conchales” resource demonstrates perfectly the far greater significance of the “Los Conchales” resource (Figure 3).

Global conceptual exploration target upgrade

During the 2012/2013 year, Latin upgraded the global conceptual exploration target (CET) for the Guadalupito Project to 4,480Mt @6.1% HM2 excluding the “Heldmaier” and “Tres Chosas” JORC inferred resources. The CET was based on regional exploration drilling, shafts and pit samples as well as an updated geological model taking into account all the exploration work to date.

The target is almost exclusively located within Latin’s 100% owned concessions and promises significant extensions to the “Los Conchales” style of mineralisation, predominantly in the eastern part of the system.

Considering that the “Los Conchales” JORC inferred resource was more than 50% greater than its preceding CET, the future resource potential at Guadalupito promises to be astounding.

Mineral assemblage and process

CPG-Mineral Technologies (“CPG”), Carrara, QLD reported on first pass mineral separation testing undertaken on 2 x 500 kg composites of material representative of the above water table resource at the Heldmaier and Tres Chosas areas and concluded that the similarity of test results from both bulk samples demonstrates good geological continuity between Heldmaier and Tres Chosas resource areas, as suggested by mapping.

High grade magnetite products, containing 63% Fe and less than 4% TiO2 were obtained using conventional wet Low Intensity Magnetic drum Separators (LIMS). The -106 micron fractions contained even higher grade magnetite up to 66.9% Fe with less than 3% TiO2.

Gold concentrates were obtained using conventional gravimetric processes and contained between 10 g/t and 19 g/t Au.

Andalusite concentrates generated by heavy liquid separation showed the potential for an Andalusite product containing up to 58% Al2O3, while electrostatic separation was shown to reduce the Titanium and Phosphorus contaminants in the Andalusite product, further upgrading the Al2O3 content.

Zircon products were generated using conventional wet gravity, magnetic and electrostatic separation processes. The Zircon quality was mostly in line with typical zircon product specifications.

Rutile samples were obtained using heavy liquid separation and quality consistent with typical rutile product specifications.

Figure 3: Section A-B shows %HM in situ and contrasts the intersections from the Heldmaier JORC Inferred Resource with those of the Los Conchales JORC Inferred Resource.

2 The latest global Conceptual Exploration Target (CET) for the Guadalupito Project was estimated at between 3.9 and 5.1 Billion tonnes with between 3.2% and 8.4% HM (weighted average 4.5 Bt @ 6.1% HM), and was exclusive of previously published JORC inferred resource estimates at “Heldmaier” and “Tres Chosas”. A detailed explanation of the estimate was published on 21 November 2012. The potential quantity and grade is conceptual in nature, and there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

A N N U A L R E P O R T 2 0 1 3 1 1

“...with a vision to de!ne a rapidly implementable plan

towards production.”

An Iron/Titanium oxide product stream

was obtained using conventional magnetic and electrostatic separation techniques contained 23% TiO2

and 46% Fe.

Mineralogical classification was also undertaken on HM composites broadly representative of the “Los Conchales” JORC inferred resource estimate area from surface to over 30 m depth showing that Magnetite and Andalusite dominate the HM assemblage within the new resource area (24% and 23% of the HM respectively). A suite of Titanium minerals (Ilmenite, Rutile, Leucoxene and Titanite) make up an average 6.4%, with accessory minerals Zircon, Monazite, Garnets and Apatite all with some potentially viable commercial significance to be determined by further metallurgical test work.

Other test work on the “Los Conchales” HM composites has confirmed that a high Iron (greater than 63% Fe) and relatively low Titanium (less than 3% TiO2) magnetite concentrate can be produced in the laboratory and should be replicable by standard industrial processes. Relatively low levels of Titanium and other impurities is a function of the high level of natural liberation of Magnetite at Guadalupito and should allow for a premium price over that of other Titanomagnetite concentrates in the market.

Andalusite in the HM composites from “Los Conchales” is significantly more liberated than that in any other HM samples evaluated from Guadalupito suggesting that a high purity Andalusite concentrate from the “Los Conchales” area should have impurities well below even the lower limits of Andalusite sold in existing markets. This in turn promises to open up a range of favourable alternatives for the sale of an Andalusite concentrate from the Project. Andalusite products are currently sold at between US$350 and US$450 per tonne into a range of markets.

Evaluation of the production of Titanium mineral and other concentrates including Zircon and Monazite from “Los Conchales” are expected to add further value streams to an eventual operation at Guadalupito.

Feasibility Studies

With the Company having moved its focus to the vastly superior “Los Conchales” resource area, it is in the process of finalising a specific project description based around certain aspects of the Ausenco scoping study at the same time taking into account the various more favourable characteristics of the “Los Conchales” resource. Latin is currently in discussions with a number of specialised engineering firms in preparation for launching a feasibility study with a vision to define a rapidly implementable plan towards production. This will be based on a modest scale operation with relatively low capex and opex to produce initially only Magnetite and Andalusite products.

The Panamerican highway runs within metres of the eastern boundary of the “Los Conchales” resource and continues 20 km south to the town of Chimbote home to one of Peru’s largest iron smelters and a significant operating port facility. Latin’s Guadalupito concessions extend in their southern limits to the mouth of the Santa River, the largest Pacific draining river in Peru, where ample fresh water discharges into the Pacific Ocean all year round (Figure 4).

The “Los Conchales” area is arid desert terrain with no vegetation or resident population. Latin maintained ongoing community relations with the residents of the nearest small population centre, “Campo Nuevo”, located more than 10 km south of the Study area and with other groups throughout the Guadalupito District. The company has recently received a letter signed by all of the local authorities and principal leaders of civil society within the Guadalupito District recognising its ability to undertake its business in complete harmony with nearby inhabitants and at the same time o!ering their full and immediate support for the development of the project into a mine.


Figure 4: Key infrastructure proposed by Ausenco’s scoping study in 2012 remains the basis for the Guadalupito project layout which is now being updated based around a mine plan focussed on the “Los Conchales” resource.

A N N U A L R E P O R T 2 0 1 3 1 3

ILO NORTE IOCG PROJECT ! READY TO DRILLDuring 2012/2013 Latin has undertaken a full review of the Ilo Norte project drilled in 2011, and has generated an exciting new drilling target for Copper-Gold mineralisation based on geophysical (IP) surveying, surface geochemistry and more extensive detailed geological mapping of the project area.

An Induced Polarization (IP) survey undertaken at the Ilo Norte Project by the Company’s Peruvian geophysical contractor, Val D’or Geofisica (VDG del Peru S.A.C.), consisted of three (3) parallel survey lines spaced every 400 meters, for a total of 11.9 line-km. (Figure 6)

VDG’s 3D inversion block model interpreted a deep chargeability anomaly along each of the three survey lines. The chargeability anomaly amplitude is 15 mV/V over a background of 3-5 mV/V .

Anomalous chargeability values form a broad zone that extends from approximately 300 m below surface over approximately 2000 m width, extending from the cli! line in the west to at least 800 metres north east. The anomaly remains open to the NE and continues to deepen consistent with the dip of the stratigraphy (Figure 5).

The anomalous geophysical responses appear to coincide with the quaternary covered, down dip extension of a strata-bound Skarn unit that outcrops down the slope to the west of the survey area

and an overlying zone of intense Silica-Albite alteration, both very favourable indications of potential copper-gold mineralisation. .

Copper and Gold anomalies were generated from soil and chip-channel samples taken in the vicinity of the IP anomaly and enhance the prospectivity of the copper-gold drill target at the project (Figure 5).

The Ilo Norte project has become an advanced exploration project, prospective for copper-gold mineralisation. The project hosts a very large alteration system, which extends at least 10 kilometres along strike and several hundred metres thick. This alteration is important for several reasons:

Many mineral deposits are surrounded by a halo of altered rocks that is a much larger exploration target than the deposit alone.

Variations in alteration can be used as vectors for the location of a mineral deposit.

Large alteration zones can indicate large mineral deposits.

The drilling completed by Latin in 2011 was downslope of the (then undiscovered) alteration package, but nonetheless returned some very good intersections, the most significant of which were:

These results prove that the system hosts copper and gold and it would not be unreasonable to expect better results within the heart of the alteration system.

With the new drilling target defined, Latin proceeded with necessary permitting activities including successful community workshops, initial drilling permit approval (DIA), approvals for commencement of drilling activities, a water use permit and surface land agreement with surface land owners. With permitting completed Ilo Norte is ready to drill.

Latin is in discussions with a number of potential Joint Venture Partners to fund the drilling program.

HOLE IDTOTAL DEPTH

MFROM

MTO M

INTERVAL M

CU %

AU G/T

IN-01 318 176 180 4 0.38 0.19

244 248 4 0.36 0.13

IN-02 324 30 66 36 0.29 0.09

Including 52 66 14 0.55 0.13

80 88 8 0.24 0.10

IN-03 350 254 276 22 0.25 0.09

IN-06 336 98 128 30 0.11 0.14


Figure 5: Results of Surface Soil and Chip-Channel samples plotted over the Chargeability anomaly modelled at 400 m depth. The 2011 drill holes completed approximately 1 km to the SSW of the new target are also plotted.

Figure 6: Stacked Sections of the IP Chargeability Anomaly (left) and the IP Resistivity Anomaly (right) at Ilo Norte.

A N N U A L R E P O R T 2 0 1 3 1 5

Figure 7: Section through A-B shown on Figure 5 showing the relationship between 2011 drilling and the soil sampling and geophysical anomalies generated this year. The proposed new drill holes test the new target.

MARIELA IRON ORE PROJECTThe Mariela project comprises 7 mining concessions covering approximately 5,200 hectares in the Islay Province of Arequipa in southern Peru. It is situated in very close proximity to key infrastructure as it is located directly on the Panamerican Highway, a major road transport route, and is only 60 km from the port of Ilo.

Following up a regional aeromagnetic anomaly, exploration geophysical work by Latin successfully delineated a large and intense coincident magnetic and gravity anomaly interpreted to comprise a central magnetite-rich core (magnetite anomaly) flanked on both sides to east and west by the gravity anomaly.

The drilling programme at Mariela that commenced in May 2012 continued throughout the year and is being managed by Hong

Agreement (reported Nov 2011).

Drilling has been typically deep with a number of holes reaching 1,000 m total depth. Iron intersections reported were generally relatively narrow (<100 m) and a steeply dipping Fe-rich structure is inferred with grades from selective sampling of the order of 20-40% Fe.


LATIN RESOURCES COASTAL IOCG AND PORPHYRY COPPER EXPLORATIONOngoing exploration at both Mariela and Ilo Norte has provided Latin’s geologists with invaluable knowledge of the mineralization processes that have occurred in the region, which has been applied to identify new exploratory targets. A thorough revision carried out during the year of the geological, geochemical, geophysical and spectral data available to the Company over its Ilo concessions, with the added perspective gained from work on the Mariela and Ilo Norte projects, has allowed the company to identify ten new highly prospective targets for IOCGs and porphyry copper deposits.

The ten new IOCG/Porphyry Cu target areas are located within the Company’s more than 110,000 hectares of 100% owned concession holdings in the highly prospective coastal IOCG/Porphyry Cu belt of Southern Peru (Figure 9). Over 125 billion pounds of contained copper in published reserves and resources are found within 100 km of these concessions (Figure 8) and are the source of around half of Peru’s copper production (the world’s third largest copper producing nation).

Latin has already been successful in identifying two previous targets within this part of the belt that have been partly drill tested to date: The Mariela Fe/Cu Project and Ilo Norte, where drilling by Latin in 2011 uncovered the edge of an IOCG/Skarn replacement system that was subsequently followed up with additional geochemistry and geophysics identifying a new target which is now fully permitted and ready to drill (announced 11 April 2013).

Latin is in discussions with several potential Joint Venture partners to continue drill testing these targets in the region, a strategy that proved to be very successful for Latin at Mariela.

Other advantages to the area include the proximity to the Pan American highway and the port facility and copper smelter/refinery at Ilo city. The proximity of Latin’s 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.

Figure 8: Latin’s 100% owned concession holding in Southern Peru – host to ten new target areas in addition to the Mariela Project (discovered late 2010), and Ilo Norte (drilled in 2011), a proven IOCG/Skarn replacement mineralised system, ready to drill phase II with the right JV Partner.

A N N U A L R E P O R T 2 0 1 3 1 7

Figure 9: Ten new target areas identified in Latin’s 100% owned concessions in Peru’s Southern Cordillera and the Ilo Norte Project.


C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y C S R , E N V I R O N M E N T A N D S A F E T Y

Through its Peruvian subsidiary, Latin Resources Limited applies some of the most comprehensive and advanced policies in Corporate Social Responsibility in the Peruvian Exploration and Mining Sector and shareholders can be assured that these provide Latin with a definite competitive advantage over other explorers in the Peruvian socio-environmental context. In addition the company strives to comply fully with international environmental and safety standards that are the basis for Peruvian legislation governing the Mining Industry.

At the Guadalupito and Mariela projects Latin has established strategic alliances with the local residents which have enabled exploration of these projects to proceed in harmony with their surroundings, while at the same time stimulating the local economy in a sustainable fashion and generating a healthy level of identification with the projects amongst locals.

Such alliances have been built around sound management of expectations and the development of high trust relationships with local authorities, community leaders and the population at large. A fundamental part of building such relationships is the provision of extensive information about the projects and the planned activities of the Company.

Latin informs locals through numerous information workshops, guided tours of the project areas, and in some cases localized media campaigns designed to inform locals about the projects in ways that are familiar to them, all the while respecting local culture and customs.

In conjunction with the commencement of exploration activities at Guadalupito, Latin engaged with local leaders and interest groups to arrange informative sessions and establish a local committee to organize and prioritize candidates for the required labor force based on established economic need. Workers are employed on a rotational basis, working 15 day shifts before

rotating with other members of the community.

This policy creates two-fold benefits:

firstly by sharing limited available employment opportunities amongst the highest possible number of locals in need of work; and

secondly avoids the creation of divisions and conflict amongst local residents as a result of a relatively small number of comparatively well paid local workers forming an economic “elite” amongst a less solvent population at large.

Local Leaders and Residents on a Guided visit to the Mariela Project Area.

A N N U A L R E P O R T 2 0 1 3 1 9

The success of Latin’s CSR policies at Guadalupito has been recognized in a

letter signed by all of the local authorities and principal leaders of civil society within the Guadalupito Political District

Jurisdiction commending the Company’s ability to undertake its business in complete harmony with nearby inhabitants and at the same time o!ering full and immediate support for the development of the project into a mine.

At Mariela, Latin’s policies implemented during the permitting phase were continued by exploration partner Junefield and have helped maintain harmonious relationships between operator and community and have allowed the project to continue unhindered through a major drilling campaign.

At Ilo Norte widespread consultation with local communities allowed for smooth permitting of exploration activities and the issuing of a water use permit within an area where there are competing interests for water. By integrating the Company’s CSR policy into all Company activities, getting projects to a drill ready status has been achieved in market leading timeframes.

As part of the e!ort to stimulate the local economy in each Project’s surrounds, and to generate maximum positive local economic impact, Latin prioritized local businesses and providers when sourcing products and services that may have been sourced at reduced cost in a major regional center. The e!ect of such a policy further expanded the number of people perceiving positive impact from the presence of the Company and has helped align the interests of locals with those of the company in the development of its projects.

With respect to its commitment to Environmental best practice, Latin complies with the requirements of Peruvian environmental legislation which applied to the Mining Sector is stringent and in line with international best practice.

At Guadalupito, the company undertakes regular monitoring of environmental conditions across the project area as the exploration program progresses.

In an e!ort to go beyond legislative requirements, Latin is in the process of organizing local committees to undertake participative environmental monitoring as an extension of the Company’s CSR policy of transparency of information. By implementing such an initiative, Latin involves and trains local people to be part of the environmental monitoring of the project which in turn promotes greater environmental awareness and protects against potential mis-information about environmental impacts that might be promoted by outside interests.

Safety is paramount in all Latin’s activities, and the company has had an exemplary record to date with no lost time injuries of employees on any Project.

Safety is paramount

in all Latin’s activities, and the

company has had an exemplary record to date

with no lost time injuries of employees on any Project.

Water Quality Monitoring at Guadalupito.


C O M P E T E N T P E R S O N S T A T E M E N T

The information in this report that relates to Geological and Geochemical Data, Exploration Results, Latin Resources Limited’s Conceptual Exploration Target and Mineral Resources is based on information compiled by Mr Andrew Bristow, a full time employee of Latin Resources Limited’s Peruvian subsidiary. Mr. Bristow is a member of the Australian Institute of Geoscientists and has su"cient experience which is relevant to the style of mineralisation and the type of deposit under consideration to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code). Mr Bristow consents to the inclusion in this report of the matters based on his information in the form and context in which they appear.

A N N U A L R E P O R T 2 0 1 3 2 1

D I R E C T O R S ’ R E P O R T

T H E D I R E C T O R S P R E S E N T T H E I R R E P O R T T O G E T H E R W I T H T H E F I N A N C I A L

S T A T E M E N T S O F T H E G R O U P C O N S I S T I N G O F L A T I N R E S O U R C E S L I M I T E D

" L A T I N O R T H E C O M P A N Y # A N D I T S S U B S I D I A R Y " T O G E T H E R T H E G R O U P #

F O R T H E F I N A N C I A L Y E A R E N D E D 3 0 J U N E 2 0 1 3 .

D I R E C T O R S ’ R E P O R T2 2 D I R E C T O R S ’ R E P O R T2 2

Directors

The names and details of the Company’s directors in o$ce during the

!nancial year and until the date of this report are set out below.

The directors were in o$ce for this entire period unless otherwise stated.

D A V I D V I L E N S K Y (appointed 2 October 2008, Independent Non-Executive Chairman)

Mr Vilensky is a practising corporate lawyer and the managing director of Perth law firm Bowen Buchbinder Vilensky. He has more than 30 years experience in the areas of corporate and business laws and in commercial

and corporate management. Mr Vilensky practises mainly in the area of mining and resources, corporate and commercial law, trade practices law, contract law and complexz dispute resolution. Mr Vilensky acts for a number

company focusing on copper exploration in Zambia’’

Other directorships of Australian listed companies held by Mr Vilensky in the last three years are:

Current: Zambezi Resources Limited.

C H R I S T O P H E R G A L E (appointed 8 June 2008, Managing Director)

Mr Gale has extensive experience in senior management roles in both the public and private sectors, especially in commercial and financial roles. He has also held various board and executive roles at a number of mining and technology companies during his career.

Chris is the current Chairman of the Council on Australian Latin American Relations (COALAR) established by the Australian Government Department of Foreign A!airs and Trade(DFAT). He is also a founding director of Allegra Capital, a boutique corporate advisory firm based in Perth and is a member of the Australian Institute of Company Directors (AICD).

F R A N K I E L I (Appointed 21 March 2012, Non-Executive Director)

Mr Li has 25 years of experience in the accounting and finance profession and has extensive experience in compliance, profit planning and

(Holding) Limited.

Z H O N G S H E N G L I U(appointed 5 June 2013, Non-Executive Director)

Mr Liu is currently an executive director and the chief executive o"cer of Junefield Department Store Group Limited, a company listed on

Chinese businesses.

M A R K R O W B O T T A M (appointed 2 June 2008, 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 Financial Services Institute of Australasia and active member of the Australian Institute of Company Directors and Chartered Secretaries Australia. Mr Rowbottam has more than 15 years’ experience in the corporate finance arena and has been involved in

Other directorships of Australian listed companies held by Mr Rowbottam in the last three years are:

Current: Aleator Energy Limited and GRP Corporation Limited.

A N N U A L R E P O R T 2 0 1 3 2 3

D I R E C T O R S ’ S H A R E A N D O P T I O N H O L D I N G S

As at the date of this report, the interests of the Directors in the shares and options of Latin were as follows:

Table 1: Directors’ shares and options

DIRECTORS ORDINARY SHARES NUMBER OPTIONS NUMBER

David Vilensky 1,269,230 634,515

Chris Gale 9,087,692 528,846

Frankie Li Nil Nil

Zhongsheng Liu Nil Nil

Mark Rowbottam 6,528,730 Nil

C O M P A N Y S E C R E T A R Y

Anthony Begovich (appointed 13 February 2012, Company secretary)

Mr Begovich is a chartered accountant with more than 17 years’ experience in the resources sector. Mr Begovich has over 11 years’ experience working as a Company Secretary for Australian listed companies.

P R I N C I P A L A C T I V I T I E S

The principal activities during the year of entities within the consolidated entity were the exploration and evaluation of our mining projects in Peru.

F I N A N C I A L R E V I E W

RESULT FOR THE YEAR The Group recorded a consolidated loss for the year ended 30 June 2013 was $7,023,051 (2012: $2,864,686).

The result reflects no revenue from the sale of exploration and evaluation properties during the year (2012: $0.9 million) and an increase in the total amount of exploration and evaluation expenditure expensed during the period which totalled $3.2 million (2012: $0.2 million). The increase is mainly due to the write o! of the exploration and evaluation assets relating to the Heldmaier concessions at the Guadalupito project which were dropped in June 2013. Other cost categories remained at similar levels to last year.

front of the Annual report.

ASSETSTotal assets rose by 11% or $2.7 million to $27.9 million during the year reflecting an increase of $4.7 million in Exploration and evaluation assets from continued exploration and evaluation work on our mining projects in Peru in particular Guadalupito and Ilo Norte. The increase in Exploration and evaluation assets was achieved despite $3.2 million of costs being written o! due to the decision to drop the Heldmaier concessions at the Guadalupito project.

O!setting this increase was a reduction in Cash & cash equivalents and other assets of $2 million due to the Company’s next tranche of funding being delayed until after year end.

LIABILITIESTotal liabilities rose by 22% or $2.6 million to $14.1 million during the year reflecting a $0.7 million increase in trade and other payables and a $0.6 million increase in short term loans due to the delay in funding. In addition the deferred consideration balances relating to the acquisition of the Guadalupito concessions increased by $1.3 million reflecting payments made during the period and present value and USD/AUD exchange rate movements on the balance.

EQUITYTotal equity rose by 1% or $0.1 million during the year to $13.7 million reflecting a $6.1 million increase in Contributed equity due to share placements and an Option entitlement issue totalling $5.5 million to fund the progression of its projects in Peru and for general working capital purposes. In addition $0.5 million of shares were issued as partial settlement of a vendor commitment with the balance reflecting the net e!ect of shares issued to employees for achieving performance milestones in accordance with their contracts, the exercise of options and cost of share trust purchases.

D I R E C T O R S ’ R E P O R T2 4

SHAREHOLDER RETURNSThe Company’s share price fell during the year but has outperformed most of its peers as market sentiment has turned against junior mining and exploration companies.

its stated objectives.

These steps have included all Directors and Senior Management replacing 20% of their cash remuneration with shares in the Company to preserve cash. Furthermore, all major exploration work in respect of the Guadalupito and Ilo projects have been suspended with immediate e!ect.

The Group is in discussions with a number of possible joint venture partners to contribute to the funding of future major exploration work at the Company’s projects.

The Company expects these actions will provide a platform for the share price to rebound in the year ahead.

Table 2: Shareholder returns for the last 5 years

2013 2012# 2011# 2010# 2009#*

Loss attributable to the Group ($) (7,023,051) (2,864,686) (3,102,447) (2,635,035) (1,463,440)

Basic loss per share (Cents) (3.59) (1.78) (2.46) (3.56) (2.09)

Dividends ($) Nil Nil Nil Nil Nil

Share price as at 30 June 2013 ($) $0.08 $0.25 $0.25 N/a N/a

Total shareholder return % (68) 0 N/a N/a N/a

# The results have been restated to reflect the change in accounting policy for exploration and evaluation expenditure.* The 2009 results include information for the period from the date of incorporation on 2 June 2008 to 30 June 2009.

D I V I D E N D S

No amounts have been paid or declared by way of a dividend since the end of the previous financial period and up until the date of this report. The Directors do not recommend the payment of any dividend for the financial year ended 30 June 2013.

L I Q U I D I T Y A N D C A P I T A L R E S O U R C E S

The Group’s principal source of liquidity as at 30 June 2013 is cash and cash equivalents of $58,476 (2012: $2,217,284). The Group also has two short term loans totalling $550,000 which attract interest of 12% and 16% per annum.

The loans were repaid in full in August 2013 from part of the proceeds of a $2.5 million converting loan that the Company secured from Junefield High Value Metals Investments Limited at 12% per annum.

S H A R E S A N D O P T I O N S

As at 30 June 2013 the Company had 213,597,125 fully paid shares on issue and 42,561,294 Options on issue.

SHARE ISSUES DURING THE YEARDuring the year the Company issued a total of 28,652,292 fully paid shares at an amount per share ranging from $0.15 to $0.28 raising gross proceeds of $5,441,397 via three separate placements to sophisticated and professional investors. The proceeds were used to fund the progression of its projects in Peru and for general working capital purposes (refer note 18 for further details).

On the 21 September 2012, 60,750,000 shares issued to seed investors prior to the IPO were released from escrow.

On 21 May 2013, 3,000,000 fully paid shares were issued at deemed price of $0.17 each as partial settlement of a vendor commitment.

In June 2013 the Company issued 19,692 shares from the conversion of options with an exercise price of $0.20 each raising a total of $3,938 and 500,000 shares were issued to two employees for deemed values of $0.28 and $0.17 per share in accordance with their employment contracts.

A N N U A L R E P O R T 2 0 1 3 2 5

“In the next !nancial year the Company intends to capitalise on

the advanced stage of its projects to attract quality Joint Venture

partners with favourable terms and conditions to fund major

exploration and development expenditure...”

OPTION MOVEMENTS DURING THE YEAROn the 21 September 2012, 8 million options exercisable at $0.30 each on or before 31 March 2013 issued to seed

investors prior to the IPO were released from escrow.

On 31 March 2013, 52,446,000 options exercisable at $0.30 each expired.

In April 2013 the Company announced a 1 for 2 Option entitlement issue which resulted in 41,580,986 options exercisable at $0.20 each on or before 26 October 2014 being issued at $0.01 each raising a total of $415,810.

As stated above 19,692, $0.20 options were exercised in June 2013.

R I S K M A N A G E M E N T

The Board is responsible for identifying business risks and implementing actions to manage those risks and corporate systems to assure quality.

The Board delegates these tasks to management who provide the Board with periodic reports identifying areas of potential risks and the safeguards in place to e"ciently manage material business risks.

Strategic and operational risks are reviewed at least annually as part of the forecasting and budgeting process.

The Managing director and Chief financial o"cer have provided assurance in writing to the Board that they believe that the Company’s material business risks are being managed e!ectively.

The Managing director and Chief financial o"cer have also provided assurance in writing to the Board that the Company’s financial reporting, risk management and associated compliance and controls have been assessed and are operating e!ectively so far as they relate to the financial report.

S I G N I F I C A N T E V E N T S A F T E R B A L A N C E D A T E

PLACEMENT On 30 July 2013 the Company announced the completion of a Placement to sophisticated and professional investors involving the issue of 11,428,574 ordinary shares at $0.07 per share raising gross proceeds of $800,000. Each new share comes with 1 free attaching listed option exercisable at $0.20 each on or before 26 October 2014 subject to shareholder approval.

CONVERTING LOAN

to provide AUD$2,500,000 in funds in the form of a Converting Loan to progress the development of its projects in South America and for general working capital purposes. The Converting Loan is to be replaced by a Convertible Note with an interest rate of 12% and a conversion price of $0.07, subject to shareholder approval at a meeting in October 2013.

SETTLEMENT OF INTEREST BEARING LOANSIn August 2013 the Company repaid in full the interest bearing loans of $550,000 in cash.

MARIELAOn 27 September 2013 the Company announced that it had entered into a Memorandum of Understanding with Total Genius Iron Mining SAC (TGIM) for the sale of its Mariela concessions for US$2,500,000. The transaction is expected to be completed in October 2013 subject to shareholder approval in November 2013.


L I K E L Y D E V E L O P M E N T S A N D E X P E C T E D R E S U L T S

In the next financial year the Company intends to capitalise on the advanced stage of its projects to attract quality Joint Venture partners with favourable terms and conditions to fund major exploration and development expenditure.

The Company will also continue its cost cutting program to reduce costs and preserve cash, consider divesting some of its non-core assets and continue to look for other opportunities in South America that will create value for its shareholders.

E N V I R O N M E N T A L R E G U L A T I O N A N D P E R F O R M A N C E

The Group carries out exploration and evaluation activities at its operations in Peru which are subject to environmental regulations. During the year there has been no significant breach of these regulations.

I N D E M N I F I C A T I O N A N D I N S U R A N C E O F D I R E C T O R S A N D O F F I C E R S

During the year insurance premiums were paid to insure the Directors and o"cers against certain liabilities arising out of their conduct while acting as a director or an o"cer of the Company. Under the terms and conditions of the insurance contract, the nature of the liabilities insured against and the premium paid cannot be disclosed.

D I R E C T O R S ’ M E E T I N G S

The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director are as follows:

Table 3: Directors meetings and attendance

BOARD REMUNERATION COMMITTEE

DIRECTOR MEETINGS HELD MEETINGS ATTENDED MEETINGS HELD MEETINGS ATTENDED

David Vilensky 11 11 2 2

Chris Gale 11 11 - -

Frankie Li 11 10 - -

Zhongsheng Liu1 1 1 - -

Mark Rowbottam 11 10 2 2

1 appointed on 5 June 2013 and was represented at the June 2013 Board meeting by his Alternate.

Committee membership

At the date of this report, the Company has a Remuneration committee consisting of David Vilensky (Chairman) and Mark Rowbottam.

The Board as a whole decides on matters a!ecting identification, appointment and review of board membership, and audit and risk management.

A N N U A L R E P O R T 2 0 1 3 2 7

A U D I T O R I N D E P E N D E N C E A N D N O N A U D I T S E R V I C E S

AUDITORS’ INDEPENDENCE DECLARATIONThe auditors independence declaration is set out on page 71 and forma part of the Directors’ report for the financial year ended 30 June 2013.

NON"AUDIT SERVICESNon-audit services provided by the Group’s auditor Deloitte Touche Tomatsu during the year is shown at note 27 of the financial statements.

The directors are satisfied that the provision of non-audited services, during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporation Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

R E M U N E R A T I O N R E P O R T A U D I T E D

This remuneration report for the year ended 30 June 2013 outlines the remuneration arrangements of the Company and the Group

required by section 308(3C) of the Act.

having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly and indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives in the Parent and Group receiving the highest remuneration.

For the purposes of this report, the term executive includes executive directors and other senior management of the Parent and the Group.

DIRECTOR AND SENIOR MANAGEMENT The following persons acted as directors of the Company during or since the end of the financial year:

Non-executive directors

David Vilensky Chairman

Frankie Li Non-executive director

Zhongsheng Liu Non-executive director (appointed on 5 June 2013)

Mark Rowbottam Non-executive director

Executive director

Chris Gale Managing director

Other executives

Anthony Begovich Chief financial o"cer and Company secretary

Andrew Bristow General manager - Peru operations

Carlos Spier Group exploration manager (appointed 1 September 2012)

R E M U N E R A T I O N G O V E R N A N C E

REMUNERATION COMMITTEEThe Remuneration committee has delegated decision making authority for some matters related to the remuneration arrangements for Non-executive directors and executives, and is required to make recommendations to the Board on other matters.

The Board approves the remuneration arrangements of the Managing director and other executives and all awards made under incentive plans following recommendations from the Remuneration committee.

The Board also sets the remuneration of Non-executive directors, subject to the fee pool approved by shareholders.

The Remuneration committee approves, having regard to the recommendations of the Managing director, the level of incentives to other personnel and contractors.


USE OF REMUNERATION CONSULTANTS

recommendations concerning an appropriate structure and quantum or value of long term incentives that could be awarded to key management personnel.

The remuneration consultant was paid $15,200 for their services and did not provide any other advice to the Company or any of its entities during the period.

For each of the recommendations by the remuneration consultant, the Remuneration committee is satisfied that the recommendations were made free from any undue influence by key management personnel.

NON"EXECUTIVE DIRECTOR REMUNERATION ARRANGEMENTSThe Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.

time to time by a general meeting of shareholders. The current limit is $350,000 which remains unchanged from when the company first

Non-executive directors are remunerated by way of fees and superannuation. Current fees for Non-executives range from $60,000 to $84,000 per annum for directors and $108,000 for the Chairman.

Non-executive directors do not receive retirement benefits, nor do they participate in any incentive programs.

As at the date of this report no options or shares were awarded to non-executive directors for the 2012/13 financial year.

The remuneration of Non-executive directors for the year ended 30 June 2013 and 30 June 2012 is detailed in table 4 and 5

EXECUTIVE REMUNERATION ARRANGEMENTSThe Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group that is competitive by market standards and aligns their interests with those of shareholders.

Executive remuneration consists of fixed remuneration and variable remuneration comprising short term incentives and long term incentives.

Fixed Remuneration

The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market.

Fixed remuneration is reviewed annually by the Remuneration committee through a process that considers individual performance, Group performance and market conditions.

Variable Remuneration

employees and contractors. The Company also established “The Latin Resources Limited Employee Share Trust” (Trust) to obtain Shares as a result of the vesting and exercise of rights under the Plan. The Trust provides a range of commercial benefits for the Company.

The Plan provides the Company with a range of incentives to attract retain and align the interest of shareholders and employees and contractors.

Short term incentives

For the 2012/13 financial year no STI’s were awarded to executives apart from the issue of 500,000 shares to the General manager- Peru operations for achieving the following performance measures in accordance with his employment contract.

Completion of 12 months service;

Completion of a JORC resource for the Guadalupito project; and

Completion of a Scoping study for the Guadalupito project.

The remuneration of Executives for the year ended 30 June 2013 and 30 June 2012 is detailed in table 4 and 5.

A N N U A L R E P O R T 2 0 1 3 2 9

“For the 2012/13 !nancial year the maximum percentage of

base remuneration that the Managing director could receive was

60% and for other executives it was 45%.”

Long term incentives

cash;

retention rights being rights that vest and may be exercised into Restricted Shares, based on completion of a period of service ; and

performance rights, being rights that vest and may be exercised into Restricted Shares, based on achievement of specified performance objectives.

The retention and performance rights are issued for no consideration, however, the vesting of the benefits are conditional on achieving specific measurable performance measures that are aligned with the Company’s strategic objectives. The following performance measures were used, in equal weighting, for the 2012/13 financial year:

Completion of service for the year; and

Shareholder returns (Total shareholder return of 15% per annum or greater for three years from 1 July 2012 to 1 July 2015).

Vesting of the LTI is measured over a three year interval at three points being 1, 2 And 3 years after the initial grant.

The Company is aware that the vesting of performance rights is treated as income to executives and attracts tax in a similar manner to cash payments irrespective of the executive selling or retaining the resulting shares.

The maximum percentage of base remuneration that an executive may receive as a LTI is pre-determined based on the advice of the remuneration consultant.

For the 2012/13 financial year the maximum percentage of base remuneration that the Managing director could receive was 60% and for other executives it was 45%.

The Remuneration policy prohibits those directors and employees that are granted shares as a result of incentive rights from entering into arrangements that limit their exposure to losses that would result from share price decreases. The policy also requires directors, and employees to seek approval from the Company prior to that individual buying or selling any company securities. Directors and employees are not permitted to trade during a closed period. Procedures are in place where trading during a closed period is sought in exceptional circumstances.

Where a director or employee ceases employment prior to their incentives vesting due to resignation or termination for cause, incentives will be forfeited. Where a director or employee ceases employment for any other reason, they may retain a number of unvested share options on a pro-rata basis to reflect their period of service during the LTI grant performance period. These unvested share options only vest subject to meeting the relevant LTI performance measures.

As at the date of this report no LTI incentives had been awarded to executives for the 2012/13 financial year.

The remuneration of Executives for the year ended 30 June 2013 and 30 June 2012 is detailed in table 4 and 5.

Refer to page 25 for a summary of the Company’s performance over the last 5 years.


EMPLOYMENT AGREEMENTS AND CONTRACTS The Group has entered into contracts and agreements with executives the details of which are provided below.

Managing director

The Managing director is currently employed under a consultancy agreement for a two year term ending on 30 September 2013 which can be extended by mutual consent.

The Group may terminate the agreement with or without cause by giving one month and six months’ notice respectively.

The Managing director may terminate the agreement with or without cause by giving 21 days and three months’ notice respectively.

If the Group terminates the agreement without cause the Managing director is entitled to be paid out fees that would have been earned for the remaining term of the agreement otherwise payment will consist of the fees that accrued until the date of termination.

However, if the agreement is terminated due to a change of control the Managing director is entitled to a payment equivalent to fees for one year, the value of any annual fringe benefits and any vested entitlement under a LTI plan.

The Group retains the right to terminate the agreement immediately by making a payment in lieu of notice for termination by either party without cause.

General manager – Peru

The General manager- Peru is currently employed under a consultancy agreement for a one year term ending on 30 September 2012 which has been extended for a further 12 months and can be extended further by mutual consent.

Both parties may terminate the agreement without cause by giving thirty days’ notice.

The Group may terminate the agreement with cause by giving up to ten days’ notice.

due to a change of control in which case he is entitled to a payment equivalent to fees for one year, one annual bonus and the value of any annual fringe benefits.

The Group retains the right to terminate the agreement immediately by making a payment in lieu of notice for termination by either party without cause.

Other Key Management Personnel (KMP)

month and up to three months’ notice respectively.

The Group retains the right to terminate the contracts immediately by making a payment in lieu of notice for termination by either party with or without cause.

Executives are also entitled to receive statutory entitlements of any accrued annual and long service leave, together with superannuation benefits.

A N N U A L R E P O R T 2 0 1 3 3 1

Table 4: Remuneration of key management personnel and executives for the year ended 30 June 2013

SHORTTERM BENEFITS POST EMPLOYMENT

LONGTERM

BENEFITS

SHAREBASED

PAYMENTS TOTALPERFORMANCE

RELATEDEQUITY

COMPENSATION

30 JUNE 2012

SALARY & FEES

$BONUS

$

NON!CASH BENEFITS

$OTHER

$SUPER

$

TERMINATION BENEFITS

$

LONG SERVICE

LEAVE $

SHARES $ $ % %

Directors

D. Vilensky 108,000 - - - - - - - 108,000 - -

C. Gale 396,000 - - - - - - - 396,000 - -

F. Li 66,000 - - - - - - - 66,000 - -

Z.Liu1 4,167 - - - - - - - 4,167 - -

M. Rowbottam 64,638 - - - 1,362 - - - 66,000 - -

Other executives

A. Begovich 200,005 - - - 16,500 - - - 216,506 - -

A. Bristow 244,104 - - - - 10,581 - 85,0003 339,685 - 25.0

C Spier2 219,622 - - - 16,341 - - - 234,963 - -

Total 1,302,536 - - - 33,203 10,581 - 85,000 1,431,321 - 25.0

1 Appointed on the 5 June 2013.2 Appointed on the 5 June 2013.3 500,000 shares were issued during the year and the fair value was measured at its quoted market price of $0.17 per share at the grant date.

Table 5 - Remuneration of key management personnel and executives for the year ended 30 June 2012

SHORTTERM BENEFITS POST EMPLOYMENT

LONGTERM

BENEFITS

SHAREBASED

PAYMENTS TOTALPERFORMANCE

RELATEDEQUITY

COMPENSATION

30 JUNE 2012

SALARY & FEES

$BONUS

$

NON!CASH BENEFITS

$OTHER

$SUPER

$

TERMINATION BENEFITS

$

LONG SERVICE

LEAVE $

SHARES $ $ % %

Directors

D. Vilensky 53,500 - - - - - - - 53,500 - -

R. Brown1 85,278 - - 21,675 - - - 106,953 - -

C. Gale 385,473 - - 12,000 - - - - 397,473 - -

F. Li2 18,629 - - - - - - - 18,629 - -

M. Rowbottam 54,187 - - - - - - - 54,187 - -

Other executives

A. Begovich3 75,296 - - - 6,777 - - - 82,073 - -

A. Bristow4 255,520 - - - - - - 190,0007 445,520 - 42.6

Z. Lewis5 92,031 - - - - - - - 92,031 - -

J. Moran6 94,758 - - - 7,049 - - - 101,807 - -

Total 1,114,672 - - 12,000 35,501 - - 190,000 1,352,173 - 42.6

1 Resigned on the 28 May 2012, Super includes $14,000 salary sacrifice.2 Appointed on the 20 March 2012.3 Appointed on the 13 February 2012.4 Appointed as a full time employee on 30 September 2011.5 Appointed on the 8 November 2011 and resigned on the 29 June 2012.6 Resigned on the 9 November 2011.7 1,000,000 shares were issued during the year and the fair value was measured at its quoted market price of $0.19 per share at the grant date.


O P T I O N S G R A N T E D A N D V E S T E D F O R T H E Y E A R

There were no options granted and vested to key management personnel during the year.

S H A R E S I S S U E D O N E X E R C I S E O F O P T I O N S

There were no shares issued on exercise of options to key management personnel during the year.

D I V E R S I T Y

Latin strives to be an equal opportunity employer and we will not discriminate against prospective employees based on gender or any other non-skill related characteristic. We pride ourselves on the diversity of our sta! and encourage suitably qualified young people, women, people from cultural minorities and people with disabilities to apply for positions.

Whilst e!orts will be made to identify suitably qualified female candidates and candidates from a diversity of backgrounds when seeking to fulfill positions, the Company does not believe it is meaningful, nor in the best interests of shareholders to set formal targets for the composition of employees based on gender or any other non-skill related characteristic nor detailed policies in this regard.

The Board has established a policy regarding diversity and details of the policy are available on the Company’s website.

Table 6: Gender composition

2013 2012

FEMALE MALE FEMALE MALE

Board - 100% - 100%

Executive - 100% - 100%

Group 25% 75% 31% 69%

This Report is signed in accordance with a resolution of the Board of Directors.


Signed on 27 September 2013, in Perth, Western Australia.

A N N U A L R E P O R T 2 0 1 3 3 3

C O R P O R A T E G O V E R N A N C E S T A T E M E N T


T H E B O A R D D E V E L O P S S T R A T E G I E S F O R T H E G R O U P ,

R E V I E W S S T R A T E G I C O B J E C T I V E S A N D M O N I T O R S P E R F O R M A N C E

A G A I N S T T H O S E O B J E C T I V E S .

3 4

A N N U A L R E P O R T 2 0 1 3

A P P R O A C H T O C O R P O R A T E G O V E R N A N C E

The Board develops strategies for the Group, 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 Group’s conduct and activities; and

c) ensure compliance with the Group’s legal and regulatory objectives.

D I S C L O S U R E P R I N C I P L E S A N D R E C O M M E N D A T I O N S

The Group reports below on how it has followed (or otherwise departed from) each of

with a view to making amendments where applicable after considering the Group’s size and the resources it has available.

As the Group’s activities develop in size, nature and scope, the size of the Board and the implementation of any additional formal Corporate governance committees will be given

further consideration.

B O A R D

Roles and responsibilities of the Board and Senior executives (Recommendations: 1.1, 1.3)

The Company has established the functions reserved to the Board, and those delegated to Senior executives are set out in their individual employment contracts.

The Company’s Board of directors assume the following responsibilities:

a) developing initiatives for profit and asset growth;

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.

Senior executives are responsible for supporting and assisting the Managing director with the running the general operations and financial business of the Company, in accordance with the delegated authority of the Board.

A summary of the Board functions and a summary of the functions delegated to Senior executives is available on the Company’s website.

Skills, experience, expertise and period of office of each director (Recommendation: 2.6)

A profile of each director setting out their skills, experience, expertise and period of o"ce is set out in the Directors’ Report.

The Board of Directors is

responsible for Corporate

governance of the Group having

regard to the ASX Corporate

Governance Council’s Corporate

Governance Principles

and Recommendations

(‘Principles and Recommendations’).

3 5


Director independence (Recommendations: 2.1, 2.2, 2.3, 2.6)

The Board does not have a majority of directors who are independent. The Board is of the view that given the Company’s size and composition, the Board’s current composition was the best structure for the Company’s objectives during the period.

The independent directors of the Company during the period were Mr Vilensky and Mr Rowbottam.

These directors are considered independent because they are non-executive directors who were not members of management nor were they within the last three years and who were free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of his judgment.

Independence is measured having regard to the relationships listed in Box 2.1 of the Principles & Recommendations.

As Mr Frankie Li is an o"cer of a substantial shareholder and Mr Zhongsheng Liu is a director of substantial shareholder neither Non-executive director satisfies the independence guidelines referred to above. The Board considers that these facts have not impaired either director from acting in an independent manner and in the best interests of the Company.

The independent Chairman of the Board is Mr Vilensky and the Chief executive o"cer is Mr Gale.

Independent professional advice (Recommendation: 2.6)

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.

Selection and (re) appointment of directors (Recommendation: 2.6)

Election of Board members is substantially the province of the shareholders in general meetings. 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 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.

B O A R D C O M M I T T E E S

Nomination committee (Recommendations: 2.4, 2.6)

The Company has not established a separate Nomination committee. Given the current size and composition of the Board, the Board believes that there would be no e"ciencies gained by establishing a separate Nomination committee. Accordingly, the Board performs the role of the Nomination committee.

A summary of the Company’s Nomination committee charter is available on the Company website.

Audit committee (Recommendations: 4.1, 4.2, 4.3, 4.4)

The Company has not established a separate Audit committee.

Given the current size and composition of the Board, the Board believes that there would be no e"ciencies gained by establishing a separate Audit committee. Accordingly, the Board performs the role of the Audit committee.

A summary of the Company’s Audit committee charter is available on the Company website.

Remuneration committee (Recommendations: 8.1, 8.2, 8.3, 8.4)

The Company has established a separate Remuneration committee. The Committee consists of Mr Vilensky who is the independent chairman of the Remuneration committee and Mr Rowbottam who is also an independent director. Given the current size and composition of the Board the committee does not have at least three members as desired under Recommendation 8.2.

Details of the number of Remuneration committee meetings held during the Reporting Period, the members of the Committee and their attendance at committee meetings is set out in the Directors’ report.

Details regarding the role and responsibilities of the Remuneration committee are set out in the Remuneration report which forms part of the Directors’ report.

There are no termination or retirement benefits for non-executive directors (other than for superannuation).

A summary of the Company’s Remuneration committee charter is available on the Company website.

3 6

A N N U A L R E P O R T 2 0 1 3

E X T E R N A L A U D I T

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.

P E R F O R M A N C E E V A L U A T I O N

Senior executives (Recommendations: 1.2, 1.3)

The Managing director reviews the performance of senior executives annually by individual interviews. The review is conducted with reference to the terms of senior executive’s employment contract.

Board, Remuneration committee and individual directors (Recommendations: 2.5, 2.6)

A formal performance evaluation of the Board, Remuneration committee and Non-executive directors and Managing director was not undertaken during the Reporting Period but the Company has committed to undertake such an evaluation by the end of 2013.

E T H I C A L A N D R E S P O N S I B L E D E C I S I O N M A K I N G

Code of conduct (Recommendations: 3.1, 3.5)

The Board is committed to the establishment and maintenance of appropriate ethical standards.

The Group has established a Code of conduct as to the practices necessary to maintain confidence in the Company’s integrity, practices necessary to take into account their legal obligations and the expectations of their stakeholders and responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

A summary of the Company’s Code of conduct is available on the Company website.

Diversity (Recommendations: 3.2, 3.3, 3.4, 3.5)

The Group is committed to having an appropriate blend of diversity including on the Board and in senior management positions.

The Board has established a Diversity policy and a summary of the policy is available on the Company’s website.

Continuous disclosure (Recommendations: 5.1, 5.2)

accountability at a senior executive level for that compliance.

The Company’s Continuous disclosure policy is available on the Company’s website.

Shareholder communication (Recommendations: 6.1, 6.2)

The Board ensures that Shareholders are kept informed of all major developments that a!ect their Shareholding or the Company’s state of a!airs 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 [email protected]

Risk management (Recommendations: 7.1, 7.2, 7.3, 7.4)

The Board is responsible for identifying business risks and implementing actions to manage those risks and corporate systems to assure quality.

The Board delegates these tasks to management who provide the Board with periodic reports identifying areas of potential risks and the safeguards in place to e"ciently manage material business risks.

Strategic and operational risks are reviewed at least annually as part of the forecasting and budgeting process.

I D E N T I F I C A T I O N A N D M A N A G E M E N T O F R I S K

Details regarding the Group’s Risk management are set out in the Directors’ report.

A summary of the Group’s Risk management policy is available on the Company website.

3 7

3 8

C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M EF O R T H E Y E A R E N D E D 30 J U N E 2013

NOTES2013

$2012

$

Finance revenue 5a 17,943 65,354

Other revenue 5b 6,337 861,014

Depreciation and amortisation expense (38,453) (24,932)

Employee benefits expense 6a (1,588,161) (1,480,514)

Finance expenses 6b (116,777) (23,641)

Exploration and evaluation expenditure 13 (3,249,511) (200,077)

Other expenses 6c (2,054,429) (2,061,890)

Loss before tax (7,023,051) (2,864,686)

Income tax expense 7 - -

Loss for the year (7,023,051) (2,864,686)

Loss attributable to owners of the Group 20 (7,023,051) (2,864,686)

Other comprehensive loss

Items that would subsequently be reclassi"ed to Pro"t or Loss:

Foreign currency translation 955,649 2,288,568

Total comprehensive loss for the year attributable to owners of the Group (6,067,402) (576,118)

Basic and diluted loss per share 8 (3.59) (1.78)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E

A N N U A L R E P O R T 2 0 1 3 3 9

C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O NA S A T 30 J U N E 2013

NOTES2013

$2012

$2011

$

ASSETS

Current assets

Cash and bank balances 9a 58,476 2,217,284 3,314,271

Trade and other receivables 10 1,231,620 1,031,881 537,265

Other financial assets 11 113,276 240,794 25,142

Total current assets 1,403,372 3,489,959 3,876,678

Non-current assets

Plant & equipment 12 303,750 236,098 109,734

Exploration and evaluation assets 13 26,179,232 21,474,835 4,096,962

Total non-current assets 26,482,982 21,710,933 4,206,696

Total assets 27,886,354 25,200,892 8,083,374

LIABILITIES

Current liabilities

Trade and other payables 14 2,541,515 1,808,331 650,920

Interest bearing loans and borrowings 15 550,000 - -

Deferred consideration 16a 1,478,498 1,295,505 -

Provisions 17 214,224 187,907 98,247

Total current liabilities 4,784,237 3,291,743 749,167

Non-current liabilities

Deferred consideration 15b 9,360,647 8,255,136 -

Total non-current liabilities 9,360,647 8,255,136 -

Total liabilities 14,144,884 11,546,879 749,167

Net assets 13,741,470 13,654,013 7,334,207

EQUITY

Contributed equity 18 27,388,521 21,248,962 12,198,743

Reserves 19 3,441,605 2,470,656 2,336,383

Accumulated losses 20 (17,088,656) (10,065,605) (7,200,919)

Total equity 13,741,470 13,654,013 7,334,207

The above consolidated statement of financial position should be read in conjunction with accompanying notes

4 0

C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T YF O R T H E Y E A R E N D E D 30 J U N E 2013

CONTRIBUTED EQUITY

$

SHARE BASED PAYMENT RESERVE

$

FOREIGN CURRENCY

TRANSLATION RESERVE

$

ACCUMULATED LOSSES

$TOTAL

$

Balance at 30 June 2011 12,198,743 1,419,856 916,527 (7,200,919) 7,334,207

Profit/(loss) for the period - - - (2,864,686) (2,864,686)

Other comprehensive income - - 134,273 - 134,273

Total comprehensive income - - 134,273 (2,864,686) (2,730,413)

Issue of shares 7,955,833 - - - 7,955,833

Option premium 882,667 - - - 882,667

Exercise of options 31,200 - - - 31,200

Share based payments 190,000 - - - 190,000

Transaction costs (9,481) - - - (9,481)

Balance at 30 June 2012 21,248,962 1,419,856 1,050,800 (10,065,605) 13,654,013

Profit/(loss) for the period - - - (7,023,051) (7,023,051)

Other comprehensive income - - 955,649 - 955,649

Total comprehensive income 955,649 (7,023,051) (6,067,402)

Issue of shares 5,441,397 - - - 5,441,397

Option premium 415,810 - - - 415,810

Share based payments 735,000 15,300 - - 750,300

Exercise of options 3,938 - - - 3,938

Transaction costs (456,586) - - - (456,586)

Balance at 30 June 2013 27,388,521 1,435,156 2,006,449 (17,088,656) 13,741,470

The above consolidated statement of changes in equity should be read in conjunction with accompanying notes.

C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y

A N N U A L R E P O R T 2 0 1 3 4 1

C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W SF O R T H E Y E A R E N D E D 30 J U N E 2013

NOTES2013

$2012

$

Cash flows from operating activities

Receipts from other income - 13,076

Payments to suppliers and employees (2,405,797) (2,931,031)

Interest received 17,943 65,354

Interest paid (8,321) (23,705)

Net cash flows (used in) operating activities 9b (2,396,175) (2,876,306)

Cash Flows from investing activities

Payments for plant and equipment (83,379) (164,605)

Proceeds from sale of plant and equipment - 1,000

Payments for exploration and evaluation assets (5,731,552) (6,344,167)

Proceeds from sale of exploration and evaluation assets - 847,938

Proceeds from/(payments for) security deposits 129,916 (195,652)

Net cash flows (used in) investing activities (5,685,015) (5,855,486)

Cash flows from financing activities

Proceeds from the issue of equity 5,861,145 8,869,700

Transaction costs of issuing shares (456,586) (9,481)

Proceeds from borrowing 850,000 -

Repayment of borrowings (300,000) -

Net cash (from) financing activities 5,954,559 8,860,219

Net (decrease)/increase in cash and cash equivalents (2,126,631) 128,427

Cash and cash equivalents at the beginning of the period 2,217,284 3,314,271

Net foreign exchange di!erence (32,177) (1,225,414)

Cash and cash equivalents at the end of the period 9a 58,476 2,217,284

The above consolidated statement of cash flows should be read on conjunction with accompanying notes.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S4 2

N O T E S T O T H E F I N A N C I A L S T A T E M E N T SF O R T H E Y E A R E N D E D 30 J U N E 2013

1 . C O R P O R A T E I N F O R M A T I O N

The consolidated financial statements of the Group, being Latin Resources Limited (the Company or Parent) and its subsidiaries, for the year ended 30 June 2013 were authorised for issue in accordance with a resolution of the directors on 25 September 2013.

Latin Resources Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock exchange.

The nature of the operations and principle activities of the Group are described in the directors’ report.

2 . S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S

(a) Basis of preparation

The financial report is a for-profit general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for exploration and evaluation properties which have been measured at fair value.

The financial report is presented in Australian dollars and all values are rounded to the nearest dollar unless otherwise stated.

(b) Compliance with IFRS

Accounting Standards Board.

(c) Change in accounting policy and disclosures.

The accounting policies adopted are consistent with those of the previous financial year except as follows:

Change in accounting policy – Exploration and Evaluation expenditure

In the current reporting period the Group has made a voluntary change to its Accounting Policy for reporting and disclosing Exploration and Evaluation expenditure.

All Exploration and Evaluation expenditure is now capitalised and carried forward as an asset in the Statement of financial position subject to ongoing review of the potential for economic recoverability and that rights to tenure are current.

The previous accounting policy was to charge all Exploration and Evaluation expenditure to the Statement of Profit or loss and other comprehensive income as incurred.

The directors are of the opinion that the change in accounting policy provides the users with reliable and more relevant information as:

the Group accounting policy is being aligned to the accounting policy followed at the operating entity level which are prepared in compliance with International Financial Reporting Standard IFRS 6: Exploration and Evaluation of Mineral Resources;

a large number of junior explorers in Australia do capitalise exploration and evaluation costs under AASB 6: Exploration and Evaluation of Mineral Resources. Adoption of this approach by the Group would not make the financial statements less reliable.

The capitalisation of exploration and evaluation costs in the Statement of Financial Position would be relevant information to users especially those who have or are contemplating investing in the Group to enable them to monitor and assess the value of the Group.

A N N U A L R E P O R T 2 0 1 3 4 3


E!ects of Change in Accounting Policy for Exploration and Evaluation expenditure

The financial report has been prepared on the basis of a retrospective application of the new accounting policy relating to exploration and evaluation expenditure. The following table demonstrates the e!ect of this change.

PREVIOUSLY REPORTED

30 JUNE 2012 $

EFFECT OF THE CHANGE IN

ACCOUNTING POLICY

$

RESTATED 30 JUNE 2012

$

Current assets

Statement of financial position 214,359 21,739 236,098

Plant and equipment 8,885,246 12,589,589 21,474,835

Exploration and evaluation assets 1,436,926 1,033,730 2,470,656

Reserves (21,643,203) 11,577,598 (10,065,605)

Accumulated losses

Statement of profit or loss and other comprehensive income

Depreciation and amortisation expense (46,401) 21,469 (24,932)

Unwinding of discount on Exploration and evaluation properties (1,725,514) 1,725,514 -

Exploration and evaluation expenditure (7,071,151) 6,871,074 (200,077)

Other expenses (1,942,984) (118,906) (2,061,890)

Loss attributable to owners of the Group (11,363,837) 8,499,151 (2,864,686)

Basic and diluted loss per share (0.07) 0.05 (0.02)

(d) New accounting standards and interpretations

(i) Standards and Interpretations adopted in the current year:

The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and e!ective for the current reporting period. The adoption of these amendments has not resulted in any changes to the Group’s accounting policies and has no e!ect on the amounts reported for the current or prior periods.



(ii) Standards and Interpretations issued but not yet adopted:

The following new and revised Standards and Interpretations were issued but not e!ective at the date of authorisation of these financial statements:

STANDARD / INTERPRETATION

EFFECTIVE FOR FINANCIAL PERIOD BEGINNING ON OR

AFTER

INITIAL APPLICATION TO THE ENTITY FOR THE YEAR ENDING

01 Jan 2015 31 Dec 2016

01 Jan 2013 31 December 2013

Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’

01 Jan 2013 31 Dec 2014

01 Jan 2013 31 Dec 2014

01 Jan 2013 31 Dec 2014

01 Jan 2013 31 Dec 2014

to Australian Accounting Standards arising from AASB 13’01 Jan 2013 31 Dec 2014

119 (2011)’

01 Jan 2013 31 Dec 2014

AASB 2011-4 Amendments to Australian Accounting Standards

Requirements

01 Jul 2013 31 Dec 2015

Financial Assets and Financial Liabilities’

01 Jan 2013 &

01 Jan 2013

31 Dec 2014 &

31 Dec 2015

arising from Annual Improvements 2009-2011 Cycle’01 Jan 2013 31 Dec 2014

Accounting Standards arising from Interpretation 20’

01 Jan 2013 31 Dec 2014

(e) Basis of consolidation

The consolidated financial statements comprise the financial statements of Latin Resources Limited and its subsidiaries as at 30 June each year (the Group).

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. Information regarding subsidiaries is disclosed in note 23(c).

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies or adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profits and losses resulting from inter-group transactions, have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group.

A N N U A L R E P O R T 2 0 1 3 4 5


(f) Comparative information

Certain comparative information in the financial report may have been reclassified to aid comparability with the current period.

(g) Going concern

The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

For the year ended 30 June 2013 the consolidated entity incurred a loss of $7,023,051 (2012: $2,864,686), had net cash outflows from operating and investing activities of $8,081,190 (2011: $8,731,792) and had net current liabilities of $3,380,865 (30 June 2012: net current assets of $198,216) as at 30 June 2013.

These conditions indicate a material uncertainty that may cast significant doubt about the company and the consolidated entity’s ability to continue as a going concern.

In the period subsequent to 30 June 2013, the company has received $800,000 through placement of equity shares and $2,500,000 through issue of convertible notes. The proceeds from these shares / convertible notes have been applied to settle the interest bearing liabilities of $550,000 and part of the creditors.

The ability of the company and the consolidated entity to continue as going concerns is principally dependent upon:

a) Reaching agreement with creditors amounting to approximately $1,200,000 to settle their obligations through issue of equity shares;

b) Sale of one of the exploration projects for cash consideration of US$2,500,000 (approximately $2,717,391) which is forecasted to occur in the month of November 2013; and

c) Reaching agreement with vendors of Guadalupito project to settle the current deferred consideration of $1,478,498 payable in January 2014 through a combination of equity and cash or the entire payment further deferred; and

d) If the Company is not successful in relation to the negotiation in (a) and (c) above, it will be required to raise funds of at least $600,000 (after costs) by 31 January 2014, and further amount of $2,500,000 (after costs) to enable the Consolidated Entity to meet its forecasted expenditure through to 30 September 2014.

The directors are in negotiation with the creditors and the vendors of Guadalupito project to settle the obligations through issue of equity shares and these negotiations are on-going.

The directors are in advanced discussion with a potential buyer for the sale of one of the exploration projects. The directors expect the terms of sale to be finalised by end of October 2013 and this sale will be subject to shareholders approval in the annual general meeting to be held in November 2013.

The company continues to engage in negotiations with a number of interested parties regarding potential project funding through the issue of equity and debt instruments. As at the date of this report the negotiations are ongoing.

The directors have prepared a cash flow forecast, which indicates that the company and the consolidated entity will have su!cient cash flows to meet commitments and working capital requirements for the 12 month period from the date of signing this financial report if they are successful in relation to matters referred to above.

Based on the cash flow forecasts and other factors referred to above, the directors are satisfied that the going concern basis of preparation is appropriate. In particular, given the company’s history of raising capital to date, the directors are confident of the company’s ability to raise additional funds as and when they are required.

Notwithstanding the above, there is a material uncertainty whether the company and the consolidated entity will continue as going concerns and, therefore, whether they will realise their assets and extinguish their liabilities in the normal course of business and at the amounts stated in the financial statements.

The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or to the amount and classification of liabilities that might be necessary should the company and the consolidated entity not continue as going concerns.



(h) Segment reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.

Operating segments have been identified based on the information provided to the chief operating decision makers being the Board.

Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements.

The Group determines and presents operating segments based on the information internally provided to the Board.

(i) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Interest income

Revenue is recognised as the interest accrues (using the e!ective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

(j) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary di!erences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary di!erences except:

deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, a!ects neither the accounting profit nor taxable profit or loss; or

when the taxable temporary di!erence is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary di!erences can be controlled and it is probable that the temporary di!erence will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary di!erences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary di!erences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

when the deferred income tax asset relating to the deductible temporary di!erence arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, a!ects neither the accounting profit nor taxable profit or loss; or

when the deductible temporary di!erence is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary di!erence will reverse in the foreseeable future and taxable profit will be available against which the temporary di!erence can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that su"cient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

A N N U A L R E P O R T 2 0 1 3 4 7


Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are o!set only if a legally enforceable right exists to set o! current tax assets against current tax liabilities and the deferred tax assets and liabilities related to the same taxable entity and the same taxation authority.

(k) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of GST except:

when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(l) Leases

Leases in which a significant portion of the risks and rewards of ownership benefits are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to Profit or Loss on a straight lined basis over the life of the lease.

(m) Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax e!ect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(n) Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities in the balance sheet.

(o) Property, plant & equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Plant and equipment - over 3 to 5 years; and

Motor Vehicles - over 8 years



The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the di!erence between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the item is derecognised.

(p) Exploration and evaluation expenditure

Exploration and evaluation expenditure is capitalised provided the rights to tenure of the area of interest is current and either:

the exploration and evaluation activities are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; or

exploration and evaluation activities in the area of interest have not, at the reporting date, reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or relating to, the area of interest are continuing.

When technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then any

reclassification, capitalised exploration and evaluation expenditure is assessed for impairment.

The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the cash generating unit level whenever facts and circumstances suggest that the carrying value of the asset may exceed its recoverable amount.

An impairment exists when the carrying amount of an asset or cash generating unit exceeds its estimated recoverable amount. The asset or cash generating unit is then written down to its recoverable amount. Any impairment losses are recognised in the statement of profit or loss and other comprehensive income.

(q) Trade and other payables

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

(r) Deferred consideration

Deferred consideration arises when settlement of all or any part of the cost of an exploration and evaluation properties is deferred.

It is stated at fair value at the date of acquisition, which is determined by discounting the amount due to present value at t hat date.

Interest is imputed on the fair value of non-interest bearing deferred consideration at the discount rate and capitalised as part of exploration and evaluation properties.

At each balance sheet date deferred consideration comprises the remaining deferred consideration valued at acquisition plus interest imputed on such amounts from acquisition to the balance sheet date.

(s) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

Provisions are measured at the present value of managements best estimate of the expenditure required to settle the present obligation at the balance sheet date. If the e!ect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs.

A N N U A L R E P O R T 2 0 1 3 4 9


(t) Interest bearing loans and borrowings

Interest bearing loans are recognised as initially at fair value, net of transaction costs incurred on the date at which the Group becomes a party to the contractual obligations of the instrument. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the interest rate method.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

(u) Employee benefits

Wages, salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

Long service leave and other employment entitlements

The liability for long service leave and other employment entitlements is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

(v) Foreign currency translation

Functional and presentation currency

Each entity in the Group determines its own functional currency base on the primary economic environment and items included in the financial statements of each entity are measured using that functional currency.

The consolidated financial statements are presented in Australian dollars, which is Latin Resources Limited’s functional and presentation currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency at the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at a rate of exchange ruling at the reporting date.

All exchange di!erences in the consolidated financial statements are taken to the Statement of comprehensive income with the exception of di!erences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the Statement of comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in equity relating to that particular foreign operation is recognised in the Statement of comprehensive income. Tax charges and credits attributable to exchange di!erences on those borrowings are also recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Group companies

The functional currency of Peruvian Latin Resources SAC is United States dollars.

The functional currency of this subsidiary has been translated into Australian dollars for presentation purposes. The assets and liabilities of this subsidiary are translated using the exchange rates prevailing at the reporting date; revenues and expenses are translated using average exchange rates for the year; and equity transactions eliminated on consolidation are translated at exchange rates prevailing at the dates of transactions. The resulting di!erence from translation is recognised in a foreign currency translation reserve through other comprehensive income.



(w) Share-based payment transactions

The Group provides benefits to directors, employees and other parties in the form of share-based payment transactions,

transactions’). The Group has also provided benefits to various parties in the form of cash-settled share based payments, whereby the various parties provide goods and services in exchange for cash, the amounts of which are determined by reference to movements in the price of the shares.

Equity settled transactions

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the Statement of comprehensive income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Cash settled transactions

For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.

3 . S I G N I F I C A N T A C C O U N T I N G J U D G E M E N T S , E S T I M A T E S A N D A S S U M P T I O N S

Significant accounting judgements

In the process of applying the Group’s accounting policies management has the following significant accounting judgements apart from those involving estimations, which have the most significant e!ect on the amounts recognised in the financial statements.

Determination of mineral resources and ore reserves

The Group reports its mineral resources and ore reserves in accordance with the Australasian Code for Reporting of Exploration Results,

ore reserves were prepared by or under the supervision of Competent Persons as defined in the JORC code.

There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation may change significantly when new information becomes available.

Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in reserves or resources being restated.

Impairment of capitalised Exploration and evaluation expenditure

The future recoverability of capitalised acquisition costs is dependent on a number of factors, including whether the Group decides to exploit the related concession itself or, if not, whether it can successfully recover the related exploration and evaluation asset through sale.

Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices.

To the extent that capitalised Exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made.

A N N U A L R E P O R T 2 0 1 3 5 1


In addition, Exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be written o!, profits and net assets will be reduced in the period in which this determination is made.

Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Share-based payment transactions

The Group measures the cost of equity-settled and cash-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model and the assumptions and carrying amount at the reporting date.

Deferred income tax benefit from carried forward tax losses

The future recoverability of the carried forward tax losses are dependent upon Group’s ability to generate taxable profits in the future in the same tax jurisdiction in which the losses arise. This is also subject to determinations and assessments made by the taxation authorities. The recognition of a deferred tax asset on carried forward tax losses (in excess of taxable temporary di!erences) is dependent on management’s assessment of these two factors. The ultimate recoupment and the benefit of these tax losses could di!er materially from management’s assessment.

4 . O P E R A T I N G S E G M E N T I N F O R M A T I O N

The Group has identified its operating segments in accordance with its accounting policy as set out in note 2(h) and based on the internal reports that are reviewed and used by the Board (chief operating decision maker) in assessing performance and in determining the allocation of resources.

The Group’s two operating segments are Australia and Peru. Discrete financial information regarding these operating segments is reported to the Board on a monthly basis.

The following is an analysis of the Group’s revenues, results, assets, liabilities by reportable operating segment.

2013AUSTRALIA

$PERU

$TOTAL

$

Revenue

Interest revenue 17,362 581 17,943

Other income - 6,337 6,337

Total revenue 17,362 6,918 24,280

Results

Depreciation & amortisation expense (13,588) (24,865) (38,453)

Share based payments (225,000) - (225,000)

Interest expense (11,039) (2,888) (13,927)

Net foreign exchange gain 72,187 (16,116) 56,071

Segment loss (3,702,711) (3,320,340) (7,023,051)

Segment assets 3,618,124 24,268,230 27,886,354

Segment liabilities (1,394,146) (12,750,737) (14,144,883)

Additions to non-current assets

Plant & equipment 30,018 97,343 127,361

Exploration & evaluation properties 1,833,664 4,572,826 6,460,490

Total additions to non-current assets 1,863,682 4,670,169 6,533,851



2012

Revenue

Interest revenue 64,937 417 65,354

Other income 13,076 847,938 861,014

Total revenue 78,013 848,355 926,368

Results

Depreciation & amortisation expense (12,047) (12,885) (24,932)

Share based payments (190,000) - (190,000)

Interest expense (5,907) (64) (5,971)

Net foreign exchange gain 118,885 (11,910) 106,976

Loss on disposal of plant and equipment (1,096) - (1,096)

Segment loss (2,639,246) (225,440) (2,864,686)

Segment assets 4,991,015 20,209,877 25,200,892

Segment liabilities 436,686 11,110,194 11,546,880

Additions to non-current assets

Plant & equipment 23,884 143,352 167,236

Exploration & evaluation assets 1,655,379 5,385,897 7,041,276

Total additions to non-current assets 1,679,263 5,529,249 7,208,512

Segment profit represents the profit earned by each segment without allocation of corporate overhead costs. This is the information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

5 . R E V E N U E 2013

$ 2012

$

(a) Finance revenue

Interest received 17,943 65,354

(b) Other revenue

Proceeds from sale of exploration and evaluation properties - 847,938

Sundry income 6,337 13,076

6,337 861,014

A N N U A L R E P O R T 2 0 1 3 5 3


6 E X P E N S E S

2013 $

2012 $

(a) Employee benefits expense

Employee benefits 1,363,161 1,290,514

Share based payments 225,000 190,000

1,588,161 1,480,514

(b) Finance expenses

Bank fees and charges 20,051 17,734

Interest expense 13,927 5,907

Other finance charges1 82,800 -

116,777 23,641

(c) Other expenses

Administration expenses 718,613 558,395

Corporate expenses 1,131,227 1,433,681

Net Foreign exchange (gain)/loss (56,071) (106,976)

Occupancy expenses 260,660 175,630

(Profit)/loss on disposal of plant and equipment - 1,096

2,054,429 2,061,826

1 Other finance charges relate to fees associated with short term loans obtained by the Company during the period.

7 . I N C O M E T A X E S

2013 $

2012 $

The components of income tax benefit comprise:

Current income tax benefit - -

Deferred income tax benefit - -

Income tax benefit reported in the consolidated statement of profit or loss and other comprehensive income - -

Income tax expense recognised in equity - -

Accounting loss before tax (7,023,051) (2,864,686)

At the statutory income tax rate of 30% (in Australia and Peru) (2,106,915) (859,406)

Other non-deductible expenditure for income tax purposes 453,469 585,861

Prior year adjustment (unders/overs) 26,895 -

Unrecognised tax losses 1,626,551 273,545

Income tax benefit reported in the consolidated statement of profit or loss and other comprehensive income - -



2012 $

2011 $

Deferred tax assets

Carried forward revenue losses - Australia 2,253,570 1,204,620

Carried forward revenue losses - Peru 972,514 830,715

Exploration and evaluation assets 22,721 -

Provisions and accruals 62,367 3,333

Other 475,766 48,790

Gross deferred tax asset 3,786,939 2,087,459

O!set against deferred tax liability - (105,349)

Unrecognised tax losses 3,786,939 1,982,110

Deferred tax liabilities

Exploration and evaluation assets - (97,527)

Plant and equipment - (7,822)

Gross deferred tax liability - (105,349)

O!set against deferred tax asset - 105,349

Net deferred tax liability - -

8 . E A R N I N G S P E R S H A R E

2013 Cents

2012 Cents

Basic and diluted earnings per share (3.59) (1.78)

$ $

Loss used in calculating basic and diluted earnings per share (7,023,052) (2,864,686)

Number Number

Weighted average number of ordinary shares used in calculating basic and diluted earnings per share 195,829,795 160,669,752

At balance date there were 42,561,294 (2012: 62,446,000) share options on issue which were anti dilutive and therefore excluded from the weighted average number of ordinary shares used in calculating dilutive earnings per share.

A N N U A L R E P O R T 2 0 1 3 5 5


9 . C A S H & C A S H E Q U I V A L E N T S

2013 $

2012 $

2011 $

(a) Cash and short term deposits

Cash in hand 894 1,825 930

Cash at bank 57,582 825,580 3,293,341

Short term deposits - 1,389,879 20,000

58,476 2,217,284 3,314,271

2013 $

2012 $

(b) Reconciliation of net loss after income tax to net cash flows from operating activities:

Loss for the year (7,023,051) (2,864,686)

Other income from sale of exploration and evaluation properties - (847,938)

Non cash adjustments:

Depreciation 38,453 24,932


Net foreign exchange (gain)/loss (56,071) (106,976)

Exploration and evaluation assets written o! 3,249,511 200,077

(Profit)/loss on sale of plant & equipment - 1,096

Working capital adjustments:

(Increase)/decrease in trade and other receivables (93,042) (494,617)

Increase/(decrease) in trade and other payables 504,787 936,833

Increase/(decrease) in provisions 81,496 84,973

Net cash flows from operating activities (2,396,175) (2,876,306)

1 0 . T R A D E & O T H E R R E C E I V A B L E S

2013 $

2012 $

2011 $

Other receivables 39,792 59,622 43,692

Goods & services tax1 1,176,970 945,902 414,479

Related party receivables 822 9,031 156

Prepayments 14,037 17,326 78,938

1,231,620 1,031,881 537,265

1 Goods and services tax (‘GST’) includes $1,129,093 (2012: $885,741) receivable from the company’s subsidiary in Peru which can only be offset against GST attributable to future sales.

1 1 . O T H E R F I N A N C I A L A S S E T S

2013 $

2012 $

2011 $

Security deposits/bonds 113,276 240,794 25,142



1 2 . P L A N T & E Q U I P M E N T

2013 $

2012 $

2011 $

Plant and equipment - other

At cost 370,078 242,717 122,279

Less Accumulated depreciation (99,996) (49,188) (32,028)

270,082 193,529 90,251

Motor vehicles

At cost 62,896 57,243 26,386

Less Accumulated Depreciation (29,228) (14,675) (6,903)

33,668 42,568 19,483

Total plant and equipment 303,750 236,098 109,734

Plant and equipment - other

Balance at 1 July 193,529 90,251 59,718

Additions 127,361 136,380 54,966

Disposals - (2,096) -

Depreciation expense (23,900) (17,160) (8,201)

E!ects of exchange rate movements (26,908) (13,845) (16,232)

Balance at 30 June 270,082 193,530 90,251

Motor vehicles

Balance at 1 July 42,568 19,483 30,570

Additions - 30,857 -

Disposals - - -

Depreciation expense (14,553) (7,772) (5,379)

E!ects of exchange rate movements 5,653 - (5,708)

Balance at 30 June 33,668 42,568 19,483

Total 303,750 236,098 109,734

A N N U A L R E P O R T 2 0 1 3 5 7


1 3 . E X P L O R A T I O N A N D E V A L U A T I O N A S S E T S

2013 $

2012 $

2011 $

Exploration and evaluation properties

Balance at 1 July 12,230,046 813,595 641,316

Additions 1,738,808 11,545,364 172,269

Amounts expensed (458,228) (172,652) -

Foreign currency transaction movement 1,348,415 43,749 -

Balance at 30 June 14,887,797 12,230,046 813,585

Exploration and evaluation expenditure

Balance at 1 July 9,244,790 3,283,376 589,195

Additions 4,153,107 5,868,251 2,694,181

Amounts expensed (2,820,040) (27,425) -

Foreign currency transaction movement 713,578 120,588 -

Balance at 30 June 11,291,435 9,244,790 3,283,376

Total 26,179,232 21,474,836 4,096,961

1 4 . T R A D E & O T H E R P A Y A B L E S

2013 $

2012 $

2011 $

Trade payables 2,027,413 1,729,071 539,784

Other payables 268,949 23,980 19,581

Accruals 245,153 55,280 91,570

2,541,515 1,808,331 650,920

1 5 . I N T E R E S T B E A R I N G L O A N S & B O R R O W I N G S

2013 $

2012 $

2011 $

Loans 550,000 - -

This amount refers to two short term unsecured loans borrowed from third parties at interest rates ranging from 12% to 16% per annum. The loans were repaid in full on 21 August 2013.

1 6 . D E F E R R E D C O N S I D E R A T I O N

2013 $

2012 $

2011 $

(a) Current 1,478,498 1,295,505 -

(b) Non-current 9,360,647 8,255,136 -

Total 10,839,145 9,550,641 -

Deferred consideration refers to the fair value of the purchase price the Company agreed to pay in February 2011 to acquire 20 concessions covering 14,000 hectares that form part of the Guadalupito project. The purchase price of US$20.035 million is payable in instalments over 10 years.



1 7 . P R O V I S I O N S

2013 $

2012 $

2011 $

Employee benefits - Leave entitlements 214,224 187,907 98,247

1 8 . C O N T R I B U T E D E Q U I T Y

2013 $

2012 $

2011 $

(a) Issued capital

Issued capital 25,674,545 19,950,795 11,783,243

Option premium 1,713,977 1,298,167 415,500

27,388,522 21,248,962 12,198,743

NUMBER $

(b) Movements in issued capital

Shares

Balance at 1 July 2011 148,134,619 11,783,243

Share purchase plan 1,686,522 438,500

Exercise of options 104,000 31,200

Placement 30,000,000 7,517,333

Share based payment 1,000,000 190,000

Transaction costs - (9,481)

Balance at 30 June 2012 180,925,141 19,950,795

Placement1 8,796,563 2,463,038

Placement2 13,517,669 2,027,650

Placement3 6,338,060 950,709

Share based payment4 1,000,000 225,000

Share based payment5 3,000,000 510,000

Exercise of options6 19,692 3,939

Transaction costs - (456,586)

Balance at 30 June 2013 213,597,125 25,674,545

Option premium

Balance at 1 of July 2011 41,550,000 415,500

Placement 10,000,000 882,667

Balance at 30 June 2011 51,550,000 1,298,167

Lapsed7 (41,550,000) -

Entitlement issue8 41,580,986 415,810

Share based payments9 1,000,000 -

Exercised6 (19,692) -

Lapsed10 (10,000,000) -

Balance at 30 June 2012 42,561,294 1,713,977

A N N U A L R E P O R T 2 0 1 3 5 9


1 On the 10 September 2012, 8,796,563 shares were issued at $0.28 per share to sophisticated investors.2 On the 31 December 2012, 13,517,669 shares were issued at $0.15 per share to sophisticated investors. 3 On the 26 April 2013, 6,338,060 shares were issued at $0.15 to Junefield High Value Metals Investments Limited. 4 On the 26 April 2013, 1,000,000 shares were issued to two employees for nil proceeds in accordance with their employment contracts. 5 On the 21 May 2013, 3,000,000 shares were issued at a deemed value of $0.17 per share as partial settlement of a vendor commitment.6 On the 27 June 2013, 19,692 shares were issued due to the exercise of 19,692 options at an exercise price of $0.20 each.7 On the 31 March 2013 41,550,000 LRSO options exercisable at $0.30 each lapsed.8 During the period 14 May 2013 to 30 June 2013, 41,580,986 options were issued at $0.01 per option. The options are exercisable at $0.20 each on or before 26 October

2014 and were issued in accordance with an Option Entitlement issue.9 Issued on 26 June 2013 as part of the loan agreement with Mighty River International Limited.10 On the 26 June 2013 10,000,000 LRSAI options exercisable at $0.30 each lapsed.

1 9 . R E S E R V E S

2013 $

2012 $

2011 $

Foreign currency translation reserve

Balance at 1 July 1,050,800 916,527 (155,365)

Foreign currency translations 955,649 134,273 1,017,892

Balance at 30 June 2,006,449 1,050,800 916,527

Share based payments reserve

Balance at 1 July 1,419,856 1,419,856 -

Share based payments 15,300 - 1,419,856

Balance at 30 June 1,435,156 1,419,856 1,419,856

Total 3,441,605 2,470,656 2,336,383

Nature and purpose of reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange di!erences arising from the translation of the financial statements of foreign subsidiaries.

Share based payments reserve

The share based payments reserve is used to recognise the value of options provided to directors employees and other parties as part of their remuneration and fees. Refer note 21 for further details regarding share based payments.

2 0 . A C C U M U L A T E D L O S S E S

2013 $

2012 $

2011 $

Balance at 1 July (10,065,605) (7,200,919) (4,098,472)

Loss after income tax (7,023,051) (2,864,686) (3,102,447)

Balance at 30 June (17,088,656) (10,065,605) (7,200,919)



2 1 . S H A R E B A S E D P A Y M E N T S

2013 $

2012 $

(a) Expenses arising from share based payment transactions

Shares issued to employees1 225,000 190,000

Shares issued to third parties2 510,000 -

Options issued to third parties3 15,300 -

750,300 190,000

1 1,000,000 shares issued in accordance with employment contracts, recorded at market value at the vesting date and recognised as part of employee benefit expense - refer note 6a.

2 3,000,000 shares issued as part settlement of a vendor commitment. 3 1,000,000 Options issued in accordance with loan agreement with Mighty River International Limited, recorded at fair value (see below) and recognised as

part of financing costs - refer note 6b.

(b) Movements in issued capital

Options were priced using a binomial option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the e!ects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations.

INPUT VARIABLE JUNE 2013

Grant date share price $0.08

Exercise price $0.30

Expected volatility 100%

Risk-free interest rate 2.5%

Option life 2.02 years

NUMBER OF OPTIONS

WEIGHTED AVERAGE EXERCISE PRICE

(c) Movements in share options during the year

Balance at 1 July 2011 21,000,000 $0.30

Granted during the year - -

Forfeited, exercised and expired during the year - -

Balance at 30 June 2012 21,000,000 $0.30

Granted during the year 1,000,000 $0.30

Forfeited, exercised and expired during the year (21,000,000) $0.30

Balance at 30 June 2013 1,000,000 $0.30

2 2 . K E Y M A N A G E M E N T P E R S O N N E L D I S C L O S U R E S

(a) Compensation of key management personnel

2013 $

2012 $

Short term employee benefits 1,302,536 1,126,672

Post-employment benefits 43,785 35,501


1,431,321 1,352,173

A N N U A L R E P O R T 2 0 1 3 6 1


(b) Share holdings of key management personnel

The number of shares held by directors and other key management personnel both directly and indirectly are set out below.

2013BALANCE AT 1 JULY

GRANTED AS REMUNERATION

ON EXERCISE OF OPTIONS

NET CHANGE OTHER

BALANCE AT 30 JUNE

Directors

David Vilensky 1,269,230 - - - 1,269,230

Chris Gale 12,537,692 (3,450,000)1 9,087,692

Frankie Li - - - - -

Zhongsheng Liu - - - - -

Mark Rowbottam 6,498,730 - - 30,000 6,528,730

Other key management personnel

Anthony Begovich - - - 10,000 10,000

Andrew Bristow 1,000,000 500,000 - (222,165) 1,277,835

Carlos Spier - - - 100,000 100,000

21,305,652 500,000 - (3,732,165) 18,273,487

1 450,000 shares have been excluded from the total shareholding of Chris Gale as they refer to shares held by family members who are no longer considered dependents.

2012BALANCE AT 1 JULY

GRANTED AS REMUNERATION

ON EXERCISE OF OPTIONS

NET CHANGE OTHER

BALANCE AT 30 JUNE

Directors

Roderick Brown1 807,692 - - (807,692) -

David Vilensky 1,269,230 - - - 1,269,230

Chris Gale 12,480,000 - - 57,692 12,537,692

Frankie Li - - - - -

Mark Rowbottam 6,498,730 - - - 6,498,730


Anthony Begovich - - - - -

Andrew Bristow - 1,000,000 - - 1,000,000

Zane Lewis - - - - -

Jim Moran - - - - -

21,055,652 1,000,000 - (750,000) 21,305,652

1 Resigned on 29 May 2012.



(c) Option holdings of key management personnel

The number of options held by directors and other key management personnel both directly and indirectly are set out below.

2012BALANCE AT

1 JULYGRANTED AS

REMUNERATION EXERCISEDNET CHANGE

OTHERBALANCE

AT 30 JUNEVESTED

EXERCISABLEVESTED NOT

EXERCISABLE

Directors

David Vilensky 250,000 - - 384,515 634,515 634,515 -

Chris Gale 496,000 - - 32,846 528,846 528,846 -

Frankie Li - - - - - - -

Zhongsheng Liu - - - - - - -

Mark Rowbottam 1,295,900 - - (1,295,900) - - -


Anthony Begovich - - - 1,000,000 1,000,000 1,000,000 -

Andrew Bristow 300,000 - - 230,110 530,110 530,110 -

2,341,900 351,571 2,693,471 2,693,471

2012BALANCE AT

1 JULYGRANTED AS

REMUNERATION EXERCISEDNET CHANGE

OTHERBALANCE

AT 30 JUNEVESTED

EXERCISABLEVESTED NOT

EXERCISABLE

Directors

Roderick Brown1 150,000 - - (150,000) - - -

David Vilensky 250,000 - - - 250,000 250,000 -

Chris Gale 2,496,000 - - (2,000,000) 496,000 496,000 -

Frankie Li - - - - - - -

Mark Rowbottam 1,295,900 - - - 1,295,900 1,295,900 -


Anthony Begovich - - - - - - -

Andrew Bristow 300,000 - - - 300,000 300,000 -

Zane Lewis - - - - - - -

Jim Moran - - - - - - -

4,491,900 - - (2,150,000) 2,341,900 2,341,900 -

1 Resigned on 29 May 2012.

(d) Loans to key management personnel

There were no loans to key management personnel during the current or prior year.

(e) Other transactions with key management personnel

Refer note 23 for details of other transactions with directors. There were no other transactions with other key management personnel during the current or prior year.

A N N U A L R E P O R T 2 0 1 3 6 3


2 3 . R E L A T E D P A R T Y D I S C L O S U R E S

(a) Remuneration of directors

Information of directors remuneration share and option holdings are disclosed in the Directors’ report.

(b) Other transactions with related parties

Allegra Capital Pty Ltd a related party of Mr Chris Gale paid fees totaling $3,660 (2012: $4,500) to the Company during the year in relation to the shared expenses.

Bowen Buchbinder & Vilensky lawyers, a related party of Mr David Vilensky, charged fees to the Company totaling $38,314 (2012: $77,163) in relation to legal matters.

(c) Subsidiaries

The consolidated financial statements include the financial statements of Latin Resources Limited and its 99.96% owned

Gale holds 0.04% of the shares in PLR on trust for Latin Resources Limited.

The Company has advanced funds to PLR which at the date of this report do not attract interest and are not subject to a repayment schedule.

(d) Ultimate parent company

Latin Resources Limited is the ultimate parent of the Group.

2 4 . C O M M I T M E N T S A N D C O N T I N G E N C I E S

Commitments

2013 $

2012 $

Operating lease commitments:

Not later than one year 408,028 334,095

Later than one year but not later than five years 545,856 775,694

Later than five years - -

953,884 1,109,789

Exploration commitments:

Not later than one year - 1,012,765

Later than one year but not later than five years - -


- 1,012,765

Contingencies

Lino Hilario Flores Cano - Option agreement

On 21 November 2011, PLR signed an exclusive and irrevocable transfer option agreement with Mr. Lino Hilario Flores Cano (Lino Flores) to acquire 100% of three mining concessions located in the department of Arequipa (Perú).

The agreed total transfer price was US$12,000,000, and will be paid according to payment schedule specified in the agreement.

PLR may exercise the option until February 2014; if PLR decides not to exercise the option, there is no obligation to complete the payment schedule.



Guadalupito project – Royalty obligation

common principal shareholder to acquire additional mining concessions for its Guadalupito project.

The Acquisition agreement requires PLR to pay the Vendors a net smelting royalty of 1% which is calculated on all extracted and commercialised minerals from the New concessions. The royalty is payable once commercial mining operations have been initiated and mineral products are produced, at an average rate of not less than 70% of the normal capacity of the mining facilities.

Total Genius - Option agreement

On November 29, 2011 PLR signed a transfer option agreement with Total Genius Iron Mining S.A.C. (Total Genius), by which it gives to Total Genius, the sole and exclusive option to acquire 70% of the rights and shares of 5 concessions and the granting of the transfer of rights to carry out exploration, exploitation, transportation and commercial activities during the term of the contract.

If the option is exercised, PLR and Total Genius agree to create a new entity with Total Genius having 70% of the issued capital and PLR the remaining 30%.

If the option is not exercised and the contract is terminated, Total Genius is not entitled to claim payments made to the Company or the amounts invested in concessions or studies or any other disbursement under the contract. Also, all maps, reports and other documents related to the concessions Total Genius has in his possession will be transferred to PLR without any charge.

Total Genius - Assignment of option agreement

On April 13, 2012, PLR signed an assignment agreement, which assigns to Total Genius 70% of the transfer option with Lino Flores. As a result of the agreement Total Genius assumes 70% of payment obligations in accordance with the provisions of the agreement with Lino Flores.

2 5 . F I N A N C I A L R I S K M A N A G E M E N T O B J E C T I V E S A N D P O L I C I E S

The Group’s principal financial instruments comprise cash and cash equivalents, trade and other receivables, other financial assets, trade and other payables, loans and deferred consideration.

The main risks a!ecting these financial instruments are market risk (e.g. foreign currency risk and interest rate risk), credit risk and liquidity risk.

The Board manages the Group’s exposure to these risks which are recurring items for deliberation at Board meetings.

(a) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities and the Group’s net investment in its subsidiary in Peru.

The Group currently does not hedge its net investment in its foreign operations.

The Group also has transactional currency exposures from operating costs and concession payments that are denominated in

The Board attempts to mitigate the e!ect of its foreign currency exposure by acquiring USD in accordance with budgeted expenditures when the exchange rate is favourable.

A N N U A L R E P O R T 2 0 1 3 6 5


As at 30 June 2013, the Group had the following exposure to USD that is not designated in cash flow hedges:

2013 $

2012 $

Financial assets

Cash and cash equivalents 28,639 641,157

Trade and other receivables 1,177,635 962,689

Other financial assets 39,723 187,068

1,245,997 1,790,914

Financial liabilities

Trade and other payables (1,744,335) (1,404,562)

Deferred consideration1 (10,839,145) (9,550,641)

12,583,480 (10,955,203)

Net exposure (11,337,483) (9,164,289)

1 This is the carrying amount of the liability recognised in the Statement of Financial Position. As at 30 June 2013, the Group had an obligation to pay USD 18 million in various instalments by 30 January 2021. The liability is recognised in the Group’s subsidiary in Peru whose functional currency is US dollar.

The following sensitivity analysis is based on the judgements by management of reasonably possible movements in foreign exchange rates after consideration of the views of market commentators.

The sensitivity is also based on foreign currency risk exposures to financial asset and liability balances as at 30 June which are on average not expected to significantly increase over the next twelve months.

The following tables demonstrate the sensitivity to a reasonably possible change in the AUD/USD exchange rate with all other variables held constant.

The impact on the Group’s pre-tax profit is due to changes in the fair value of monetary assets and liabilities. The impact on the Group’s equity is due to changes in the fair value of the deferred consideration.

The Group’s exposure for all other currencies is not material.

2013

EFFECT ON PROFIT BEFORE TAX

$

EFFECT ON EQUITY

$

AUD/USD +10% (49,834) (1,133,748)

AUD/USD -10% 49,834 1,133,748

2012

AUD/USD +5% 19,318 (458,214)

AUD/USD -10% (38,635) 916,429

The movement in pre-tax profit is a result of changes to the fair value of monetary assets and liabilities denominated in USD.

The deferred consideration liability is recognised in the Group’s subsidiary in Peru whose functional currency is US dollars. Hence the sensitivity of deferred consideration is recognised in equity. The sensitivity is measured based on the carrying amount of the liability rather than the contractual cash outflows up to 30 January 2021.

(b) Interest rate risk

FInterest rate risk is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates. The Group is exposed to interest rate risk on its cash and cash equivalent balances.

The Board constantly monitors its interest rate exposure and attempts to maximise interest income by using a mixture of fixed and variable interest rates, whilst ensuring su"cient funds are available for the Group’s operating activities.

As at 30 June 2013 the Group had the following exposure to Australian variable interest rate risk.



2013 $

2012 $

Financial assets

Cash and cash equivalents 58,476 2,217,284

The following sensitivity analysis is based on the judgements by management of reasonably possible movements in interest rates after consideration of the views of market commentators.

As at 30 June 2013, if interest rates had moved, as indicated in the table below, with all other variables held constant, pre-tax loss would have been a!ected as follows:

Pre-tax loss

+0.5% (50 basis points) 292

-1.0% (100 basis points) (292)

The sensitivity is less in 2013 than in 2012 due to a decrease in the cash and cash equivalents balance.

(c) Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.

The Group’s maximum exposure to credit risk at the reporting date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the Statement of financial position.

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents (refer note 9a) and trade and other receivables (refer note 10) and other financial assets (refer note 11).

The Group only trades with recognised creditworthy third parties. The Group only invests in high credit quality financial institutions with a credit rating of investment grade or better.

(d) Liquidity risk

Liquidity risk is the risk that the Group will not have su"cient cash to meet its commitments as and when they fall due.

The Board manages liquidity risk by regularly reviewing the Group’s liquidity position, monitoring forecast and actual cash flows, and matching the maturity profiles of financial assets and liabilities.

The following tables summarise the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.

2013

LESS THAN 1 MONTH

$ 13 MONTHS

$312 MONTHS

$15 YEARS

$5+ YEARS

$TOTAL

$

Trade and other payables 436,084 436,084 872,168 - - 1,744,335

Interest bearing loans 550,000 - - - - 550,000

Deferred consideration - - 1,617,251 8,625,337 9,164,420 19,407,008

986,084 436,084 2,489,418 8,625,337 9,164,420 21,701,344

2012

LESS THAN 1 MONTH

$ 13 MONTHS

$312 MONTHS

$15 YEARS

$5+ YEARS

$TOTAL

$

Trade and other payables 13,417 1,794,915 - - - 1,808,332

Deferred consideration 294,377 - 686,881 6,868,806 10,793,838 18,643,901

307,794 1,794,915 686,881 6,868,806 10,793,838 20,452,233

A N N U A L R E P O R T 2 0 1 3 6 7


(e) Capital management

The Board is responsible for capital management of the Group. The Board’s objective is to ensure the entity continues as a going concern as well as to maintain an optimal structure to reduce the cost of capital.

The Group is dependent from time to time on its ability to raise capital from the issue of new shares, obtain debt and its ability to realise value from its existing assets. This involves the use of cashflow forecasts to determine future capital management requirements.

Capital management is undertaken to ensure a secure, cost e!ective and flexible supply of funds is available to meet the Group’s operating and capital expenditure requirements.

As at 30 June 2013 the Group is not subject to any external capital requirements.

The following table details the Group’s capital

NOTES2013

$2012

$

Cash & cash equivalents 9a 58,476 2,217,284

Trade and other receivables 10 1,231,620 1,031,881

Other financial assets 11 113,276 240,794

Trade and other payables 14 (2,541,516) (1,808,332)

Interest bearing loans 15 (550,000) -

Deferred consideration 16 (10,839,145) (9,550,641)

Net debt (12,527,288) (7,882,431)

Equity 18, 19 & 20 13,741,470 13,654,013

Total capital 1,214,182 5,771,582

2 6 . E V E N T S A F T E R R E P O R T I N G P E R I O D

Placement

On 30 July 2013 the Company announced the completion of a Placement to sophisticated and professional investors involving the issue of 11,428,574 ordinary shares at $0.07 per share raising gross proceeds of $800,000. Each new share comes with 1 free attaching listed option exercisable at $0.20 each on or before 26 October 2014 subject to shareholder approval.

Converting loan

On 21 August 2013 the company announced that it had accepted an o!er from Junefield High Value Metals Investments Limited

America and for general working capital purposes. The Converting Loan is to be replaced by a Convertible Note with an interest rate of 12% and a conversion price of $0.07, subject to shareholder approval.

Settlement of interest bearing loans

In August 2013 the Company repaid in full the interest bearing loans of $550,000 in cash.

Mariela

On 27 September 2013 the Company announced that it had entered into a Memorandum of Understanding with Total Genius Iron Mining SAC (TGIM) for the sale of its Mariela concessions for US$2,500,000. The transaction is expected to be completed in October 2013 subject to shareholder approval in November 2013.



2 7 . A U D I T O R S R E M U N E R A T I O N

2013 $

2012 $

Amounts received or due and receivable by Deloitte Touche Tohmatsu Australia for:

An audit or review of the financial report of the consolidated group 51,465 41,425

Amounts received or due and receivable by network firms of Deloitte Touche Tohmatsu Australia audit firms for:

An audit or review of the financial report of the consolidated group 29,500 27,140

Other services in relation to the consolidated group - 8,260

29,500 35,400

80,965 76,825

2 8 . P A R E N T E N T I T Y I N F O R M A T I O N

(a) Financial position

2013 $

2012 $

Assets

Current assets 158,010 2,256,986

Non-current assets 14,977,607 11,833,713

Total assets 15,135,617 14,090,699

Liabilities

Current liabilities 1,394,147 436,686

Net assets 13,741,470 13,654,013

Equity

Contributed equity 27,388,521 21,248,460

Reserves 1,408,456 1,409,856

Accumulated losses (15,055,507) (9,004,303)

13,741,470 13,654,013

(b) Financial performance

Loss of the parent entity (8,712,998) (5,301,040)

Total comprehensive loss of the parent entity (8,712,998) (5,301,040)

A N N U A L R E P O R T 2 0 1 3 6 9


(c) Contingencies and commitments

2013 $

2012 $

Operating lease commitments:

Not later than one year 408,028 184,778

Later than one year but not later than five years 545,856 343,273


953,884 528,050

Exploration commitments:

Not later than one year - 174,168

Later than one year - -

- 174,168

7 0 D I R E C T O R S ’ D E C L A R A T I O N

D I R E C T O R S ’ D E C L A R A T I O N

The directors declare that:

in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;

in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 2(b) to the financial statements;

in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and the consolidated entity; and

the directors have been given the declarations required by s295A of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors made pursuant to s.295 (5) of the Corporations Act 2001.

On behalf of the Directors


Signed on 27 September 2013, in Perth, Western Australia.

A N N U A L R E P O R T 2 0 1 3 7 1

A U D I T O R S ’ I N D E P E N D E N C E D E C L A R A T I O N

7 2 I N D E P E N D E N T A U D I T O R ’ S R E P O R T

I N D E P E N D E N T A U D I T O R ’ S R E P O R T

A N N U A L R E P O R T 2 0 1 3 7 3

I N D E P E N D E N T A U D I T O R ’ S R E P O R T

7 4

A S X A D D I T I O N A L I N F O R M A T I O N

The information was applicable as at 20 September 2013.

Distribution of equity securities

Shares

There were 227,544,213 ordinary fully paid shares on issue held by 605 individual shareholders. All issued ordinary shares carry one vote per share.

Options

The Company has the following classes of options on issue at 20 September 2012 as detailed below. Options do not carry any rights to vote.

CODE CLASS TERMS NUMBER

LRSOA Listed Exercisable at $0.20 each and expiring on 26 October 2014 45,542,780

LRSAI Unlisted Exercisable at $0.30 each and expiring on 25 June 2015 1,000,000

The number of equity holders by size and holding, in each class are:

RANGEORDINARY

SHARESOPTIONS

LISTEDOPTIONS UNLISTED

37 5

67 29

98 30

253 43

100,001 and over 150 23 1

Total 605 130 1

Holding less than a marketable parcel 120 106 -

Substantial shareholders

The substantial shareholders in the Company, as disclosed in substantial shareholding notices given to the company are:

SHAREHOLDERNO. OF

SHARES HELD%

HELD

Junefield High Value Metal Investment Ltd 46,745,060 22.20

Dempsey Resources Pty Ltd 23,329,122 10.92

Voting rights

In accordance with the Company’s Constitution:

on a show of hands every shareholder present in person or by proxy, attorney or representative of a shareholder has one vote and

on a poll every shareholder present in person or by proxy, attorney or representative of a shareholder has in respect of fully paid shares, one vote for every share held. No class of option holder has a right to vote, however the shares issued upon exercise of options will rank parri passu with the then existing issued fully paid ordinary shares.


A N N U A L R E P O R T 2 0 1 3 7 5


Twenty largest holders of quoted shares

SHAREHOLDERNO. OF

SHARES HELD%

HELD

1. Junefield High Value Metals Investments Limited 46,745,060 20.54

2. Dempsey Resources Pty Ltd 25,329,122 11.13

3. SRP RED Pty Ltd <SRP 2009 Investment A/C> 8,835,333 3.88

4. SCW RED Pty Ltd <SCW 2009 Investment A/C> 8,333,333 3.66

5. J P Morgan Nominees Australia Limited 7,750,000 3.41

6. Lascelles Holdings Pty Ltd 7,030,000 3.09

7. Saliba and Yvonne Sassine <Sassine Super Fund A/C> 5,000,000 2.20

8. Heelmo Holdings Pty Ltd <Deep Blue A/C> 4,475,000 1.97

9. Melbourne Capital Limited 4,000,000 1.76

10. Sixth Erra Pty Ltd <Sta! Super Fund A/C> 3,838,096 1.69

11. HSBC Custody Nominees (Australia) Limited 3,809,754 1.67

12. Alocasia Pty Limited <Camellia Super Fund A/C> 3,654,400 1.61

13. 3,528,612 1.55

14. Elmer Moises Rosales Castillo 3,000,000 1.32

15. Sixth Erra Pty Ltd <The I Collie Family A/C> 2,794,046 1.23

16. CPS Control Systems Pty Limited <The Ian Campbell S/Fund A/C> 2,673,080 1.17

17. Fitel Nominees Limited 2,513,776 1.10

18. Hongkong Merchants United Gold Co. Limited 2,500,000 1.10

19. 2,131,389 0.94

20. Interprac Financial Planning Pty Ltd 2,112,000 0.93

Total 150,053,001 65.94

Twenty largest holders of quoted options

OPTION HOLDER NUMBER % HELD

1. Junefield High Value Metals Investments Limited 23,372,530 51.32

2. J P Morgan Nominees Australia Limited 3,875,000 8.51

3. Evan Campbell 2,000,000 4.39

4. Dempsey Resources Pty Ltd 2,000,000 4.39

5. Ganbaru Pty Ltd <The Parrish Super Fund A/C> 2,000,000 4.39

6. Alocasia Pty Limited <Camellia Super Fund A/C> 1,827,200 4.01

7. 1,107,189 2.43

8. Anthony Begovich 1,000,000 2.20

9. Sixth Erra Pty Ltd <Sta! Super Fund A/C> 847,619 1.86

10. Coilens Corporations Pty Ltd 634,515 1.39

11. Sixth Erra Pty Ltd <The I Collie Family A/C> 609,226 1.34

12. 601,750 1.32

13. Peta Pty Ltd <Rosebud Super Pension A/C> 593,445 1.30

14. Anera Services Limited 530,110 1.16

15. Stephanie Gale 500,000 1.10

16. Roderick and Lynette Seymour Brown <Enterprise Super Fund A/C> 407,346 0.89

17. Mark Phillips <Clive T A/C> 362,500 0.80

18. Dixtru Pty Limited 350,000 0.77

19. 342,856 0.75

20 226,000 0.50

Total 43,187,286 94.83

7 6

Tenement schedule

mining concessions.

TENEMENT NAME CODE LOCATION OWNERSHIP STATUS

Latin Toray I 01-04995-08 Peru 100% PLR Concession

Latin Toray II 01-04996-08 Peru 100% PLR Concession

Latin Ilo Este I 01-05005-08 Peru 100% PLR Concession

Latin Ilo Este II 01-05003-08 Peru 100% PLR Concession

Latin Ilo Este III 01-05001-08 Peru 100% PLR Concession

Latin Ilo Este IV 01-05007-08 Peru 100% PLR Concession

Latin Ilo Este V 01.05008-08 Peru 100% PLR Concession

Latin Ilo Este VI 01-05009-08 Peru 100% PLR Concession

Latin Coribeni I 01-05002-08 Peru 100% PLR Concession

Latin Coribeni II 01-05004-08 Peru 100% PLR Concession

Latin Coribeni III 01-05006-08 Peru 100% PLR Concession

Latin Coribeni IV 01-04999-08 Peru 100% PLR Concession

Latin Toray III 01-05000-08 Peru 100% PLR Concession

Latin Toray IV 01-04998-08 Peru 100% PLR Concession

Latin Toray V 01-04997-08 Peru 100% PLR Concession

Latin Ilo Sur A 01-05276-08 Peru 100% PLR Concession

Latin Ilo Sur B 01-06227-08 Peru 100% PLR Concession

Latin Ilo Sur C 1 01-05275-08 Peru 100% PLR Concession

Latin Ilo Sur C 2 01-05277-08 Peru 100% PLR Concession

Latin Ilo Sur D 01-05278-08 Peru 100% PLR Concession

Latin Ilo Sur E 1 01-06720-08 Peru 100% PLR Concession

Latin Ilo Sur E 2 01-06721-08 Peru 100% PLR Concession

Latin Ilo Norte 1 01-00828-09 Peru 100% PLR Concession








Latin Ilo Sur G 01-02514-09 Peru 100% PLR Concession

Latin Ilo Sur H 01-02515-09 Peru 100% PLR Concession

Latin Ilo Sur I 01-02516-09 Peru 100% PLR Concession

Latin Ilo Sur J 01-02517-09 Peru 100% PLR Concession

01-02825-09 Peru 100% PLR Concession

Latin Ilo Sur L 01-02826-09 Peru 100% PLR Concession

Latin Ilo Sur F 01-02824-09 Peru 100% PLR Concession

Latin Morrito 1 01-02827-09 Peru 100% PLR Concession



Latin Pampa de Pongo 1 01-02932-09 Peru 100% PLR Concession

Latin Ilo Este VII 01-00335-10 Peru 100% PLR Concession

Essendon 1 01-01894-10 Peru 100% PLR Concession





A N N U A L R E P O R T 2 0 1 3 7 7





Bombers 1 01-02059-10 Peru 100% PLR Concession



Fremantle 1 01-02062-10 Peru 100% PLR Concession






















Flemantle 16 01-02431-10 Peru 100% PLR Concession






Vandals 1 01-02437-10 Peru 100% PLR Concession







Ryan 01-01821-11 Peru 100% PLR Concession

Bridgette 01-01820-11 Peru 100% PLR Concession

Maddison 01-01822-11 Peru 100% PLR Concession






7 8 A S X A D D I T I O N A L I N F O R M A T I O N








Ryan 1 01-01843-11 Peru 100% PLR Concession

Bridgette 1 01-01844-11 Peru 100% PLR Concession

Maddison 1 01-01845-11 Peru 100% PLR Concession
















Stephanie 01-01839-11 Peru 100% PLR Concession











Dockers 1 01-01865-11 Peru 100% PLR Concession




Ashleigh 01-01869-11 Peru 100% PLR Concession







Dylan III 540005010 Peru Under option Concession

Dylan IV 540005110 Peru Under option Concession


A N N U A L R E P O R T 2 0 1 3 7 9


Auxiliadora II 01-00586-07 Peru 100% PLR Concession

Auxiliadora III 01-00587-07 Peru 100% PLR Concession

Santa 70 6300029-08 Peru 100% PLR Concession

01.00590-07 Peru 100% PLR Concession

















Mathew 1 01-01634-11 Peru 100% PLR Concession

Mathew 2 01.01635-11 Peru 100% PLR Concession

Blackburn 1 01-03226-11 Peru 100% PLR Concession

Blackburn 2 01-03534-11 Peru 100% PLR Under application




Pampacolpa A 01-01404-11 Peru 100% PLR Concession

Perthiam 1 01-00675-12 Peru 100% PLR Concession

Perthiam 2 01-00676-12 Peru 100% PLR Concession

Los Conchales 01-02590-12 Peru 100% PLR Under application


8 0 N O T E S

N O T E S

REGISTERED OFFICE

Suite 2, Level 1 254 Rokeby Road

SUBIACO 6008 Western Australia

Telephone: (08) 9485 0601 Facsimile: (08) 9321 6666

Documents

ANNUAL REPORT 2013 - Latin Resources Limitedlatinresources.com.au/sites/latinresources.com.au/files/financial... · DIRECTORSÕ REPORT 22 CORPORATE GOVERNANCE STATEMENT 34 ... ilmenite